0001144204-11-043193.txt : 20110801 0001144204-11-043193.hdr.sgml : 20110801 20110801172947 ACCESSION NUMBER: 0001144204-11-043193 CONFORMED SUBMISSION TYPE: 20-F PUBLIC DOCUMENT COUNT: 19 CONFORMED PERIOD OF REPORT: 20110730 FILED AS OF DATE: 20110801 DATE AS OF CHANGE: 20110801 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Rich Mountain Enterprises Ltd CENTRAL INDEX KEY: 0001485536 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 000000000 STATE OF INCORPORATION: D8 FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 20-F SEC ACT: 1934 Act SEC FILE NUMBER: 000-53939 FILM NUMBER: 111001377 BUSINESS ADDRESS: STREET 1: 29 WILBER STREET CITY: NEW PROVIDENCE STATE: NJ ZIP: 07974 BUSINESS PHONE: 9086562539 MAIL ADDRESS: STREET 1: 29 WILBER STREET CITY: NEW PROVIDENCE STATE: NJ ZIP: 07974 20-F 1 v230348_20f.htm SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE Unassociated Document
  
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 20-F

¨
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

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

For the fiscal year ended ______________
 
OR
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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

Date of event requiring this shell company report: July 30, 2011
 
Commission file number: 000-53939
 
Sino Oil & Gas Pipe Holdings Limited
(Formerly Rich Mountain Enterprises Ltd.)
(Exact name of Registrant as Specified in its Charter)

British Virgin Islands
(Jurisdiction of Incorporation or Organization)
 
No 1. Road, Yuci Industrial Park,
Jin Zhong City,
Shanxi Province, 030600,
People’s Republic of China
(Address of Principal Executive Offices)
 
Xudong Liu
Tel: +86 (354) 3966-203
Fax: +86 (354) 3966-200
No 1. Road, Yuci Industrial Park,
Jin Zhong City,
Shanxi Province, 030600,
People’s Republic of China
(Name, Telephone, E-mail and/or Facsimile Number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:
 
Title of Each Class
  
Name of Each Exchange On Which Registered
None
  
None
Securities registered or to be registered pursuant to Section 12(g) of the Act:
 
Ordinary Shares, par value $0.01 per share
(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
 
None
(Title of Class)
 
The number of outstanding shares of each of the issuer’s classes of capital or common stock as of July 30, 2011 was: 12,000,000 ordinary shares par value $0.01 per share.
 
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
 
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
 
Yes ¨ No ¨
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:
 
Yes ¨ No x
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
Yes ¨ No ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer ¨       Accelerated filer ¨     Non-accelerated filer x
 
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
 
x U.S. GAAP  International Financial Reporting Standards as issued by the International Accounting Standards Board ¨  Other ¨
 
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow: Item 17 ¨  Item 18 ¨
 
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ¨ No ¨

 
 
 

SINO OIL & GAS PIPE HOLDINGS LIMITED
(FORMERLY RICH MOUNTAIN ENTERPRISES LIMITED)
FORM 20-F SHELL COMPANY REPORT
TABLE OF CONTENTS

PART I
  
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
2
ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE
3
ITEM 3.
KEY INFORMATION
3
ITEM 4.
INFORMATION ON THE COMPANY
22
ITEM 4a.
UNRESOLVED STAFF COMMENTS
52
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
52
ITEM 6.
DIRECTORS, SENIOR MANAGEMENT, AND EMPLOYEES
79
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
81
ITEM 8.
FINANCIAL INFORMATION
82
ITEM 9.
THE OFFER AND LISTING
82
ITEM 10.
ADDITIONAL INFORMATION
83
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
88
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
89
   
PART II
  
ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
89
ITEM 14.
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
89
ITEM 15.
CONTROLS AND PROCEDURES
90
ITEM 16.
RESERVED
90
ITEM 16a.
AUDIT COMMITTEE FINANCIAL EXPERT
90
ITEM 16b.
CODE OF ETHICS
90
ITEM 16c.
PRINCIPAL ACCOUNTING FEES AND SERVICES
90
ITEM 16d.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
90
ITEM 16e.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
90
ITEM 16f.
CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
90
ITEM 16g.
CORPORATE GOVERNANCE
91
   
PART III
  
ITEM 17.
FINANCIAL STATEMENTS
92
ITEM 18.
FINANCIAL STATEMENTS
92
ITEM 19.
EXHIBITS
92
 
 
i
 

CERTAIN INFORMATION
 
In this shell company report on Form 20-F, unless otherwise indicated, “we,” “us,” “our,” the “Company” , the “Shell Company” and “Sino Oil & Gas” refer to Sino Oil & Gas Pipe Holdings Limited, formerly RICH MOUNTAIN ENTERPRISES LTD., a company organized in the British Virgin Islands, and its subsidiaries and consolidated entities, subsequent to the business combination referred to below. The “business combination” refers to the share exchange between the Shell Company and the shareholders of RISE KING MANAGEMENT LIMITED, Or RISE KING, resulting in(i) each of the RISE KING Shareholders shall sell, transfer, convey, assign and deliver to the Shell Company each share of its RISE KING Stock free and clear of all Liens, in exchange for 140 newly issued ordinary shares of Shell Company Stock and (ii) the Shell Company Shareholder shall sell, transfer, convey, assign and deliver to the RISE KING Shareholders all of the capital stock of the Shell Company issued and outstanding on the Closing Date free and clear of all Liens in exchange for an aggregate of $200,000 (which is equal to $0.04 per share) in cash, which was consummated on July 30, 2011.
 
Unless the context indicates otherwise, all references to “China” refer to the People’s Republic of China. All references to “Renminbi” or “RMB” are to the legal currency of the People’s Republic of China and all references to “U.S. dollars,” “dollars” and “$” are to the legal currency of the United States. This report contains translations of Renminbi amounts into U.S. dollars at specified rates solely for the convenience of the reader. We make no representation that the Renminbi or U.S. dollar amounts referred to in this report could have been or could be converted into U.S. dollars or Renminbi, as the case may be, at any particular rate or at all. On July 30, 2011, the cash buying rate announced by the People’s Bank of China was RMB 6.4282 to $1.00.
 
FORWARD-LOOKING STATEMENTS
 
This report contains “forward-looking statements” that represent our beliefs, projections and predictions about future events. All statements other than statements of historical fact are “forward-looking statements” including any projections of earnings, revenue or other financial items, any statements of the plans, strategies and objectives of management for future operations, any statements concerning proposed new projects or other developments, any statements regarding future economic conditions or performance, any statements of management’s beliefs, goals, strategies, intentions and objectives, and any statements of assumptions underlying any of the foregoing. Words such as “may”, “will”, “should”, “could”, “would”, “predicts”, “potential”, “continue”, “expects”, “anticipates”, “future”, “intends”, “plans”, “believes”, “estimates” and similar expressions, as well as statements in the future tense, identify forward-looking statements.
 
These statements are necessarily subjective and involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from any future results, performance or achievements described in or implied by such statements. Actual results may differ materially from expected results described in our forward-looking statements, including with respect to correct measurement and identification of factors affecting our business or the extent of their likely impact, and the accuracy and completeness of the publicly available information with respect to the factors upon which our business strategy is based or the success of our business.
 
Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of whether, or the times by which, our performance or results may be achieved. Forward-looking statements are based on information available at the time those statements are made and management’s belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to, those factors discussed under the headings “Risk Factors”, “Operating and Financial Review and Prospects” and elsewhere in this report.

 
1
 

PART I
 
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
 
1.A.  Directors and Senior Management
 
The following table lists the members of the Company’s board of directors:
 
Name
  
Age
  
Position(s) 
Xudong Liu
  
31
  
Chairman
Ning Li
  
42
  
Director
Lizi Liu
  
46
  
Director
 
The business address for each of our directors is: No. 1 Road, Yuci Industrial Park. Jinzhong City, Shanxi Province, P.R.C..
 
The following table lists the senior management of the Company:
 
Name
  
Age
  
Position(s)
         
Ning Li
  
42
  
CEO
Hongteng Yang
  
55
  
CFO
 
The business address for each of the members of senior management is: No. 1 Road, Yuci Industrial Park. Jinzhong City, Shanxi Province, P.R.C..
 
See Item 6.A. – Directors and Senior Management below for more information about our directors and executive officers.
 
1.B.  Advisors
 
The Company’s legal advisors in the People’s Republic of China are: Dacheng Law Offices, 30/F, China Development Bank Building, No. 500 Pudongnan Road, Shanghai 200120, China.
 
The Company’s legal advisors in the United States are: Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of the Americas, New York, NY 10036.
  
1.C.  Auditors
 
The Company’s auditors are: Weinberg & Company, P.A. 6100 Glades Road. Suite 205 Boca Raton, Florida 33434, U.S.A. See Item 16.F – Change in Registrant’s Certifying Accountant below for information about the change in our auditor following the business combination.
 
Weinberg & Company, P.A. has confirmed that it is independent with respect to the Company under the guidelines of the SEC and the Independence Standards Board.
 
 
2
 

ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE
 
Not Applicable.
 
ITEM 3.
KEY INFORMATION
 
3.A.  Selected Financial Data
 
The following selected financial information should be read in connection with, and is qualified by reference to, our consolidated financial statements and their related notes and the section entitled “Operating and Financial Review and Prospectus,” each of which is included elsewhere in this report. The consolidated statements of operations and comprehensive income data for the fiscal years ended April 30, 2010 and 2009 and the balance sheets data as of April 30, 2010 and 2009 are derived from the audited consolidated financial statements included elsewhere in this report. The consolidated statements of operations and comprehensive income data for the fiscal years ended April 30, 2008, 2007 and 2006 and the balance sheets data as of April 30, 2008, 2007 and 2006 have been derived from unaudited financial statements that are not included in this report. Our historical results for any of these periods are not necessarily indicative of results to be expected in any future period.
 
The current corporate structure was completed as of April, 2011. Before the completion of the structure, all the companies included in this structure were under common control of the same major shareholder, Mr. Xudong Liu. The Company believes that it is proper to present the selected financial data “as if” the structure was completed at the beginning of the earliest period presented below.

 
3
 

   
Consolidated Statements of Income (loss) and Comprehensive Income (loss)
Years Ended April 30,
  
   
2010
(Audited)
    
2009
(Audited)
    
2008
(Unaudited)
    
2007
(Unaudited)
    
2006
(Unaudited)
  
                               
Revenue, net
   $ 146,835,283     $ 152,511,228     $ 108,001,988     $ 82,288,351     $ 59,750,922  
Cost of goods sold
     (123,110,120 )     (130,600,207 )     (91,842,042 )     (70,256,431 )     (52,637,924 )
Gross profit
     23,725,163       21,911,021       16,159,946       12,031,920       7,112,998  
                                         
Selling and marketing expenses
     (3,952,504 )     (5,878,246 )     (5,776,583 )     (3,885,392 )     (2,038,229 )
General and administrative expenses
     (3,003,542 )     (2,387,684 )     (1,706,053 )     (1,341,527 )     (1,180,585 )
Research and development expenses
     (33,111 )     (11,713 )     -       -       -  
Total Operating Expenses
     (6,989,157 )     (8,277,643 )     (7,482,636 )     (5,226,919 )     (3,218,814 )
                                         
Income from operations
     16,736,006       13,633,378       8,677,310       6,805,001       3,894,184  
                                         
Interest expense
     (9,765,845 )     (9,216,142 )     (7,819,587 )     (5,470,828 )     (4,672,549 )
Interest income
     2,438,152       2,673,890       478,004       308,463       30,340  
Other income (expense), net
     36,313       (91,537 )     2,071,238       (26,268 )     85,849  
                                         
Income (loss) before income taxes
     9,444,626       6,999,589       3,406,965       1,616,368       (662,176 )
                                         
Income taxes
     (2,868,260 )     (2,026,906 )     (1,124,300 )     (862,654 )     -  
                                         
Net income (loss)
     6,576,366       4,972,683       2,282,665       753,714       (662,176 )
Net income attributable to non-controlling interest
     (10,824 )     (6,079 )     (21,900 )     19,004       29,291  
                                         
Net income (loss) attributable to controlling interest
     6,565,542       4,966,604       2,260,765       772,718       (632,885 )
                                         
Other comprehensive income (loss)
     13,358       (116,373 )     (1,242,438 )     (503,885 )     -  
                                         
Comprehensive Income (loss)
   $ 6,578,900     $ 4,850,231     $ 1,018,327     $ 268,833     $ (632,885 )
 
 
4
 

Balance Sheets Data (at end of fiscal year )
  
April 30,
  
(in U.S. Dollars)
  
2010
    
2009
    
2008
    
2007
    
2006
  
   
Audited
    
Audited
    
Unaudited
    
Unaudited
    
Unaudited
  
Cash and cash equivalents
   $ 6,413,448     $ 1,980,229     $ 5,657,767     $ 4,890,833     $ 3,917,200  
Total current assets
     164,811,655       142,642,497       103,905,033       83,718,634       68,204,529  
Total assets
     267,779,636       231,862,383       207,360,029       161,709,216       140,633,103  
                                         
Total liabilities
     220,461,001       191,133,463       171,137,837       136,533,283       115,706,999  
Total shareholders’ equity
     47,318,635       40,728,920       36,222,192       25,175,933       24,926,104  
Total liabilities and shareholders’ equity
     267,779,636       231,862,383       207,360,029       161,709,216       140,633,103  

 
5
 

3.A.3.  Exchange Rates
 
Not Applicable.

3.B.  Capitalization and Indebtedness
  
The following table sets forth our capitalization and indebtedness as of January 31, 2011 on an actual basis. This information should be read in conjunction with our consolidated financial statements and the notes relating to such statements appearing elsewhere in this report.

   
January 31,
  
Cash:
  
2011
  
Cash and cash equivalents
   $ 2,801,465  
Restricted cash (1)
     50,114,660  
         
Debt:
        
Notes payable (1)
     55,436,601  
Short-term bank loans (2)
     112,798,503  
Product and other financing arrangements(3)
     36,321,376  
         
Shareholders’ equity:
        
Common stock, $1 par value
     50,000  
Accumulated other comprehensive income
     2,203,445  
Additional paid-in capital
     52,584,504  
Retained deficit
     (303,993 )
Non-controlling interest
     114,688  
Total shareholders’ equity
   $ 54,648,644  

(1)     Restricted cash represents amounts held by a bank as security for bank acceptance notes and domestic letters of credit financing and therefore is not available for the Company’s use until such time as the bank acceptance notes and domestic letters of credit have been fulfilled or expired, normally within a three and twelve month period.  All the notes payable are subject to bank charges of 0.05% of the principal amount as commission on each loan transaction. 

(2)     Short-term bank loans are obtained from local banks in China. All the short-term bank loans are repayable within one year and are secured by property, plant and equipment and land use rights owned by us, as well as by guarantees made by our related and unrelated parties.

(3)     The liabilities are due to two unrelated parties. The balances represent funds received to support our Company’s business operations. The inventory described in the product financing arrangements was not shipped to unrelated parties and the title did not pass to unrelated parties. However, the unrelated parties have the right to request the shipment if our Company do not perform our repurchase obligation. Such transaction was also secured by a land use right and the additional paid in capital.
  
3.C.  Reasons For The Offer And Use Of Proceeds
 
Not Applicable.
 
3.D.  Risk Factors
 
You should carefully consider the risks described below in evaluating our business before investing in our ordinary shares. If any of the following risks were to occur, our business, results of operations and financial condition could be harmed. In that case, the trading price of our ordinary shares could decline and you might lose all or part of your investment in our ordinary shares. You should also refer to the other information set forth in this report, including our consolidated financial statements and the related notes and the section captioned “Operating and Financial Review and Prospects” before deciding whether to invest in our ordinary shares.

RISKS RELATED TO OUR BUSINESS AND INDUSTRY
 
Our revenue is generated substantially from the sale of a single product.
 
We generate a significant majority of our revenue from the sale of SSAW and ERW pipes. For the year ended 30 April 2009 and 30 April 2010, sales of SSAW pipes accounted for 57.5% and 83.7% of the Group’s revenue, respectively. Approximately 70% of large-diameter petroleum and natural gas pipelines in China are constructed using SSAW pipes, however, ERW pipes are commonly used as sub-pipelines which are limited by the coil width and are thinner in wall thickness and smaller in diameter . A shift in market preference for other types of pipes among pipeline operators or a substantial reduction in  pipe price for SSAW pipe or ERW pipe may result in lost sales. To the extent that we are not able to replace sales lost to other types of pipes, our business, financial condition and results of operations would be adversely affected. If we cannot expand our product offering to include other pipes as planned or other products in the future, our source of revenue will remain concentrated on SSAW pipes and our financial condition, results of operations and growth prospects may be adversely affected.

 
6
 

Our revenue largely depends on public spending on petroleum and natural gas pipeline infrastructure.
 
We believe our revenue and sales volume increased significantly during the Period, in part, as a result of favorable government policies that have supported substantial public spending on petroleum and natural gas pipeline infrastructure, including a fiscal stimulus plan in 2008 in response to the global economic crisis. We cannot assure you that government support for pipeline infrastructure spending will remain as strong or at sufficient levels to sustain our current sales volume or growth rates. A reduction in pipeline spending may reduce demand for our products and adversely affect our financial condition, results of operations and growth prospects.
 
We are vulnerable to the delay or rescheduling of petroleum and natural gas pipeline projects.
 
We derive a substantial majority of our revenue from sales of high-grade SSAW pipes, which have enjoyed greater demand in recent years due to the continued development and growth of the PRC economy, active exploration and production activities by petroleum and natural gas companies, and favorable government energy policies, which in turn have resulted in the construction of more petroleum and natural gas pipelines.
 
Planned and ongoing petroleum and natural gas pipeline projects can be delayed or rescheduled for a number of reasons including, among other factors, changes in the business strategy of pipeline operators, technical difficulties, natural disasters, delays in regulatory approval or budget constraints. We believe that our ongoing projects and the projects for which we have secured supply contracts will contribute significantly to our revenue and profitability. However, should any of the major projects to which we plan to supply line pipes be delayed or rescheduled, our financial forecasts for the year ending 30 April 2011 could become materially inaccurate.
 
The delay or rescheduling of such projects might also lead to the termination of supply contracts for our products. In the event that our supply contracts are terminated, our business, financial condition and results of operations may be materially and adversely affected.
 
We are exposed to risks arising from credit terms extended to our customers.
 
We are exposed to the risk of payment delays and defaults by our two major customers, namely the Company A and the Company B, arising from the credit terms granted to these customers. As of April 30, 2009 and April 30, 2010, the accounts receivables balance of SXGL, inclusive of retention money withheld by customers to guarantee against major quality defects in our delivered products, was $15.6 million and $35.2 million, respectively. Our credit terms vary by customers. Credit terms that are extended to domestic customers for our SSAW pipes and ERW pipes are generally 60 days. Payments by overseas customers for our overseas sales of SSAW or ERW pipes are generally made by letter of credit. For the year ended April 30, 2009 and April 30, 2010, the accounts receivable turnover days for the company were 43 days and 63 days, respectively.
 
There may be a time gap between the maturity of our payables and receivables. To the extent that our receivable turnover days exceed our payable turnover days, we may be required to raise additional working capital. In addition, we cannot assure you that we will be able to maintain or improve current payment terms with our major customers, who have substantial bargaining power over us.

 
7
 

We cannot guarantee the timeliness of our customers’ payments or that such customers will be able to perform their obligations. Any inability on the part of our domestic customers to settle their payments in a timely manner may adversely affect our financial performance and cash flow.
 
We may fail to secure supply contracts for new projects through competitive bidding.
 
Our revenue is generated on a project basis from pipeline projects that are non-recurring in nature. Approximately 80% of contracts of the SXGL, based on contract value, were secured through bidding and negotiation, our financial performance is dependent on our ability to maintain our bidding eligibility, submit competitive bids and continually secure supply contracts.
 
In addition, due to the nature of the PRC petroleum and natural gas pipeline industry, the value of projects that we are able to secure may fluctuate from year to year. We cannot assure you that we will continue to secure new supply contracts or that these supply contracts will be profitable. If we are unable to secure profitable supply contracts, our business, financial performance and financial position will be adversely affected.
 
Fluctuations in global petroleum and natural gas prices could lead to reduced demand for our products and services.
 
Our primary product, SSAW pipes, is used to transport petroleum and natural gas. Demand for SSAW pipes directly correlates with, among other things, the level of demand and prices for petroleum and natural gas. Fluctuations, especially a sustained period of decline, in petroleum and natural gas prices would affect the investment policies and capital spending by petroleum and natural gas companies which in turn could reduce the level of demand for our products and services and adversely affect our financial condition and results of operations.
 
We cannot predict the future movement of petroleum and natural gas prices nor can we provide any assurance that these prices will otherwise remain at sufficiently high levels to support demand for our products.  Any sustained decline in the prices of petroleum and natural gas may reduce the willingness of petroleum and natural gas companies to invest in petroleum and natural gas pipeline projects, which may have a detrimental effect on demand for or prices of our products and, as a result, materially and adversely affect our results of operations and financial condition.
 
We may experience shortages of or price increases in raw materials.
 
Our production depends on our ability to obtain adequate supplies of raw material on commercially acceptable terms and in a timely manner. A shortage of any of our key raw materials may increase the prices of such materials and reduce our profit margins to the extent that we are unable to pass these price increases to our customers. Raw material purchases accounted for 91% and 88% of the cost of sales of SXGL for the year ended April 30, 2009 and April 30, 2010, respectively.
 
The principal raw material in our operations and production of SSAW and ERW pipes is hot-rolled steel coils/Strip. The price of steel has historically fluctuated significantly in line with supply and demand, price fluctuations in iron ore and coking coal and government policies on steel and related industries, among other factors.
 
For the year ended April 30, 2009 and April 30, 2010, raw material purchases from the five largest suppliers of SXGL, which are all Independent Third Parties, accounted for approximately 56.4% and 38.1%, respectively. We have not entered into any long-term supply agreement with these suppliers, and cannot assure you we will be able to procure sufficient supplies of raw materials on acceptable terms.

 
8
 

Failure to compete effectively in our industry may adversely affect our business and prospects.
 
We face competition in the domestic PRC market from a number of manufacturers that produce steel pipes that are similar to, or can be used as substitutes for, our products. Our major competitors for SSAW pipes include Baoji Petroleum Steel Pipe Co., Ltd., The Steel Pipe Works Of North China Petroleum, Shandong Shengli Steel Pipe Co., Ltd. , Shashi Steel Pipe Works of Jianghan Petroleum Administration Bureau, SINOPEC. , and Shanghai BSW Petro-Pipe Co., Ltd. The majority of these competitors are all units of CNPC which may have priority by virtue of their affiliation with CNPC when demand for line pipes is limited.
 
Our ability to compete depends on our ability to offer sufficient quantities of high quality products that are suitable for our customers’ needs at competitive prices. In addition, our competitiveness depends on our ability to maintain our track record of short lead-times, timely deliveries, low transportation costs and superior customer service. Competitive pressure may require us to reduce our prices and therefore adversely affect our profit margins and results of operations. Our failure to compete effectively could materially and adversely affect our business, financial condition, results of operations and market position.
 
Any significant downtime in our production facilities would adversely affect our business.
 
Our business requires substantial investments in complex production facilities and the uninterrupted operation of specialized manufacturing equipment. Our production facilities require periodic shutdowns for repair and maintenance. Major maintenance of our production facilities occurs approximately each year for a month each time.
 
Substantial damage to our production facilities from extraordinary events, such as earthquakes, floods and fires, or resulting consequences and disruptions, could be costly and time-consuming to repair and may disrupt our production. Any disruption or delay in our production may require us to incur additional expenses in order to produce sufficient inventory and could impair our ability to meet the demand of customers and cause our customers to cancel orders, any of which could negatively affect our reputation and results of operations.
 
We may incur significant costs in relation to warranties provided to our customers.
 
We may incur significant costs in relation to warranties provided to certain of our customers. Consistent with industry practice, we allow our SSAW pipe customers to retain 5% to 10% of the purchase price for sales of goods for a warranty period ranging from 12 to 18 months after delivery as a warranty provision against any major quality defects in our delivered products. We also warrant our SSAW pipes to be free of certain defects, and we guarantee the quality of our products for the warranty period, during which we will rectify any defects.
 
The warranty arrangement requires that the money retained by our customers be paid to us if there are no major quality issues with our products during the warranty period. Historically, we have recovered all of the money retained by our customers as it became due. We cannot assure you, however, that we can maintain our historical recovery rate for retention money in the future.

 
9
 

We have limited insurance coverage.
 
The insurance industry in China is in an early stage of development compared with countries such as the United States. Insurance companies in China offer limited commercial insurance products. Consistent with what we believe to be customary practice in the petroleum and natural gas steel pipe industry in China, we do not have any product liability, business interruption, or litigation insurance coverage for our operations. Any uninsured loss or damage to property, litigation or business disruption may cause us to incur substantial costs and the diversion of resources, which could have a material adverse effect on our financial condition and results of operations. The occurrence of certain incidents including earthquake, fire, severe weather, war, floods, power outages and the consequences, damages and disruptions resulting from them may not be covered adequately or at all by our insurance policies. If we were to incur substantial liabilities that are not covered by our insurance policies or if our business operations were interrupted for a substantial period of time, we could incur costs and losses that could materially and adversely affect our business, financial condition, results of operations and business prospects.
 
Our expansion plans require significant and continual capital expenditures, for which we may not have adequate financial resources.
 
Our expansion plans will require us to make substantial capital expenditures and assume consequential risks. We may need to raise additional funds through bank borrowing or the issuance of debt or equity securities to finance these capital expenditures. However, our ability to obtain additional financing in the future is subject to a variety of factors, including, but not limited to:
 
 
·
obtaining the necessary PRC Government approvals to repatriate funds that are raised overseas;
 
 
·
our future financial condition, results of operations and cash flows;
 
 
·
general market conditions for capital raising activities by similar companies; and
 
 
·
economic, political and other conditions in China and elsewhere.
 
We may be unable to obtain additional financing in a timely manner or on acceptable terms or at all. Moreover, the utilization of debt, equity or other capital resources may not create value for us or our Shareholders. Further financing activities or the remittance of the proceeds into China may also require PRC regulatory approvals, which may not be granted in a timely manner or at all. If adequate funding is delayed or not available, our ability to develop and expand our business may be adversely affected and if we have to divert our capital resources allocated for other uses to finance our capital expenditure plans, our operating results and financial condition may also be adversely affected.
 
Our business operations and financial condition may be adversely affected by present or future environmental, health and safety laws and regulations or enforcement.
 
As a company with substantially all of its operations in China, we are subject to various periodic inspections, examinations, inquiries and audits by PRC regulatory authorities in accordance with applicable PRC environmental, health and safety laws and regulations, as part of maintaining or renewing the various licenses, certificates and permits required for conducting business. As the PRC environmental, health and safety laws and regulations continue to change, we cannot guarantee that we will continue to be in compliance with all applicable laws or that we will not incur additional costs to comply with such laws and regulations. Failure to comply with any of these laws and regulations could result in the untimely delivery of goods, delayed receipt of revenue, loss of income, the accrual of substantial costs and fines and the suspension or termination of our contracts. Any limitations or costs incurred as a result of our non-compliance with environmental, health and safety laws and regulations may have a material adverse effect on our business, financial condition and results of operations.

 
10
 

Protectionist measures such as initiation of anti-dumping and anti-subsidy proceedings and imposition of anti-dumping and/or countervailing duties by governments in our overseas markets could materially and adversely affect our export sales.
 
During the Period, we did not generate a large portion of revenue from overseas sales of our SSAW pipes outside China. The overseas sales of our SSAW or ERW pipes to North America and Europe area for the year ended April 30, 2009 and April 30, 2010 accounted for 6.6% and 0.3% of total sales of SXGL, respectively. We, however, may enter into overseas sales in the future and such sales may trigger anti-dumping or anti-subsidy proceedings, or both, in the countries where our products are sold.
 
Anti-dumping and anti-subsidy proceedings have been initiated by local producers in countries such as the United States and EU in relation to steel products. These proceedings have resulted in the imposition of significant penalties, anti-dumping or countervailing duties, or a combination of the foregoing. These and other similar measures could trigger trade disputes in the international steel product markets. While the majority of our overseas customers are from Africa and other Asia countries, , we cannot guarantee that our plans to expand overseas will not increase the risk of protectionist investigations or proceedings against us. Any such investigation or proceeding would divert significant time and resources from us if unsuccessful and impede access to export markets for our products and limit our growth opportunities if successful.
 
Failure to protect our corporate name and reputation effectively may affect our business and financial performance.
 
We believe that we have an established corporate name and reputation that are widely recognized by peers and customers in our industry. We consider our corporate name and reputation to be vital in promoting recognition and customer loyalty. Any major defects in our products or any adverse publicity regarding us may harm our corporate image and reputation and cause our customers to lose confidence in our products, which would in turn adversely affect the number of projects we may secure and have a negative impact on our business and financial performance.
 
We may not successfully obtain and maintain the necessary regulatory permits, approvals or clearance for the manufacture and sale of our products in certain markets.
 
The manufacture of petroleum and natural gas line pipes is regulated by the government, industry organizations and international standardization bodies, which set requirements and standards for the manufacturing, functionality and safety performance of our products. Our adherence to such requirements and standards can be expensive, which can result in increased manufacturing and development costs. Although we have been advised by our PRC legal advisers, Dacheng Law Offices, that we possessed all necessary regulatory permits, approvals and clearances for the manufacture and sale of our products, any failure to maintain such permits and approvals could have a material adverse effect on our business and prospects. In addition, extensive government regulation and the related delays in seeking the appropriate approvals can significantly delay the introduction of new products, which could materially and adversely affect our market competitiveness. Even if we do obtain approval from the appropriate authorities, it may be granted on a limited basis or subject to modification of our products, which could increase operation costs.
 
We cannot guarantee that we will receive the necessary regulatory approvals to market our products in the countries and markets where we may seek approval in the future. Moreover, even if we obtain the requisite approvals for our current products, we cannot guarantee that we will remain compliant with these countries’ regulations in the future. Any failure to do so may result in a variety of actions against us, including penalties, injunctions, suspension of production, loss of regulatory approvals, product recalls and termination of distribution.

 
11
 

Our levels of indebtedness and interest payment obligations may adversely affect our business.
 
Our current levels of debt and the instability in debt markets may affect our ability to secure funding for current operations and future production expansion. Historically, we have primarily relied upon short-term borrowings to fund a portion of our capital expenditures and operations. As of April 30, 2010, our total bank borrowings amounted to $104 million.  We recorded net current liabilities of $191 million and $220 million as of April 30, 2009 and April 30, 2010, respectively, primarily due to a combine effect of operating activity and financing needs.
 
We may seek additional financing in the form of loans for planned capital expenditures and future expansion plans. The level of our indebtedness and the amount of our interest payments could limit our ability to obtain the necessary financing or obtain favorable terms for the financing to fund future capital expenditures and working capital. A shortage of such funds could restrict our ability to prepare for organic and acquisitive growth, or to react to changing market conditions. Such limitations on our debt financing could reduce our competitiveness and increase our exposure and sensitivity to adverse economic and industry conditions, which could have an adverse effect on our financial condition and results of operations.
 
Our products may subject us to product liability claims.
 
We may be subject to product liability claims under the laws of applicable jurisdictions where our products are installed if our products are defective and result in our customers’ or any third parties’ financial loss or personal injury. We do not carry product liability insurance to protect us against these claims. Although we were not subject to any product liability claims during the Period, we cannot assure you that we will not be subject to future product liability claims or that if any such claim is successful, our business and results of operations will not be materially and adversely affected. Further, we may be held liable for any damages or losses incurred in connection with or arising from defects in our products. Even if claims are not brought against us or our customers or if the claims fail, our business relationship with customers may be undermined as a result of any alleged product failure, which in turn may result in the loss of future business.

Our manufacturing processes involve inherent risks and occupational hazards.
 
Our business operations, particularly our manufacturing activities, involve risks and occupational hazards that are inherent to the manufacturing industry and which cannot be completely eliminated through preventive efforts. During the X-ray inspection of line pipes, our employees may be exposed to hazards caused by inhalation of chemical substances or radiation. We cannot assure you that accidents, which may result in property damage, severe personal injuries or even fatalities, will not occur at our production facilities. The occurrence of any of the foregoing events may have an adverse effect on our business, financial condition and results of operations.
 
Power shortages or substantial increase in energy costs could have an adverse impact on our operations.
 
We consume substantial amounts of electricity in our production process. Our production schedules may be affected by power shortages and blackout periods as we do not have backup generators at our production facilities. If the PRC Government imposes restrictions on the use of electricity due to power shortages, thereby disrupting our power supply, or if we are otherwise unable to obtain adequate supplies of electricity to meet our production requirements, our operations may be disrupted and our production and delivery schedules may be adversely affected. During the Period, we did not experience any material disruption to our production due to power shortages. In addition, our ability to pass increased energy costs along to our customers may be limited by pressures from competition and customer resistance. We cannot assure you that we will be able to recover the substantial cost increases of energy by raising the prices of our products.

 
12
 

Risks Related to Our Business
 
Our operations are cash intensive, and our business could be adversely affected if we fail to maintain sufficient levels of liquidity and working capital.
 
Historically, we have spent a significant amount of cash on our operational activities, principally to maintain adequate levels of inventory. We finance our operations primarily through operating profit, short-term bank borrowings from local banks in the PRC.  If we fail to continue to generate sufficient cash flow, we may not have sufficient liquidity to fund our operating costs and our business could be adversely affected.
 
Our short-term loans are from Chinese banks and are generally secured by our inventories and/or guarantees by third parties. The term of almost all such loans is one year or less. Historically, we have rolled over such loans on an annual basis. However, we may not have sufficient funds available to pay all of our borrowings upon maturity in the future. Failure to roll over our short-term borrowings at maturity or to service our debt could result in the imposition of penalties, including increases in interest rates, legal actions against us by our creditors, or even insolvency.
 
If available liquidity is not sufficient to meet our operating and loan obligations as they come due, our plans include considering pursuing alternative financing arrangements, reducing expenditures as necessary, or limiting our plans for expansion to meet our cash requirements. However, there is no assurance that, if required, we will be able to raise additional capital, reduce discretionary spending or efficiently limit our expansion to provide the required liquidity. Currently, the capital markets for small capitalization companies are extremely difficult and banking institutions have become stringent in their lending requirements. Accordingly, we cannot be sure of the availability or terms of any third party financing. If we are unable to raise additional financing, we may be unable to implement our long-term business plan, develop or enhance our products, take advantage of future opportunities or respond to competitive pressures on a timely basis. In the alternative, if we raise capital by issuing equity or convertible debt securities, such issuances could result in substantial dilution to our shareholders.
 
As we expand our operations, we may need to establish a more diverse supplier network for our materials.  The failure to secure a more diverse and reliable supplier network could have an adverse effect on our financial condition.
 
We currently purchase almost all of our materials from a small number of suppliers.  During fiscal years 2009 and 2010, we purchased approximately 56.4% and 38.1%, respectively, of our raw materials from our top five suppliers.  As we increase the scale of our operations, we may need to establish a more diverse supplier network, while attempting to continue to leverage our purchasing power to obtain favorable pricing and delivery terms.  However, in the event that we need to diversify our supplier network, we may not be able to procure a sufficient supply of high quality raw materials at a competitive price, which could have an adverse effect on our results of operations, financial condition and cash flows.
 
Furthermore, despite our efforts to control our supply of hot-rolled steel Coils/Strip and maintain good relationships with our existing suppliers, we could lose one or more of our existing suppliers at any time.  The loss of one or more key suppliers could increase our reliance on higher cost or lower quality supplies, which could negatively affect our profitability.  Any interruptions to, or decline in, the amount or quality of our raw materials could materially disrupt our production and adversely affect our business, financial condition and financial prospects.

 
13
 

We are subject to various risks and uncertainties that might affect our ability to procure high quality raw materials.
 
Our performance depends on our ability to procure high quality raw materials on a timely basis from our suppliers.  Our supplies are subject to certain risks, including availability of materials, labor disputes, inclement weather, natural disasters, and general economic and political conditions, which might limit the ability of our suppliers to provide us with high quality merchandise on a timely basis.  Furthermore, for these or other reasons, one or more of our suppliers might not adhere to our quality control standards, and we might not identify the deficiency.  Our suppliers’ failure to supply quality materials at a reasonable cost on a timely basis could reduce our net sales, damage our reputation and have an adverse effect on our financial condition.
 
Our inability to manage our growth may have a material adverse effect on our business, results of operations and financial condition.
 
We have experienced significant growth since we began operations in 2000.  Our revenues have declined from approximately $152,511,228 in the year ended April 30, 2009 to approximately $146,835,283 in the year ended April 30, 2010.
 
We expect our growth to continue to place significant demands on both our management and our resources. This requires us to continuously evolve and improve our operational, financial and internal controls across our organization. In particular, continued expansion increases the challenges we face in:
 
 
·
recruiting, training and retaining sufficient skilled sales and management personnel;
 
·
adhering to our high quality and process execution standards;
 
·
maintaining high levels of customer satisfaction;
 
·
creating and managing economies of scale;
 
·
maintaining and managing costs to correspond with timeliness of revenue recognition; and
 
·
developing and improving our internal administrative infrastructure, including our financial, operational and communication systems, processes and controls.
 
Any inability to manage our growth may have a material adverse effect on our business, results of operations and financial condition.
 
Our quarterly results may fluctuate because of many factors and, as a result, investors should not rely on quarterly operating results as indicative of future results.
 
Fluctuations in operating results or the failure of operating results to meet the expectations of public market analysts and investors may negatively impact the value of our securities. Quarterly operating results may fluctuate in the future due to a variety of factors that could affect revenues or expenses in any particular quarter. Fluctuations in quarterly operating results could cause the value of our securities to decline. Investors should not rely on quarter-to-quarter comparisons of results of operations as an indication of future performance. As a result of the factors listed below, it is possible that in future periods our results of operation may be below the expectations of public market analysts and investors. Factors that may affect our quarterly results include:
 
 
·
vulnerability of our business to a general economic downturn in China;
 
 
·
fluctuation and unpredictability of costs related to our raw materials;
 
 
·
changes in the laws of the PRC that affect our operations;
 
 
·
competition from our competitors;
 
 
·
our ability to obtain all necessary government certifications and/or licenses to conduct our business; and
 
 
·
development of a public trading market for our securities.

 
14
 

Our success depends in large part upon our senior management and key personnel and our inability to attract or retain these individuals could materially and adversely affect our business, results of operations and financial condition.
 
We are highly dependent on our senior management, including Mr. Xudong Liu and Mr. Ning Li. Our future performance will be dependent upon the continued service of members of our senior management.  Competition for senior management in our industry is intense, and we may not be able to retain our senior management and key personnel or attract and retain new senior management and key personnel in the future, which could materially and adversely affect our business, results of operations and financial condition.
 
One shareholder owns a large percentage of our outstanding stock and could significantly influence the outcome of our corporate matters.
 
Currently, Xudong Liu, beneficially owns approximately 63.6% of our outstanding ordinary shares. As our majority shareholder, Xudong Liu is able to exercise significant influence over all matters that require 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 our assets. This concentration of ownership in our shares by Xudong Liu will limit your ability to influence corporate matters and may have the effect of delaying or preventing a third party from acquiring control over us.
 
Our business could be materially adversely affected if we cannot protect our intellectual property rights.
 
We have developed trademarks, patents, know-how, trade names and other intellectual property rights that are of significant value to us. However, the legal regime governing intellectual property in the PRC is still evolving and the level of protection of intellectual property rights in the PRC may differ from those in other jurisdictions. Thus, it may be difficult to enforce our rights relating to our intellectual property. In the event of the occurrence of any unauthorized use of, or other infringement to, our intellectual property, potential sales of our products might be diverted to such unauthorized sellers and could cause potential damage to, or dilute the value of, such rights or our brand.
 
Our inability to maintain appropriate internal financial reporting controls and procedures 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 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, or Sarbanes-Oxley, which requires annual management assessments of the effectiveness of our internal controls over financial reporting and, for many companies, a report by the 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.

 
15
 

We will incur increased costs as a result of being a public company.
 
As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. We expect the rules and regulations to which public companies are subject, including Sarbanes-Oxley, to increase our legal, accounting and financial compliance costs and to make certain corporate activities more time-consuming and costly. In addition, we will incur additional costs associated with our public company reporting requirements.
 
Risks Related to Our Corporate Structure
 
The PRC government may determine that our corporate structure is not in compliance with applicable PRC laws, rules and regulations.
 
Our wholly owned subsidiaries, Shangxi Shipaipu and Shanxi Ruixingtng, manage and operate our business through Shanxi Guolian Pipe Industry Group Co., Ltd., or SXGL, and Shanxi Zhonglian Gas Development Co., Ltd., or Shanxi Zhonglian, two PRC companies that we control. SXGL is 89% owned by Xudong Liu, our Chairman, and 11% owned by his uncle, Lizi Liu, who is also the Vice President of the Board of Directors of SXGLSXGL. Shanxi Zhonglian is wholly owned by Juan Kong. Shanxi Shipaipu and Shanxi Ruixingtong  operate SXGL and Shanxi Zhonglian business pursuant to contractual arrangements , which arrangements we also refer to throughout this report as the VIE Agreements. Almost all economic benefits and risks arising from these operations have been transferred to Shanxi Shipaipu and Shanxi Ruixingtong under these agreements.
 
Shanxi Ruixingtong Business Consulting Co., Ltd., or Shanxi Ruixingtong, a wholly owned subsidiary of our subsidiary SOUND WAY ENTERPRISES LIMITED, or SWEL, a company incorporated under the laws of the British Virgin Islands, manages and operates our business through Shanxi Zhonglian Gas Development Co., Ltd., or Shanxi Zhonglian, a PRC company owned by Juan Kong. Shanxi Ruixingtong operates Shanxi Zhonglian’s business pursuant to contractual arrangements with Shanxi Zhonglian and Juan Kong, which arrangements we also refer to throughout this report as the VIE Agreements. Almost all economic benefits and risks arising from Shanxi Zhonglian’s operations have been transferred to Shanxi Ruixingtong under these agreements.
 
Details of the VIE Agreements are set out below in Item 4A – “History and Development of the Company – Contractual Arrangements.”
 
There are risks involved in the operation of our business in reliance on the VIE Agreements, including the risk that the VIE Agreements may be determined by PRC regulators or courts to be unenforceable.  If the VIE Agreements were for any reason determined to be in breach of any existing or future PRC laws or regulations, the relevant regulatory authorities would have broad discretion in dealing with such breach, including:
 
 
·
imposing economic penalties;
 
 
·
discontinuing or restricting the operations of Shanxi Shipaipu, Shanxi Ruixingtong, SXGL or Shanxi Zhonglian SXGL;
 
 
·
imposing conditions or requirements in respect of the VIE Agreements with which SXGL or Shanxi Ruixingtong may not be able to comply;
 
 
·
requiring our company to restructure the relevant ownership structure or operations;
 
 
·
taking other regulatory or enforcement actions that could adversely affect our company’s business; and

 
 
16
 

 
·
revoking the business licenses and/or the licenses or certificates of SXGL, Shanxi Ruixingtong,or SXGL or Shanxi ZhonglianSXGL, and voiding the VIE Agreements.
 
Any of these actions could adversely affect our ability to manage, operate and gain the financial benefits of SXGL and Shanxi Zhonglian, which would have a material adverse impact on our business, financial condition and results of operations.
 
Our ability to manage and operate SXGL and Shanxi Zhonglian under the VIE Agreements may not be as effective as direct ownership.
 
We conduct our  businesses in the PRC, and generate all of our revenues, through the VIE Agreements. Our plans for future growth are based on growing the operations of SXGL and Shanxi Zhonglian. However, the VIE Agreements may not be as effective in providing us with control over SXGL and Shanxi Zhonglian as direct ownership. Under the current VIE arrangements, as a legal matter, if SXGL or Shanxi Zhonglian fails to perform its obligations under these contractual arrangements, we may have to (a) incur substantial costs and resources to enforce such arrangements and (b) seek legal remedies under PRC law, which we cannot be sure would be effective. Therefore, if we fail to effectively control SXGL or Shanxi Zhonglian, such failure would have an adverse effect on our ability to achieve our business objectives and grow our revenues.

The shareholders of SXGL or Shanxi Zhonglian may breach, or cause SXGL or Shanxi Zhonglian to breach, the VIE Agreements.
 
Mr. Xudong Liu, the primary shareholder of SXGL and Ms. Juan Kong, the shareholder of Shanxi Zhonglian, may breach, or cause SXGL or Shanxi Zhonglian to breach, the VIE Agreements because their respective equity interests in SXGL and Shanxi Zhonglian are greater than their equity interests in our company.  As a result, any of these individuals may breach a contract with us if he believes that such breach will lead to greater economic benefit for him.  If any of these individuals was to breach, or cause SXGL or Shanxi Zhonglian to breach, the VIE Agreements for this reason or any other reason, we may have to rely on legal or arbitral proceedings to enforce our contractual rights, including specific performance, injunctive relief or claiming damages. Such arbitral and legal proceedings may cost us substantial financial and other resources, and result in disruption of our business, and we cannot assure you that the outcome will be in our favor.
 
The payment arrangement under the VIE Agreements may be challenged by the PRC tax authorities.
 
We generate our revenues through payments that we receive from SXGL and Shanxi Zhonglian pursuant to the VIE Agreements. We could face adverse tax consequences if the PRC tax authorities determine that the VIE Agreements were not entered into based on arm’s length negotiations. For example, PRC tax authorities may adjust our income and expenses for PRC tax purposes which could result in our being subject to higher tax liability.
 
Risks Related to Doing Business in China
 
Changes in China’s political or economic situation could harm us and our operating results.
 
Economic reforms adopted by the Chinese government have had a positive effect on the economic development of the country, but the government could change these economic reforms or any of the legal systems at any time. This could either benefit or damage our operations and profitability. Some of the things that could have a negative effect are:
 
 
·
level of government involvement in the economy;
 
 
·
control of foreign exchange;
 
 
·
methods of allocating resources;
 
 
·
balance of payments position;
 
 
·
international trade restrictions; and
 
 
17
 

 
·
international conflict.
 
The Chinese economy differs from the economies of most countries belonging to the Organization for Economic Cooperation and Development, or OECD, in a number of ways. For example, state-owned enterprises still constitute a large portion of the Chinese economy, and weak corporate governance and the lack of a flexible currency exchange policy still prevail in China. As a result of these differences, we may not develop in the same way or at the same rate as might be expected if the Chinese economy was similar to those of OECD member countries.
 
The PRC government exerts substantial influence over the manner in which we must conduct our business activities.
 
The PRC 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 the jurisdictions in which we operate 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.
 
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 highly fluctuating rates of inflation. During the past ten years, the rate of inflation in China has been as high as 5.9% and as low as (0.8)%. These factors have led to the adoption by the Chinese government, from time to time, of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. High inflation may in the future cause the Chinese government to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity in China, and thereby harm the market for our products and our company.
 
You may have difficulty enforcing judgments against us.
 
Our assets are located, and our operations are conducted, in the PRC. In addition, all of our directors and officers are nationals and residents of the PRC and a substantial portion of their assets are located outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon these persons. In addition, there is uncertainty as to whether the courts of the PRC would recognize or enforce judgments of U.S. courts because China does not have any treaties or other arrangements that provide for the reciprocal recognition and enforcement of foreign judgments with the United States. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates basic principles of PRC law or national sovereignty, security, or the public interest.
 
 
18
 

Most of our revenues are denominated in Renminbi, which is not freely convertible for capital account transactions and may be subject to exchange rate volatility.
 
We are exposed to the risks associated with foreign exchange controls and restrictions in China, as our revenues are primarily denominated in Renminbi, which is currently not freely exchangeable. The PRC government imposes control over the convertibility between Renminbi and foreign currencies. Under the PRC foreign exchange regulations, payments for “current account” transactions, including remittance of foreign currencies for payment of dividends, profit distributions, interest and operation-related expenditures, may be made without prior approval but are subject to procedural requirements. Strict foreign exchange control continues to apply to “capital account” transactions, such as direct foreign investment and foreign currency loans. These capital account transactions must be approved by, or registered with, the PRC State Administration of Foreign Exchange, or SAFE. Further, capital contribution by an offshore shareholder to its PRC subsidiaries may require approval by the Ministry of Commerce in China or its local counterparts. We cannot assure you that we will be able to meet all of our foreign currency obligations to remit profits out of China or to fund operations in China.
 
On August 29, 2008, SAFE promulgated the Circular on the Relevant Operating Issues concerning the Improvement of the Administration of Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or Circular 142, to regulate the conversion by foreign invested enterprises, or FIEs, of foreign currency into Renminbi by restricting how the converted Renminbi may be used. Circular 142 requires that Renminbi converted from the foreign currency-dominated capital of a FIE may be used only for purposes within the business scope approved by the applicable government authority and may not be used for equity investments within the PRC unless specifically provided. In addition, SAFE strengthened its oversight over the flow and use of Renminbi funds converted from the foreign currency-dominated capital of a FIE. The use of such Renminbi may not be changed without approval from SAFE, and may not be used to repay Renminbi loans if the proceeds of such loans have not yet been used. Compliance with Circular 142 may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business.
 
Fluctuation in the value of the Renminbi and of the U.S. dollar may have a material adverse effect on investments in our ordinary shares.
 
Any significant revaluation of the Renminbi may have a material adverse effect on the U.S. dollar equivalent amount of our revenues and financial condition as well as on the value of, and any dividends payable on, our ordinary shares in foreign currency terms. For instance, a decrease in the value of Renminbi against the U.S. dollar could reduce the U.S. dollar equivalent amounts of our financial results, the value of your investment in our ordinary shares and the dividends we may pay in the future, if any, all of which may have a material adverse effect on the prices of our common shares. All of our revenues are denominated in Renminbi. Any further appreciation of the Renminbi against the U.S. dollar may result in significant exchange losses.
 
Prior to 1994, the Renminbi experienced a significant net devaluation against most major currencies, and there was significant volatility in the exchange rate during certain periods. Upon the execution of the unitary managed floating rate system in 1994, the Renminbi was devalued by 50% against the U.S. dollar. Since 1994, the Renminbi to U.S. dollar exchange rate has largely stabilized. On July 21, 2005, the People’s Bank of China announced that the exchange rate of U.S. dollar to Renminbi would be adjusted from $1 to RMB8.27 to $1 to RMB8.11, and it ceased to peg the Renminbi to the U.S. dollar. Instead, the Renminbi would be pegged to a basket of currencies, whose components would be adjusted based on changes in market supply and demand under a set of systematic principles. On September 23, 2005, the PRC government widened the daily trading band for Renminbi against non-U.S. dollar currencies from 1.5% to 3.0% to improve the flexibility of the new foreign exchange system. Since the adoption of these measures, the value of Renminbi against the U.S. dollar has fluctuated on a daily basis within narrow ranges, but overall has further strengthened against the U.S. dollar. In June 2010, the Chinese government announced its intention to allow the Renminbi to fluctuate within the June 2005 parameters.  There remains significant international pressure on the PRC government to further liberalize its currency policy, which could result in a further and more significant appreciation in the value of the Renminbi against the U.S. dollar. The Renminbi may be revalued further against the U.S. dollar or other currencies, or may be permitted to enter into a full or limited free float, which may result in an appreciation or depreciation in the value of the Renminbi against the U.S. dollar or other currencies.

 
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China’s legal system is different from those in some other countries.
 
China is a civil law jurisdiction. Under the civil law system, prior court decisions may be cited as persuasive authority but do not have binding precedential effect. Although progress has been made in the promulgation of laws and regulations dealing with economic matters, such as corporate organization and governance, foreign investment, commerce, taxation and trade, China’s legal system remains less developed than the legal systems in many other countries. Furthermore, because many laws, regulations and legal requirements have been recently adopted, their interpretation and enforcement by the courts and administrative agencies may involve uncertainties. Sometimes, different government departments may have different interpretations. Licenses and permits issued or granted by one government authority may be revoked by a higher government authority at a later time. Government authorities may decline to take action against unlicensed operators which may work to the disadvantage of licensed operators, including us. The PRC legal system is based in part on government policies and internal rules that may have a retroactive effect. We may not be aware of our violation of these policies and rules until some time after the violation. Changes in China’s legal and regulatory framework, the promulgation of new laws and possible conflicts between national and provincial regulations could adversely affect our financial condition and results of operations. In addition, any litigation in China may result in substantial costs and diversion of resources and management attention.
 
Under the New Enterprise Income Tax Law, we may be classified as a “resident enterprise” of China. Such classification would likely result in unfavorable tax consequences to us and our non-PRC shareholders.
 
China passed a New Enterprise Income Tax Law, or the New EIT Law, which became effective on January 1, 2008. Under the New EIT Law, an enterprise established outside of China with de facto management bodies within China is considered a resident enterprise, meaning that it can be treated in a manner similar to a Chinese enterprise for enterprise income tax purposes. The implementing rules of the New EIT Law define de facto management as “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise. In addition, a circular issued by the State Administration of Taxation on April 22, 2009 clarified that dividends and other income paid by such resident enterprises will be considered to be PRC source income, subject to PRC withholding tax, currently at a rate of 10%, when recognized by non-PRC enterprise shareholders. This recent circular also subjects such resident enterprises to various reporting requirements with the PRC tax authorities.
 
Although all of our management is currently located in the PRC, it remains unclear whether the PRC tax authorities would require or permit our overseas registered entities to be treated as PRC resident enterprises. We do not currently consider our company to be a PRC resident enterprise. However, if the PRC tax authorities determine that we are a resident enterprise for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income as well as PRC enterprise income tax reporting obligations. In our case, this would mean that income such as interest on offering proceeds and non-China source income would be subject to PRC enterprise income tax at a rate of 25%. Second, although under the New EIT Law and its implementing rules dividends paid to us from our PRC subsidiaries would qualify as tax-exempt income, we cannot guarantee that such dividends will not be subject to a 10% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax, have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes. Finally, it is possible that future guidance issued with respect to the new resident enterprise classification could result in a situation in which a 10% withholding tax is imposed on dividends we pay to our non-PRC shareholders and with respect to gains derived by our non-PRC shareholders from transferring our shares.
 
Restrictions under PRC law on our PRC subsidiaries’ ability to pay dividends and make other distributions could materially and adversely affect our ability to grow, make investments or acquisitions that could benefit our business, pay dividends to you, and otherwise fund and conduct our business.
 
PRC regulations restrict the ability of PRC subsidiaries to pay dividends and make other payments to their offshore parent company. PRC legal restrictions permit payments of dividends by PRC subsidiaries only out of their accumulated after-tax profits, if any, determined in accordance with PRC accounting standards and regulations. PRC subsidiaries are also required under PRC laws and regulations to allocate at least 10% of their annual after-tax profits determined in accordance with PRC GAAP to a statutory general reserve fund until the amounts in said fund reaches 50% of their registered capital. Allocations to these statutory reserve funds can be used only for specific purposes and are not transferable to us in the form of loans, advances, or cash dividends. Any limitations on the ability of our PRC subsidiaries to transfer funds to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends and otherwise fund and conduct our business.

 
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The scope of our business license in China is limited, and we may not expand or continue our business without government approval.
 
Shanxi Shipaipu and Shanxi Ruixingtong, our wholly owned subsidiaries, are wholly foreign owned enterprises, commonly known as WFOEs. A WFOE can conduct business only within the approved business scope that appears on the company’s business license. Our PRC subsidiaries’ business licenses permit them to conduct our existing and projected business.  Any amendment to the scope of our business requires further application and government approval. In order to expand beyond the scope of these licenses, our PRC subsidiaries will be required to enter into a negotiation with the authorities for the approval to expand the scope of their business. In addition, for the production of spiral welded pipes, an additional valid qualification certificate or a license for operation must be obtained for the national Bureau of Safety Supervision of Special Equipment of General Administraionof Quality Supervision, Inspection and Quarantine before operation. We cannot assure you that our PRC subsidiaries will be able to obtain the necessary government approval for any change or expansion of their business.
 
If the China Securities Regulatory Commission, or CSRC, or another Chinese regulatory agency, determines that CSRC approval is required in connection with our business combination or our contractual arrangements with SXGL or Shanxi Zhonglian and their shareholders, we may become subject to penalties.
 
On August 8, 2006, six Chinese regulatory agencies, including the Chinese Securities Regulatory Commission, or CSRC, promulgated the M&A Regulation, which became effective on September 8, 2006 and was subsequently revised on June 22, 2009. This regulation, among other things, has certain provisions that require offshore special purpose vehicles formed for the purpose of acquiring Chinese domestic companies and directly or indirectly established or controlled by Chinese entities or individuals, to obtain the approval of the CSRC prior to publicly listing their securities on an overseas stock market. On September 21, 2006, the CSRC published on its official website a notice specifying the documents and materials that are required to be submitted for obtaining CSRC approval. It is not clear how the provisions in the regulation regarding the offshore listing and trading of the securities of a special purpose vehicle apply to us. We believe, based on the interpretation of the regulation and the practice experience of our Chinese legal counsel, Dacheng Law Offices, that CSRC approval is not required for the business combination between the Shell Company and RISE KING or our contractual arrangements with SXGL and Shanxi Zhonglian and their shareholders. There remains some uncertainty as to how this regulation will be interpreted or implemented. If the CSRC or another Chinese regulatory agency subsequently determines that the CSRC’s approval is required for the business combination or our contractual arrangements with SXGL and Shanxi Zhonglian and their shareholders, we may face sanctions by the CSRC or another Chinese regulatory agency. If this happens, these regulatory agencies may impose fines and penalties on our operations in China, limit our operating privileges in China, restrict or prohibit payment or remittance of dividends to us or take other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects.
 
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 making prohibited payments to foreign officials for the purpose of obtaining or retaining business.  Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time to time in mainland China.  If any of our non-U.S. listed competitors that are not subject to the Foreign Corrupt Practices Act engage in these practices, they may receive preferential treatment and secure business from government officials in a way that is unavailable to us.  Furthermore, although we inform our personnel that such practices are illegal, we cannot assure you that our employees or other agents will not engage in illegal conduct for which we might be held responsible under U.S. law.  If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties.
 
Because our funds are held in banks that do not provide insurance, the failure of any bank in which we deposit our funds could affect our ability to continue our business operations.
 
Banks and other financial institutions in the PRC do not provide insurance for funds held on deposit. As a result, in the event of a bank failure, we may not have access to funds on deposit. Depending upon the amount of money we maintain in a bank that fails, our inability to have access to our cash could impair our operations, and, if we are not able to access funds to pay our suppliers, employees and other creditors, we may be unable to continue our business operations.

 
21
 

If relations between the United States and China worsen, investors may be unwilling to hold or buy our ordinary shares and our share price may decrease.
 
At various times during recent years, the United States and China have had significant disagreements over political and economic issues. Controversies may arise in the future between these two countries. Any political or trade controversies between the United States and China, whether or not directly related to our business, could reduce the price of our ordinary shares.
 
Risks Related to Our Ordinary Shares.
 
We may not be able to pay any dividends on our ordinary shares.
 
Under British Virgin Islands law, we may pay dividends if we are able to satisfy the solvency test laid out in the BVI Business Companies Act, 2004, or the BVI Act, which provides that directors must declare that immediately following the payment of a dividend or distribution the Company would be solvent on both a cash flow and balance sheet basis.  Our ability to pay dividends will therefore depend on our ability to generate sufficient profits. We cannot give any assurance that we will declare dividends of any amounts, at any rate or at all in the future. Future dividends, if any, will be at the discretion of our board of directors and will depend upon our results of operations, our cash flows, our financial condition, the payment of our subsidiaries of cash dividends to us, our capital needs, future prospects and other factors that our directors may deem appropriate.  We have never declared or paid any dividend on our ordinary shares and we do not anticipate paying any dividends on our ordinary shares in the future.
 
There is no public market for our ordinary shares, and you may not be able to resell our ordinary shares at or above the price you paid, or at all.
 
There is no public market for our ordinary shares. If an active trading market for our ordinary shares does not develop, the market price and liquidity of our ordinary shares will be materially and adversely affected and you may not be able to resell our ordinary shares at or above the price you paid, or at all. An active trading market for our ordinary shares may not develop in a timely manner or at all.
 
If equity research analysts do not publish research reports about our company or if they issue unfavorable commentary or downgrade our ordinary shares, the price of our ordinary shares could decline.
 
The trading market for our ordinary shares will rely in part on the research reports that equity research analysts publish about us and our company. We do not control these analysts. The price of our ordinary shares could decline if one or more equity analysts downgrade our ordinary shares or if they issue other unfavorable commentary, or cease publishing reports, about us or our company.
 
ITEM 4.
INFORMATION ON THE COMPANY
 
4A.  History and Development of the Company
   
We are a British Virgin Islands limited liability company organized on January 5, 2010 under the BVI Act under the name RICH MOUNTAIN ENTERPRISES LIMITED, or RICH MOUNTAIN, as a blank check company for the purpose of acquiring, through a share exchange, asset acquisition or other similar business combination, an operating business. On July 20th, 2011, it was resolved by the directors that the name of the Company be changed to Sino Oil & Gas Pipe Holdings Limited.

 
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Business Combination
 
On July 30, 2011, the Shell Company and its sole shareholder entered into a share exchange agreement with RISE KING, a British Virgin Islands limited liability company organized on February 10, 2009 under the BVI Act, and the shareholders of RISE KING. Pursuant to the share exchange agreement, the Shell Company acquired from the shareholders of RISE KING all of the issued and outstanding shares of RISE KING, in exchange for an aggregate of 7,000,000 newly issued ordinary shares issued by the Shell Company to the shareholders of RISE KING (equal to an exchange of 140 shares of the Shell Company for each share of Rise King).  In addition, the sole shareholder of the Shell Company sold all of the 5,000,000 ordinary shares of the Shell Company that were issued and outstanding prior to the business combination, to the shareholders of RISE KING for cash, at an aggregate price of $200,000.  As a result, the individuals and entities that owned shares of RISE KING prior to the business combination acquired 100% of the equity of the Shell Company, and the Shell Company acquired 100% of the equity of RISE KING.  RISE KING is now a wholly owned subsidiary of The Shell Company.  In conjunction with the business combination, the Shell Company filed an amended charter, pursuant to which the Shell Company changed its name to Sino Oil & Gas Pipe Holdings Limited., changed the par value of its ordinary shares to $0.01 per share and increased its authorized shares to 100,000,000 on July 20th 2011.  Upon the consummation of the business combination, we ceased to be a shell company.
 
Our Shareholders
 
 
l
Xudong Liu, our Chairman, owns 100% of the equity of DAWNING HOLDINGS LIMITED, a British Virgin Island company which owned 63.6% of the equity of RISE KING prior to the business combination, and has owned 63.6 % of our shares since the business combination.
 
 
l
Lizi Liu, the  owner of 11% of SXGL, one of our VIE entities,  owns 100% of the equity of WELLYI HOLDING LIMITED, a British Virgin Islands company which owned 7.5% of the shares of RISE KING prior to the business combination and has owned 7.5 % of our shares since the business combination.
 
 
l
Ning Li, the General Manager of SXGL, owns 100% of the equity of HAOTAI HOLDING LIMITED, a British Virgin Islands company which owned 5.5% of the shares of RISE KING prior to the business combination and has owned 5.5 % of our shares since the business combination.
 
 
l
Junze Zhao, the Vice General Manager of SXGL, owns 100% of the equity of RUIZE HOLDING LIMITED, a British Virgin Islands company which owned 4% of the shares of RISE KING prior to the business combination and has owned 4% of our equity since the business combination.
 
 
l
Hongteng Yang, the Vice General Manager of SXGL, owns 100% of the equity of PO CHEUNG HOLDING LIMITED, a British Virgin Islands company, which owned 2.4% of the equity of RISE KING prior to the business combination and has owned 2.4% of our equity since the business combination.
 
 
l
The holders of the remaining 17 % of our shares are individuals or entities that are residents of the PRC and are unaffiliated with us.
 
Our Subsidiaries
 
Offshore Holding Company Subsidiaries
 
RISE KING, our wholly owned subsidiary, was incorporated on February 10, 2009 under the laws of the British Virgin Islands.  We acquired all of the capital stock of RISE KING pursuant to the business combination on July 30, 2011.
 
On April 30, 2009, RISE KING acquired all of the outstanding equity of SOUND WAY ENTERPRISES LIMITED, or SOUND WAY, a limited liability company formed on January 2, 2009 under the laws of the British Virgin Islands.
 
On May 5, 2011, RISE KING acquired:

 
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·
all of the outstanding equity of BRAVE KING ENTERPRISES LIMITED, or BRAVE KING, a limited liability company formed on March 19, 2010 under the laws of Hong Kong; and
 
On May 5, 2011, SOUND WAY acquired:
 
 
·
all of the outstanding equity of MAJOR AIM ENTERPRISES LIMITED, or MAJOR AIM, a limited liability company formed on March 19, 2010 under the laws of Hong Kong.
 
On April 1, 2011, BRAVE KING established a wholly owned subsidiary, Shanxi Shipaipu Business Consulting Co., Ltd., or Shanxi Shipaipu, a wholly foreign owned enterprise formed under the laws of the PRC.
 
On April 1, 2011, MAJOR AIM established a wholly owned subsidiary, Shanxi Ruixingtong Business Consulting Co., Ltd., or Shanxi Ruixingtong, a wholly foreign owned enterprise formed under the laws of the PRC.
 
As of July 30th, 2011, a share exchange agreement by and among the Shell Company, the shareholder of the Shell Company, RISE KING, and the shareholders of RISE KING was concluded to the extent that (i) each of the RISE KING Shareholders shall sell, transfer, convey, assign and deliver to the Shell Company each share of its RISE KING Stock in exchange for 140 newly issued ordinary shares of Shell Company Stock and (ii) the Shell Company Shareholder shall sell, transfer, convey, assign and deliver to the RISE KING Shareholders all of the capital stock of the Shell Company issued and outstanding in exchange for an aggregate of $200,000 in cash.
 
RISE KING, SOUNDWAY, BRAVE KING, MAJOR AIM, Shanxi Shipaipu and Shanxi Ruixingtong are holding companies. As a result of these transactions, each of RISE KING, SOUND WAY, BRAVE KING, MAJOR AIM, Shanxi Shipaipu and Shanxi Ruixingtong are wholly owned subsidiary of ours and we manage and operate the business of the two variable interest entities SXGL and Shanxi Zhonglian through the VIE Agreements.
 
PRC Operating Companies
 
Shanxi Guolian Pipe Industry Group Co., Ltd., or SXGL is a PRC company formed on May 12, 2003, formerly known as Shanxi Yuci Guolian Steel Pipe Co., Ltd. ,or Yuci Guolian . Xudong Liu, our chairman and majority shareholder owns 89% and Lizi Liu, the Vice President of Board of Directors owns 11% of SXGL.
 
Shanxi Zhonglian Gas Development Co., Ltd., or Shanxi Zhonglian, is a PRC company formed on November 12, 2004, .   Juan Kong own 100% of Shanxi Zhonglian.

 
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Shanxi Guolian’s operating subsidiaries as of the date hereof are as follows:
 
Name
  
Date Of
Formation/
Incorporation
  
Percentage of
Ownership by
Shanxi
Guolian
  
Principal Activities
             
Shanxi Guolian Spiral Tubulation Co., Ltd.
  
March 15, 2000.
  
97.7% owned by Shanxi Guolian
  
Design, development, manufacture, and commercialization of SSAW pipes.
             
Xi’an Guolian Spiral Tubulation Co., Ltd.
  
February 22, 2002.
  
99% owned by
Shanxi Guolian
  
Manufacture and sales of SSAW pipes.
             
Shanxi Guolian Pipe Technology Co., Ltd.
  
June 14, 2007
  
100% owned by Shanxi Guolian
  
Technology research, development and test of pipes
 
History of Our Company
 
Our business is operated by Shanxi Guolian Pipe Industry Group Co., Ltd, or SXGL, the successor of Shanxi Yuci Guolian Steel Pipe Co., Ltd. (or “Yuci Guolian”)., a P.R.C. company located at Shanxi Yuci Industrial Park was established on May 12, 2003 with a registered capital of RMB 30 million. Yuci Guolian was principally engaged in the manufacture and sales of SSAW pipes and ERW pipes.

In order to achieve scale operation and integrated management, Yuci Guolian reorganized as a group in July 2007, holding three subsidiaries, Shanxi Guolian Spiral Tubulation Co., Ltd. (“Taiyuan Guolian”), Xi’an Guolian Spiral Tubulation Co., Ltd. (“Xi’an Guolian”) and Shanxi Guolian Pipe Technology Co., Ltd. (“GLPT”). Yuci Guolian increased its registered capital from RMB 30 million to RMB 100 million, and was renamed Shanxi Guolian Pipe Industry Group Co., Ltd. in September 2007.

In March 2000, four shareholders contributed RMB 10 million to establish the Group’s earliest subsidiary, Shanxi Guolian Spiral Tubulation Co., Ltd.

Taiyuan Guolian became one of top 50 companies in Taiyuan in 2004 and top 100 companies in 2006. From 2005 to 2008, it was rated as a large taxpayer for four years consecutively.

From its establishment up to now, Taiyuan Guolian has undertaken urban pipeline network innovation projects in and outside the province, Taiyuan heating power company’s project, Changsha natural gas project and other projects.

 
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In February 2002, six shareholders contributed RMB 5 million to establish Xi’an Guolian Spiral Tubulation Co., Ltd. which is mainly engaged in production and sales of SSAW. Products of Xi’an Guolian are widely used in urban pipeline network innovation projects.
  
On 14 June 2007, Yuci Guolian invested RMB 3 million to establish Shanxi Guolian Pipe Technology Co., Ltd. which is engaged in technical research, development, test and experiment of pipe-making equipment.
  
After three years’ development,Taiyuan Guolian could not accommodate growing market demand with our production scale. On 12 May 2003, 12 shareholders jointly invested RMB 30 million Yuan to establish a production base in Yuci Industrial Park, named as Yuci Guolian.

In 2003, Yuci Guolian undertook Taiyuan heating power project, Xinjiang Changji heating power project and Changsha natural gas project which was a key natural gas transmission project of the state.
  
In January 2005, it obtained GB/T9711.1-1997 and GB/T9711.2-1999 Licenses and Manufacture License of Special Equipment (pressure pipelines) for its main products, SSAW and ERW and in February 2005, it obtained the Cerfiticate of Authority from the American Petroleum Institute (“API”)(API 5L and API 5CT Cerficiates)  to use the official API monogram on its SSAW pipes whose quality system that met the API-5L international standards., and in November 2005, it obtained the Import and Export Registration Certificate. In April 2006, it expanded its scope of business to cover export.
  
In July 2007, Shanxi Guolian Pipe Industry Group Co., Ltd. was established, with “Yuci Guolian” being the parent company and “Taiyuan Guolian”, “Xi’an Guolian” and “GLPT” being subsidiaries. “Yuci Guolian” was renamed “Shanxi Guolian Pipe Industry Group Co., Ltd.,” and its registered capital increased from RMB 30 million to RMB 100 million. Its scope of business was extended to cover manufacturing and sales of oil casing pipes. In September 2007, Yuci Guolian changed its name to Shanxi Guolian Pipe Industry Group Co., Ltd.
  
In October 2007, the Group obtained the honorary title of 2007 Advanced Private Enterprise in Technological Management, the Certificate of Enterprise of Observing Contract and Valuing Credit, the Certificate of Famous Chinese Enterprises in November, and the Certificate of Access to EnergyAhead in December.
 
 
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In May 2010, it expanded the scope of business to cover the manufacturing of pressure pipelines.

In March 2010, it obtained “GL” trademark registration certificate; It obtained Class I Enterprise Certificate for Enterprises Exporting Industrial Products in May, and environmental management system authentication certificate, occupational health and safety management system authentication certificate and China Petroleum Health, Safety and Environment Management System Certificate in June.
   
Contractual Arrangements
 
Due to restrictions under PRC law on foreign investment, we currently conduct all of our operations in China through SXGL and Shanxi Zhonglian, our consolidated entities. SXGL and Shanxi Zhonglian have obtained all necessary licenses and permits from the PRC government to engage in the steel pipe business.
 
SXGL
 
Mr. Xudong Liu owns 89% of SXGL and Mr. Liu Lizi, owns the remaining 11%. SXGL, Mr. Xudong Liu, Mr. Liu Lizi and Shanxi Shipaipu entered into a series of contractual arrangements on April 3, 2011 through which we:
 
·      exercise effective control over SXGL through, among other things, (i) exercising the shareholder rights of SXGL pursuant to the power of attorney executed by such shareholders, (ii) directing its corporate governance and management by designating its key management members including its directors, supervisors, general manager and other senior management members, and (iii) exclusively providing services necessary for SXGL’s business operation;
 
·      receive substantially all of the economic benefits from SXGL for the services provided by us, including without limitation, technology consulting services, marketing consulting services and general management services; and
 
·      have an exclusive option to purchase all of the equity interests in SXGL when and to the extent permitted under PRC law.
 
As a result of these contractual arrangements, we are the primary beneficiary of SXGL, and treat it as our variable interest entity under generally accepted accounting principles in the United States. We have consolidated the financial results of SXGL into our consolidated financial statements in accordance with U.S. GAAP.
 
The following descriptions summarize the contractual arrangements entered into between our wholly owned subsidiary, Shanxi Shipaipu, and SXGL:

 
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Exclusive Business Cooperation Agreement.  Pursuant to the exclusive business cooperation agreement entered into on April 3, 2011 between Shanxi Shipaipu and SXGL, Shanxi Shipaipu provides technical and consulting services related to the business operations of SXGL. As consideration for such services, SXGL has agreed to pay to Shanxi Shipaipu a service fee equal to 100% of the after-tax profits of SXGL.  The term of this agreement is 30 years from the date thereof. SXGL may terminate the agreement upon Shanxi Shipaipu’s gross negligence or commission of a fraudulent act against SXGL.  Shanxi Shipaipu may terminate the agreement at any time upon giving 30 days’ prior written notice to SXGL.
 
The service fee to be paid by SXGL to Shanxi Shipaipu has not yet been determined because the parties have agreed that the service fee is to be calculated based on the annual income of SXGL, which can only be determined after the completion of the annual audit of SXGL.    Because all of the shareholders of SXGL have provided a power of attorney (as described below) pursuant to which they have granted Shanxi Shipaipu the power to act as their exclusive agent with respect to all matters related to their ownership of the equity in SXGL, we, as the sole owner of Shanxi Shipaipu, may determine the profits to be paid by SXGL to Shanxi Shipaipu as a service fee.  SXGL must comply with applicable PRC laws, which require a company organized in the PRC to set aside at least 10% of its after-tax net profits based on PRC accounting standards each year to its statutory reserves until the accumulative amount of such reserves reaches 50% of its registered capital.
 
Exclusive Option Agreement.    Shanxi Shipaipu entered into an exclusive option agreement on April 3, 2011 with each of the shareholders of SXGL,  Xudong Liu and Lizi Liu, as well as SXGL itself, pursuant to which Shanxi Shipaipu has an exclusive option to purchase, or to designate another qualified person to purchase, to the extent permitted by PRC law and foreign investment policies, part or all of the equity interests in SXGL owned by Xudong Liu and Lizi Liu.  In addition, Shanxi Shipaipu has an exclusive option to purchase, or to designate another qualified person to purchase, the assets of SXGL.  To the extent permitted by the PRC laws, the purchase price for the entire equity interest shall equal the actual price designated by Shanxi Shipaipu to the extent permitted by relevant laws and regulations. The exclusive option agreement has a 30 year term.
 
Power of Attorney.   Xudong Liu and Lizi Liu each signed a power of attorney dated April 3, 2011 providing Shanxi Shipaipu the power to act as his exclusive agent with respect to all matters related to his ownership of SXGL, including the right to attend shareholders’ meetings of SXGL and the right to exercise voting rights to which he is entitled under PRC law.
 
Share Pledge Agreement.    Pursuant to separate share pledge agreements dated April 3, 2011, each of  Xudong Liu and Lizi Liu pledged his equity interest in SXGL to Shanxi Shipaipu to secure SXGL’s’ obligations under the exclusive business cooperation agreement as described above. In addition, the shareholders of SXGL agreed not to transfer, sell, pledge, dispose of or create any encumbrance on any equity interests in SXGL that would affect Shanxi Shipaipu’s interests. The share pledge agreement will expire when SXGL fully performs its obligations under the exclusive business cooperation agreement described above.  The share pledges have been registered with the local Administration of Industry and Commerce branch in the PRC.
 
Shanxi Zhonglian
 
Juan Kong owns 100% of Shanxi Zhonglian. Shanxi Ruixingtong, Ms. Juan Kong and Shanxi Zhonglian entered into a series of contractual arrangements on April 3, 2011 through which we:
 
·      exercise effective control over Shanxi Zhonglian through, among other things, (i) exercising the shareholder rights of Shanxi Zhonglian pursuant to the power of attorney executed by such shareholders, (ii) directing its corporate governance and management by designating its key management members including its directors, supervisors, general manager and other senior management members, and (iii) exclusively providing services necessary for Shanxi Zhonglian’s business operation;
 
·      receive substantially all of the economic benefits from Shanxi Zhonglian for the services provided by us, including without limitation, technology consulting services, marketing consulting services and general management services; and

 
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·      have an exclusive option to purchase all of the equity interests in Shanxi Zhonglian when and to the extent permitted under PRC law.
 
As a result of these contractual arrangements, we are the primary beneficiary of Shanxi Zhonglian, and treat it as our variable interest entity under generally accepted accounting principles in the United States. We have consolidated the financial results of Shanxi Zhonglian into our consolidated financial statements in accordance with U.S. GAAP.
 
The following descriptions summarize the contractual arrangements entered into between our wholly owned subsidiary, Shanxi Ruixingtong, and Shanxi Zhonglian:
 
Exclusive Business Cooperation Agreement.  Pursuant to the exclusive business cooperation agreement entered into on April 3, 2011 between Shanxi Ruixingtong and Shanxi Zhonglian, Shanxi Ruixingtong provides technical and consulting services related to the business operations of Shanxi Zhonglian. As consideration for such services, Shanxi Zhonglian has agreed to pay to Shanxi Ruixingtong a service fee equal to 100% of the after-tax profits of Shanxi Zhonglian.  The term of this agreement is 30 years from the date thereof. Shanxi Zhonglian may terminate the agreement upon Shanxi Ruixingtong’s gross negligence or commission of a fraudulent act against Shanxi Zhonglian.  Shanxi Ruixingtong may terminate the agreement at any time upon giving 30 days’ prior written notice to Shanxi Zhonglian.
 
The service fee to be paid by Shanxi Zhonglian to Shanxi Ruixingtong has not yet been determined because the parties have agreed that the service fee is to be calculated based on the annual income of Shanxi Zhonglian, which can only be determined after the completion of the annual audit of Shanxi Zhonglian.  Because the shareholder of Shanxi Zhonglian has provided a power of attorney (as described below) pursuant to which he has granted Shanxi Ruixingtong the power to act as his exclusive agent with respect to all matters related to their ownership of the equity in Shanxi Zhonglian, we, as the sole owner of Shanxi Ruixingtong, may determine the profits to be paid by Shanxi Zhonglian to Shanxi Ruixingtong as a service fee.  Shanxi Zhonglian must comply with applicable PRC laws, which require a company organized in the PRC to set aside at least 10% of its after-tax net profits based on PRC accounting standards each year to its statutory reserves until the accumulative amount of such reserves reaches 50% of its registered capital.
 
Exclusive Option Agreement.    Shanxi Ruixingtong entered into an exclusive option agreement on April 3, 2011 with the shareholders of Shanxi Zhonglian, Juan Kong, as well as Shanxi Zhonglian itself, pursuant to which Shanxi Ruixingtong has an exclusive option to purchase, or to designate another qualified person to purchase, to the extent permitted by PRC law and foreign investment policies, part or all of the equity interests in Shanxi Zhonglian owned by Juan Kong.  In addition, Shanxi Ruixingtong has an exclusive option to purchase, or to designate another qualified person to purchase, the assets of Shanxi Zhonglian.  To the extent permitted by the PRC laws, the purchase price for the entire equity interest shall equal the actual price designated by Shanxi Ruixingtong to the extent permitted by relevant laws and regulations. The exclusive option agreement has a 30 year term.
 
Power of Attorney.   Juan Kong signed a power of attorney dated April 3, 2011 providing Shanxi Ruixingtong the power to act as his exclusive agent with respect to all matters related to his ownership of Shanxi Zhonglian, including the right to attend shareholders’ meetings of Shanxi Zhonglian and the right to exercise voting rights to which he is entitled under PRC law.
 
Share Pledge Agreement.    Pursuant to separate share pledge agreements dated April 3, 2011, Juan Kong pledged his equity interest in Shanxi Zhonglian to Shanxi Ruixingtong to secure Shanxi Zhonglian’ obligations under the exclusive business cooperation agreement as described above. In addition, the shareholder of Shanxi Zhonglian agreed not to transfer, sell, pledge, dispose of or create any encumbrance on any equity interests in Shanxi Zhonglian that would affect Shanxi Ruixingtong’s interests. The share pledge agreement will expire when Shanxi Zhonglian fully performs its obligations under the exclusive business cooperation agreement described above.  The share pledges have been registered with the local Administration of Industry and Commerce branch in the PRC.

 
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However, as discussed under the heading “Risk Factors—Risks Related to Our Corporate Structure” above, there are numerous risks related to these contractual arrangements.  For example, there are uncertainties regarding the interpretation and application of the relevant PRC laws, rules and regulations. If a PRC government authority determines that our corporate structure, the contractual arrangements underlying our corporate structure or the reorganization we undertook to establish our current corporate structure violate any applicable PRC laws, rules or regulations, the contractual arrangements may become invalid or unenforceable, and we could be subject to strict penalties and be required to obtain additional governmental approvals from the PRC regulatory authorities. In addition, the contractual arrangements may not be as effective in providing operational control or enabling us to derive economic benefits as ownership of controlling equity interests.
 
As a result of consolidating the financial results of SXGL and Shanxi Zhonglian, 100% of our revenue during the two years ended April 30, 2010 and the nine months ended January 31, 2011 was derived from SXGL and Shanxi Zhonglian.

 
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Organizational Structure Chart
 
The following chart reflects our organizational structure as of the date hereof:
 
 
 
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Capital Expenditures
 
 Our capital expenditures consist primarily of expenditures on construction in progress and on  property, plant and equipment. Capital expenditures on construction in progress, which includes construction of a new production line and a new plant, for the years ended April 30, 2010 and 2009, were $1.2 million and $5.1 million respectively. Capital expenditures on property, plant and equipment which includes the expenditure on the new machinery and equipment to expand our production capacity and upgrade our manufacturing facility, for the years ended April 30, 2010 and 2009, were $4.713221 million and $ 1,737,126 million..
 
During the years ended April 30, 2010 and 2009, $6,210,995 and $1,306,300 were transferred from construction in progress to plant and equipment, respectively.
 
If available liquidity is not sufficient to meet our expansion plans, our plans include considering pursuing financing arrangements. However, there is no assurance that, if required, we will be able to raise additional capital. In the alternative, in the event that we raise capital by issuing equity or convertible debt securities, such issuances could result in substantial dilution to our shareholders.
 
Registered office
 
The address of our registered office in the British Virgin Islands is: Akara Building, 24 De Castro Street, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands. The telephone number of the registered office is (284) 494-4840.
 
4B. Description of Business
 
Business of the Group

OVERVIEW
 
We are a mid-tier petroleum and natural gas line pipe manufacturer in China. We focus on the design, manufacture and servicing of spiral submerged arc welded pipes, or SSAW pipes, that are used to transport crude oil, refined petroleum products and natural gas, among others. and high frequency straight seam electric resistance welded pipes, or ERW pipes. We led the PRC industry in terms of production capacity and the number of production lines for SSAW pipes as of April 30, 2010. With 11 production lines including ten SSAW production lines and one ERW production line that have a collective annual production capacity of 500,000 tonnes, we increased our market share of P.R.C. transmission welded steel pipe and were ranked the seventh among the approved SSAW pipe manufactuers in terms of SSAW sales according to INDUSTRY ANALYSIS AND FORECAST REPORT ON P.R.C. TRANSMISSION WELDED STEEL PIPE. As one of the few approved SSAW pipe suppliers to China’s major petroleum and natural gas companies and a major ERW pipe supplier, we are well positioned to benefit from our rapidly growing industry and the planned pipeline projects of our major customers.

 
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We have long-standing customer relationships with some of China’s largest petroleum and natural gas companies, which we have established as a result of our solid track record. The natural gas industry in the PRC has entered into a high-speed development period. However, natural gas is unique as compared with other kinds of energy because it exists in the form of gas state. Therefore, its transmission means depends on pipelines (especially for long distance land and sea transmission). The natural gas industry development of a country largely depends on the construction situation of pipeline network in the nation. Our extensive supply of SSAW pipes to natural gas pipeline network projects, in particular milestone projects such as the First and Second West-East Gas Pipelines and PRC Provincial and Municipal Natural Gas Pipeline Network have helped raise industry perception of the quality of SSAW pipes. Shanxi Province, for example, is passed through by three national natural gas pipelines: the First West-East Gas Pipeline, the Shaanxi-Beijing Pipeline and the Second Shaanxi-Beijing pipeline. These invaluable gas pipelines usher in and guarantee adequate natural gas resources for the whole province. Our SSAW pipes were installed in various projects for the construction of Shanxi Provincial Natural Gas Pipeline Network and were recognized as a superior supplier of SSAW pipes. Our products contributed to a significant part of the construction of Shanxi Provincial Natural Gas Pipeline Network. In just 6 years, more than 3000 km pipeline network was finished and our products stand for 76% of the market share. Our superior performance in the construction of Shanxi Provincial Natural Gas Pipeline Network and the accumulation of our experience in providing high-quality products with low cost that meets the requirement for provincial pipeline network construction strengthened our reputation of being a reliable steel pipe supplier with the ability to produce high-performance products adapted to various customers’ requirements, such as X80 SSAW pipes, with low cost and time efficiency and positioned us favorably to secure future contracts. We were further invited to supply SSAW pipes to the projects such as Henan Provincial Natural Gas Pipeline Network and Regional Natural Gas Pipeline Network for Inner Mongolia Autonomous Region. Our company distinguished itself as the winner of the project bidding for the Changqing Gas Field-Wuhai-Linhe Gas Transmission Pipeline Project. Our SSAW pipes under the contract were 185km, over 61% out of the 300 km SSAW pipes needed for the whole project. All of the products under the contract were recognized as meeting prevailing global industry standards. By pioneering the development of high performance products, such as X80 SSAW pipes, and promoting the industry's widespread adoption of these products, we continuously build upon our track record of industry leadership.
 
We believe that we are one of the few suppliers in China with SSAW pipes that meet the high pressure and large diameter requirements for the transportation of crude oil, refined petroleum products and natural gas over long distances. We differentiate ourselves from our major competitors by offering comprehensive quality services encompassing pre-sale, oiling processing, transportation and maintenance services for our steel pipes. We can offer specific requirements on tolerances, execution, length, mechanical as well as corrosion properties on request.We believe that our customer-oriented service model and ongoing support services provide us with a platform to establish long-standing customer relationships and generate recurring business
 
In addition to our SSAW pipes, we produce high frequency straight seam electric resistance welded pipe , or ERW pipes, which are widely used in engineering purposes, fencing, scaffoldings, line piping and many more and which are known for their toughness, performance and corrosion resistance.
 
Our production facilities are strategically located in Yuci,Jinzhong City,  Taiyuan City of Shanxi Province and Xi’an in Shaanxi Province, in proximity to major highways, railway lines and national gas pipelines for low-cost and timely delivery of our products across Chian as well as to major shipping ports for convenient exportation. The location of each of our manufacturing facilities also ensures the stable supply of energy and raw materials and ready access to the skilled labor required for our operations.
 
During the period, we experienced significant revenue and profit growth. For the year ended April 30, 2009 and the year ended April 30, 2010, SXGL generated revenue of $152.51 million and  $146.83 million, respectively. SXGL’s net profit for the year ended April 30, 2009 and the year ended April 30, 2010 was $4.97 million and $6.57 million, respectively.
 
Our Growth Strategy
 
Broadening our geographical coverage domestically and internationally.
 
While we have already established a strong position in the PRC pipeline industry by supplying to China's large-scale national and transnational pipeline projects, we plan to broaden our coverage by entering the sizeable regional markets in China. Regional pipeline infrastructure represents approximately half of the total length of pipelines in China. Strong petroleum and natural gas demand as well as urbanization in China is expected to result in the increased construction of regional pipeline networks, which are critical for the economical distribution of refined petroleum products. These construction activities are expected to create significant demand for SSAW pipes and ERW pipes, which are commonly used in regional and municipal distribution networks. We plan to leverage our competitive strengths, capital resources and manufacturing knowledge to penetrate regional markets in China and secure additional revenue sources for our business.

 
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In 2009, a significant portion of our revenue was generated by sales to foreign countries, including the United States, Spain, Italy, a number of Latin American countries as well as countries in Southeast Asia.  However, the United States and the European Union subsequently passed anti-dumping laws, thereby forcing us to cease exports to customers in those regions.  In addition, due to fierce competition and considering the strong demand in the domestic market, we reduced the production and sales to other Asian countries since August 2009 and we generated virtually no revenue in fiscal year 2010 in Asia (excluding China), as compared to approximately $19.8 million, or 13% of total revenue, in fiscal year 2009.  As a result, in 2010, we exported our products to other emerging markets, such as Africa, where we generated approximately $16.4 million, or 11.2% of total revenue, in fiscal year 2010.  However, competition in those regions has subsequently increased significantly, and as a result our revenue to export markets decreased to $8.7 million, or 6% of overall revenue, during the nine months ended January 31, 2011, as compared to $16.9 million, or 14.2% of overall revenue, during the nine months ended January 31, 2010.  Consequently, our current strategy is to focus almost exclusively on the PRC market. To the extent that conditions in other regions cease over time, we would attempt to export to those markets.
 
Pursuing strategic relationships and acquisition opportunities
 
We intend to evaluate and pursue acquisition opportunities and strategic partner relationships which could enhance our product offerings, customer base or geographic reach, or which could allow us to achieve economies of scale and operating efficiencies.  We currently have no plans, agreements or commitments with respect to any material acquisitions or strategic relationships. However, one area in which we may seek an acquisition target in the future is anti-corrosion treatment, which our customers have been increasingly demanding. Currently, we cooperate with a PRC company that provides such treatment for our products.
 
Competitive Advantages
 
Our management believes that the following competitive strengths differentiate us from other domestic and international competitors and are the key factors to our success:
 
A Leading Petroleum and Natural Gas Pipe Manufacturer in China
 
Based on our extensive experience in the industry, we believe that SXGL is one of the leading enterprises in the PRC in the design, engineering, manufacture and sale of petroleum and natural gas line pipes.  We manufacture and sell an array of petroleum and natural gas pipes which are used in high pressure petroleum and natural gas pipelines in the PRC and internationally.  Our facilities are located in Yuci Industrial Park, which is in Jinzhong City of Shanxi Province, Taiyuan City of Shanxi Province and Xi’an City of Shannxi Province.  According to the Industry Analysis and Forecast Report on P.R.C. Transmission Welded Steel Pipe, in 2010, our products were ranked 7th in sales in the PRC for SSAW pipes and ranked 10th in sales in the PRC for ERW pipes.  In addition, until the U.S. and European Union imposed anti-dumping rules within the past several years, we were a large exporter of these pipes to numerous industrial countries. As one of the few approved SSAW pipe suppliers to China’s major petroleum and natural gas companies and a major ERW pipe supplier, we are well positioned to benefit from our rapidly growing industry and the planned pipeline projects of our major customers.
 
Established Track Record of Providing Reliable and Industry Leading Products
 
We have a solid track record of supplying SSAW pipes for major petroleum and natural gas pipeline projects in China as well as overseas and transnational pipeline projects undertaken by numerous major companies in the petroleum and natural gas industry in the PRC and internationally. Our production facilities and manufacturing processes that meet stringent customer requirements ensure our continued status as an approved oil and gas line pipe supplier to these large enterprises, and we have maintained such status since these customers began constructing petroleum and natural gas pipelines. As a result of increasingly stringent customer requirements, a strong track record of supplying reliable products is required to secure orders for major pipeline projects in China.

 
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Our extensive supply of SSAW pipes to natural gas pipeline network projects, and in particular milestone projects such as the First and Second West-East Gas Pipelines and the PRC Provincial and Municipal Natural Gas Pipeline Network, have enhanced the reputation of the quality of SSAW pipes in the PRC. In addition, our SSAW pipes were installed in various projects for the construction of the Shanxi Provincial Natural Gas Pipeline Network and as a result we were recognized as a superior supplier of SSAW pipes. In just six years, this 3,000-plus km pipeline network was finished, and our products represent 76% of the market share for this project.  In addition, we were invited to supply SSAW pipes to the Henan Provincial Natural Gas Pipeline Network project and the Regional Natural Gas Pipeline Network project in Inner Mongolia, among other high profile projects, because of our solid track record.  Our company distinguished itself as the winner of the project bidding for the Changqing Gas Field-Wuhai-Linhe Gas Transmission Pipeline Project. Our SSAW pipes constituted more than 60% of the 300 km SSAW pipes needed for the whole project.  By pioneering the development of high performance products, such as X80 SSAW pipes, and promoting the industry's widespread adoption of these products, we continuously build upon our track record of industry leadership.
 
The following list is a sample of some of the recent projects in which our SSAW pipes were used in both the domestic and the international markets:
 
Shanxi Provincial Natural Gas Major Pipe
Network Project
Shanxi Duanshi-Jincheng-Boai Coal-bed
Gas Transportation Pipeline Project
Inner Mongolia Su-Dong-Zhun Natural gas
Transportation Pipeline Project
Ningxia Second Civil Natural Gas
Transportation Pipeline Project
Changqing Gas Field-Wuhai-Linhe Gas
Transportation Pipeline Project
Taiyuan Gas Pipeline Project
Taiyuan Heating Power Pipe Network
Project
Singapore Natural Gas Transportation
Pipeline Project
Algeria Natural Gas Transportation Pipeline Project
 
In addition, we are currently supplying to or have secured contracts to supply SSAW pipes to the following major petroleum and natural gas pipeline projects:
 
Hongdong-Anze-Changzi Gas Transportation
Pipeline Project
Boai-Zhongzhou Aluminium Special Gas
Transportation Pipeline Project
Changqing Gas Field-Hohhot Double-Track
Natural Gas Transportation Pipeline Project
Xuedian-Xinmi-Dengfeng Branch Pipeline of
Second West-East Gas Pipeline
Algeria Oil & Natural Gas Transportation
Pipeline Project

 
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Our Location in the PRC Provides Strategic Advantages
4
Our strategically located production facilities contribute to our operational efficiency and competitiveness. We believe that our facility, which is located in central Shanxi Province, is the only steel pipe manufacturing facility within approximately 500 km.   As a result, we believe that we control approximately 85% of the pipes manufactured according to national standard set for most of welded steel pipes for petroleum and natural gas transmission such as GB/T 9711.2-1999 ( Petroleum and Natural Gas Industries--Steel Pipe for Pipelines--Technical Delivery Conditions--Part 2: Pipes of requirement class B) and used for high-end users of petroleum and natural gas. We also control more than 65% of the pipes manufactured according to national standard set for most of welded steel pipes for thermal power and water supply and drainage such as GB/T 9711.1-1997 (Petroleum and natural gas industries--Steel pipe for pipelines--Technical delivery conditions--Part 1:Pipes of requirements class A) and used for medium and low end users of thermal power and water supply and drainage in the PRC. Our location also provides a strong base for us to service Inner Mongolia and provinces of the Northwest China markets, which have high levels of demand for steel pipes with few local steel pipe manufacturers.  We believe that our key customers select suppliers based on transportation costs, among other factors. Our delivery advantage contributes to our success in bidding for projects and is critical to maintaining low operating costs. In addition, our production facilities are located in a region that gives us ready access to raw materials due to the fact that most raw materials suppliers in this area are in close proximity to our facility, reliable energy supplies and skilled labor at competitive costs.
 
Experienced Management and Operational Teams with Domestic PRC International Market Knowledge
 
Our senior management team and key operating personnel have extensive management skills, relevant operating experience and industry knowledge.  In particular, Mr. Xudong Liu, our Chairman, has extensive experience managing and operating companies in the pipe manufacturing industry.  We believe our management team’s experience and in depth knowledge of the market in China and internationally will enable us to continue to successfully execute our expansion strategies. In addition, we believe our management team’s strong track record will enable us to continue to take advantage of market opportunities that may arise.
 
Strong In-House Research and Development Capabilities
 
Our research and development team consists of members educated in top universities in China, and our management team has 10 years of industry experience on average. We have built a recognized brand name, GL, in the industry by introducing innovative solutions to the petroleum and natural gas pipeline industry, and particularly SSAW and ERW pipes, in China and internationally.  Our engineering team works closely with our customers in order to understand their requirements.  We have been able to introduce new equipment to enhance cost saving and time reduction in the manufacturing of pipes to be used in numerous petroleum and natural gas pipeline projects.
 
Efficient Proprietary Production Technology
 
We continually pursue technological improvements to our manufacturing processes via our strong in-house development teams.  We, together with China CAMC Engineering Co., Ltd., have been granted one utility model patent for our multi-layer steel pipe external package packing apparatus and one invention patent for the method of multi-layer steel tube package packing by the SIPO (State Intellectual Property Office of the People’s Republic of China).  These patents are intended to protect our technologies, including production processes for the production of pipes. Our research and development efforts have generated technological improvements that have been instrumental in controlling our production costs and increasing our operational efficiency.
 
Rigorous Quality Control Standards
 
Consistent with our continuing commitment to quality, we impose rigorous quality control standards at various stages of our production process.  We strictly comply with various national and international quality standards with respect to the manufacture of pipes for use in the petroleum and natural gas industry. Our certifications and accreditations include Manufacture License of Special Equipment (pressure pipeline), Certificate of Access to the EnergyAhead (A level supplier) by CNPC, the Cerfiticate of Authority from the American Petroleum Institute (“API”)(API 5L and API 5CT Cerficiates)  to use the official API monogram on its SSAW pipes whose quality system that met the API-5L international standards Import and Export Registration Certificate, the Certificate of Enterprise of Observing Contract and Valuing Credit, the Certificate of Famous Chinese Enterprises and an ISO 9001: 2000 certification.  We believe that these certifications, together with the numerous national awards that we have been awarded demonstrate our commitment to producing high-quality products as well as providing us with a competitive advantage over some of our competitors in certain international markets and in China.

 
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Our Products
 
We manufacture and sell welded steel pipes for transmission of materials, including primarily petroleum and natural gas.  We generate substantially all of our revenue from the sale of SSAW pipes and ERW pipes.
 
Spiral submerged arc welded pipe (SSAW pipe)
 
SSAW pipes are installed primarily in petroleum and natural gas pipelines to transport crude oil, petroleum products and natural gas as either the main pipes or long distance pipes.  The SSAW pipes are also used in gas mains, water pipes, irrigation pipes, sanitation pipes, steel tubular pipes, structural sections in building construction and structural and mechanical pipes in marine engineering projects. SSAW pipes are particularly suitable for use in the petroleum and natural gas industry due to their tolerance to high temperature and pressure and their impact strength, which properties enable SSAW pipes to withstand sudden impact loads. SSAW pipes are manufactured from hot-rolled steel coils using an automated submerged arc welding process that enables the manufacture of pipes with large outer diameters with narrow steel sheets. See "Manufacturing Process- Production Process" for more details on our SSAW pipe production process and anti-corrosion treatment process.
 
Our SSAW pipes are produced according to American Petroleum Institute, or API, standards, namely API 5L specifications for line pipes that are designed for the transportation of petroleum and natural gas, among other liquids. API 5L specifications include a stringent set of product criteria regarding steel material, permissible variations in wall thickness, tensile strength requirements and testing requirements. We also cooperate with a third party  in the PRC that owns equipments located in our facility that are used to treat our pipes with anti-corrosion treatments.  Customers have been increasingly demanding these treatments, thereby rendering such service by closely cooperation with a third party adds value to our products.  Our SSAW pipes are manufactured to meet customer specifications with respect to the steel grade and dimensions of SSAW pipes.
 
Electric resistance welded pipe (ERW pipe)
 
ERW pipes are made from hot-rolled steel Coils/strip and are of a smaller diameter than SSAW pipes due to the limitation of the width of steel strips used for the production of ERW pipes. In order to manufacture straight seam steel pipes with a certain diameter, steel strips with corresponding width must be selected. SSAW, however, is flexible and convenient in its choice of the width of steel strips and can be manufactured of a larger diameter. This smaller size makes the ERW pipe more suitable as sub-pipelines instead of being used as main long distance pipelines like the SSAW pipes. ERW pipes have a longitudinal weld running the length of the pipe that is formed by resistance heating or high frequency induction heating.
 
Competition
 
Compared to other developing countries, the total length of China’s pipeline infrastructure in relation to the country’s energy consumption is low.  This relatively underdeveloped pipeline network suggests that pipeline infrastructure construction should continue to increase in order for China to compete with other developing countries.  There has been increasing demand in the PRC for our products, which is why our revenue in the PRC increased from $116.6 million, or 76.4% of overall revenue during fiscal year 2009 to $125.6 million, or 85.6% of overall revenue during fiscal year 2010, and from $101.9 million, or 85.8% of overall revenue, during the nine months ended January 31, 2010 to $137.7 million, or 94% of overall revenue, during the nine months ended January 31, 2011.  Continued growth of pipeline construction in the PRC is expected to cause increased competition amidst our existing and future competitors in the PRC.
 
In 2009, a significant portion of our revenue was generated by sales to foreign countries, including the United States, Spain, Italy, a number of Latin American countries as well as countries in Southeast Asia.  However, the United States and the European Union subsequently passed anti-dumping laws, thereby forcing us to cease exports to customers in those regions.  In addition, due to fierce competition and considering the strong demand in the domestic market, we reduced the production and sales to other Asian countries since August 2009 and we generated virtually no revenue in fiscal year 2010 in Asia (excluding China), as compared to approximately $19.8 million, or 13% of total revenue, in fiscal year 2009.  As a result, in 2010, we exported our products to other emerging markets, such as Africa, where we generated approximately $16.4 million, or 11.2% of total revenue, in fiscal year 2010.  However, competition in those regions has subsequently increased significantly, and as a result our revenue to export markets decreased to $8.7 million, or 6% of overall revenue, during the nine months ended January 31, 2011, as compared to $16.9 million, or 14.2% of overall revenue, during the nine months ended January 31, 2010.  Consequently, our current strategy is to focus almost exclusively on the PRC market. To the extent that conditions in other regions cease over time, we would attempt to export to those markets.

 
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We believe that being located in China provides us with a number of competitive factors within our industry, including the following:
 
 
·
Pricing.  Flexibility to control pricing of products and the ability to use economies of scale to secure competitive pricing advantages;
 
 
·
Technology.  Ability to manufacture products efficiently, utilize low-cost raw materials, and to achieve better production quality; and
 
 
·
Barriers to entry.  Technical knowledge, access to capital, local market knowledge and established relationships with suppliers and customers to support the development of commercially viable production facilities and products.
 
We face competition in all aspects of our business. We compete primarily against PRC manufacturers based on product and service quality, business track record and reputation, production capacity, production technology, capital resources and proximity to pipeline projects and suppliers. We believe that new market entrants face substantial obstacles to entry including the challenge of gaining customer acceptance, particularly in relation to the supply of petroleum and natural gas line pipes for which customers require potential suppliers to have a strong track record; the technical knowledge required to develop high-performance and reliable products; and the significant capital required to achieve the production volumes required to keep pace with the demand of major customers and maintain competitive pricing.
 
We compete against certain competitors in China for sales of SSAW pipes that are suitable for large-scale petroleum and natural gas pipelines. Our five largest competitors are Baoji Petroleum Steel Pipe Co., Ltd., The Steel Pipe Works Of North China Petroleum, Shandong Shengli Steel Pipe Co., Ltd., Shashi Steel Pipe Works of Jianghan Petroleum Administration Bureau, SINOPEC. and Shanghai BSW Petro-pipe Co., Ltd.
 
We compete against certain competitors in China for sales of ERW pipes. Our five largest competitors are Panyu Chu Kong Steel Pipe Co., Ltd., Juyi Steel Pipe Co., Ltd., Liaoning Large-scale Steel Pipe Co., Ltd., Jiangsu Yulong Steel Pipe Co., Ltd. and Huludao City Steel Pipe Industrial Co., Ltd.
 
We believe that we are well-positioned to compete effectively in the PRC, and may in the future be able to re-enter international markets, including emerging markets such as Africa (to the extent we can be profitable) once global economic conditions ease, and that our strengths and strategies distinguish us from our competitors. See " Competitive Strengths" for a discussion of our competitive strengths.
 
We believe that we differentiate ourselves because we have built a recognized brand name in the industry and because we offer superior product quality, timely delivery and high value.
 
Seasonality
 
Our manufacturing and sales activities are generally not subject to seasonality. However, sales of our small-diameter SSAW pipes, are lower during winter than the rest of the year. We attribute this seasonality to the slowdown or suspension of the installation of regional and municipal pipeline networks during winter, particularly in northern China, due to inclement weather conditions.

 
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Our Raw Materials and Supply
 
Raw Materials
 
Hot rolled steel strips/coils are the primary raw materials required to manufacture our SSAW and ERW pipes.  Hot rolled steel strips/coils are categorized as: hot rolled steel strips (width below 900mm) and hot rolled steel coils (width above 900mm).The specifications of the hot rolled strips we purchase differ based on specific client requirements.
 
Our Supply Sources
 
We select our suppliers by assessing criteria such as the quality of materials supplied, the duration of the supplier’s business relationship with us, pricing, delivery reliability and response time to orders placed by us.  To minimize purchasing costs, we use a limited number of suppliers.  Because we purchase substantial quantities from these suppliers, we are often able to procure these products at competitive prices.  We usually enter into a one-year purchase agreement with each supplier and then order on a spot basis for each delivery.  We negotiate pricing with our suppliers on an arm’s length basis prior to the delivery of these supplies to us, based upon the prevailing market prices at such time and we settle the payment with these suppliers on a monthly basis.  For suppliers that we have not entered into year long purchase agreements with, we are usually required to make a prepayment equivalent to approximately 20% to 50% of the total purchase amounts to secure the supply contract. In most cases, our suppliers require us to settle the remaining balance before the delivery of raw materials.  We believe that these payment terms are in line with current market practices generally adopted in the PRC.  As we increase the scale of our production, we may need to establish a more diverse supplier network while attempting to continue to leverage our purchasing power to obtain favorable pricing and delivery and payment terms.
 
As both product price and quantity are, in general, specified in our sales contracts, any increase in raw materials prices that occurs after the signing of a contract with a customer will affect our profits.  Consequently, we have adopted a back-to-back procurement policy whereby we obtain a quotation of raw material prices, with a specific validity period, from our suppliers prior to the signing of a sales contract or the submission of tender document in a bid.  The pricing of the sales order or tender will be determined with reference to such quotation.  After the signing of the sales contract or successfully obtaining a tender, so long as we are within the validity period of the relevant raw material quotation, we then enter into a back-to-back purchase agreement with our supplier to purchase the quantity of raw materials necessary to fulfill the sales contract.  Notwithstanding the above, the terms of our sales contracts and purchase contracts are negotiated separately with our respective customers and suppliers.
 
In the year ended 30 April 2010, the suppliers (each of whom supplies us with hot rolled strips) from whom we acquired a significant amount of supplies, were as follows:
 
Supplier
  
Percentage
  
       
Company F
     11.90 %
Company G
     9.80 %
Company H
     5.0 %
Company I
     7.9 %
Company J
     3.5 %
 
In the year ended 30 April 2009, the suppliers (each of whom supplies us with hot rolled strips) from whom we acquired a significant amount of supplies, were as follows:
 
Supplier
  
Percentage
  
       
Company F
     30.20 %
Company G
     14.09 %
Company H
        
Company I
        
Company J
     12.1 %
 
 
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Purchases from our five largest suppliers amounted to 56.39% and 38.1% of our raw material purchases during fiscal years 2009 and 2010, respectively.
 
We are not dependent on any one of our suppliers, as we are able to source raw materials from alternative vendors should the need arise.  We have not experienced significant production disruptions due to a supply shortage from our suppliers, nor have we had any major dispute with a material supplier.
 
Volatility of Price of Raw Materials
 
The price of hot rolled Coils/strip fluctuates based on the price of coal, mine powder, iron alloy, scrap steel, state policy and market needs.  As discussed above under “– Our Supply Sources,” we attempt to offset any increase in raw materials by executing back-to-back agreements with suppliers and customers.
 
Manufacturing Process
 
Production Process
 
The production of our products involves various steps, including uncoiling, plate edging, butt welding, beveling and fly cutting.  The technology and procedures used in the above processes vary among the different products that we manufacture and depend upon the product specifications prescribed by a particular customer.
 

 
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Production Lines
 
We currently have 11 production lines, consisting of the following:
 
 
·
Ten production lines for SSAW pipes seven of which are located in our Yuci facility, one of which is located in our Taiyuan facility and two of which are located in our Xi’an facility, each composes of an uncoiling machine, a three-roller dismantling machine, a seven-roller flattening machine, an electric vertical roll, an end shearing and butt welding machine (with a milling welding machine), an edge milling machine, an automatic chip cleaner, a manual double vertical roll, an edge rust removal device, a cleaning device, a delivering machine, a forming machine and a centralizer.
 
 
·
One production line for ERW pipes, which is located in our Yuci facility which composes of uncoiling machine, dismantling machine, pinching rolling and flattening machine, electric vertical roll, transforming roll rlatform 1, transforming roll platform 2, hydro-dynamic vertical roll, shearing machine, cutting welding machine, pinch roll A, pinch roll B, loop device, seven-roller flattening machine, guiding roll, preliminary forming machine, cage roll forming machine, fine forming machine.
 
 
41
 

Quality Control
 
Consistent with our continuing commitment to quality, we impose rigorous quality control standards at various stages in the production process.
 
We strictly comply with various national and international quality standards with respect to the manufacture of pre-stressed materials. Our certifications and accreditations include the American Petroleum Institute (API), and the China Classification Society Quality Assurance Ltd. In addition, we have obtained an ISO 9001 certification.
 
Raw Material Quality Control
 
Each steel coil supplied to us is accompanied by a quality certificate containing an identification number and information on the specifications, weight and steel grade of the steel coil. We conduct sample testing on the steel coils that we receive to ensure that they meet our quality requirements for use in our production. Steel coil samples are subject to chemical analysis to determine the chemical composition and content of the sample. Our quality control team measures the dimension of steel coil samples, checks for visible nonconformities and conducts a tensile test to ensure that the tensile strength of the steel coil meets customer requirements. In addition, we conduct ultrasound testing on each steel coil to ensure that the thickness of the steel coil conforms to stated specifications. If quality defects are discovered, the entire batch of steel coils may be returned to the relevant steel mill which supplied the raw material for replacement.
 
Product Quality Control
 
In addition to our quality control procedures, our SSAW pipes are also manufactured in accordance with API 5L specifications, which provide the leading industry standard for the manufacture of pipes used for the transportation of water, petroleum and natural gas.  We utilize a fleet of state-of-the-art equipment in our production process to conduct detailed testing processes to aid our quality control, including  vacuum direct-reading spectrum instrument;  universal material testing machine; sharp impact test machine; X-ray inspection systems; X-ray imaging systems; and digital auto-UT inspection systems.  In addition, we are equipped with hydrostatic testing machines which have the ability to test the internal pressure tolerance of pipes and to detect any leakage.  We configure our testing equipment and instruments regularly to ensure the accuracy of our quality tests.  We believe that these measures will ensure that our products meet API 5L specifications with respect to chemical composition, physical properties, dimension and appearance.
 
In addition, we are equipped with hydrostatic testing machines which have the ability to test the internal pressure tolerance of pipes and to detect any leakage.  We believe that our x-ray systems, together with the other clients of our quality control system, are superior to those of many of our competitors, thereby providing us with a significant advantage in the marketplace.
 
Our quality control procedures also require inspections at various stages of our production process and on finished products to ensure that our finished products conform to their intended specifications. We require our quality control personnel to have relevant educational qualifications or work experience in quality control management. In addition to on-the-job training, we conduct regular internal and external training sessions and administer annual assessments for our quality control team. In addition to our internal inspections, our production process and products are also subject to periodic quality control inspections by government regulatory authorities and quality control teams retained by our customers.

 
42
 

Facilities
 
Under PRC law, land is owned by the state.  “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 have land-use right for facilities at our Yuci facility, Shanxi Province, each of which we utilize for production and for employee living quarters.  In addition, we use our Yuci facility for research and development activities.  Our Taiyuan facility (Shanxi Province) and our Xi’an facility (Shaanxi Province), which are leased, are used for production and employee living quarters.  We have paid all amounts relating to our properties. The land-use rights for our Yuci facility expire in 2053. The lease for our Taiyuan facility expires on January 1, 2020, the lease for our Xi’an facility expires on December 31, 2011. Our Yuci facilities cover an aggregate of approximately 144,298.15 square meters, and the land use rights for this facility expire in 2053.
 
As of April 30, 2010, our production facility in Yuci had a total gross floor area of 135,219.15 square meters and we employed 448 production personnel at that facility. Our Yuci facility contained seven SSAW production lines and one ERW production line with an annual production of approximately 129,645 and 142,959 tons in 2009 and 2010, respectively. As of April 30, 2010, our production facility in Taiyuan had a total gross floor area of approximately 2,980 square meters and we employed 63 production personnel at that facility. Our Taiyuan facility contained one SSAW production line with an annual production of approximately 30,258 and 29,856 tons in 2009 and 2010 respectively.  As of April 30, 2010, our production facility in Xi’an had a total gross floor area of approximately 6,099 square meters and we employed 61 production personnel at that facility. Our Xi’an facility contained two SSAW production lines with an annual production of approximately 25,349 and 23,761 tons in 2009 and 2010 respectively.  Historically, our facilities are closed for maintenance and repair for approximately one month each year.  We have not experienced any major interruptions to production due to an equipment failure.
 
We believe that our current property rights are sufficient for our current operations.
 
Sales, Marketing and Distribution
 
Sales and Marketing
 
We have been successful to date in maintaining long-term relationships with numerous customers by satisfying their commercial needs. In addition, our marketing team monitors the market and responds accordingly in order to increase our customer base. We have a dedicated marketing and sales team of 56 employees, 36 of whom proactively follows up on new sales leads.
 
Our marketing team develops strategies for the short-term and long-term by obtaining first-hand information about our products’ market positioning, monitoring national macro-economic policies, inquiring about current and future markets needs, following the progress of existing projects and the satisfaction of existing customers.  In addition, our technicians and sales representatives regularly visit governmental departments, construction development companies, design institutes, supervision institutions, national construction quality inspection institutions and builders to promote new products. The company participates in selected international or national exhibitions, including Tube China 2008, CIPPE 2009 (which is the largest petroleum exhibition in the world), China (Beijing) International Steel Tube Industry Expo 2009, and Tekno/Tube Arabia 2011 to promote the company and its products.
 
Bidding Process
 
Our SSAW pipe contracts are generally procured through public tendering. As is customary in our industry, the bidding process is used by pipeline project operators to solicit bid proposals from qualified suppliers. Qualified suppliers submit non-binding bid proposals to indicate their available production capacity and price levels. After sections of a pipeline project are awarded, the prices for pipes are finalized. Large-scale pipeline projects are generally awarded in stages as construction of the pipeline progresses, and the prices of the pipes are generally finalized and the chance of fluctuations or movements in the prices of raw materials is slim because the company takes the countermeasure of “price locking” and “stage-by-stage raw materials procurement” to evade the risk of the rise and fall in the price of raw materials.

 
43
 

Generally, the price that we submit in bid proposals reflects our costs of raw materials and labor, production expenses and profit. Because our raw material costs are passed onto our customers at cost, fluctuations in the price of our key raw materials have limited effect on us because we are able to pass substantially all price fluctuations of raw materials to our customers pursuant to our production and payment arrangements.
 
Warranties
 
We offer warranties for our SSAW pipes and ERW pipes and allow our customers to withhold 5% to 10% of contract amount for 12 to 18 months following product delivery as retention money against any major quality defects in our products. We generally permit the withholding of a certain percentage of the purchase price of the goods sold. If no major defects are discovered during the warranty period, our warranty arrangements require our customers to remit the held back monies. Historically, we have collected substantially all of the withheld money from our customers after the expiration of the relevant warranty period.
 
Distribution
 
Each of our manufacturing plants is equipped with facilities for cargo lifting, shipment and distribution. Products for domestic customers are distributed to the destination designated by our customers. Products for international customers are delivered either to carriers at various ports of exit in China or delivered to a designated destination overseas.
 
Technical After-Sales Services
 
The company generally assigns an employee to provide after-sales service for small projects and personalized on-site services for large projects.
 
Such services include:
  
 
·
Information notification on raw material and production process information;
 
·
Information notification on the estimation and execution of loading and dispatching;
 
·
Coordination Service for on-site cargo discharge, stack and organize onto a pallet and delivery process, On-site documentation acknowledgement and information transfer service;
 
·
Service for collection, acknowledgement and transfer of documentation and notes.
  
Technical support services include: Professional safety reminder service on cargo discharge and cargo stacking; Provision of professional tool support if necessary; Provision of professional solution to any issues arising from the use of pipes; Provision of pipe-related document support.
 
Our Customers
   
We sell the majority of our products domestically in China.  Since our inception, we have also exported our products to foreign countries, including the United States, Mexico, Spain, Australia, several countries in each of Asia, Latin America and Africa, Our customers are diverse in nature, as we sell our products directly to end users, to other manufacturers and to distributors, in each case depending on the nature of the product and the utilization of the product.
 
 
44
 

While we value our relationship with each of our customers, we believe that generally the loss of any particular customer, including our largest customers, would not materially impact our business in the long-term.  Many of our customer contracts relate to designated infrastructure projects which are performed during a defined period of time, and are not necessarily long-term in nature.  Accordingly, if any of our customers were to discontinue purchasing our products, we would actively seek new customers, which we have been successful doing in the past.
 
As of the year ended 30 April 2009 and 2010, sales to our five largest customers, in the aggregate, accounted for approximately 17.9 % and 28.9 % of our total sales, respectively.  The following table provides the name of each customer that contributed to 8% or more of our revenues in each of the year ended 30 April 2009 and 2010 and the percent of total revenues generated from such customer during these periods.

Name of Customer
  
2009 Revenues
(%)
    
2010 Revenues
(%)
  
             
Customer A
     11.6 %     8.2  
                 
Customer B
     * %     8.1 %

* Less than 8% of our annual revenues.
 
Research and Development

Our research and development efforts are focused on three objectives:
 
 
·
Superior product safety and quality;
 
 
·
Reduction of operating costs; and
 
 
·
Sustaining growth through the development of new products.
 
We have a research and development staff comprised of 43 employees at our Yuci facility.  We spent $33,111 and $11,713 in the fiscal years 2010 and 2009, respectively, on our research and development activities.
 
We regularly train the members of our research and development department in order to consistently enhance our research and development capabilities in the field of pipe manufacturing. We have developed a business model that involves a very close interrelationship between our research and development department and our product development and marketing departments. As a result, we focus our research and development activities on projects that would enable us to branch out our products into new desired markets.  In addition, we conduct research and development activities that enable us to increase our market share in existing markets in the PRC and internationally.
 
 
45
 
 
 
We also focus certain of our research and development activities on higher margin products. As for the R&D mode, we gives priority to independent R&D and innovation, and cooperates with the pipe research institute, the pipeline bureau, the welding research institute as well as the leading production and inspection equipment suppliers for the purpose of joint development and introduction of advanced technologies.
 
Due to the development trend of the petroleum and natural gas pipeline (particularly the natural gas pipeline) demanding for high strength, high toughness, large wall thickness, large deformation resistance and HIC resistance, we developed Grade X80, 1219*18.4 SSAW pipe. The steel strips are purchased from Taiyuan Iron and Steel Co., Ltd. (hereafter referred to as TISOC). The trial-production on 3000 SSAW pipe mill latest put into use was successful. Through the type test by CNPC Pipeline Research Institute, an authority in the industry, the parameters, such as appearance, geometric dimensions, physical and chemical properties, and water pressure blasting, etc. meet GB/T9711.2-1999 Petroleum and natural gas industries- Transmission Welded Steel Pipe -Technical delivery conditions-Part 2: Pipes of requirements class B, and Q/SY GJX0102-2007 Technical specifications for SSAW pipes used for the second West-to-East gas pipeline project, the most stringent requirements in the industry at present. On the basis of such success, we cooperated with TISOC on the trial production of X100 and X120 high-class pipes, which is going on presently. The small amount of trail production and the new product evaluation will be conducted upon the arrival of materials, so as to reserve the technology for the upgrading and updating of products in the future.
 
The steel pipes are more frequently used by various diversion works emerging in China these years. They feature in thin wall, large diameter, less transmission pressure (3-5MPa for the most part) and the conventional materials. Compared with spheroidal graphite pipe, concrete pipe and other traditional pipes, the steel pipes has the advantage of less damage along the line and high pressure resistance. However, the high costs and slow progress of the conventional welding connection is the main factor leading to the relatively low competitiveness of the welded pipes. There have been complete sets of standards and construction specifications for the connection of bell and spigot in foreign countries. Therefore, through the cooperation with foreign clients, we fabricate the bell and spigot of steel pipe in Spain water delivery project (1829*14.3 steel pipe). The equipment and process has become mature and laid foundation for the domestic application and dissemination. Currently the special bell and spigot connection plan has been customized for the client in Ningxia Great Wall Water’s water delivery project. Furthermore, we will also fabricate non-weld slide-on rubber gasket sealing bell and spigot.
 
The production equipments of welded pipe manufactures in China are of less difference, but their capabilities on the equipment transformation and renovation vary greatly. We are one of the earlier domestic manufactures of welded pipes and finishing equipment, and we own a large group of experienced technicians and strong capability in equipment transformation and renovation. Through the technical transformation of the production equipment, our welded pipe production line ranks top concerning the technology and efficiency. The new 3000 SSAW pipe mill adopts the advanced technology in the industry, and the equipment capability and products meet the requirements of the second West-to-East gas pipeline project. The high cost-performance ratio makes it competitive in the market.
 
The weld quality of the ERW pipes relies on the plate edge quality condition to a great extent, whereas the ERW mill mostly adopts the method of shearing. Since the sheared plate edges always have some tearing, the adverse impact on the weld seam can not be eliminated completely. Currently the new edge milling machine is arranged on the production line for the second processing of the plate edges, which can both ensure the precise working breadth of the steel plate and mill the groove in accordance with the process, thus guaranteeing the steady production of the high-grade and thick-wall steel pipes and increasing the use ratio of raw materials as well.
 
Since the acid gases (hydrogen sulfide for example) in the petroleum or natural gas may corrode the pipeline resulting in cracks even pipeline failure and other severe consequences, so the capability to resist hydrogen sulfide and other acid gases is of great significance to the petroleum and natural gas pipeline. We have cooperated with TISOC in Shanxi CBM Transmission Project to supply acid-resistant SSAW pipes (X60) successfully. Currently, we are cooperating with the Pipe Research Institute to research the ERW pipes serving in acid environment and develop high-end acid-resistant steel pipe products with high value-added and high scientific and technological content, thus enhancing the comprehensive competitiveness in the market.
 
 
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To boost the R&D capability, the welding laboratory is being built, the test and inspection equipment deployed, and the welding process matching parameters tested in laboratory in advance, so as to prepare for the service of new technology, new materials and new process.
 
Intellectual Property
 
We rely on a combination of patents, trademarks, domain names and confidentiality agreements to protect our intellectual property. Our manufacturing processes are based on technology developed primarily in-house by our research and development and engineering personnel.
 
With respect to proprietary know-how that is not patentable and processes for which patents are difficult to enforce, we rely on, among other things, trade secret protection and confidentiality agreements to safeguard our interests. All of our research and development personnel have entered into confidentiality and proprietary information agreements with us. These agreements address intellectual property protection issues and require our associates to assign to us all of the inventions, designs and technologies they develop during the course of employment with us.  We are not aware of any material infringement of our intellectual property rights.
 
Patents
 
We have been granted one utility model patent and one invention patent. The term of the utility model patent is ten years from the filing of the application. The term of invention patent is 20 years from the filing of the application. We currently do not have any patents registered or pending in any jurisdiction outside of the PRC.
 
The following table provides the name, the application number or patent number, the name of the applicant or patent holder and the status of our registered utility model patent and the expiration date of our registered utility model patent:
Name
  
Application No.
/Patent No.
  
Applicant
/Patent
Holder
  
Status
  
Expiration
Date 
                 
Multi-layer Steel Tube External Package Packing Apparatus
  
ZL 2008 2 0079133.2
  
Yuci Guolian and China CAMC Engineering Co., Ltd.
  
Registered
  
2/19/2018
The following table provides the name, the application number or patent number, the name of the applicant or patent holder and the status of our registered invention patent and the expiration date of our registered invention patent:
 
Name
  
Application No.
/Patent No.
  
Applicant
/Patent
Holder
  
Status
  
Expiration
Date 
                 
Multi-layer Steel Tube Package Packing Method
  
ZL 2008 1 0100809.6
  
Yuci Guolian and China CAMC Engineering Co., Ltd.
  
Registered
  
2/21/2028

 
 
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Trademarks
 
We have been granted one commodity trademark and one service trademark which is registered in the PRC:
 
Name of Trademark
  
Application No.
/Trademark No.
  
Applicant
/Trademark
Holder
  
Status
             
GL (The commodities on which the use of trademark as been approved:( the 6th class) Pipelines, Elbows of metal for pipes, Junctions of metal for  pipes, Casings of metal for oilwells and Branching pipes of metal.)   
  
6565067
  
Shanxi Guolian Pipe Industry Group Co., Ltd
  
Registered
             
GL (Advertising; Special permission management commercial management; Import-export agencies; Procurement services for others; Personnel Management consultancy; Relocation services for businesses; Carry on administrative processing to the purchase order form; Write the receipt; Tax preparation; Seek the support)
  
7226500
  
Shanxi Guolian Pipe Industry Group Co., Ltd
  
Registered
 
Environmental Matters
 
The Environmental Protection Law, promulgated by the National People’s Congress on December 26, 1989, is the primary law for environmental protection in China.  The law establishes basic principles for coordinated advancement of economic growth, social progress and environmental protection, and defines the rights and duties of governments at all levels.  Local environmental protection bureaus may set stricter local standards than the national standards and enterprises are required to comply with the stricter of the two sets of standards.  Due to the nature of our business, we produce certain amounts of waste water, gas and solid waste materials during the course of our production.  We believe that we are in compliance in all material respects with applicable PRC laws and regulations.  All of our products meet the relevant environmental requirements under PRC laws and during the two years ended April 30, 2009 and 2010, we were not subject to any fines or legal action involving non-compliance with any relevant environmental regulation, nor are we aware of any threatened or pending action, including by any environmental regulatory authority.
 
 
48
 
 
Governmental Regulations
 
Business license
 
Any company that conducts business in the PRC must have a business license that covers a particular type of work. Our business license covers our present and projected business. Prior to expanding our business beyond that of our business license, we are required to apply and receive approval from the PRC government. In addition, for the production of spiral welded pipes, an additional valid qualification certificate or a license for operation must be obtained from the Bureau of Safety Supervision of Special Equipment of General Administration of Quality Supervision, Inspection and Quarantine before operation.
 
Employment laws
 
We are subject to laws and regulations governing our relationship with our employees, including: wage and hour requirements, working and safety conditions, citizenship requirements, work permits and travel restrictions. These include local labor laws and regulations, which may require substantial resources for compliance. China’s National Labor Law, which became effective on January 1, 1995, and China’s National Labor Contract Law, which became effective on January 1, 2008, permit workers in both state and private enterprises in China to bargain collectively. The National Labor Law and the National Labor Contract Law provide for collective contracts to be developed through collaboration between the labor union (or worker representatives in the absence of a union) and management that specify such matters as working conditions, wage scales, and hours of work. The laws also permit workers and employers in all types of enterprises to sign individual contracts, which are to be drawn up in accordance with the collective contract.
 
Patent protection in China
 
The PRC has domestic laws for the protection of copyrights, patents, trademarks and trade secrets.  The PRC is also signatory to some of the world’s major intellectual property conventions, including:
 
 
·
Convention establishing the World Intellectual Property Organization (WIPO Convention) (June 4, 1980);
 
 
·
Paris Convention for the Protection of Industrial Property (March 19, 1985);
 
 
·
Patent Cooperation Treaty (January 1, 1994); and
 
 
·
The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) (November 11, 2001).
 
Patents in the PRC are governed by the China Patent Law and its Implementing Regulations, each of which went into effect in 1985.  Amended versions of the China Patent Law and its Implementing Regulations came into effect in 2001 and 2003, respectively.
 
The PRC is signatory to the Paris Convention for the Protection of Industrial Property, in accordance with which any person who has duly filed an application for a patent in one signatory country shall enjoy, for the purposes of filing in the other countries, a right of priority during the period fixed in the convention (12 months for inventions and utility models, and 6 months for industrial designs).
 
 
49
 
 
The Patent Law covers three kinds of patents - patents for inventions, utility models and designs. The Chinese patent system adopts the principle of first to file, which means that a patent may be granted only to the person who first files an application. Consistent with international practice, the PRC allows the patenting of inventions or utility models that possess the characteristics of novelty, inventiveness and practical applicability only. For a design to be patentable it cannot be identical with, or similar to, any design which, before the date of filing, has been publicly disclosed in publications in the country or abroad or has been publicly used in the country, and should not be in conflict with any prior right of another.
 
Value added tax
 
Pursuant to the Provisional Regulation of China on Value Added Tax and their implementing rules, all entities and individuals that are engaged in the sale of goods, the provision of repairs and replacement services and the importation of goods in China are generally required to pay VAT at a rate of 17.0% of the gross sales proceeds received, less any deductible VAT already paid or borne by the taxpayer. Furthermore, when exporting goods, the exporter is entitled to a portion, or in some instances all, of the VAT refund that the exporter previously paid.
 
Foreign currency exchange
 
Under the PRC foreign currency exchange regulations applicable to us, the Renminbi is convertible for current account items, including the distribution of dividends, interest payments, and trade and service-related foreign exchange transactions. Conversion of Renminbi for capital account items, such as direct investment, loan, security investment and repatriation of investment, however, is still subject to the approval of the PRC State Administration of Foreign Exchange, or SAFE. Foreign-invested enterprises may buy, sell and/or remit foreign currencies only at those banks authorized to conduct foreign exchange business, after providing valid commercial documents and, in the case of capital account item transactions, obtaining approval from SAFE. Capital investments by foreign-invested enterprises outside of China are also subject to limitations, which include approvals by the Ministry of Commerce, SAFE and the State Reform and Development Commission.
 
Mandatory statutory reserve and dividend distributions
 
Under applicable PRC regulations, foreign-invested enterprises in China may pay dividends out of their accumulated profits only, if any, as determined in accordance with PRC accounting standards and regulations. In addition, a foreign-invested enterprise in China is required to set aside at least 10% of its after-tax profit based on PRC accounting standards each year for its general reserve until the cumulative amount of such reserve reaches 50% of its registered capital. These reserves are not distributable as cash dividends. The board of directors of a foreign-invested enterprise has the discretion to allocate a portion of its after-tax profits to staff welfare and bonus funds, which may not be distributed to equity owners except in the event of liquidation.
 
Employees
 
As of April 30, 2010, we had 947 full-time employees. The following table shows the breakdown in numbers and percentages of employees by department:
 
Functions
  
April
2010
  
April
 2009
  
April
2008
             
Manufacturing
  
572 (60%)
  
569 (61%)
  
574 (62%)
Technology
  
5 (1%)
  
7 (1%)
  
11 (1%)
Research & Development
  
43 (5%)
  
43(5%)
  
43 (5%)
Quality Control
  
174(18%)
  
183 (20%)
  
177 (19%)
General Administration, Purchasing, Sales and Marketing
  
196 (21%)
  
177 (19%)
  
166 (18%)
Total
  
947 (100%)
  
936 (100%)
  
928 (100%)

We have not experienced any significant labor disputes and consider our relationship with our employees to be good. Our employees are not covered by any collective bargaining agreement.
 
 
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We have established an employee welfare plan in accordance with the relevant PRC laws and regulations. Our total expenses for this plan were approximately $95,711, $97,460 and $90,055 in 2008, 2009 and 2010, respectively.
 
As we continue to expand our business, we believe it is critical to hire and retain top talent, especially in the areas of  marketing, professional welding engineering, steel Coils/strip for pipeline use application technology, non-destructive testing engineering. We believe we have the ability to attract and retain high quality engineering talent in China based on our competitive salaries, annual performance-based bonus system, and equity incentive program for senior employees and executives. In addition, we have a training program for entry-level engineers that allows them to work closely with an experienced mentor to gain valuable hands-on experience and provide other professional development opportunities, including seminars where experienced engineers give lectures on specific engineering topics and new methods that can be applied to various projects.
 
Legal Proceedings
 
From time to time, we may be involved in various claims and legal proceedings arising in the ordinary course of business. We are not currently a party to any such claims or proceedings which, if decided adversely to us, would either, individually or in the aggregate, have a material adverse effect on our business, financial condition, results of operations or cash flows.
4C.  Organizational Structure
 
See “—History and Development of the Company” above in subsection A of Item 4 for a description of our organizational structure.
 
4D.  Property, Plants and EquipmentLand Use Rights
 
See disclosure above under the heading “Facility” in Item 4.
 
 
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ITEM 4A.
UNRESOLVED STAFF COMMENTS
 
Not applicable
 
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 
The following discussion and analysis should be read in conjunction with our consolidated financial statements, the notes to those financial statements and other financial data that appear elsewhere in this report. In addition to historical information, the following discussion contains forward-looking statements based on current expectations that involve risks and uncertainties. Actual results and the timing of certain events may differ significantly from those projected in such forward-looking statements due to a number of factors, including those set forth in “Risk Factors” and elsewhere in this report. Our consolidated financial statements are prepared in conformity with U.S. GAAP.
 
5A. Operating Results
 
This section should be read in conjunction with our audited consolidated financial statements as of and for the years ended April 30, 2010 and 2009, as well as our unaudited consolidated financial statements as of and for the nine months ended January 31, 2011 and 2010, respectively, included elsewhere in this report. Readers should carefully review the risk factors disclosed in this transition report on Form 20-F. In addition, this transition report on Form 20-F includes forward-looking statements. Generally, the words “believes “, “anticipates”, “ may “, “ will “, “ should “, “ expect “, “ intend “, “estimate”, “continue” and similar expressions, or the negative thereof, are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, including the risks set forth in this transition report on Form 20-F, which could cause actual results or outcomes to differ materially from those projected. Undue reliance should not be placed on these forward-looking statements, which speak as of the date hereof only. We undertake no obligation to update these forward-looking statements unless required by law.

 
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Overview

Through our subsidiaries and certain commercial and contractual relationships and arrangements with other Chinese companies, we operate companies in China that develop, manufacture, and distribute high quality steel pipe for a variety of different industries.  We are located in Taiyuan and Jingzhong of Shanxi Province, as well as Xi’an of Shaanxi Province, and conduct business throughout China, Africa, South America and Europe.  Our main production facility in Shanxi province has an area of approximately 200 acres.  We produce pipe with diameters from 219 to 2120 mm of Spiral Submerged Arc Welding (SSAW) pipe and pipe with a diameter from 50 to 508 mm Electric Resistance Welding (ERW) pipe. Our products are used in numerous industries, including natural gas, petroleum and chemical, thermal power, water supply, municipal construction and heat power industries. 

China is the world’s second largest energy consumer. Notwithstanding this, the total length of China’s domestic steel pipeline infrastructure is far below the global average, which, as of 2008, was 58,300 km, which was approximately 7.3% of that in the United States. China’s oil and natural gas consumption was about half of that in the United States, while its total length of pipelines is less than one tenth of that in the United States. As such, the management believes that steel infrastructure development still has tremendous potential.

Pursuant to the “12th Five-year Plan”, China will enhance the development of unconventional gas resources, such as offshore natural gas resources and coal bed methane, and accelerate the exploration and exploitation of these resources overseas.

Although the United States and Europe were most affected by the 2008 and 2009 financial crisis, governments throughout Asia as well as the Africa region took steps to stabilize their markets and economic developments. To offset slowing global growth, on November 5, 2008, at the State Council meeting, Premier Wen Jiabao offered a RMB4 trillion ($586 billion) stimulus package for the next two years.

Pursuant to the stimulus package, the Chinese government committed to launch more projects related to people’s livelihood and infrastructure and decided to invest RMB100 billion ($14.49 billion) in these projects, which started in the fourth quarter of 2008. The actions taken by the Chinese government will significantly increase the demand for pipe products which are essential for infrastructure construction and will provide market opportunities for the Company in the coming years.

In addition, although the financial crises also affected Chinese enterprises that rely on overseas markets, our operations were not materially affected as less than 10% of our revenues are generated from the United States and Europe, and the relatively strong domestic market demand positioned us to continue to grow notwithstanding the financial crisis and economic recession since late 2008.

Management believes that the financial crisis and economic recession in the United States and Europe should not have a material negative impact on our business, and management believes we will benefit from the stimulus plan of the central government of China.

Principal Factors Affecting our Financial Performance

We believe that the following factors affect our financial performance:

Growth of China’s Urbanization and Industrialization

The annual growth rate of China is expected to be 7% for the next five years according to the “12th Five-Year Program” on National Economic and Social Development. This growth is fueled by rapid industrialization and manufacturing industries developing in China. If this growth continues, we believe that the growth rate of the steel pipe production industry will grow at a similar rate and that the Company will be able to sustain its growth.

The People’s Republic of China (the “PRC”) Regulations
  
China looked favorably on the steel pipe production industry and loosened regulations to promote manufacturing growth in China, which ultimately benefits our businesses and similarly situated companies. As long as China continues to promote economic growth and allow manufacturing companies to grow and expand their operations, we expect our operations will be positively affected by PRC regulations.

 
53
 

Summary of Significant Accounting Policies and  Estimates
 
The SEC defines critical accounting policies as those that are, in management’s view, most important to the portrayal of our financial condition and results of operations and those that require significant judgments and estimates.

The discussion and analysis of our financial condition and results of operations is based upon our financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities. On an on-going basis, we evaluate our estimates including the allowance for doubtful accounts, the salability and recoverability of inventory, income taxes and contingencies. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We cannot predict what future laws and regulations might be passed that could have a material effect on our results of operations. We assess the impact of significant changes in laws and regulations on a regular basis and update the assumptions and estimates used to prepare our financial statements when we deem it necessary.

This section should be read together with the Summary of Significant Accounting Policies and Estimated included as Note 4 to the attached consolidated financial statements included in this Report.

(a)
Economic and Political Risks

The Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy.

The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things.

 
54
 

(b)
Fair Value of Financial Instruments

Accounting Standards Codification (“ASC”) 820-10 Fair Value Measurements establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market.
These tiers include:

•Level 1—defined as observable inputs such as quoted prices in active markets;
•Level 2—defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and
•Level 3—defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The carrying amounts of financial assets and liabilities, such as cash and cash equivalents, accounts receivable, notes receivable, prepayments for goods, due from related parties, due from employees, short-term bank loans, accounts payable, customer deposits, short-term notes payable, product financing arrangements and other payables, approximate their fair values because of the short maturity of these instruments. The fair value of the Company’s long-term notes receivable is estimated based on the current rates offered to the Company for debt of similar terms and maturities.

(c)
Product Financing Arrangements

The Company simultaneously sells and agrees to repurchase inventory to and from third parties. The repurchase price is contractually fixed at an amount equal to the original sales price plus the financing entity’s carrying and financing costs. The inventory is not shipped, and the title is not passed to the buyer. The purpose of the transaction is to enable the Company to arrange financing of its original purchase of the inventory.

FASB ruled that the substance of this transaction is that of a borrowing transaction, not a sale. That is, the transaction is, in substance, no different from the Company directly obtaining third-party financing to purchase inventory. ASC 470-10, Product Financing Arrangement, specifies that the proper accounting by the Company is to record a liability in the amount of the selling price when the funds are received from the financing entity in exchange for the initial transfer of the inventory. The liability is satisfied when the Company repurchases the inventory.

(d)
Impairment of Long-Term Assets

Long-term assets of the Company are reviewed annually as to whether their carrying value has become impaired, pursuant to the guidelines established in ASC 360-10. The Company considers assets to be impaired if the carrying value exceeds the future projected cash flows from the related operations.  The Company also re-evaluates the periods of amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives. There was no impairment for the years ended April 30, 2010 and 2009.

(e)
Goodwill

The Company evaluates goodwill in accordance with ASC Topic 350, “ Intangibles — Goodwill and Other.” Goodwill is recorded at the time of an acquisition and is calculated as the difference between the total considerations paid for an acquisition and the fair value of the net tangible and intangible assets acquired. Accounting for acquisitions requires extensive use of accounting estimates and judgments to allocate the purchase price to the fair value of the net tangible and intangible assets acquired. Goodwill deemed to have indefinite lives are not amortized, but are subject to annual impairment tests. If the assumptions and estimates used to allocate the purchase price are not correct, or if business conditions change, purchase price adjustments or future asset impairment charges could be required. The value of goodwill, could be impacted by future adverse changes such as: (i) any future declines in our operating results, (ii) a decline in the valuation of technology, including the valuation of our common stock, (iii) a significant slowdown in the worldwide economy or (iv) any failure to meet the performance projections included in our forecasts of future operating results. In accordance with ASC Topic 350, the Company tests goodwill for impairment on an annual basis or more frequently if the Company believes indicators of impairment exist. Impairment evaluations involve management estimates of asset useful lives and future cash flows. Significant management judgment is required in the forecasts of future operating results that are used in the evaluations. It is possible, however, that the plans and estimates used may be incorrect. If our actual results, or the plans and estimates used in future impairment analysis, are lower than the original estimates used to assess the recoverability of these assets, the Company could incur additional impairment charges in a future period.

 
55
 

The Company performs its annual impairment review of goodwill in April, and when a triggering event occurs between annual impairment tests. The Company recorded no impairment loss for the years ended April 30, 2010 and 2009.

(f)
Inventories

Inventories are stated at the lower of cost or net realizable value. The cost of raw materials is determined on the basis of weighted average. The cost of finished goods is determined on the weighted average basis and comprises direct materials, direct labor and an appropriate proportion of overhead. Net realizable value is based on estimated selling prices less any further costs expected to be incurred for completion and disposal.

(g) 
Accounts receivable and allowance for doubtful accounts

The Company’s business operations are conducted in the PRC. During the normal course of business, the Company grants unsecured credit to its customers by selling on various credit terms. Management reviews its accounts receivable on a quarterly basis to determine if the allowance for doubtful accounts is adequate. An estimate for doubtful accounts is recorded when collection of the full amount is no longer probable. The Company’s existing reserve is consistent with its historical experience and considered adequate by the management.

(h)
Revenue Recognition

Revenue represents the invoiced value of goods sold, recognized upon the shipment of goods to customers. Revenue is recognized when all of the following criteria are met:

-Persuasive evidence of an arrangement exists,
-Delivery has occurred or services have been rendered,
-The seller’s price to the buyer is fixed or determinable, and
-Collectability is reasonably assured.

The majority of the Company’s revenue results from sales contracts with distributors and revenue is recorded upon the shipment of goods. Management conducts credit background checks for new customers as a means to reduce the subjectivity of collectability.

The Company simultaneously sells and agrees to repurchase inventory to and from third parties. The Company does not recognize sales and purchases for such transactions, but records a liability in the amount of the selling price when the funds are received from the financing entity. The liability is satisfied when the Company repurchases the inventory.

(i)
Foreign Currency Translation

The accompanying consolidated financial statements are presented in United States dollars. The functional currency of the Company is the Renminbi (RMB). Capital accounts of the consolidated financial statements are translated into United States dollars from RMB at their historical exchange rates when the capital transactions occurred.

 
56
 

Assets and liabilities are translated at the exchange rates as of the balance sheet date. Income and expenditures are translated at the average exchange rate of the year.

   
April 30,
2010
    
April 30,
2009
  
Year end RMB : US$ exchange rate
   $ 6.8358     $ 6.8352  
Average yearly RMB : US$ exchange rate
     6.8355       6.9155  

   
January 31,
2011
    
January 31,
2010
  
Period end RMB : US$ exchange rate
   $ 6.5829     $ 6.8169  
Average RMB : US$ exchange rate for nine months and ended
     6.7094       6.8261  

The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US dollars at the rates used in translation.

(j)
Comprehensive Income

Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income are required to be reported in a financial statement that is presented with the same prominence as other financial statements. Comprehensive income includes net income and the foreign currency translation gain and unrealized gains on marketable securities.

(k)
Segment and Geographic Reporting
 
 
The Company operates in one business segment, the design, development, manufacture, and commercialization of spiral submerged-arc welding (SSAW) pipe, electric resistance welding (ERW) pipe and gas equipments mainly in the PRC and oversea market.

(l)
Non-Controlling Interest

Non-controlling minority interests represent the portion of earnings that is not within the parent Company’s control. These amounts are now required to be reported as equity instead of as a liability on the balance sheet. Net income from non-controlling minority interests is shown separately on the consolidated statements of income. There was $10,824 and $6,079 net income contributed to non-controlling interest for the years ended April 30, 2010 and 2009, respectively.

Recent Accounting Pronouncements

Effective January 1, 2009, the Company adopted ASC 815-10 (formerly SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities), which amends SFAS No. 133 and expands disclosures to include information about the fair value of derivatives, related credit risks and a company’s strategies and objectives for using derivatives. The adoption of ASC 815-10 did not have a material effect on the Company’s financial statements as of April 30, 2010, 2009 and January 31, 2011.

Effective January 1, 2009, the Company adopted ASC 815-40 (formerly Emerging Issues Task Force (“EITF”) Issue No. 07-05, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock (“EITF 07-05”). ASC 815-40 addresses the determination of whether an instrument (or an embedded feature) is indexed to an entity’s own stock, which is the first part of the scope exception in paragraph 11(a) of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS 133”). If an instrument (or an embedded feature) that has the characteristics of a derivative instrument under paragraphs 6–9 of SFAS 133 is indexed to an entity’s own stock, it is still necessary to evaluate whether it is classified in stockholders’ equity (or would be classified in stockholders’ equity if it were a freestanding instrument). Other applicable authoritative

 
57
 

Recent Accounting Pronouncements

accounting literature, including Issues EITF 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company Own Stock, and EITF 05-2, The Meaning of “Conventional Debt Instrument” in Issue No. 00-19, provides guidance for determining whether an instrument (or an embedded feature) is classified in stockholders’ equity (or would be classified in stockholders’ equity if it were a freestanding instrument). ASC 815-40 does not address that second part of the scope exception in paragraph 11(a) of SFAS 133. The adoption of ASC 815-40 did not have a material effect on the Company’s financial statements as of April 30, 2010, 2009 and January 31, 2011.

On April 9, 2009, the Financial Accounting Standards Board (“FASB”) also approved ASC 825-10 (formerly FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments) to require disclosures about fair value of financial instruments in interim period financial statements of publicly traded companies and in summarized financial information required by APB Opinion No. 28, Interim Financial Reporting. We are required to adopt ASC 825-10 for our interim and annual reporting periods ending after June 15, 2009. ASC 825-10 does not require disclosures for periods presented for comparative purposes at initial adoption. ASC 825-10 requires comparative disclosures only for periods ending after initial adoption. The adoption of ASC 825-10 did not have a material effect on the Company’s financial statements as of April 30, 2010, 2009 and January 31, 2011.
 
In April 2009, the FASB updated guidance related to fair-value measurements to clarify the guidance related to measuring fair-value in inactive markets, to modify the recognition and measurement of other-than-temporary impairments of debt securities, and to require public companies to disclose the fair values of financial instruments in interim periods. The adoption did not have a material effect on the Company’s financial statements as of April 30, 2010, 2009 and January 31, 2011.

In June 2009, the FASB issued ASC 810-10 (formerly SFAS No. 167) Amendments to FASB Interpretation No. 46(R), which require an enterprise to perform an analysis and ongoing reassessments to determine whether the enterprises variable interest or interests give it a controlling financial interest in a variable interest entity and amends certain guidance for determining whether an entity is a variable interest entity. It also requires enhanced disclosures that will provide users of financial statements with more transparent information about an enterprises involvement in a variable interest entity. ASC 810-10 is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009 and for all interim reporting periods after that. The adoption of ASC 810-10 did not have a material effect on the Company’s financial statements as of April 30, 2010, 2009 and January 31, 2011.
 
In January 2010, the FASB issued guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires disclosure of transfers of assets and liabilities between Level 1 and Level 2 of the fair value measurement hierarchy, including the reasons and the timing of the transfers and information on purchases, sales, issuance, and settlements on a gross basis in the reconciliation of the assets and liabilities measured under Level 3 of the fair value measurement hierarchy. This guidance is effective for the Company beginning March 1, 2010. The adoption did not have a material effect on the Company’s financial statements as of April 30, 2010, 2009 and January 31, 2011.

 
58
 

Results of Operations

For the Fiscal Year Ended April 30, 2010 Compared to the Fiscal Year Ended April 30, 2009

The following table sets forth the amounts and the percentage relationship to revenues of certain items in our consolidated statements of income for the years ended April 30, 2010 and 2009:

   
Years Ended April 30,
  
   
2010
    
2009
    
Comparison
  
   
Amount
    
% of
Revenues
    
Amount
    
% of
Revenues
    
Change in
Amount
    
Change 
in %
  
   
$
          
$
          
$
        
Revenues, net
     146,835,283       100 %     152,511,228       100 %     (5,675,945 )     (4 )%
                                                 
Cost of goods sold
     (123,110,120 )     (84 )%     (130,600,207 )     (86 )%     7,490,087       (6 )%
Gross profit
     23,725,163       16 %     21,911,021       14 %     1,814,142       8 %
                                                 
Selling and marketing
     (3,952,504 )     (3 )%     (5,878,246 )     (4 )%     1,925,742       (33 )%
General and administrative
     (3,003542 )     (2 )%     (2,387,684 )     (2 )%     (615,858 )     26 %
Research and development
     (33,111 )     (0.02 )%     (11,713 )     (0.01 )%     (21,398 )     183 %
Income from operations
     16,736,006       11 %     13,633,378       9 %     3,102,628       23 %
                                                 
Interest expense
     (9,765,845 )     (7 )%     (9,216,142 )     (6 )%     (549,703 )     6 %
Interest income
     2,438,152       2 %     2,673,890       2 %     (235,738 )     (9 )%
Other income (expense), net
     36,313       0.02 %     (91,537 )     (0.06 )%     127,850       (140 )%
                                                 
Income before income taxes
     9,444,626       6 %     6,999,589       5 %     2,445,037       35 %
                                                 
Income taxes
     (2,868,260 )     (2 )%     (2,026,906 )     (1 )%     (841,354 )     42 %
                                                 
Net income
     6,576,366       4 %     4,972,683       3 %     1,603,683       32 %
                                                 
Net income attributable to non-controlling interest
     (10,824 )     (0.01 )%     (6,079 )     (0.004 )%     (4,745 )     78 %
                                                 
Net income attributable to controlling interest
     6,565,542       4 %     4,966,604       3 %     1,598,938       32 %
Other comprehensive (loss) income
                                                
Foreign currency translation gain
     (590 )     -       (104,823 )     (0.07 )%     104,233       (99 )%
Unrealized gain (loss) on marketable securities
     13,948       0.01 %     (11,550 )     (0.01 )%     25,498       (221 )%
                                                 
Comprehensive income
     6,578,900       4 %     4,850,231       3 %     1,728,669       36 %
 
 
59
 

Revenues

 
Our revenues are derived from the design, development, manufacture, and commercialization of spiral submerged-arc welding (SSAW) pipe, electric resistance welding (ERW) pipe and gas equipment for the PRC and export markets. The following table sets forth a breakdown of our revenues by product, in the PRC and internationally, for the years ended April 30, 2010 and 2009, respectively:

   
Years Ended April 30,
  
   
2010
    
2009
    
Comparisons
  
   
Amount
    
% of
Total
    
Amount
    
% of 
Total
    
Increase/
(Decrease)
    
Increase/
(Decrease)
  
      $            $            $      %  
Revenues:
                                          
PRC markets:
                                          
SSAW pipe
     114,321,038       77.9 %     83,743,464       54.9 %     30,577,574       37 %
ERW pipe
     2,008,230       1.4 %     24,453,307       16 %     (22,445,077 )     (92 )%
Other(1)
     9,279,189       6.3 %     8,410,451       5.5 %     868,738       10 %
Subtotal
     125,608,457       85.6 %     116,607,222       76.4 %     9,001,235       8 %
Export markets:
                                                
SSAW pipe
     8,534,738       5.8 %     3,948,178       2.6 %     4,586,560       116 %
ERW pipe
     12,692,088       8.6 %     31,955,828       21 %     (19,263,740 )     (60 )%
Subtotal
     21,226,826       14.4 %     35,904,006       23.6 %     (14,677,180 )     (41 )%
                                                 
Total
     146,835,283       100 %     152,511,228       100 %     (5,675,945 )     (4 )%

(1)
Includes sales of gas equipment (0.3%) and scrap (3.5%), revenues generated by processing services we provided to customers (2.7%), other revenues (0.2%), less sales tax (0.4%).

Our revenues from sales in the PRC market increased approximately $9 million, or 8%, to approximately $125.6 million for the year ended April 30, 2010 from approximately $116.6 million for the year ended April 30, 2009. Adjusting for the effect of changes in exchange rates, our revenues from the PRC market increased by 5%. Overall sales volume increased by 11%, offset by an 11% decrease in the average sales price per ton of our ERW pipes in the year ended April 30, 2010 as compared to the year ended April 30, 2009.

The increased sales volume was attributable to the following factors: (i) an improvement in the PRC economy, which led to an increase in market demand, (ii) our successful marketing efforts, (iii) retaining our many of existing customers and adding additional customers, and (iv) increased sales to PRC-based state-owned enterprises in need of high-end SSAW pipes with a larger diameter, which are used in the transmission of natural gas.
 
 
Sales volume for SSAW pipes in the PRC market was up 34% in 2010. This increase was mainly due to (i) the selection of our company to supply SSAW pipes for the second West-East natural gas pipeline of sub-lines and (ii) the PRC central government’s encouragement of pipeline industry development in fiscal 2010.

Revenues from the domestic sales of ERW pipes for the year ended April 30, 2010 amounted to approximately $2.0 million, accounted for only 1.4% of the our total revenues in fiscal 2010, representing a decrease of approximately $22.4 million or 92%, compared to fiscal year 2009. Sales volume for ERW pipes in the PRC market declined by 91% in 2010. This decrease was due to a shift in market demand from ERW pipes to SSAW pipes, which are better situated for use in the petro-chemical, thermal power and heat power industries. As a result of these conditions, during the year ended April 30, 2010, our market strategy shifted to gain more market share for SSAW pipes.

Export sales volume decreased by 40% in 2010. this decline was attributable to the following: (i) the financial crisis in the United States and the unfolding European sovereignty debt crisis, in these regions customers purchased fewer products, (ii) the European Commission and United States imposed an anti-dumping and an anti-subsidy duties rules in fiscal 2010, adversely affecting the sales performance and export volume of our ERW pipes, and (iii) in order to meet growing demand in the domestic market, we reduced the production and sales to other Asian countries after August 2009. Moving forward, our plan is to focus on the PRC market, which is expected to continue to grow, as well as emerging markets internationally, to the extent that we can be profitable in such markets.

 
60
 

We expect our revenues to grow, primarily from sales of SSAW pipes to PRC customers, in the near future.

Cost of Goods Sold

Our cost of goods sold is primarily comprised of the cost of raw materials, such as hot-rolled steel strip, labor costs, and manufacturing overhead. Specifically, the cost of raw materials represented approximately 87% of our total costs of goods sold in fiscal years 2010 and 2009.  For the year ended April 30, 2010, our cost of goods sold relating to the PRC markets increased by 6%, compared with fiscal year 2009. The increase was attributable to the following: (i) increase in cost of materials, due to an increase in sales volumes and offset by the slight decrease in volume purchased of hot-rolled steel strips, and (ii) increase in labor costs increased since more steel pipes was produced by employees to meet the demand for our products sold.  Our cost of goods sold from the export markets decreased by 44% during the year ended April 30, 2010 because of the decrease in sales to those markets during that period, as discussed above.

Gross Profit and Gross Margin

Gross profit is equal to revenues less cost of goods sold. Gross margin is equal to gross profit divided by revenues.  Our gross profit increased by 8%, or approximately $1.8, to $23.7 million for the year ended April 30, 2010, from approximately $21.9 million for the year ended April 30, 2009. The increase was due to the fact that our cost of goods sold decreased more than our revenues in the year ended April 30, 2010.

Historically, the margins of our primary products, SSAW pipes and ERW pipes, have been relatively stable in the PRC market,  since the selling price is generally adjusted to reflect the price we paid for the raw materials, as discussed above in Item 4.  However, the gross margin of SSAW pipes, which accounted for approximately 83.7% of our revenues during the year ended April 30, 2010, increased slightly during that period because we negotiated a better purchase price with our hot-rolled steel strip suppliers. This resulted in the increase in gross profit for the year ended April 31, 2010.

Our gross profit in export markets decreased 23.5%, or $1.2 million, to $4.0 million for the year ended April 30, 2010 as compared to $5.2 million for the year ended April 30, 2009.  Due to heightened competition in international trade, foreign countries imposed anti-dumpling or countervailing measures such as imposition of duties on certain goods exported by the PRC (including our steel pipe products) so as to protect their own industries, the sales volume of ERW pipe decreased by 59%.  Nonetheless, our gross margin for the year ended April 30, 2010 increased by 4% in export markets because the gross margin of ERW pipes in the export markets increased by 5%. This increase was attributable primarily to the fact that (i) we were able to charge a comparatively higher selling price since our major customer in Africa required special anti-corrosive features for its ERW pipes and (2) we were able to benefit from the decreased purchase price with our hot-rolled steel strip suppliers.

We expect our overall average gross margin to grow as we expand our high-margin products.

Selling and Marketing Expenses

Our selling and marketing expenses primarily include shipping and handling costs, payroll, travel, bid costs, sales agent fees and business entertainment costs. The table below sets forth a breakdown of our selling and marketing expenses for the years indicated:

 
61
 

   
Years Ended April 30,
  
   
2010
    
2009
    
Comparisons
  
    
Amount
    
% of
Total
    
Amount
    
% of
Total
    
Increase/
(Decrease)
    
Increase/
(Decrease)
  
 
 
$
           
$
          
$
    
%
  
Shipping and handling costs
     1,815,080       46 %     3,445,156       59 %     (1,630,077 )     (47 )%
Payroll
     519,251       13 %     558,172       9.5 %     (38,921 )     (7 )%
Travel
     295,361       8 %     556,677       9.5 %     (261,316 )     (47 )%
Bid costs
     289,470       7 %     265,001       5 %     24,469       9 %
Other
     1,033,342 (1)     26 %     1,053,240 (2)     17 %     (19,897 )     (2 )%
Total
     3,952,504       100 %     5,878,246       100 %     (1,925,742 )     (33 )%

(1)
Includes business entertainment (6%), sales agent fees (1%), inspection and insurance (3%), office expenses (5%), utilities & vehicles (5%), depreciation expense (1%), and other expenses (5%).

(2)
Includes business entertainment (4%), sales agent fees (1%), inspection and insurance (1%), office expenses (4%), utilities & vehicles (4%), depreciation expense (1%), and other expenses (2%).

Selling and marketing expenses decreased by 33%, or approximately $1.9 million, to approximately $4.0 million for the year ended April 30, 2010 from approximately $5.9 million for the year ended April 30, 2009. This decrease was due primarily to a 47% decrease in shipping and handling costs and international travel, which resulted from the significant decrease in sales activities in the export sales markets during the year ended April 30, 2010.

We anticipate such expenses will revert to fiscal 2009 levels and beyond, as we expand our sales network and build our operations in additional regional markets in China and internationally.

General and Administrative Expenses

The table below sets forth a breakdown of our general and administrative expenses for the years indicated:

   
Years Ended April 30,
  
   
2010
    
2009
    
Comparisons
  
   
Amount
    
% of
Total
    
Amount
    
% of
Total
    
Increase/
(Decrease)
    
Increase/
(Decrease)
  
     
$
          
$
          
$
    
%
  
Payroll
     822,462       27 %     650,109       27 %     172,353       27 %
Depreciation and amortization
     340,244       11 %     263,147       11 %     77,097       29 %
Financial consulting fees
     307,653       10 %     254,791       8 %     52,862       21 %
Office expenses
     344,354       12 %     285,902       12 %     58,452       20 %
Business entertainment
     205,772       7 %     232,279       10 %     (26,507 )     (11 )%
Other
     983,057 (1)     33 %     701,456 (2)     32 %     281,601       40 %
Total
     3,003,542       100 %     2,387,684       100 %     615,858       26 %

(1)
Includes retirement benefits (3%), travel (3%), legal consulting fees (2%), utilities & vehicles (6%), land usage and property taxes (6%), endowment insurance (5%), insurance fees (2%), labor union fees (1%) and other expenses (5%).

(2)
Includes retirement benefits (3%), travel (3%), legal consulting fees (2%), utilities & vehicles (6%), land usage and property taxes (6%), endowment insurance (5%), insurance fees (2%), labor union fees (1%) and other expenses (4%).
 
 
62
 

 
Our general and administrative expenses increased by 26%, or approximately $0.6 million, to approximately $3.0 million for the year ended April 30, 2010 from approximately $2.4 million for the year ended April 30, 2009, which increase was due to the following factors:

·
Payroll expenses increased by approximately $0.2 million, or 27%, compared with 2009, as a result of the increased average salary for administrative employees;

·
Other expenses increased by approximately $0.3 million, or 40% in 2010 compared to 2009. This increase was mainly due to increases in utilities and vehicles, endowment insurance and insurance fees in 2010.

We expect such expenses to increase as our business expands. We will also incur additional costs to meet the requirements of being a public company in the U.S., such as hiring additional staff with experience in U.S. GAAP and SEC reporting requirements and developing internal audit and disclosure controls and compliance functions. All of these measures will increase our general and administrative expenses in the periods following the filing of this transition report.
 
 
63
 
 
Interest Expense

Our financing costs consist of interest for short-term loans, product financing, bank acceptance notes and other borrowings and miscellaneous bank charges.

Interest expense increased by 6%, or approximately $0.6 million, to approximately $9.8 million for the year ended April 30, 2010 from approximately $9.2 million for the year ended April 30, 2009. This increase was due to increases in interest for bank loans and notes payable to third parties, and increased bank charges, offset by decreases in discount interest for bank acceptance notes and interest for product financing arrangements. The increased interest for bank loans resulted from increased average bank loans during the year ended April 30 2010, as well as increased average interest rates on our loans. The People’s Bank of China increased the benchmark of the interest rates for short-term loans from 5.6% for the fiscal year ended April 30, 2009 to 6.5% for the fiscal year ended April 30, 2010. Our lenders increased our interest rates accordingly. We reduced the loans approximately $200 million for our product financing arrangements and bank acceptance notes during the year ended April 30, 2010 led to interest in connection to financing arrangements and bank acceptance notes decreased.

Other Income, Net
 
Other income (expense), net, was a net income of $36,313 for the year ended April 30, 2010, compared to a net expense of $(91,537) for the year ended April 30, 2009. This resulted primarily from government subsidies of $89,486 in fiscal 2010, offset by overdue fines for tax payments of $44,399 during fiscal 2010.

Income Tax

Our income tax expense increased by 42%, or approximately $0.8 million, to approximately $2.9 million, for the year ended April 30, 2010, from approximately $2.0 million for the year ended April 30, 2009. The increase in income taxes for the year ended April 30, 2010 was due to our increased level of income.

In accordance with the relevant tax laws and regulations of the PRC, the applicable corporate income tax rate for our operating entities is 25%. Our effective income tax rate  was 30% and 29% for the years ended April 30, 2010 and 2009, respectively.

Net Income

As a result of the foregoing, our net income increased by 32%, or $1,603,683, to $6,576,366 for the year ended April 30, 2010 from $4,972,683 for the year ended April 30, 2009.

Our net profit margin increased to 4% in 2010 from 3% in 2009 due to improved gross margins and decreased selling and marketing costs in the year ended April 30, 2010, offset by increase in general and administrative costs, interest expense and income taxes.
  
For Nine Months Period Ended January 31, 2011 Compared With January 31, 2010

The following table sets forth the amounts and the percentage relationship to revenues of certain items in our condensed consolidated statements of income for the nine months ended January 31, 2011 and 2010:
 
 
64
 

   
Nine Months Ended January 31,
  
   
2011
    
2010
    
Comparisons
  
   
Amount
    
% of
Revenues
    
Amount
    
% of
Revenues
    
Change in
Amount
    
Change 
in %
  
   
$
          
$
          
$
        
Revenues, net
     146,455,472       100 %     118,766,033       100 %     27,689,439       23 %
                                                 
Cost of goods sold
     (125,462,453 )     (86 )%     (99,605,081 )     (84 )%     (25,857,372 )     26 %
Gross profit
     20,993,019       14 %     19,160,952       16 %     1,832,067       10 %
                                                 
Selling and marketing
     (3,447,506 )     (2 )%     (3,017,835 )     (3 )%     (429,671 )     14 %
General and administrative
     (2,762,907 )     (2 )%     (2,278,514 )     (2 )%     (484,393 )     21 %
Research and development
     -               (24,001 )     (0.02 )%     24,001       (100 )%
Income from operations
     14,782,606       10 %     13,840,602       12 %     942,004       7 %
                                                 
Interest expense
     (9,844,493 )     (7 )%     (6,368,063 )     (5 )%     (3,476,430 )     55 %
Interest income
     1,874,907       1 %     1,896,105       2 %     (21,198 )     (1 )%
Other income (expense), net
     1,503,919       1 %     (19,146 )     (0.02 )%     1,523,065       (7955 )%
                                                 
Income before income taxes
     8,316,939       6 %     9,349,498       8 %     (1,032,559 )     (11 )%
                                                 
Income taxes
     (2,342,280 )     (2 )%     (2,610,058 )     (2 )%     267,778       (10 )%
                                                 
Net income
     5,974,659       4 %     6,739,440       6 %     (764,781 )     (11 )%
                                                 
Net (loss) income attributable to non-controlling
     (2,147 )     -       (13,291 )     (0.01 )%     11,144       (84 )%
                                                 
Net income (loss) attributable to controlling interest
     5,972,512       4 %     6,726,149       6 %     (753,637 )     (11 )%
Other comprehensive (loss) income
                                                
Foreign currency
translation gain (loss)
     1,353,184       1 %     76,841       0.06 %     1,276,343       1661 %
Unrealized gain on marketable securities
     2,166       -       12,444       0.01 %     (10,278 )     (83 )%
                                                 
Comprehensive income
     7,327,862       5 %     6,815,434       6 %     512,428       8 %
 
 
65
 

Revenues

Our revenues are derived from the design, development, manufacture, and commercialization of spiral submerged-arc welding (SSAW) pipe, electric resistance welding (ERW) pipe and gas equipment for the PRC and export markets. The following table sets forth a breakdown of our revenues by product, in the PRC and internationally, for the nine months ended January 31, 2011 and 2010, respectively:
 
   
Nine Months Ended January 31,
  
   
2011
    
2010
    
Comparisons
  
   
Amount
    
% of
Total
    
Amount
    
% of 
Total
    
Increase/
(Decrease)
    
Increase/
(Decrease)
  
   
$
          
$
          
$
    
%
  
Revenues:
                                    
PRC markets:
                                    
SSAW pipe
     113,561,115       77.5 %     91,739,277       77.2 %     21,821,838       24 %
ERW pipe
     12,415,761       8.5 %     1,576,914       1.3 %     10,838,847       687 %
Other(1)
     11,735,804       8 %     8,550,670       7.3 %     3,185,134       37 %
Subtotal
     137,712,680       94.0 %     101,866,861       85.8 %     35,845,819       35 %
Export markets
                                                
SSAW pipe
     6,036,602       4.1 %     9,050,150       7.6 %     (3,013,548 )     (33 )%
ERW pipe
     2,706,190       1.9 %     7,849,022       6.6 %     (5,142,832 )     (66 )%
Subtotal
     8,742,792       6.0 %     16,899,172       14.2 %     (8,156,380 )     (48 )%
                                                 
Total
     146,455,472       100 %     118,766,033       100 %     27,689,439       23 %

(1) Includes sales of gas equipment (0.3%) and scrap (3%), revenues generated by processing services we provided to customers (4.9%), other revenues (0.1%), less sales tax (0.3%).

Our revenues from sales in the PRC market increased $35,845,819 or 35%, to $137,712,680 for the nine months ended January 31, 2011 from $101,866,861 for the nine months ended January 31, 2010. The increase mainly resulted from the combined effect of the increased sales volume and sales unit price of SSAW pipe and ERW pipe. The sales unit price for SSAW pipe and ERW pipe reached an average increase of 4% and 14%, respectively.  The sales volume of both SSAW pipe and ERW pipe combined increased 27%, to 186,462 tons in nine months ended January 31, 2011 from 146,622 tons in nine months ended January 31, 2010.

The increased sales volume was attributable to the following factors:

 
·
As a result of the issuance of the national supporting policy and West-East Gas pipeline project(2) and the improvement of laws and regulations,  there was a great opportunity for the domestic market sales of SSAW pipe and ERW pipe. Therefore we put more effort into the domestic market.

 
·
The consistent good quality strengthened our reputation for our products, and we also maintained favorable relationships with old customers.  Therefore, more sales orders were obtained during the nine months ended January 31, 2011 compared with the same period last year.

(2)  The gas pipeline, a large infrastructure project in China, will transport clean fuel from Xinjiang to the energy-hungry Yangtze River Delta.

Revenues from SSAW pipe in the PRC market for the nine months ended January 31, 2011 was $113,561,115 and accounted for 78% of the total revenues in nine months ended January 31, 2011, which is approximately $22 million or 24% more than that of the nine months ended January 31, 2010. Sales volume was 171,168 tons for the nine months ended January 31, 2011, which increased 19% from 144,407 tons in the nine months ended January 31, 2010. The increase was attributable to increased demand for our SSAW pipe fueled by rapid industrialization and governmental capital expenditures on China’s infrastructure. In addition, our SSAW pipe with high-end and larger pipe diameters, which are popular among our customers, also contributed to the sales volume  increase 19%, and unit selling price increase of 4% as compared to sales in the same period last year. We also put effort in expanding sales in the petrochemical and thermal power areas, while strengthening the current heat natural gas pipe market for our products .

 
66
 

Revenues derived from the domestic sales of ERW pipe for the nine months ended January 31, 2011 was $12,415,761 and accounted for 8.5% of our total revenues. ERW sales increased $10,838,847 or 687% during the nine months ended January 31, 2010. Sales volume for ERW was 15,294 tons for the nine months ended January 31, 2011, which increased 590% from 2,215 tons in the nine months ended January 31, 2010. These increases were attributable to the large market demand for ERW pipe used in the thermal power and heat power industries. The average unit sales price increased 14%. It was mainly because the Company adjusted the unit price according to the market price of major raw materials.

Our revenues from export sales decreased $8,156,380, or 48%, to $8,742,792 for the nine months ended January 31, 2011 from $16,899,172 for the nine months ended January 31, 2010. Sales volume was 11,876 tons for the nine months ended January 31, 2011, which decreased by 42% from 20,383 tons in nine months ended January 31, 2010. The main reason for this decline was attributable to following: i) considering the strong demand in the domestic market and the increasing shipping costs to Africa which was in line with the increase in fuel costs, we reduced the production and sales volume to African countries since July 2010 as an adjustment to our market structure, and ii) Since the global market was increasingly competitive, the average unit sales price of ERW pipe decreased by 27%.

We expect our revenues to continue to grow as we seek to expand our sales network and to explore further markets.

Cost of Goods Sold

Our cost of goods sold is primarily comprised of the costs of raw materials, such as hot-rolled steel strip, labor costs, and manufacturing overhead. The costs of raw materials represented approximately 86% of the total costs of goods sold.

 Our total cost of goods sold increased by 26%, or approximately $25.9 million, to approximately $125.5 million for the nine months ended January 31, 2011 from approximately $99.6 million for the nine months ended January 31, 2010.

For the nine months ended January 31, 2011, our cost of goods sold relating to the PRC markets increased by $32,469,705, or 38%, to $118,091,468, compared with $85,621,763 for the comparable period in 2010. The increase was attributable to the following: (i) along with the increase in sales volume, our cost of direct materials increased, (ii) the labor costs increased since more steel pipe was produced by employees to meet the demand for our products sold, and (iii) we started to purchase some raw materials through a trading company instead of buying raw materials from manufacturing companies directly.  In this way, we negotiated higher purchase prices but we were granted longer payment terms with these suppliers which led to the increase in the cost of raw materials for the nine months ended January 31, 2011. The increase was mainly derived from the $20,932,565 or 27% increase of the cost of goods sold for SSAW pipe in the PRC markets.

Our cost of goods sold from export markets decreased by $6,612,333, or 47%, to $7,370,985 for the nine months ended January 31, 2011 from $13,983,318 for the nine months ended January 31, 2010. This decrease was mainly because that we reduced the production and sales volume in overseas markets and focused on our domestic markets.

Gross Profit and Gross Margin

Gross profit is equal to revenues less cost of goods sold. Gross margin is equal to gross profit divided by revenues. Our gross profit increased by 10%, or approximately $1.8 million, to approximately $21 million for the nine months ended January 31, 2011 from approximately $19.2 million for the nine months ended January 31, 2010. The increase was due to the increased revenues generated by our product sales, especially from the sales in the PRC market of SSAW pipe and ERW pipe. The gross profit derived from sales of SSAW pipe and ERW pipe in the PRC increased by $889,273 and $1,687,253, respectively, as well as increased gross profit of $807,930, from our processing services rendered in the PRC, offset by decreased gross profit for SSAW pipe and ERW pipe of $695,408 and $848,639 from the export markets, respectively.

 
67
 

SSAW pipe and ERW pipe typically enjoy stable gross margins since the selling price is adjusted according to the market price fluctuation of raw materials.  The gross margin of SSAW pipe for the nine months ended January 31, 2011 decreased by 3% compared with that of the same period of 2010. This decrease resulted primarily from higher raw materials and labor costs used in production. To ease the capital demand pressure, we purchased some hot-rolled steel strip through a trading company which sold it at a higher price but provided longer payment terms compared with buying raw materials from manufacturing suppliers directly. This is the reason for the increase in the cost of raw materials in the nine months ended January 31, 2011.
 
Our gross profit in export markets decreased by $1,544,047, to $1,371,807 for the nine months ended January 31, 2011 as compared with $2,915,854 for the nine months ended January 31, 2010, and our gross margin for the nine months ended January 31, 2011 decreased by 1% from the nine months ended January 31, 2010. The gross margin for SSAW pipe in the export markets on average decreased by 2%. This was primarily due to the global market’s increased competition, which led to the average unit sales price decrease. The cost of raw materials increased at the same time as aforementioned.
 
We expect our overall average gross margin to grow as we further expand our higher-margin products and services.

Selling and Marketing Expenses

Our selling and marketing expenses primarily include shipping and handling costs, payroll, travel, bid costs, sales agent fees, and business entertainment costs. The table below sets forth a breakdown of our selling and marketing expenses for the periods indicated:

   
Nine Months Ended January 31,
  
   
2011
    
2010
    
Comparisons
  
   
Amount
    
% of
Total
    
Amount
    
% of
Total
    
Increase/
(Decrease)
    
Increase/
(Decrease)
  
 
 
$
           
$
           
$
    
%
  
Shipping and handling costs
     1,691,336       49 %     1,450,508       48 %     240,828       17 %
Payroll
     567,742       16 %     453,442       15 %     114,300       25 %
Travel
     147,813       4 %     214,160       7 %     (66,347 )     (31 )%
Bid costs
     234,508       7 %     246,334       8 %     (11,826 )     (5 )%
Sales agent fees
     107,506       3 %     76,616       3 %     30,890       40 %
Business entertainment
     275,857       8 %     207,781       7 %     68,076       33 %
Inspection and insurance
     176,585       5 %     166,419       6 %     10,166       6 %
Office expenses
     170,810       5 %     147,637       5 %     23,173       16 %
Other
     75,349       3 %     54,938       1 %     20,411       37 %
Total
     3,447,506       100 %     3,017,835       100 %     429,671       14 %

The percentage of our selling and marketing expenses to our revenues was 2% and 3% for the nine months ended January 31, 2011 and 2010, respectively. Selling and marketing expenses increased by 14%, or $429,671, to $3,447,506 for the nine months ended January 31, 2011 from $3,017,835 for the nine months ended January 31, 2010. This increase was primarily due to: (i) an increase $240,828 in shipping and handling costs for more long distance domestic shipping and handling transactions incurred in nine months ended January 31, 2011, such as shipping to xinjiang province, PRC  (ii) an increase of $114,300 in payroll compared with last same period, as a result of the increased average salary for sales employees, and (iii) increased business entertainment of $68,070 in connection with the increasing sales activities, partially offset by decreases of $66,347 for overseas travel related expenses.

 
68
 

We anticipate such expenses will increase as we expand our sales network and build our operations in additional regional markets in China and overseas markets, and we expect such expenses will remain stable as a percentage of revenues in the near future.

General and Administrative Expenses

Our general and administrative expenses consist primarily of payroll, retirement benefits, travel, depreciation and amortization, financial consulting fees, legal consulting fees, office expenses, business entertainment, utilities & vehicles, land usage and property taxes and miscellaneous. The table below sets forth a breakdown of our general and administrative expenses for the periods indicated:

   
Nine Months Ended January 31,
  
   
2011
    
2010
    
Comparisons
  
   
Amount
    
% of
Total
    
Amount
    
% of
Total
    
Increase/
(Decrease)
    
Increase/
(Decrease)
  
 
 
$
           
$
           
$
    
%
  
Payroll
     729,982       26 %     589,200       26 %     140,782       24 %
Retirement benefits
     259,722       9 %     123,949       5 %     135,773       110 %
Travel
     101,668       4 %     137,983       6 %     (36,315 )     (26 )%
Depreciation and amortization
     421,127       15 %     239,247       11 %     181,880       76 %
Financial consulting fees
     237,018       9 %     277,043       12 %     (40,025 )     (14 )%
Legal consulting fees
     6,364       -       22,156       1 %     (15,792 )     (71 )%
Office expenses
     309,958       11 %     246,827       11 %     63,131       26 %
Business entertainment
     253,983       9 %     306,618       13 %     (52,635 )     (17 )%
Utilities & vehicles
     151,663       6 %     87,356       4 %     64,307       74 %
Land usage and property taxes
     144,267       5 %     144,078       6 %     189       -  
Miscellaneous
     147,155       6 %     104,057       5 %     43,098       41 %
Total
     2,762,907       100 %     2,278,514       100 %     484,393       21 %

Our general and administrative expenses increased by 21%, or $484,393, to $2,762,907 for the nine months ended January 31, 2011 from $2,278,514 for the nine months ended January 31, 2011, which was primarily due to following factors:

(i)
Payroll expenses increased by $140,782, or 24% compared with the nine months ended January 2010, as a result of the increased average salary for administrative employees to retain more employees to support our operations,

(ii)
Retirement benefit expenses increased by $135,773, or 110% compared with the nine months ended January 31, 2010, as a result of the increased basic salary and its base ratio for employees,

(iii)
Depreciation and amortization increased by $181,880, or 76% compared with the nine months ended January 31, 2010, due primarily to the increase in office equipment and motor vehicles and

(iv)
Miscellaneous expenses increased by $43,098, or 41% in the nine months ended January 31, 2011 compared to same period of 2010. This increase was mainly due to increases in welfare fees and insurance fees in the nine months ended January 31, 2011.

The percentage of our general and administrative expenses to our revenues was 2% for both periods.

We expect such expenses to increase as our business expands. We will also incur additional costs to meet the requirements of being a public company in the U.S., such as hiring additional staff with experience in U.S. GAAP and SEC reporting requirements and developing internal audit and disclosure controls and compliance functions. All of these measures will increase our general and administrative expenses in the periods following the filing of this transition report.

 
69
 

Interest Expense

Our financing costs consist of interest for short-term loans, product financing, bank acceptance notes and other borrowing and miscellaneous bank charges.

For the nine months ended January 31, 2011 and 2010, our interest expense was approximately $9.8 million and approximately $6.4 million, represented 7% and 5% of our revenues, respectively.

Interest expenses increased by 55%, or approximately $3.5 million, to approximately $9.8 million for the nine months ended January 31, 2011 from approximately $6.3 million for the nine months ended January 31, 2010. This increase was primarily due to the short-term bank loans interest which increased by approximately $0.7 million or 21% to approximately $4.3 million from $3.6 million for the nine months ended January 31, 2010. The increased bank loan interest was a result of increased average bank loans obtained during the nine months ended January 31, 2011, as well as a result of the increased average interest rate of our bank loans. The increased discount interest was primarily due to the increasing discount bank acceptance notes to purchase raw materials and to repay the product financing arrangements, as well as the increased average discount interest rate in the nine months ended January 31, 2011.

Other Income, Net
 
Other income (expense), net, was a net income of $1,503,919 for the nine months ended January 31, 2011, compared with a net expense of $(19,146) for the nine months ended January 31, 2010. This primarily resulted from i) the government subsidies of $111,874; ii) income from a forfeited long-aged customer deposit of $1,075,887. The deposit was aged over three years and the customer refused to implement the contracts. The amount was forfeited in line with the contract term ; iii) and compensation of $294,482 from a logistic company who breached a contract during the nine months ended January 31, 2011.

Income Tax

Our income tax expense decreased by 10%, or $267,778, to $2,342,280 for the nine months ended January 31, 2011 from $2,610,058 for the nine months ended January 31, 2010. The decrease in the income taxes was mainly due to the decrease in income before income taxes as a result of increase in interest expense.

In accordance with the relevant tax laws and regulations of the PRC, the applicable corporate income tax rate for operating subsidiaries is 25%. Our effective tax rate was 28% for the nine months ended January 31, 2011 and 2010.

Net Income

Primarily as a result of the foregoing, our net income decreased by 11%, or $764,781, to $5,974,659 for the nine months ended January 31, 2011 from $6,739,440 for the nine months ended January 31, 2010.

Our net profit margin decreased to 4% in nine months ended January 31, 2011 from 6% in nine months ended January 31, 2010, which was mainly attributable to the business expansion and increased interest expenses.
 
 
70
 

Liquidity and Capital Resources

The following table is a summary of our liquidity and capital resources for the reported periods:

   
January 31, 2011
    
April 30, 2010
  
Cash and cash equivalents
   $ 2,801,465     $ 6,413,448  
Current assets
     202,247,312       164,811,655  
Current liabilities
     (251,989,258 )     (220,461,001 )
Working capital
     (49,741,946 )     (55,649,346 )
Shareholder’ equity
   $ 54,533,956     $ 47,206,094  

We had a working capital deficit of $(49,741,946) and $(55,649,346) at January 31, 2011 and April 30, 2010, respectively. Our working capital deficit was attributable to the significant levels of short-term debt that we have historically carried, reflected as follows at January 31, 2010 and April 30, 2010, respectively:

   
January 31,
2011
    
April 30,
2010
  
Short-term bank borrowings
   $ 112,798,503     $ 104,156,201  
Due to a related party
     3,310,289       1,426,048  
Notes payable
     55,436,601       43,080,547  
Product and other financing arrangements
     36,321,376       43,871,968  
Total short-term debt
   $ 207,866,769       192,534,764  

We believe that we will generate sufficient cash during the next twelve months to fund our operations, service our debt and remain in a positive cash position based on anticipated revenues, which is received primarily in cash, and sources of short-term debt that we expect to be available to us.  Furthermore, we have generated positive net cash flow from our operating activities.  During the reporting years, we arranged a number of bank loans and other borrowings, including loans from related parties, notes to third parties, and products and other financing arrangements, as set forth in the table above, to satisfy our financing needs. As of the date of this report , we have not experienced any difficulty in raising funds through bank loans, and we have not experienced any liquidity problems in settling our payables in the normal course of business and repaying our bank loans when they are due. In addition, in 2010 and 2011, the Company obtained commitments from two shareholders Xudong Liu and Ning Li to provide working capital to the Company, if needed, in the form of notes payable or personal loans.

Since the global financial crisis happened in late 2008, the pipeline industry experienced a downturn and the Company was faced with a great development opportunity as a result of the issuance of the PRC national supporting policy. To improve our operations, we developed expanding market strategies for our SSAW pipe and ERW pipe that are high end and have larger diameters and enjoy higher gross margins. For example, in December, 2010, we have entered into several sales arrangements with some large stated-owned enterprises relating to our higher margin SSAW pipes, with projected aggregate sales over $40 million during 2011. We also initiated cost control strategies in fiscal 2010 with regard to reducing selling and marketing costs as well as general management costs to improve profitability. We  also collected outstanding accounts receivable balances while maintaining strong business relationships with our customers during this period. We also negotiated, and continue to negotiate with our suppliers to extend our credit terms when needed.

 
71
 

For years ended April 30, 2010 and 2009

The following table sets forth movements of our cash flows for the years indicated:

   
Year Ended April 30,
  
   
2010
    
2009
  
   
$
    
$
  
Net cash (used in) provided by operating activities
     (27,381,738 )     18,337,581  
Net cash used in investing activities
     (7,999,264 )     (70,277,295 )
Net cash provided by financing activities
     39,822,114       46,959,262  
Net increase (decrease) in cash and cash equivalents
     4,441,112       (4,980,452 )
Effect of exchange rate changes on cash
     (7,893 )     1,302,914  
Cash and cash equivalents at beginning of year
     1,980,229       5,657,767  
Cash and cash equivalents at end of year
     6,413,448       1,980,229  

We believe that the level of financial resources is a significant factor for our future development and accordingly, we may determine from time to time to raise capital through private debt or equity financing to strengthen the our financial position, to expand our facilities and to provide us with additional flexibility to take advantage of business opportunities. No assurances can be given that we will be successful in raising such additional capital on terms acceptable to us.

Operating Activities
 
Net cash used in operating activities was $27,381,738 for the year ended April 30, 2010, which is primarily attributable to our net income of $6,565,542, adjusted by non-cash related expenses including depreciation and amortization of $6,059,318, deferred income taxes of $2,162,543, increase in accounts receivable of $19,584,747, increase in inventories of $13,492,642, increased in prepayment for goods of $6,271,627 and increase in accounts payable of $5,504,797, offset by decrease in customer deposits of $9,723,281.

For the year ended April 30, 2009, net cash provided by operating activities was $18,337,581. This was primarily due to the net income of $4,966,604, adjusted by non-cash related expenses including depreciation and amortization of $4,692,407 and deferred income taxes of $1,048,682, plus a net increase in working capital items of $7,623,809. The net increase in working capital items was mainly due to the decrease in accounts receivable of $5,086,132, inventory of $1,651,827 and decrease in prepayment for goods of $4,043,982 and accounts payable of $903,561. The net increase in working capital items was partially offset by decrease in customer deposits of $7,129,559.
 
Investing Activities
 
Net cash used in investing activities was $7,999,264 for the year ended April 30, 2010. It was primarily due to the decreases in $12,219,842 for notes receivable and offset by the purchases of plant and equipment of $4,713,221, purchases of construction in progress of $1,215,685, payment for deposit of land use rights of $1,075,222, increases in notes receivable from related parties of $8,229,824, accrued interest from related parties of $1,400,532 and payment for long-term investment of 3,510,915.

Net cash used in investing activities was $70,277,295 for the year ended April 30, 2009, which is primarily attributable to decreases in notes receivable from related parties of $5,608,493 and offset by the purchases of plant and equipment of $1,737,126, purchases of construction in progress of $5,118,570, increases in notes receivable of $3,556,126, accrued interest from related parties of $1,743,883, advances to related parties of $20,033,494 and purchases of a subsidiary of $43,696,589.
 
 
72
 
 
Financing Activities
 
Net cash provided by financing activities was $39,822,114 for the year ended April 30, 2010, which is primarily attributable to decreases in restricted cash of $9,076,908, proceeds from short-term loans of $196,021,252, proceeds from product financing arrangements of $110,745,373, offset by repayments of short-term loans of $156,517,145, repayments for product financing arrangements of $105,917,373 and decreases in notes payable of $13,586,901.

Net cash provided by financing activities was $46,959,262 for the year ended April 30, 2009, which is primarily attributable to increases in capital contribution of $38,562,951, proceeds from short-term loans of $112,724,383, proceeds from product financing arrangements of $112,009,255 and increases in notes payable of $14,885,347, offset by increases in restricted cash of $21,729,776, repayments of short-term loans of $98,510,063 and repayments for product financing arrangements of $110,982,835.

For Nine Months Ended January 31, 2011 and 2010

The following table sets forth movements of our cash flows for the periods indicated:

   
Nine Months Ended January 31,
  
   
2011
    
2010
  
   
$
    
$
  
Net cash (used in) operating activities
     (2,680,375 )     (14,639,830 )
Net cash used in investing activities
     (10,901,140 )     (19,039,538 )
Net cash provided by financing activities
     4,954,846       36,582,335  
Net (decrease) increase in cash and cash equivalents
     (8,626,669 )     2,902,967  
Effect of exchange rate changes on cash
     5,014,686       309,048  
Cash and cash equivalents at beginning of period
     6,413,448       1,980,229  
Cash and cash equivalents at end of period
     2,801,465       5,192,244  

We believe that the level of financial resources is a significant factor for our future development and accordingly, we may determine from time to time to raise capital through private debt or equity financing to strengthen the Company’s financial position, to expand our facilities and to provide us with additional flexibility to take advantage of business opportunities. No assurances can be given that we will be successful in raising such additional capital on terms acceptable to us.

Operating Activities
 
Net cash used in operating activities was $2,680,375 for the nine months ended January 31, 2011, which is primarily attributable to our net income of $5,972,512, adjusted by non-cash related expenses including depreciation and amortization of $5,198,086, deferred income taxes of $2,222,345, increase in accounts receivable of $6,884,115, increase in inventories of $16,416,501, increased in prepayment for goods of $6,946,901, increase in accounts payable of $7,916,397and increase in customer deposits of $6,764,232.

For the nine months ended January 31, 2010, net cash used in operating activities was $14,639,830. This was primarily due to the net income of $6,726,149, adjusted by non-cash related expenses including depreciation and amortization of $4,446,983 and deferred income taxes of $2,500,449, plus a net decrease in working capital items of $28,326,703. The net decrease in working capital items was mainly due to the increase in accounts receivable of $11,245,336 and in inventories of $2,070,073, the increase in prepayment for goods of $8,483,165 and accounts payable of $9,129,452. The net decrease in working capital items was partially offset by decrease in customer deposits of $14,768,470.
 
Investing Activities
 
Net cash used in investing activities was $10,901,140 for the nine months ended January 31, 2011. It was primarily due to the increases in $5,508,071 for notes receivable, purchases of plant and equipment of $2,317,208, increases in $1,638,400 from related parties and accrued interest from related parties of $1,422,556.

Net cash provided by investing activities was $19,039,538 for the nine months ended January 31, 2010, which is primarily attributable to decreases in notes receivable of $6,066,009 and offset by the purchases of plant and equipment of $2,345,552, purchases of construction in progress of $2,179,412, increases in accrued interest from related parties of $1,061,540, advances to related parties of $17,655,773 and payment for long-term investment of $1,760,723.

 
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Financing Activities

Net cash provided by financing activities was $4,954,846 for the nine months ended January 31, 2011, which is primarily attributable to proceeds from short-term loans of $165,183,142, proceeds from product financing arrangements of $96,134,499 and increases in notes payable of $10,499,318, offset by increases in restricted cash of $1,035,881, repayments of short-term loans of $160,629,750 and repayments for product financing arrangements of $105,196,482.

Net cash provided by financing activities was $36,582,335 for the nine months ended January 31, 2010, which is primarily attributable to decreases in restricted cash of $23,279,452, proceeds from short-term loans of $142,761,033 and proceeds from product financing arrangements of $42,191,311, offset by repayments of short-term loans of $109,380,731, repayments for product financing arrangements of $28,566,770 and decreases in notes payable of $33,701,960.
 
5.C.  Research and Development, Patents and Licenses, etc.
 
See the sections entitled  “Research and Development” and “Intellectual Property” in Item 4.B above.
 
5.D.  Trend Information
 
See discussion in Parts A and B of this item.
 
Off-Balance Sheet Commitments and Arrangements

For Year Ended April 30, 2010

(1)
As of April 30, 2010, the Company entered into two guarantee contracts to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi Rong Xiang Trading Co., Ltd. (“SXRX”). If SXRX defaults on the repayment of its bank loans when they fall due, the Company is required to repay the outstanding balance. As of April 30, 2010, the guarantee provided for the bank loans borrowed by SXRX was $4,388,660, which consists of the following:

   
April 30, 2010
  
Due November 14, 2010 (expired)
   $ 2,194,330  
Due October 27, 2010 (expired)
     2,194,330  
Total
   $ 4,388,660  

(2)
As of April 30, 2010, the Company entered into a guarantee contract to serve as guarantor for bank loans borrowed by an unrelated party, Taiyuan North Metallurgy Co., Ltd with a guarantee amount of $2,925,773, due May 26, 2010 (expired).

(3)
As of April 30, 2010, the Company entered into four guarantee contracts to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi Tongyuan Industrial Group Co., Ltd. (“SXTY”). SXTY also provided a cross guarantee for bank loans of $5,851,546 borrowed by the Company. As of April 30, 2010, the guarantee provided for the bank loans borrowed by SXTY was $7,753,299, which consists of the following:

 
74
 

   
April 30, 2010
  
Due January 14, 2011 (expired)
   $ 2,633,196  
Due August 5, 2010 (expired)
     3,657,216  
Due April 24, 2011 (expired)
     1,462,887  
Total
   $ 7,753,299  

(4)
As of April 30, 2010, the Company entered into one guarantee contract to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi Wanbang Industry and Trade Co., Ltd. (“SXWB”) with a guarantee amount of $4,388,660, due June 4, 2010 (expired). SXWB also provided a cross guarantee for the short-term loan of $2,925,773 borrowed by the Company.

(5)
As of April 30, 2010, the Company entered into two guarantee contracts to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi Taishi Metallurgy Industry Group Co., Ltd. (“SXTS”). SXTS also provided a cross guarantee for bank loans of $2,925,773 borrowed by the Company. As of April 30, 2010, the guarantee provided for the bank loans borrowed by SXTS was $7,314,433, which consists of the following:

   
April 30, 2010
  
Due May 18, 2011 (expired)
   $ 4,388,660  
Due February 24, 2011 (expired)
     2,925,773  
Total
   $ 7,314,433  

(6)
As of April 30, 2010, the Company entered into two guarantee contracts to serve as guarantor for bank loans borrowed by an unrelated party, Taiyuan North Metallurgy Co., Ltd (“TYNM”). As of April 30, 2010, the guarantee provided for bank loans borrowed by TYNM was $2,121,186, which consists of the following:

   
April 30, 2010
  
Due April 30, 2011 (expired)
   $ 1,097,165  
Due November 4, 2010 (expired)
     1,024,021  
Total
   $ 2,121,186  

(7)
As of April 30, 2010, the Company entered into two guarantee contracts to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi Guanghua Pipe produce Co., Ltd. (“SXGH”). SXGH also provided a cross guarantee for bank loan of $4,388,660 borrowed by the Company. As of April 30, 2010, the guarantee provided for the bank loans borrowed by SXGH was $29,257,732, which consists of the following:

   
April 30, 2010
  
Due October 10, 2010 (expired)
   $ 7,314,433  
Due April 13, 2010 (expired)
     7,314,433  
Due October 10, 2016 (expired)
     14,628,866  
Total
   $ 29,257,732  

(8)
As of April 30, 2010, the Company entered into two guarantee contracts to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi XinDayu Material Co., Ltd. (“SXXD”). SXXD also provided a cross guarantee for bank loans of $4,388,660 borrowed by the Company. As of April 30, 2010, the guarantee provided for the bank loans borrowed by SXXD was $3,218,351, which consists of the following:

   
April 30, 2010
  
Due December 16, 2010 (expired)
   $ 1,462,887  
Due March 25, 2011 (expired)
     1,755,464  
Total
   $ 3,218,351  
 
 
75
 

(9)
As of April 30, 2010, the Company entered into a guarantee contract to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi Changxin Steel Co., Ltd. from the Huaxia Bank with a guarantee amount of $1,755,464, due September 13, 2010 (expired).

(10)
As of April 30, 2010, the Company entered into a guarantee contract to serve as guarantor for the bank loans borrowed by the Shanxi Xinhuayuan Trading Co., Ltd. from the Jinshang  Bank with a guarantee amount of $1,755,464, due June 25, 2010 (expired).
  
All the guarantee liabilities due before July 30, 2011 were subsequently released since the debtors repaid the loans.

Other than the arrangement described above, as of April 30, 2010, we do not have any outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions of foreign currency forward contracts. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit support to us or that engages in leasing, hedging or research and development services with us.

 
76
 

For Nine Months Ended January 31, 2011

(1)
As of January 31, 2011, the Company entered into two guarantee contracts to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi Rong Xiang Trading Co., Ltd. (“SXRX”). If SXRX defaults on the repayment of its bank loans when they fall due, the Company is required to repay the outstanding balance. As of January 31, 2011, the guarantee provided for the bank loans borrowed by SXRX was $ 3,949,627, which consists of the following:

   
January 31, 2011
  
Due November 15, 2011
   $ 1,670,996  
Due October 25, 2011
     2,278,631  
Total
   $ 3,949,627  

(2)
As of January 31, 2011, the Company entered into three guarantee contract to serve as guarantor for bank loans borrowed by an unrelated party, Taiyuan North Metallurgy Co., Ltd with a guarantee amount of $4,481,307, which consists of the following:

   
January 31, 2011
  
Due July 12, 2011 (expired)
   $ 2,278,631  
Due April 30, 2011 (expired)
     1,139,315  
Due May 19, 2011 (expired)
     1,063,361  
Total
   $ 4,481,307  

(3)
As of January 31, 2011, the Company entered into four guarantee contracts to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi Tongyuan Industrial Group Co., Ltd. (“SXTY”). SXTY also provided a cross guarantee for bank loans of $9,114,524 borrowed by the Company. As of January 31, 2011, the guarantee provided for the bank loans borrowed by SXTY was $8,354,980, which consists of the following:

   
January 31, 2011
  
Due February 24, 2011 (expired)
   $ 3,797,718  
Due April 24, 2011 (expired)
     1,519,087  
Due May 19, 2011 (expired)
     3,038,175  
Total
   $ 8,354,980  

(4)
As of January 31, 2011, the Company entered into one guarantee contract to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi Wanbang Industry and Trade Co., Ltd. (“SXWB”) with a guarantee amount of $4,557,262, due November 29, 2011. SXWB also provided a cross guarantee for the short-term loan of $10,633,611 borrowed by the Company.

(5)
As of January 31, 2011, the Company entered into two guarantee contracts to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi Taishi Metallurgy Industry Group Co., Ltd. (“SXTS”). SXTS also provided a cross guarantee for bank loans of $9,114,524 borrowed by the Company. As of January 31, 2011, the guarantee provided for the bank loans borrowed by SXTS was $7,595,437, which consists of the following:

   
January 31, 2011
  
Due February 24, 2011 (expired)
   $ 3,038,175  
Due May 19, 2011 (expired)
     4,557,262  
Total
   $ 7,595,437  

 
77
 

(6)
As of January 31, 2011, the Company entered into two guarantee contracts to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi Guanghua Pipe produce Co., Ltd. (“SXGH”). SXGH also provided a cross guarantee for bank loan of $15,950,417 borrowed by the Company. As of January 31, 2011, the guarantee provided for the bank loans borrowed by SXGH was $30,381,747, which consists of the following:

   
January 31, 2011
  
Due April 13, 2011(expired)
   $ 7,595,437  
Due October 29, 2011
     7,595,437  
Due October 12, 2016
     15,190,873  
Total
   $ 30,381,747  

(7)
As of January 31, 2011, the Company entered into two guarantee contracts to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi XinDayu Material Co., Ltd. (“SXXD”). SXXD also provided a cross guarantee for bank loans of $4,557,262 borrowed by the Company. As of January 31, 2011, the guarantee provided for the bank loans borrowed by SXXD was $6,312,726, which consists of the following:

   
January 31, 2011
  
Due June 10, 2011 (expired)
   $ 4,557,262  
Due March 25, 2011 (expired)
     1,755,464  
Total
   $ 6,312,726  

(8)
As of January 31, 2011, the Company entered into a guarantee contract to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi Changxin Steel Co., Ltd. from the Huaxia Bank with a guarantee amount of $1,670,996, due September 27, 2011.

(9)
As of January 31, 2011, the Company entered into two guarantee contract to serve as guarantor for bank loans borrowed by an unrelated party, Dalian Binggong Trading Co., Ltd. with a guarantee amount of $12,152,699, which consists of the following:

   
January 31, 2011
  
Due September 3, 2011
   $ 4,557,262  
Due July 18, 2011 (expired)
     7,595,437  
Total
   $ 12,152,699  

(10)
As of January 31, 2011, the Company entered into a guarantee contract to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi Xin Bang Trading Co., Ltd. (“SXXB”) from the China Minsheng Bank with a guarantee amount of $6,076,349, due September 26, 2011. SXXB also provided a cross guarantee for bank loans of $6,076,349 borrowed by the Company.

(11)
As of January 31, 2011, the Company entered into a guarantee contract to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi Jintaoyuan Coal Co., Ltd. from the China Minsheng Bank with a guarantee amount of $30,381,747, due January 31, 2012.

All the guarantee liabilities due before July 30, 2011 were subsequently released since the debtors repaid the loans.

Other than the arrangement described above, as of January 31, 2011, we do not have any outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions of foreign currency forward contracts. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit support to us or that engages in leasing, hedging or research and development services with us.

 
78
 

5.F.  Tabular Disclosure of Contractual Obligations
 
Contractual Obligations
 
We have certain fixed contractual obligations and commitments that include future estimated payments. Changes in our business needs, cancellation provisions, changing interest rates, and other factors which may result in actual payments differing from the estimates. We cannot provide certainty regarding the timing and amounts of payments. We have presented below a summary of the most significant assumptions used in our determination of amounts presented in the tables, in order to assist in the review of this information within the context of our consolidated financial position, results of operations, and cash flows. 

The following tables summarize our contractual obligations as of January 31, 2011, and the effect these obligations are expected to have on our liquidity and cash flows in future periods.

   
Payments Due by Period
  
   
Total
    
Less than 
1 year
    
Over 1 year
  
Contractual Obligations:
  
 
   
 
   
 
 
Short-term bank borrowings
   $ 112,798,503     $ 112,798,503     $ -  
Notes payable
     55,436,601       55,436,601       -  
Product finance arrangements
     36,321,376       36,321,376       -  
Total Contractual Obligations:
   $ 204,556,480     $ 204,556,480     $ -  

Short-term bank borrowings consists of secured and unsecured borrowings from Agriculture Bank of China, Bank of Communications, Everbright Bank, China Construction Bank, China Bohai Bank, China Merchants Bank, CITIC Bank, Industrial , Commercial Bank of China and etc..

Notes payable includes loan from unrelated parties and bank acceptance notes.
 
ITEM 6.
DIRECTORS, SENIOR MANAGEMENT, AND EMPLOYEES
 
6.A.  Directors and Senior Management
Prior to the date of our business combination, Wei Guo served as our sole director and executive officer.  Mr. Guo’s service was terminated on the date of our business combination.  Since the date of our business combination, the following individuals have served as our directors and executive officers:
 
Name
  
Position
  
Age
Xudong Liu
  
Chairman
  
31
Ning Li
  
Chief Executive Officer and Director
  
42
Hongteng Yang
  
Chief Financial Officer
  
55
Lizi Liu
  
Director
  
46
  
Mr. Liu has served in various capacities for our company’s operating entities since 2003.  Specifically, from 2003 to 2005, Mr. Liu served as General Manager for Xi’an Guolian Spiral Tubulation Co., Ltd. and since 2004, Mr. Liu has served as chairman of a number of our operating entities.  In addition, Mr. Liu has been serving as General Manager of Taiyuan Tianlong Machine Manufacture Co., Ltd., a related party of ours.  Since 2007, Mr. Liu has been elected as Representative of the National People’s Congress (NPC)and Member of the National Committee of the Chinese People's Political Consultative Conference (CPPCC) for the Yuci District of Jinzhong City, Shanxi Province.
 
Mr. Ning Li has served in various capacities for our company’s operating entities since 2002.  Specifically, from 2002 to 2005, Mr. Li served as Sales Manager of Shanxi Guolian Spiral Tubulation Co., Ltd., in 2006, Mr. Li served as General Manager of Xi’an Guolian Spiral Tubulation Co., Ltd. and since 2007, Mr. Li has been serving as General Manager of Shanxi Guolian Pipe Industry Group Co., Ltd.  In 1991, Mr. Li graduated from North China Institute of Petroleum Technology, majoring in the internal combustion engine.  In 2010, Mr. Li graduated from Shanxi University, Bachelor Degree in administration management.
 
Mr. Lizi Liu served as General Manager of Shanxi Guolian Spiral Tubulation Co., Ltd. from 1999 until 2006.  Since 2007, Mr. Liu has been serving as Vice Chairman of the Board of Shanxi Guolian Pipe Industry Group Co., Ltd.  From May 2008 to July, 2011, Mr. Liu served as Chairman of the Board of Shanxi Liaoyuan Equestrian Club.  Since July 2011, Mr. Liu has been serving as Chairman of the Board of Jinzhong Mingle Agro-Ecological Manor.  From 2001 to 2006, Mr. Liu was elected as the Representative of NPC for Yuci District of Jinzhong City, Shanxi Province.  Earlier this year, Mr. Liu was elected as the Representative of NPC for Yuci District of Jinzhong City, Shanxi Province.
 
Ms. Hongteng Yang has served in various capacities for our company’s operating entities since 2001.  Specifically, Ms. Hongteng served as Deputy General Manager of Shanxi Guolian Spiral Tubulation Co., Ltd. from 2001 to 2002.  Since 2003, Ms. Yang served as Deputy General Manager of Shanxi Guolian.
 
Messrs. Xudong Liu, Ning Li and Lizi Liu, our directors since the date of our business combination, will serve as directors until our next annual general meeting and until their successors are duly elected and qualified.
 
Other than Lizi Liu’s being Xudong Liu’s uncle, there are no family relationships between any of our directors or senior management. There are no arrangements or understandings with major shareholders, customers, suppliers or others, pursuant to which any person referred to above was selected as a director or member of senior management.
   
6.B.  Compensation
 
Director Compensation
 
Our directors do not currently receive any cash compensation for their service as members of the board of directors.
 
Executive Compensation
 
Prior to the business combination, no executive officer of the Shell Company had received any cash compensation for services rendered to the Shell Company.
 
 
79
 

Rich Mountain has no options or long-term compensation plans.
  
6.C. Board Practices
 
Board Composition and Terms of Directors and Officers
 
Our board of directors currently consists of three directors: Xudong Liu, Ning Li and Lizi Liu, none of whom qualifies as an independent director.
 
Pursuant to our memorandum and articles of association, the business of our company is managed by our board of directors. Commencing with the first annual meeting of the shareholders, directors are elected for a term of office to expire at the next succeeding annual meeting of the shareholders after their election. Each director holds office until the expiration of his or her term of office and until his or her successor has been elected and qualified, or until his or her earlier death, resignation or removal by resolution of shareholders or a resolution of directors in accordance with the memorandum and articles of association.
 
The directors may at any time by resolution of directors appoint any person to be a director to fill a vacancy. There is a vacancy if a director dies or otherwise ceases to hold office as a director. The directors may not appoint a director to fill a vacancy for a term exceeding the term that remained when the person ceasing to be a director ceased to hold office.
 
Our officers are appointed by resolution of our directors and hold office until removed from office by our directors, whether or not a successor is appointed.
 
Committees of the Board of Directors
 
We currently do not have any committees under our board of directors.
 
Duties of Directors
 
Under the laws of the British Virgin Islands, a director in exercising their powers or performing their duties shall act honestly and in good faith and in what the director believes to be the best interests of the company. In fulfilling their duty of care to us, our directors must ensure compliance with our Memorandum and Articles of Association. We have the right to take legal action if a duty owed by our directors is breached.
 
We have not entered into a director service contract with any of our directors
 
6.D.  Employees
 
See the discussion under the heading “Employees” in Item 4.B. above.

 
80
 
 
6.E.  Share Ownership
 
As of the date hereof, 12,000,000 of our ordinary shares are outstanding. Holders of our ordinary shares are entitled to vote together as a single class on all matters submitted to shareholders for approval. No holder of ordinary shares has different voting rights from other any other holders of ordinary shares. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company. As of the date hereof, no ordinary shares were held by record holders in the United States.
 
Beneficial ownership is determined in accordance with the rules and regulations of the SEC. Percentage of beneficial ownership of each listed person is based on ordinary shares outstanding as of July 30, 2011.
 
The following table sets forth information with respect to the beneficial ownership of our common shares as of July 30, 2011 by:
 
 
·
each of our directors and executive officers; and
 
·
each person known to us to beneficially own more than 5% of our outstanding ordinary shares.
 
Except as otherwise noted, the business address of each person listed in the table is No 1. Road, Yuci Industrial Park, Jin Zhong City,Shanxi Province, 030600, People’s Republic of China.
    
 
Shares
Beneficially Owned
  
 
Number
    
%
  
Directors, Executive Officers and 5% Shareholders:
          
Xudong Liu
     7,632,000       63.6 %
Ning Li
     660,000       5.5 %
Lizi Liu
     900,000       7.5 %
Hongteng Yang
     288,000       2.4 %
Total
     9,480,000       79.0 %
  
Stock Options
 
We do not currently have a stock option plan.
 
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 
7.A.  Major Shareholders
 
See Item 6.E., “Share Ownership,” for a description of our major shareholders.
 
7.B.  Related Party Transactions
 
Contractual Arrangements
 
See discussion above under “History and Development of the Company – Contractual Arrangements” for a discussion about the arrangements between Shanxi Shipaipu, Shanxi Ruixingtong, SXGL and Shanxi Zhonglian.
 
Issuance of Shares to Related Parties
 
On July 30, 2011, The Shell Company issued 63.6% of its equity to Mr. Xudong Liu, the chairman of SXGL and the owner of the an entity that owned 63.6% of the equity of RISE KING. Mr. Xudong Liu received 7,632,000 shares in the Shell Company in exchange for his shares in RISE KING pursuant to the terms of the business combination.

 
81
 
 
On July 30, 2011, The Shell Company issued 7.5% of its equity to Mr. Lizi Liu, the uncle of Mr. Xudong Liu, the vice general manager of SXGL and the owner of an entity that owned 7.5 % of the equity of RISE KING. Mr. Xudong Liu received 900,000 shares in the Shell Company in exchange for his shares in RISE KING pursuant to the terms of the business combination.
 
On July 30, 2011, The Shell Company issued 5.5% of its equity to an entity owned by Ning Li, who is the the general manager of SXGL and the owner of an entity that owned 5.5% of the equity of RISE KING ,. Mr. Li received 660,000 shares in our company in exchange for his shares in RISE KING pursuant to the terms of the business combination.
  
7.C.  Interests of Experts and Counsel
 
Not applicable.
 
ITEM 8.
FINANCIAL INFORMATION
 
Consolidated Statements and Other Financial Information
 
The financial statements required by this item may be found at the end of this report on 20-F.
 
Legal Proceedings
 
From time to time, we may be involved in various claims and legal proceedings arising in the ordinary course of business. We are not currently a party to any such claims or proceedings which, if decided adversely to us, would either, individually or in the aggregate, have a material adverse effect on our business, financial condition, results of operations or cash flows.
 
Dividends
 
We have never declared or paid any dividend on our ordinary shares and we do not anticipate paying any dividends on our ordinary shares in the future. We currently intend to retain all future earnings to finance our operations and to expand our business.
 
No Significant Changes
 
No significant changes to our financial condition have occurred since the date of the annual financial statements contained herein.
 
ITEM 9.
THE OFFER AND LISTING
 
9.A.  Offer and Listing Details
 
Not Applicable.
 
9.B.  Plan of Distribution
 
Not Applicable.
 
9.C.  Markets
 
Our ordinary shares are not currently traded on any exchange.

 
82
 
 
9.D.  Selling Shareholders
 
Not Applicable.
 
9.E.  Dilution
 
Not Applicable.
 
9.F.  Expenses of the Issuer
 
Not Applicable.
 
ITEM 10.
ADDITIONAL INFORMATION
 
10.A.  Share Capital
 
Authorized/Issued Capital
 
Since July 20, 2011, on which date we amended our memorandum and articles of association in connection with our business combination, we are authorized to issue 100,000,000 ordinary shares, par value $0.01 per share.
 
The Shell Company issued 50,000 shares to its original shareholder.  These shares were subsequently increased to 5,000,000 upon the change in the par value of our shares from $1.00 to $0.01 on July 20, 2011.  These 5,000,000 shares were sold to the former shareholders of RISE KING pursuant to the business combination.  In addition, we issued 7,000,000 new ordinary shares on July 30, 2011 to the former shareholders of RISE KING pursuant to the business combination.
 
Shares Not Representing Capital
 
Not Applicable.
 
Shares Held By Company
 
Not Applicable.
 
Resolutions/Authorizations/Approvals
 
Not Applicable.
 
10.B.  Memorandum and Articles of Association
 
Charter
 
Our charter documents consist of our amended and restated memorandum of association and our amended and restated articles of association, or the memorandum and articles of association.  We may amend our memorandum and articles of association generally by a special resolution of our shareholders.
 
 
83
 
 
The following description of certain provisions of our memorandum and articles of association does not propose to be complete and is qualified in its entirety by our memorandum and articles of association included as an exhibit hereto.
 
Corporate Powers
 
The Shell Company was incorporated under the BVI Act on January 5, 2010.  Pursuant to our memorandum of association, the objects for which we were established are unrestricted and we have full power and authority to carry out any objects not prohibited by the BVI Act, as the same may be revised from time to time, or any other law of the British Virgin Islands, except that we have no power to carry on banking or trust business, business as an insurance or reinsurance company, insurance agent or insurance broker, the business of company management, the business of providing the registered office or the registered agent for companies incorporated in the British Virgin Islands, or business as a mutual fund, mutual fund management or mutual fund administrator, unless we obtain certain licenses under the laws of the British Virgin Islands.
 
Board Composition
 
Pursuant to our memorandum and articles of association, the business of our company is managed by our board of directors.  Commencing with the first annual meeting of the shareholders, directors are elected for a term of office to expire at the next succeeding annual meeting of the shareholders after their election.  Each director will hold office until the expiration of his or her term of office and until his or her successor has been elected and qualified, or until his or her earlier death, resignation or removal by the shareholders or a resolution passed by the majority of the remaining directors.
 
In the interim between annual meetings of shareholders, or special meetings of shareholders called for the election of directors, any vacancy on the board of directors may be filled by the vote of a majority of the remaining directors then in office, although less than a quorum, or by the sole remaining director. A director elected to fill a vacancy resulting from death, resignation or removal of a director will serve for the remainder of the full term of the director whose death, resignation or removal will have caused such vacancy and until his successor will have been elected and qualified.
 
There is no cumulative voting by shareholders for the election of directors.  We do not have any age-based retirement requirement and we do not require our directors to own any number of shares to qualify as a director.
 
Board Meetings
 
Board meetings may be held at the discretion of the directors at such times and in such manner as the directors may determine upon not less than three days notice having been given to all directors. Decisions made by the directors at meetings shall be made by a majority of the directors.  There must be at least a majority of the directors (with a minimum of two) at each meeting.
 
Directors Interested in a Transaction
 
A director must, immediately after becoming aware of the fact that he is interested in a transaction entered into or to be entered into by us, disclose such interest to the board of directors.  A director who is interested in a transaction entered into, or to be entered into, by the company, may vote on a matter related to the transaction, attend a meeting of directors at which a matter relating to the transaction arises and be included among the directors present at the meeting for the purposes of a quorum and sign a document on behalf of the company, or do any other thin in his capacity as a director, that relates to the transaction.  A director is not required to disclose his interest in a transaction or a proposed transaction to our board of directors if the transaction or proposed transaction is between the director and us, or the transaction or proposed transaction is or is to be entered into the ordinary course of our business and on usual terms and conditions.

 
84
 
 
The directors may exercise all powers of our company to borrow money, mortgage or charge our undertakings and property, issue debentures, debenture shares and other securities whenever money is borrowed or as security for any debt, liability or obligation of the company or of any third party.
 
Our directors may, by resolution, fix the compensation of directors in respect of services rendered or to be rendered in any capacity to us.
 
A director may attend and speak at any meeting of the shareholders and at any separate meeting of the holders of any class of our shares.
 
Rights of Shares
 
We are currently authorized to issue 100,000,000 ordinary shares.  The shares are made up of one class and one series, namely ordinary shares with a par value of $0.01 per share.  The ordinary shares have one vote each and have the same rights with regard to dividends paid by the company and distributions of the surplus assets of the company.
 
We may purchase, redeem or acquire our shares, provided that we obtain the consent of the member whose shares are being purchased, redeemed or otherwise acquired.
 
Issuance of Shares; Variation of Rights of Shares
 
Our articles of association provide that directors may, without limiting or affecting any right of holders of existing shares, offer, allot, grant options over or otherwise dispose of our unissued shares to such persons at such times and for such consideration and upon such terms and conditions as the directors may determine.
 
Without prejudice to any special rights previously conferred on the holders of any existing shares or class of shares, we may issue shares, with such preferred, deferred or other special rights or such restrictions, whether in regard to dividend, voting or otherwise, as the directors from time to time may determine.
 
If we issue shares of more than one class, we will further amend and restate our Memorandum and Articles of Association to reflect the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) as may be varied with the consent in writing of the holders of not less than three-fourths of the issued shares of that class and the holders of not less than three-fourths of the issued shares of any other class of shares which may be affected by such variation.  The rights conferred upon the holders of the shares of any class issued with preferred or other rights will not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.
 
Shareholders Meetings
 
Under our memorandum and articles of association, we are required to hold an annual meeting of shareholders each year at such date and time determined by our directors.  Meetings of shareholders may be called pursuant to board resolution or the written request of shareholders holding more than 30% of the votes of our outstanding voting shares.  Written notice of meetings of shareholders must be given to each shareholder entitled to vote at a meeting not fewer than 10 days prior to the date of the meeting, with certain limited exceptions.  The written notice will state the place, time and business to be conducted at the meeting.  The shareholders listed in our share register on the date prior to the date the notice is given shall be entitled to vote at the meeting, unless the notice provides a different date for determining the shareholders who are entitled to vote.
 
 
85
 

A meeting of shareholders held without proper notice will be valid if shareholders holding 90% majority of the total number of shares entitled to vote on all matters to be considered at the meeting, or 90% of the votes of each class or series of shares where shareholders are entitled to vote thereon as a class or series, together with an absolute majority of the remaining votes, have waived notice of the meeting and, for this purpose, presence of a shareholder at the meeting is deemed to constitute a waiver.  The inadvertent failure of the directors to give notice of a meeting to a shareholder, or the fact that a shareholder has not received notice, will not invalidate a meeting.
 
Shareholders may vote in person or by proxy.  No business may be transacted at any meeting unless a quorum of shareholders is present.  A quorum consists of the presence in person or by proxy of holders entitled to exercise at least 50% of the voting rights of the shares of each class or series of shares entitled to vote as a class or series thereon and the same proportion of the votes of the remaining shares entitled to vote thereon.
 
Changes in the Maximum Number of Shares the Company is Authorized to Issue
 
Subject to the provisions of the BVI Act, we may, by a resolution of shareholders, amend our memorandum and articles of association to increase or decrease the number of shares authorized to be issued.  Our directors may, by resolution, authorize a distribution by us at a time, of an amount, and to any shareholders they think fit if they are satisfied, on reasonable grounds, that we will, immediately after the distribution, satisfy the solvency test as set forth in the BVI Act, which requires that the value of a company’s assets exceeds its liabilities, and the company is able to pay its debts as they fall due.
 
Indemnification
 
Subject to the provisions of the BVI Act, we may indemnify any person who (a) is or was a party or is threatened to be made a party to any threatened, pending or completed proceedings, whether civil, criminal, administrative or investigative, by reason of the fact that the person is or was a director of our company; or (b) is or was, at our request, serving as a director of, or in any other capacity is or was acting for, another company or a partnership, joint venture, trust or other enterprise, against all expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred in connection with legal, administrative or investigative proceedings.
 
10.C.  Material Contracts
  
Material contracts are disclosed elsewhere in this Form 20-F.
  
10.D.  Exchange Controls
 
British Virgin Islands
 
There are no exchange control regulations imposed on us or our shareholders under British Virgin Islands law.
 
The PRC
 
China regulates foreign currency exchanges primarily through the following rules and regulations:
 
 
·
Foreign Currency Administration Rules of 1996, as amended; and

 
·
Administrative Rules of the Settlement, Sale and Payment of Foreign Exchange of 1996.
 
As we have disclosed in the risk factors above, Renminbi is not a freely convertible currency at present. Under the current PRC regulations, conversion of Renminbi is permitted in China for routine current-account foreign exchange transactions, including trade and service related foreign exchange transactions, payment of dividends and service of foreign debts. Conversion of Renminbi for most capital-account items, such as direct investments, investments in PRC securities markets and repatriation of investments, however, is still subject to the approval of SAFE.

 
86
 
 
Pursuant to the above-mentioned administrative rules, foreign-invested enterprises, such as our PRC subsidiaries, may buy, sell and/or remit foreign currencies for current account transactions at banks in China with authority to conduct foreign exchange business by complying with certain procedural requirements, such as presentment of valid commercial documents. For capital-account transactions involving foreign direct investment, foreign debts and outbound investment in securities and derivatives, approval from SAFE is a pre-condition. Capital investments by foreign-invested enterprises outside China are subject to limitations and requirements in China, such as prior approvals from the PRC Ministry of Commerce or SAFE.
 
10.E.  Taxation
 
The following summary of the material tax consequences of an investment in our ordinary shares relevant to our shareholders is based upon laws and relevant interpretations thereof in effect as of the date of this prospectus, all of which are subject to change, possibly with retroactive effect. The discussion is not intended to be, nor should it be construed as, legal or tax advice to any prospective purchaser and is not exhaustive of all possible tax considerations. This summary does not deal with all possible tax consequences relating to an investment in our shares, such as the tax consequences under U.S. federal, state and local tax laws or non-PRC and non-BVI tax laws. You should consult your own tax advisors with respect to the consequences of the acquisition, ownership and disposition of our shares.
 
British Virgin Islands Taxation
 
All dividends, interests, rents, royalties, compensations and other amounts paid by us are exempt from all forms of taxation in the British Virgin Islands and any capital gains realized with respect to any of our shares, debt obligations, or other securities are not subject to any form of taxation in the British Virgin Islands. No estate, inheritance, succession or gift tax, rate, duty, levy or other charge is payable under BVI law by persons who are not persons resident in the British Virgin Islands with respect to any of our shares, debt obligation or other securities. There are currently no withholding taxes or exchange control regulations in the British Virgin Islands applicable to us or our shareholders. Currently, there is no income tax treaty, convention or reciprocal tax treaty regarding withholdings currently in effect between the United States and the British Virgin Islands.  We will only be liable to pay payroll tax with respect to employees employed and working in the British Virgin Islands.  We do not currently have, and do not intend to have in the near future, any employees in the British Virgin Islands.
 
People’s Republic of China Taxation
 
Under the former Income Tax Law for Enterprises with Foreign Investment and Foreign Enterprises, any dividends payable by foreign-invested enterprises to non-PRC investors were exempt from PRC withholding tax. In addition, any dividends payable, or distributions made, by us to holders or beneficial owners of our shares would not be subject to any PRC tax, provided that such holders or beneficial owners, including individuals and enterprises, were not deemed to be PRC residents under the PRC tax law and were not otherwise subject to PRC tax.
 
On March 16, 2007, the PRC National People’s Congress approved and promulgated a new PRC Enterprise Income Tax Law, which took effect as of January 1, 2008. Under the new tax law, enterprises established under the laws of non-PRC jurisdictions but whose “de facto management body” are located in China are considered “resident enterprises” for PRC tax purposes. Under the implementation regulations issued by the State Council relating to the new tax law, “de facto management body” is defined as the body that has material and overall management control over the business, personnel, accounts and properties of an enterprise. In April 2009, the PRC State Administration of Taxation promulgated a circular to clarify the definition of “de facto management body” for enterprises incorporated overseas with controlling shareholders being PRC enterprises. It remains unclear how the tax authorities will treat an overseas enterprise invested or controlled by another overseas enterprise and ultimately controlled by PRC individual residents as is in our case. We are currently not treated as a PRC resident enterprise by the relevant tax authorities. Since substantially all of our management is currently based in China and may remain in China in the future, we may be treated as a “resident enterprise” for the PRC tax purposes, in which case, we will be subject to PRC income tax as to our worldwide income at a uniform income tax rate of 25%. In addition, the new tax law provides that dividend income between qualified “resident enterprises” is exempt from income tax.

 
87
 
 
Moreover, the new tax law provides that an income tax rate of 10% is normally applicable to dividends payable for earnings derived since January 1, 2008 to non-PRC investors who are “non-resident enterprises,” to the extent such dividends are derived from sources within China. We are a British Virgin Islands holding company and substantially all of our income is derived from dividends, if any, we receive from our operating subsidiaries located in China. Thus, dividends payable to us by our subsidiaries in China may be subject to the 10% withholding tax if we are considered as a “non-resident enterprise” under the new tax law.
 
Under the currently available guidance of the new tax law, dividends payable by us to our shareholders should not be deemed to be derived from sources within China and therefore should not be subject to withholding tax at 10%, or a lower rate if reduced by a tax treaty or agreement. However, what will constitute income derived from sources within China is currently unclear. In addition, gains on the disposition of our shares should not be subject to PRC withholding tax. However, these conclusions are not entirely free from doubt. In addition, it is possible that these rules may change in the future, possibly with retroactive effect.
 
10.F.  Dividends and Paying Agents
 
The Company has no current plans to pay dividends. The Company does not currently have a paying agent.
 
10.G.  Statement by Experts
 
The consolidated financial statements of the Company as of and for the years ended April 30, 2010, and 2009, included herein, have been audited by Weinberg & Company, P.A., independent registered public accounting firm, as stated in their report appearing herein, and is included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing and their consent and authorization.
 
10.H.  Documents on Display
 
The Company’s documents can be viewed at its headquarters, located at: No. 1 Road, Yuci Industrial Park. Jinzhong City, Shanxi Province  Shanxi Guolian Pipe Industry Group Co., Ltd.. The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and will file reports, registration statements and other information with the SEC. The Company’s reports, registration statements and other information can be inspected on the SEC’s website at www.sec.gov and such information can also be inspected and copies ordered at the public reference facilities maintained by the SEC at the following location: 100 F Street NE, Washington, D.C.  20549.
 
10.I. Subsidiary Information
 
Not Applicable.
 
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
Quantitative and Qualitative Disclosures about Market Risk
 
Financial instruments that expose us to concentrations of credit risk primarily consist of cash and accounts receivables. The maximum amount of loss due to credit risk in the event of other parties failing to perform their obligations is represented by the carrying amount of each financial asset as stated in our consolidated balance sheets.
 
As of April 30, 2010 and 2009, substantially all of our cash included bank deposits in accounts 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 bank failure. However, we have not experienced any losses in such accounts and we believe we are not exposed to any significant risks on our cash in bank accounts.

 
88
 
 
We are exposed to various types of market risks, including changes in foreign exchange rates, commodity prices and inflation in the normal course of business.
 
Interest rate risk
 
We are subject to risks resulting from fluctuations in interest rates on our bank balances. A substantial portion of our cash is held in China in interest bearing bank deposits and denominated in RMB. To the extent that we may need to raise debt financing in the future, upward fluctuations in interest rates would increase the cost of new debt. We do not currently use any derivative instruments to manage our interest rate risk.
 
Commodity price risk
 
Certain raw materials used by us are subject to price volatility caused by supply conditions, political and economic variables and other unpredictable factors. The primary purpose of our commodity price management activities is to manage the volatility associated with purchases of commodities in the normal course of business. We do not speculate on commodity prices.
 
Foreign exchange risk
 
The RMB is not a freely convertible currency. The PRC government may take actions that could cause future exchange rates to vary significantly from current or historical exchange rates. Fluctuations in exchange rates may adversely affect the value of any dividends we declare.
 
Very limited hedging transactions are available in China 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 enter into hedging transactions in the future, the availability and effectiveness of these transactions may be limited, and we may not be able to successfully hedge our exposure at all. In addition, our foreign currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert RMB into foreign currencies.
 
Inflation risk
 
In recent years, China has not experienced significant inflation or deflation and thus inflation and deflation have not had a significant effect on our business during the past three years. Inflationary factors such as increases in the cost of our products and overhead costs may adversely affect our operating results. A high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and selling, general and administrative expenses as a percentage of net revenues if the selling prices of our products do not increase proportionately with these increased costs.
 
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
 
Not Applicable.
 
PART II
 
ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
 
Not Applicable.
 
ITEM 14.
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
 
Not Applicable.
 
 
89
 
 
ITEM 15.
CONTROLS AND PROCEDURES
 
Not Applicable.
 
ITEM 16.
RESERVED
 
ITEM 16A.
AUDIT COMMITTEE FINANCIAL EXPERT
 
Not Applicable.
 
ITEM 16B.
CODE OF ETHICS
 
Not Applicable.
 
ITEM 16C.
PRINCIPAL ACCOUNTIING FEES AND SERVICES
 
Not Applicable.
 
ITEM 16D.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
 
Not Applicable.
 
ITEM 16E.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
 
Not Applicable.
 
ITEM 16F.
CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
 
On July 30, 2011, our board of directors approved the engagement of Sherb & Co. as our independent registered public accounting firm for the year ended April 30, 2010. The board determined not to renew the engagement of Li & Company, PC as our independent registered public accounting firm.
 
The board of directors determined to engage Weinberg & Company, P.A. in order to realize economies and efficiencies, since Weinberg & Company, P.A. acted as the independent registered public accounting firm for Shanxi Guolian prior to the business combination.
 
The report of Li & Company, PC on the financial statements of the Company as of February 28, 2010 did not contain an adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles.
 
In connection with the audit of our financial statements for the period ended February 28, 2010, there were no disagreements with Li & Company, PC on any matters of accounting principles or practices, financial statement disclosure, or auditing scope and procedures which, if not resolved to the satisfaction of Li & Company, PC, would have caused Li & Company, PC to make reference to the matter of such disagreements in their reports.
 
We engaged Weinberg & Company, P.A. as our new independent registered public accounting firm as of July 30, 2011. During our two most recent fiscal years neither our company nor anyone on its behalf has consulted with Weinberg & Company, P.A. regarding either: (a) the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on our financial statements, and neither a written report was provided to us nor oral advice was provided by Weinberg & Company, P.A. that was an important factor considered by us in reaching a decision as to any accounting, auditing or financial reporting issue; or (b) any matter that was the subject of a disagreement, as that term is defined by SEC regulations, or a reportable event, as that term is defined by SEC regulations.
 
 
90
 
 
ITEM 16G.
CORPORATE GOVERNANCE
 
Not Applicable.
 
 
91
 

PART III
ITEM 17.
FINANCIAL STATEMENTS
 
Not applicable.
 
ITEM 18.
FINANCIAL STATEMENTS
 
The consolidated financial statements and related notes required by this item are contained herein, beginning on page F-1.
 
ITEM 19.
EXHIBITS
 
Exhibit
Number
  
Description of Documents
1.1
  
Amended and Restated Memorandum of Association
1.2
  
Amended and Restated Articles of Association
4.1
  
Share Exchange Agreement by and among Rich Mountain Enterprises Limited, the shareholder of Rich Mountain Enterprises Limited, Rise King Management Limited, and the shareholders of Rise King Management Limited, dated July 30, 2011
4.2
  
Form of Employment Contract by and between Shanxi Guolian Pipe Industry Group Co., Ltd. and employees and executive officers
4.3
  
Form of Non-Disclosure Agreement by and between Shanxi Guolian Pipe Industry Group Co., Ltd. and employees and executive officers
4.4
  
Form of Purchase Contract between Shanxi Taigang Stainless Steel Co., Ltd. and Shanxi Guolian Pipe Industry Group Co., Ltd.
4.5
  
Purchase and Sale Agreement on Hot Rolled Steel Strip, dated January 1, 2008, between Shanxi Yuci Guolian Steel Pipe Co., Ltd. and Delong Steel Co., Ltd.
4.6   Warehousing, Purchase and Sale Agreement on Medium-Width Steel Strips, dated March 31, 2009, between Shanxi Guolian Spiral Tabulation Co., Ltd. and Lingyuan Iron & Steel Co., Ltd.
4.7   Purchase and Sale Contract, dated August 5, 2008, between Shanxi Guolian Pipe Industry Group Co., Ltd. and Dalian Binggong Trade Co., Ltd.
4.8
  
Exclusive Business Cooperation Agreement between Shanxi Ruixingtong Business Consulting Co., Ltd. and Shanxi Zhonglian Gas Development Co., Ltd. dated April 3, 2011
4.9
  
Exclusive Option Agreement by and among Shanxi Ruixingtong Business Consulting Co., Ltd., Juan Kong and Shanxi Zhonglian Gas Development Co., Ltd. dated April 3, 2011
4.10
  
Share Pledge Agreement by and among Shanxi Ruixingtong Business Consulting Co., Ltd., Juan Kong and Shanxi Zhonglian Gas Development Co., Ltd. dated April 3, 2011
4.11
  
Power of Attorney Authorized by Juan Kong to Shanxi Ruixingtong Business Consulting Co., Ltd. dated April 3, 2011
4.12
  
Exclusive Business Cooperation Agreement between Shanxi Shipaipu Business Consulting Co., Ltd. and Shanxi Guolian Pipe Industry Group Co., Ltd. dated April 3, 2011
4.13
  
Exclusive Option Agreement by and among Shanxi Shipaipu Business Consulting Co., Xudong Liu, Lizi Liu and Shanxi Guolian Pipe Industry Group Co., Ltd., dated April 3, 2011
4.14
  
Share Pledge Agreement by and among Shanxi Shipaipu Business Consulting Co., Xudong Liu, Lizi Liu and Shanxi Guolian Pipe Industry Group Co., Ltd., dated April 3, 2011
4.15
  
Power of Attorney Authorized by Xudong Liu to Shanxi Shipaipu Business Consulting Co., Ltd., dated April 3, 2011
4.16
  
Power of Attorney Authorized by Liu Lizi to Shanxi Shipaipu Business Consulting Co., Ltd., dated April 3, 2011
8.1
  
Subsidiaries of the Registrant
15.1
  
Consent of Weinberg & Company, P.A.
 
 
92
 

SIGNATURES
 
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this registration statement on its behalf.
 
Sino Oil & Gas Pipe Holdings Limited
(formerly Rich Mountain Enterprises Ltd.)
   
By:
 /s/ Xudong Liu
 
Name: Xudong Liu
 
Title:   Chairman
 
Date: August 1, 2011
 
 
93
 
 
RISE KING MANAGEMENT LIMITED
 
AND SUBSIDIARIES

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED

JANUARY 31, 2011 AND 2010

(UNAUDITED)
 
 
 
 
 
RISE KING MANAGEMENT LIMITED
AND SUBSIDIARIES
 
CONTENTS

PAGES
  
1-2
  
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF JANUARY 31, 2011 AND APRIL 30, 2010 (UNAUDITED)
         
PAGE
  
3
  
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010 (UNAUDITED)
         
PAGES
  
4-5
  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010 (UNAUDITED)
         
PAGES
  
6-40
  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED JANUARY 31, 2011 (UNAUDITED)

 
 
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 (UNAUDITED)

ASSETS
  
   
January 31,
    
April 30,
  
   
2011
    
2010
  
CURRENT ASSETS
            
Cash and cash equivalents
   $ 2,801,465     $ 6,413,448  
Restricted cash
     50,114,660       49,078,779  
Accounts receivable, net of allowance for doubtful accounts of $224,172 and $215,878 at January 31, 2011 and April 30, 2010, respectively
     42,087,560       35,211,738  
Marketable securities
     198,307       178,467  
Inventories
     46,158,891       29,742,389  
Notes receivable
     15,916,907       9,921,858  
Prepayments for goods
     23,157,116       16,246,032  
Prepaid expenses and other receivables
     3,007,557       1,766,315  
Due from employees
     648,366       409,322  
Due from related parties
     16,545,980       13,023,340  
Interest receivable from related parties, current portion
     1,610,503       886,240  
Deferred tax assets
     -       1,933,727  
Total Current Assets
     202,247,312       164,811,655  
                 
LONG-TERM ASSETS
                
Plant and equipment, net
     55,450,860       56,488,868  
Land use rights, net
     2,884,350       2,826,947  
Long-term investment
     3,797,718       3,657,216  
Deposit for land use right
     1,116,529       1,075,222  
Notes receivable from related parties
     29,801,014       28,698,483  
Interest receivable from related parties
     2,600,242       1,772,481  
Deferred tax assets
     1,350,280       1,059,167  
Goodwill
     7,389,597       7,389,597  
Total Long-Term Assets
     104,390,590       102,967,981  
                 
TOTAL ASSETS
   $ 306,637,902     $ 267,779,636  

See accompanying notes to the condensed consolidated financial statements
 
 
F-1
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 (UNAUDITED)
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
  
             
   
January 31,
    
April 30,
  
   
2011
    
2010
  
CURRENT LIABILITIES
            
Short-term bank borrowings
   $ 112,798,503     $ 104,156,201  
Accounts payable
     17,166,365       9,249,968  
Customer deposits
     20,478,373       13,714,140  
Due to related parties
     3,310,289       1,426,048  
Notes payable
     55,436,601       43,080,547  
Product and other financing arrangements
     36,321,376       43,871,968  
Deferred tax liabilities
     579,732       -  
Income tax payable
     1,268,454       1,264,157  
Other payables and accrued expenses
     4,629,565       3,697,972  
Total Current Liabilities
     251,989,258       220,461,001  
                 
TOTAL LIABILITIES
     251,989,258       220,461,001  
                 
COMMITMENTS AND CONTINGENCIES
                
                 
SHAREHOLDERS’ EQUITY
                
Common stock, $1 par value; 50,000 shares authorized, issued and outstanding
     50,000       50,000  
Additional paid-in capital
     52,584,504       52,584,504  
Retained deficit
     (303,993 )     (6,276,505 )
Accumulated other comprehensive income
     2,203,445       848,095  
TOTAL SHAREHOLDERS’ EQUITY
     54,533,956       47,206,094  
                 
NON-CONTROLLING INTEREST
     114,688       112,541  
                 
TOTAL EQUITY
     54,648,644       47,318,635  
                 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
   $ 306,637,902     $ 267,779,636  
 
See accompanying notes to the condensed consolidated financial statements
 
 
F-2
 

RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME
 (UNAUDITED)
 
   
Nine Months Ended
January 31,
  
   
2011
    
2010
  
REVENUES
   $ 146,455,472     $ 118,766,033  
COST OF GOODS SOLD
     (125,462,453 )     (99,605,081 )
GROSS PROFIT
     20,993,019       19,160,952  
                 
Selling and marketing
     (3,447,506 )     (3,017,835 )
General and administrative
     (2,762,907 )     (2,278,514 )
Research and development
     -       (24,001 )
INCOME FROM OPERATIONS
     14,782,606       13,840,602  
                 
Interest expense
     (9,844,493 )     (6,368,063 )
Interest income
     1,874,907       1,896,105  
Other income (expense), net
     1,503,919       (19,146 )
                 
INCOME BEFORE INCOME TAXES
     8,316,939       9,349,498  
                 
INCOME TAXES
     (2,342,280 )     (2,610,058 )
                 
NET INCOME
     5,974,659       6,739,440  
                 
NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST
     (2,147 )     (13,291 )
                 
NET INCOME ATTRIBUTABLE TO CONTROLLING INTEREST
     5,972,512       6,726,149  
                 
OTHER COMPREHENSIVE (LOSS) INCOME
                
Foreign currency translation loss
     1,353,184       76,841  
Unrealized gain (loss) on marketable securities
     2,166       12,444  
OTHER COMPREHENSIVE INCOME (LOSS)
     1,355,350       89,285  
                 
COMPREHENSIVE INCOME
   $ 7,327,862     $ 6,815,434  
                 
WEIGHTED AVERAGE SHARES
                
Basic and diluted
     50,000       50,000  
NET INCOME PER SHARE
                
Basic and diluted
   $ 119.45     $ 134.52  
 
See accompanying notes to the condensed consolidated financial statements
 
 
F-3
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)

   
Nine Months Ended January 31,
  
   
2011
    
2010
  
CASH FLOWS FROM OPERATING ACTIVITIES:
            
Net income
   $ 5,972,512     $ 6,726,149  
Adjustments to reconcile net income to net cash used in operating activities:
                
Non-controlling interest
     2,147       13,292  
Depreciation and amortization
     5,198,086       4,446,983  
Deferred income taxes
     2,222,345       2,500,449  
Changes in operating assets and liabilities:
                
(Increase) Decrease In:
                
Accounts receivable
     (6,884,115 )     (11,245,336 )
Inventories
     (16,416,501 )     (2,070,073 )
Prepaid expenses and other receivables
     (1,205,425 )     (990,096 )
Prepayments for goods
     (6,946,901 )     (8,483,165 )
Due from employees
     (239,044 )     (457,040 )
                 
Increase (Decrease) In:
                
Accounts payable
     7,916,397       9,129,452  
Other payables and accrued expenses
     931,594       647,467  
Income tax payable
     4,298       (89,442 )
Customer deposits
     6,764,232       (14,768,470 )
Net cash used in operating activities
     (2,680,375 )     (14,639,830 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
                
Purchases of plant and equipment
     (2,317,208 )     (2,345,552 )
Purchases of construction in progress
     -       (2,179,412 )
Purchases of marketable securities
     (14,905 )     (102,547 )
(Increase) decrease in notes receivable
     (5,508,071 )     6,066,009  
Accrued interest from related parties
     (1,422,556 )     (1,061,540 )
Due from related parties
     (1,638,400 )     (17,655,773 )
Payment for long-term investment
     -       (1,760,723 )
Net cash used in investing activities
     (10,901,140 )     (19,039,538 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
                
Restricted cash
     (1,035,881 )     23,279,452  
Proceeds from short-term loans
     165,183,142       142,761,033  
Repayments of short-term loans
     (160,629,750 )     (109,380,731 )
Proceeds from product and other financing arrangements
     96,134,499       42,191,311  
Repayments for product and other financing arrangements
     (105,196,482 )     (28,566,770 )
Increase (decrease) in notes payable
     10,499,318       (33,701,960 )
Net cash provided by financing activities
     4,954,846       36,582,335  
                 
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
     (8,626,669 )     2,902,967  
 Effect of exchange rate changes on cash
     5,014,686       309,048  
 Cash and cash equivalents at beginning of period
     6,413,448       1,980,229  
CASH AND CASH EQUIVALENTS AT END OF PERIOD
   $ 2,801,465     $ 5,192,244  
 
See accompanying notes to the condensed consolidated financial statements
 
 
F-4
 

RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)

   
Nine Months Ended January 31,
  
   
2011
    
2010
  
             
SUPPLEMENTARY CASH FLOW INFORMATION:
            
Income taxes paid
   $ 90,822     $ 179,396  
Interest paid
   $ 8,142,991     $ 5,982,763  
   
SUPPLEMENTAL NON-CASH DISCLOSURES:
  
 
1. During the nine months ended January 31, 2011 and 2010, $0 and $1,405,445 were transferred from construction in progress to plant and equipment, respectively.
 
See accompanying notes to the condensed consolidated financial statements
 
 
F-5
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)
 
NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES
  
Offshore Holding Company and Subsidiaries

RISE KING MANAGEMENT LIMITED, or RISE KING, was incorporated under the laws of the British Virgin Islands (“BVI”) on February 10, 2009 and was initially held by Mr. Xudong Liu and Mr. Li Ning, 90% and 10%, respectively. As of April 30, 2010 and 2009, there were 50,000 ordinary shares, par value $1.00 per share, issued and outstanding.

On April 30, 2009, pursuant to the acquisition agreements between RISE KING and the shareholder of Sound Way Enterprises Limited, or Sound Way, RISE KING purchased 100% of the outstanding shares of SOUND WAY.  As a result of the acquisition, SOUND WAY became a wholly-owned subsidiary of RISE KING. SOUND WAY was incorporated under the laws of the BVI on January 2, 2009, with Ms. Kong Juan as the initial sole shareholder. As of April 30, 2010 and 2009, there were 50,000 ordinary shares, par value $1.00 per share, issued and outstanding.

In April 2011, RISE KING acquired all of the outstanding equity of Brave King Enterprises Limited, or Brave King, a limited liability company formed on March 19, 2010 under the laws of Hong Kong.

In April 2011, SOUND WAY acquired all of the outstanding equity of MAJOR AIM ENTERPRISES LIMITED, or MAJOR AIM, a limited liability company formed on March 19, 2010 under the laws of Hong Kong.

In April, 2011, Brave King established a wholly owned subsidiary, Shanxi Shipaipu Business Consulting Co., Ltd., or Shanxi Shipaipu, a wholly foreign owned enterprise formed under the laws of the PRC.
 
In April, 2011, Major Aim established a wholly owned subsidiary, Shanxi Ruixingtong Business Consulting Co., Ltd., or Shanxi Ruixingtong, a wholly foreign owned enterprise formed under the laws of the PRC.

RISE KING, SOUNDWAY, BRAVE KING, MAJOR AIM, Shanxi Shipaipu and Shanxi Ruixingtong are holding companies. As a result of these transactions, each of SOUND WAY, BRAVE KING, MAJOR AIM, Shanxi Shipaipu and Shanxi Ruixingtong are wholly owned subsidiary of RISE KING and we manage and operate the business of the two variable interest entities SXGL and Shanxi Zhonglian through the VIE Agreements.

PRC Operating Companies
 
Shanxi Guolian Pipe Industry Group Co., Ltd., or SXGL is a PRC company formed on May 12, 2003, formerly known as Shanxi Yuci Guolian Steel Pipe Co., Ltd. ,or Yuci Guolian . Xudong Liu, our chairman and majority shareholder owns 89% and Lizi Liu, the Vice President of Board of Directors owns 11% of SXGL.
 
Shanxi Zhonglian Gas Development Co., Ltd., or Shanxi Zhonglian, is a PRC company formed on November 12, 2004. Juan Kong own 100% of Shanxi Zhonglian.
 
 
F-6
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)

NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED)

 
In April 2011, Shanxi Shipaipu and Shanxi Ruixingtong entered into contractual agreements (known as a “variable interest entity” (VIE) arrangement) with SXGL and SXZL respectively, under which Shanxi Shipaipu and Shanxi Ruixingtong provide exclusive management and technical services and exclusive technology consulting services (collectively, the “Consulting Service Agreements”) to SXGL and SXZL, respectively, in exchange for substantially all of the net income of the SXGL and SXZL. As collateral to ensure the SXGL’s and SXZL’s payments under the Consulting Service Agreements, the shareholders of SXGL and SXZL, through an equity pledge agreement, pledged all of their rights and interests in the Company, including voting rights and dividend rights, to Shanxi Shipaipu and Shanxi Ruixingtong. In addition, the shareholders of SXGL and SXZL, through an exclusive option agreement, granted to Shanxi Shipaipu and Shanxi Ruixingtong an exclusive, irrevocable and unconditional right to purchase part or all of the equity interests in the Company when the purchase becomes permissible under the relevant PRC Law.

In accordance with ASC 810-10 (formerly FASB Interpretation No. 46R) “Consolidation of Variable Interest Entities”, an Interpretation of Accounting Research Bulletin No. 51, a Variable Interest Entity (a “VIE”) is to be consolidated by a company if that company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE’s residual returns. After executing the service agreements, SXGL and SXZL are now considered a VIE.

The current corporate structure was completed as of April, 2011. Before the completion of the structure, all the companies included in this structure were under common control of the same major shareholder, Mr. Xudong Liu. The Company believes that it is proper to present the consolidated financial statements “as if” the structure was completed at the acquisition date of SOUND WAY.

The principal activities of RISE KING and its subsidiaries (the “Company”) are the design, development, manufacturing, and commercialization of spiral submerged-arc welding (SSAW) pipe, electric resistance welding (ERW) pipe and gas equipment for the PRC and export markets.
   
Also see Note 25.

 
F-7
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)

NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED)
  
Detail of the Company’s operating subsidiaries as of January 31, 2011 are as follows:

Name
  
Place And Date
Of
Establishment/
Incorporation
  
Percentage of
Ownership
  
Principal Activities
Shanxi Guolian Pipe Industry Group Co., Ltd. (“SXGL”)
  
Shanxi, PRC
May 12, 2003.
  
VIE of Shanxi
Shipaipu
  
Design, development, manufacturing, and commercialization of spiral submerged-arc welding (SSAW) pipe and electric resistance welding (ERW) pipe
             
Shanxi Guolian Spiral Tubulation Co., Ltd. (“ SXSP”)
  
Shanxi, PRC
March 15, 2000.
  
97.7%
owned by SXGL
  
Design, development, manufacture, and commercialization of spiral submerged-arc welding pipe (SSAW).
             
Xi'an Guolian Spiral Tubulation Co., Ltd. (“ XASP”)
  
Xian, PRC
February 22, 2002.
  
99%
owned by
SXGL
  
Manufacture and sales of spiral submerged-arc welding pipe (SSAW).
             
Shanxi Guolian Pipe Technology Co., Ltd.
(“SXPT “)
  
Shanxi, PRC
June 14, 2007
  
100%
owned by SXGL
  
Technology research, development and test of pipes
             
Shanxi Zhonglian Gas Development Co., Ltd (“SXZL”)
  
Shanxi, PRC
November 12, 2004.
  
VIE of Shanxi Ruixingtong
  
Manufacture and sales of gas equipment.
 
 
F-8
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)
 
NOTE 2 – PRINCIPLES OF CONSOLIDATION
  
The consolidated financial statements include the accounts of RISE KING and the following subsidiaries:
 
 
(a)
BRAVE KING ( a wholly-owned subsidiary of RISE KING)
 
(b)
Shanxi Shipaipu ( a wholly-owned subsidiary of BRAVE KING)
 
(c)
SOUND WAY ( a wholly-owned subsidiary of RISE KING)
 
(d)
MAJOR AIM (a wholly-owned subsidiary of  SOUND WAY)
 
(e)
Shanxi Ruixingtong (a wholly-owned subsidiary of MAJOR AIM)
 
(f)
SXGL (a VIE of Shanxi Shipaipu);
 
(g)
SXSP (97.7% subsidiary of SXGL);
 
(h)
XASP (99% subsidiary of SXGL);
 
(i)
SXPT (100% subsidiary of SXGL);
 
(j)
SXZL (a VIE of Shanxi Ruixingtong)
   
All inter-company accounts and transactions have been eliminated in consolidation.

NOTE 3 – BASIS OF PRESENTATION

The Company’s unaudited condensed consolidated financial statements as of January 31, 2011 and for the three and nine months ended January 31, 2011 and 2010 have been prepared in accordance with generally accepted accounting principles for interim financial information and pursuant to the requirements for reporting on Rule 8-03 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the consolidated financial position and the consolidated results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full year. The condensed consolidated balance sheet information as of April 30, 2010 was derived from the audited consolidated financial statements included in Form 20-F. These interim condensed consolidated financial statements should be read in conjunction with that report.

NOTE 4 – USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period.

Management makes these estimates using the best information available at the time the estimates are made; however actual results when ultimately realized could differ from those estimates.
 
 
F-9
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)

NOTE 5 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)
Economic and Political Risks

The Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy.

The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things.

(b)
Fair Value of Financial Instruments

Accounting Standards Codification (“ASC”) 820-10 Fair Value Measurements establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market.
These tiers include:

•Level 1—defined as observable inputs such as quoted prices in active markets;
•Level 2—defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and
•Level 3—defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The assets measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820-10 as of January 31, 2011 and April 30, 2010 are as follows:

               
Fair Value Measurements at Reporting Date
Using
  
   
Carrying
Value as of
January 31,
2011
    
Carrying
Value as of
April 30,
2010
    
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
    
Significant
Other
Observable
Inputs
(Level 2)
    
Significant
Unobservable
Inputs
(Level 3)
  
Bank acceptance notes
   $ 6,273,049       3,300,272     $ 6,273,049       -       -  
Marketable securities
     198,307       178,467       198,307       -       -  
 
 
F-10
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)
 
NOTE 5 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(c)
Fair Value of Financial Instruments (Continued)

The carrying amounts of financial assets and liabilities, such as cash and cash equivalents, accounts receivable, notes receivable, prepayments for goods, due from related parties, due from employees, short-term bank loans, accounts payable, customer deposits, short-term notes payable, product financing arrangements and other payables, approximate their fair values because of the short maturity of these instruments. The fair value of the Company’s long-term notes receivable is estimated based on the current rates offered to the Company for debt of similar terms and maturities.

(d)
Earnings Per Share
 
Basic earnings per share are computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There were no potentially dilutive shares for the nine months ended January 31, 2011 and 2010.

(e)
Cash and Cash Equivalents

For financial reporting purposes, the Company considers highly liquid investments purchased with original maturity of three months or less to be cash equivalents. Restricted cash represents time deposits to guarantee bank acceptance notes and to collateralize short-term bank loans and letters of credit. Also see Note 8.

(f)
Marketable Securities

The Company’s investment in marketable securities consists of an investment in a Chinese open-ended mutual fund that invests in Chinese corporate equity securities. The Company’s investment is classified as available-for-sale.

In accordance with ASC 320-10 “Accounting for Certain Investments in Debt and Equity Securities”, this investment is carried at fair market value and any unrealized gains and losses are included in other comprehensive income, a separate component of shareholders’ equity.

Realized gains and losses from the sales of marketable securities and declines in value considered to be other than temporary are to be included in other income (expense). For the nine months ended January 31, 2011 and 2009, there were $2,166 and $12,444 unrealized gain included in other comprehensive income, respectively.

(g)
Inventories

Inventories are stated at the lower of cost or net realizable value. The cost of raw materials is determined on the basis of weighted average. The cost of finished goods is determined on the weighted average basis and comprises direct materials, direct labor and an appropriate proportion of overhead. Net realizable value is based on estimated selling prices less any further costs expected to be incurred for completion and disposal.
 
 
F-11
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)

NOTE 5 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(h)
Prepayments

Prepayments represent cash paid in advance to suppliers for purchases of raw materials.

(i)
Product Financing Arrangements

The Company simultaneously sells and agrees to repurchase inventory to and from third parties. The repurchase price is contractually fixed at an amount equal to the original sales price plus the financing entity’s carrying and financing costs. The inventory is not shipped, and the title is not passed to the buyer. The purpose of the transaction is to enable the Company to arrange financing of its original purchase of the inventory.

FASB ruled that the substance of this transaction is that of a borrowing transaction, not a sale. That is, the transaction is, in substance, no different from the Company directly obtaining third-party financing to purchase inventory. ASC 470-10, Product Financing Arrangement, specifies that the proper accounting by the Company is to record a liability in the amount of the selling price when the funds are received from the financing entity in exchange for the initial transfer of the inventory. The liability is satisfied when the Company repurchases the inventory. Also see Note 19.

(j)
Long-Term Investments

The Company invested in companies in the PRC that have operations in the guarantee and commercial banking industries. As of January 31, 2011 and April 30, 2010, the Company does not have more than 20% interest in any of the investments and does not exercise significant influence over them. The Company accounts for the investments under the cost method. Investment income is recognized by the Company when the investee declares a dividend and the Company believes it is collectible. Also see Note 14.

(k)
Plant and Equipment

Plant and equipment are carried at cost less accumulated depreciation and amortization. Depreciation is provided over their estimated useful lives, using the straight-line method. Leasehold improvements are amortized over the life of the asset or the term of the lease, whichever is shorter. Estimated useful lives are as follows:
 
Buildings
30 years
Machinery
10~12 years
Motor vehicles
5 years
Office equipment
5 years

The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the statement of income. The cost of maintenance and repairs is charged to expense as incurred, whereas significant renewals and betterments are capitalized.
 
 
F-12
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)
 
NOTE 5 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(l)
Construction in Progress

Construction in progress represents direct costs of construction or the acquisition cost of buildings or machinery and design fees. Capitalization of these costs ceases and the construction in progress is transferred to plant and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is provided until the assets are completed and ready for their intended use.

(m)
Land Use Rights

According to the laws of China, land in the PRC is owned by the government and cannot be sold to an individual or company.  However, the government grants the user a “land use right” to use the land.  The land use right granted to the Company is being amortized using the straight-line method over the lease term of fifty years.

(n)
Impairment of Long-Term Assets

Long-term assets of the Company are reviewed annually as to whether their carrying value has become impaired, pursuant to the guidelines established in ASC 360-10. The Company considers assets to be impaired if the carrying value exceeds the future projected cash flows from the related operations.  The Company also re-evaluates the periods of amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives. There was no impairment for the nine months ended January 31, 2011 and 2010.

(o)
Goodwill

The Company evaluates goodwill in accordance with ASC Topic 350, “Intangibles — Goodwill and Other.” Goodwill is recorded at the time of an acquisition and is calculated as the difference between the total considerations paid for an acquisition and the fair value of the net tangible and intangible assets acquired. Accounting for acquisitions requires extensive use of accounting estimates and judgments to allocate the purchase price to the fair value of the net tangible and intangible assets acquired. Goodwill deemed to have indefinite lives are not amortized, but are subject to annual impairment tests. If the assumptions and estimates used to allocate the purchase price are not correct, or if business conditions change, purchase price adjustments or future asset impairment charges could be required. The value of goodwill, could be impacted by future adverse changes such as: (i) any future declines in our operating results, (ii) a decline in the valuation of technology, including the valuation of our common stock, (iii) a significant slowdown in the worldwide economy or (iv) any failure to meet the performance projections included in our forecasts of future operating results. In accordance with ASC Topic 350, the Company tests goodwill for impairment on an annual basis or more frequently if the Company believes indicators of impairment exist. Impairment evaluations involve management estimates of asset useful lives and future cash flows. Significant management judgment is required in the forecasts of future operating results that are used in the evaluations. It is possible, however, that the plans and estimates used may be incorrect. If our actual results, or the plans and estimates used in future impairment analysis, are lower than the original estimates used to assess the recoverability of these assets, the Company could incur additional impairment charges in a future period.
 
 
F-13
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)
 
NOTE 5– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(p)
Goodwill (Continued)

The Company performs its annual impairment review of goodwill in April, and when a triggering event occurs between annual impairment tests. The Company recorded no impairment loss for the nine months ended January 31, 2011 and 2010.

(q)
Revenue Recognition

Revenue represents the invoiced value of goods sold, recognized upon the shipment of goods to customers. Revenue is recognized when all of the following criteria are met:

-Persuasive evidence of an arrangement exists,
-Delivery has occurred or services have been rendered,
-The seller's price to the buyer is fixed or determinable, and
-Collectability is reasonably assured.

The majority of the Company’s revenue results from sales contracts with distributors and revenue are recorded upon the shipment of goods. Management conducts credit background checks for new customers as a means to reduce the subjectivity of collectability.

The Company simultaneously sells and agrees to repurchase inventory to and from third parties. The Company does not recognize sales and purchases for such transactions, but records a liability in the amount of the selling price when the funds are received from the financing entity. The liability is satisfied when the Company repurchases the inventory. Also see Note 5 (h), and Note 19.

(r)
Retirement Benefits

Retirement benefits in the form of contributions under defined contribution retirement plans to the relevant authorities are charged to expense as incurred. Retirement benefits amounting to $259,722 and $123,949 were charged to operations for the nine months ended January 31, 2011 and 2010, respectively.

(s)
Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequence attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statement of income in the period that includes the enactment date. 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.  Also see Note 20.
 
 
F-14
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)
 
NOTE 5 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(t)
Shipping and Handling

The Company's shipping and handling costs are included in selling and marketing expenses. For the nine months ended January 31, 2011 and 2010, the shipping and handling costs were $1,691,336 and $1,450,508, respectively.

(u)
Foreign Currency Translation

The accompanying condensed consolidated financial statements are presented in United States dollars. The functional currency of the Company is the Renminbi (RMB). Capital accounts of the condensed consolidated financial statements are translated into United States dollars from RMB at their historical exchange rates when the capital transactions occurred.

Assets and liabilities are translated at the exchange rates as of the balance sheet date. Income and expenditures are translated at the average exchange rate of the quarter.

   
January
31, 2011
    
April
30, 2010
    
January
31, 2010
  
Period end RMB : US$ exchange rate
   $ 6.5829     $ 6.8358     $ -  
Average RMB : US$ exchange rate for nine months ended
     6.7094       -       6.8261  

The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US dollars at the rates used in translation.

(v)
Comprehensive Income

Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income are required to be reported in a financial statement that is presented with the same prominence as other financial statements. Comprehensive income includes net income and the foreign currency translation gain and unrealized gains on marketable securities.

(w)
Segment and Geographic Reporting
 
The Company operates in one business segment, the design, development, manufacture, and commercialization of spiral submerged-arc welding (SSAW) pipe, electric resistance welding (ERW) pipe and gas equipments mainly in the PRC and overseas market. Also see Note 24.
 
 
F-15
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)
 
NOTE 5 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(x)
Non-Controlling Interest

Non-controlling minority interest represents the portion of earnings that is not within the parent Company’s control. These amounts are now required to be reported as equity instead of as a liability on the balance sheet. Net income from non-controlling minority interests is shown separately on the condensed consolidated statements of income. There was $2,147 and $13,291 net loss contributed to non-controlling interest for the nine months ended January 31, 2011 and 2010, respectively.

NOTE 6 – LIQUIDITY

The Company has a working capital deficit of $49,741,946 and $55,649,346 at January 31, 2011 and April 30, 2010, respectively. This was principally due to the Company had $207,866,769 and $192,534,764 of short-term debt at January 31, 2011 and April 30, 2010, respectively, derived from following:

   
January 31,
2011
    
April 30,
2010
  
Short-term bank borrowings
   $ 112,798,503     $ 104,156,201  
Due to a related party
     3,310,289       1,426,048  
Notes payable
     55,436,601       43,080,547  
Product and other financing arrangements
     36,321,376       43,871,968  
Total short-term debt
   $ 207,866,769       192,534,764  

The Company currently generates its cash flow through operating profit, and the Company had a net income of $5,972,512 and $ 6,726,149 for the nine months ended January 31, 2011 and 2010, respectively. As of the date of this report, the Company has not experienced any liquidity problems in settling payables in the normal course of business and repaying bank loans when they become due. To improve liquidity, the Company may explore new expansion opportunities and funding sources including seeking external funding and financing.

NOTE 7 – CONCENTRATIONS

(a)
Customers

The Company has major customers who accounted for the following percentages of total sales and accounts receivable:

 
  
Sales
Nine Months Ended
    
Accounts Receivable
  
Customers
  
January 31,
2011
    
January 31,
2010
    
January 31,
2011
    
April 30,
2010
  
Company A
     10.2 %     7.5 %     3.5 %     11.2 %
Company B
     8.2 %     -       4.7 %     18.7 %
Company C
     8.2 %     7.4 %     4.9 %     7.8 %
Company D
     5.1 %     4.5 %     3.4 %     2.0 %
 
 
F-16
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)
 
NOTE 7 – CONCENTRATIONS (CONTINUED)

(b) 
Suppliers

The Company has major suppliers who accounted for the following percentages of total purchases and accounts payable:

   
Purchases
Nine Months Ended
    
Accounts Payable
  
Suppliers
  
January 31,
2011
    
January 31,
2010
    
January 31,
2011
    
April 30,
2010
  
Company F
     15.5 %     12.0 %     -       28.1 %
Company G
     10.6 %     10.3 %     -       26.8 %
Company H
     10.3 %     -       28.8 %     0.2 %
Company I
     7.7 %     -       -       3.7 %
Company J
     6.8 %     7.5 %     -       3.7 %

NOTE 8 – RESTRICTED CASH

Restricted cash as of January 31, 2011 and April 30, 2010 represented time deposits with original maturity between three and twelve months to secure banking facilities granted by various financial institutions as follows:

         
January 31,
2011
    
April 30,
2010
  
                   
Notes payable-bank acceptance notes
   18(b)     $ 34,096,462     $ 33,574,710  
Domestic letters of credit financing
   17(b)       12,691,720       13,504,251  
Savings deposits as guarantee for due to a shareholder
   10(d)       759,544       1,462,887  
Bidding for project
           2,545,239       521,096  
Interest income
           21,695       15,835  
Total
         $ 50,114,660     $ 49,078,779  

NOTE 9 – INVENTORIES
 
Inventories are summarized as follows:
 
   
January 31,
2011
    
April 30,
2010
  
Raw materials
   $ 18,099,866     $ 9,022,627  
Work-in-progress
     280,381       263,119  
Finished goods
     27,778,644       20,456,643  
Total inventories
   $ 46,158,891     $ 29,742,389  

As of January 31, 2011, inventories with a carrying amount of $16,750,051 were pledged as collateral for Minsheng Bank and $14,624,477 were pledged as collateral for Everbright Bank short-term loans. Also see Note 17(a).
 
 
F-17
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)

NOTE 10 – NOTES RECEIVABLE

Notes receivable consist of the following:

   
January 31,
2011
    
April 30,
2010
  
             
Notes receivable from unrelated companies:
            
Due October 7, 2011, interest free
   $ 151,909     $ -  
Due December 20, 2011, interest free
     303,817       -  
Due June 21, 2011, interest free(settled on its due date)
     151,909       -  
Due July 11, 2011, interest free(settled on its due date)
     455,726       -  
Due February 9, 2011, interest free (settled on its due date)
     555,073       -  
Due February 12, 2011, interest free (settled on its due date)
     7,113,972       -  
Due April 29, 2011, interest at 5.31% per annum (Renewed on its due date)
     911,452       877,732  
Due October 7, 2010, interest free (settled on its due date)
     -       146,289  
Due December 21, 2010, interest free (settled on its due date)
     -       146,289  
Due December 31, 2010, interest free (settled on its due date)
     -       731,443  
Due May 10, 2010, interest free (settled on its due date)
     -       1,607,201  
Due May 15, 2010 interest free (settled on its due date)
     -       3,112,632  
Sub total of notes receivable from unrelated companies
     9,643,858       6,621,586  
                 
Bank acceptance notes:
                
Due February 5, 2011 (settled on its due date)
     7,595       -  
Due February 7, 2011 (settled on its due date)
     30,382       -  
Due April 13, 2011 (settled on its due date)
     15,191       -  
Due April 14, 2011 (settled on its due date)
     15,191       -  
Due May 15, 2011 (settled on its due date)
     75,954       -  
Due June 2, 2011 (settled on its due date)
     10,634       -  
Due June 2, 2011 (settled on its due date)
     26,561       -  
Due July 13, 2011(settled on its due date)
     15,191       -  
Due July 23, 2011(settled on its due date)
     1,519,087       -  
Due July 27, 2011(settled on its due date)
     4,557,263       -  
Due May 30, 2010 (settled on its due date)
     -       14,629  
Due June 25, 2010 (settled on its due date)
     -       7,314  
Due July 28, 2010 (settled on its due date)
     -       2,194,330  
Due August 3, 2010 (settled on its due date)
     -       29,258  
Due August 8, 2010 (settled on its due date)
     -       76,070  
Due August 9, 2010 (settled on its due date)
     -       7,314  
Due August 10, 2010 (settled on its due date)
     -       43,887  
Due September 8, 2010 (settled on its due date)
     -       49,738  
Due October 21, 2010 (settled on its due date)
     -       877,732  
Sub total bank acceptance notes
     6,273,049       3,300,272  
                 
Total
   $ 15,916,907     $ 9,921,858  

Notes receivable from unrelated companies are unsecured.
 
 
F-18
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)
 
NOTE 11 – RELATED PARTY TRANSACTIONS

(I)
Due From Related Parties

       
January 31,
2011
    
April 30,
2010
  
 
                
Taiyuan Guangfa Material Trading Co., Ltd
  
(a)
   $ 2,827,886     $ 7,745,403  
Shanxi Jieyuan Material Trading Co., Ltd
  
(b)
     13,718,094       5,158,764  
Taiyuan Tianlong Machine Manufacture Co., Ltd
  
(c)
     -       25,796  
Bai Jie
  
(e)
     -       93,377  
Total
       $ 16,545,980     $ 13,023,340  

(II)
Due To Related Parties
 
       
January 31,
2011
    
April 30,
2010
  
                 
Xudong Liu
  
(d)
   $ 1,481,111     $ 1,426,048  
Taiyuan Tianlong Machine Manufacture Co., Ltd
  
(c)
     1,829,178          
Total
       $ 3,310,289     $ 1,426,048  

(III)
Due From Employees
 
       
January 31, 2011
    
April 30, 2010
  
                 
Current
       $ 648,366     $ 409,322  
Total due from employees
  
(f)
   $ 648,366     $ 409,322  
 
(a) Taiyuan Guangfa Material Trading Co., Ltd (“Guangfa”) is under the control of Tian Lanfang, a member of SXGL’s principal owner's immediate family. The balances represent advances to Guangfa for materials purchases. The balances are interest free, unsecured and were subsequently settled.

(b) Shanxi Jieyuan Material Trading Co., Ltd (“Jieyuan”) is under the control of Tian Lanfang and Bai Jie, two members of SXGL’s principal owner's immediate family. The balances represent advances to Jieyuan for materials purchases. The balances are interest free, unsecured and were subsequently settled.

(c) Taiyuan Tianlong Machine Manufacture Co., Ltd (“Tianlong) is under the control of Tian Lanfang, a member of SXGL’s principal owner's immediate family. The payable balance represented business related expenses paid by Tianlong on behalf of the company, which was unsecured, interest-free and subsequently settled.
 
(d) Xudong Liu is the principal owner and the chairman of the Company. The balance at January 31, 2011 and April 30, 2010 represents a loan to the Company for working capital purposes, which is secured by a time deposit, interest-free and has no fixed repayment term. See Note 8.

(e) Bai Jie is the spouse of Xudong Liu, also see (d). The balance represented the sales proceeds from marketable securities received by Bai Jie on behalf of the Company, which was interest-free and was settled during nine months ended January 31, 2011
 
 
F-19
 

RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)
 
NOTE 11 – RELATED PARTY TRANSACTIONS (CONTINUED)

(f) Due from employees are interest-free, unsecured and have no fixed repayment terms. The Company provides these advances for business-related purposes only, including for the purchases of raw materials and business-related travel in the ordinary course of business.

NOTE 12 – PLANT AND EQUIPMENT, NET

Plant and equipment consist of the following:

   
January 31,
2011
    
April 30,
2010
  
At cost:
            
Buildings
   $ 5,251,384     $ 4,795,023  
Machinery and equipment
     70,865,616       66,940,817  
Office equipment
     375,539       319,727  
Motor vehicles
     2,179,461       1,824,593  
      78,672,000       73,880,160  
Less : Accumulated depreciation
                
Buildings
     (407,144 )     (268,817 )
Machinery and equipment
     (21,211,111 )     (15,786,739 )
Office equipment
     (248,217 )     (196,451 )
Motor vehicles
     (1,354,668 )     (1,139,285 )
      (23,221,140 )     (17,391,292 )
Plant and equipment, net
   $ 55,450,860     $ 56,488,868  

Depreciation expense for the nine months ended January 31, 2011 and 2010 was $5,147,850 and $4,397,605, respectively.

As of January 31, 2011, the application for ownership certificates of four buildings with an aggregate net book value of $1,963,541 is in progress. The Company’s legal counsel has confirmed the ownership of the four buildings by the Company.

As of January 31, 2011 and April 30, 2010, plant and equipment with a net book value of $4,815,169 and $3,508,782, respectively were pledged as collateral for bank loans. Also see Note 17(a).

NOTE 13 – LAND USE RIGHTS, NET

Land use rights consist of the following:

   
January 31,
2011
    
April 30,
2010
  
Cost of land use rights
   $ 3,345,164     $ 3,221,405  
Less: Accumulated amortization
     (460,814 )     (394,458 )
Land use rights, net
   $ 2,884,350     $ 2,826,947  

Amortization expense for the nine months ended January 31, 2011 and 2010 were $50,236 and $49,378, respectively.
 
 
F-20
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)
 
NOTE 13 - LAND USE RIGHTS, NET (CONTINUED)

Amortization expense for the next five years and thereafter is as follows:
 
2011 (Three months)
   $ 16,436  
2012
     65,746  
2013
     65,746  
2014
     65,746  
2015
     65,746  
Thereafter
     2,604,930  
Total
   $ 2,884,350  

As of January 31, 2011, a land use right with a net book value of $2,173,278 was pledged to Minmetals Steel Beijing Co., Ltd. for product financing arrangements in the amount of $13,231,249. Also see Note 19.
 
NOTE 14 – LONG TERM INVESTMENTS
 
Long term investments consist of the following:
 
   
Ownership
Interest
    
January
31, 2011
    
Ownership
Interest
    
April 30,
2010
  
At cost:
                        
Shanxi Zhong Lian Steel Guarantee Co., Ltd.
     8 %   $ 3,645,810       8 %   $ 3,510,927  
Jinzhong Credit Union Bank
  
<20
 %      151,908    
<20
 %      146,289  
Total
           $ 3,797,718             $ 3,657,216  
 
As of January 31, 2011 and April 30, 2010, the Company does not have more than 20% interest in any of the investments and does not exercise significant influence over them.

The Company accounts for these investments under the cost method. Investment income is recognized by the Company when the invested companies declare a dividend and the Company believes it is collectible. No investment income was recognized for the nine months ended January 31, 2011 and 2010.
 
 
F-21
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)

NOTE 15 – LONG-TERM NOTES RECEIVABLE FROM RELATED PARTIES

The long-term notes receivable from related parties consist of the following:

         
January 31,
2011
    
April 30,
2010
  
                   
Taiyuan Tianlong Machine Manufacture Co., Ltd, due April 30, 2013, interest at 6.91% per annum.
     a)     $ 7,710,226     $ 7,424,976  
                         
Taiyuan Guangfa Material Trading Co., Ltd, due April 30, 2013, interest at 6.91% per annum.
     b)       1,239,037       1,193,197  
                         
Taiyuan Guangfa Material Trading Co., Ltd, due April 30, 2013, interest at 6.48% per annum.
     b)       4,678,455       4,505,369  
                         
Shanxi Jieyuan Material Trading Co., Ltd, due April 30, 2013, interest at 6.91% per annum
     c)       12,090,569       11,643,262  
                         
Shanxi Jieyuan Material Trading Co., Ltd, due April 30, 2013, interest at 6.48% per annum.
     c)       4,082,727       3,931,679  
Long-term portion
             29,801,014       28,698,483  

To explore new markets in China and meet the competition in developing areas in China, in 2008, 2009 and 2010, the Company entered into several long-term notes with related parties, Taiyuan Tianlong Machine Manufacture Co., Ltd. ("Tianlong"), Taiyuan Guangfa Material Trading Co., Ltd. ("Guangfa) and Shanxi Jieyuan Material Trading Co., Ltd, which will assist SXGL to expand in local markets. The principal shall be repaid at maturity. Also see Note 16 for accrued interest receivable.

a) Taiyuan Tianlong Machine Manufacture Co., Ltd. (“Tianlong”) is under the control of Tian Lanfang, a member of SXGL’s principal owner's immediate family. The notes are unsecured.

b) Taiyuan Guangfa Material Trading Co., Ltd. (“Guangfa”) is under the control of Tian Lanfang, a member of SXGL’s principal owner's immediate family. The notes are unsecured.
 
c) Shanxi Jieyuan Material Trading Co., Ltd. (“Jieyuan”) is under the control of Tian Lanfang and Bai Jie, two members of SXGL’s principal owner's immediate family. The notes are unsecured.

Interest income for long-term notes receivable from related parties for the nine months ended January 31, 2011 and 2010 was $1,422,556 and $1,061,540, respectively.
 
 
F-22
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)
 
NOTE 16 – INTEREST RECEIVABLE FROM RELATED PARTIES

Interest receivable from related parties consists of the following:

   
January 31,
2011
    
April 30,
2010
  
                 
Taiyuan Tianlong Machine Manufacture Co., Ltd.
     1,398,943       1,026,429  
                 
Shanxi Jieyuan Material Trading Co., Ltd.
     2,350,802       1,469,164  
                 
Taiyuan Guangfa Material Trading Co., Ltd.
     461,000       163,128  
Total
   $ 4,210,745       2,658,721  
                 
Less: Current portion
     (1,610,503 )     (886,240 )
Long-term portion
   $ 2,600,242     $ 1,772,481  

Interest shall be paid quarterly starting April 30, 2011 according to the repayment schedule.

NOTE 17 – SHORT-TERM BANK BORROWINGS

The short-term bank borrowings consist of the following:

       
January 31,
2011
    
April 30,
2010
  
Short-term bank loans
  
(a)
   $ 82,167,434     $ 76,084,730  
Domestic letter of credit financing
  
(b)
     30,631,069       28,071,471  
        $ 112,798,503     $ 104,156,201  
 
 
(a)
Short-Term Bank Loans
 
 
The short-term bank loans consist of the following:

   
January 31,
2011
    
April 30,
2010
  
Loans from Agriculture Bank of China:
            
             
Monthly interest only payments at 6.372% per annum, due June 20, 2011, guaranteed by Shanxi Guanghua Pipeline Casting Co., Ltd. (Settled on its due date)
   $ 3,493,901     $ -  
                 
Monthly interest only payments at 6.372% per annum, due June 24, 2011, guaranteed by Shanxi Guanghua Pipeline Casting Co., Ltd. (Settled on its due date)
     4,101,536       -  
                 
Monthly interest only payments at 6.372% per annum, due May 10, 2010, guaranteed by Shanxi 525 Storage and Transportation Co., Ltd. (Settled on its due date)
     -       3,949,794  
 
 
F-23
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)
 
NOTE 17 – SHORT-TERM BANK BORROWINGS (CONTINUED)

 
(a)
Short-Term Bank Loans (continued)

   
January 31,
2011
    
April 30,
2010
  
                 
Monthly interest only payments at 6.372% per annum, due June 25, 2010, guaranteed by Shanxi 525 Storage and Transportation Co., Ltd. (Settled on its due date)
   $ -     $ 3,364,639  
                 
Loans from Bank of China:
                
                 
Monthly interest only payments at 5.841% per annum, due June 25, 2011, guaranted by Shanxi Guanghua pipe Co. SXGL, Liu Lizi, and a shareholder, Xudong Liu.  (Settled on its due date)
     2,278,631       -  
                 
Loans from Bank of Communications:
                
                 
Monthly interest only payments at 6.903% per annum, due March 28, 2011, guaranteed by Taiyuan Rongfeng Energy Co., Ltd., Shanxi Zhongbao Technology & Trade Co., Ltd. and Shanxi Guanghua Cast Pipe Co., Ltd. (Settled on its due date)
     4,557,262       -  
                 
Loans from Bank of Communications:
                
                 
Monthly interest only payments at 6.903% per annum, due August 12, 2010, guaranteed by Shanxi Guanghua Cast Pipe Co., Ltd., Shanxi Zhongbao Technology & Trade Co., Ltd., Taiyuan Rongfeng Energy Co., Ltd. and a shareholder, Xudong Liu. (Settled on its due date)
     -       4,388,660  
                 
Loans from Everbright Bank:
                
Monthly interest only payments at 5.100% per annum, due May 25, 2011. Inventory of $14,624,477 were pledged as collateral. Also see Note 9. (Settled on its due date)
     3,038,175       -  
                 
Monthly interest only payments at 5.350% per annum, due July 14, 2011 guaranteed by Shanxi Wanbang Industry and Trade Co., Ltd., also see Note 24. (Settled on its due date)
       4,557,262       -  
                 
Monthly interest only payments at 5.560% per annum, due April 22, 2011 guaranteed by Shanxi Wanbang Industry and Trade Co., Ltd., also see Note 24. (Settled on its due date)
     1,519,087       -  
 
 
F-24
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)
 
NOTE 17 – SHORT-TERM BANK BORROWINGS (CONTINUED)

 
(a)
Short-Term Bank Loans (continued)

   
January 31,
2011
    
April 30,
2010
  
                 
Monthly interest only payments at 5.310% per annum, due April 25, 2010 guaranteed by Shanxi Wanbang Industry and Trade Co., Ltd., and collateralized by inventory owned by the Company. (Settled on its due date)
   $ -     $ 2,925,773  
                 
Monthly interest only payments at 4.860% per annum, due May 7, 2010. Accounts receivable from Xinjiang Yinuo Co., Ltd. was pledged as collateral, which was collected before April 30, 2010. (Settled on its due date).
     -       1,462,887  
                 
Monthly interest only payments at 4.860% per annum, due July 28, 2010. Accounts receivable of $897,447 of Xi’an Rongdi Pipe Group Co., Ltd. was pledged as collateral. (Settled on its due date).
     -       4,388,660  
                 
Loans from China Construction Bank:
                
                 
Monthly interest only payments at 7.228% per annum, due November 22, 2011, secured by machinery and equipment owned by the company. Also see Note 12.
     303,817       -  
                 
Monthly interest only payments at 7.228% per annum, due November 22, 2011, secured by machinery and equipment owned by the company. Also see Note 12.
     455,726       -  
                 
Monthly interest only payments at 5.810% per annum, due January 29, 2012, secured by machinery and equipment owned by the Company. Also see Note 12.
     5,468,714       -  
                 
Monthly interest only payments at 7.553% per annum, due January 29, 2012, secured by machinery and equipment owned by the company. Also see Note 12.
     2,734,357       -  
                 
Monthly interest only payments at 5.310% per annum, due May 28, 2010, secured by machinery and equipment owned by the Company. (Settled on its due date)
     -       731,443  
 
 
F-25
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)
 
NOTE 17 – SHORT-TERM BANK BORROWINGS (CONTINUED)

 
(a)
Short-Term Bank Loans (continued)
   
January 31,
2011
    
April 30,
2010
  
                 
Monthly interest only payments at 5.310% per annum, due November 10, 2010, secured by machinery and equipment owned by the Company. (Settled on its due date)
   $ -     $ 731,442  
                 
Monthly interest only payments at 5.310% per annum, due January 24, 2011, secured by machinery and equipment owned by the Company. (Settled on its due date)
     -       5,705,257  
                 
Monthly interest only payments at 5.310% per annum, due January 25, 2011, secured by machinery and equipment owned by the Company. (Settled on its due date)
     -       731,442  
                 
Monthly interest only payments at 5.310% per annum, due January 26, 2011, secured by machinery and equipment owned by the Company. (Settled on its due date)
     -       2,194,329  
                 
Loans from China Bohai Bank:
                
                 
Monthly interest only payments at 6.116% per annum, due November 17, 2011, guaranteed by Jingzhong Wanbang Trading Company, also see Note 24.
     2,278,631       -  
                 
Monthly interest only payments at 5.610% per annum, due May 18, 2011, guaranteed by Jingzhong Wanbang Trading Company, also see Note 24. (Settled on its due date)
     2,278,631       -  
                 
Monthly interest only payments at 5.841% per annum, due October 22, 2010, guaranteed by a shareholder, Xudong Liu. (Settled on its due date)
             2,194,330  
                 
Loans from China Merchants Bank:
                
                 
Monthly interest only payments at 7.553% per annum, due January 11, 2012, guaranteed by Jingzhong Xindayu Stainless Steel Co., Ltd. also see Note 24.
     3,038,175       -  
                 
Monthly interest only payments at 6.903% per annum, due March 3, 2011, guaranteed by Shanxi Zhonglian Steel Guarantee Co., Ltd. (Settled on its due date)
     1,519,087       1,462,887  
 
 
F-26
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)
 
NOTE 17 – SHORT-TERM BANK BORROWINGS (CONTINUED)

 
(a)
Short-Term Bank Loans (continued)

   
January 31,
2011
    
April 30,
2010
  
                 
Monthly interest only payments at 6.903% per annum, due July 21, 2010, guaranteed by Shanxi XinDayu Material Co., Ltd., and a shareholder, Xudong Liu. (Settled on its due date)
   $ -     $ 2,925,773  
                 
Loans from CITIC Bank:
                
                 
Monthly interest only payments at 6.903% per annum, due April 7, 2011, guaranteed by Shanxi Xin Da Yu Material Co., Ltd., also see Note 24. (Settled on its due date)
     1,519,087       1,462,887  
                 
Monthly interest only payments at 6.903% per annum, due May 20, 2011, guaranteed by Shanxi Taishi Metallurgical Industrial Co., Ltd., also see Note 24. (Settled on its due date)
     4,557,262       -  
                 
Monthly interest only payments at 6.903% per annum, due May 28, 2010, guaranteed by Shanxi Tongyuan Industrial Co., Ltd. (Settled on its due date)
     -       4,388,660  
                 
Loans from Industrial and Commercial Bank of China:
                
                 
Monthly interest only payments at 7.2280% per annum, due December 20, 2011, guaranteed by Shanxi Guanghua Cast Pipe Co., Ltd., also see Note 24.
     1,519,087       -  
                 
Monthly interest only payments at 6.903% per annum, due January 12, 2011, guaranteed by Shanxi Taishi Metallurgical Industrial Co., Ltd. (Settled on its due date)
     -       1,462,887  
                 
Loans from Huaxia Bank:
                
                 
Monthly interest only payments at 5.865% per annum, due May 25, 2011, guaranteed by Taiyuan Rongfeng Co.,Ltd, Shanxi Zhongbao Technology & Trade Co., Ltd., Taiyuan Rongfeng Energy Co., Ltd, Shanxi Guolian Pipe Industry Co., Ltd, and a shareholder, Xudong Liu. (Settled on its due date)
     4,557,262       -  
 
 
F-27
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)
 
NOTE 17 – SHORT-TERM BANK BORROWINGS (CONTINUED)

 
(a)
Short-Term Bank Loans (continued)

   
January 31,
2011
    
April 30,
2010
  
Loans from Huaxia Bank:
            
             
Monthly interest only payments at 5.832% per annum, due June 24, 2010, guaranteed by Shanxi Tongyuan Industrial Co., Ltd., and a shareholder, Xudong Liu. (Settled on its due date)
   $ -     $ 1,462,887  
                 
Monthly interest only payments at 6.107% per annum, due December 25, 2010, guaranteed by Zhongbao Trading Co., Ltd., and Taiyuan Rongfeng Co., Ltd. (Settled on its due date)
     -       4,388,660  
                 
Loans from Jinshang Bank:
                
                 
Monthly interest only payments at 6.903% per annum, due June 10, 2011, guaranteed by Shanxi Zhonglian Steel Guarantee Co., Ltd. (Settled on its due date)
     2,065,959       -  
                 
Monthly interest only payments at 6.903% per annum, due September 14, 2011, guaranteed by Shanxi Zhonglian Steel Guarantee Co. Ltd.
     972,216       -  
                 
Monthly interest only payments at 5.310% per annum, due November 19, 2010, guaranteed by Shanxi Zhonglian Steel Guarantee Co., Ltd., and a shareholder, Xudong Liu. (Settled on its due date)
     -       1,462,887  
                 
Loans from China Minsheng Bank:
                
                 
Monthly interest only payments at 5.576% per annum, due September 8, 2011, guaranteed by Shanxi Xingbang Trading Company, also see Note 24.
     3,038,175       -  
                 
Monthly interest only payments at 5.576% per annum, due September 12, 2011, guaranteed by Shanxi Xingbang Trading Company, also see Note 24.
     3,038,175       -  
                 
Monthly interest only payments at 5.103% per annum, due July 11, 2010, guaranteed by XASP. (Settled on its due date)
     -       5,295,649  
                 
Monthly interest only payments at 5.346% per annum, due October 6, 2010. Inventory of $16,750,051 were pledged as collateral. (Settled on its due date)
     -       2,925,773  
 
 
F-28
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)
 
NOTE 17 – SHORT-TERM BANK BORROWINGS (CONTINUED)

 
(a)
Short-Term Bank Loans (continued)

   
January 31,
2011
    
April 30,
2010
  
Loans from National Development Bank:
            
             
Monthly interest only payments at 5.767% per annum, due July 18, 2011, guaranteed by Taiyuan Shanxi SME Credit Guarantee Co., Ltd. (Settled on its due date)
   $ 2,582,448     $ -  
                 
Loans from Jinzhong Credit Union:
                
                 
Monthly interest only payments at 9.756% per annum, due December 27, 2011, guaranteed by Shanxi Jinliheng Trading Co., Ltd.
     1,503,896       -  
                 
Monthly interest only payments at 10.368% per annum, due December 27, 2010, guaranteed by Shanxi 525 Storage Transportation Co., Ltd. (Settled on its due date)
     -       1,448,258  
                 
Loans from Shanghai Pudong Development Bank:
                
                 
Monthly interest only payments at 6.372% per annum, due March 31, 2011, guaranteed by Shanxi Taishi Metallurgical Industrial Co., Ltd. also see Note 24. (Settled on its due date)
     1,519,087       1,462,887  
                 
Monthly interest only payments at 6.372% per annum, due June 10, 2011, guaranteed by Shanxi Taishi Metallurgical Industrial Co., Ltd. also see Note 24. (Settled on its due date)
     1,519,087       -  
                 
Monthly interest only payments at 5.31% per annum, due June 12, 2011, guaranteed by Shanxi SME Credit Guarantee Co., Ltd. (Settled on its due date)
     1,519,087       -  
                 
Monthly interest only payments at 6.153% per annum, due July 19, 2011, guaranteed by ShanXi Tongyuan Industry Group Company, also see Note 24. (Settled on its due date)
     4,557,262       -  
                 
Monthly interest only payments at 5.865% per annum, due April 26, 2011, guaranteed by Shanxi Taishi Metallurgical Industrial Co., Ltd. also see Note 24. (Settled on its due date)
     1,519,087       -  
 
 
F-29
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)
 
NOTE 17 – SHORT-TERM BANK BORROWINGS (CONTINUED)

 
(h)
Short-Term Bank Loans (continued)

   
January 31,
2011
    
April 30,
2010
  
                 
Monthly interest only payments at 5.610% per annum, due May 3, 2011, guaranteed by Shanxi Tongyuan Co. Guarantee, also see Note 24. (Settled on its due date)
   $ 2,278,632     $ -  
                 
Monthly interest only payments at 5.885% per annum, due June 18, 2011, guaranteed by Shanxi Tongyuan Co. Guarantee, also see Note 24. (Settled on its due date)
     2,278,633       -  
                 
Monthly interest only payments at 5.885% per annum, due June 2, 2010, guaranteed by Shanxi SME Credit Guarantee Co., Ltd. (Settled on its due date)
     -       1,462,887  
                 
Monthly interest only payments at 6.372% per annum, due June 18, 2010, guaranteed by Shanxi Taishi Metallurgical Industrial Co., Ltd. (Settled on its due date)
     -       1,462,887  
                 
Monthly interest only payments at 4.860% per annum, due May 10, 2010. Accounts receivable of $1,389,727 of Taiyuan Reli Co., Ltd. was pledged as collateral. (Settled on its due date),
     -       2,194,329  
                 
Monthly interest only payments at 4.860% per annum, due July 31, 2010. Accounts receivable of $1,389,727 of Taiyuan Reli Co., Ltd. was pledged as collateral. (Settled on its due date)
     -       2,194,329  
                 
Monthly interest only payments at 5.589% per annum, due September 21, 2010. Accounts receivable of $6,570,475 of Datong Thermal Co., Ltd. was pledged as collateral. (Settled on its due date).
     -       4,388,660  
                 
Monthly interest only payments at 5.589% per annum, due October 28, 2010. Accounts receivable of $6,570,475 of Datong Thermal Co., Ltd. was pledged as collateral. (Settled on its due date).
     -       1,462,887  
                 
Total
   $ 82,167,434     $ 76,084,730  

Interest expense for short-term bank loans for nine months ended January 31, 2011 and 2010 was $3,598,390 and $3,141,179, respectively.
 
 
F-30
 

RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)
 
NOTE 17 – SHORT-TERM BANK BORROWINGS (CONTINUED)

(a) Short-Term Bank Loans (continued)

The Company is able to obtain short-term bank loans based on the volume of outstanding accounts receivable. The accounts receivable collateralizes the bank loans. The receivables are collected into a bank controlled account, and the money in that account pays the debt at maturity. The Company obtains the asset based loans from Everbright Bank and Shanghai Pudong Development Bank.

The Company’s credit risk consists principally of accounts receivable. The Company extends credit based on an evaluation of the customer’s financial condition, generally without requiring collateral or other security. In order to minimize the credit risk, the management of the Company has delegated a team responsible for determining credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover receivables. Furthermore, the Company reviews the recoverable amount of each individual trade receivable at each balance sheet date to ensure that adequate impairment losses are provided for unrecoverable amounts. In this regard, the directors of the Company consider that the Company’s credit risk is significantly reduced.

 
(i)
Domestic Letters of Credit Financing

The Domestic Letters of Credit (DLC) refers to a settlement method with which the DLC-opening bank, at the request of the buyer, issues a written payment commitment to the seller and pays to the seller the sales price upon receipt of documents that comply with the domestic provisions of DLC in domestic trade. As a buyer, the Company has a liability when the DLC-opening bank pays the seller.

   
January 31,
2011
    
April 30,
2010
  
Due March 16, 2011 (settled on its due date)
   $ 6,076,349     $    
Due April 2, 2011 (settled on its due date)
     1,971,840          
Due May 1, 2011 (settled on its due date)
     1,368,500          
Due May 17, 2011 (settled on its due date)
     3,365,097          
Due May 15, 2011 (settled on its due date)
     6,076,349          
Due February 15, 2011 (settled on its due date)
     3,038,175          
Due June 14, 2011 (settled on its due date)
     4,976,531          
Due July 5, 2011 (settled on its due date)
     3,758,228          
Due May 6, 2010 (settled on its due date)
             889,229  
Due May 18, 2010 (settled on its due date)
             427,678  
Due May 28, 2010 (settled on its due date)
             3,251,927  
Due June 10, 2010 (settled on its due date)
             405,296  
Due July 1, 2010 (settled on its due date)
             3,936,477  
Due July 13, 2010 (settled on its due date)
             3,072,037  
Due August 6, 2010 (settled on its due date)
             2,361,904  
Due August 11, 2010 (settled on its due date)
             1,807,323  
Due October 26, 2010 (settled on its due date)
             1,898,827  
Due June 4, 2010 (settled on its due date)
             5,851,546  
Due July 16, 2010 (settled on its due date)
             4,169,227  
    $ 30,631,069     $ 28,071,471  
 
 
F-31
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)
 
NOTE 17 – SHORT-TERM BANK BORROWINGS (CONTINUED)

Interest expense was $718,047 and $428,976 for the nine months ended January 31, 2011 and 2010, respectively.

The DLC financing are secured by $12,691,720 and $13,504,251 of restricted cash at January 31, 2011 and April 30, 2010 respectively. Also see Note 8.

NOTE 18 – NOTES PAYABLE

Notes payable consist of the following:
       
January 31,
2011
    
April 30,
2010
  
Notes payable to unrelated parties
  
(a)
   $ 1,288,186     $ 1,459,961  
Bank acceptance notes
  
(b)
     54,148,415       41,620,586  
Total
       $ 55,436,601     $ 43,080,547  

 
(a)
Notes Payable to Unrelated Parties

The Notes payable to unrelated parties consist of the followings:

   
January 31,
2011
    
April 30,
2010
  
             
Due December 30, 2011, interest free, unsecured
   $ 455,726     $ 304,280  
Due April 30, 2011, interest at 24% per annum (settled on its due date)
     315,970       1,024,021  
Due May 11, 2011, interest free, unsecured (settled on its due date)
     379,772       131,660  
Due April 30, 2011, interest free, unsecured (settled on its due date)
     136,718          
Subtotal
   $ 1,288,186     $ 1,459,961  

Interest expense for notes payable to unrelated parties for the nine months ended January 31, 2011 and 2010 was $142,986 and $263,361 respectively.
 
 
F-32
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)
 
NOTE 18 - NOTES PAYABLE (CONTINUED)

 
(b)
Bank Acceptance Notes

The bank acceptance notes consist of the followings:

   
January 31,
2011
    
April 30,
2010
  
Bank acceptance notes (aggregated by month of maturity):
            
Due February, 2011 (settled on its due date)
   $ 13,755,336     $    
Due March, 2011 (settled on its due date)
     2,719,166          
Due April, 2011 (settled on its due date)
     7,139,710          
Due May, 2011 (settled on its due date)
     12,912,242          
Due June, 2011(settled on its due date)
     15,190,874          
Due July, 2011 (settled on its due date)
     2,431,087          
Due May, 2010 (settled on its due date)
             5,266,392  
Due June, 2010 (settled on its due date)
             15,453,934  
Due July, 2010 (settled on its due date)
             7,899,587  
Due August, 2010 (settled on its due date)
             4,886,041  
Due September, 2010 (settled on its due date)
             5,627,725  
Due October, 2010 (settled on its due date)
             2,486,907  
Total
   $ 54,148,415     $ 41,620,586  

All the bank acceptance notes are subject to bank charges of 0.005% of the principal as commission on each transaction. Bank charges for notes payable were $33,234 and $17,961 for the nine months ended January 31, 2011 and 2010, respectively.

The bank acceptance notes are secured by $34,096,462 and $33,574,710 of restricted cash at January 31, 2011 and April 30, 2010, respectively. Also see Note 8.
 
 
F-33
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)
 
NOTE 19 – PRODUCT AND OTHER FINANCING ARRANGEMENTS

Liabilities from product and other financing arrangements consist of the following:

     
January 31,
2011
    
April 30,
2010
  
Due November 11, 2011, interest at 1% per 75 days
(a)
   $ 1,519,087     $ -  
Due November 24, 2011, interest at 1% per 75 days
(a)
     1,822,905       -  
Due December 26, 2011, interest at 1% per 75 days
(a)
     1,519,087       -  
Due February 8, 2011, interest at 1% per 75 days (settled on its due date)
(a)
     4,557,262       -  
Due February 13, 2011, interest at 1% per 75 days (settled on its due date)
(a)
     4,557,262       -  
Due March 12, 2011, interest at 1% per 75 days (settled on its due date)
(a)
     4,557,262       -  
Due April 14, 2011, interest at 1% per 75 days (settled on its due date)
(a)
     4,557,262       -  
Due March 31, 2011, interest at 1.5% per 90 days (settled on its due date)
(b)
     759,543       21,050,938  
Due April 31, 2011, interest at 1.5% per 90 days (settled on its due date)
(b)
     22,786       -  
Due June 30, 2011, interest at 1.5% per 90 days (settled on its due date)
(b)
     759,543       -  
Due September 30, 2011, interest at 1.5% per 90 days
(b)
     5,316,806       -  
Due December, 2011, interest at 1.5% per 90 days
(b)
     6,372,571       -  
Due May 8, 2010, interest at 1% per 75 days (settled on its due date)
(a)
     -       3,510,926  
Due May 16, 2010, interest at 1% per 75 days (settled on its due date)
(a)
     -       5,266,392  
Due June 17, 2010, interest at 1% per 75 days (settled on its due date)
(a)
     -       3,510,928  
Due July 14, 2010, interest at 1% per 75 days (settled on its due date)
(a)
     -       3,510,928  
Due July 5, 2010, interest at 1% per 75 days (settled on its due date)
(a)
     -       3,510,928  
Due July 11, 2010, interest at 1% per 75 days (settled on its due date)
(a)
     -       3,510,928  
                   
Total
     $ 36,321,376     $ 43,871,968  

(a)
The liabilities are due to an unrelated party. The balances represent funds received to support the Company’s business operations. The inventory described in the product financing arrangements was not shipped to party (a) and the title did not pass to party (a). However, party (a) has the right to request the shipment if the Company does not perform its repurchase obligation. The notes were all settled on their due date.
 
 
F-34
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)
 
(b)
The liabilities are due to an unrelated party. The balances represent funds received to support the Company’s business operations. The inventory described in the product financing arrangements was not shipped to party (b) and the title did not pass to party (b). However, party (b) has the right to request the shipment if the Company does not perform its repurchase obligation. Such transaction was also secured by a land use right, also see Note 13, and the additional paid in capital of SXGL, also see Note 22.

Interest expense for liabilities from product financing arrangements for the nine months ended January 31, 2011 and 2010 was $961,345 and $773,507, respectively.
 
NOTE 20 – TAXES

 
(a)
Corporation Income Tax (“CIT”)

On March 16, 2007, the National People’s Congress of China approved the Corporate Income Tax Law of the People’s Republic of China (the “new CIT law”), which went into effective on January 1, 2008. In accordance with the relevant tax laws and regulations of PRC, the applicable corporate income tax rate for the Company is 25%. 

Effective January 1, 2007, the Company adopted FASB Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes. The interpretation addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements.
 
 
Under FIN 48, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. FIN 48 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. As of January 31, 2011 and April 30, 2010, the Company does not have a liability for unrecognized tax benefits.

The Company’s income tax expense for the nine months ended January 31, 2011 and 2010 are summarized as follows:

   
January 31,
2011
    
January 31,
2010
  
Current:
            
Provision for CIT
   $ 119,935     $ 109,609  
                 
Deferred:
                
Provision for CIT
     2,222,345       2,500,449  
                 
Income tax expense
   $ 2,342,280     $ 2,610,058  
 
 
F-35
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)
 
NOTE 20 -TAXES (CONTINUED)

 
(a)
Corporation Income Tax (“CIT”) (Continued)

The Company’s income tax expense differs from the “expected” tax expense for the nine months ended January 31, 2011 and 2010 (computed by applying the CIT rate of 25% percent to income before income taxes) as follows:

   
January 31,
2011
    
January 31,
2010
  
             
Computed “expected” expense
   $ 2,079,235     $ 2,337,375  
Permanent differences
     263,045       272,683  
                 
Income tax expense
   $ 2,342,280     $ 2,610,058  

The tax effects of temporary differences that give rise to the Company's net deferred tax assets and liabilities as of January 31, 2011 and 2010 are as follows:

   
January 31,
2011
    
April 30,
2010
  
Deferred tax assets (liabilities):
            
Current portion:
            
Loss carry forward
   $ 301,028     $ 127,712  
Sales
     1,618,469       1,458,724  
Expenses cut-off
     1,658,856       1,622,373  
Overaccrued cost of sales
     (4,110,636 )     (1,163,385 )
Other
     (47,449 )     (111,697 )
Subtotal
     (579,732 )     1,933,727  
                 
Non-current portion:
                
Depreciation
     2,402,966       1,723,847  
Interest income from long-term notes receivable
     (1,052,686 )     (664,680 )
                 
Subtotal
     1,350,280       1,059,167  
                 
Net deferred tax assets
   $ 770,548     $ 2,992,894  

(b)       Value Added Tax (“VAT”)

Enterprises or individuals, who sell commodities, engage in repair and maintenance or import or export goods in the PRC are subject to a value added tax in accordance with Chinese Laws. The value added tax standard rate is 17% of the gross sale price and the Company records its revenue net of VAT. A credit is available whereby VAT paid on the purchases of semi-finished products or raw materials used in the production of the Company’s finished products can be used to offset the VAT due on the sales of the finished products.
 
 
F-36
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)
 
NOTE 20 -TAXES (CONTINUED)

(b)       Value Added Tax (“VAT”) (Continued)

On January 1, 2002, the export policy of VAT "Exemption, Credit and Refund" began to apply to all exports by manufacture-based enterprises. In accordance with this policy, exported goods are exempted from output VAT and the input VAT charged for purchases of the raw materials, components and power consumed for the production of the exported goods may be refunded. The refund rate of steel pipe related products applicable to the Company is 13%.

The VAT payable of $1,073,826 and $933,256 at January 31, 2011 and April 30, 2010, respectively, is included in other payables in the accompanying condensed consolidated balance sheet.

NOTE 21 – REGISTERED CAPITAL

The registered capital of the Company before the share exchange is as follows:

Registered Capital:
  
January 31, 2011
    
April 30, 2010
  
                         
Xudong Liu
   $ 45,000       90 %   $ 45,000       90 %
Li Ning
     5,000       10 %     5,000       10 %
Total
   $ 50,000       100 %   $ 50,000       100 %
 
The Company was incorporated under the laws of the British Virgin Islands. The registered capital of the Company was $50,000, held by Mr. Liu Xudong and Mr. Li Ning in the proportion of 90% and 10%, respectively.
 
NOTE 22 – ADDITIONAL PAID-IN CAPITAL

In 2009, Mr. Liu Xiudong, a shareholder and the chairman of the Company, contributed $38,562,951 to the Company to support the Company’s business development. This resulted in an additional paid-in capital of $38,562,951 which has been reflected in the condensed consolidated balance sheet as of January 31, 2011 and April 30, 2010.

As of January 31, 2011, additional paid in capital of $9,671,828 secured notes payable for product financing arrangements.
 
 
F-37
 

RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)
 
NOTE 23 – GEOGRAPHIC SALES

The following table discloses the Company’s revenue from customers by geographical area based on the location of the customer for the nine months ended January 31, 2011 and 2010:

   
January 31, 2011
    
January 31, 2010
  
Area
  
Amounts
    
Percentage
    
Amounts
    
Percentage
  
China
   $ 137,712,680       94 %   $ 101,866,861       85.8 %
Africa
     5,146,152       3.5 %     13,339,271       11.1 %
South America
     3,482,160       2.4 %     3,201,907       2.7 %
North America
     -               281,487       0.3 %
Asia (excluding China)
     114,480       0.1 %     76,507       0.1 %
Europe
     -       -       -          
Total
   $ 146,455,472       100 %   $ 118,766,033       100 %

The Company’s credit risk consists principally of accounts receivable. The Company extends credit based on an evaluation of the customer’s financial condition, generally without requiring collateral or other security. In order to minimize the credit risk, the management of the Company bought business credit insurance for all the export sales to insure payment of credit extended by the export sales

NOTE 24 – CONTINGENCIES

 
(1)
As of January 31, 2011, the Company entered into two guarantee contracts to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi Rong Xiang Trading Co., Ltd. (“SXRX”). If SXRX defaults on the repayment of its bank loans when they fall due, the Company is required to repay the outstanding balance. As of January 31, 2011, the guarantee provided for the bank loans borrowed by SXRX was $ 3,949,627, which consists of the following:

   
January 31, 2011
  
Due November 15, 2011
   $ 1,670,996  
Due October 25, 2011
     2,278,631  
Total
   $ 3,949,627  

 
(2)
As of January 31, 2011, the Company entered into three guarantee contract to serve as guarantor for bank loans borrowed by an unrelated party, Taiyuan North Metallurgy Co., Ltd with a guarantee amount of $4,481,307, which consists of the following:

   
January 31, 2011
  
Due July 12, 2011 (expired)
   $ 2,278,631  
Due April 30, 2011 (expired)
     1,139,315  
Due May 19, 2011 (expired)
     1,063,361  
Total
   $ 4,481,307  
 
 
F-38
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)
 
NOTE 24 - CONTINGENCIES (CONTINUED)

 
(3)
As of January 31, 2011, the Company entered into three guarantee contracts to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi Tongyuan Industrial Group Co., Ltd. (“SXTY”). SXTY also provided a cross guarantee for bank loans of $9,114,524 borrowed by the Company. Also see Note 17(a). As of January 31, 2011, the guarantee provided for the bank loans borrowed by SXTY was $8,354,980, which consists of the following:

   
January 31, 2011
  
Due February 24, 2011 (expired)
     3,797,718  
Due April 24, 2011 (expired)
     1,519,087  
Due May 19, 2011 (expired)
     3,038,175  
Total
   $ 8,354,980  

 
(4)
As of January 31, 2011, the Company entered into one guarantee contract to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi Wanbang Industry and Trade Co., Ltd. (“SXWB”) with a guarantee amount of $4,557,262, due November 29, 2011. SXWB also provided a cross guarantee for the short-term loan of $10,633,611 borrowed by the Company. See Note 17(a).

 
(5)
As of January 31, 2011, the Company entered into two guarantee contracts to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi Taishi Metallurgy Industry Group Co., Ltd. (“SXTS”). SXTS also provided a cross guarantee for bank loans of $9,114,524 borrowed by the Company. Also see Note 17(a). As of January 31, 2011, the guarantee provided for the bank loans borrowed by SXTS was $7,595,437, which consists of the following:

   
January 31, 2011
  
Due February 24, 2011 (expired)
     3,038,175  
Due May 19, 2011 (expired)
     4,557,262  
Total
   $ 7,595,437  

 
(6)
As of January 31, 2011, the Company entered into two guarantee contracts to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi Guanghua Pipe produce Co., Ltd. (“SXGH”). SXGH also provided a cross guarantee for bank loan of $15,950,417 borrowed by the Company. See Note 17(a). As of January 31, 2011, the guarantee provided for the bank loans borrowed by SXGH was $30,381,747, which consists of the following:

   
January 31, 2011
  
Due April 13, 2011(expired)
   $ 7,595,437  
Due October 29, 2011
     7,595,437  
Due October 12, 2016
     15,190,873  
Total
   $ 30,381,747  
 
 
F-39
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)
 
NOTE 24 - CONTINGENCIES (CONTINUED)

 
(7)
As of January 31, 2011, the Company entered into two guarantee contracts to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi XinDayu Material Co., Ltd. (“SXXD”). SXXD also provided a cross guarantee for bank loans of $4,557,262 borrowed by the Company. Also see Note 17(a). As of January 31, 2011, the guarantee provided for the bank loans borrowed by SXXD was $6,312,726, which consists of the following:

   
January 31, 2011
  
Due June 10, 2011 (expired)
   $ 4,557,262  
Due March 25, 2011 (expired)
     1,755,464  
Total
   $ 6,312,726  

 
(8)
As of January 31, 2011, the Company entered into a guarantee contract to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi Changxin Steel Co., Ltd. from the Huaxia Bank with a guarantee amount of $1,670,996, due September 27, 2011.

 
(9)
As of January 31, 2011, the Company entered into two guarantee contract to serve as guarantor for bank loans borrowed by an unrelated party, Dalian Binggong Trading Co., Ltd. with a guarantee amount of $12,152,699, which consists of the following:

   
January 31, 2011
  
Due September 3, 2011
   $ 4,557,262  
Due July 18, 2011 (expired)
     7,595,437  
Total
   $ 12,152,699  
 
 
(10)
As of January 31, 2011, the Company entered into a guarantee contract to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi Xin Bang Trading Co., Ltd. (“SXXB”) from the China Minsheng Bank with a guarantee amount of $6,076,349, due September 26, 2011. SXXB also provided a cross guarantee for bank loans of $6,076,349 borrowed by the Company. Also see Note 17(a).

 
(11)
As of January 31, 2011, the Company entered into a guarantee contract to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi Jintaoyuan Coal Co., Ltd. from the China Minsheng Bank with a guarantee amount of $30,381,747, due January 31, 2012.

All the guarantee liabilities due before July 30, 2011 were subsequently released since the debtors repaid the loans. Also see Note 25.

A default by the warrantees is considered remote by the management. Based on the information available to management, no liability for the guarantor's obligation under the guarantee was recognized as of January 31, 2011.
 
 
F-40
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JANUARY 31, 2011 AND 2010
(UNAUDITED)
 
NOTE 25 – SUBSEQUENT EVENTS

On June 29, 2011, the Company entered into a guarantee contract to serve as guarantor for the bank loans borrowed by the Shanxi Taishi Metallurgy Industry Group Co., Ltd. from the Citic Bank with a guarantee amount of $7,595,437, due June 28, 2012.
  
In January 2011, the 40% shares of the subsidiary SXGL pledged to Shengli Steel Pipe Co. were released. As of July 30, 2011, the remaining 60% shares of the subsidiary SXGL were still pledged to Sinosteel Co., Ltd.

On July 30, 2011, Sino Oil & Gas Pipe Holdings Limited (“SOGP”) executed a Share Exchange Agreement (the “Share Exchange Agreement”) by and between SOGP, the shareholder of SOGP, RISE KING, and the shareholders of RISE KING.

Under the Share Exchange Agreement, at the Closing on July 30, 2011, the Company issued 7,000,000 shares of its common stock, representing 58.33% of the Company’s issued and outstanding common stock, to the RISE KING shareholders in exchange for 100% of the common stock of RISE KING. The shareholder of SOGP agreed to transfer all of 5,000,000 shares of its common stock, representing 41.67% of the Company’s issued and outstanding common stock to RISE KING shareholders on the Closing Date in exchange for an aggregate of $200,000 in cash.

After the closing of the transaction, SOGP had a total of 12,000,000 shares of common stock issued and outstanding, with the RISE KING Shareholder owning 100% of the total issued and outstanding shares of SOGP’s common stock, and the balance held by those who held shares of SOGP’s common stock prior to the closing of the exchange. This share exchange transaction resulted in the RISE KING Shareholder obtaining wholly voting interest in SOGP. Generally accepted accounting principles require that the company whose shareholders retain the majority interest in a combined business be treated as the acquirer for accounting purposes, resulting in a reverse acquisition. Accordingly, the share exchange transaction has been accounted for as a recapitalization of SOGP.
 
F-41
 
 
RISE KING MANAGEMENT LIMITED
 
AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2010 AND 2009
 
 
 
 

RISE KING MANAGEMENT LIMITED
AND SUBSIDIARIES

CONTENTS

PAGE
  
1
  
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
         
PAGES
  
2-3
  
CONSOLIDATED BALANCE SHEETS AS OF APRIL 30, 2010 AND 2009
         
PAGE
  
4
  
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME FOR THE YEARS ENDED APRIL 30, 2010 AND 2009
         
PAGE
  
5
  
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEARS ENDED APRIL 30, 2010 AND 2009
         
PAGES
  
6-7
  
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED APRIL 30, 2010 AND 2009
         
PAGES
  
8-45
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED APRIL 30, 2010 AND 2009

 
 
 

 
Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of:
Rise King Management Limited and Subsidiaries

We have audited the accompanying consolidated balance sheets of Rise King Management Limited and subsidiaries (the “Company”) as of April 30, 2010 and 2009, and the related consolidated statements of income and comprehensive income, changes in shareholders’ equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with 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 consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. According, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Rise King Management Limited and subsidiaries as of April 30, 2010 and 2009 and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Weinberg & Company, P.A.

Boca Raton, Florida
July 30, 2011

 
F-1
 

 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

ASSETS
  
   
April 30,
    
April 30,
  
   
2010
    
2009
  
CURRENT ASSETS
            
Cash and cash equivalents
   $ 6,413,448     $ 1,980,229  
Restricted cash
     49,078,779       58,155,687  
Accounts receivable, net of allowance for doubtful accounts of $215,878 and $215,897 at April 30, 2010 and 2009, respectively
     35,211,738       15,626,973  
Marketable securities
     178,467       76,753  
Inventories
     29,742,389       16,249,747  
Notes receivable
     9,921,858       22,143,107  
Prepayments for goods
     16,246,032       9,899,792  
Prepaid expenses and other receivables
     1,766,315       961,835  
Due from employees
     409,322       302,142  
Due from related parties
     13,023,340       12,594,975  
Notes receivable from related parties, current portion
     -       108,409  
Interest receivable from related parties, current portion
     886,240       7,025  
Notes receivable from related parties
     -       92,170  
Deferred tax assets
     1,933,727       4,443,653  
Total Current Assets
     164,811,655       142,642,497  
                 
LONG-TERM ASSETS
                
Plant and equipment, net
     56,488,868       51,562,157  
Construction in progress
     -       4,995,529  
Land use rights, net
     2,826,947       2,892,944  
Long-term investment
     3,657,216       146,301  
Deposit for land use right
     1,075,222       -  
Notes receivable from related parties, long-term portion
     28,698,483       20,263,214  
Interest receivable from related parties, long-term portion
     1,772,481       1,258,360  
Deferred tax assets
     1,059,167       711,784  
Goodwill
     7,389,597       7,389,597  
Total Long-Term Assets
     102,967,981       89,219,886  
                 
TOTAL ASSETS
   $ 267,779,636     $ 231,862,383  
 
See accompanying notes to the consolidated financial statements

 
F-2
 

RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
LIABILITIES AND SHAREHOLDERS’ EQUITY  
             
   
April 30,
    
April 30,
  
   
2010
    
2009
  
CURRENT LIABILITIES
            
Short-term bank borrowings
   $ 104,156,201     $ 64,659,504  
Accounts payable
     9,249,968       3,745,171  
Customer deposits
     13,714,140       23,437,420  
Due to a related party
     1,426,048       983,613  
Notes payable
     43,080,547       56,671,825  
Product and other financing arrangements
     43,871,968       39,047,607  
Income tax payable
     1,264,157       737,319  
Other payables and accrued expenses
     3,697,972       1,851,004  
Total Current Liabilities
     220,461,001       191,133,463  
                 
TOTAL LIABILITIES
     220,461,001       191,133,463  
                 
COMMITMENTS AND CONTINGENCIES
                
                 
SHAREHOLDERS’ EQUITY
                
Common stock, $1 par value; 50,000 shares authorized, issued and outstanding;
     50,000       50,000  
Additional paid-in capital
     52,584,504       52,584,504  
Retained deficit
     (6,276,505 )     (12,842,047 )
Accumulated other comprehensive income
     848,095       834,737  
TOTAL SHAREHOLDERS’ EQUITY
     47,206,094       40,627,194  
                 
NON-CONTROLLING INTEREST
     112,541       101,726  
                 
TOTAL EQUITY
     47,318,635       40,728,920  
                 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
   $ 267,779,636     $ 231,862,383  
 
See accompanying notes to the consolidated financial statements

 
F-3
 

RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE YEARS ENDED APRIL 30, 2010 AND 2009

   
2010
    
2009
  
REVENUES
   $ 146,835,283     $ 152,511,228  
COST OF GOODS SOLD
     (123,110,120 )     (130,600,207 )
GROSS PROFIT
     23,725,163       21,911,021  
                 
Selling and marketing
     (3,952,504 )     (5,878,246 )
General and administrative
     (3,003,542 )     (2,387,684 )
Research and development
     (33,111 )     (11,713 )
INCOME FROM OPERATIONS
     16,736,006       13,633,378  
                 
Interest expense
     (9,765,845 )     (9,216,142 )
Interest income
     2,438,152       2,673,890  
Other income (expense), net
     36,313       (91,537 )
                 
INCOME BEFORE INCOME TAXES
     9,444,626       6,999,589  
                 
INCOME TAXES
     (2,868,260 )     (2,026,906 )
                 
NET INCOME
     6,576,366       4,972,683  
                 
NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST
     (10,824 )     (6,079 )
                 
NET INCOME ATTRIBUTABLE TO CONTROLLING INTEREST
     6,565,542       4,966,604  
                 
OTHER COMPREHENSIVE (LOSS) INCOME
                
Foreign currency translation loss
     (590 )     (104,823 )
Unrealized gain (loss) on marketable securities
     13,948       (11,550 )
OTHER COMPREHENSIVE INCOME (LOSS)
     13,358       (116,373 )
                 
COMPREHENSIVE INCOME
   $ 6,578,900     $ 4,850,231  
                 
WEIGHTED AVERAGE SHARES
                
Basic and diluted
     50,000       50,000  
NET INCOME PER SHARE
                
Basic and diluted
   $ 131.31     $ 99.33  
 
See accompanying notes to the consolidated financial statements

 
F-4
 

RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED APRIL 30, 2010 AND 2009

   
Registered Capital
    
Additional
Paid-in Capital
    
Retained Deficit
    
Accumulated Other Comprehensive Income
    
Non- Controlling Interest
    
Total
  
                                     
BALANCE AT APRIL 30, 2008
   $ 50,000     $ 14,021,553     $ (17,808,651 )   $ 951,110     $ 93,382     $ (2,692,606 )
                                                 
Foreign currency translation gain (loss)
     -       -       -       (104,823 )     2,265       (102,558 )
                                                 
Unrealized loss on marketable securities
     -       -       -       (11,550 )     -       (11,550 )
                                                 
Capital contribution
     -       38,562,951       -       -       -       38,562,951  
                                                 
Net income
     -       -       4,966,604       -       6,079       4,972,683  
                                                 
BALANCE AT APRIL 30, 2009
     50,000       52,584,504       (12,842,047 )     834,737       101,726       40,728,920  
                                                 
Foreign currency translation loss
     -       -       -       (590 )     (9 )     (599 )
                                                 
Unrealized gain on marketable securities
                             13,948       -       13,948  
                                                 
Net income
     -       -       6,565,542       -       10,824       6,576,366  
                                                 
BALANCE AT APRIL 30, 2010
   $ 50,000     $ 52,584,504     $ (6,276,505 )   $ 848,095     $ 112,541     $ 47,318,635  
 
See accompanying notes to the consolidated financial statements

 
F-5
 


RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED APRIL 30, 2010 AND 2009

   
2010
    
2009
  
             
CASH FLOWS FROM OPERATING ACTIVITIES:
            
Net income
   $ 6,565,542     $ 4,966,604  
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
                
Non-controlling interest
     10,824       6,079  
Depreciation and amortization
     6,059,318       4,692,407  
Deferred income taxes
     2,162,543       1,048,682  
Changes in operating assets and liabilities, net of effects of acquisition:
                
(Increase) Decrease In:
                
Accounts receivable
     (19,584,747 )     5,086,132  
Inventories
     (13,492,642 )     1,651,827  
Prepaid expenses and other receivables
     (879,093 )     572,991  
Prepayments for goods
     (6,271,627 )     4,043,982  
Due from employees
     (107,180 )     685,338  
                 
Increase (Decrease) In:
                
Accounts payable
     5,504,797       903,561  
Other payables and accrued expenses
     1,846,970       1,072,218  
Taxes payable
     526,838       737,319  
Customer deposits
     (9,723,281 )     (7,129,559 )
Net cash (used in) provided by operating activities
     (27,381,738 )     18,337,581  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
                
Purchases of plant and equipment
     (4,713,221 )     (1,737,126 )
Purchases of construction in progress
     (1,215,685 )     (5,118,570 )
Payment for deposit of land use rights
     (1,075,222 )     -  
Purchases of marketable securities
     (175,554 )     -  
Decrease (increase) in notes receivable
     12,219,842       (3,556,126 )
(Increase) decrease in notes receivable from related parties
     (8,229,824 )     5,608,493  
Accrued interest from related parties
     (1,400,532 )     (1,743,883 )
Due from related parties
     101,847       (20,033,494 )
Purchase of subsidiary, net of cash acquired
     -       (43,696,589 )
Payment for long-term investment
     (3,510,915 )     -  
Net cash used in investing activities
     (7,999,264 )     (70,277,295 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
                
Restricted cash
     9,076,908       (21,729,776 )
Capital contribution
     -       38,562,951  
Proceeds from short-term loans
     196,021,252       112,724,383  
Repayments of short-term loans
     (156,517,145 )     (98,510,063 )
Proceeds from product and other financing arrangements
     110,745,373       112,009,255  
Repayments for product and other financing arrangements
     (105,917,373 )     (110,982,835 )
(Decrease) increase of notes payable
     (13,586,901 )     14,885,347  
Net cash provided by financing activities
     39,822,114       46,959,262  
 
See accompanying notes to the consolidated financial statements

 
F-6
 

RISE KING MANAGEMENT LIMITED
 AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED APRIL 30, 2010 AND 2009

    2010     2009  
                 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
     4,441,112       (4,980,452 )
 Effect of exchange rate changes on cash
     (7,893 )     1,302,914  
 Cash and cash equivalents at beginning of year
     1,980,229       5,657,767  
CASH AND CASH EQUIVALENTS AT END OF YEAR
   $ 6,413,448     $ 1,980,229  
                 
SUPPLEMENTARY CASH FLOW INFORMATION
                
Income taxes paid
   $ 118,821     $ 179,142  
Interest paid
   $ 6,493,118     $ 7,832,690  
   
SUPPLEMENTAL NON-CASH DISCLOSURES:
  
   
1. During the years ended April 30, 2010 and 2009, $6,210,995 and $1,306,300 were transferred from construction in progress to plant and equipment, respectively.
  
   
2. During the year ended April 30, 2010, $87,773 of marketable securities were transferred to the Company in satisfaction of a due from related party balance.
  
 
See accompanying notes to the consolidated financial statements

 
F-7
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009
 
NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES
  
Offshore Holding Company and Subsidiaries

RISE KING MANAGEMENT LIMITED, or RISE KING, was incorporated under the laws of the British Virgin Islands (“BVI”) on February 10, 2009 and was initially held by Mr. Liu Xudong and Mr. Li Ning, 90% and 10%, respectively. As of April 30, 2010 and 2009, there were 50,000 ordinary shares, par value $1.00 per share, issued and outstanding.

On April 30, 2009, pursuant to the acquisition agreements between RISE KING and the shareholder of Sound Way Enterprises Limited, or Sound Way, RISE KING purchased 100% of the outstanding shares of SOUND WAY.  As a result of the acquisition, SOUND WAY became a wholly-owned subsidiary of RISE KING. SOUND WAY was incorporated under the laws of the BVI on January 2, 2009, with Ms. Kong Juan as the initial sole shareholder. As of April 30, 2010 and 2009, there were 50,000 ordinary shares, par value $1.00 per share, issued and outstanding.

In April 2011, RISE KING acquired all of the outstanding equity of Brave King Enterprises Limited, or Brave King, a limited liability company formed on March 19, 2010 under the laws of Hong Kong.

In April 2011, SOUND WAY acquired all of the outstanding equity of MAJOR AIM ENTERPRISES LIMITED, or MAJOR AIM, a limited liability company formed on March 19, 2010 under the laws of Hong Kong.

In April, 2011, Brave King established a wholly owned subsidiary, Shanxi Shipaipu Business Consulting Co., Ltd., or Shanxi Shipaipu, a wholly foreign owned enterprise formed under the laws of the PRC.
 
In April, 2011, Major Aim established a wholly owned subsidiary, Shanxi Ruixingtong Business Consulting Co., Ltd., or Shanxi Ruixingtong, a wholly foreign owned enterprise formed under the laws of the PRC.

RISE KING, SOUNDWAY, BRAVE KING, MAJOR AIM, Shanxi Shipaipu and Shanxi Ruixingtong are holding companies. As a result of these transactions, each of SOUND WAY, BRAVE KING, MAJOR AIM, Shanxi Shipaipu and Shanxi Ruixingtong are wholly owned subsidiary of RISE KING and we manage and operate the business of the two variable interest entities SXGL and Shanxi Zhonglian through the VIE Agreements.

PRC Operating Companies
 
Shanxi Guolian Pipe Industry Group Co., Ltd., or SXGL is a PRC company formed on May 12, 2003, formerly known as Shanxi Yuci Guolian Steel Pipe Co., Ltd. ,or Yuci Guolian . Xudong Liu, our chairman and majority shareholder owns 89% and Lizi Liu, the Vice President of Board of Directors owns 11% of SXGL.
 
Shanxi Zhonglian Gas Development Co., Ltd., or Shanxi Zhonglian, is a PRC company formed on November 12, 2004. Juan Kong own 100% of Shanxi Zhonglian.
 
Shanxi Zhonglian Gas Development Co., Ltd., or Shanxi Zhonglian, is a PRC company formed on November 12, 2004. Juan Kong own 100% of Shanxi Zhonglian.
 
F-8
 

RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009
 
NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED)

In April 2011, Shanxi Shipaipu and Shanxi Ruixingtong entered into contractual agreements (known as a “variable interest entity” (VIE) arrangement) with SXGL and SXZL respectively, under which Shanxi Shipaipu and Shanxi Ruixingtong provide exclusive management and technical services and exclusive technology consulting services (collectively, the “Consulting Service Agreements”) to SXGL and SXZL, respectively, in exchange for substantially all of the net income of the SXGL and SXZL. As collateral to ensure the SXGL’s and SXZL’s payments under the Consulting Service Agreements, the shareholders of SXGL and SXZL, through an equity pledge agreement, pledged all of their rights and interests in the Company, including voting rights and dividend rights, to Shanxi Shipaipu and Shanxi Ruixingtong. In addition, the shareholders of SXGL and SXZL, through an exclusive option agreement, granted to Shanxi Shipaipu and Shanxi Ruixingtong an exclusive, irrevocable and unconditional right to purchase part or all of the equity interests in the Company when the purchase becomes permissible under the relevant PRC Law.

In accordance with ASC 810-10 (formerly FASB Interpretation No. 46R) “Consolidation of Variable Interest Entities”, an Interpretation of Accounting Research Bulletin No. 51, a Variable Interest Entity (a “VIE”) is to be consolidated by a company if that company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE’s residual returns. After executing the service agreements, SXGL and SXZL are now considered a VIE.

The current corporate structure was completed as of April, 2011. Before the completion of the structure, all the companies included in this structure were under common control of the same major shareholder, Mr. Liu Xudong. The Company believes that it is proper to present the consolidated financial statements “as if” the structure was completed at the acquisition date of SOUND WAY.

The principal activities of RISE KING and its subsidiaries (the “Company”) are the design, development, manufacturing, and commercialization of spiral submerged-arc welding (SSAW) pipe, electric resistance welding (ERW) pipe and gas equipment for the PRC and export markets.
 
Also see Note 25.
 
 
 
F-9
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009
  
NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED)
  
Detail of the Company’s operating subsidiaries as of April 30, 2010 and 2009 are as follows:

Name
  
Place And Date
Of
Establishment/ Incorporation
  
Percentage of
Ownership
  
Principal Activities
Shanxi Guolian Pipe Industry Group Co., Ltd. (“SXGL”)
  
Shanxi, PRC
May 12, 2003.
  
VIE of Shanxi
Shipaipu
  
Design, development, manufacturing, and commercialization of spiral submerged-arc welding (SSAW) pipe and electric resistance welding (ERW) pipe
             
Shanxi Guolian Spiral Tubulation Co., Ltd. (“ SXSP”)
  
Shanxi, PRC
March 15, 2000.
  
97.7%
owned by SXGL
  
Design, development, manufacture, and commercialization of spiral submerged-arc welding pipe (SSAW).
             
Xi'an Guolian Spiral Tubulation Co., Ltd. (“ XASP”)
  
Xian, PRC
February 22, 2002.
  
99%
owned by
SXGL
  
Manufacture and sales of spiral submerged-arc welding pipe (SSAW).
             
Shanxi Guolian Pipe Technology Co., Ltd.
(“SXPT “)
  
Shanxi, PRC
June 14, 2007
  
100%
owned by SXGL
  
Technology research, development and test of pipes
             
Shanxi Zhonglian Gas Development Co., Ltd (“SXZL”)
  
Shanxi, PRC
November 12, 2004.
  
VIE of Shanxi Ruixingtong
  
Manufacture and sales of gas equipment.
 
 
F-10
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009
 
NOTE 2 – PRINCIPLES OF CONSOLIDATION
 
The consolidated financial statements include the accounts of RISE KING and the following subsidiaries:
 
 
l
BRAVE KING ( a wholly-owned subsidiary of RISE KING)
 
l
Shanxi Shipaipu ( a wholly-owned subsidiary of BRAVE KING)
 
l
SOUND WAY ( a wholly-owned subsidiary of RISE KING)
 
l
MAJOR AIM (a wholly-owned subsidiary of  SOUND WAY)
 
l
Shanxi Ruixingtong (a wholly-owned subsidiary of MAJOR AIM)
 
l
SXGL (a VIE of Shanxi Shipaipu);
 
l
SXSP (97.7% subsidiary of SXGL);
 
l
XASP (99% subsidiary of SXGL);
 
l
SXPT (100% subsidiary of SXGL);
 
l
SXZL (a VIE of Shanxi Ruixingtong)
  
All inter-company accounts and transactions have been eliminated in consolidation.

NOTE 3 – USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period.

Management makes these estimates using the best information available at the time the estimates are made; however actual results when ultimately realized could differ from those estimates.

NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)
Economic and Political Risks

The Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy.

The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things.

 
F-11
 
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009

NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(b)
Fair Value of Financial Instruments

Accounting Standards Codification (“ASC”) 820-10 Fair Value Measurements establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market.
These tiers include:

•Level 1—defined as observable inputs such as quoted prices in active markets;
•Level 2—defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and
•Level 3—defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The assets measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820-10 as of April 30, 2010 and 2009 are as follows:

               
Fair Value Measurements at Reporting Date Using
  
    
Carrying
Value as of
April 30,
2010
    
Carrying
Value as of
April 30,
2009
    
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
    
Significant
Other
Observable
Inputs
(Level 2)
    
Significant
Unobservable
Inputs
(Level 3)
  
Bank acceptance notes
   $ 3,300,272       1,000,474     $ 3,300,272       -       -  
Marketable securities
     178,467       76,753       178,467       -       -  

The carrying amounts of financial assets and liabilities, such as cash and cash equivalents, accounts receivable, notes receivable, prepayments for goods, due from related parties, due from employees, short-term bank loans, accounts payable, customer deposits, short-term notes payable, product financing arrangements and other payables, approximate their fair values because of the short maturity of these instruments. The fair value of the Company’s long-term notes receivable is estimated based on the current rates offered to the Company for debt of similar terms and maturities.

(c)
Earnings Per Share
 
Basic earnings per share are computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There were no potentially dilutive shares for the years ended April 31, 2010 and 2009.
 
 
F-12
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009

NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(d)
Cash and Cash Equivalents

For financial reporting purposes, the Company considers highly liquid investments purchased with original maturity of three months or less to be cash equivalents. Restricted cash represents time deposits to guarantee bank acceptance notes and to collateralize short-term bank loans and letters of credit. Also see Note 7.

(e)
Marketable Securities

The Company’s investment in marketable securities consists of an investment in a Chinese open-ended mutual fund that invests in Chinese corporate equity securities. The Company’s investment is classified as available-for-sale.

In accordance with ASC 320-10 “Accounting for Certain Investments in Debt and Equity Securities”, this investment is carried at fair market value and any unrealized gains and losses are included in other comprehensive income, a separate component of shareholders’ equity.

Realized gains and losses from the sales of marketable securities and declines in value considered to be other than temporary are to be included in other income (expense).  For the years ended April 31, 2010 and 2009, there were $13,948 and $(11,550) unrealized gain (loss) included in other comprehensive income (loss), respectively.

(f)
Inventories

Inventories are stated at the lower of cost or net realizable value. The cost of raw materials is determined on the basis of weighted average. The cost of finished goods is determined on the weighted average basis and comprises direct materials, direct labor and an appropriate proportion of overhead. Net realizable value is based on estimated selling prices less any further costs expected to be incurred for completion and disposal.

(g)
Prepayments

Prepayments represent cash paid in advance to suppliers for purchases of raw materials.

(h)
Product Financing Arrangements

The Company simultaneously sells and agrees to repurchase inventory to and from third parties. The repurchase price is contractually fixed at an amount equal to the original sales price plus the financing entity’s carrying and financing costs. The inventory is not shipped, and the title is not passed to the buyer. The purpose of the transaction is to enable the Company to arrange financing of its original purchase of the inventory.

FASB ruled that the substance of this transaction is that of a borrowing transaction, not a sale. That is, the transaction is, in substance, no different from the Company directly obtaining third-party financing to purchase inventory. ASC 470-10, Product Financing Arrangement, specifies that the proper accounting by the Company is to record a liability in the amount of the selling price when the funds are received from the financing entity in exchange for the initial transfer of the inventory. The liability is satisfied when the Company repurchases the inventory. Also see Note 18.

 
F-13
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009

NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(i)
Long-Term Investments

The Company invested in companies in the PRC that have operations in the guarantee and commercial banking industries. As of April 30, 2010 and 2009, the Company does not have more than 20% interest in any of the investments and does not exercise significant influence over them. The Company accounts for the investments under the cost method. Investment income is recognized by the Company when the investee declares a dividend and the Company believes it is collectible. Also see Note 13.

(j)
Plant and Equipment

Plant and equipment are carried at cost less accumulated depreciation and amortization. Depreciation is provided over their estimated useful lives, using the straight-line method. Leasehold improvements are amortized over the life of the asset or the term of the lease, whichever is shorter.  Estimated useful lives are as follows:
 
Buildings
30 years
Machinery
10~12 years
Motor vehicles
5 years
Office equipment
5 years

The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the statement of income. The cost of maintenance and repairs is charged to expense as incurred, whereas significant renewals and betterments are capitalized.

(k)
Construction in Progress

Construction in progress represents direct costs of construction or the acquisition cost of buildings or machinery and design fees. Capitalization of these costs ceases and the construction in progress is transferred to plant and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is provided until the assets are completed and ready for their intended use.

(l)
Land Use Rights

According to the laws of China, land in the PRC is owned by the government and cannot be sold to an individual or company.  However, the government grants the user a “land use right” to use the land.  The land use right granted to the Company is being amortized using the straight-line method over the lease term of fifty years.

(m)
Impairment of Long-Term Assets

Long-term assets of the Company are reviewed annually as to whether their carrying value has become impaired, pursuant to the guidelines established in ASC 360-10. The Company considers assets to be impaired if the carrying value exceeds the future projected cash flows from the related operations.  The Company also re-evaluates the periods of amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives. There was no impairment for the years ended April 30, 2010 and 2009.

 
F-14
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009

NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(n)
Goodwill

The Company evaluates goodwill in accordance with ASC Topic 350, “ Intangibles — Goodwill and Other.” Goodwill is recorded at the time of an acquisition and is calculated as the difference between the total considerations paid for an acquisition and the fair value of the net tangible and intangible assets acquired. Accounting for acquisitions requires extensive use of accounting estimates and judgments to allocate the purchase price to the fair value of the net tangible and intangible assets acquired. Goodwill deemed to have indefinite lives are not amortized, but are subject to annual impairment tests. If the assumptions and estimates used to allocate the purchase price are not correct, or if business conditions change, purchase price adjustments or future asset impairment charges could be required. The value of goodwill, could be impacted by future adverse changes such as: (i) any future declines in our operating results, (ii) a decline in the valuation of technology, including the valuation of our common stock, (iii) a significant slowdown in the worldwide economy or (iv) any failure to meet the performance projections included in our forecasts of future operating results. In accordance with ASC Topic 350, the Company tests goodwill for impairment on an annual basis or more frequently if the Company believes indicators of impairment exist. Impairment evaluations involve management estimates of asset useful lives and future cash flows. Significant management judgment is required in the forecasts of future operating results that are used in the evaluations. It is possible, however, that the plans and estimates used may be incorrect. If our actual results, or the plans and estimates used in future impairment analysis, are lower than the original estimates used to assess the recoverability of these assets, the Company could incur additional impairment charges in a future period.

The Company performs its annual impairment review of goodwill in April, and when a triggering event occurs between annual impairment tests. The Company recorded no impairment loss for the years ended April 30, 2010 and 2009.

(o)
Revenue Recognition

Revenue represents the invoiced value of goods sold, recognized upon the shipment of goods to customers. Revenue is recognized when all of the following criteria are met:

-Persuasive evidence of an arrangement exists,
-Delivery has occurred or services have been rendered,
-The seller's price to the buyer is fixed or determinable, and
-Collectability is reasonably assured.

The majority of the Company’s revenue results from sales contracts with distributors and revenue is recorded upon the shipment of goods. Management conducts credit background checks for new customers as a means to reduce the subjectivity of collectability.

The Company simultaneously sells and agrees to repurchase inventory to and from third parties. The Company does not recognize sales and purchases for such transactions, but records a liability in the amount of the selling price when the funds are received from the financing entity. The liability is satisfied when the Company repurchases the inventory. Also see Note 4 (h), and Note 18.

 
F-15
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009

NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(p)
Retirement Benefits

Retirement benefits in the form of contributions under defined contribution retirement plans to the relevant authorities are charged to expense as incurred. Retirement benefits amounting to $90,055 and $97,460 were charged to operations for the years ended April 30, 2010 and 2009, respectively.

(q)
Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequence attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statement of income in the period that includes the enactment date. 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.  Also see Note 19.

(r)
Shipping and Handling

The Company's shipping and handling costs are included in selling and marketing expenses. For the years ended April 30, 2010 and 2009, the shipping and handling costs were $1,809,268 and $3,418,496, respectively.

(s)
Foreign Currency Translation

The accompanying consolidated financial statements are presented in United States dollars. The functional currency of the Company is the Renminbi (RMB). Capital accounts of the consolidated financial statements are translated into United States dollars from RMB at their historical exchange rates when the capital transactions occurred.
 
Assets and liabilities are translated at the exchange rates as of the balance sheet date. Income and expenditures are translated at the average exchange rate of the year.

   
April 30, 2010
    
April 30, 2009
  
Year end RMB : US$ exchange rate
   $ 6.8358     $ 6.8352  
Average yearly RMB : US$ exchange rate
     6.8355       6.9155  

The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US dollars at the rates used in translation.

 
F-16
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009

NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(t)
Comprehensive Income

Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income are required to be reported in a financial statement that is presented with the same prominence as other financial statements. Comprehensive income includes net income and the foreign currency translation gain and unrealized gains on marketable securities.

(u)
Segment and Geographic Reporting
 
The Company operates in one business segment, the design, development, manufacture, and commercialization of spiral submerged-arc welding (SSAW) pipe, electric resistance welding (ERW) pipe and gas equipments mainly in the PRC and overseas market. Also see Note 23.

(v)
Non-Controlling Interest

Non-controlling minority interest represents the portion of earnings that is not within the parent Company’s control. These amounts are now required to be reported as equity instead of as a liability on the balance sheet. Net income from non-controlling minority interests is shown separately on the consolidated statements of income. There was $10,824 and $6,079 net income contributed to non-controlling interest for the years ended April 30, 2010 and 2009, respectively.

(w)
Recent Accounting Pronouncements

Effective January 1, 2009, the Company adopted ASC 815-10 (formerly SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities), which amends SFAS No. 133 and expands disclosures to include information about the fair value of derivatives, related credit risks and a company's strategies and objectives for using derivatives. The adoption of ASC 815-10 did not have a material effect on the Company’s financial statements as of April 30, 2010.

Effective January 1, 2009, the Company adopted ASC 815-40 (formerly Emerging Issues Task Force (“EITF”) Issue No. 07-05, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock (“EITF 07-05”). ASC 815-40 addresses the determination of whether an instrument (or an embedded feature) is indexed to an entity's own stock, which is the first part of the scope exception in paragraph 11(a) of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS 133”). If an instrument (or an embedded feature) that has the characteristics of a derivative instrument under paragraphs 6–9 of SFAS 133 is indexed to an entity's own stock, it is still necessary to evaluate whether it is classified in stockholders' equity (or would be classified in stockholders' equity if it were a freestanding instrument). Other applicable authoritative accounting literature, including Issues EITF 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company Own Stock, and EITF 05-2, The Meaning of “Conventional Debt Instrument” in Issue No. 00-19, provides guidance for determining whether an instrument (or an embedded feature) is classified in stockholders' equity (or would be classified in stockholders' equity if it were a freestanding instrument).

 
F-17
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009
 
NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(w) Recent Accounting Pronouncements (Continued)

ASC 815-40 does not address that second part of the scope exception in paragraph 11(a) of SFAS 133. The adoption of ASC 815-40 did not have a material effect on the Company’s financial statements as of April 30, 2010.

On April 9, 2009, the Financial Accounting Standards Board (“FASB”) also approved ASC 825-10 (formerly FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments) to require disclosures about fair value of financial instruments in interim period financial statements of publicly traded companies and in summarized financial information required by APB Opinion No. 28, Interim Financial Reporting. We are required to adopt ASC 825-10 for our interim and annual reporting periods ending after June 15, 2009. ASC 825-10 does not require disclosures for periods presented for comparative purposes at initial adoption. ASC 825-10 requires comparative disclosures only for periods ending after initial adoption. The adoption of ASC 825-10 did not have a material effect on the Company’s financial statements as of April 30, 2010.
 
In April 2009, the FASB updated guidance related to fair-value measurements to clarify the guidance related to measuring fair-value in inactive markets, to modify the recognition and measurement of other-than-temporary impairments of debt securities, and to require public companies to disclose the fair values of financial instruments in interim periods. The adoption did not have a material effect on the Company’s financial statements as of April 30, 2010.

In June 2009, the FASB issued ASC 810-10 (formerly SFAS No. 167) Amendments to FASB Interpretation No. 46(R), which require an enterprise to perform an analysis and ongoing reassessments to determine whether the enterprises variable interest or interests give it a controlling financial interest in a variable interest entity and amends certain guidance for determining whether an entity is a variable interest entity. It also requires enhanced disclosures that will provide users of financial statements with more transparent information about an enterprises involvement in a variable interest entity. ASC 810-10 is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009 and for all interim reporting periods after that. The adoption of ASC 810-10 did not have a material effect on the Company’s financial statements as of April 30, 2010.
 
In January 2010, the FASB issued guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires disclosure of transfers of assets and liabilities between Level 1 and Level 2 of the fair value measurement hierarchy, including the reasons and the timing of the transfers and information on purchases, sales, issuance, and settlements on a gross basis in the reconciliation of the assets and liabilities measured under Level 3 of the fair value measurement hierarchy. This guidance is effective for the Company beginning March 1, 2010. The adoption did not have a material effect on the Company’s financial statements as of April 30, 2010.

 
F-18
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009

NOTE 5 – LIQUIDITY

The Company has a working capital deficit of $55,649,346 and $48,490,966 at April 30, 2010 and 2009, respectively. This was principally due to the fact that the Company had $192,534,764 and $161,362,549 of short-term debt at April 30, 2010 and 2009, derived from following:

   
April 30,
2010
    
April 30,
2009
  
Short-term bank borrowings
   $ 104,156,201     $ 64,659,504  
Due to a related party
     1,426,048       983,613  
Notes payable
     43,080,547       56,671,825  
Product and other financing arrangements
     43,871,968       39,047,607  
Total short-term debt
   $ 192,534,764       161,362,549  

The Company also had a $17,808,651 accumulated deficit at April 30, 2008. The Company currently generates its cash flow through operating profit, and the Company had net income of $6,576,366 and $4,972,683 for the years ended April 30, 2010 and 2009, respectively. As of the date of this report, the Company has not experienced any liquidity problems in settling payables in the normal course of business and repaying bank loans when they become due. To improve liquidity, the Company may explore new expansion opportunities and funding sources, including seeking external funding and financing.

NOTE 6 – CONCENTRATIONS

(a)   Customers

The Company has major customers who accounted for the following percentages of total sales and accounts receivable:

 
  
Sales
Years Ended April 30,
    
Accounts Receivable
April 30,
  
Customers
  
2010
    
2009
    
2010
    
2009
  
Company A
     8.2 %     11.6 %     11.2 %     18.8 %
Company B
     8.1 %     3.6 %     18.7 %     8.6 %
Company C
     4.8 %     0.7 %     7.8 %     -  
Company D
     4.4 %     2.0 %     2.0 %     -  
Company E
     3.4 %     -       6.1 %     -  

(b)   Suppliers

The Company has major suppliers who accounted for the following percentages of total purchases and accounts payable:

   
Purchases
Years Ended April 30,
    
Accounts Payable
April 30,
  
Suppliers
  
2010
    
2009
    
2010
    
2009
  
Company F
     11.9 %     30.2 %     -       -  
Company G
     9.8 %     14.1 %     -       -  
Company H
     5.0 %     -       -       -  
Company I
     7.9 %     12.1 %     -       12.0 %
Company J
     3.5 %     -       -       -  


 
F-19
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009

NOTE 7 – RESTRICTED CASH

Restricted cash as of April 30, 2010 and 2009 represented time deposits with original maturity between three and twelve months to secure banking facilities granted by various financial institutions as follows:

 
  
 
    
April 30,
2010
    
April 30,
2009
  
                   
Notes payable-bank acceptance notes
     17 (b)   $ 33,574,710     $ 50,775,875  
Domestic letters of credit financing
     16 (b)     13,504,251       5,948,997  
Savings deposits as guarantees for due to a shareholder
     10 (e)     1,462,887       731,507  
Bidding for project
             521,096       698,443  
Interest income
             15,835       865  
Total
           $ 49,078,779     $ 58,155,687  

NOTE 8 – INVENTORIES

Inventories are summarized as follows:

   
April 30,
2010
    
April 30,
2009
  
Raw materials
   $ 9,022,627     $ 6,448,741  
Work-in-progress
     263,119       150,558  
Finished goods
     20,456,643       9,650,448  
Total inventories
   $ 29,742,389     $ 16,249,747  

As of April 30, 2010, inventories with a carrying amount of $25,005,824 were pledged as collateral for Minsheng Bank and Everbright Bank short-term loans. Also see Note 16 (a).
 
 
F-20
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009

NOTE 9 – NOTES RECEIVABLE

Notes receivable consist of the following:

   
April 30,
2010
    
April 30,
2009
  
             
Notes receivable from unrelated companies:
            
Due April 29, 2011, interest at 5.31% per annum
   $ 877,732     $ -  
Due October 7, 2010, interest free (settled on its due date)
     146,289       -  
Due December 21, 2010, interest free (settled on its due date)
     146,289          
Due December 31, 2010, interest free (settled on its due date)
     731,443          
Due May 10, 2010, interest free (settled on its due date)
     1,607,201          
Due May 15, 2010 interest free (settled on its due date)
     3,112,632          
Due December 31, 2009, interest free (settled on its due date)
     -       746,138  
Due January 31, 2010, interest free(settled on its due date)
     -       73,151  
Due December 21, 2009, interest free (settled on its due date)
     -       73,151  
Due October 6, 2009, interest free (settled on its due date)
     -       146,301  
Due May 6, 2009, interest free (settled on its due date)
     -       117,440  
Due May 8, 2009, interest free (settled on its due date)
     -       18,806,677  
Due May 15, 2009, interest free (settled on its due date)
     -       1,179,775  
Sub total of notes receivable from unrelated companies
     6,621,586       21,142,633  
                 
Bank acceptance notes:
                
Due May 30, 2010
     14,629       -  
Due June 25, 2010
     7,314       -  
Due July 28, 2010
     2,194,330       -  
Due August 3, 2010
     29,258       -  
Due August 8, 2010
     76,070       -  
Due August 9, 2010
     7,314       -  
Due August 10, 2010
     43,887       -  
Due September 8, 2010
     49,738       -  
Due October 21, 2010
     877,732       -  
Due October 20, 2009
     -       731,507  
Due June 8, 2009
     -       38,038  
Due June 17, 2009
     -       146,301  
Due May 21, 2009
     -       84,628  
Sub total bank acceptance notes
     3,300,272       1,000,474  
                 
Total
   $ 9,921,858     $ 22,143,107  

Notes receivable from unrelated companies are unsecured.

 
All the bank acceptance notes are interest free and were settled on the due date.

 
F-21
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009

NOTE 10 – RELATED PARTY TRANSACTIONS

(I)
Due From Related Parties

     
April 30,
2010
    
April 30,
2009
  
 
              
Taiyuan Guangfa Material Trading Co., Ltd
(a)
   $ 7,745,403     $ 7,507,184  
Shanxi Jieyuan Material Trading Co., Ltd
(b)
     5,158,764       5,076,043  
Taiyuan Tianlong Machine Manufacture Co., Ltd
(c)
     25,796       11,748  
Bai Jie
(d)
     93,377       -  
Total
     $ 13,023,340     $ 12,594,975  

(II)
Due To a Related Party
 
     
April 30,
2010
    
April 30,
2009
  
               
Liu Xudong
(e)
   $ 1,426,048     $ 983,613  
Total
     $ 1,426,048     $ 983,613  

(III)
Notes receivable from related parties
 
   
April 30,
2010
    
April 30,
2009
  
             
Taiyuan Guangfa Material Trading Co., Ltd, due April 30, 2010, interest at 6.37% per annum. (Settled on its due date)
   $ -     $ 92,170  
Total
   $ -     $ 92,170  
 
(IV)
Due From Employees
 
     
April 30,
2010
    
April 30,
2009
  
               
Current
     $ 409,322     $ 302,142  
Total due from employees
(f)
   $ 409,322     $ 302,142  

 
(a) Taiyuan Guangfa Material Trading Co., Ltd (“Guangfa”) is under the control of Tian Lanfang, a member of SXGL’s principal owner's immediate family. The balances represent advances to Guangfa for materials purchases. The balances are interest free, unsecured and were subsequently settled.

 
(b) Shanxi Jieyuan Material Trading Co., Ltd (“Jieyuan”) is under the control of Tian Lanfang and Bai Jie, two members of SXGL’s principal owner's immediate family. The balances represent advances to Jieyuan for materials purchases. The balances are interest free, unsecured and were subsequently settled.

(c) Taiyuan Tianlong Machine Manufacture Co., Ltd (“Tianlong) is under the control of Tian Lanfang, a member of SXGL’s principal owner's immediate family. The receivable balance represents business related expenses paid by the Company on behalf of Tianlong, which is unsecured, interest-free and has no fixed repayment term and is due on demand.
 
 

 
F-22
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009

NOTE 10 – RELATED PARTY TRANSACTIONS (CONTINUED)

(d) Bai Jie is the spouse of Liu Xudong, also see (e). The balance represents the sales proceeds from marketable securities received by Bai Jie on behalf of the Company, which is interest-free and due on demand.

(e) Liu Xudong is the principal owner and the chairman of the Company. The balance at April 30, 2010 and 2009 represents a loan to the Company for working capital purposes, which is secured by a time deposit, interest-free and has no fixed repayment term. See Note 7.

 (f) Due from employees are interest-free, unsecured and have no fixed repayment terms. The Company provides these advances for business-related purposes only, including for the purchases of raw materials and business-related travel in the ordinary course of business.

NOTE 11 – PLANT AND EQUIPMENT, NET

 
Plant and equipment consist of the following:

   
April 30,
2010
    
April 30,
2009
  
At cost:
            
Buildings
   $ 4,795,023     $ 3,194,532  
Machinery and equipment
     66,940,817       57,962,295  
Office equipment
     319,727       286,151  
Motor vehicles
     1,824,593       1,518,123  
      73,880,160       62,961,101  
Less : Accumulated depreciation
                
Buildings
     (268,817 )     (152,961 )
Machinery and equipment
     (15,786,739 )     (10,173,357 )
Office equipment
     (196,451 )     (142,945 )
Motor vehicles
     (1,139,285 )     (929,681 )
      (17,391,292 )     (11,398,944 )
Plant and equipment, net
   $ 56,488,868     $ 51,562,157  

 
Depreciation expense for the years ended April 30, 2010 and 2009 was $5,993,573 and $4,627,422, respectively.

 
As of April 30, 2010, the application for ownership certificates of four buildings with an aggregate net book value of $1,896,323 is in progress. The Company’s legal counsel has confirmed the ownership of the four buildings by the Company.

As of April 30, 2010 and 2009, plant and equipment with a net book value of $3,508,782 and $1,267,019, respectively, were pledged as collateral for bank loans. Also see Note 16(a).

 
F-23
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009

NOTE 12 – LAND USE RIGHTS, NET

Land use rights consist of the following:

   
April 30,
2010
    
April 30,
2009
  
Cost of land use rights
   $ 3,221,405     $ 3,221,687  
Less: Accumulated amortization
     (394,458 )     (328,743 )
Land use rights, net
   $ 2,826,947     $ 2,892,944  

 
Amortization expense for the years ended April 30, 2010 and 2009 was $65,745 and $64,985, respectively.

 
Amortization expense for the next five years and thereafter is as follows:
 
2011
   $ 65,746  
2012
     65,746  
2013
     65,746  
2014
     65,746  
2015
     65,746  
Thereafter
     2,498,217  
Total
   $ 2,826,947  

 
As of April 30, 2010, a land use right with a net book value of $2,130,026 was pledged to Minmetals Steel Beijing Co., Ltd. for product financing arrangements in the amount of $21,050,938. Also see Note 18.

NOTE 13 – LONG TERM INVESTMENTS

 
Long term investments consist of the following:

   
Ownership
Interest
    
April 30,
2010
    
Ownership
Interest
    
April 30,
2009
  
At cost:
                        
Shanxi Zhong Lian Steel Guarantee Co., Ltd.
     8 %   $ 3,510,927       -     $ -  
Jinzhong Credit Union Bank
  
<20
 %      146,289    
<20%
       146,301  
Total
           $ 3,657,216             $ 146,301  

 
As of April 30, 2010 and 2009, the Company does not have more than 20% interest in any of the investments and does not exercise significant influence over them.

 
The Company accounts for these investments under the cost method. Investment income is recognized by the Company when the invested companies declare a dividend and the Company believes it is collectible. No investment income was recognized for the years ended April 31, 2010 and 2009.

 
F-24
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009

NOTE 14 – LONG-TERM NOTES RECEIVABLE FROM RELATED PARTIES

 
The long-term notes receivable from related parties consist of the following:

         
April 30,
2010
    
April 30,
2009
  
                         
Taiyuan Tianlong Machine Manufacture Co., Ltd, due April 30, 2013, interest at 6.91% per annum.
     a )   $ 7,424,976     $ 7,425,628  
                         
Taiyuan Tianlong Machine Manufacture Co., Ltd, due April 30, 2010, interest at 6.37% per annum. (Settled on its due date)
     a )     -       108,409  
                         
Taiyuan Guangfa Material Trading Co., Ltd, due April 30, 2013, interest at 6.91% per annum.
     b )     1,193,197       1,193,302  
                         
Taiyuan Guangfa Material Trading Co., Ltd, due April 30, 2013, interest at 6.48% per annum.
     b )     4,505,369       -  
                         
Shanxi Jieyuan Material Trading Co., Ltd, due April 30, 2013, interest at 6.91% per annum
     c )     11,643,262       11,644,284  
                         
Shanxi Jieyuan Material Trading Co., Ltd, due April 30, 2013, interest at 6.48% per annum.
     c )     3,931,679       -  
Total
             28,698,483       20,371,623  
                         
Less: Current portion
             -       (108,409 )
Long-term portion
             28,698,483       20,263,214  

To explore new markets in China and meet the competition in developing areas in China, in 2008, 2009 and 2010, the Company entered into several long-term notes with related parties, Taiyuan Tianlong Machine Manufacture Co., Ltd. (“Tianlong”), Taiyuan Guangfa Material Trading Co., Ltd. ("“Guangfa) and Shanxi Jieyuan Material Trading Co., Ltd. (“Jieyuan”), which will assist SXGL to expand in local markets. The principal shall be repaid at maturity.  Also see Note 15 for accrued interest receivable.

a) Tianlong is under the control of Tian Lanfang, a member of SXGL’s principal owner's immediate family. The notes are unsecured.

 
b) Guangfa is under the control of Tian Lanfang, a member of SXGL’s principal owner's immediate family. The notes are unsecured.
 
 

 
F-25
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009
 
NOTE 14 – LONG-TERM NOTES RECEIVABLE FROM RELATED PARTIES (CONTINUED)

 
c) Jieyuan is under the control of Tian Lanfang and Bai Jie, two members of SXGL’s principal owner's immediate family. The notes are unsecured.

 
Interest income for long-term notes receivable from related parties for the years ended April 30, 2010 and 2009 was $1,400,532 and $1,743,883, respectively.

NOTE 15 – INTEREST RECEIVABLE FROM RELATED PARTIES

 
Interest receivable from related parties consist of the following:

   
April 30,
2010
    
April 30,
2009
  
                 
Taiyuan Tianlong Machine Manufacture Co., Ltd.
     1,026,429       507,385  
                 
Taiyuan Tianlong Machine Manufacture Co., Ltd, due April 30, 2010. (Settled on its due date)
     -       7,025  
                 
Shanxi Jieyuan Material Trading Co., Ltd.
     1,469,164       664,441  
                 
Taiyuan Guangfa Material Trading Co., Ltd.
     163,128       86,534  
Total
   $ 2,658,721       1,265,385  
                 
Less: Current portion
     (886,240 )     (7,025 )
Long-term portion
   $ 1,772,481     $ 1,258,360  

 
Interest shall be paid quarterly starting April 30, 2011 according to the repayment schedule.

 
F-26
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009

NOTE 16 – SHORT-TERM BANK BORROWINGS

 
The short-term bank borrowings consist of the following:

     
April 30,
2010
    
April 30,
2009
  
Short-term bank loans
(a)
   $ 76,084,730     $ 52,887,260  
Domestic letter of credit financing
(b)
     28,071,471       11,772,244  
      $ 104,156,201     $ 64,659,504  
 
 
(a)
Short-Term Bank Loans
 
 
The short-term bank loans consist of the following:

   
April 30,
2010
    
April 30,
2009
  
Loans from Agriculture Bank of China:
            
             
Monthly interest only payments at 6.372% per annum, due May 10, 2010, guaranteed by Shanxi 525 Storage and Transportation Co., Ltd.
   $ 3,949,794     $ -  
                 
Monthly interest only payments at 6.372% per annum, due June 25, 2010, guaranteed by Shanxi 525 Storage and Transportation Co., Ltd.
     3,364,639       -  
                 
Monthly interest only payments at 9.711% per annum, due June 26, 2009, guaranteed by Shanxi 525 Storage and Transportation Co., Ltd.
     -       3,364,934  
                 
Loans from Bank of Communications:
                
                 
Monthly interest only payments at 6.903% per annum, due August 12, 2010, guaranteed by Shanxi Guanghua Cast Pipe Co., Ltd., Shanxi Zhongbao Technology & Trade Co., Ltd., Taiyuan Rongfeng Energy Co., Ltd. and a shareholder, Liu Xudong.
     4,388,660       -  
                 
Monthly interest only payments at 7.254% per annum, due December 4, 2009, guaranteed by Taiyuan Rongfeng Co., Ltd. and Shanxi Zhongbao Co., Ltd.
     -       2,926,030  
                 
Loans from Everbright Bank:
                
                 
Monthly interest only payments at 5.310% per annum, due April 25, 2010 guaranteed by Shanxi Wanbang Industry and Trade Co., Ltd., also see Note 21 and collateralized by inventory owned by the Company. Also see Note 8.
     2,925,773       -  

 
F-27
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009
 
NOTE 16 – SHORT-TERM BANK BORROWINGS (CONTINUED)

 
(a)
Short-Term Bank Loans (continued)

   
April 30,
2010
    
April 30,
2009
  
Everbright Bank Taiyuan Branch:
            
             
Monthly interest only payments at 4.860% per annum, due May 7, 2010. Accounts receivable from Xinjiang Yinuo Co., Ltd. was pledged as collateral, which was collected before April 30, 2010.
   $ 1,462,887     $ -  
                 
Monthly interest only payments at 4.860% per annum, due July 28, 2010. Accounts receivable of $897,447 of Xi’an Rongdi Pipe Group Co., Ltd. was pledged as collateral.
     4,388,660       -  
                 
Monthly interest only payments at 6.570% per annum, due May 6, 2009. Accounts receivable from Xinjiang Yinuo Co., Ltd. was pledged as collateral, which was collected before April 30, 2009.
     -       2,048,221  
                 
Monthly interest only payments at 4.860% per annum, due August 21, 2009. Accounts receivable of $77,737 of Xi’an Rongdi Pipe Group Co., Ltd. was pledged as collateral.
     -       4,389,045  

 
F-28
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009
 
 
(a)
Short-Term Bank Loans (continued)

   
April 30,
2010
    
April 30,
2009
  
Loans from China Construction Bank:
            
             
Monthly interest only payments at 5.310% per annum, due May 28, 2010, secured by machinery and equipment owned by the Company. Also see Note 11.
   $ 731,443     $ -  
                 
Monthly interest only payments at 5.310% per annum, due November 10, 2010, secured by machinery and equipment owned by the Company. Also see Note 11.
     731,442     $ -  
                 
Monthly interest only payments at 5.310% per annum, due January 24, 2011, secured by machinery and equipment owned by the Company. Also see Note 11.
     5,705,257       -  
                 
Monthly interest only payments at 5.310% per annum, due January 25, 2011, secured by machinery and equipment owned by the Company. Also see Note 11.
     731,442       -  
                 
Monthly interest only payments at 5.310% per annum, due January 26, 2011, secured by machinery and equipment owned by the Company. Also see Note 11.
     2,194,329          
                 
Monthly interest only payments at 7.470% per annum, due May 29, 2009, secured by machinery and equipment owned by the Company. Also see Note 11.
     -       731,507  
                 
Monthly interest only payments at 6.660% per annum, due November 5, 2009, secured by machinery and equipment owned by the Company. Also see Note 11.
     -       731,507  
                 
Monthly interest only payments at 5.310% per annum, due January 19, 2009, secured by machinery and equipment owned by the Company. Also see Note 11.
     -       731,507  
                 
Monthly interest only payments at 5.310% per annum, due January 23, 2009, secured by machinery and equipment owned by the Company. Also see Note 11.
     -       2,194,522  

 
F-29
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009

NOTE 16 – SHORT-TERM BANK BORROWINGS (CONTINUED)

 
(a)
Short-Term Bank Loans (continued)

   
April 30,
2010
    
April 30,
2009
  
Loans from China Bohai Bank:
            
             
Monthly interest only payments at 5.841% per annum, due October 22, 2010, guaranteed by a shareholder, Liu Xudong.
   $ 2,194,330     $ -  
                 
Monthly interest only payments at 5.346% per annum, due October 19, 2009, guaranteed by Shanxi Wanbang Trade and Industry Co., Ltd.
     -       2,194,522  
                 
Loans from China Merchants Bank:
                
                 
Monthly interest only payments at 6.903% per annum, due July 21, 2010, guaranteed by Shanxi XinDayu Material Co., Ltd., also see Note 21 and a shareholder, Liu Xudong.
     2,925,773       -  
                 
Monthly interest only payments at 6.903% per annum, due March 3, 2011, guaranteed by Shanxi Zhonglian Steel Guarantee Co., Ltd.
     1,462,887       -  
                 
Loans from CITIC Bank:
                
                 
Monthly interest only payments at 6.903% per annum, due May 28, 2010, guaranteed by Shanxi Tongyuan Industrial Co., Ltd., also see Note 21.
     4,388,660       -  
                 
Monthly interest only payments at 6.903% per annum, due April 7, 2011, guaranteed by Shanxi XinDayu Material Co., Ltd., also see Note 21.
     1,462,887       -  
                 
Monthly interest only payments at 9.711% per annum, due May 28, 2009 guaranteed by Shanxi Tongyuan Industrial Co., Ltd.
     -       2,926,031  
                 
Monthly interest only payments at 6.903% per annum, due August 5, 2009, guaranteed by Shanxi Tongyuan Industrial Co., Ltd.
     -       1,463,016  
                 
Monthly interest only payments at 6.903% per annum, due March 20, 2010, guaranteed by Shanxi XinDayu Material Co., Ltd.
     -       1,463,016  

 
F-30
 

RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009

NOTE 16 – SHORT-TERM BANK BORROWINGS (CONTINUED)

 
(a)
Short-Term Bank Loans (continued)

   
April 30,
2010
    
April 30,
2009
  
Loans from Industrial and Commercial Bank of China:
            
             
Monthly interest only payments at 6.903% per annum, due January 12, 2011, guaranteed by Shanxi Taishi Metallurgical Industrial Co., Ltd., also see Note 21.
   $ 1,462,887     $ -  
                 
Monthly interest only payments at 9.711% per annum, due September 2, 2009, guaranteed by Shanxi Taishi Metallurgical Industrial Co., Ltd.
     -       1,463,015  
                 
Loans from Huaxia Bank:
                
                 
Monthly interest only payments at 5.832% per annum, due June 24, 2010, guaranteed by Shanxi Tongyuan Industrial Co., Ltd., also see Note 21 and a shareholder, Liu Xudong.
     1,462,887       -  
                 
Monthly interest only payments at 6.107% per annum, due December 25, 2010, guaranteed by Zhongbao Trading Co., Ltd., and Taiyuan Rongfeng Co., Ltd.
     4,388,660       -  
                 
Monthly interest only payments at 5.832% per annum, due July 1, 2009, guaranteed by Shanxi Tongyuan Industrial Co., Ltd., and a shareholder, Liu Xudong.
     -       1,463,015  
                 
Monthly interest only payments at 6.372% per annum, due January 2, 2010, guaranteed by Zhongbao Trading Co., Ltd., and Taiyuan Rongfeng Co., Ltd.
     -       4,389,045  
                 
Loans from Jinshang Bank:
                
                 
Monthly interest only payments at 5.310% per annum, due November 19, 2010, guaranteed by Shanxi zhonglian guarantee Co., Ltd., and a shareholder, Liu Xudong.
     1,462,887       -  
                 
Monthly interest only payments at 6.903% per annum, due April 12, 2010, guaranteed by Taiyuan SME Guarantee Co., Ltd.
     -       2,487,125  
 
 
F-31
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009

NOTE 16 – SHORT-TERM BANK BORROWINGS (CONTINUED)

 
(a)
Short-Term Bank Loans (continued)

   
April 30,
2010
    
April 30,
2009
  
Loans from China Minsheng Bank:
            
             
Monthly interest only payments at 5.103% per annum, due July 11, 2010, guaranteed by XASP.
   $ 5,295,649     $ -  
                 
Monthly interest only payments at 5.346% per annum, due October 6, 2010, pledged by inventory of the Company. Also see Note 8.
     2,925,773       -  
                 
Monthly interest only payments at 6.318% per annum, due July 4, 2009, pledged by inventory of the Company. Also see Note 8.
     -       72,419  
                 
Monthly interest only payments at 5.310% per annum, due April 14, 2010, pledged by inventory of the Company, also see Note 8 and guaranteed by a shareholder, Liu Xudong.
     -       2,926,030  
                 
Loans from Jinzhong Credit Union:
                
                 
Monthly interest only payments at 10.368% per annum, due December 27, 2010, guaranteed by Shanxi 525 Storage Transportation Co., Ltd.
     1,448,258       -  
                 
Monthly interest only payments at 7.560% per annum, due January 7, 2010, guaranteed by Shanxi 525 Storage an Transportation Co., Ltd.
     -       1,755,618  
                 
Loans from Shanghai Pudong Development Bank:
                
                 
Monthly interest only payments at 6.372% per annum, due June 2, 2010, guaranteed by Shanxi SME Credit Guarantee Co., Ltd.
     1,462,887       -  
                 
Monthly interest only payments at 6.372% per annum, due June 18, 2010, guaranteed by Shanxi Taishi Metallurgical Industrial Co., Ltd.
     1,462,887       -  
 
 
F-32
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009

NOTE 16 – SHORT-TERM BANK BORROWINGS (CONTINUED)

 
(a)
Short-Term Bank Loans (continued)

   
April 30,
2010
    
April 30,
2009
  
Loans from Shanghai Pudong Development Bank:
            
             
Monthly interest only payments at 6.372% per annum, due March 31, 2011, guaranteed by Shanxi Taishi Metallurgical Industrial Co., Ltd.
   $ 1,462,887     $ -  
                 
Monthly interest only payments at 7.470% per annum, due May 21, 2009, guaranteed by Shanxi SME Credit Guarantee Co., Ltd.
     -       2,926,030  
                 
Monthly interest only payments at 8.964% per annum, due June 30, 2009, guaranteed by Taiyuan Tianlong Machinery Manufacturing Co., Ltd. & Shanxi Jinzhong Industry & Trade Co., Ltd.
     -       1,463,015  
                 
Monthly interest only payments at 4.860% per annum, due May 10, 2010, accounts receivable of $1,389,727 of Taiyuan Reli Co., Ltd. was pledged as collateral.
     2,194,329       -  
                 
Monthly interest only payments at 4.860% per annum, due July 31, 2010, accounts receivable of $1,389,727 of Taiyuan Reli Co., Ltd. was pledged as collateral.
     2,194,329       -  
                 
Monthly interest only payments at 5.589% per annum, due September 21, 2010, accounts receivable of $6,570,475 of Datong Thermal Co., Ltd. was pledged as collateral.
     4,388,660       -  
                 
Monthly interest only payments at 5.589% per annum, due October 28, 2010, accounts receivable of $6,570,475 of Datong Thermal Co., Ltd. was pledged as collateral.
     1,462,887       -  
                 
Monthly interest only payments at 6.633% per annum, due May 17, 2009, accounts receivable of $1,563,484 of Taiyuan Reli Co., Ltd. was pledged as collateral.
     -       2,194,523  

 
F-33
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009

NOTE 16 – SHORT-TERM BANK BORROWINGS (CONTINUED)

 
(a)
Short-Term Bank Loans (continued)
 
 
   
April 30,
    
April 30,
   
2010
    
2009
Loans from Shanghai Pudong Development Bank:
          
           
Monthly interest only payments at 5.346% per annum, due September 10, 2009, accounts receivable of $1,563,484 of Taiyuan Reli Co., Ltd. was pledged as collateral.
  
-
    
2,194,523
           
Monthly interest only payments at 5.346% per annum, due October 2, 2009, accounts receivable of $77,737 of Xi’an Rongdi Pipe Group Co., Ltd. was pledged as collateral.
  
-
    
4,389,044
Total
$
76,084,730
 
$
52,887,260

Interest expense for short-term bank loans for the years ended April 30, 2010 and 2009 was $4,320,605 and $3,616,306, respectively. All of the short-term bank loans were repaid on their due date.

The Company is able to obtain short-term bank loans based on the volume of outstanding accounts receivable. The accounts receivable collateralizes the bank loans. The receivables are collected into a bank controlled account, and the money in that account pays the debt at maturity. The Company obtains the asset based loans from Everbright Bank and Shanghai Pudong Development Bank.

The Company’s credit risk consists principally of accounts receivable. The Company extends credit based on an evaluation of the customer’s financial condition, generally without requiring collateral or other security. In order to minimize the credit risk, the management of the Company has delegated a team responsible for determining credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover receivables. Furthermore, the Company reviews the recoverable amount of each individual trade receivable at each balance sheet date to ensure that adequate impairment losses are provided for unrecoverable amounts. In this regard, the directors of the Company consider that the Company’s credit risk is significantly reduced.

 
F-34
 

RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009

NOTE 16 – SHORT-TERM BANK BORROWINGS (CONTINUED)

 
(b)
Domestic Letters of Credit Financing

The Domestic Letters of Credit (DLC) refers to a settlement method with which the DLC-opening bank, at the request of the buyer, issues a written payment commitment to the seller and pays to the seller the sales price upon receipt of documents that comply with the domestic provisions of the DLC in domestic trade. As a buyer, the Company has a liability when the DLC-opening bank pays the seller.

The DLC financing consist of the followings:

   
April 30,
2010
    
April 30,
2009
  
Due May 6, 2010
   $ 889,229     $ -  
Due May 18, 2010
     427,678       -  
Due May 28, 2010
     3,251,927       -  
Due June 10, 2010
     405,296       -  
Due July 1, 2010
     3,936,477       -  
Due July 13, 2010
     3,072,037       -  
Due August 6, 2010
     2,361,904       -  
Due August 11, 2010
     1,807,323       -  
Due October 26, 2010
     1,898,827       -  
Due June 4, 2010
     5,851,546       -  
Due July 16, 2010
     4,169,227       -  
Due May 7, 2009
             1,258,192  
Due June 17, 2009
             1,755,625  
Due June 25, 2009
             1,755,699  
Due July 7, 2009
             3,950,147  
Due July 15, 2009
             3,052,581  
    $ 28,071,471     $ 11,772,244  

Interest expense was $620,381 and $552,205 for the years ended April 30, 2010 and 2009, respectively.

The DLC financing are secured by $13,504,251 and $5,948,997 of restricted cash at April 30, 2010 and 2009, respectively. Also see Note 7.

The above listed domestic letters of credit were all settled on their due date.

NOTE 17 – NOTES PAYABLE

Notes payable consist of the following:
 
     
April 30,
2010
    
April 30,
2009
  
Notes payable to unrelated parties
(a)
   $ 1,459,961     $ 2,969,920  
Bank acceptance notes
(b)
     41,620,586       53,701,905  
Total
     $ 43,080,547     $ 56,671,825  


 
F-35
 

RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009

NOTE 17 – NOTES PAYABLE (CONTINUED)

 
(a)
Notes Payable to Unrelated Parties

The Notes payable to unrelated parties consist of the followings:

   
April 30,
2010
    
April 30,
2009
  
             
Due June 4, 2010, interest at 19.2% per annum
   $ 304,280     $ -  
Due August 13, 2010, interest at 24% per annum
     1,024,021       -  
Due August 13, 2010, interest free, unsecured
     131,660       -  
Due May 12, 2009, interest free, unsecured
     -       585,206  
Due June 3, 2009, interest at 19.2% per annum
     -       204,822  
Due August 13, 2010, interest at 24% per annum
     -       877,809  
Due August 13, 2010, interest free, unsecured
     -       131,672  
Due August 13, 2010, interest free, unsecured
     -       1,170,411  
Subtotal
   $ 1,459,961     $ 2,969,920  

Interest expense for notes payable to unrelated parties for the years ended April 30, 2010 and 2009 was $325,247 and $48,118, respectively.

The above listed notes payable to unrelated third parties were all settled on their due date.

 
(b)
Bank Acceptance Notes

The bank acceptance notes consist of the followings:

   
April 30,
2010
    
April 30,
2009
  
Bank acceptance notes (aggregated by month of maturity):
            
Due May, 2010
     5,266,392       -  
Due June, 2010
     15,453,934       -  
Due July, 2010
     7,899,587       -  
Due August, 2010
     4,886,041       -  
Due September, 2010
     5,627,725       -  
Due October, 2010
     2,486,907       -  
Due May, 2009
     -       4,096,442  
Due June, 2009
     -       11,704,120  
Due July, 2009
     -       14,911,447  
Due August, 2009
     -       9,509,597  
Due September, 2009
     -       8,648,546  
Due October, 2009
     -       4,831,753  
Total
   $ 41,620,586     $ 53,701,905  
 
All the bank acceptance notes are subject to bank charges of 0.005% of the principal as commission on each transaction. Bank charges for notes payable were $39,737 and $50,284 for the years ended April 30, 2010 and 2009, respectively.


 
F-36
 

RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009
 
NOTE 17 – NOTES PAYABLE (CONTINUED)

 
(b)
Bank Acceptance Notes (continued)

The bank acceptance notes are secured by $33,754,710 and $50,775,875 of restricted cash at April 30, 2010 and 2009, respectively. Also see Note 7.

The above listed bank acceptance notes payable were all settled on their due date.

NOTE 18 – PRODUCT AND OTHER FINANCING ARRANGEMENTS

Liabilities from product and other financing arrangements consist of the following:

     
April 30,
2010
    
April 30,
2009
  
                   
Due May 8, 2010, interest at 1% per 75 days
(a)
   $ 3,510,926     $    
                   
Due May 16, 2010, interest at 1% per 75 days
(a)
     5,266,392          
                   
Due June 17, 2010, interest at 1% per 75 days
(a)
     3,510,928          
                   
Due July 14, 2010, interest at 1% per 75 days
(a)
     3,510,928          
                   
Due July 5, 2010, interest at 1% per 75 days
(a)
     3,510,928          
                   
Due July 11, 2010, interest at 1% per 75 days
(a)
     3,510,928          
                   
Due March 31, 2011, interest at 1.5% per 90 days
(b)
     21,050,938       22,223,198  
                   
Due June 16, 2009, interest at 1% per 75 days
(a)
     -       5,266,854  
                   
Due June 28, 2009, interest at 1% per 75 days
(a)
             3,277,154  
                   
Due June 30, 2009, interest at 1% per 75 days
(a)
             5,266,854  
                   
Due July 5, 2009, interest at 1% per 75 days
(a)
             3,013,547  
                   
Total
       43,871,968       39,047,607  

 
F-37
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009

NOTE 18 – PRODUCT AND OTHER FINANCING ARRANGEMENTS (CONTINUED)

(a) 
The liabilities are due to an unrelated party. The balances represent funds received to support the Company’s business operations. The inventory described in the product financing arrangements was not shipped to party (a) and the title did not pass to party (a). However, party (a) has the right to request the shipment if the Company does not perform its repurchase obligation. The notes were all settled on their due date.

(b) 
The liabilities are due to an unrelated party. The balances represent funds received to support the Company’s business operations. The inventory described in the product financing arrangements was not shipped to party (b) and the title did not pass to party (b). However, party (b) has the right to request the shipment if the Company does not perform its repurchase obligation. Such transaction was also secured by a land use right, also see Note 12, and the additional paid in capital of SXGL, also see Note 21.

 
Interest expense for liabilities from product financing arrangements for the years ended April 30, 2010 and 2009 was $1,120,594 and $1,652,615, respectively.

All of the arrangements that were due before July 30, 2011 were settled on their due date.

 
F-38
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009
 
NOTE 19 – TAXES

(a)       Corporation Income Tax (“CIT”)

On March 16, 2007, the National People’s Congress of China approved the Corporate Income Tax Law of the People’s Republic of China (the “new CIT law”), which went into effective on January 1, 2008. In accordance with the relevant tax laws and regulations of PRC, the applicable corporate income tax rate for the Company is 25%.

Effective January 1, 2007, the Company adopted FASB Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes. The interpretation addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements.
 
 
Under FIN 48, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. FIN 48 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. As of April 30, 2010 and 2009, the Company does not have a liability for unrecognized tax benefits.

The Company’s income tax expense for the years ended April 30, 2010 and 2009 are summarized as follows:

   
April 30,
2010
    
April 30,
2009
  
Current:
            
Provision for CIT
   $ 705,717     $ 978,224  
                 
Deferred:
                
Provision for CIT
     2,162,543       1,048,682  
                 
Income tax expense
   $ 2,868,260     $ 2,026,906  

The Company’s income tax expense differs from the “expected” tax expense for the years ended April 30, 2010 and 2009 (computed by applying the CIT rate of 25% percent to income before income taxes) as follows:

   
April 30,
2010
    
April 30,
2009
  
             
Computed “expected” expense
   $ 2,361,157     $ 1,749,897  
Permanent differences
     507,103       277,009  
                 
Income tax expense
   $ 2,868,260     $ 2,026,906  
 
 
F-39
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009
 
NOTE 19 – TAXES (CONTINUED)

The tax effects of temporary differences that give rise to the Company's net deferred tax assets and liabilities as of April 30, 2010 and 2009 are as follows:

   
April 30,
2010
    
April 30,
2009
  
Deferred tax assets (liabilities):
            
Current portion:
            
Loss carry forward
   $ 127,712     $ 187,516  
Sales
     1,458,724       1,336,023  
Expenses cut-off
     1,622,373       1,609,138  
(Over) under accrued cost of sales
     (1,163,385 )     1,313,620  
Other
     (111,697 )     (2,644 )
Subtotal
     1,933,727       4,443,653  
                 
Non-current portion:
                
Depreciation
     1,723,847       1,026,374  
Interest income from long-term notes receivable
     (664,680 )     (314,590 )
                 
Subtotal
     1,059,167       711,784  
                 
Net deferred tax assets
   $ 2,992,894     $ 5,155,437  

(b)      Value Added Tax (“VAT”)

Enterprises or individuals, who sell commodities, engage in repair and maintenance or import or export goods in the PRC are subject to a value added tax in accordance with Chinese Laws. The value added tax standard rate is 17% of the gross sale price and the Company records its revenue net of VAT. A credit is available whereby VAT paid on the purchases of semi-finished products or raw materials used in the production of the Company’s finished products can be used to offset the VAT due on the sales of the finished products.

On January 1, 2002, the export policy of VAT “Exemption, Credit and Refund” began to apply to all exports by manufacture-based enterprises. In accordance with this policy, exported goods are exempted from output VAT and the input VAT charged for purchases of the raw materials, components and power consumed for the production of the exported goods may be refunded. The refund rate of steel pipe related products applicable to the Company is 13%.

The VAT payable of $933,256 and $463,884 at April 30, 2010 and 2009, respectively, is included in other payables in the accompanying consolidated balance sheets.

 
F-40
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009

NOTE 20 – REGISTERED CAPITAL
 
The registered capital of the Company prior to the share exchange was as follows:
 
Registered Capital:
  
April 30, 2010
    
April 30, 2009
  
                         
Liu Xudong
   $ 45,000       90 %   $ 45,000       90 %
Li Ning
     5,000       10 %     5,000       10 %
Total
   $ 50,000       100 %   $ 50,000       100 %
 
The Company was incorporated under the laws of the British Virgin Islands. The registered capital of the Company was $50,000, held by Mr. Liu Xudong and Mr. Li Ning in the proportion of 90% and 10%, respectively.

NOTE 21 – ADDITIONAL PAID-IN CAPITAL

In 2009, Mr. Liu Xiudong, a shareholder and the chairman of the Company, contributed $38,562,951 to the Company to support the Company’s business development. This resulted in additional paid-in capital of $38,562,951 which has been reflected in the consolidated balance sheet as of April 31, 2010 and 2009.

As of April 30, 2010, additional paid in capital of $ 9,671,828 secured notes payable for product financing arrangements.

NOTE 22 – ACQUISITION

On April 30, 2009, the Company acquired from Sound Way Enterprises Ltd. (“SWEL”) shareholder all of the issued and outstanding shares of capital stock of SWEL. SWEL only acts as holding company with no substantial operations, and the business of SWEL is through its VIE, Shanxi Zhonglian Gas Development Co., Ltd. (“SXZL”). The principal activity of SXZL is the design, development, manufacturing, and commercialization of gas equipment in the PRC market. The purpose of the acquisition is to grow the Company’s operations and enlarge the distributor channel by acquiring other business entities and sharing customer bases.

The acquisition cost was $43,800,000 in cash.

The Company accounted for the business combination under the acquisition method. The assets acquired and liabilities assumed were measured at their fair value at the acquisition date. The fair value of the non-financial asset mainly includes the plant and equipment, was determined using the replacement cost method resulting in increases to Level 3 valuation amounts.

In connection with the acquisition, goodwill of $7,389,579 was recorded at the time of the acquisition and is calculated as the difference between the total consideration paid for and the fair value of the net tangible and intangible assets acquired. The recognized goodwill is mainly comprised of synergies from combining operations.

 
F-41
 

RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009
 
NOTE 22 – ACQUISITION (CONTINUED)

The Company had an insignificant amount of acquisition related cost during the years ended April 31, 2010 and 2009. The costs were expensed as incurred in the consolidated statement of income.

The following represents the major class of assets acquired and liabilities assumed at the acquisition date based on their respective fair values:

 
  
 
  
           Plant and equipment
   $ 33,798,545  
           Deferred tax assets
     613,102  
           Cash and cash equivalents
     103,411  
Accounts receivable
     205,824  
           Notes receivable
     38,038  
           Other assets
     1,819,540  
     Total assets purchased
   $ 36,578,460  
         
           Accounts payable
     (154,073 )
           Other liabilities
     (13,984 )
     Total liabilities assumed
   $ (168,057 )
         
Total net assets
   $ 36,410,403  
         
Share percentage
     100 %
         
Net assets acquired
   $ 36,410,403  
         
Total consideration paid
   $ 43,800,000  
         
Goodwill
   $ 7,389,597  
 
NOTE 23 – GEOGRAPHIC SALES

The following table discloses the Company’s revenue from customers by geographical area based on the location of the customer for the years April 30, 2010 and 2009:
 
 
  
April 30, 2010
    
April 30, 2009
  
Area  
Amounts
    
Percentage
    
Amounts
    
Percentage
  
China
   $ 125,608,457       85.6 %   $ 116,607,222       76.4 %
Africa
     16,414,308       11.2 %     -       -  
South America
     4,328,557       2.8 %     5,499,483       4 %
North America
     380,533       0.3 %     6,884,626       4.6 %
Asia (excluding China)
     103,428       0.1 %     19,840,547       13 %
Europe
     -       -       3,679,350       2 %
Total
   $ 146,835,283       100 %   $ 152,511,228       100 %
 
The Company’s credit risk consists principally of accounts receivable. The Company extends credit based on an evaluation of the customer’s financial condition, generally without requiring collateral or other security. In order to minimize the credit risk, the management of the Company bought business credit insurance for all the export sales to insure payment of credit extended by the export sales.

 
F-42
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009
 
NOTE 24 – CONTINGENCIES

 
(1)
As of April 30, 2010, the Company entered into two guarantee contracts to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi Rong Xiang Trading Co., Ltd. (“SXRX”). If SXRX defaults on the repayment of its bank loans when they fall due, the Company is required to repay the outstanding balance. As of April 30, 2010, the guarantee provided for the bank loans borrowed by SXRX was $4,388,660, which consists of the following:

   
April 30, 2010
  
Due November 14, 2010
   $ 2,194,330  
Due October 27, 2010
     2,194,330  
Total
   $ 4,388,660  

 
(2)
As of April 30, 2010, the Company entered into a guarantee contract to serve as guarantor for bank loans borrowed by an unrelated party, Taiyuan North Metallurgy Co., Ltd with a guarantee amount of $2,925,773, due May 26, 2010.

 
(3)
As of April 30, 2010, the Company entered into four guarantee contracts to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi Tongyuan Industrial Group Co., Ltd. (“SXTY”). SXTY also provided a cross guarantee for bank loans of $5,851,546 borrowed by the Company. Also see Note 16(a). As of April 30, 2010, the guarantee provided for the bank loans borrowed by SXTY was $7,753,299, which consists of the following:

   
April 30, 2010
  
Due January 14, 2011
   $ 2,633,196  
Due August 5, 2010
     3,657,216  
Due April 24, 2011
     1,462,887  
Total
   $ 7,753,299  

 
(4)
As of April 30, 2010, the Company entered into one guarantee contract to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi Wanbang Industry and Trade Co., Ltd. (“SXWB”) with a guarantee amount of $4,388,660, due June 4, 2010. SXWB also provided a cross guarantee for the short-term loan of $2,925,773 borrowed by the Company. See Note 16(a).

 
(5)
As of April 30, 2010, the Company entered into two guarantee contracts to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi Taishi Metallurgy Industry Group Co., Ltd. (“SXTS”). SXTS also provided a cross guarantee for bank loans of $2,925,773 borrowed by the Company. Also see Note 16(a). As of April 30, 2010, the guarantee provided for the bank loans borrowed by SXTS was $7,314,433, which consists of the following:

   
April 30, 2010
  
Due May 18, 2011
   $ 4,388,660  
Due February 24, 2011
     2,925,773  
Total
   $ 7,314,433  

 
F-43
 

RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009

NOTE 24 – CONTINGENCIES (CONTINUED)

 
(6)
As of April 30, 2010, the Company entered into two guarantee contracts to serve as guarantor for bank loans borrowed by an unrelated party, Taiyuan North Metallurgy Co., Ltd (“TYNM”). As of April 30, 2010, the guarantee provided for bank loans borrowed by TYNM was $2,121,186, which consists of the following:

   
April 30, 2010
  
Due April 29, 2011
   $ 1,097,165  
Due November 4, 2010
     1,024,021  
Total
   $ 2,121,186  

 
(7)
As of April 30, 2010, the Company entered into two guarantee contracts to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi Guanghua Pipe produce Co., Ltd. (“SXGH”). SXGH also provided a cross guarantee for bank loan of $4,388,660 borrowed by the Company. See Note 16(a). As of April 30, 2010, the guarantee provided for the bank loans borrowed by SXGH was $29,257,732, which consists of the following:

   
April 30, 2010
  
Due October 10, 2010
   $ 7,314,433  
Due April 13, 2010
     7,314,433  
Due October 10, 2016
     14,628,866  
Total
   $ 29,257,732  

 
(8)
As of April 30, 2010, the Company entered into two guarantee contracts to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi XinDayu Material Co., Ltd. (“SXXD”). SXXD also provided a cross guarantee for bank loans of $4,388,660 borrowed by the Company. Also see Note 16(a). As of April 30, 2010, the guarantee provided for the bank loans borrowed by SXXD was $3,218,351, which consists of the following:

   
April 30, 2010
  
Due December 16, 2010
   $ 1,462,887  
Due March 25, 2011
     1,755,464  
Total
   $ 3,218,351  

 
(9)
As of April 30, 2010, the Company entered into a guarantee contract to serve as guarantor for bank loans borrowed by an unrelated party, Shanxi Changxin Steel Co., Ltd. from the Huaxia Bank with a guarantee amount of $1,755,464, due September 13, 2010.

 
(10)
As of April 30, 2010, the Company entered into a guarantee contract to serve as guarantor for the bank loans borrowed by the Shanxi Xinhuayuan Trading Co., Ltd. from the Jinshang  Bank with a guarantee amount of $1,755,464, due June 25, 2010

All the guarantee liabilities due before July 30, 2011 were subsequently released since the debtors repaid the loans. Also see Note 25.
 
 

 
F-44
 
 
 
RISE KING MANAGEMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED APRIL 30, 2010 And 2009

NOTE 24 – CONTINGENCIES (CONTINUED)

A default by the warrantees is considered remote by the management. Based on the information available to management, no liability for the guarantor's obligation under the guarantee was recognized as of April 30, 2010.

NOTE 25 – SUBSEQUENT EVENTS

On June 29, 2011, the Company entered into a guarantee contract to serve as guarantor for bank loans borrowed by the Shanxi Taishi Metallurgy Industry Group Co., Ltd. from the Citic Bank with a guarantee amount of $7,595,437, due June 28, 2012.
  
In January, 2011, the 40% shares of the subsidiary SXGL pledged to Shengli Steel Pipe Co. were released. As of July 30, 2011, the remaining 60% shares of the subsidiary SXGL were still pledged to Sinosteel Co., Ltd.

On July 30, 2011, Sino Oil & Gas Pipe Holdings Limited (“SOGP”) executed a Share Exchange Agreement (the “Share Exchange Agreement”) by and between SOGP, the shareholder of SOGP, RISE KING, and the shareholders of RISE KING.

Under the Share Exchange Agreement, at the Closing on July 30, 2011, the Company issued 7,000,000 shares of its common stock, representing 58.33% of the Company’s issued and outstanding common stock, to the RISE KING shareholders in exchange for 100% of the common stock of RISE KING. The shareholder of SOGP agreed to transfer all of 5,000,000 shares of its common stock, representing 41.67% of the Company’s issued and outstanding common stock to RISE KING shareholders on the Closing Date in exchange for an aggregate of $200,000 in cash.

After the closing of the transaction, SOGP had a total of 12,000,000 shares of common stock issued and outstanding, with the RISE KING Shareholder owning 100% of the total issued and outstanding shares of SOGP’s common stock, and the balance held by those who held shares of SOGP’s common stock prior to the closing of the exchange. This share exchange transaction resulted in the RISE KING Shareholder obtaining wholly voting interest in SOGP. Generally accepted accounting principles require that the company whose shareholders retain the majority interest in a combined business be treated as the acquirer for accounting purposes, resulting in a reverse acquisition. Accordingly, the share exchange transaction has been accounted for as a recapitalization of SOGP.

 
F-45
 
 
SINO OIL & GAS PIPE HOLDINGS LIMITED

(FORMERLY RICH MOUNTAIN ENTERPRISES LIMITED)

 AND SUBSIDIARIES

UNAUDITED CONDENSED COMBINED PRO FORMA

FINANCIAL STATEMENTS

CONTENTS

PAGE
1 
Basis of Presentation

PAGE
2 
Unaudited Condensed Combined Pro Forma Balance Sheet as of January 31, 2011

PAGE
3 
Unaudited Condensed Combined Pro Forma Statement of Income and Comprehensive Income for the Nine Months Ended January 31, 2011

PAGE
4 
Unaudited Condensed Combined Pro Forma Statement of Income and Comprehensive Income for the Year Ended April 30, 2010

PAGE
5
Notes to Unaudited Condensed Combined Pro Forma Financial Statements
 
 
 
 

SINO OIL & GAS PIPE HOLDINGS LIMITED
(FORMERLY RICH MOUNTAIN ENTERPRISES LIMITED)
UNAUDITED CONDENSED
COMBINED PRO FORMA FINANCIAL INFORMATION
 
Basis of Presentation

RICH MOUNTAIN ENTERPRISES LIMNITED, or RICH MOUNTAIN, is a corporation incorporated under the laws of British Virgin Islands (the "BVI"). On July 20, 2011, RICH MOUNGAIN changed its name to Sino Oil & Gas Pipe Holdings Limited.

On July 30, 2011, Sino Oil & Gas Pipe Holdings Limited (the “Company” or “SOGP”) executed a Share Exchange Agreement (the “Share Exchange Agreement”) by and between Sino Oil & Gas Pipe Holdings Limited, the shareholder of SOGP, RISE KING MANAGEMENT LIMITED, a BVI corporation, or RISE KING, and the shareholders of RISE KING.

Under the Share Exchange Agreement, at the Closing on July 30, 2011, the Company issued 7,000,000 shares of its common stock, representing 58.33% of the Company’s issued and outstanding common stock, to the RISE KING shareholders in exchange for 100% of the common stock of RISE KING. The shareholder of SOGP agreed to transfer all of 5,000,000 shares of its common stock, representing 41.67% of the Company’s issued and outstanding common stock to RISE KING shareholders on the Closing Date in exchange for an aggregate of $200,000 in cash.
 
After the closing of the transaction, SOGP had a total of 12,000,000 shares of common stock issued and outstanding, with the RISE KING Shareholder owning 100% of the total issued and outstanding shares of SOGP’s common stock, and the balance held by those who held shares of SOGP’s common stock prior to the closing of the exchange. This share exchange transaction resulted in the RISE KING Shareholder obtaining wholly voting interest in SOGP. Generally accepted accounting principles require that the company whose shareholders retain the majority interest in a combined business be treated as the acquirer for accounting purposes, resulting in a reverse acquisition. Accordingly, the share exchange transaction has been accounted for as a recapitalization of SOGP.

The unaudited condensed combined pro forma statements of income combine the historical condensed consolidated statements of income of SOGP and RISE KING, the wholly owned operating group of entities of RISE KING, giving effect to the share exchange and other related events as if it had occurred on May 1, 2009 and May 1, 2010. The unaudited condensed combined pro forma balance sheet combines the historical condensed consolidated balance sheets of SOGP and RISE KING, giving effect to the share exchange and other related events as if it had been consummated on January 31, 2011. These unaudited condensed combined pro forma financial statements have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which actually would have resulted had the transaction occurred on the date indicated and are not necessarily indicative of the results that may be expected in the future.
 
 
1
 
 
SINO OIL & GAS PIPE HOLDINGS LIMITED
(FORMERLY RICH MOUNTAIN ENTERPRISES LIMITED)
UNAUDITED CONDENSED COMBINED PRO FORMA
BALANCE SHEET AS OF JANUARY 31, 2011
 
   
RKLM
HISTORICAL
    
SOGP
HISTORICAL
    
PRO FORMA
ADJUSTMENTS
    
PRO FORMA
COMBINED
  
CURRENT ASSETS
                        
Cash and cash equivalents
   $ 2,801,465     $ -     $ -     $ 2,801,465  
Restricted cash
     50,114,660       -               50,114,660  
Accounts receivable, net
     42,087,560       -       -       42,087,560  
Marketable securities
     198,307       -               198,307  
Notes receivable
     15,916,907       -       -       15,916,907  
Inventories
     46,158,891       -       -       46,158,891  
Prepayments for goods
     23,157,116       -       -       23,157,116  
Prepaid expenses and other receivables
     3,007,557       -       -       3,007,557  
Due from related parties
     16,545,980       -       -       16,545,980  
Due from employees
     648,366       -       -       648,366  
Interest receivable from related parties, current portion
     1,610,503       -               1,610,503  
Deferred taxes
     -       -       -       -  
 Total current assets
     202,247,312       -       -       202,247,312  
                                 
Plant and equipment, net
     55,450,860       -       -       55,450,860  
Land use rights, net
     2,884,350       -       -       2,884,350  
Long-term investment
     3,797,718       -       -       3,797,718  
Deposit for land use rights
     1,116,529       -       -       1,116,529  
Notes receivable from related parties
     29,801,014               -       29,801,014  
Interest receivable from related parties
     2,600,242       -       -       2,600,242  
Goodwill
     7,389,597       -       -       7,389,597  
Deferred taxes
     1,350,280       -       -       1,350,280  
 Total long-term assets
     104,390,590       -       -       104,390,590  
                                 
TOTAL ASSETS
   $ 306,637,902     $ -     $ -     $ 306,637,902  
                                 
CURRENT LIABILITIES
                                
Short-term bank borrowings
   $ 112,798,503     $ -     $ -     $ 112,798,503  
Accounts payable
     17,166,365       -       -       17,166,365  
Customer deposits
     20,478,373       -       -       20,478,373  
Due to related parties
     3,310,289                       3,310,289  
Notes payable
     55,436,601       -       -       55,436,601  
Product and other financing arrangements
     36,321,376       -       -       36,321,376  
Deferred tax liabilities
     579,732       -       -       579,732  
Income tax payable
     1,268,454       -       -       1,268,454  
Other payables and accrued expenses
     4,629,565       -       -       4,633,565  
Total current liabilities
     251,989,258       -       -       251,989,258  
                                 
TOTAL LIABILITIES
     251,989,258       -       -       251,989,258  
                                 
SHAREHOLDERS’ EQUITY
                                
Common stock, $0.01 par value; 100,000,000 shares authorized, 12,000,000 issued and outstanding;
     50,000       120,000       (50,000 )     120,000  
Additional paid-in capital
     52,584,504       (70,000 )     50,000       52,564,504  
Retained (deficit)
     (303,993 )     (50,000 )     -       (353,993 )
Accumulated other comprehensive income
     2,203,445       -       -       2,203,445  
                                 
Total Shareholders’ Equity
     54,533,956       -       -       54,533,956  
                                 
Non-controlling interest
     114,688       -       -       114,688  
                                 
TOTAL EQUITY
     54,648,644       -       -       54,648,644  
                                 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
   $ 306,637,902     $ -     $ -     $ 306,637,902  
 
 
2
 
 
SINO OIL & GAS PIPE HOLDINGS LIMITED
(FORMERLY RICH MOUNTAIN ENTERPRISES LIMITED)
 UNAUDITED CONDENSED COMBINED PRO FORMA
 STATEMENT OF INCOME AND COMPREHENSIVE INCOME
FOR NINE THREE MONTHS ENDED JANUARY 31, 2011
 
   
RKLM
HISTORICAL
    
SOGP
 HISTORICAL
    
PRO FORMA
ADJUSTMENTS
    
PRO FORMA
COMBINED
  
                         
REVENUES, NET
   $ 146,455,472     $ -     $ -     $ 146,455,472  
                                 
COST OF GOODS SOLD
     (125,462,453 )     -       -       (125,462,453 )
                                 
GROSS PROFIT
     20,993,019       -       -       20,993,019  
                                 
Selling and marketing
     (3,447,506 )     -       -       (3,447,506 )
                                 
General and administrative
     (2,762,907 )     -       -       (2,762,907 )
                                 
INCOME FROM OPERATIONS
     14,782,606       -       -       14,782,606  
                                 
Interest expense
     (9,844,493 )     -       -       (9,844,493 )
                                 
Interest Income
     1,874,907       -               1,874,907  
                                 
Other income, net
     1,503,919       -               1,503,919  
                                 
INCOME BEFORE TAXES
     8,316,939       -       -       8,316,939  
                                 
Income Taxes
     (2,342,280 )     -       -       (2,342,280 )
                                 
NET INCOME
   $ 5,974,659     $ -     $ -       5,974,659  
                                 
NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST
     (2,147 )     -               (2,147 )
                                 
NET INCOME ATTRIBUTABLE TO CONTROLLING INTEREST
     5,972,512       -               5,972,512  
                                 
OTHER COMPREHENSIVE INCOME
                     -          
Unrealized gain on marketable securities
     2,166       -               2,166  
Foreign currency translation gain
     1,353,184       -       -       1,353,184  
OTHER COMPREHENSIVE INCOME
     1,355,350       -       -       1,355,350  
                                 
COMPREHENSIVE INCOME
   $ 7,327,862       -       -     $ 7,327,862  
                                 
WEIGHTED AVERAGE SHARES OUTSTANDING, BASIC AND DILUTED
     50,000       12,000,000       -       12,000,000  
                                 
Net income per common share, basic and diluted
   $ 119.45       -       -     $ 0.50  
 
 
3
 
 
SINO OIL & GAS PIPE HOLDINGS LIMITED
(FORMERLY RICH MOUNTAIN ENTERPRISES LIMITED)
UNAUDITED CONDENSED COMBINED PRO FORMA
 STATEMENT OF INCOME AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED APRIL 30, 2010
 
   
RKLM
HISTORICAL
    
SOGP
 HISTORICAL
    
PRO FORMA
ADJUSTMENTS
    
PRO FORMA
COMBINED
  
                         
REVENUES, NET
   $ 146,835,283     $ -     $ -     $ 146,835,283  
                                 
COST OF GOODS SOLD
     (123,110,120 )     -       -       (123,110,120 )
                                 
GROSS PROFIT
     23,725,163       -       -       23,725,163  
                                 
Selling and marketing
     (3,952,504 )     -       -       (3,952,504 )
                                 
General and administrative
     (3,003,542 )     (50,000 )             (3,053,642 )
                                 
Research and development
     (33,111 )     -       -       (33,111 )
                                 
INCOME (LOSS) FROM OPERATIONS
     16,736,006       (50,000 )     -       16,686,006  
                                 
Interest expense
     (9,765,845 )     -       -       (9,765,845 )
                                 
Interest Income
     2,438,152       -               2,438,152  
                                 
Other income, net
     36,313       -               36,313  
                                 
INCOME (LOSS) BEFORE TAXES
     9,444,626       (50,000 )     -       9,394,626  
                                 
Income Taxes
     (2,868,260 )     -       -       (2,868,260 )
                                 
NET INCOME (LOSS)
   $ 6,576,366     $ (50,000 )   $ -       6,526,366  
                                 
NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST
     (10,824 )     -       -       (10,824 )
                                 
NET INCOME (LOSS) ATTRIBUTABLE TO CONTROLLING INTEREST
     6,565,542       (50,000 )             6,515,542  
                                 
OTHER COMPREHENSIVE INCOME
                                
Unrealized gain on marketable securities
     13,948       -       -       13,948  
Foreign currency translation (loss)
     (590 )     -       -       (590 )
OTHER COMPREHENSIVE INCOME
     13,358       -       -       13,358  
                                 
COMPREHENSIVE INCOME (LOSS)
   $ 6,578,900       (50,000 )     -     $ 6,528,900  
                                 
WEIGHTED AVERAGE SHARES OUTSTANDING, BASIC AND DILUTED
     50,000       12,000,000       -       12,000,000  
                                 
Net income (loss) per common share, basic and diluted
   $ 131.52       (0.004 )     -     $ 0.54  
 
 
4
 
 
SINO OIL & GAS PIPE HOLDINGS LIMITED
(FORMERLY RICH MOUNTAIN ENTERPRISES LIMITED)
NOTES TO UNAUDITED COMBINED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS

Notes:

The following adjustments to the unaudited condensed combined pro forma financial statements are based on the assumption that the share exchange was consummated on May 1, 2010 and May 1, 2009.
 
 
1
Adjustment to eliminate the common stock of RISE KING as if the share exchange occurred on May 1, 2010 and May 1, 2009.
 
 
5
 
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TERRITORY OF THEBRITISH VIRGIN ISLANDS
 
THE BVI BUSINESS COMPANIES ACT, 2004
 
(No. 16 of 2004)
 
AMENDED AND RESTATED
MEMORANDUM OF ASSOCIATION
OF
 
Sino Oil & Gas Pipe Holdings Limited
(formerly RICH MOUNTAIN ENTERPRISES LIMITED)
 
NAME
 
1.
The name of the Company is Sino Oil & Gas Pipe Holdings Limited
 
 
TYPE OF COMPANY
 
2.
The Company is a company limited by shares.
 
 
REGISTERED OFFICE
 
3.
The first Registered Office of the Company is the offices of Mossack Fonseca & Co. (B.V..) Ltd., P.O. Box 3136, Road Town, Tortola, British Virgin Islands, the office of the first registered agent.
 
 
REGISTERED AGENT
 
4.
The first Registered Agent of the Company is Mossack Fonseca & Co. (B.V.I.) Ltd.
 
 
ISSUED SHARES
 
5.
The maximum number of shares that the Company is authorized to issue is 100,000,000.
 
 
CLASSES, NUMBER AND PAR VALUE OF SHARES
 
6.
The shares issued by the Company shall be made up of one class and one series of shares, namely ordinary shares with a par value of US$0.01 each
 
 
FRACTIONAL SHARES
 
7.
The Company may issue fractions of a share and a fractional share shall have the same corresponding fractional liabilities, limitations, preferences, privileges, qualifications, restrictions, rights and other attributes of a whole share of the same class or series of shares.
 
RIGHTS, PRIVILEGES, RESTRICTIONS AND CONDITIONS ATTACHING TO SHARES
 
8.
(1)
All shares shall have;
 
 
(a)
the right to one vote at a meeting of the members of the Company or on any resolution of members;
 
 
(b)
the right to an equal share in any distribution by way of dividend paid by the Company; and
 
 
 
 
 
 
(c)
the right to an equal share in the distribution of the surplus assets of the Company on its liquidation.
 
 
(2)
The directors may at their discretion by resolution of directors redeem, purchase or otherwise acquire, for fair value, all or any of the shares in the Company subject to the Articles
 
VARIATION OF CLASS RIGHTS
 
9.
If at any time the issued shares are divided into different classes or series of shares, the rights attached to any class or series (unless otherwise provided by the terms of issue of the shares of that class or series) may, whether or not the Company is being wound up, be varied with the consent in writing of the holders of not less than three-fourths of the issued shares of that class or series and of the holders of not less than three-fourths of the issued shares of any other class or series of shares which may be affected by such variation.
 
 
RIGHTS NOT VARIED BY THE ISSUE OF SHARES PARI PASSU
 
10.
The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.
 
CAPACITY AND POWERS
 
11.
Subject to the Act, any other British Virgin Islands legislation and paragraph 12 below the Company has, irrespective of corporate benefit:
 
 
(a)
full capacity to carry on or undertake any business or activity, do any act or enter into any transaction;
 
 
(b)
for the purposes of paragraph (a), full rights, powers and privileges; and
 
 
(c)
full powers to issue shares with pre-emptive rights, subject to the Articles.
 
LIMITATIONS ON THE COMPANY’S BUSINESS
 
12.
For the purposes of section 9(4)  of the Act the Company may not;
 
 
(a)
carry on banking or trust business, unless it is licensed to do so under the Banks and Trust Companies Act, 1990;
 
 
(b)
carry on business as an insurance or reinsurance company, insurance agent or insurance broker, unless it is licensed under the Insurance Act 1994;
 
 
(c)
carry on business of company management, unless it is licensed under the Company Management Act, 1990;
 
 
(d)
carry on the business of providing the registered office or the registered agent for companies incorporated in the British Virgin Islands;
 
 
(e)
carry on the business as a mutual fund, manager of mutual funds or administrator of mutual funds unless it is recognized or licenced as the case may be under the Mutual Funds Act 1996; or
 
 
 
 
 
 
(f)
carry on any other business that gives rise to a licencing requirement under any law for the time being in force in the British Virgin Islands unless it is licenced, regulated, recognised or otherwise approved pursuant to such law.
 
 
REGISTERED SHARES AND PROHIBITION ON ISSUE OF BEARER SHARES
 
13.
Shares in the Company may only be issued as registered shares. The issue of shares to bearer is prohibited.
 
 
PROHIBITION ON EXCHANGE AND CONVERSION OF REGISTERED SHARES TO BEARER SHARES
 
14.
The exchange or conversion of registered shares to bearer shares is prohibited.
 
 
TRANSFER OF REGISTERED SHARES
 
15.
Shares in the Company may be transferred, subject to any limitations contained in the Articles.
 
15A.
In the case of uncertificated shares, and subject to the Act, a shareholder shall be entitled to transfer his shares and other securities by means of a relevant system and the operator of the relevant system shall act as agent of the shareholders for the purposes of the transfer of shares or other securities.
 
15B.
Any provision in the Memorandum or Articles in relation to the shares shall not apply to any uncertified shares to the extent that they are inconsistent with the holding of any shares in uncertificated form, the transfer of title to any shares by means of a relevant system and any provision of the Regulations.
 
 
AMENDMENT OF MEMORANDUM AND ARTICLES OF ASSOCIATION
 
16.1
No article shall be rescinded, altered or amended and no new Article shall be made until the same has been approved by a special resolution of the Members.  A special resolution shall be required to alter the provisions of the Memorandum of Association or to change the name of the Company.
 
 
DEFINITIONS
 
17.
The meanings of words in this Memorandum are as defined in the Articles.
 
 
We, Mossack Fonseca & Co (B.V.I.) LTD of P. O Box 3136, Road Town, Tortola, British Virgin Islands for the purpose of incorporating a BVI Business Company under the laws of the British Virgin Islands hereby sign this restated Memorandum of Association the [           ] day of  [             ], 2011.
 
Incorporator
 
Sgd. Rosemarie Flax
  
Rosemarie Flax
  
Authorised Signatory
  
Mossack Fonseca & Co. (B.V.I.) LTD
  

 
 
 

TERRITORY OF THEBRITISH VIRGIN ISLANDS
 
THE BVI BUSINESS COMPANIES ACT, 2004
 
(No. 16 of 2004)
 
AMENDED AND RESTATED
ARTICLES OF ASSOCIATION
OF
 
Sino Oil & Gas Pipe Holdings Limited
(formerly RICH MOUNTAIN ENTERPRISES LIMITED)
PRELIMINARY
 
1.
In these Articles, if not inconsistent with the subject or context, the words and expressions standing in the first column of the following table shall bear the meanings set opposite them respectively in the second column thereof.
 
Words
  
Meaning
     
Act
  
the BVI Business Companies Act, 2004 (No 16 of 2004.) including any modification, extension, re-enactment or renewal thereof and any regulations made thereunder.
     
Articles
  
these Articles of Association as originally framed or as from time to time amended.
     
Designated Stock Exchange
  
either the Nasdaq National Stock Market, Inc. or such other exchange or quotation bureau on which, the Company’s Securities are listed or traded; provided that until the Securities are listed on any such “Exchange” the rules of any such Designated Stock Exchange shall be inapplicable to these Articles.
     
Director
  
a director of the Company.
     
Distribution
  
in relation to a distribution by a company to a member, means
     
     
(i)
the direct or indirect transfer of an asset, other than the Company’s own shares, to or for the benefit of the member or
         
     
(ii)
the incurring of a debt to or for the benefit of a member,
         
   
in relation to shares held by a member, and whether by means of a purchase of an asset, the purchase, redemption or other acquisition of shares, a transfer of indebtedness or otherwise, and does not include a dividend unless specifically indicated herein.
     
Independent Director
  
a person who meets the then current requirements for “independence” of the applicable rules and regulations of the U.S. Securities and Exchange Commission and the Designated Stock Exchange.

 
 
 

member or shareholder
  
in relation to the Company, means a person whose name is entered in the register of members as the holder of one or more shares, or fractional shares, in the Company.
     
Memorandum
  
the Memorandum of Association of the Company as originally framed or as from time to time amended.
     
person
  
An individual, a corporation, a trust, trustee, the estate of a deceased individual, a partnership or an unincorporated association of persons.
     
Regulations
  
The Uncertificated Securities Regulations 2001.
     
Related Party
  
(a) any director, officer and employee of the Company; (b) any family member of such director, officer and employee; and (c) any entity (e.g. a corporation, partnership, or trust) controlled by or set up for the benefit of a director, officer or employee, or a family member of such director, officer or employee.
     
Relevant System
  
A facility for the electronic transfer of uncertificated securities administered by The Depository Trust Company or such other Person regulated by the SEC.
     
resolution of directors
  
(a)
A resolution approved at a duly convened and constituted meeting of directors of the Company or of a committee of directors of the Company by the affirmative vote of a simple majority of the directors present at the meeting who voted and did not abstain; or
     
   
(b)
a resolution consented to in writing by a simple majority of the directors or of all members of the committee, as the case may be;
     
     
except that where a director is given more than one vote, he shall be counted by the number of votes he casts for the purpose of establishing a majority.
     
resolution of members
  
Subject to the provisions of the Memorandum and Articles means:
     
   
(a)
A resolution approved at a duly convened and constituted meeting of the members of the Company by the affirmative vote of
     
     
(i)
a majority of in excess of 50% of the votes of the shares entitled to vote and voting on the resolution, or
     
     
(ii)
a majority of in excess of 50% of the votes of each class or series of shares entitled to vote as a class or series and voting on the resolution and a majority of in excess of 50% of the votes of the remaining shares entitled to vote and voting on the resolution; or

 
 
 

   
(b)
a resolution consented to in writing by
         
     
(i)
an absolute majority of the votes of shares entitled to vote thereon, or
         
     
(ii)
an absolute majority of the votes of each class or series of shares entitled to vote thereon as a class or series and of an absolute majority of the votes of the remaining shares entitled to vote thereon.

Seal
  
Any Seal which has been duly adopted as the common seal of the Company.
     
SEC
  
The United States Securities and Exchange Commission.
     
Securities
  
shares  and  debt  obligations  of every kind, and options, warrants and rights to acquire shares, or debt obligations.
     
share
  
a share issued or to be issued by the Company.
     
solvency test
  
a company satisfies the solvency test if;
     
(i)
  
the value of the company’s assets exceeds its liabilities, and
     
(ii)
  
the company is able to pay its debts as they fall due.
     
Special resolution
  
A resolution shall be a special resolution when it meets the definition of a “resolution of members”, except that the threshold shall be 66 2/3 % in place of 50%.
     
treasury shares
  
shares in the Company that were previously issued but were repurchased, redeemed or otherwise acquired by the Company and not cancelled.
 
2.
“Written” or any term of like import includes words typewritten, printed, painted, engraved, lithographed, photographed or represented or reproduced by any mode of  reproducing words in a visible form, including telex, facsimile, telegram, cable or other form of writing produced by electronic communication.
 
3.
Save as aforesaid any words or expressions defined in the Act shall bear the same meaning in these Articles.
 
4.
Whenever the singular or plural number, or the masculine, feminine or neuter gender is used in these Articles, it shall equally, where the context admits, include the others.
 
5.
A reference in these Articles to voting in relation to shares shall be construed as a reference to voting by members holding the shares except that it is the votes allocated to the shares that shall be counted and not the number of members who actually voted and a reference to shares being present at a meeting shall be given a corresponding construction.
 
 
 
 
 
6.
A reference to money in these Articles is, unless otherwise stated, a reference to the currency in which shares in the Company shall be issued according to the provisions of the Memorandum.
 
REGISTERED SHARES
 
7.
Every member holding registered shares in the Company shall be entitled to a certificate signed by a director or officer of the Company or such other person who may be authorised from time to time by resolution of directors or under the Seal, with or without the signature of any director of the Company, specifying the share or shares held by him and the signature of the director or officer or person so authorised and the Seal may be facsimiles.
 
8.
Any member receiving a share certificate for registered shares shall indemnify and hold the Company and its directors and officers harmless from any loss or liability which it or they may incur by reason of any wrongful or fraudulent use or representation made by any person by virtue of the possession thereof.  If a share certificate for registered shares is worn out or lost it may be renewed on production of the worn out certificate or on satisfactory proof of its loss together with such indemnity as may be required by a resolution of directors.
 
8A.
Subject to the Act and the rules of the Designated Stock Exchange, the Board without further consultation with the holders of any shares or securities of the Company may resolve that any class or series of shares or other securities of the Company from time to time in issue or to be issued (including shares in issue at the date of the adoption of these Articles) may be issued, held, registered, converted to, transferred or otherwise dealt with in uncertificated form in accordance with the Regulations and practices instituted by the operator of the relevant system, and no provision of these Articles will apply to any uncertificated share or other securities of the Company to the extent that they are inconsistent with the holding of such shares or other securities in uncertificated form or the transfer of title to any such shares or other securities by means of a relevant system or any provision of the Regulations.
 
8B.
Conversion of shares held in certificated form into shares held in uncertificated form, and vice versa, may be made in such manner as the Board may, in its absolute discretion, think fit (subject always to the Regulations and the requirements of the relevant system concerned).  The Company shall enter on the register of members how many shares are held by each shareholder in  uncertificated form and in certificated form and shall maintain the register of members in each case as is required by the Regulations and the relevant system concerned.  Notwithstanding any provisions of these Articles, a class or series of shares shall not be treated as two classes by virtue of that class or series comprising both certificated shares and uncertificated shares or as a result of any provision of these Articles or the Regulations which apply only in respect of certificated or uncertificated shares.
 
9.
If several persons are registered as joint holders of any shares, any one of such persons may give an effectual receipt for any distribution payable in respect of such shares.
 
10.
Nothing in these Articles shall require title to any shares or other Securities to be evidenced by a certificate if the Act and the rules of the Designated Stock Exchange permit otherwise.
 
SHARES AND ISSUED SHARES
 
11.
Subject to the provisions of these Articles and, if applicable, the rules of the Designated Stock Exchange, and any resolution of members, the directors of the Company may, without limiting or affecting any rights previously conferred on the holders of any existing shares or class or series of shares, offer, allot, grant options over or otherwise dispose of shares to such persons, at such times and upon such terms and conditions as the Company may by resolution of directors determine. The directors shall not issue more shares than the maximum number provided for in the Memorandum.
 
 
 
 
 
12.
The Company may issue fully paid, partly paid or nil paid shares as well as bonus shares.  A partly paid or nil paid share or a share issued for a promissory note or other written obligation for payment of a debt may be issued subject to forfeiture in the manner prescribed in these Articles.
 
13.
Shares in the Company may be issued for consideration in any form, including money, a promissory note or other obligation to contribute money or property, real property, personal property (including goodwill and know-how) services rendered or a contract for future services  and the amount of such consideration shall be determined by resolution of directors, except that in the case of shares with par value, the amount shall not be less than the par value, and in the absence of fraud the decision of the directors as to the value of the consideration received by the Company in respect of the issue is conclusive unless a question of law is involved.
 
14.
Before issuing shares for a consideration other than money, the directors shall pass a resolution stating;
 
 
(a)
the amount to be credited for the issue of the shares;
 
 
(b)
their determination of the reasonable present cash value of the non-money consideration for the issue; and
 
 
(c)
that, in their opinion, the present cash value of the non-money consideration for the issue is not less than the amount to be credited for the issue of the shares.
 
15.
A share issued by the Company upon conversion of, or in exchange for, another share or a debt obligation or other security in the Company, shall be treated for all purposes as having been issued for money equal to the consideration received or deemed to have been received by the Company in respect of the other share, debt obligation or security.
 
16.
Treasury shares may be disposed of by the Company on such terms and conditions (not otherwise inconsistent with these Articles) as the Company may by resolution of directors determine.
 
17.
Subject to these Articles, the Company may purchase, redeem or otherwise acquire and hold its own shares save that the Company may not purchase, redeem or otherwise acquire its own shares without the consent of the member whose shares are to be purchased, redeemed or otherwise acquired unless the Company is permitted by the Act or any other provision in the Memorandum or Articles to purchase, redeem or otherwise acquire the shares without their consent.
 
18.
No purchase, redemption or other acquisition of shares shall be made unless the directors determine by resolution of the directors that immediately after the purchase, redemption or other acquisition the value of the  Company’s assets will exceed its liabilities and the Company will be able to pay its debts as they fall due.
 
19.
Sections 60 (Process for acquisition of own shares), 61 (Offer to one or more shareholders) and 62 (Shares redeemed otherwise than at the option of company) of the Act shall not apply to the Company.
 
20.
A determination by the directors under Article 18 is not required;
 
 
(a)
the Company redeems a share or shares pursuant to  a  right  of  a member to have his shares redeemed or to have his shares exchanged for money or other property of the Company; or
 
 
(b)
by virtue of the provisions of Section 179 of the Act.
 
21.
Shares that the Company purchases, redeems or otherwise acquires pursuant to Article 17 may be cancelled or held as treasury shares except to the extent that such shares are in excess of 80 percent of the issued shares of the Company in which case they shall be cancelled but they shall be available for reissue.
 
 
 
 
 
22.
Shares in the Company shall only be held as treasury shares where the directors of the Company resolve as such and the number of shares acquired, when aggregated with shares of the same class already held by the Company as treasury shares, does not exceed 50% of the shares of that class previously issued by the Company, excluding shares that have been cancelled. All rights and obligations attaching to a treasury share are suspended and shall not be exercised by or against the Company while it holds the share as a treasury share. Treasury shares may be reissued by the Company as new shares.
 
23.
The Company shall keep a register of members containing;
 
 
(a)
the names and addresses of the persons who hold registered shares in the Company;
 
 
(b)
the number of each class and series of registered shares held by each member;
 
 
(c)
the date on which the name of each member was entered in the register of members;
 
 
(d)
the date on which any person ceased to be a member; and
 
 
(e)
such other information as may be prescribed pursuant to the Act.
 
24.
The register of members may be in any such form as the directors may approve but if it is in magnetic, electronic or other data storage form, the company must be able to produce legible evidence of its contents.
 
25.
The original or a copy of the register of members shall be kept at the registered office of the Company or at the office of the registered agent of the Company.
 
26.
A share is deemed to be issued when the name of the member is entered in the register of members.
 
27.
Subject to the Act and the rules of the Designated Stock Exchange, the board of directors without further consultation with the holders of any shares or Securities may resolve that any class or series of shares or other Securities from time to time in issue or to be issued (including shares in issue at the date of the adoption of these Articles) may be issued, held, registered and converted to uncertificated form.
 
28.
Conversion of shares held in certificated form into shares held in uncertificated form, and vice versa, may be made in such manner as the board of directors, in its absolute discretion, may think fit.  The Company or any duly authorised transfer agent (a “Transfer Agent”) shall enter on the register of members how many shares are held by each member in uncertificated form and in certificated form and shall maintain the register of members. Notwithstanding any provision of these Articles, a class or series of shares shall not be treated as two classes by virtue only of that class or series comprising both certificated shares and uncertificated Shares or as a result of any provision of these Articles which apply only in respect of certificated or uncertificated shares.
 
MORTGAGES AND CHARGES OF REGISTERED SHARES
 
29.
Members may mortgage or charge their registered shares in the Company with such mortgage or charge being evidenced in writing and signed by, or with the authority of the registered holder of a registered share to which the mortgage or charge relates.  The Company shall give effect to the terms of any valid mortgage or charge except insofar as it may conflict with any requirements herein contained for consent to the transfer of shares.
 
 
 
 

30.
In the case of the mortgage or charge of registered shares there may be entered in the share register of the Company at the request of the registered holder of such shares
 
 
(a)
a statement that the shares are mortgaged or charged;
 
 
(b)
the name of the mortgagee or chargee; and
 
 
(c)
the date on which the aforesaid particulars are entered in the share register.
 
31.
Where particulars of a mortgage or charge are entered in the register of members, such particulars shall be cancelled
 
 
(a)
with the written consent of the named mortgagee or chargee or anyone authorized to act on his behalf; or
 
 
(b)
upon evidence satisfactory to the directors of the discharge of the liability secured by the mortgage or charge and the issue of such indemnities as the directors shall consider necessary or desirable.
 
32.
Whilst particulars of a mortgage or charge over registered shares are entered in the register of members pursuant to the preceding articles no transfer of any share comprised therein shall be effected without the written consent of the named mortgagee or chargee or anyone authorized to act on his behalf.
 
FORFEITURE
 
33.
When shares not fully paid on issue or issued for a promissory note or other written obligation for payment of a debt have been issued subject to forfeiture, the following provisions shall apply.
 
34.
Written notice specifying a date for payment to be made and the shares in respect of which payment is to be made shall be served on the member who defaults in making payment pursuant to a promissory note or other written obligations to pay a debt.
 
35.
The written notice specifying a date for payment shall
 
 
(a)
name a further date not earlier than the expiration of 14 days from the date of service of the notice on or before which payment required by the notice is to be made; and
 
 
(b)
contain a statement that in the event of non-payment at or before the time named in the notice the shares, or any of them, in respect of which payment is not made will be liable to be forfeited.
 
36.
Where a written notice has been issued and the requirements of the notice have not been complied with within the prescribed time, the directors may at any time before tender of payment forfeit and cancel the shares to which the notice relates.
 
37.
The Company is under no obligation to refund any moneys to the member whose shares have been forfeited and cancelled pursuant to these provisions.  Upon forfeiture and cancellation of the shares the member is discharged from any further obligation to the Company with respect to the shares forfeited and cancelled.
 
 
 
 

38.
The Company shall have a first and paramount lien on every share issued for a promissory note or for any other binding obligation to contribute money or property or any combination thereof to the Company, and the Company shall also have a first and paramount lien on every share standing registered in the name of a member, whether singly or jointly with any other person or persons, for all the debts and liabilities of such member or his estate to the Company, whether the same shall have been incurred before or after notice to the Company of any interest of any person other than such member, and whether the time for the payment or discharge of the same shall have actually arrived or not, and notwithstanding  that  the  same are joint debts or liabilities of such member or his estate and any other person, whether a member of the Company or not.  The Company’s lien on a share shall extend to all distributions payable thereon.  The directors may at any time either generally, or in any particular case, waive any lien that has arisen or declare any share to be wholly or in part exempt from the provisions of this Article.
 
39.
In the absence of express provisions regarding sale in the promissory note or other binding obligation to contribute money or property, the Company may sell, in such manner as the directors may by resolution of directors determine, any share on which the Company has a  lien, but no sale shall be made unless some sum in respect of which the lien exists is presently payable nor until the expiration of twenty-one days after a notice in writing, stating and demanding payment of the sum presently payable and giving notice of the intention to sell in default of such payment, has been served on the holder for the time being of the share.
 
40.
The net proceeds of the sale by the Company of any shares on which it has a lien shall be applied in or towards payment of discharge of the promissory note or other binding obligation to contribute money or property or any combination thereof in respect of which the lien exists so far as the same is presently payable and any residue shall (subject to a like lien for debts or liabilities not presently payable as existed upon the share prior to the sale) be paid to the holder of the share immediately before such sale.  For giving effect to any such sale the directors may authorize some person to transfer the share sold to the purchaser thereof.  The purchaser shall be registered as the holder of the share and he shall not be bound to see to the application of the purchase money, nor shall his title to the share be affected by any irregularity or invalidity in the proceedings in reference to the sale.
 
TRANSFER OF SHARES
 
41.
Registered shares in the Company are transferred by a written instrument of transfer signed by the transferor and containing the name and address of the transferee. The instrument of transfer shall be signed by the transferee if registration as a holder of the share shall impose a liability to the Company on the transferee. The instrument of transfer of a registered share shall be sent to the Company for registration.
 
42.
The board of directors may resolve that interests in shares in the form of depositary receipts may be transferred or otherwise dealt with in accordance with the regulations and practices instituted by the operator of the Relevant System and any  holder of interests in shares shall be entitled to transfer such interests by means of such Relevant System and the operator of the Relevant System shall act as agent of the holders of such interests for the purposes of the transfer of those interests.
 
43.
The register of members may be closed at such times and for such periods as the board of directors may from time to time determine, upon notice being given by advertisement in such newspapers as may be required by the Act and the practice of the Designated Stock Exchange.
 
44.
The transfer of a registered share is effective when the name of the transferee is entered on the register of members.
 
45.
If the directors of the Company are satisfied that an instrument of transfer relating to shares has been signed but that the instrument has been lost or destroyed, they may resolve;
 
 
(a)
to accept such evidence of the transfer of the shares as they consider appropriate; and
 
 
(b)
that the transferee’s name should be entered in the register of members notwithstanding the absence of the instrument of transfer.
 
 
 
 
 
46.
The Company must on the receipt of an instrument of transfer from the transferor or transferee of a registered share in the Company enter the name of the transferee of the share in the register or members unless the directors, if permitted by the Memorandum or these Articles, resolve by resolution of directors to refuse or delay the registration of the transfer for reasons that shall be specified in the resolution of directors.
 
TRANSMISSION OF SHARES
 
47.
The personal representative of a deceased member may transfer a share even though the personal representative is not a member at the time of the transfer.
 
48.
The personal representative, executor or administrator of a deceased member, the guardian of an incompetent member or the trustee of a bankrupt member shall be the only person recognized by the Company as having any title to his share but they shall not be entitled to exercise any rights as a member of the Company until they have proceeded as set forth in the next following three Articles.
 
49.
The production to the Company of any document which is evidence of probate of the will, or letters of administration of the estate, or confirmation as executor, of a deceased member or of the appointment of a guardian of an incompetent member or the trustee of a bankrupt member shall be accepted by the Company    even if the deceased, incompetent or bankrupt member is domiciled outside the  British  Virgin Islands if the document evidencing the grant of probate or letters of administration, confirmation as executor, appointment as guardian or trustee in bankruptcy is issued by a foreign court which had competent jurisdiction in the matter.  For the purpose of establishing whether or not a foreign court had competent jurisdiction in such a matter the directors may obtain appropriate legal advice.  The directors may also require an indemnity to be given by the executor, administrator, guardian or trustee in bankruptcy.
 
50.
The Company may enter in the register of members the name of any person becoming entitled by operation of law or otherwise to a share or shares in consequence of the death, incompetence or bankruptcy upon such evidence being produced as may reasonably be required by the directors.
 
51.
Any person who has become entitled to a share or shares in consequence of the death, incompetence or bankruptcy of any member may, instead of being registered himself, request in writing that some person to be named by him be registered as the transferee of such share or shares and such request shall likewise be treated as if it were a transfer.
 
52.
What amounts to incompetence on the part of a person is a matter to be determined by the court having regard to all the relevant evidence and the circumstances of the case.
 
REDUCTION OR INCREASE IN AUTHORISED AND UNISSUED SHARES
 
53.
The Company may amend the Memorandum to increase or reduce the maximum number of shares the Company is authorised to issue and may in respect of any unissued shares increase or reduce the number of such shares, or effect any combination of the foregoing.
 
54.
The Company may
 
(1)           (a)            divide its shares, including issued shares, into a larger number of shares; or
 
(b)            combine its shares, including issued shares, into a smaller number of shares.
 
 
(2)
A division or combination of shares, including issued shares, of a class or series shall be for a larger or smaller number, as the case may be, of shares in the same class or series.
 
 
 
 
 
 
(3)
A company shall not divide its shares under subsection (1)(a) or (2) if it would cause the maximum number of shares that the Company is authorised to issue by its memorandum to be exceeded.
 
 
(4)
Where shares are divided or combined under this article, the aggregate par value of the new shares must be equal to the aggregate par value of the original shares.
 
MEETINGS AND CONSENTS OF MEMBERS
 
55.
An annual general meeting of the Company shall be held in each year other than the year of the Company’s incorporation, in accordance with the Articles (and any applicable rules of the Designated Stock Exchange on which the Company’s Securities are listed or traded), at such time and place as may be determined by the directors. Only the directors may call an annual general meeting.
 
56.
Each general meeting, other than an annual general meeting, shall be called an extraordinary general meeting. General meetings may be held at such times and in any location in the world as may be determined by the directors.
 
57.
The directors must convene an extraordinary general meeting on receipt of a written requisition of members holding 30 percent or more of the voting rights in respect of the matter for which the meeting is requested.
 
58.
The directors shall give not less than 10 days notice of general meetings to those persons whose names on the date the notice is given appear as members in the share register of the Company and are entitled to vote at the meeting.
 
59.
The directors may fix the date notice is given of a general meeting as the record date for determining those shares that are entitled to vote at the meeting.
 
60.
An annual general meeting may be called on short notice if all members holding shares entitled to vote on all or any matters to be considered at the meeting have agreed to short notice of the meeting.
 
61.
An extraordinary general meeting may be called on short notice:
 
 
(a)
if members holding not less than 90 percent of the total number of shares entitled to vote on all matters to be considered at the meeting, or 90 percent of the votes of each class or series of shares where members are entitled to vote thereon as a class or series together with not less than a 90 percent majority of the remaining votes, have agreed to short notice of the meeting, or
 
 
(b)
if all members holding shares entitled to vote on all or any matters to be considered at the meeting have waived notice of the meeting and for this purpose presence at the meeting shall be deemed to constitute waiver.
 
62.
The notice shall specify the time and place of the meeting and, in case of special business, the general nature of the business.  The notice convening an annual general meeting shall specify the meeting as such.  Notice of every general meeting shall be given to all members other than to such members as, under the provisions of these Articles or the terms of issue of the shares they hold, are not entitled to receive such notices from the Company, to all persons entitled to a share in consequence of the death or bankruptcy or winding-up of a member and to each of the directors and the auditors.
 
63.
The inadvertent failure of the directors to give notice of a meeting to a member, or the fact that a member has not received notice, does not invalidate the meeting.
 
 
 
 
 
64.
A member may be represented at a meeting of members by a proxy who may speak and vote on behalf of the member.
 
65.
The instrument appointing a proxy shall be produced at the place appointed for the meeting before the time for holding the meeting at which the person named in such instrument proposes to vote.
 
66.
An instrument appointing a proxy shall be in substantially the following form or such other form as the Chairman of the meeting shall accept as properly evidencing the wishes of the member appointing the proxy.
 
(Name of Company)
 
I/We
being a member of the above
Company with
shares HEREBY APPOINT
of
or failing him
of
to be my/our proxy to vote for me/us at the meeting of members to be held on the day
of
and at any adjournment thereof.
   
(Any restrictions on voting to be inserted here.)
 
Signed this              day of
  
 
  
Member
  
 
 
 
67.
The following shall apply in respect of joint ownership of shares:
 
 
(a)
if two or more persons hold shares jointly each of them may be present in person or by proxy at a meeting of members and may speak as a member;
 
 
(b)
if only one of the joint owners is present in person or by proxy he may vote on behalf of all joint owners, and
 
 
(c)
if two or more of the joint owners are present in person or by proxy they must vote as one.
 
68.
A member shall be deemed to be present at a meeting of members if he participates by telephone or other electronic means and all members participating in the meeting are able to hear each other.
 
69.
A meeting of members is duly constituted if, at the commencement of the meeting, there are present in person or by proxy not less than 50 percent of the votes of the shares or class or series of shares entitled to vote on resolutions of members to be considered at the meeting.  If a quorum be present, notwithstanding the fact that such quorum may be represented by only one person then such person may resolve any matter and a certificate signed by such person accompanied where such person be a proxy by a copy of the proxy form shall constitute a valid resolution of members.
 
70.
If within two hours from the time appointed for the meeting a quorum is not present, the meeting, if convened upon the requisition of members, shall be dissolved; in any other case it shall stand adjourned to the next business day at the same time and place or to such other time and place as the directors may determine, and if at the adjourned meeting there are present within one hour from the time appointed for the meeting in person or by proxy not less than one third of the votes of the  shares or each class or series of shares entitled to vote on the resolutions to be considered by the meeting, those present shall constitute a quorum but otherwise the meeting shall be dissolved.
 
 
 
 

71.
At every meeting of members, the Chairman of the Board of Directors shall preside as chairman of the meeting.  If there is no Chairman of the Board of Directors or if the Chairman of the Board of Directors is not present at the meeting, the members present shall choose some one of their number to be the chairman.  If the members are unable to choose a chairman for any reason, then the person representing the greatest number of voting shares present in person or by prescribed form of proxy at the meeting shall preside as chairman failing which the oldest individual member or representative of a member present shall take the chair.
 
72.
The chairman may, with the consent of the meeting, adjourn any meeting from time to time, and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place.
 
73.
At any meeting of the members the chairman shall be responsible for deciding in such manner as he shall consider appropriate whether any resolution has been carried or not and the result of his decision shall be announced to the meeting and recorded in the minutes thereof.  If the chairman shall have any doubt as to the outcome of any resolution put to the vote, he shall cause a poll to be taken of all votes cast upon such resolution, but if the chairman shall fail to take a poll then any member present in person or by proxy who disputes the announcement by the chairman of the result of any vote may immediately following such announcement demand that a poll be taken and the chairman shall thereupon cause a poll to be taken.  If a poll is taken at any meeting, the result thereof shall be duly recorded in the minutes of that meeting by the chairman.
 
74.
Any person other than an individual shall be regarded as one member and subject to the specific provisions hereinafter contained for the appointment of representatives of such persons the right of any individual to speak for or represent such member shall be determined by the law of the jurisdiction where, and by the documents by which, the person is constituted or derives its existence.  In case of doubt, the directors may in good faith seek legal advice from any qualified person and unless and until a court of competent jurisdiction shall otherwise rule, the directors may rely and act upon such advice without incurring any liability to any member.
 
75.
Any person other than an individual which is a member of the Company may by resolution of its directors or other governing body authorize such person as it thinks fit to act as its representative at any meeting of the Company or of any class of members of the Company, and the person so authorized shall be entitled to exercise the same powers on behalf of the person which he represents as that person could exercise if it were an individual member of the Company.
 
76.
The chairman of any meeting at which a vote is cast by proxy or on behalf of any person other than an individual may call for a notarially certified copy of such proxy or authority which shall be produced within 7 days of being so requested or the votes cast by such proxy or on behalf of such person shall be disregarded.
 
77.
Directors of the Company may attend and speak at any meeting of members of the Company and at any separate meeting of the holders of any class or series of shares in the Company.
 
78.
An action that may be taken by the members at a meeting may also be taken by a resolution of members consented to in writing or by telex, telegram, cable, facsimile or other written electronic communication, without the need for any notice, but if any resolution of members is adopted otherwise than by the unanimous written consent of all members, a copy of such resolution shall forthwith be sent to all members not consenting to such resolution.  The consent may be in the form of counterparts, each counterpart being signed by one or more members.
 
DIRECTORS
 
79.
The first directors of the Company shall be appointed by the first registered agent of the Company and thereafter the directors shall be appointed by resolution of members, subject to Article 78, for such term as the members determine.  A person shall not be appointed as a director unless he has consented in writing to be a director.
 
 
 
 
 
80.
The minimum number of directors shall be one and the maximum number shall be 20. Unless otherwise determined by the Company in a meeting of shareholders and subject to the requirements of the Memorandum, the directors may by a Resolution of Directors, amend this Regulation 77 to change the number of directors. For as long as Securities of the Company are listed or traded on the Designated Stock Exchange, the directors shall include such number of Independent Directors as applicable law, rules or regulations of the Designated Stock Exchange may require for a foreign private issuer as long as the Company is a foreign private issuer.
 
81.
Each director shall hold office for the term, if any, fixed by resolution of members or until his earlier death, resignation or removal.
 
82.
Where the Company has only one member who is an individual and that member is also the sole director of the Company, that sole member/director may, by instrument in writing, nominate a person who is not disqualified from being a director of the Company under section 111(1) of the Act as a reserve director of the Company to act in the place of the sole director in the event of his death.
 
83.
The nomination of a person as a reserve director of the Company ceases to have effect if;
 
 
(a)
before the death of the sole member/director who nominated him;
 
 
(i)
he resigns as reserve director, or
 
 
(ii)
the sole member/director revokes the nomination in writing; or
 
 
(b)
the sole member/director who nominated him ceases to be the sole member/director of the Company for any reason other than his death.
 
84.
A director may be removed from office, with or without cause, by a resolution of directors or a resolution of members. For the purposes of this Regulation 76, “cause” means the willful and continuous failure by a director to substantially perform his duties to the Company (other than any such failure resulting from incapacity due to physical or mental illness) or the willful engaging by the director in gross misconduct materially and demonstrably injurious to the Company. If a director is removed from office without cause by a resolution of the members, for the purposes of this Regulation, the resolution of members will require the affirmative vote of the holders of 66 2/3 percent or more of the outstanding votes of the shares entitled to vote thereon.
 
85.
A director may resign his office by giving written notice of his resignation to the Company and the resignation shall have effect from the date the notice is received by the Company or from such later date as may be specified in the notice. A director of the Company shall resign forthwith if he is, or becomes, disqualified to act as a director under the Act.
 
86.
The directors may at any time by resolution of directors appoint any person to be a director to fill a vacancy.  There is a vacancy if a director dies or otherwise ceases to hold office as a director prior to the expiration of his term of office, where his term of office was fixed upon his appointment. The directors may not appoint a director to fill a vacancy for a term exceeding the term that remained when the person who has ceased to be a director left or otherwise ceased to hold office.
 
87.
The Company shall keep a register of directors containing:
 
 
(a)
the names and addresses of the persons who are directors of the Company or who have been nominated as reserve directors of the Company;
 
 
(b)
the date on which each person whose name is entered in the register was appointed as a director of the Company or nominated as a reserve director of the Company;
 
 
 
 
 
 
(c)
the date on which each person named as a director ceased to be a director of the Company;
 
 
(d)
the date on which the nomination of any person nominated as a reserve director ceased to have effect; and
 
 
(e)
such other information as may be prescribed pursuant to the Act.
 
88.
The original or a copy of any register of directors shall be kept at the office of the registered agent of the Company.
 
89.
The register of directors may be in any such form as the directors may approve but if it is in magnetic, electronic or other data storage form, the company must be able to produce legible evidence of its contents.
 
90.
With the prior or subsequent approval by a resolution of members, the directors may, by a resolution of directors, fix the emoluments of directors with respect to services to be rendered in any capacity to the Company.
 
91.
A director shall not require a share qualification and may be an individual or a company.
 
POWERS OF DIRECTORS
 
92.
The business and affairs of the Company shall be managed by the directors who may pay all expenses incurred preliminary to and in connection with the formation and registration of the Company and may exercise all such powers of the Company as are not by the Act or by the Memorandum or these Articles required to be exercised by the members of the Company, subject to any delegation of such powers as may be authorized by these Articles and to such requirements as may be prescribed by a resolution of members; but no requirement made by a resolution of members shall prevail if it be inconsistent with these Articles nor shall such requirement invalidate any prior act of the directors which would have been valid if such requirement had not been made. Notwithstanding anything in Section 175 of the Act the directors shall have the power to sell, transfer, lease, exchange or otherwise dispose of more than fifty percent of the assets of the Company without submitting a proposal to or obtaining the consent of the members of the Company.
 
93.
If the Company is a wholly-owned subsidiary of a holding company a director may when exercising powers or performing duties as a director act in a manner which he believes is in the best interests of the holding company even though it may not be in the best interests of the Company.
 
94.
The directors may, by a resolution of directors, appoint any person, including a person who is a director, to be an officer or agent of the Company.  The resolution of directors appointing an agent may authorize the agent to appoint one or more substitutes or delegates to exercise some or all of the powers conferred on the agent by the Company.
 
95.
Every officer or agent of the Company has such powers and authority of the directors, including the power and authority to affix the Seal, as are set forth in these Articles or in the resolution of directors appointing the officer or agent, except that no agent has any power or authority with respect to the following;
 
 
(a)
to amend the memorandum or articles;
 
 
(b)
to change the registered office or agent;
 
 
(c)
to designate committees of directors;
 
 
 
 
  
 
(d)
to delegate powers to a committee of directors;
 
 
(e)
to appoint or remove directors;
 
 
(f)
to appoint or remove an agent;
 
 
(g)
to fix emoluments of directors;
 
 
(h)
to approve a plan of merger, consolidation or arrangement;
 
 
(i)
to make a declaration of solvency for the purposes of section 198(1)(a) of the Act or to approve a liquidation plan;
 
 
(j)
to make a determination under section 57(1) of the Act that the company will, immediately after a proposed distribution, satisfy the solvency test; or
 
 
(k)
to authorise the Company to continue as a company incorporated under the laws of a jurisdiction outside the British Virgin Islands.
 
96.
Any director which is a body corporate may appoint any person its duly authorized representative for the purpose of representing it at meetings of the Board of Directors or with respect to unanimous written consents.
 
97.
The continuing directors may act notwithstanding any vacancy in their body, save that if their number is reduced to their knowledge below the number fixed by or pursuant to these Articles as the necessary quorum for a meeting of directors, the continuing directors or director may act only for the purpose of appointing directors to fill any vacancy that has arisen or for summoning a meeting of members.
 
98.
The directors may by resolution of directors exercise all the powers of the Company to borrow money and to mortgage or charge its undertakings and property or any part thereof, to issue debentures, debenture stock and other securities whenever money is borrowed or as security for any debt, liability or obligation of the Company or of any third party.
 
99.
All cheques, promissory notes, drafts, bills of exchange and other negotiable instruments and all receipts for moneys paid to  the  Company, shall be signed, drawn, accepted, endorsed or otherwise executed, as the case may be, in such manner as shall from time to time be determined by resolution of directors.
 
100.
The Company shall keep a register of all relevant charges created by the Company showing:
 
 
(a)
if the charge is a charge created by the Company, the date of its creation or if the charge is existing on property acquired by the Company, the date on which the property was acquired;
 
 
(b)
a short description of the liability secured by the charge;
 
 
(c)
a short description of the property charged;
 
 
(d)
the name and address of the trustee for the security, or if there is no such trustee the name and address of the chargee;
 
 
(e)
unless the charge is a security to bearer, the name and address of the holder of the charge;
 
 
 
 

 
(f)
details of any prohibition or restriction , if any, contained in the instrument creating the charge on the power of the company to create any future charge ranking in priority to or equally with the charge; and
 
 
(g)
such other information as may be prescribed pursuant to the Act.
 
101.
The original or a copy of the register of charges shall be kept at the registered office of the Company or at the office of the registered agent of the Company.
 
101A.
A director of the Company may, when exercising his powers of performing his duties as a director in a manner in which he believes to be in the best interests of the Company or in the best interests of the shareholders appointing him, shall be in the best interests of the Company.
 
PROCEEDINGS OF DIRECTORS
 
102.
The directors of the Company or any committee thereof may meet at such times and in such manner and places within or outside the British Virgin Islands as the directors may determine to be necessary or desirable. Any one or more directors may convene a meeting of directors.
 
103.
A director shall be deemed to be present at a meeting of directors if he participates by telephone or other electronic means and all directors participating in the meeting are able to hear each other.
 
104.
A director shall be given not less than 3 days notice of meetings of directors, but a meeting of directors held without 3 days notice having been given to all directors shall be valid if all the directors entitled to vote at the meeting who do not attend, waive notice of the meeting and for this purpose, the presence of a director at a meeting shall constitute waiver on his part.  The inadvertent failure to give notice of a meeting to a director, or the fact that a director has not received the notice, does not invalidate the meeting.
 
105.
A director may by a written instrument appoint an alternate who need not be a director and an alternate is entitled to attend meetings in the absence of the director who appointed him and to vote or consent in place of the director.
 
106.
A meeting of directors is duly constituted for all purposes if at the commencement of the meeting there are present in person or by alternate not less than one half of the total number of directors, unless there are only 2 directors in which case the quorum shall be 2.
 
107.
If the Company shall have only one director the provisions herein contained for meetings of the directors shall not apply but such sole director shall have full power to represent and act for the Company in all matters as are not by the Act or the Memorandum or these Articles required to be exercised by the members of the Company and in lieu of minutes of a meeting shall record in writing and sign a note or memorandum of all matters requiring a resolution of directors.  Such a note or memorandum shall constitute sufficient evidence of such resolution for all purposes.
 
108.
At every meeting of the directors the Chairman of the Board of Directors shall preside as chairman of the meeting.  If there is no Chairman of the Board of Directors or if the Chairman of the Board of Directors is not present at the meeting the Vice Chairman of the Board of Directors shall preside.  If there is no Vice Chairman of the Board of Directors or if the Vice Chairman of the Board of Directors is not present at the meeting the directors present shall choose some one of their number to be chairman of the meeting.
 
109.
An action that may be taken by the directors or a committee of directors at a meeting may also be taken by a resolution of directors or a committee of directors consented to in writing or by telex, telegram, cable, facsimile or other written electronic communication by all directors or all members of the committee as the case may be, without the need for any notice.  The consent may be in the form of counterparts, each counterpart being signed by one or more directors.
 
 
 
 
 
110.
The directors shall cause the following records to be kept:
 
 
(a)
minutes of all meetings of directors, members, committees of directors and committees of members; and
 
 
(b)
copies of all resolutions consented to by directors, members, committees of directors and committees of members.
 
111.
The resolutions, records and minutes referred to in the preceding Article shall be kept at the registered office of the Company, its principal place of business or at such other place as the directors determine.
 
112.
The directors may, by resolution of directors, designate one or more committees, each consisting of one or more directors.
 
113.
Subject to the following Article, each committee of directors has such powers and authorities of the directors, including the power and authority to affix the Seal, as are set forth in the resolution of directors establishing the committee.
 
114.
The directors have no power to delegate the following powers to a committee of directors;
 
 
(a)
to amend the memorandum or articles;
 
 
(b)
to change the registered office or agent;
 
 
(c)
to designate committees of directors;
 
 
(d)
to delegate powers to a committee of directors;
 
 
(e)
to appoint or remove directors;
 
 
(f)
to appoint or remove an agent;
 
 
(g)
to fix emoluments of directors;
 
 
(h)
to approve a plan of merger, consolidation or arrangement;
 
 
(i)
to make a declaration of solvency for the purposes of section 198(1)(a) or to approve a liquidation plan;
 
 
(j)
to make a determination under section 57(1) that the company will, immediately after a proposed distribution, satisfy the solvency test; or
 
 
(k)
to authorise the company to continue as a company incorporated under the laws of a jurisdiction outside the British Virgin Islands.
 
Paragraphs (c) and (d) do not prevent a committee of directors, where authorised by the directors, from appointing a sub-committee and delegating powers exercisable by the committee to the sub-committee.
 
115.
The meetings and proceedings of each committee of directors consisting of 2 or more directors shall be governed mutatis mutandis by the provisions of these Articles regulating the proceedings of directors so far as the same are not superseded by any provisions in the resolution establishing the committee.
 
 
 
 

116.
Without prejudice to the freedom of the directors to establish any other committee, if the shares (or depositary receipts therefore) are listed or quoted on the Designated Stock Exchange, and if required by the Designated Stock Exchange, the directors shall establish and maintain an audit committee as a committee of the board of directors, the composition and responsibilities of which shall comply with the rules and regulations of the SEC and the Designated Stock Exchange.  The audit committee shall meet at least once every financial quarter, or more frequently as circumstances dictate.
 
117.
The Company shall adopt a formal written audit committee charter and review and assess the adequacy of the formal written charter on an annual basis. The charter shall specify the responsibilities of the Audit Committee which shall include responsibility for, among other things, ensuring its receipt from the outside auditors of the Company of a formal written statement delineating all relationships between the auditor and the Company, and the Audit Committee’s responsibility for actively engaging in a dialogue with the auditor with respect to any disclosed relationships or services that may impact the objectivity and independence of the auditor take appropriate action to oversee the independence of the outside auditor. In addition, the Audit Committee is responsible for reviewing potential conflict of interest situations and approving all Related Party Transactions.
 
118.
Without prejudice to the freedom of the directors to establish any other committees, the Board may establish a Stock Option Committee to administer the Company’s stock option plans, including authority to make and modify awards under such plans. For so long as the Securities of the Company are listed or traded on the Designated Stock Exchange, the Stock Option Committee shall have at least two Independent Directors. The Stock Option Committee will administer the Company’s stock option plans, including the authority to make and modify awards under such plans.
 
119.
Without prejudice to the freedom of the directors to establish any other committees, the Board may establish a Nominating Committee to assist the Board in identifying qualified individuals to become members of the Board.
 
OFFICERS
 
120.
The Company may by resolution of directors appoint officers of the Company at such times as shall be considered necessary or expedient.  Such officers may consist of a Chairman of the Board of Directors, a Vice Chairman of the Board of Directors, a President and one or more Vice Presidents, Secretaries and Treasurers and such other officers as may from time to time be deemed desirable.  Any number of offices may be held by the same person.
 
121.
The officers shall perform such duties as shall be prescribed at the time of their appointment subject to any  modification in such duties as may be prescribed thereafter by resolution of directors or resolution of members, but in the absence of any specific allocation of duties it shall be the responsibility of the Chairman of the Board of Directors to preside at meetings of directors and members, the Vice Chairman to act in the absence of the Chairman, the President to manage the day to day affairs of the Company, the Vice Presidents to act in order of seniority in the absence of the President but otherwise to perform such duties as may be delegated to them by the President, the Secretaries to maintain the share register, minute books and records (other than financial records) of the Company and to ensure compliance with all procedural requirements imposed on the Company by applicable law, and the Treasurer to be responsible for the financial affairs of the Company.
 
122.
Subject to the rules of the Designated Stock Exchange, the emoluments of all officers shall be fixed by resolution of directors.
 
123.
The officers of the Company shall hold office until their successors are duly elected and qualified, but any officer elected or appointed by the directors may be removed at any time, with or without cause, by resolution of directors.  Any vacancy occurring in any office of the Company may be filled by resolution of directors.
 
 
 
 
 
CONFLICT OF INTERESTS
 
124.
A director of the Company shall, forthwith after becoming aware of the fact that he is interested in a transaction entered into or to be entered into by the Company, disclose the interest to all other directors of the Company.
 
125.
A director of the Company is not required to comply with Article 121 if;
 
 
(a)
the transaction or proposed transaction is between the director and the Company; and
 
 
(b)
the transaction or proposed transaction is or is to be entered into in the ordinary course of the company’s business and on usual terms and conditions.
 
126.
For the purposes of Article 112 a disclosure to all other directors to the effect that a director is a member, director or officer of another named entity or has a fiduciary relationship with respect to the entity or a named individual and is to be regarded as interested in any transaction which may, after the date of the entry or disclosure, be entered into with that entity or individual, is a sufficient disclosure of interest in relation to that transaction.
 
127.A.
A director of the Company who is interested in a transaction entered into or to be entered into by the Company may:
 
 
(i)
vote on a matter relating to the transaction;
 
 
(ii)
attend a meeting of directors at which a matter relating to the transaction arises and be included among the directors present at the meeting for the purposes of a quorum; and
 
 
(iii)
sign a document on behalf of the Company, or do any other thing in his capacity as a director, that relates to the transaction,
 
and, subject to compliance with the Act shall not, by reason of his office be accountable to the Company for any benefit which he derives from such transaction and no such transaction shall be liable to be avoided on the grounds of any such interest or benefit.
 
127.B.
For so long the Securities of the Company are listed or traded on the Designated Stock Exchange, the Company shall conduct an appropriate review of all material Related Party Transactions on an ongoing basis and shall utilize the Audit Committee for the review and approval of potential conflicts of interest situations.
 
INDEMNIFICATION
 
128.
Subject to the limitations hereinafter provided the Company may indemnify against all expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred in connection with legal, administrative  or  investigative proceedings any person who;
 
 
(a)
is or was a party or is threatened to be made a party to any threatened, pending or completed proceedings, whether civil, criminal, administrative or investigative, by reason of the fact that the person is or was a director, an officer or a liquidator of the Company; or
 
 
(b)
is or was, at the request of the Company, serving as a director of, or in any other capacity is or was acting for, another body corporate or a partnership, joint venture, trust or other enterprise.
 
129.
The Company may only indemnify a person if the person acted honestly and in good faith in what he believed to be in the best interests of the Company and, in the case of criminal proceedings, the person had no reasonable cause to believe that his conduct was unlawful.
 
 
 
 
 
130.
For the purposes of the preceding Article, a director acts in the best interests of the Company if he acts in the best interests of;
 
 
(a)
the Company’s holding company; or
 
 
(b)
a shareholder or shareholders of the Company;
 
in either case, in the circumstances specified in Article 98B.
 
131.
The decision of the directors as to whether the person acted honestly and in good faith and with a view to the best interests of the Company and as to whether the person had no reasonable cause to believe that his conduct was unlawful is, in the absence of fraud, sufficient for the purposes of these Articles, unless a question of law is involved.
 
132.
The termination of any proceedings by any judgment, order, settlement, conviction or the entering of a nolle prosequi does not, by itself, create a presumption that the person did not act honestly and in good faith and with a view to the best interests of the Company or that the person had reasonable cause to believe that his conduct was unlawful.
 
133.
Expenses, including legal fees, incurred by a director in defending any legal, administrative or investigative proceedings may be paid by the Company in advance of the final disposition of such proceedings upon receipt of an undertaking by or on behalf of the director to repay the amount if it shall ultimately be determined that the director is not entitled to be indemnified by the Company in accordance with these Articles.
 
134.
Expenses, including legal fees, incurred by a former director in defending any legal, administrative or investigative proceedings may be paid by the Company in advance of the final disposition of such proceedings upon receipt of an undertaking by or on behalf of the former director to repay the amount if it shall ultimately be determined that the director is not entitled to be indemnified by the Company in accordance with these Articles.
 
135.
The indemnification and advancement of expenses provided by, or granted pursuant to, these Articles is not exclusive of any other rights to which the person seeking indemnification of advancement of expenses may be entitled under any agreement, resolution of members, resolution of disinterested directors or otherwise, both as to acting in the person’s official capacity and as to acting in another capacity while serving as a director of the Company.
 
136.
If a person to be indemnified has been successful in defence of any proceedings referred to above the person is entitled to be indemnified against all expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred by the person in connection with the proceedings.
 
137.
The Company may purchase and maintain insurance in relation to any person who is or was a director, an officer or a liquidator of the Company, or who at the request of the Company is or was serving as a director, an officer or a liquidator of, or in any other capacity is or was acting for, another body corporate or a  partnership, joint  venture, trust or other enterprise, against any liability  asserted against the person and incurred by the person in that capacity, whether or not the Company has or would have had the power to indemnify the person against the liability as provided in these Articles.

 
 
 

138.
The Company shall have a Seal and may have more than one Seal. References herein to the Seal shall be references to every Seal which shall have been duly adopted by resolution of directors.  The directors shall provide for the safe custody of the Seal and for an imprint thereof to be kept at the office of the registered agent of the Company.  Except as otherwise expressly provided herein, the Seal when affixed to any written instrument, shall be witnessed and attested to by the signature of a director or any other person so authorized from time to time by resolution of directors.  Such authorization may be before or after the Seal is affixed, may be general or specific and may refer to any number of sealings. The Directors may provide for a facsimile of the Seal and of the signature of any director or authorized person which may be reproduced by printing or other means on any instrument and it shall have the same force and validity as if the Seal had been affixed to such instrument and the same had been signed as hereinbefore described.
 
DISTRIBUTIONS
 
139.
The directors of the Company may  by resolution authorise a distribution by the Company at any time and of any amount and to any members they think fit if they are satisfied on reasonable grounds that immediately after the distribution;
 
 
(a)
the value of the Company’s assets will exceed its liabilities, and
 
 
(b)
the Company will be able to pay its debts as they fall due.
 
140.
A resolution of the directors passed under the preceding Article shall contain a statement that, in the opinion of the directors, immediately after the distribution the value of the Company’s assets will exceed its liabilities, and the Company will be able to pay its debts as they fall due.
 
141.
If, after a distribution is authorised and before it is made, the directors cease to be satisfied on reasonable grounds that the Company will, immediately after the distribution satisfy the solvency test, any distribution made by the Company is deemed not to have been authorised.
 
142.
If, by virtue of the preceding Article, a distribution is deemed not to have been authorised, a director who;
 
 
(a)
ceased, after authorisation but before the making of the distribution, to be satisfied on reasonable grounds for believing that the company would satisfy the solvency test immediately after the distribution is made; and
 
 
(b)
failed to take reasonable steps to prevent the distribution being made;
 
is personally liable to the company to repay to the company so much of the distribution as is not able to be recovered from members.
 
143.
A distribution made to a member at a time when the company did not, immediately after the distribution, satisfy the solvency test may be recovered by the company from the member unless;
 
 
(a)
the member received the distribution in good faith and without knowledge of the company’s failure to satisfy the solvency test;
 
 
(b)
the member has altered his position in reliance on the validity of the distribution; and
 
 
(c)
it would be unfair to require repayment in full or at all.
 
DISTRIBUTIONS BY WAY OF DIVIDEND
 
144.
The Company may by a resolution of directors declare a distribution by way of dividend and pay such distribution in money, shares or other property.  In the event that distributions by way of dividend are paid in specie the directors shall have responsibility for establishing and recording in the resolution of directors authorizing the distribution by way of dividend, a fair and proper value for the assets to be so distributed.
 
 
 
 
 
145.
The directors may from time to time pay to the members such interim distributions by way of dividend as appear to the directors to be justified by the profits of the Company.
 
146.
The directors may, before declaring any distribution by way of dividend, set aside out of the profits of the Company such sum as they think proper as a reserve fund, and may invest the sum so set aside as a reserve fund upon such securities as they may select.
 
147.
Notice of any distribution by way of dividend that may have been declared shall be given to each member in the manner hereinafter mentioned and all distributions by way of dividend unclaimed for 3 years after having been declared may be forfeited by resolution of directors for the benefit of the Company.
 
148.
No distribution by way of dividend shall bear interest as against the Company and no distribution by way of dividend shall be paid on treasury shares or shares held by another company of which the Company holds, directly or indirectly, shares having more than 50 percent of the vote in electing directors.
 
149.
A share issued as a distribution by way of dividend by the Company shall be treated for all purposes as having been issued for money equal to the value determined by resolution of the directors.  In the absence of fraud the decision of the directors as to the value of the share is conclusive unless a question of law is involved.
 
150.
A division of the issued and outstanding shares of a class or series of shares into a larger number of shares of the same class or series having a proportionately smaller par value does not constitute a distribution by way of dividend of shares.
 
ACCOUNTS AND AUDIT
 
151.
The Company may by resolution of members call for the directors to prepare periodically a profit and loss account and a balance sheet.  The profit and loss account and balance sheet shall be drawn up so as to give respectively a true and fair view of the profit and loss of the Company for the financial period and a true and fair view of the state of affairs of the Company as at the end of the financial period.
 
152.
The Company may by resolution of members call for the accounts to be examined by auditors.
 
153.
Subject to the rules of the Designated Stock Exchange, the first auditors shall be appointed by resolution of directors; subsequent auditors shall be appointed by the Audit Committee and shall hold office until the Audit Committee appoint another independent auditor.
 
154.
Subject to the rules of the Designated Stock Exchange, the remuneration of the auditors of the Company shall be fixed by the Audit Committee.
 
155.
The auditors shall examine each profit and loss account and balance sheet required to be served on every member of the Company or laid before a meeting of the members of the Company and shall state in a written report whether or not
 
 
(a)
in their opinion the profit and loss account and balance sheet give a true and fair view respectively of the profit and loss for the period covered by the accounts, and of the state of affairs of the Company at the end of that period; and
 
 
(b)
all the information and explanations required by the auditors have been obtained.
 
156.
The report of the auditors shall be annexed to the accounts and shall be read at the meeting of members at which the accounts are laid before the Company or shall be served on the members.
 
 
 
 
 
157.
Every auditor of the Company shall have a right of access at all times to the books of account and vouchers of the Company, and shall be entitled to require from the directors and officers of the Company such information and explanations as he thinks necessary for the performance of the duties of the auditors.
 
158.
The auditors of the Company shall be entitled to receive notice of, and to attend any meetings of members of the Company at which the Company’s profit and loss account and balance sheet are to be presented.
 
159.
Any notice, information or written statement to be given by the Company to members may be served in any way by which it can reasonably be expected to reach each member or by mail addressed to each member at the address shown in the share register.
 
160.
Any summons, notice, order, document, process, information or written statement to be served on the Company may be served by leaving it, or by sending it by registered mail addressed to the Company, at its registered office, or by leaving it with, or by sending it by registered mail to, the registered agent of the Company.
 
161.
Service of any summons, notice, order, document, process, information or written statement to be served on the Company may be proved by showing that the summons, notice, order, document, process, information or written statement was delivered to the registered office or the registered agent of the Company or that it was mailed in such time as to admit to its being delivered to the registered office or the registered agent of the Company in the normal course of delivery within the period prescribed for service and was correctly addressed and the postage was prepaid.
 
PENSION AND SUPERANNUATION FUNDS
 
162.
The directors may establish and maintain or procure the establishment and maintenance of any non-contributory or contributory pension or superannuation funds for the benefit of, and give or procure the giving of donations, gratuities, pensions, allowances or emoluments to, any persons who are or were at any time in the employment or service of the Company or any company which is a subsidiary of the Company or is allied to or associated with the Company or with any such subsidiary, or who are or were at any time directors or officers of the Company or of any such other company as aforesaid or who hold or held any salaried employment or office in the Company or such other company, or any persons in whose welfare the Company or any such other company as aforesaid is or has been at any time interested, and to the wives, widows, families and dependents of any such person, and may make payments for or towards the insurance of any such persons as aforesaid, and may do any of the matters aforesaid either alone or in conjunction with any such other  company as aforesaid.  Subject always to the proposal being approved by resolution of members, a director holding any such employment or office shall be entitled to participate in and retain for his own benefit any such donation, gratuity, pension allowance or emolument.
 
VOLUNTARY WINDING UP AND DISSOLUTION
 
163.
The Company may voluntarily commence to wind up and dissolve by a resolution of members but if the Company has never issued shares it may voluntarily commence to wind up and dissolve by resolution of directors.
 
CONTINUATION
 
164.
The Company may by resolution of members or by a resolution passed unanimously by all directors of the Company continue as a company incorporated under the laws of a jurisdiction outside the British Virgin Islands in the manner provided under those laws.
 
 
 
 
 
ARBITRATION
 
165.
Whenever any difference arises between the Company on the one hand and any of the members or their executors, administrators or assigns on the other hand, touching the true intent and construction or the incidence or consequences of these Articles or of the Act, touching anything done or executed, omitted or suffered in pursuance of the Act or touching any breach or alleged breach or otherwise relating to the premises or to these Articles, or to any Act or Ordinance affecting the Company or to any of the affairs of the Company such difference shall, unless the parties agree to refer the same to a single arbitrator, be referred to 2 arbitrators one to be chosen by each of the parties to the difference and the arbitrators shall before entering on the reference appoint an umpire.
 
166.
If either party to the reference makes default in appointing an arbitrator either originally or by way of substitution (in the event that an appointed arbitrator shall die, be incapable of acting or refuse to act) for 10 days after the other party has given him notice to appoint the same, such other party may appoint an arbitrator to act in the place of the arbitrator of the defaulting party.
 
We, Mossack Fonseca & Co. (B.V.I.) LTD of P.O. Box 3136, Road Town, Tortola, British Virgin Islands for the purpose of incorporating a BVI Business Company under the laws of the British Virgin Islands hereby sign these restated Articles of Association the [            ]day of  [           ], 2011.
 
Incorporator
 
Sgd. Rpsemarie Flax
  
   
Rosemarie Flax
Authorised Signatory
Mossack Fonseca & COO (B.V.I.) LTD

 
 
 
EX-4.1 4 v230348_ex4-1.htm
 
 
 
SHARE EXCHANGE AGREEMENT
 
by and among
 
RICH MOUNTAIN ENTERPRISES LIMITED
 
THE SHAREHOLDER OF
Rich Mountain Enterprises Limited
 
RISE KING MANAGEMENT LIMITED
 
And
 
THE SHAREHOLDERS OF
RISE KING MANAGEMENT LIMITED
 
Dated as of July 30, 2011
 

 
 
 
 
TABLE OF CONTENTS
 
   
Page
     
ARTICLE I  Exchange of Shares
1
1.1
Share Exchange
1
1.2
Closing
1
     
ARTICLE II  Representations and Warranties of the RISE KING Shareholders
2
2.1
Good Title
2
2.2
Organization
2
2.3
Power and Authority
2
2.4
No Conflicts
2
2.5
Litigation
2
2.6
No Finder’s Fee
2
2.7
Purchase Entirely for Own Account
2
2.8
Available Information
2
2.9
Non-Registration
3
2.10
Restricted Securities
3
2.11
Accredited Investor
3
2.12
Additional Legend
3
2.13
Disclosure
3
     
ARTICLE III  Representations and Warranties of RISE KING
3
3.1
Organization, Standing and Power
3
3.2
Subsidiaries; Equity Interests.
3
3.3
Capital Structure
4
3.4
Authority; Execution and Delivery; Enforceability
4
3.5
No Conflicts; Consents.
4
3.6
Taxes.
5
3.7
Benefit Plans.
5
3.8
Litigation
5
3.9
Compliance with Applicable Laws
5
3.10
Contracts
5
3.11
Title to Properties
6
3.12
Intellectual Property
6
3.13
Labor Matters
6
3.14
Financial Statements; Liabilities
6
3.15
Investment Company
6
3.16
Foreign Corrupt Practices
6
3.17
Absence of Certain Changes or Events
6
3.18
Disclosure
7
     
ARTICLE IV  Representations and Warranties of Shell Company
7
4.1
Organization, Standing and Power
7
4.2
Subsidiaries; Equity Interests
8
4.3
Capital Structure
8
4.4
Authority; Execution and Delivery; Enforceability
8
4.5
No Conflicts; Consents.
8
4.6
Taxes.
9
4.7
Benefit Plans
9
4.8
Benefit Plans
9
4.9
Litigation
9
4.10
Compliance with Applicable Laws
9
4.11
Contracts
10
4.12
Title to Properties
10

 
i
 

4.13
Intellectual Property
10
4.14
Labor Matters
10
4.15
SEC Documents; Undisclosed Liabilities.
10
4.16
Transactions With Affiliates and Employees
11
4.17
Investment Company
11
4.18
Foreign Corrupt Practices
11
4.19
Absence of Certain Changes or Events
11
4.20
Certain Registration Matters
12
4.21
Disclosure
12
4.22
No Undisclosed Events, Liabilities, Developments or Circumstances
12
4.23
No Additional Agreements
12
     
ARTICLE V  Representations and Warranties of the Shell Company Shareholder
12
5.1
Good Title
12
5.2
Power and Authority
13
5.3
No Conflicts
13
5.4
Litigation
13
5.5
No Finder’s Fee
13
5.6
Disclosure
13
     
ARTICLE VI  Conditions to Closing
13
6.1
Shell Company Conditions Precedent
13
6.2
RISE KING Conditions Precedent
14
     
ARTICLE VII  Covenants
16
7.1
Amended Charter
16
7.2
Public Announcements
16
7.3
Fees and Expenses
16
7.4
Continued Efforts
16
7.5
Exclusivity
16
7.6
Filing of 20-F
16
7.7
Furnishing of Information
16
7.8
Access
16
7.9
Preservation of Business
16
     
ARTICLE VIII  Miscellaneous
17
8.1
Notices
17
8.2
Amendments; Waivers
17
8.3
Replacement of Securities
18
8.4
Remedies
18
8.5
Limitation of Liability
18
8.6
Interpretation
18
8.7
Severability
18
8.8
Counterparts; Facsimile Execution
18
8.9
Entire Agreement; Third Party Beneficiaries
18
8.10
Survival
18
8.11
Governing Law
18
8.12
Assignment
19
     
SCHEDULE A
22
ANNEX A Definitions
23

 
ii
 

SHARE EXCHANGE AGREEMENT
 
This SHARE EXCHANGE AGREEMENT (this “Agreement”), dated as of July 30, 2011, is by and among RICH MOUNTAIN ENTERPRISES LIMITED, a British Virgin Islands company (the “Shell Company”), the shareholder of the Shell Company set forth on Schedule A hereto (the “Shell Company Shareholder”), RISE KING MANAGEMENT LIMITED, a British Virgin Islands company (“RISE KING”), and the shareholders of RISE KING set forth on Schedule A hereto (the “RISE KING Shareholders”). Each of the parties to this Agreement is individually referred to herein as a “Party” and collectively, as the “Parties.” Capitalized terms used herein that are not otherwise defined herein shall have the meanings ascribed to them in Annex A hereto.
 
BACKGROUND
 
A.           Shell Company is a company incorporated with limited liability under the laws of the British Virgin Islands with no significant operations.
 
B.           RISE KING is a company incorporated with limited liability under the laws of the British Virgin Islands.
 
C.           RISE KING has 50,000 ordinary shares (the “RISE KING Stock”) issued and outstanding, all of which are held by the RISE KING Shareholders according to the allocation set forth on Schedule A hereto.  Each of the RISE KING Shareholders has agreed to transfer each of its shares of RISE KING Stock in exchange for 140 newly issued ordinary shares of Shell Company (the “Shell Company Stock”).
 
D.           The Shell Company Shareholder has agreed to transfer all of the capital stock of the Shell Company issued and outstanding on the Closing Date in exchange for an aggregate of $200,000 (which is equal to $0.04 per share following the effectiveness of the Amended Charter (defined below)) in cash.
 
E.           The Shell Company Stock to be issued and transferred to the RISE KING Shareholders pursuant to this Agreement constitutes all of the issued and outstanding capital stock of the Shell Company as of and immediately after the Closing (as defined in Section 1.2 below).
 
F.           The Board of Directors of each of the Shell Company and RISE KING has determined that it is desirable to effect this plan of reorganization and share exchange.
 
AGREEMENT
 
NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, and intending to be legally bound hereby, the Parties agree as follows:
 
ARTICLE I
Exchange of Shares
 
1.1           Share Exchange.  At the Closing, (i) each of the RISE KING Shareholders shall sell, transfer, convey, assign and deliver to the Shell Company each share of its RISE KING Stock free and clear of all Liens, in exchange for 140 newly issued ordinary shares of Shell Company Stock (referred to herein as the “Shares”), according to the allocation set forth on Schedule B hereto and (ii) the Shell Company Shareholder shall sell, transfer, convey, assign and deliver to the RISE KING Shareholders all of the capital stock of the Shell Company issued and outstanding on the Closing Date free and clear of all Liens in exchange for an aggregate of $200,000 (which is equal to $0.04 per share following the effectiveness of the Amended Charter (defined below)) in cash, according to the allocation set forth on Schedule B hereto.

 
 
 

1.2           Closing.  The closing (the “Closing”) of the transactions contemplated hereby (the “Transactions”) shall take place at the offices of Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of the Americas, New York, New York 10036, commencing at 9:00 a.m. local time on the second business day following the satisfaction or waiver of all conditions to the obligations of the Parties to consummate the Transactions (other than conditions with respect to actions that the respective parties will take at Closing) or such other date and time as the Parties may mutually determine (the “Closing Date”).  Subsequent to the Closing, the RISE KING Shareholders shall bear responsibility for registering the Transactions with the Shell Company’s registered agent in the British Virgin Islands.
 
ARTICLE II
Representations and Warranties of the RISE KING Shareholders
 
Each of the RISE KING Shareholders severally (and not jointly) hereby represents and warrants to Shell Company and Shell Company Shareholder as follows.
 
2.1           Good Title.  The RISE KING Shareholder is the record and beneficial owner, and has good title to its RISE KING Stock, with the right and authority to sell and deliver such RISE KING Stock, free and clear of all Liens, claims, charges, encumbrances, pledges, mortgages, security interests, options, rights to acquire, proxies, voting trusts or similar agreements, restrictions on transfer or adverse claims of any nature whatsoever. Upon delivery of any certificate or certificates duly assigned, representing the same as herein contemplated and/or upon registering of Shell Company as the new owner of such RISE KING Stock in the share register of RISE KING, Shell Company will receive good title to such RISE KING Stock, free and clear of all Liens.
 
2.2           Organization.  The RISE KING Shareholder is duly organized and validly existing in its jurisdiction of organization.
 
2.3           Power and Authority.  The RISE KING Shareholder has the legal power and authority to execute and deliver this Agreement and to perform its obligations hereunder. All acts required to be taken by the RISE KING Shareholder to enter into this Agreement and to carry out the Transactions have been properly taken. This Agreement constitutes a legal, valid and binding obligation of the RISE KING Shareholder, enforceable against the RISE KING Shareholders in accordance with the terms hereof.
 
2.4           No Conflicts.  The execution and delivery of this Agreement by the RISE KING Shareholder and the performance by the RISE KING Shareholder of its obligations hereunder in accordance with the terms hereof: (a) will not require the consent of any third party or Governmental Entity under any Laws; (b) will not violate any Laws applicable to the RISE KING Shareholder; and (c) will not violate or breach any contractual obligation to which the RISE KING Shareholder is a party.
 
2.5           Litigation.  There is no pending proceeding against the RISE KING Shareholder that involves the Shares or that challenges, or may have the effect of preventing, delaying or making illegal, or otherwise interfering with, any of the Transactions and, to the knowledge of the RISE KING Shareholder, no such proceeding has been threatened, and no event or circumstance exists that is reasonably likely to give rise to or serve as a basis for the commencement of any such proceeding.
 
2.6           No Finder’s Fee.  The RISE KING Shareholder has not created any obligation for any finder’s, investment banker’s or broker’s fee in connection with the Transactions that are not payable entirely by the RISE KING Shareholder.
 
2.7           Purchase Entirely for Own Account.  The RISE KING Shareholder is acquiring the Shell Company Stock proposed to be acquired hereunder for investment for its own account and not with a view to the resale or distribution of any part thereof, and the RISE KING Shareholder has no present intention of selling or otherwise distributing the Shell Company Stock, except in compliance with applicable securities laws.
 
2.8           Available Information.  The RISE KING Shareholder has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of investment in Shell Company and has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the Shell Company Stock.

 
2
 
 
2.9           Non-Registration.  The RISE KING Shareholder understands that the Shell Company Stock has not been registered under the Securities Act and, if issued in accordance with the provisions of this Agreement, will be issued by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the RISE KING Shareholder’s  representations as expressed herein. The non-registration shall have no prejudice with respect to any rights, interests, benefits and entitlements attached to the Shell Company Stock in accordance with the Shell Company Constituent Instruments or the laws of its jurisdiction of incorporation.
 
2.10         Restricted Securities.  The RISE KING Shareholder understands that the Shares are characterized as “restricted securities” under the Securities Act inasmuch as this Agreement contemplates that, if acquired by the RISE KING Shareholder pursuant hereto, the Shares would be acquired in a transaction not involving a public offering. The issuance of the Shares hereunder is being effected in reliance upon an exemption from registration afforded under Section 4(2) of the Securities Act for transactions by an issuer not involving a public offering. The RISE KING Shareholder further acknowledges that if the Shares are issued to the RISE KING Shareholder in accordance with the provisions of this Agreement, such Shares may not be resold without registration under the Securities Act or the existence of an exemption therefrom. The RISE KING Shareholder represents that it is familiar with Rule 144 promulgated under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.
 
2.11         Accredited Investor.  The RISE KING Shareholder is an “accredited investor” within the meaning of Rule 501 under the Securities Act and the RISE KING Shareholder was not organized for the specific purpose of acquiring the Shares.
 
2.12         Additional Legend.  The RISE KING Shareholder consents to Shell Company making a notation on its records or giving instructions to any transfer agent of Shares in order to implement the restrictions on transfer of the Shares.
 
2.13         Disclosure.  This Agreement, the schedules hereto and any certificate attached hereto or delivered in accordance with the terms hereof by or on behalf of the RISE KING Shareholder in connection with the Transactions, when taken together, do not contain any untrue statement of a material fact or omit any material fact necessary in order to make the statements contained herein and/or therein not misleading.
 
ARTICLE III
Representations and Warranties of RISE KING
 
Subject to the exceptions set forth in the RISE KING Disclosure Letter (regardless of whether or not the RISE KING Disclosure Letter is referenced below with respect to any particular representation or warranty), RISE KING represents and warrants to Shell Company, the Shell Company Shareholder and the RISE KING Shareholders as follows.
 
3.1           Organization, Standing and Power.  RISE KING and each of its subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized and has the corporate power and authority and possesses all governmental franchises, licenses, permits, authorizations and approvals necessary to enable it to own, lease or otherwise hold its properties and assets and to conduct its businesses as presently conducted, other than such franchises, licenses, permits, authorizations and approvals the lack of which, individually or in the aggregate, has not had and would not reasonably be expected to have a material adverse effect on RISE KING and its subsidiaries taken as a whole, a material adverse effect on the ability of RISE KING to perform its obligations under this Agreement or on the ability of RISE KING to consummate the Transactions (a “RISE KING Material Adverse Effect”). RISE KING and each of its subsidiaries is duly qualified to do business in each jurisdiction where the nature of its business or its ownership or leasing of its properties make such qualification necessary except where the failure to so qualify would not reasonably be expected to have a RISE KING Material Adverse Effect. RISE KING has delivered to Shell Company true and complete copies of the RISE KING Constituent Instruments, and the comparable charter, organizational documents and other constituent instruments of each of its subsidiaries, in each case as amended through the date of this Agreement.

 
3
 
 
3.2          Subsidiaries; Equity Interests.
 
(a)           The RISE KING Disclosure Letter lists each subsidiary of RISE KING and its jurisdiction of organization. All the outstanding shares of capital stock or equity investments of each subsidiary have been validly issued and are fully paid and nonassessable and are as of the date of this Agreement owned by RISE KING or by another subsidiary of RISE KING, free and clear of all Liens.
 
(b)           Except for its interests in its subsidiaries, RISE KING does not, as of the date of this Agreement, own, directly or indirectly, any capital stock, membership interest, partnership interest, joint venture interest or other equity interest in any person.
 
3.3          Capital Structure.  The authorized capital stock of RISE KING consists of 50,000 ordinary shares, all of which are issued and outstanding. Except as set forth above, no shares of capital stock or other voting securities of RISE KING are issued, reserved for issuance or outstanding.  Except as disclosed in the RISE KING Disclosure Letter, RISE KING is the sole record and beneficial owner of all of the issued and outstanding capital stock of each of its subsidiaries. All outstanding shares of the capital stock of RISE KING and each of its subsidiaries are duly authorized, validly issued, fully paid and nonassessable and not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the applicable corporate laws of the jurisdiction in which such entity was organized, the organizational documents of any such entity or any Contract to which RISE KING is a party or otherwise bound. There are not any bonds, debentures, notes or other indebtedness of RISE KING or any of its subsidiaries having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which holders of RISE KING Stock or the capital stock of any of its subsidiaries may vote (“Voting RISE KING Debt”). As of the date of this Agreement, there are not any options, warrants, rights, convertible or exchangeable securities, “phantom” stock rights, stock appreciation rights, stock-based performance units, commitments, Contracts, arrangements or undertakings of any kind to which RISE KING or any of its subsidiaries is a party or by which any of them is bound (a) obligating RISE KING or any of its subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity interests in, or any security convertible or exercisable for or exchangeable into any capital stock of or other equity interest in, RISE KING or any of its subsidiaries or any Voting RISE KING Debt, (b) obligating RISE KING or any of its subsidiaries to issue, grant, extend or enter into any such option, warrant, call, right, security, commitment, Contract, arrangement or undertaking or (c) that give any person the right to receive any economic benefit or right similar to or derived from the economic benefits and rights occurring to holders of the capital stock of RISE KING or of any of its subsidiaries. As of the date of this Agreement, there are not any outstanding contractual obligations of RISE KING to repurchase, redeem or otherwise acquire any shares of capital stock of RISE KING.
 
3.4          Authority; Execution and Delivery; Enforceability.  RISE KING has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the Transactions. The execution and delivery by RISE KING of this Agreement and the consummation by RISE KING of the Transactions have been duly authorized and approved by the Board of Directors of RISE KING and no other corporate proceedings on the part of RISE KING are necessary to authorize this Agreement and the Transactions. When executed and delivered, this Agreement will be enforceable against RISE KING in accordance with its terms.
 
3.5          No Conflicts; Consents.
 
(a)           The execution and delivery by RISE KING of this Agreement does not, and the consummation of the Transactions and compliance with the terms hereof will not, conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, or result in the creation of any Lien upon any of the properties or assets of RISE KING or any of its subsidiaries under, any provision of (i) the RISE KING Constituent Instruments or the comparable charter or organizational documents of any of its subsidiaries, (ii) any Contract to which RISE KING or any of its subsidiaries is a party or to which any of their respective properties or assets is subject or (iii) subject to the filings and other matters referred to in Section 3.5(b), any material judgment, order or decree or material Law applicable to RISE KING or any of its subsidiaries or their respective properties or assets, other than, in the case of clauses (ii) and (iii) above, any such items that, individually or in the aggregate, have not had and would not reasonably be expected to have a RISE KING Material Adverse Effect.

 
4
 
 
(b)           Except for required filings with the SEC, and filings in the British Virgin Islands in connection with the Amended Charter (defined below), no Consent of, or registration, declaration or filing with, or permit from, any Governmental Entity is required to be obtained or made by or with respect to RISE KING or any of its subsidiaries in connection with the execution, delivery and performance of this Agreement or the consummation of the Transactions.
 
3.6          Taxes.
 
(a)           RISE KING and each of its subsidiaries has timely filed, or has caused to be timely filed on its behalf, all Tax Returns required to be filed by it, and all such Tax Returns are true, complete and accurate, except to the extent any failure to file or any inaccuracies in any filed Tax Returns, individually or in the aggregate, have not had and would not reasonably be expected to have a RISE KING Material Adverse Effect. All Taxes shown to be due on such Tax Returns, or otherwise owed, have been timely paid, except to the extent that any failure to pay, individually or in the aggregate, has not had and would not reasonably be expected to have a RISE KING Material Adverse Effect. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of RISE KING know of no basis for any such claim.
 
(b)           The RISE KING Financial Statements reflect an adequate reserve for all Taxes payable by RISE KING and its subsidiaries (in addition to any reserve for deferred Taxes to reflect timing differences between book and Tax items) for all taxable periods and portions thereof through the date of such financial statements. No deficiency with respect to any Taxes has been proposed, asserted or assessed against RISE KING or any of its subsidiaries, and no requests for waivers of the time to assess any such Taxes are pending, except to the extent any such deficiency or request for waiver, individually or in the aggregate, has not had and would not reasonably be expected to have a RISE KING Material Adverse Effect.
 
3.7          Benefit Plans.
 
(a)           Neither RISE KING nor any of its subsidiaries maintains any collective bargaining agreement or any bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, medical or other plan, arrangement or understanding (whether or not legally binding) providing benefits to any current or former employee, officer or director of RISE KING or any of its subsidiaries. As of the date of this Agreement there are not any severance or termination agreements or arrangements between RISE KING or any of its subsidiaries and any current or former employee, officer or director of RISE KING or any of its subsidiaries, nor does RISE KING or any of its subsidiaries have any general severance plan or policy.
 
3.8          Litigation.  There is no Action against or affecting RISE KING or any of its subsidiaries or any of their respective properties which (a) adversely affects or challenges the legality, validity or enforceability of any of this Agreement or the Shares or (b) could, if there were an unfavorable decision, individually or in the aggregate, have or reasonably be expected to result in a RISE KING Material Adverse Effect. Neither RISE KING nor any of its subsidiaries, nor any director or officer thereof (in his or her capacity as such), is or has been the subject of any Action involving a claim or violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty.
 
3.9          Compliance with Applicable Laws.  Except as set forth in the RISE KING Disclosure Letter, RISE KING and each of its subsidiaries have conducted their business and operations in compliance with all applicable Laws, including those relating to occupational health and safety and the environment, except for instances of noncompliance that, individually and in the aggregate, have not had and would not reasonably be expected to have a RISE KING Material Adverse Effect. RISE KING has not received any written communication during the past two years from a Governmental Entity that alleges that RISE KING is not in compliance in any material respect with any applicable Law. This Section 3.9 does not relate to matters with respect to Taxes, which are the subject of Section 3.6.
 
3.10          Contracts.  Neither RISE KING nor any of its subsidiaries is in violation of or in default under (nor does there exist any condition which upon the passage of time or the giving of notice would cause such a violation of or default under) any Contract to which it is a party or to which it or any of its properties or assets is subject, except for violations or defaults that would not, individually or in the aggregate, reasonably be expected to result in a RISE KING Material Adverse Effect.

 
5
 
 
3.11        Title to Properties.  RISE KING and each of its subsidiaries has sufficient title to, or valid leasehold interests in, all of its properties and assets used in the conduct of its businesses. All such assets and properties, other than assets and properties in which RISE KING or any of its subsidiaries has leasehold interests, are free and clear of all Liens and except for Liens that, in the aggregate, do not and will not materially interfere with the ability of RISE KING and its subsidiaries to conduct business as currently conducted.
 
3.12        Intellectual Property.  RISE KING and each of its subsidiaries own, or are validly licensed or otherwise have the right to use, all Intellectual Property Rights which are material to the conduct of the business of RISE KING and its subsidiaries taken as a whole. There are no claims pending or, to the knowledge of RISE KING, threatened that RISE KING or any of its subsidiaries is infringing or otherwise adversely affecting the rights of any person with regard to any Intellectual Property Right. To the knowledge of RISE KING, no person is infringing the rights of RISE KING or any of its subsidiaries with respect to any Intellectual Property Right.
 
3.13        Labor Matters.  There are no collective bargaining or other labor union agreements to which RISE KING or any of its subsidiaries is a party or by which any of them is bound. No material labor dispute exists or, to the knowledge of RISE KING, is imminent with respect to any of the employees of RISE KING.
 
3.14        Financial Statements; Liabilities.  RISE KING has delivered to Shell Company its audited consolidated financial statements for the fiscal years ended April 30, 2010 and 2009 (the “RISE KING Financial Statements”). The RISE KING Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated. The RISE KING Financial Statements fairly present in all material respects the financial condition and operating results of RISE KING, as of the dates, and for the periods, indicated therein. RISE KING does not have any material liabilities or obligations, contingent or otherwise, other than (a) liabilities incurred in the ordinary course of business subsequent to April 30, 2010, and (b) obligations under contracts and commitments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in the RISE KING Financial Statements, which, in both cases, individually and in the aggregate, would not be reasonably expected to result in a RISE KING Material Adverse Effect.
 
3.15        Investment Company.  RISE KING is not, and is not an affiliate of, and immediately following the Closing will not have become, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
 
3.16        Foreign Corrupt Practices.  Neither RISE KING, nor any of its subsidiaries, nor, to RISE KING’s knowledge, any director, officer, agent, employee or other person acting on behalf of RISE KING or any of its subsidiaries has, in the course of its actions for, or on behalf of, RISE KING (a) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (b) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; or (c) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.
 
3.17        Absence of Certain Changes or Events.  Except as disclosed in the RISE KING Financial Statements, from April 30, 2010 to the date of this Agreement, RISE KING has conducted its business only in the ordinary course, and during such period there has not been:
 
(a)           any change in the assets, liabilities, financial condition or operating results of RISE KING or any of its subsidiaries, except changes in the ordinary course of business that have not caused, in the aggregate, a RISE KING Material Adverse Effect;
 
(b)           any damage, destruction or loss, whether or not covered by insurance, that would have a RISE KING Material Adverse Effect;

 
6
 
 
(c)           any waiver or compromise by RISE KING or any of its subsidiaries of a valuable right or of a material debt owed to it;
 
(d)           any satisfaction or discharge of any lien, claim, or encumbrance or payment of any obligation by RISE KING or any of its subsidiaries, except in the ordinary course of business and the satisfaction or discharge of which would not have a RISE KING Material Adverse Effect;
 
(e)           any material change to a material Contract by which RISE KING or any of its subsidiaries or any of its respective assets is bound or subject;
 
(f)           any mortgage, pledge, transfer of a security interest in, or lien, created by RISE KING or any of its subsidiaries, with respect to any of its material properties or assets, except liens for taxes not yet due or payable and liens that arise in the ordinary course of business and do not materially impair RISE KING’s or its subsidiaries’ ownership or use of such property or assets;
 
(g)           any loans or guarantees made by RISE KING or any of its subsidiaries to or for the benefit of its employees, officers or directors, or any members of their immediate families, or any loans or advances to any persons, corporations, business trusts, associations, companies, partnerships, limited liability companies, joint ventures and other entities, governments, agencies and political subdivision other than travel advances and other advances made in the ordinary course of its business;
 
(h)           any alteration of RISE KING’s method of accounting or the identity of its auditors;
 
(i)            any declaration or payment of dividend or distribution of cash or other property to the RISE KING Shareholders or any purchase, redemption or agreements to purchase or redeem any RISE KING Stock;
 
(j)            any issuance, sale, disposition or encumbrance of equity securities to any officer, director or affiliate, or any change in their outstanding shares of capital stock or their capitalization, whether by reason of reclassification, recapitalization, stock split, combination, exchange or readjustment of shares, stock dividend or otherwise; or
 
(k)           any arrangement or commitment by RISE KING or any of its subsidiaries to do any of the matters described in this Section 3.20.
 
3.18        Disclosure.  RISE KING confirms that neither it nor any person acting on its behalf has provided Shell Company or its agents or counsel with any information that it believes constitutes material, non-public information except insofar as the existence and terms of the proposed transactions hereunder may constitute such information and except for information that will be disclosed by Shell Company under a shell company report on Form 20-F filed within four business days after the Closing. RISE KING understands and confirms that Shell Company will rely on the foregoing representations and covenants in effecting transactions in securities of RISE KING. All of the representations and warranties of RISE KING set forth in this Agreement are true and correct and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.
 
ARTICLE IV
Representations and Warranties of Shell Company
 
Shell Company represents and warrants as follows to RISE KING and the RISE KING Shareholders.

 
7
 

4.1          Organization, Standing and Power.  Shell Company is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized and has full corporate power and authority and possesses all governmental franchises, licenses, permits, authorizations and approvals necessary to enable it to own, lease or otherwise hold its properties and assets and to conduct its businesses as presently conducted, other than such franchises, licenses, permits, authorizations and approvals the lack of which, individually or in the aggregate, has not had and would not reasonably be expected to have a material adverse effect on Shell Company, a material adverse effect on the ability of Shell Company to perform its obligations under this Agreement or on the ability of Shell Company to consummate the Transactions (a “Shell Company Material Adverse Effect”). Shell Company is duly qualified to do business in each jurisdiction where the nature of its business or its ownership or leasing of its properties makes such qualification necessary and where the failure to so qualify would reasonably be expected to have a Shell Company Material Adverse Effect. Shell Company has delivered to RISE KING or its counsel true and complete copies of the Shell Company Constituent Instruments.
 
4.2          Subsidiaries; Equity Interests.  Shell Company does not own, directly or indirectly, any capital stock, membership interest, partnership interest, joint venture interest or other equity interest in any person.
 
4.3          Capital Structure.  Upon the effectiveness of the Amended Charter (defined below), the authorized capital stock of Shell Company shall consist of 100,000,000 ordinary shares of $0.01 par value each. As of the date hereof, (a) 50,000 ordinary shares are issued and outstanding, (b) no preference shares are issued and outstanding, and (c) no ordinary shares or preference shares are held by Shell Company in its treasury. Upon the effectiveness of the Amended Charter (defined below), (a) 5,000,000 ordinary shares will be issued and outstanding, (b) no preference shares will be issued and outstanding, and (c) no ordinary shares or preference shares will be held by Shell Company in its treasury. Except as set forth above, no shares of capital stock or other voting securities of Shell Company were issued, reserved for issuance or outstanding. Upon the effectiveness of the Amended Charter (defined below), all outstanding shares of the capital stock of Shell Company, and all such shares that may be issued prior to date, will be duly authorized, validly issued, fully paid and nonassessable.  None of the outstanding shares of capital stock are subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the applicable corporate laws of the British Virgin Islands, the Shell Company Constituent Instruments or any Contract to which Shell Company is a party or otherwise bound. There are not any bonds, debentures, notes or other indebtedness of Shell Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which holders of Shell Company’s ordinary shares may vote (“Voting Shell Company Debt”). As of the date of this Agreement, there are not any options, warrants, rights, convertible or exchangeable securities, “phantom” stock rights, stock appreciation rights, stock-based performance units, commitments, Contracts, arrangements or undertakings of any kind to which Shell Company is a party or by which it is bound (a) obligating Shell Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity interests in, or any security convertible or exercisable for or exchangeable into any capital stock of or other equity interest in, Shell Company or any Voting Shell Company Debt, (b) obligating Shell Company to issue, grant, extend or enter into any such option, warrant, call, right, security, commitment, Contract, arrangement or undertaking or (c) that give any person the right to receive any economic benefit or right similar to or derived from the economic benefits and rights occurring to holders of the capital stock of Shell Company. As of the date of this Agreement, there are not any outstanding contractual obligations of Shell Company to repurchase, redeem or otherwise acquire any shares of capital stock of Shell Company. The RISE KING Shareholder list provided to RISE KING is a current shareholder list and accurately reflects all of the issued and outstanding shares of Shell Company’s capital stock.
 
4.4          Authority; Execution and Delivery; Enforceability.  The execution and delivery by Shell Company of this Agreement and the consummation by Shell Company of the Transactions have been duly authorized and approved by the Board of Directors of Shell Company and no other corporate proceedings on the part of Shell Company are necessary to authorize this Agreement and the Transactions. This Agreement constitutes a legal, valid and binding obligation of Shell Company, enforceable against Shell Company in accordance with the terms hereof.
 
4.5          No Conflicts; Consents.
 
(a)           The execution and delivery by Shell Company of this Agreement does not, and the consummation of Transactions and compliance with the terms hereof will not, contravene, conflict with or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, or to increased, additional, accelerated or guaranteed rights or entitlements of any person under, or result in the creation of any Lien upon any of the properties or assets of Shell Company under, any provision of (i) the Shell Company Constituent Instruments, (ii) any material Contract to which Shell Company is a party or to which any of its properties or assets is subject or (iii) subject to the filings and other matters referred to in Section 4.5(b), any material Order or material Law applicable to Shell Company or its properties or assets, other than, in the case of clauses (ii) and (iii) above, any such items that, individually or in the aggregate, have not had and would not reasonably be expected to have a Shell Company Material Adverse Effect.

 
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(b)           Except for required filings with the SEC, and filings in the British Virgin Islands in connection with the Amended Charter (defined below), no Consent of, or registration, declaration or filing with, or permit from, any Governmental Entity is required to be obtained or made by or with respect to Shell Company in connection with the execution, delivery and performance of this Agreement or the consummation of the Transactions.
 
4.6          Taxes.
 
(a)           Shell Company has timely filed, or has caused to be timely filed on its behalf, all Tax Returns required to be filed by it, and all such Tax Returns are true, complete and accurate, except to the extent any failure to file, any delinquency in filing or any inaccuracies in any filed Tax Returns, individually or in the aggregate, have not had and would not reasonably be expected to have a Shell Company Material Adverse Effect. All Taxes shown to be due on such Tax Returns, or otherwise owed, have been timely paid, except to the extent that any failure to pay, individually or in the aggregate, has not had and would not reasonably be expected to have a Shell Company Material Adverse Effect.
 
(b)           The most recent financial statements contained in the SEC Reports reflect an adequate reserve for all Taxes payable by Shell Company (in addition to any reserve for deferred Taxes to reflect timing differences between book and Tax items) for all taxable periods and portions thereof through the date of such financial statements. No deficiency with respect to any Taxes has been proposed, asserted or assessed against Shell Company, and no requests for waivers of the time to assess any such Taxes are pending, except to the extent any such deficiency or request for waiver, individually or in the aggregate, has not had and would not reasonably be expected to have a Shell Company Material Adverse Effect.
 
(c)           There are no Liens for Taxes (other than for current Taxes not yet due and payable) on the assets of Shell Company. Shell Company is not bound by any agreement with respect to Taxes.
 
4.7          Benefit Plans.  Shell Company does not, and since its inception never has, maintained or contributed to any bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, medical or other plan, arrangement or understanding (whether or not legally binding) providing benefits to any current or former employee, officer or director of Shell Company. As of the date of this Agreement, there are not any employment, consulting, indemnification, severance or termination agreements or arrangements between Shell Company and any current or former employee, officer or director of Shell Company, nor does Shell Company have any general severance plan or policy.
 
4.8          Benefit Plans.  Shell Company does not, and since its inception never has, maintained or contributed to any benefit plan for the benefit of any current or former employees, consultants, officers or directors of Shell Company.
 
4.9          Litigation.  There is no Action against or affecting Shell Company or any of its properties which (a) adversely affects or challenges the legality, validity or enforceability of either of this Agreement or the Shares or (b) could, if there were an unfavorable decision, individually or in the aggregate, have or reasonably be expected to result in a Shell Company Material Adverse Effect. Neither Shell Company nor any director or officer (in his or her capacity as such), is or has been the subject of any Action involving a claim or violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty.

 
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4.10        Compliance with Applicable Laws.  Shell Company is in compliance with all applicable Laws, including those relating to occupational health and safety, the environment, export controls, trade sanctions and embargoes, except for instances of noncompliance that, individually and in the aggregate, have not had and would not reasonably be expected to have a Shell Company Material Adverse Effect. Shell Company has not received any written communication during the past two years from a Governmental Entity that alleges that Shell Company is not in compliance in any material respect with any applicable Law. Shell Company is in compliance with all effective requirements of the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations thereunder, that are applicable to it, except where such noncompliance could not have or reasonably be expected to result in a Shell Company Material Adverse Effect. This Section 4.10 does not relate to matters with respect to Taxes, which are the subject of Section 4.6.
 
4.11        Contracts.  Except as disclosed in the SEC Reports, there are no Contracts that are material to the business, properties, assets, condition (financial or otherwise), results of operations or prospects of Shell Company taken as a whole. Shell Company is not in violation of or in default under (nor does there exist any condition which upon the passage of time or the giving of notice would cause such a violation of or default under) any Contract to which it is a party or to which it or any of its properties or assets is subject, except for violations or defaults that would not, individually or in the aggregate, reasonably be expected to result in a Shell Company Material Adverse Effect.
 
4.12        Title to Properties.  Shell Company has good title to, or valid leasehold interests in, all of its properties and assets used in the conduct of its businesses. All such assets and properties, other than assets and properties in which Shell Company has leasehold interests, are free and clear of all Liens, except for Liens that, in the aggregate, do not and will not materially interfere with the ability of Shell Company to conduct business as currently conducted. Shell Company has complied in all material respects with the terms of all material leases to which it is a party and under which it is in occupancy, and all such leases are in full force and effect. Shell Company enjoys peaceful and undisturbed possession under all such material leases.
 
4.13        Intellectual Property.  Shell Company does not own, nor is validly licensed nor otherwise has the right to use, any Intellectual Property Rights. No claims are pending or, to the knowledge of Shell Company, threatened that Shell Company is infringing or otherwise adversely affecting the rights of any person with regard to any Intellectual Property Right.
 
4.14        Labor Matters.  There are no collective bargaining or other labor union agreements to which Shell Company is a party or by which it is bound. No material labor dispute exists or, to the knowledge of Shell Company, is imminent with respect to any of the employees of Shell Company.
 
4.15        SEC Documents; Undisclosed Liabilities.
 
(a)           Shell Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC since March 23, 2011, pursuant to Sections 13(a), 14(a) and 15(d) of the Exchange Act (the “SEC Reports”).
 
(b)           As of its respective filing date, the SEC Reports complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Reports. Except to the extent that information contained in the SEC Reports has been revised or superseded by any report, schedule, form, statement or other document filed by Shell Company with the SEC subsequent to the filing of such revised or superseded information, none of the SEC Reports contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The consolidated financial statements of Shell Company included in the SEC Reports comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with the U.S. generally accepted accounting principles (except, in the case of unaudited statements, as permitted by the rules and regulations of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present the consolidated financial position of Shell Company and its consolidated subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods shown (subject, in the case of unaudited statements, to normal year-end audit adjustments).

 
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(c)           Except as set forth in the SEC Reports, Shell Company has no liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) required by U.S. generally accepted accounting principles to be set forth on a balance sheet of Shell Company or in the notes thereto. There are no financial or contractual obligations and liabilities (including any obligations to issue capital stock or other securities) due after the date hereof. All liabilities of Shell Company shall have been paid off and shall in no event remain liabilities of Shell Company, RISE KING or the RISE KING Shareholders following the Closing.
 
4.16        Transactions With Affiliates and Employees.  Except as disclosed in the SEC Reports, none of the officers or directors of Shell Company and, to the knowledge of Shell Company, none of the employees of Shell Company is presently a party to any transaction with Shell Company (other than for services as employees, officers and directors), including any Contract or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of Shell Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.
 
4.17        Investment Company.  Shell Company is not, and is not an affiliate of, and immediately following the Closing will not have become, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
 
4.18        Foreign Corrupt Practices.  Neither Shell Company, nor to Shell Company’s knowledge, any director, officer, agent, employee or other person acting on behalf of Shell Company has, in the course of its actions for, or on behalf of, Shell Company (a) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (b) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; or (c) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.
 
4.19        Absence of Certain Changes or Events.  Except as disclosed in the SEC Reports, from the date of the most recent financial statements contained in the SEC Reports to the date of this Agreement, Shell Company has conducted its business only in the ordinary course, and during such period there has not been:
 
(a)           any change in the assets, liabilities, financial condition or operating results of Shell Company from that reflected in the financial statements contained in the SEC Reports, except changes in the ordinary course of business that have not caused, in the aggregate, a Shell Company Material Adverse Effect;
 
(b)           any damage, destruction or loss, whether or not covered by insurance, that would have a Shell Company Material Adverse Effect;
 
(c)           any waiver or compromise by Shell Company of a valuable right or of a material debt owed to it;
 
(d)           any satisfaction or discharge of any lien, claim, or encumbrance or payment of any obligation by Shell Company, except in the ordinary course of business and the satisfaction or discharge of which would not have a Shell Company Material Adverse Effect;
 
(e)           any material change to a material Contract by which Shell Company or any of its assets is bound or subject;
 
(f)           any material change in any compensation arrangement or agreement with any employee, officer, director or shareholder;
 
(g)           any resignation or termination of employment of any officer of Shell Company;
 
(h)           any mortgage, pledge, transfer of a security interest in or lien created by Shell Company with respect to any of its material properties or assets, except liens for taxes not yet due or payable and liens that arise in the ordinary course of business and that do not materially impair Shell Company’s ownership or use of such property or assets;

 
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(i)            any loans or guarantees made by Shell Company to or for the benefit of its employees, officers or directors, or any members of their immediate families, other than travel advances and other advances made in the ordinary course of its business;
 
(j)            any declaration, setting aside or payment or other distribution in respect of any of Shell Company’s capital stock, or any direct or indirect redemption, purchase, or other acquisition of any of such stock by Shell Company;
 
(k)           any alteration of Shell Company’s method of accounting or the identity of its auditors;
 
(l)            any issuance of equity securities to any officer, director or affiliate, except pursuant to existing Shell Company stock option plans; or
 
(m)          any arrangement or commitment by Shell Company to do any of the matters described in this Section 4.19.
 
4.20        Certain Registration Matters.  Shell Company has not granted or agreed to grant to any person any rights (including “piggy-back” registration rights) to have any securities of Shell Company registered with the SEC or any other governmental authority that have not been satisfied.
 
4.21        Disclosure.  Shell Company confirms that neither it nor any person acting on its behalf has provided RISE KING, the RISE KING Shareholder or their respective agents or counsel with any information that Shell Company believes constitutes material, non-public information except insofar as the existence and terms of the proposed transactions hereunder may constitute such information and except for information that will be disclosed by Shell Company under a shell company report on Form 20-F filed within four business days after the Closing. Shell Company understands and confirms that RISE KING and the RISE KING Shareholders will rely on the foregoing representations and covenants in effecting transactions in securities of Shell Company. All of the representations and warranties set forth in this Agreement are true and correct and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.
 
4.22        No Undisclosed Events, Liabilities, Developments or Circumstances.  No event, liability, development or circumstance has occurred or exists, or is contemplated to occur with respect to Shell Company, or its businesses, properties, prospects, operations or financial condition, that would be required to be disclosed by Shell Company under applicable securities laws on a registration statement filed with the SEC relating to an issuance and sale by Shell Company of its ordinary shares and which has not been publicly announced or will not be publicly announced in a shell company report on Form 20-F filed within four business days after the Closing.
 
4.23        No Additional Agreements.  Shell Company does not have any agreement or understanding with RISE KING or the RISE KING Shareholders with respect to the Transactions other than as specified in this Agreement.
 
ARTICLE V
Representations and Warranties of the Shell Company Shareholder
 
5.1          Good Title.  Upon the effectiveness of the Amended Charter, the Shell Company Shareholder will be the record and beneficial owner, and has good title to its Shell Company Stock, with the right and authority to sell and deliver such Shell Company Stock, free and clear of all Liens, claims, charges, encumbrances, pledges, mortgages, security interests, options, rights to acquire, proxies, voting trusts or similar agreements, restrictions on transfer or adverse claims of any nature whatsoever. Upon delivery of any certificate or certificates duly assigned, representing the same as herein contemplated and/or upon registering of the RISE KING Shareholders as the new owner of such Shell Company Stock in the share register of Shell Company, the RISE KING Shareholders will receive good title to such Shell Company Stock, free and clear of all Liens provided that the Amended Charter is then effective.

 
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5.2          Power and Authority.  The Shell Company Shareholder has the legal power and authority to execute and deliver this Agreement and to perform its obligations hereunder. All acts required to be taken by the Shell Company Shareholder to enter into this Agreement and to carry out the Transactions have been properly taken. This Agreement constitutes a legal, valid and binding obligation of the Shell Company Shareholder, enforceable against the Shell Company Shareholder in accordance with the terms hereof.
 
5.3          No Conflicts.  The execution and delivery of this Agreement by the Shell Company Shareholder and the performance by the Shell Company Shareholder of its obligations hereunder in accordance with the terms hereof: (a) will not require the consent of any third party or Governmental Entity under any Laws; (b) will not violate any Laws applicable to the Shell Company Shareholder; and (c) will not violate or breach any contractual obligation to which the Shell Company Shareholder is a party.
 
5.4          Litigation.  There is no pending proceeding against the Shell Company Shareholder that involves the Shell Company Stock to be sold by the Shell Company Shareholder pursuant to this Agreement or that challenges, or may have the effect of preventing, delaying or making illegal, or otherwise interfering with, any of the Transactions and, to the knowledge of the Shell Company Shareholder, no such proceeding has been threatened, and no event or circumstance exists that is reasonably likely to give rise to or serve as a basis for the commencement of any such proceeding.
 
5.5          No Finder’s Fee.  The Shell Company Shareholder has not created any obligation for any finder’s, investment banker’s or broker’s fee in connection with the Transactions that are not payable entirely by the RISE KING Shareholder.
 
5.6          Disclosure.  This Agreement, the schedules hereto and any certificate attached hereto or delivered in accordance with the terms hereof by or on behalf of the Shell Company Shareholder in connection with the Transactions, when taken together, do not contain any untrue statement of a material fact or omit any material fact necessary in order to make the statements contained herein and/or therein not misleading.
 
ARTICLE VI
Conditions to Closing
 
6.1          Shell Company Conditions Precedent.  The obligations of the RISE KING Shareholders and RISE KING to enter into and complete the Closing are subject, at the option of the RISE KING Shareholders and RISE KING, to the fulfillment on or prior to the Closing Date of the following conditions, any one or more of which may be waived by RISE KING and the RISE KING Shareholders in writing.
 
(a)           Representations and Covenants.  The representations and warranties of Shell Company and Shell Company Shareholder contained in this Agreement shall be true in all material respects on and as of the Closing Date with the same force and effect as though made on and as of the Closing Date. Shell Company and Shell Company Shareholder shall have performed and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by Shell Company or the Shell Company Shareholders, respectively, on or prior to the Closing Date. Shell Company and Shell Company Shareholder shall have delivered to the RISE KING Shareholders and RISE KING a certificate, dated the Closing Date, to the foregoing effect.
 
(b)           Litigation.  No action, suit or proceeding shall have been instituted before any court or governmental or regulatory body or instituted or threatened by any governmental or regulatory body to restrain, modify or prevent the carrying out of the Transactions or to seek damages or a discovery order in connection with such Transactions. No action, suit or proceeding before any court or governmental or regulatory body or instituted or threatened by any governmental or regulatory body has or may have, in the reasonable opinion of RISE KING or the RISE KING Shareholders, a Shell Company Material Adverse Effect.
 
(c)           Consents.  Shell Company shall have obtained all material consents, waivers, approvals, authorizations or orders required to be obtained, and made all filings required to be made, for the authorization, execution and delivery of this Agreement and the consummation of the Transactions, except where the failure to receive such consents, waivers, approvals, authorizations or orders or to make such filings would not have a Shell Company Material Adverse Effect.

 
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(d)           No Material Adverse Change.  There shall not have been any occurrence, event, incident, action, failure to act, or transaction since April 30, 2010 which has had or is reasonably likely to cause a Shell Company Material Adverse Effect.
 
(e)           Amended Charter.  Shell Company shall have filed all necessary documents and taken all other necessary actions to amend its articles and memorandum of association in the form attached hereto as Exhibit A (the “Amended Charter”).
 
(f)           Post-Closing Capitalization.  At, and immediately after, the Closing, the authorized capitalization, and the number of issued and outstanding shares of the capital stock of Shell Company, on a fully-diluted basis, as indicated on a schedule to be delivered by the Parties at or prior to the Closing, shall be acceptable to RISE KING and the RISE KING Shareholders.
 
(g)           Satisfactory Completion of Due Diligence.  RISE KING and the RISE KING Shareholders shall have completed their legal, accounting and business due diligence of Shell Company and the results thereof shall be satisfactory to RISE KING and the RISE KING Shareholders in their sole and absolute discretion.
 
(h)           SEC Reports.  Shell Company shall have filed all reports and other documents required to be filed by it under the U.S. federal securities laws through the Closing Date.
 
(i)            Secretary’s Certificate.  Shell Company shall have delivered to RISE KING and the RISE KING Shareholders a certificate, signed by Shell Company’s Secretary (or authorized director or officer), certifying that the attached copies of the Shell Company Constituent Instruments, as amended pursuant to the Charter Amendment,  and resolutions of its Board of Directors approving this Agreement and the Transactions are all true, complete and correct and remain in full force and effect.
 
(j)            Payoff Letters and Releases.  Shell Company shall have delivered to RISE KING and the RISE KING Shareholders such pay-off letters and releases relating to liabilities of Shell Company as RISE KING or the RISE KING Shareholders shall request, in form and substance satisfactory to RISE KING and the RISE KING Shareholders.
 
(k)           Issuance of Shares.  Shell Company and Shell Company Shareholder shall have issued the Shares on the Shell Company’s share registry. At or within five business days following the Closing, Shell Company and Shell Company Shareholder shall deliver to the RISE KING Shareholders a certificate representing the Shares.
 
(l)            No Governmental Prohibition.  No order, statute, rule, regulation. executive order, injunction, stay, decree, judgment or restraining order shall have been enacted, entered, promulgated or enforced by any Governmental Entity which prohibits the consummation of the Transactions.
 
6.2          RISE KING Conditions Precedent.  The obligations of Shell Company and Shell Company Shareholder to enter into and complete the Closing is subject, at the option of Shell Company and Shell Company Shareholder, to the fulfillment on or prior to the Closing Date of the following conditions, any one or more of which may be waived by Shell Company or Shell Company Shareholder in writing.
 
(a)           Representations and Covenants.  The representations and warranties of the RISE KING Shareholders and RISE KING contained in this Agreement shall be true in all material respects on and as of the Closing Date with the same force and effect as though made on and as of the Closing Date.  The RISE KING Shareholders and RISE KING shall have performed and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by the RISE KING Shareholders and RISE KING on or prior to the Closing Date. Each of RISE KING and the RISE KING Shareholders shall have delivered to Shell Company and Shell Company Shareholder a certificate, dated the Closing Date, to the foregoing effect.

 
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(b)           Litigation.  No action, suit or proceeding shall have been instituted before any court or governmental or regulatory body or instituted or threatened by any governmental or regulatory body to restrain, modify or prevent the carrying out of the Transactions or to seek damages or a discovery order in connection with such Transactions, or which has or may have, in the reasonable opinion of Shell Company and Shell Company Shareholder, a materially adverse effect on the assets, properties, business, operations or condition (financial or otherwise) of RISE KING.
 
(c)           Consents.  All material consents, waivers, approvals, authorizations or orders required to be obtained, and all filings required to be made, by the RISE KING Shareholders or RISE KING for the authorization, execution and delivery of this Agreement and the consummation by them of the Transactions, shall have been obtained and made by the RISE KING Shareholders or RISE KING, except where the failure to receive such consents, waivers, approvals, authorizations or orders or to make such filings would not have a RISE KING Material Adverse Effect.
 
(d)           No Material Adverse Change.  There shall not have been any occurrence, event, incident, action, failure to act, or transaction since the date of the RISE KING Financial Statements which has had or is reasonably likely to cause a RISE KING Material Adverse Effect.
 
(e)           Post-Closing Capitalization.  At, and immediately after, the Closing, the authorized capitalization, and the number of issued and outstanding shares of the capital stock of Shell Company, on a fully-diluted basis, as indicated on a schedule to be delivered by the Parties at or prior to the Closing, shall be acceptable to Shell Company.
 
(f)           Satisfactory Completion of Due Diligence.  Shell Company shall have completed its legal, accounting and business due diligence of RISE KING and the results thereof shall be satisfactory to Shell Company in its sole and absolute discretion.
 
(g)           Secretary’s Certificate.  RISE KING shall have delivered to Shell Company a certificate, signed by its Secretary (or authorized director or officer), certifying that the attached copies of the RISE KING Constituent Instruments and resolutions of the Board of Directors of RISE KING approving this Agreement and the Transactions are all true, complete and correct and remain in full force and effect.
 
(h)           Delivery of Audit Report and Financial Statements.  RISE KING shall have completed the RISE KING Financial Statements and shall have received an audit report from an independent audit firm that is registered with the Public Company Accounting Oversight Board.
 
(i)            Form 20-F.  RISE KING shall have provided Shell Company with reasonable assurances that Shell Company will be able to comply with its obligation to file a shell company report on Form 20-F within four (4) business days following the Closing containing the requisite financial statements of RISE KING and the requisite disclosure regarding RISE KING and its subsidiaries.
 
(j)            Share Transfer Documents.  The RISE KING Shareholders shall have delivered to Shell Company certificate(s) representing its RISE KING Stock, accompanied by an executed instrument of transfer and bought and sold note for transfer by the RISE KING Shareholders of its RISE KING Stock to Shell Company.
 
(k)           No Governmental Prohibition.  No order, statute, rule, regulation. executive order, injunction, stay, decree, judgment or restraining order shall have been enacted, entered, promulgated or enforced by any Governmental Entity which prohibits the consummation of the Transactions.
 
(l)            Delivery of Purchase Price.  The RISE KING Shareholders shall have delivered to the Shell Company Shareholder the applicable purchase price for the Shares to be purchased by each RISE KING Shareholder.

 
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ARTICLE VII
Covenants
 
7.1           Amended Charter.  Shell Company shall file all necessary documents and take all other necessary actions to amend its articles of association in accordance with the Amended Charter.
 
7.2           Public Announcements.  Shell Company and RISE KING will consult with each other before issuing, and provide each other the opportunity to review and comment upon, any press releases or other public statements with respect to this Agreement and the Transactions and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable Law, court process or by obligations pursuant to any listing agreement with any national securities exchanges.
 
7.3           Fees and Expenses.  All fees and expenses incurred in connection with this Agreement shall be paid by the Party incurring such fees or expenses, whether or not this Agreement is consummated.
 
7.4           Continued Efforts.  Each Party shall use commercially reasonable efforts to (a) take all action reasonably necessary to consummate the Transactions, and (b) take such steps and do such acts as may be necessary to keep all of its representations and warranties true and correct as of the Closing Date with the same effect as if the same had been made, and this Agreement had been dated, as of the Closing Date.
 
7.5           Exclusivity.  Neither Shell Company nor RISE KING shall (a) solicit, initiate, or encourage the submission of any proposal or offer from any person relating to the acquisition of any capital stock or other voting securities of Shell Company or RISE KING (as applicable), or any assets of Shell Company or RISE KING (as applicable) (including any acquisition structured as a merger, consolidation, share exchange or other business combination), (b) participate in any discussions or negotiations regarding, furnish any information with respect to, assist or participate in, or facilitate in any other manner any effort or attempt by any person to do or seek any of the foregoing, or (c) take any other action that is inconsistent with the Transactions and that has the effect of avoiding the Closing contemplated hereby. Each shall notify the other immediately if any person makes any proposal, offer, inquiry, or contact with respect to any of the foregoing.
 
7.6           Filing of 20-F.  Shell Company shall file, within four (4) business days of the Closing Date, a shell company report on Form 20-F and attach as exhibits all relevant agreements with the SEC disclosing the terms of this Agreement and other requisite disclosure regarding the Transactions and including the requisite audited consolidated financial statements of RISE KING and the requisite disclosure regarding RISE KING and its subsidiaries. In addition, Shell Company shall issue a press release at a mutually agreeable time following the Closing Date.
 
7.7           Furnishing of Information.  As long as the RISE KING Shareholders own the Shares, Shell Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by Shell Company after the date hereof pursuant to the Exchange Act. As long as the RISE KING Shareholders own the Shares, if Shell Company is not required to file reports pursuant to such laws, it will prepare and furnish to the RISE KING Shareholders and make publicly available in accordance with Rule 144(c) promulgated by the SEC pursuant to the Securities Act, such information as is required for the RISE KING Shareholders to sell Shares under Rule 144. Shell Company further covenants that it will take such further action as any holder of the Shares may reasonably request, all to the extent required from time to time to enable such person to sell the Shares without registration under the Securities Act within the limitation of the exemptions provided by Rule 144.
 
7.8           Access.  Each of Shell Company and RISE KING shall permit representatives of each other to have full access to all premises, properties, personnel, books, records, contracts, and documents of or pertaining to such party.

 
16
 

7.9           Preservation of Business.  From the date of this Agreement until the Closing Date, each of RISE KING and Shell Company shall, except as otherwise permitted by the terms of this Agreement, operate only in the ordinary and usual course of business consistent with its past practices and shall use reasonable commercial efforts to (a) preserve intact its business organization, (b) preserve the good will and advantageous relationships with customers, suppliers, independent contractors, employees and other persons material to the operation of its business, and (c) not permit any action or omission that would cause any of its representations or warranties contained herein to become inaccurate or any of its covenants to be breached in any material respect.
 
ARTICLE VIII
Miscellaneous
 
8.1           Notices.  All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given upon receipt by the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice):
 
If to Shell Company, to:

Wei Guo
RICH MOUNTAIN ENTERPRISES LIMITED
35/F Central Plaza
18 Harbour Road
Wanchai, Hong Kong
 
If to Shell Company Shareholder, to:
 
ETERNAL CITY INVESTMENTS LTD.
35/F Central Plaza
18 Harbour Road
Wanchai, Hong Kong
 
If to RISE KING, to:
 
Akara Bldg.,
24 De Castro Street,
Wickhams Cay 1, Road Town,
British Virgin Islands

with a copy to:

Kramer Levin Naftalis & Frankel LLP
1177 Avenue of the Americas
New York, New York  10036
Attention:  Bill Huo, Esq.
 
If to the RISE KING Shareholders, to:
 
No.1 Road,
Yuci Industrial Park,
Jinzhong City,
Yuci District, Jinzhong City, Shanxi, 030600,
People’s Republic of China
 
8.2           Amendments; Waivers.  No provision of this Agreement may be waived or amended except in a written instrument signed by RISE KING, Shell Company, the RISE KING Shareholders and the Shell Company Shareholder. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any Party to exercise any right hereunder in any manner impair the exercise of any such right.

 
17
 
 
8.3           Replacement of Securities.  If any certificate or instrument evidencing any Shares is mutilated, lost, stolen or destroyed, Shell Company and Shell Company Shareholder shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to Shell Company and Shell Company Shareholder of such loss, theft or destruction and customary and reasonable indemnity, if requested. The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Shares. If a replacement certificate or instrument evidencing any Shares is requested due to a mutilation thereof, Shell Company and Shell Company Shareholder may require delivery of such mutilated certificate or instrument as a condition precedent to any issuance of a replacement.
 
8.4           Remedies.  In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the RISE KING Shareholders, Shell Company, RISE KING and Shell Company Shareholder will be entitled to specific performance under this Agreement. The Parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.
 
8.5           Limitation of Liability.  Notwithstanding anything herein to the contrary, each of Shell Company, RISE KING and the RISE KING Shareholders acknowledges and agrees that the liability of any Shareholder arising directly or indirectly, under any Transaction Document of any and every nature whatsoever shall be satisfied solely out of the assets of such Shareholder, and that no trustee, officer, other investment vehicle or any other affiliate of such Shareholder or any investor, shareholder or holder of shares of beneficial interest of such Shareholder shall be personally liable for any liabilities of such Shareholder.
 
8.6           Interpretation.  When a reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”.
 
8.7           Severability.  If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule or Law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions is not affected in any manner materially adverse to any Party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that the Transactions are fulfilled to the extent possible.
 
8.8           Counterparts; Facsimile Execution.  This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Parties. Facsimile execution and delivery of this Agreement is legal, valid and binding for all purposes.
 
8.9           Entire Agreement; Third Party Beneficiaries.  This Agreement, taken together with the RISE KING Disclosure Letter, (a) constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the Parties with respect to the Transactions and (b) are not intended to confer upon any person other than the Parties any rights or remedies.
 
8.10         Survival.  The representations, warranties, and covenants of the respective Parties shall survive the Closing Date and the consummation of the Transactions for a period of eighteen (18) months.

 
18
 
 
8.11         Governing Law.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof, (except to the extent the laws of the British Virgin Islands are mandatorily applicable to the Transactions).
 
8.12         Assignment.  Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any of the Parties without the prior written consent of each of the other Parties. Any purported assignment without such consent shall be void. Subject to the preceding sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and assigns.
 
[Signature Page Follows]

 
19
 

IN WITNESS WHEREOF, the parties hereto have caused this Share Exchange Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
 
   
RICH MOUNTAIN ENTERPRISES LIMITED
     
 
By:
  
   
Name:   WEI GUO
   
Title:   PRESIDENT
     
   
SHELL COMPANY SHAREHOLDER
     
     
   
ETERNAL CITY INVESTMENTS LTD.
     
   
RISE KING MANAGEMENT LIMITED
     
 
By:
  
   
Name: XUDONG LIU
   
Title: DIRECTOR
     
 
By:
  
   
Name: NING LI
   
Title: DIRECTOR
     
     
   
DAWNING HOLDING LIMITED
     
     
   
WELLYI HOLDING LIMITED
     
     
   
HAOTAI HOLDING LIMITED
     
     
   
RUIZE HOLDING LIMITED
     
     
   
PO CHEUNG HOLDING LIMITED
     
     
   
RYEFONE INC. LIMITED

 
20
 

     
   
VISION GUIDE HOLDING LIMITED
     
     
   
GOOD BRIDGE HOLDINGS LIMITED
     
     
   
JING HUANG
     
     
   
Leopard Management Holdings Ltd.
     
     
   
Patriot Management Ltd.
     
     
   
MARKO INTERNATIONAL LIMITED
     
     
   
CITY LINKAGE HOLDINGS LIMITED

 
21
 

SCHEDULE A
 
Shell Company Shareholder:
 
ETERNAL CITY INVESTMENTS LTD. – 50,000 ordinary shares (5,000,000 ordinary shares following the effectiveness of the Amended Charter)
35/F Central Plaza
18 Harbour Road
Wanchai, Hong Kong

RISE KING Shareholders:
 
DAWNING HOLDING LIMITED 63.6% (31800 ordinary shares)
P.O.Box957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands

WELLYI HOLDING LIMITED 7.5% (3750 ordinary shares)
P.O.Box957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands

HAOTAI HOLDING LIMITED 5.5% (2750 ordinary shares)
P.O.Box957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands

RUIZE HOLDING LIMITED 4% (2000 ordinary shares)
P.O.Box957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands

PO CHEUNG HOLDING LIMITED 2.4% (1200 ordinary shares)
P.O.Box957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands

RYEFONE INC. LIMITED 0.5% (250 ordinary shares)
Room 2707 27F, Shui On Centre 6-8 Harbour Road, Wanchai, Hong Kong, P.R.China

VISION GUIDE HOLDING LIMITED 2% (1000 ordinary shares)
P.O.Box957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands

GOOD BRIDGE HOLDINGS LIMITED 3% (1500 ordinary shares)
Akara Bldg., 24 De Castro Street, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands
 
JING HUANG 1% (500 ordinary shares)
APT.2006, 19 BUILDING, NO.4 CUIWEI ROAD, HAIDIAN DISTRICT, BEIJING, P.R.CHINA

Leopard Management Holdings Ltd. 4.9% (2450 ordinary shares)
Akara Bldg., 24 De Castro Street, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands

Patriot Management Ltd. 4.6% (2300 ordinary shares)
Akara Bldg., 24 De Castro Street, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands

MARKO INTERNATIONAL LIMITED 0.35% (175 ordinary shares)
Akara Bldg., 24 De Castro Street, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands

CITY LINKAGE HOLDINGS LIMITED 0.65% (325 ordinary shares)
Akara Bldg., 24 De Castro Street, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands

 
22
 

SCHEDULE B
 
Name of Shareholder
  
Number of Shares
Newly Issued by the
Shell
    
Number of Shares
Acquired from the Shell
Shareholder
    
Total Number of Shell
Shares Held Following
the Share Exchange
  
DAWNING HOLDING LIMITED
     4,452,000       3,180,000       7,632,000  
WELLYI HOLDING LIMITED
     525,000       375,000       900,000  
HAOTAI HOLDING LIMITED
     385,000       275,000       660,000  
RUIZE HOLDING LIMITED
     280,000       200,000       480,000  
PO CHEUNG HOLDING LIMITED
     168,000       120,000       288,000  
RYEFONE INC. LIMITED
     35,000       25,000       60,000  
VISION GUIDE HOLDING LIMITED
     140,000       100,000       240,000  
GOOD BRIDGE HOLDINGS LIMITED
     210,000       150,000       360,000  
JING HUANG
     70,000       50,000       120,000  
Leopard Management Holdings Ltd.
     343,000       245,000       588,000  
Patriot Management Ltd.
     322,000       230,000       552,000  
MARKO INTERNATIONAL LIMITED
     24,500       17,500       42,000  
CITY LINKAGE HOLDINGS LIMITED
     45,500       32,500       78,000  
Total
     7,000,000       5,000,000       12,000,000  

 
23
 

ANNEX A
 
Definitions
 
“Action” means any action, suit, inquiry, notice of violation, proceeding (including any partial proceeding such as a deposition) or investigation pending or threatened in writing before or by any court, arbitrator, governmental or administrative agency, regulatory authority (federal, state, county, local or foreign), stock market, stock exchange or trading facility.
 
“Agreement” has the meaning set forth in the Preamble of this Agreement.
 
“Amended Charter” has the meaning set forth in Section 6.1(e) of this Agreement.
 
“Closing” has the meaning set forth in Section 1.2 of this Agreement.
 
“Closing Date” has the meaning set forth in Section 1.2 of this Agreement.
 
“Consent” means any material consent, approval, license, permit, order or authorization.
 
“Contract” means any contract, lease, license, indenture, note, bond, agreement, permit, concession, franchise or other instrument.
 
“Exchange” has the meaning set forth in the Background Section of this Agreement.
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
“Governmental Entity” means any federal, state, local or foreign government or any court of competent jurisdiction, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign.
 
“Hong Kong” means the Hong Kong Special Administrative Region of the People’s Republic of China.
 
“Intellectual Property Right” means any patent, patent right, trademark, trademark right, trade name, trade name right, service mark, service mark right, copyright and other proprietary intellectual property right and computer program.
 
“Law” means any statute, law, ordinance, rule, regulation, order, writ, injunction, judgment, or decree. “Laws” means the plural of any of the foregoing.
 
“Lien” means any lien, security interest, pledge, equity and claim of any kind, voting trust, stockholder agreement and other encumbrance. “Liens” means the plural of any of the foregoing.
 
“RISE KING” has the meaning set forth in the Preamble of this Agreement.
 
“RISE KING Constituent Instruments” means the certificate of incorporation and memorandum and articles of association of RISE KING and such other constituent instruments of RISE KING as may exist, each as amended to the date of this Agreement.
 
“RISE KING Disclosure Letter” means the letter delivered from RISE KING to Shell Company concurrently herewith.
 
“RISE KING Financial Statements” has the meaning set forth in the Section 3.15 of this Agreement.
 
“RISE KING Material Adverse Effect” has the meaning set forth in Section 3.1 of this Agreement.

 
24
 
 
“RISE KING Stock” has the meaning set forth in the Background Section of this Agreement.
 
“Party” and “Parties” have the meanings set forth in the Preamble of this Agreement.
 
“SEC” means the Securities and Exchange Commission.
 
“SEC Reports” has the meaning set forth in Section 4.15 of this Agreement.
 
“Securities Act” means the Securities Act of 1933, as amended.
 
“Shares” has the meaning set forth in Section 1.1 of this Agreement.
 
“Shareholder” has the meaning set forth in the Preamble of this Agreement.
 
“Shell Company” has the meaning set forth in the Preamble of this Agreement.
 
“Shell Company Constituent Instruments” means the certificate of incorporation and memorandum and articles of association of Shell Company and such other constituent instruments of Shell Company as may exist, each as amended to the date of this Agreement.
 
“Shell Company Material Adverse Effect” has the meaning set forth in Section 4.1 of this Agreement.
 
“Shell Company Stock” has the meaning set forth in the Background Section of this Agreement.
 
“Taxes” means all forms of taxation, whenever created or imposed, and whether of the United States or elsewhere, and whether imposed by a local, municipal, governmental, state, foreign, federal or other Governmental Entity, or in connection with any agreement with respect to such forms of taxation, including all interest, penalties and additions imposed with respect to such amounts. “Tax” means the singular of any of the foregoing.
 
“Tax Returns” means all federal, state, local, provincial and foreign Tax returns, declarations, statements, reports, schedules, forms and information returns and any amended Tax return relating to Taxes.
 
“Transactions” has the meaning set forth in Section 1.2 of this Agreement.
 
“Transaction Document” means any of this Agreement and any other documents or agreements executed in connection with the Transactions.
 
“Voting RISE KING Debt” has the meaning set forth in Section 3.3 of this Agreement.
 
“Voting Shell Company Debt” has the meaning set forth in Section 4.3 of this Agreement.

 
25
 
EX-4.1.1 5 v230348_ex4-1x1.htm
独家业务合作协议
Exclusive Business Cooperation Agreement

本独家业务合作协议（下称“本协议”）由以下双方于2011年4月 3日在中华人民共和国（下称“中国”）晋中市签署。
This Exclusive Business Cooperation Agreement (this “Agreement”) is made and entered into by and between the following Parties on April 3rd , 2011 in  Jinzhong City, the People's Republic of China (“China” or the “PRC”).

甲方：山西势派普商务咨询有限公司
地址：山西省晋中市榆次108国道寇村段
Party A: Shanxi Shipaipu Business Consulting Co., Ltd.
Address:  Koucun Part, National Road 108, Yuci District Jinzhong City, Shanxi Province, P.R.C.
   
乙方：山西国联管业集团有限公司
地址：山西省晋中市榆次108国道寇村段
Party B:   Shanxi Guolian Pipe Industry Group Co., Ltd.
Address:
Koucun Part, National Road 108, Yuci District Jinzhong City, Shanxi Province, P.R.C.

甲方和乙方以下各称为“一方”，统称为“双方”。
Each of Party A and Party B shall be hereinafter referred to as a "Party" respectively, and as the "Parties" collectively.

鉴于：
Whereas,

1.
甲方为依据中国法律设立的外商独资企业，专业提供企业管理咨询服务；
Party A is a wholly foreign-owned limited company duly incorporated under the laws of China which is engaged in business management consulting service;
 
秘密文件 Strictly Confidential
  
 
1
 

2.
乙方是一家注册于中国晋中市的有限责任公司，主要从事管道的生产和销售（“业务”）；
Party B is a limited liability company established in Jinzhong City, China, and is engaged in the manufacture and sale of pipes (the “Business”),

3.
甲方同意利用其人力、管理、资金优势，在本协议期间向乙方提供员工培训、管理咨询、融资服务等独家全面业务支持服务，乙方同意接受甲方或其指定方按本协议条款的规定提供咨询和服务。
Party A is willing to provide Party B with exclusive and comprehensive business support such as staff training, management consultation, financial services etc. during the term of this Agreement utilizing its own advantages in human resources, capital, management and Party B is willing to accept such services provided by Party A or Party A's designee(s), each on the terms set forth herein.

据此，甲方和乙方经协商一致，达成如下协议：
Now, therefore, through mutual discussion, the Parties have reached the following agreements:

1.
服务提供
Services Provided by Party A

 
1.1
按照本协议条款和条件，乙方在此委任甲方在本协议期间作为乙方的独家服务提供者向乙方提供全面的管理咨询、员工培训、业务支持，融资等相关服务，具体内容包括所有在乙方营业范围内由甲方视情况决定的服务，包括但不限于以下方面管理服务：
Party B hereby appoints Party A as Party B's exclusive services provider to provide Party B with complete management consultation, staff training, business support, financing and related services during the term of this Agreement, in accordance with the terms and conditions of this Agreement, of which the management services may include all services within the business scope of Party B as may be determined by Party A, such as but not limited to the following respects:
 
秘密文件 Strictly Confidential
 
 
2
 

 
a)
乙方日常经营方面,包括乙方与客户关系的管理，与任意方协议或安排的履行，是否符合现行法律法规要求；
All aspects of the day-to-day operation of Party B, including its relationships with its customers, its performance under agreements or other arrangements with any other parties, its compliance with applicable laws and regulations;

 
b)
乙方员工、顾问、代理或其他代表（包括乙方的董事和其他高级管理人员或者乙方的员工）的委派、雇佣、薪酬（包括任何奖金、非货币薪酬、附加福利和其他福利、以股权为基础的酬劳），解雇和纪律；
The appointment, hiring, compensation (including any bonuses, non-monetary compensation, fringe and other benefits, and equity-based compensation), firing and discipline of all employees, consultants, agents and other representatives of Party B, including the directors and all other executive officers or employees of Party B;

 
c)
为了乙方任何员工、顾问、代理、代表或者其他人员的利益，建立、维护、终止或者解除合同或者其他安排；Establishment, maintenance, termination or elimination of any plan or other arrangement for the benefit of any employees, consultants, agents, representatives or other personnel of Party B;

 
d)
管理、控制和授权乙方任何应收账款、应付账款和所有资金提供和投资行为；
Management, control and authority over all accounts receivables, accounts payable and all funds and investments of Party B;

 
e)
管理、控制和授权公司银行账户；
Management, control and authority over Company Bank Accounts;
 
秘密文件 Strictly Confidential
 
 
3
 

 
f)
乙方任何支出，包括任何资本性支出；
Any expenditure, including any capital expenditure, of Party B

 
g)
乙方作为一方的任何合同、协议和/或其他安排的订立、修改或解除；
The entry into， amendment or modification, or termination of any contract, arrangement and/or other arrangement to which Party is, was, or would become a party;

 
h)
乙方对任何资产、存货、不动产或动产、其他知识产权或无形资产的收购、租赁或许可；
The acquisition, lease or license by Party B of any assets, supplies, real or personal property, or intellectual or other intangible property;

 
i)
乙方作为一方与他方达成收购或合资或其他安排；
The acquisition of or entry into any joint venture or other arrangement by Party with any other Person;

 
j)
乙方任何借款或任何性质的债务或义务，或者乙方的任意资产被留置；
Any borrowing or assumption by Party B of any liability or obligation of any nature, or the subjection of any asset of Party B to any Lien:

 
k)
乙方对其所拥有的或实际受益拥有或控制的任何资产的销售、租赁、许可或其他处置；
Any sale, lease, license or other disposition of any asset owned, beneficially owned or controlled by Party B;
 
秘密文件 Strictly Confidential
 
 
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l)
申请、更新、采取任何措施以有效维持乙方经营所需的任何许可证、执照或其他授权和批准；
Applying for, renewing, and taking any action to maintain in effect, any permits, licenses or other authorizations and approvals necessary for the operation of Party’s business;

 
m)
乙方作为一方，通过调解、仲裁、诉讼或申诉方式提起诉讼或者任何纠纷解决机制或对任何诉讼或纠纷达成和解；
The commencement, prosecution or settlement by Party B of any litigation or other dispute with any other Person, through mediation, arbitration, lawsuit or appeal;

 
n)
乙方宣布分配或者支付股息或者分配利润；
The declaration or payment of any dividend or other distribution of profits of Party B;

 
o)
准备和提交纳税申报表，支付或者结算所有纳税，以及办理与纳税有关的政府手续；
The preparation and filing of all Tax Returns, the payment or settlement of any and all Taxes, and the conduct of any proceedings with any Governmental Authority with respect to any Taxes.

 
1.2
乙方接受甲方的咨询和服务。乙方进一步同意，除非经甲方事先书面同意，在本协议期间，就本协议约定事宜，乙方不得接受任何第三方提供的任何类似服务和/或支持，不得与任何第三方建立任何类似合作。双方同意，甲方可以指定其他方（该被指定方可以与乙方签署本协议第1.3条描述的某些协议）为乙方提供本协议约定的服务和/或支持。
Party B agrees to accept all the consultations and services provided by Party A. Party B further agrees that unless with Party A's prior written consent, during the term of this Agreement, Party B shall not accept any similar consultations and/or services provided by any third party and shall not establish similar cooperation relationship with any third party regarding the matters contemplated by this Agreement. Party A may appoint other parties, who may enter into certain agreements described in Section 1.3 with Party B, to provide Party B with the consultations and/or services under this Agreement.
 
秘密文件 Strictly Confidential
 
 
5
 
  
1.3           服务的提供方式
The Providing Methodology of Service

 
1.3.1
甲、乙双方同意在本协议有效期内，乙方可以与甲方或甲方指定的其他方进一步签订员工培训协议和咨询服务协议，对各项员工培训和咨询服务的具体内容、方式、人员、收费等进行约定。
Party A and Party B agree that during the term of this Agreement, Party B may enter into further staff training agreements or consulting service agreements with Party A or any other party designated by Party A, which shall provide the specific contents, manner, personnel, and fees for the specific services.

 
1.3.2
为更好地履行本协议，甲乙双方同意在本协议有效期内将直接或通过其关联方根据乙方业务进展需要随时签署其他相关文件或协议，由甲方向乙方提供支持性服务。
To fulfill this Agreement, Party A and Party B agree that during the term of this Agreement, both Parties, directly or through their respective affiliates, may enter into other relevant documents or agreements which provide that Party A shall provide support services to Party B based on the needs of the business of Party B.
 
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2.
服务的价格和支付方式
The Calculation and Payment of the Service Fees

双方约定服务的费用为乙方每年100%税后净利润。

The Parties agree that Party B shall pay the 100% Net Profit After Tax as the fees for the Services under this Agreement.

双方约定支付方式按本协议第1.3条中甲乙双方后续另行签订的协议确定。

The Parties agree that the fees for the Services under this Agreement shall be paid based on the methods set forth in the separate agreement to be entered into between Party A and Party B described in Section 1.3.

3.
知识产权和保密条款
Intellectual Property Rights and Confidentiality Clauses

 
3.1
甲方对履行本协议而产生或创造的任何权利、所有权、权益和所有知识产权包括但不限于著作权、专利权、专利申请权、软件、技术秘密、商业机密及其他均享有独占的和排他的权利和利益。
Party A shall have exclusive and proprietary rights and interests in all rights, ownership, interests and intellectual properties arising out of or created during the performance of this Agreement, including but not limited to copyrights, patents, patent applications, software, technical secrets, trade secrets and others.

 
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3.2
双方承认及确定有关本协议、本协议内容，以及彼此就准备或履行本协议而交换的任何口头或书面资料均被视为保密信息。双方应当对所有该等保密信息予以保密，而在未得到另一方书面同意前，不得向任何第三者披露任何保密信息，惟下列信息除外：(a)公众人士知悉或将会知悉的任何信息（惟并非由接受保密信息之一方擅自向公众披露）；(b)根据适用法律法规、股票交易规则、或政府部门或法院的命令而所需披露之任何信息；或(c)由任何一方就本协议所述交易而需向其股东、投资者、法律或财务顾问披露之信息，而该股东、法律或财务顾问亦需遵守与本条款相类似之保密责任。任何一方工作人员或聘请机构的泄密均视为该方的泄密，需依本协议承担违约责任。无论本协议以任何理由终止，惟本条款仍然生效。
The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in connection with the preparation and performance of this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential information to any third party, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or financial advisors shall  be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff members or agencies hired by any Party shall be deemed as disclosure of such confidential information by such Party, which Party shall be held liable for the breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.

 
3.3
双方同意，不论本协议是否变更、解除或终止，本条款将持续有效。
The Parties agree that this Section shall survive changes to, and rescission or termination of, this Agreement.
 
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4.            陈述和保证
Representations and Warranties

 
4.1
甲方陈述和保证如下：
Party A hereby represents and warrants as follows:

 
4.1.1
甲方是按照中国法律合法注册并有效存续的一家公司。
Party A is one company legally registered and validly existing in accordance with the laws of China.

 
4.1.2
甲方签署并履行本协议在其公司权力和营业范围中；已采取必要的公司行为和适当授权并取得第三方和政府部门的同意及批准；并不违反对其有约束力或影响的法律和其他的限制。
Party A's execution and performance of this Agreement is within its corporate capacity and the scope of its business operations; Party A has taken necessary corporate actions and given appropriate authorization and has obtained the consent and approval from third parties and government agencies, and will not violate any restrictions in law or otherwise binding or having an impact on Party A.

 
4.1.3
本协议构成对其合法、有效、有约束力并依本协议之条款对其强制执行的义务。
This Agreement constitutes Party A's legal, valid and binding obligations, enforceable in accordance with its terms.

 
4.2
乙方陈述和保证如下：
Party B hereby represents and warrants as follows:

 
4.2.1
乙方是按照中国法律合法注册且有效存续的公司。
Party B is a company legally registered and validly existing in accordance with the laws of China;
 
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4.2.2
乙方签署并履行本协议在其公司权力和营业范围中；已采取必要的公司行为和适当授权并取得第三方或政府的同意和批准；并不违反对其有约束力影响的法律和其他的限制。
Party B's execution and performance of this Agreement is within its corporate capacity and the scope of its business operations; Party B has taken necessary corporate actions and given appropriate authorization and has obtained the consent and approval from third parties and government agencies, and will not violate any restrictions in law or otherwise binding or having an impact on Party B.

 
4.2.3
本协议构成对其合法、有效、有约束力并依本协议之条款对其强制执行的义务。
This Agreement constitutes Party B's legal, valid and binding obligations, and shall be enforceable against it.

5.            生效和有效期
Effectiveness and Term

 
5.1
本协议于文首标明的协议日期签署并同时生效。除非依本协议或双方其他协议的约定而提前终止，本协议有效期为30年，但甲、乙双方应自本协议签署后，每3个月对本协议的内容做一次审查，以决定是否需要根据当时的情况对本协议作出相应修改和补充。
This Agreement is executed on the date first above written and shall take effect as of such date. Unless earlier terminated in accordance with the provisions of this Agreement or relevant agreements separately executed between the Parties, the term of this Agreement shall be 30 years. After the execution of this Agreement, both Parties shall review this Agreement every 3 months to determine whether to amend or supplement the provisions in this Agreement based on the actual circumstances at that time.
 
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5.2
协议期满前，经甲方书面确认，本协议可以延期。延期的期限由甲方决定，乙方必须无条件地同意该延期。
The term of this Agreement may be extended if confirmed in writing by Party A prior to the expiration thereof. The extended term shall be determined by Party A, and Party B shall accept such extension unconditionally.

6.            终止
Termination

 
6.1
除非依据本协议续期，本协议于到期之日终止。
Unless renewed in accordance with the relevant terms of this Agreement, this Agreement shall be terminated upon the date of expiration hereof.

 
6.2
本协议有效期内，除非甲方对乙方有重大过失或存在欺诈行为，乙方不得提前终止本协议。尽管如此，甲方可在任何时候通过提前30天向乙方发出书面通知的方式终止本协议。
During the term of this Agreement, unless Party A commits gross negligence, or a fraudulent act, against Party B, Party B shall not terminate this Agreement prior to its expiration date. Nevertheless, Party A shall have the right to terminate this Agreement upon giving 30 days' prior written notice to Party B at any time.

 
6.3
在本协议终止之后，双方在第3、7和8条项下的权利和义务将继续有效。
The rights and obligations of the Parties under Articles 3, 7 and 8 shall survive the termination of this Agreement.
 
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7.            适用法律和争议解决
Governing Law and Resolution of Disputes

 
7.1
本协议的订立、效力、解释、履行、修改和终止以及争议的解决适用中国的法律。
The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes hereunder shall be governed by the laws of China.

 
7.2
因解释和履行本协议而发生的任何争议，本协议双方应首先通过友好协商的方式加以解决。如果在一方向其他方发出要求协商解决的书面通知后30天之内争议仍然得不到解决，则任何一方均可将有关争议提交给中国国际经济贸易仲裁委员会，由该会按照其仲裁规则仲裁解决。仲裁应在北京进行，使用之语言为中文。仲裁裁决是终局性的，对各方均有约束力。
In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party's request to the other Parties for the resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in Beijing, and the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.

 
7.3
因解释和履行本协议而发生任何争议或任何争议正在进行仲裁时，除争议的事项外，本协议双方仍应继续行使各自在本协议项下的其他权利并履行各自在本协议项下的其他义务。
Upon the occurrence of any dispute arising from the construction and performance of this Agreement or during the pending arbitration of any dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this Agreement and perform their respective obligations under this Agreement.
 
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8.            补偿
Indemnification

就甲方根据本协议向乙方提供的咨询和服务内容所产生或引起的针对甲方的诉讼、请求或其他要求而招致的任何损失、损害、责任或费用都应由乙方补偿给甲方，以使甲方不受损害，除非该损失、损害、责任或费用是因甲方的重大过失或故意而产生的。
Party B shall indemnify and keep Party A from any losses, injuries, obligations or expenses caused by any lawsuit, claims or other demands against Party A arising from or caused by the consultations and services provided by Party A to Party B pursuant to this Agreement, except where such losses, injuries, obligations or expenses arise from the gross negligence or willful misconduct of Party A.

9.            通知
Notices

 
9.1
本协议项下要求或发出的所有通知和其他通信应通过专人递送、挂号邮寄、邮资预付或商业快递服务或传真的方式发到该方下列地址。每一通知还应再以电子邮件送达。该等通知视为有效送达的日期按如下方式确定：
All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such Party set forth below.  A confirmation copy of each notice shall also be sent by email.  The dates on which notices shall be deemed to have been effectively given shall be determined as follows:
 
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9.1.1
通知如果是以专人递送、快递服务或挂号邮寄、邮资预付发出的，则以于设定为通知的地址在送达或拒收之日为有效送达日。
Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the date of arrival or refusal at the address specified for notices.

 
9.1.2
通知如果是以传真发出的，则以成功传送之日为有效送达日（应以自动生成的传送确认信息为证）。
Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an automatically generated confirmation of transmission).

10.           协议的分割性
Severability

如果本协议有任何一条或多条规定根据任何法律或法规在任何方面被裁定为无效、不合法或不可执行，本协议其余规定的有效性、合法性或可执行性不应因此在任何方面受到影响或损害。双方应通过诚意磋商，争取以法律许可以及双方期望的最大限度内有效的规定取代那些无效、不合法或不可执行的规定，而该等有效的规定所产生的经济效果应尽可能与那些无效、不合法或不能强制执行的规定所产生的经济效果相似。
In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance with any law or regulation, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any aspect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.
 
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11.           协议的修改、补充

Amendments and Supplements

双方可以书面协议方式对本协议作出修改和补充。经过双方签署的有关本协议的修改协议和补充协议是本协议组成部分，具有与本协议同等的法律效力。
Any amendments and supplements to this Agreement shall be in writing. The amendment agreements and supplementary agreements that have been signed by the Parties and that relate to this Agreement shall be an integral part of this Agreement and shall have the same legal validity as this Agreement.

12.           语言和副本
Language and Counterparts

本协议以中文和英文书就，一式两份，甲、乙双方各持一份，具有同等效力；中英文版本如有冲突，应以中文版为准。
This Agreement is written in both Chinese and English language in two copies, each of Party A and Party B shall have one copy, which has equal legal validity; in case there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.

有鉴于此，双方已使得经其授权的代表于文首所述日期签署了本独家业务合作协议并即生效，以昭信守。
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Exclusive Business Cooperation Agreement as of the date first above written.
 
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签字页  (The page of Signature)

甲方： 山西势派普商务咨询有限公司
Party A:
Shanxi Shipaipu Business Consulting Co., Ltd.

签署(公章)
By (seal):     ____________________

公司授权代表或法定代表人（签字）
(The signature of The Representative): ____________________

乙方：山西国联管业集团有限公司
 Party B:  Shanxi Guolian Pipe Industry Group Co., Ltd.

签署(公章)
By (seal):      ____________________

公司授权代表或法定代表人（签字）
(The signature of The Representative): ____________________

[Signature Page to Exclusive Business Cooperation Agrement]

 
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EX-4.2 6 v230348_ex4-2.htm
 
No.: Y09 0002073

LABOR CONTRACT
(applicable to full-time employment)

Printed by Department of Labor and Social Security of Shanxi Province
 
 
 
 
 
Instructions for Contract Conclusion
 
I. This Contract is applicable to employment forms based on the full-time system.
II. The Employer and the Employee shall guarantee that all information provided for the other party in respect of the performance of the labor contract shall be true and valid.
III. Where the term of the labor contract is longer than three months and shorter than one year, the probation period may not exceed one month; where the term of the labor contract is longer than one year and shorter than three years, the probation period may not exceed two months; in respect of the labor contract with a fixed term of longer than three years or without the fixed term, the probation period may not exceed six months. With regard to the labor contract with a term equal to the time spent in finishing a certain task or with a term not longer than three months, the probation period may not be stipulated. The probation period shall be included in the term of the labor contract. In the event that only a probation period is stipulated in the labor contract, the probation period shall be null and void and such a period shall be the term of the labor contract.
IV. Where the Employee proposes or agrees to renew or enter into the labor contract in any of the following cases, except that the Employee proposes to conclude a labor contract with a fixed term, a labor contract without a fixed term shall be entered into: (I) the Employee has been employed by the Employer for consecutive ten years; (II) where the Employer initially implements the labor contract system or the labor contract is re-entered into in the event of restructuring of a state-owned enterprise, the Employee has be employed by the Employer for consecutive ten years and will retire within ten years in accordance with law; (III) labor contract with a fixed term is concluded for consecutive two times and the Employee renew the labor contract not under the circumstances specified in Article29 and Items 1 and 2 of Article 40 under the Labor Contract Law of the People’s Republic of China.
V. Unless the Employer offers special training fund to the Employee and non-competition clauses are stipulated, the Employer may not stipulate with the Employee the following clause: the Employee shall bear liquidated damages.

In accordance with the Labor Contract Law of the People’s Republic of China and other relevant laws and regulations, and in line with the principles of equality and voluntariness and consultation and consensus, both parties hereto enter into this Contract.
I Basic Information of Both Parties to the Labor Contract
Article1
Name of Party A (Employer): Shanxi Guolian Pipe Industry Group Co., Ltd.
Legal Representative (main principal): Liu Xudong
Registered Address: Shanxi Yuci Industrial Park
Business Address: _______________________
Social Insurance Registration Certificate No.: _________________
Tel.: _________________________________
Article 2   Name of Party B (Employee): Liu Xiaohui
  
Resident ID Card No.: 142431198109283311
  
Name of Other Valid Certificate: __________________
Party B’s
  
Certificate No.: ________________________
Photo
  
Home Address: Yuci Industrial Park
    
Current Residential Address: _____________________
    
Tel.: 18903548386
 
 
 
 
 
II. Term of Labor Contract
Article 3   This Contract adopts the first of following term forms:
1. Fixed term, from December 31, 2000 to December 31 of 2015. The probation period is ____ year(s), from ____________ to _____________.
2. Non-fixed term, from __________________. The probation term is from ___________ to _______________.
3. Term of finishing a certain job task, from ________________ to the date when the job task of ________________ is finished.
III. Work Content and Working Place
Article 4   Party B agrees to hold the post of accountant as required by Party A. Where Party B shall engage in work poisonous and harmful to him/her, Party A shall inform Party B of occupational hazards, prevention and protection measures, etc.
Article 5   According to the characteristics of Party A’s post, Party B’s working area or working place is the financial room.
Article 6   Party A shall arrange job tasks in a scientific and reasonable manner in accordance with the state, industrial and local standard of labor quota and standard of quality acceptance. Party B shall realize the product quantity and quality indicators and finish job tasks as required by Party A.
IV. Working Time and Time for Rest and Vacation
Article 7   Party A arranges Party B to execute the first of the following working time systems.
1. Standard working time system. Party B’s daily working time may not exceed 8 hours and weekly working time may not exceed 40 hours.
2. Indefinite working time system.
3. Comprehensive working time calculation system.
Party A may not arrange Party B to execute indefinite working time system or comprehensive working time calculation system without the approval by the administrative department in charge of labor and social security.
Article 8   Party A shall guarantee Party B’s right of rest in accordance with law. Party B shall enjoy statutory holidays and rights of vacation for visiting relatives, marriage, funeral, and child-bearing, and paid annual vacation.
Article 9   Party A may extend Party B’s working time due to its production and operation needs after consulting with the labor union and Party B, but the extension may not exceed 1 hour every day; where Party B’s working time shall be extended for special reasons, the extension may not exceed 3 hours every day and 36 hours every month, provided that Party B’s health shall be guaranteed.
V. Labor Remuneration
Article 10 Party A shall pay a wage to Party B in form of currency prior to the 25th day of every month, with the monthly wage of RMB ___________, or be subject to the remuneration proposal.
The wage for Party B shall be RMB _________ during the probation period. The wage paid to Party B during the probation period may not be lower than the minimum wage for the same post in this unit or 80% of the wage stipulated herein and may not be lower than the local minimum wage level specified by the law.
Article 11 Where Party A arranges Party B to extend his/her working time, a wage that is not lower than 150% of the normal wage shall be paid. Where Party A arranges Party B to work on rest days and cannot make up the missed rest, a wage that is not lower than 200% of the normal wage shall be paid. Where Party A arranges Party B to work on statutory holidays, a wage that is not lower than 300% of the normal wage shall be paid.
 
 
 
 
 
Article 12 Where Party A’s production job task is not sufficient to make Party B hold up in the work, Party A shall pay monthly living expenses that are not lower than 80% of the local minimum wage level to Party B.
VI. Social Insurance and Welfare Treatment
Article 13 Both parties hereto shall participate in social insurance in accordance with state and provincial laws, regulations and policies relevant to social insurance, and shall fully pay various social insurance premiums in time. The portion paid by Party B shall be withheld and remitted by Party A.
Article 14 The treatment received by Party B for illness or injury not resulting from the work shall be subject to relevant state, provincial and local regulations.
Article 15 The treatment received by Party B for occupational disease or work-related injury suffered by Party B shall be subject to relevant state, provincial and local regulations.
Article 16 Party A shall offer the following welfare treatments to Party B: detailed in the Company’s Regulations.
VII. Labor Protection, Labor Conditions and Occupational Hazard Prevention
Article 17 Party A shall establish production safety system in accordance with relevant state laws and regulations and offer necessary training to Party B. Party B shall strictly comply with Party A’s labor safety system and may not conduct illegal operations.
Article 18 Party A shall, according to the needs of the production post, take necessary safety protection measures to ensure Party B’s safety in accordance with relevant state and provincial labor safety and hygiene regulations and provide necessary labor protection articles.
Article 19 Party A shall establish and perfect the occupational disease prevention and treatment responsibility system, enhance the management of occupational disease prevention and treatment, and improve the prevention and treatment of occupational disease.
VIII. Modification, Dissolution and Termination of Labor Contract and Economic Compensation
Article 20 This Contract may be modified in writing after both parties consulate with each other and reach a consensus.
Article 21 Both parties hereto shall dissolve and terminate this Contract in accordance with Articles 36 and 45 of the Labor Contract Law of the People’s Republic of China.
Article 22 Where both parties hereto dissolve and terminate this Contract under the circumstances specified in Article 46 of the Labor Contract Law of the People’s Republic of China, Party A shall pay economic compensation to Party B in accordance with law.
Article 23 Party A shall issue a certificate proving the dissolution or termination of the labor contract when this Contract is dissolved or terminated and handle formalities of transferring archive and social insurance relationship for Party B within 15 days.
Article 24 Party B shall handle work transition in accordance with the stipulations of both parties hereto. Party A shall pay economic compensation to Party B at the time of settling the work transition.
Article 25 In case that Party A or Party B dissolves or terminates the labor contract in violation of laws, which cause losses to the other party, the delinquent party shall bear the liabilities for compensation.
 
 
 
 
 
IX. Other Contents Stipulated by Both Parties
Article 26 Other matters stipulated by both parties hereto in accordance with law:
 
  
X. Settlement of Labor Disputes and Miscellaneous
Article 27 Where any dispute arises from the performance of this Contract by both parties hereto, either party may apply for conciliation to Party A’s labor dispute conciliation commission; in case of failure to conciliate, it may apply for arbitration or institute a proceeding in accordance with law.
Article 28 In respect of any unaccomplished matter herein or any matter inconsistent with relevant state and provincial regulations, relevant regulations shall be subjected to.
Article 29 This Contract shall come into force upon signature by both parties hereto. This Contract shall be made in two copies with each party holding one copy respectively.

Party A (official seal)
Shanxi Guolian Pipe Industry Group Co., Ltd.
Signature of Legal Representative (main principal): Liu Xudong
 
Signing Date: Dec. 12, 2009
Signature of Party B: Liu Xiaohui
  
Signing Date: Dec. 12, 2009

 
 
 
EX-4.3 7 v230348_ex4-3.htm
Non-Disclosure Agreement
Party A (employer): Shanxi Guolian Pipe Industry Group Co., Ltd.
Party B (employee): Liu Xiaohui           ID Card No.: 142431198109283311

Whereas:
Party B is employed by Party A and receives corresponding pay from Party A.

Therefore, in accordance with the Law of the People’s Republic of China against Unfair Competition, the Labor Contract Law of the People’s Republic of China and other relevant regulations, both parties hereto, in line with the principles of equality and voluntariness, consultation and consensus, and honesty and credibility, enter into the following agreement in respect of Party B’s keeping Party A’s technology and other business secrets during employment and after resignation:
1. Confidential Contents
1) Party A’s trade secrets, including commodity production, supply and sales channels, customer list, sales contracts, sales network, trading intent, dealing or negotiating prices, and commodity performance, quality, quantity and delivery date;
2) Party A’s operation secrets, including operational policies, investment and decision-making intent, product and service pricing, market analysis, and advertising strategies;
3) Party A’s management secrets, including financial information, personnel information, logistics information, etc.;
4) Party A’s technical secrets, including product design, production drawings, production and testing equipment configuration and performance, production and manufacturing process, manufacturing technology, patent technology, etc.
2. Rights and Obligations
1) Party B may not disclose Party A’s business secrets, materials and information to any third party at any time and on any occasion;
2) Party B may not take a part-time job in other companies competitive with or having interest on business identical or similar to Party A’s business (profession). Party B mastering Party A’s proprietary product technology or sales business network may not hold a post in other companies competitive with or having interest on business identical or similar to Party A’s business (profession) within one year after he/she leaves Party A. Party B may not take advantage of Party A’s technical secrets, business secrets and customer resources to participate in horizontal trade competition within two years after his/her resignation;
3) Party B may not copy, extract or take away Party A’s confidential documents at his/her own discretion or mala fide without Party A’s consent;
4) Party B shall properly and carefully keep and dispose Party A and its customers’ confidential information and materials. In case of missing, Party B shall inform Party A immediately and take remedies to retrieve any loss;
5) Party A shall be obliged to facilitate Party B to do his/her job necessary to know confidential information during his/her work;
6) Party A shall be obliged to grant award to Party B having remarkable achievement in keeping secrets, reporting disclosure behavior, or improving secret keeping technology and measures, and timely preventing disclosure accidents and retrieving losses.
 
 
 
 
 
3. Term of Agreement
The term of this Agreement shall commence on the date of affixing signature or stamp on this Agreement by both parties hereto and end on the date two years after Party B’s resignation.
4. Liabilities for Breach of Agreement
1) In the event that Party B breaches this Agreement, Party A shall be entitled to cancel the employment contract unconditionally. In case that Party B’s breach causes certain economic losses to Party A, Party B shall compensate Party A for corresponding economic losses.
2) In case that any dispute arises from both parties’ performance of this Agreement and the enforcement of the liabilities for breach of this Agreement is beyond both parties’ authority granted by laws and regulations, either party may apply for arbitration with the labor arbitration institution at the place where Party A is located or lodge an appeal to the people’s courts.
5. Miscellaneous
This Agreement shall be made in two copies with Party A and Party B holding one respectively. This Agreement shall come into force upon both parties’ affixation of their signatures or stamps.

Party A (stamp): Shanxi Guolian Pipe Industry Group Co., Ltd.
  
Party B (signature): Liu Xiaohui
 
 
Signing Date: January 1, 2007
 
 
 
 
 EX-4.4 8 v230348_ex4-4.htm
 Steel and Iron Products Sale Contract of Shanxi Taigang Stainless Steel Co., Ltd.

Type of the Order: Y002
Order No.: 101684
Date of Execution: May 31, 2008
Place of Execution: Tai Yuan
Date of Delivery: June 30, 2008
Factory of Delivery: Hot Strip Rolling Factory

Seller
Name: Shanxi Taigang Stainless Steel Co., Ltd.
Address: #113 North Jiefang Road, Taiyuan
Zip Code: 030003 Fax: 0391-3130793 Tel.
Opening Bank: Industrial and Commercial Bank of China, Taiyuan Branch
Bank Account: 0502125109022
Tax I.D.: 140116701011888
Legal Representative or Authorized Representative of the Seller
Stamp
Purchaser
Name: Shanxi Guolian Pipe Industry Group Co., Ltd.
Address: Yuci Industrial Park
Zip Code: 030600
Fax:
Tel.: 0354-3966238
Opening Bank: Agricultural Bank, Jinzhong Branch, Daobei Sub-branch
Bank Account: 380001040009399
Tax I.D.:
Legal Representative or Authorized Representative of the Purchaser
Stamp
Other Contents
1. overage and shortage      ; where the increase or the decrease in the actual weight per piece exceeds the scope of overage and shortage,
2. In case of any special requirements in technical conditions,     ; and where the Seller handle the rail transportation for and on behalf of the Purchaser, the freight and miscellaneous charges shall be borne by the Purchaser.
3. In case of any inconsistence between the delivery and the Contract, the Purchaser shall launch the claim with the Seller within 10 days upon its receipt of the goods and shall keep the goods under the conditions existing at the time of delivery.
 
 
 
 
 
 
4. In case of any dispute, the parties shall raise the litigation with the local People’s court of the competent jurisdiction in the place where the Seller is located.
5. The Contract shall not be amended or rescinded unless agreed by the parties in writing through negotiations.
Remarks:
Terms of Payment: payment before the 10th day of the month; subject to the planned order.
Line No.
Name
Steel No.
Specifications
Ordered Quantity (Ton)
Standards
Tax-inclusive Price (RMB YUAN/Ton)
0010
Pipeline Steel Strip
X46
12,200 mm X1, 280.000 mm
1800.000
GB/T14164-2005
Market Price prevailing in Taiyuan at the time of delivery
Receiver
Shanxi Guolian Pipe Industry Group Co., Ltd.
  
Special Line
  
Arrival at the Destination Station
Self-pickup
Notes: packing code: ordinary; special requirement 1 from the client: PSL2 quality level set forth in the implemented standards; special requirement 2 from the client: RTO 5-360-524MPA; special requirement 3 from the client: N<=0.01%, AL: 0.025-0.055%, ex-factory upper deviation of thickness (+): 0.100 mm, ex-factory lower deviation of thickness (-): -0.300 mm
 
 
 
 
 
Line No.
Name
Steel No.
Specifications
Ordered Quantity (Ton)
Standards
Tax-inclusive Price (RMB YUAN/Ton)
0020
Pipeline Steel Strip
L200
6.300 mm X1, 500.000 mm
2010.000
GB/T14164-2005
Market Price prevailing in Taiyuan at the time of delivery
Receiver
Shanxi Guolian Pipe Industry Group Co., Ltd.
  
Special Line
  
Arrival at the Destination Station
Self-pickup
Notes: packing code: ordinary; special requirement 1 from the client: Charpy shock under -200C>=21Jl ; special requirement 2 from the client: RT0 5>=524MPA; special requirement 3 from the client: to deliver based on the component performance of S200 corresponding to the standards; ex-factory upper deviation of thickness (+): 0.000 mm, ex-factory lower deviation of thickness (-): -0.400 mm
Line No.
Name
Steel No.
Specifications
Ordered Quantity (Ton)
Standards
Tax-inclusive Price (RMB YUAN/Ton)
0030
Pipeline Steel Strip
B
12,200 mm X1, 280.000 mm
1200.000
GB/T14164-2005
Market Price prevailing in Taiyuan at the time of delivery
Receiver
Shanxi Guolian Pipe Industry Group Co., Ltd.
  
Special Line
  
Arrival at the Destination Station
Self-pickup
Notes: packing code: ordinary; special requirement 1 from the client: PSL2 quality level set forth in the implemented standards; special requirement 2 from the client:; special requirement 3 from the client: to deliver based on the component performance of S215 corresponding to the standards, ex-factory upper deviation of thickness (+): 0.100 mm, ex-factory lower deviation of thickness (-): -0.300 mm
In Total
    
Amount (RMB YUAN)
  
 Notes: This Contract is a standard contract. The Purchaser is advised to carefully review the contract.

 
 
 
 
2008 Purchase and Sale Agreement on Hot Rolled Steel Strip (1250mm Unit)

Party A: Delong Steel Co., Ltd.
Party B: Shanxi Yuci Guolian Steel Pipe Co., Ltd.

In consideration of the purchase and sales of hot rolled steel strips in 2008, Party A and Party B agree to conclude the Agreement as below through adequate negotiations and based on the principles of “mutual benefits, risks sharing, long-term cooperation and interests sharing”.
I.
Allocation of Resources
1.
Party B purchases the hot rolled steel strips in a total quantity of 36,000 tons from Party A from January 2008 to December 2008. Party B shall order the goods in equal quantity in each month. The agreed quantity per month is 3,000 tons. The parties allow a deviation of +/- 10% in the annual quantity and the quantity delivered in each month.
2.
Due to the equipment of Party A, the specifications of the hot rolled steel strips supplied by Party A shall be subject to the specifications which Party A may produce currently. The other specifications shall be subject to the separate agreement by the parties.

II.
Security Deposit and Price
1.
Party B shall pay the security deposit as per the agreed total quantity (subject to the attached details of security deposit). Upon the achievement of the agreement total quantity, Party A will refund the security deposit in the form of goods.
2.
Party B shall effect about 70% monthly payment before the 25th day of each month to confirm the production plan of next month. The parties shall determine such details as specifications, quantity and date of delivery through negotiations. Party B shall pay the remaining amount before the 5th day of next month.
3.
The price shall be subject to the sale price of Party A prevailing on the date of payment arrival. Upon the arrival of the payment, the price shall not be increased if the sale price of Party A is raised but shall be decreased if the sale price of Party A is decreased. In case of any significant fluctuation in the market, the parties shall settle the problems so arising based on the principles of “mutual benefits and risks sharing”. The funds in excess of the amount for the agreed monthly quantity may be carried forward to the next month; provided that the price shall be subject to the then-current sale price of Party A.

 
 
 
   
4.
The preferential policies granted by Party A to the contractual clients shall apply to the hot rolled steel strips purchased by Party B within the agreed quantity based on the polices of Party A on hot rolled steel strips.

III.
Responsibilities and Obligations
1.
In case of any quality problem arising during the time when Party B uses the products of Party A, Party A shall arrive at the site of Party B in the possibly shortest time to confirm and settle the problems through negotiations.
2.
Party A is responsible and obligated to serve Party B for the whole process. Party A shall dispatch the business personnel on a regular basis to Party B to carry out the relevant marketing services.
3.
Party A and Party B shall frequently exchange the relevant information and communicate with each other based on the principles of “sharing market and information” so that Party A may better serve Party B.

IV.
Liabilities for Breaching the Agreement
 
1.
Party A agrees that one-month agreed quantity may be waived for the benefits of Party B during the term of the Agreement taking full account of the overhaul of the equipment and the other pertinent factors of Party B. Where Party B fails to achieve the agreed quantity for two months (including the month when the agreed quantity may be waived), Party A will deduct 50% security deposit. Where Party B fails to achieve the agreed quantity for three months (including the month when the agreed quantity may be waived), Party A will deduct 100% security deposit, cancel the qualification of Party B under the Agreement and charge the fees originally exempted under the preferential policies.
 
2.
One-month agreed quantity may also be waived for the benefits of Party A. Where Party A fails to deliver the agreed quantity for two months (including the month when the agreed quantity may be waived), Party A shall indemnify Party B at 50% of the security deposit. Where Party A fails to deliver the agreed quantity for three months (including the month when the agreed quantity may be waived), Party A shall indemnify Party B at 100% of the security deposit.
V.
Miscellaneous
 
1.
The Agreement shall be performed in Xingtai, Hebei Province.

 
 
 

 
2.
Any and all the disputes arising out of or in connection with the Agreement shall be settled by Party A and Party B through negotiations. Where no agreement may be reached by the parties through such negotiations, the parties shall submit the disputes to the local arbitration institution in the place where Party A in located for arbitration.
 
3.
Matters not mentioned herein shall be settled by Party A and Party B through negotiations.
 
4.
The Agreement shall be made in two counterparts. Party A and Party B shall hold one counterpart respectively. The Agreement shall take effect after duly signed and stamped by Party A and Party B and shall remain in effect from January 1, 2008 to December 31, 2008. Party A and Party B shall separately negotiate with each other regarding the renewal of the Agreement upon the expiry of the valid term hereof.
 
For and on behalf of
For and on behalf of
Party A: Delong Steel Co., Ltd.
Party B: Shanxi Yuci Guolian Steel Pipe Co., Ltd.
Signed by:
Signed by”
Jan.1, 2008
Jan.1, 2008
 
 
 
 

2009 Warehousing, Purchase and Sale Agreement on Medium-Width Steel Strips

Party A: Lingyuan Iron & Steel Co., Ltd.
Party B: Shanxi Guolian Spiral Tubulation Co., Ltd.

In consideration of the warehousing, purchase and sales of medium-width steel strips in 2009, Party A and Party B agree to conclude the Agreement as below through adequate negotiations and based on the principles of “mutual benefits, risks sharing, long-term cooperation and interests sharing”.
1. Quantity to be warehoused
1.1 Party B purchases the medium-width steel strips in a total quantity of 60,000 tons from Party A for the whole year. Party B shall order 5,000 tons in each month. The parties allow a deviation of +/- 10% in the annual quantity and the monthly quantity.
1.2 Party A guarantees that the stock to be warehoused by it for and on behalf of Party B will not be less than: 3,000 tons in Yuci, 1,000 tons in Xi’an and 1,000 tons in Taiyuan. The exact quantity is adjustable.
1.3 The specifications of the goods available for ordering shall be subject to the common specifications of the products of Party A. The special specifications shall be subject to the separate agreement by the parties.
1.4 Party A shall timely send the medium-width steel strips to the designated warehouses based on the plan of resources submitted by Party B.

2. Performance and Price
2.1 For the purpose of guaranteeing the performance of the warehousing agreement, Party B shall pay the performance bond (in cash or by acceptance) in an amount of RMB 500/ton based on the total monthly quantity (or RMB 2,500,000 in total). The performance bond is interest free and Party A shall refund the same in the form of goods upon the achievement of the total annual quantity.
2.2 Party B shall submit the purchase plan of medium-width steel strips for the next month in writing and specify the place of warehousing (Yuci, Taiyuan or Xi’an) before the 25th day of each month.

 
 
 

2.3 Party A entrusts Shanxi 525 Warehousing and Transportation Co., Ltd., Taiyuan East (address pending) and Shaanxi Assets Warehousing and Transportation Corporation to respectively store, keep, load and unload and transport the medium-width steel strips of Lingyuan Iron & Steel Co., Ltd.. Party A shall deliver the medium-width steel strips to the designated warehouses in due time as required by Party B.
2.4 Upon the achievement of the quantity to be pick up in the month as agreed herein, the preferential sales policies of Lingyuan Iron & Steel Co., Ltd. shall apply to the goods so picked up. (i.e. the price shall be decreased by at least RMB 20/ton (including tax) based on the sale price of Party A and the preferential amount shall be reduced at the time of settlement in the month where Party A notifies Party B of its adjustment to the preferential extent based on the market conditions before the settlement of the month.)
2.5 Party A shall determine the actual settlement price based on the market conditions in the month and the steel strips meetings of East China Region and shall promulgate the actual settlement price, in principle, before the 28th day of each month.
2.6 The funds for the quantity in excessive of the agreed quantity of supply of the month may be carried forward to the next month; provided, however, that the price shall be subject to the price policies of Lingyuan Iron & Steel Co., Ltd. in the next month rather than being locked.
2.7 The transportation subsidy of RMB 30/ton shall apply and shall be paid by bank acceptance bill without discount.
2.8 Party B shall effect the payment to the local business personnel of Lingyuan Iron & Steel Co., Ltd. and shall pick up the goods based on the valid delivery voucher issued by Lingyuan Iron & Steel Co., Ltd.. The payment shall be settled directly with Lingyuan Iron & Steel Co., Ltd.. Party B shall pick up the goods in an equal quantity in each month. The warehousing fee and the transportation fee shall be borne by Party B. Party A shall collect the warehousing fee and settle the same with the warehouse owners.
2.9 Where Party B requires for increased quantity, Party B shall buy out the quantity of warehousing before Party A may send the goods.
2.10 Party B shall buy out the one-month quantity of warehousing in due time if the quantity is within the agreed quantity. Party B shall be deemed to have breached the Agreement if it fails to buy out the stocks in the warehouses, which are within the agreed quantity, upon the expiry of the term of warehousing.
 
 
 
 
 
3. Responsibilities and ObligationsParty B shall guarantee the achievement of the monthly quantity of purchase upon its payment of the security deposit; provided however, that the following rules shall prevail upon the full consideration of the overhaul of the equipment and the other relevant factors of Party B:
3.1 Where Party B fails to achieve the agreed quantity in the first month, Party B will be relieved from its liabilities.
3.2 Where Party B fails to achieve the agreed quantity in the second month, a certain amount shall be deducted from the security deposit at RMB 10/ton based on the quantity not achieved in the month. i.e. amount to be deducted from the security quantity X RMB 10/ton.
3.3 Where Party B fails to achieve the agreed quantity in the third month, Party A will implement the policies for the non-contractual clients when settling the payments for the goods sent in the month and shall deduct the security deposit at RMB20/ton based on the agreed quantity of the month.
3.4 Where Party B fails to achieve the agreed quantity in the fourth month, Party A will implement the policies for the non-contractual clients when settling the payments for the goods sent in the month, deduct all the security deposit for the agreed quantity of the whole year, terminate the Agreement and require Party B to return all the amounts which have been exempted under the relevant preferential policies.
3.5 Where Party B fails to achieve the agreed quantity by the reasons attributable to Party A, Party B will be relieved from its liabilities.
3.6 In case of the goods of special specifications, which may be delayed in arrear in another month, the parties shall be deemed to have duly performed the Contract.
4. Miscellaneous
4.1 The Agreement shall be performed in Lingyuan, Liaoning Province.
4.2 Matters not mentioned herein shall be settled by Party A and Party B through negotiations. Where no agreement may be reached by the parties through such negotiations, the parties shall submit the matters to the Chaoyang arbitration commission in located for arbitration.
4.2
The Agreement shall be made in two counterparts. Party A and Party B shall hold one counterpart respectively. The Agreement shall take effect on and from April 1, 2009 after duly signed and stamped by Party A and Party B and the security deposit duly arrives at the account and shall end on March 31, 2010. Where either party intends to change the Agreement, it shall notify the other party one month in advance. The Agreement may not be changed unless and until otherwise agreed by the parties through negotiations.

 
 
 
 
For and on behalf of
For and on behalf of
Party A: Lingyuan Iron & Steel Co., Ltd.
Party B: Shanxi Guolian Spiral Tubulation Co., Ltd.
Signed by:
Signed by:
March 31, 2009
March 31, 2009
 
 
 
 

Purchase and Sale Contract
Contract No.: BGGL2008005
Place of Execution: Dalian
Date of Execution: August 5, 2008
 Seller: Dalian Binggong Trade Co., Ltd.
 Purchaser: Shanxi Guolian Pipe Industry Group Co., Ltd.
 I. Name, Trademark, Model, Manufacturer, Quantity, Amount, Date of Supply and Quantity of Supply
Name
Trademark
Specifications and Model
Manufacturer
Unit
Quantity (ton)
Unit Price (RMB YUAN)
Total Amount (RMB YUAN)
Date and Quantity of Delivery and Pickup
Hot Rolled Medium-Width Strip
Q235B
(5.6-9.5) * (520-750)
Linggang
Ton
5560
______________
Tax-inclusive ex warehouse price
_____
Subject to the Agreement (No.: BGGL002)
Total Amount (in capital): ____________(subject to the actual settlement amount)
II. Quality Standards: with reference to GB3274-88/GB700-88/GB709-88
III, Place of Delivery: to be transported by rail to the station of Yuci, Shanxi Province and the warehouse owned by Shanxi 525 Warehousing and Transportation Co., Ltd..
IV. Method of Transportation and Fees: Rail Transportation
V. Reasonable Loss and Method of Measurement: subject to the weight list of Linggang with the reasonable deviation of 0.3% in weight.
VI. Packing Standards: subject to the ex factory packing provided by Linggang.
VII. Standards and Methods of Inspection and Acceptance: with reference to Article 2 of the Contract.
 
 
 
 
 
VIII. Method and Period of Payment: The Purchaser shall pay the performance bond at 30% of the total amount in advance and effect all the payment of the goods before January 30, 2009 subject to the provisions on the practice and the period stipulated in the agreement between the parties (No.: BGGL002).
IX. Liabilities for Breaching the Contract: subject to the agreement between the parties (No.: BGGL002).
X. Execution and Performance of the Contract: The Contract shall become legally binding and the parties shall strictly perform the Contract on and from the date when the Contract is duly executed. The Contract shall be made in four counterparts. Each party shall hold two counterparts.
XI. Disputes Settlement: Any and all the disputes arising out of the performance of the Contract shall be settled by the parties through friendly negotiations. Where no agreement may be reached through such negotiations, the parties may launch litigation with the local People’s court in the place where the Seller is located.
XII. The Contract shall take effect after the parties duly sign and stamp the Contract.
Seller
Purchaser
Name (Stamp): Dalian Binggong Trade Co., Ltd.
Address: #158 Youhao Road, Zhongshan District, Dalian
Legal Representative:
Authorized Representative: Wang Zhe
Tel.: 0411-82520161
Telex and Registered Mail:
Opening Bank: Industrial and Commercial Bank, Dalian Zhongshan Square Sub-Branch
Account No.: 3400200129006435850
Zip Code: 116001
Name (Stamp): Shanxi Guolian Pipe Industry Group Co., Ltd.
Address: No. 1 Road, Yuci Industrial Park, Jinzhong
Legal Representative: Liu Xudong
Authorized Representative: Li Dehong
Tel.: 0354-3966170
Telex and Registered Mail:
Opening Bank: Agricultural Bank, Jinzhong Branch, Daobei Sub-branch
Account No.: 3800001040009399
Zip Code: 030600
In 4 counterparts Valid Term: August 5, 2008 to February 4, 2009   
 
 
 
 

Purchasing Agency Contract in Domestic Trade
Contract No.: ZG-UCGL;-080901-043
Place of Execution: Beijing
Date of Execution: September 28, 2008

Principal (Party A): Shanxi Guolian Pipe Industry Group Co., Ltd.
Address: Yuci Industrial Park, Jinzhong, Shanxi Pronvince
Tel. No.: 0354*3966238
Fax: 0354-3967668
Agent (Party B): Sinosteel Iron & Steel Co., Ltd.
Address: #8 Haidian Street, Haidian District, Beijing
Tel. No.: 010-62688717
Fax: 010-62688633

In consideration that Party A entrusts Party B to purchase the following goods, Party A and Party B conclude the following Contract in accordance with the Contract Law of the People’s Republic of China and the other applicable laws and regulations and through friendly negotiations.
Name
Specifications (mm)
Material
Quantity (ton)
Tax-Inclusive Unit Price (RMB YUAN/ton)
Manufacturer
Plain Carbon Steel
(6.2-12.3) * (1280-1610)
Q235B
5475
_________
Shanxi Taigang Stainless Steel Co., Ltd.
In total (MRB)
___________ (in capital) _______________
Notes: The price shall be subject to the actual settlement price between Party B and Shanxi Taigang Stainless Steel Co., Ltd. in the period.

 
 
 

2. Supplier: Shanxi Taigang Stainless Steel Co., Ltd.
3. Quality and Technical Requirements and Standards and Packing Requirement: subject to the standards of Shanxi Taigang Stainless Steel Co., Ltd..
4. Time and Conditions of Order:
Party B shall conclude the purchase and sale contract with Shanxi Taigang Stainless Steel Co., Ltd. (hereinafter referred to “Shangxi Taigang”) based on the standard contract of Shangxi Taigang within 3 working days upon its receipt of the performance bond from Party A, and shall effect the payment to Shangxi Taigang for and on behalf of Party A. Party A accepts any and all the provisions stipulated herein. Party B will effect the payment to Shangxi Taigang.
5. Delivery, Storage and Fees
Time of delivery: The goods shall be delivered at Shanxi Yuci 525 Warehouse within 60 days from the date when Party B effects the payment to the manufacturer. The receiver shall be Sinosteel Iron & Steel Co., Ltd.. The manufacturer shall handle the transportation at the risks of Party A. Party A shall pick up the delivery.
Place of Storage: Shanxi Yuci 525 Warehouse. As the place of storage is designated by Party A, Party A shall undertake the joint and several liabilities if the goods of Party B suffers from any shortage, damage or loss due to the improper management in the designated warehouse or the designated warehouse delivers the goods to Party A without the written order from Party B.
Any and all the shipment and transportation fees, port charges, warehousing fees, warehouse transfer fees, warehouse-out charges and other pertinent fees and expenses shall be borne by Party A. The goods control fees shall be borne by Party A. Party A shall pay such fees to Party B and Party B shall collect and pay the same to the relevant parties for and on behalf of Party A.
6. Commission and Interest
Party A shall pay the commission to Party B at 1.0% of the total payment of the goods (including tax). Party A shall also reimburse Party B the interests and the taxes generated by the advance payment effected by Party B by the method stipulated in Article 7 hereof.
7. Method and Schedule of Payment
(1) Performance Bond

 
 
 

Party A shall pay to Party B the performance bond at 20% of the total payment of the goods, i.e. RMB_____(in capital:___), within 3 days upon the execution of the Contract. Party B may apply the performance bond in the last payment of the goods or directly to offset the possible overdue interest, warehousing and storage fees and the other pertinent fees. Where the performance bond is inadequate to pay the said fees, Party A shall supplement the same in due time. Where the market price is decreased by more than 10% of the price of order, Party A shall pay additional performance bond to Party B at 10% of the total payment of the goods within 3 working days upon its receipt of the written notice from Party B. Where the market price continues to drop, Party A shall continue to pay addition performance bond at the said rate. Where Party A fails to pay the performance bond in due time, Party A shall be deemed to have breached the Contract and Party B has the right to immediately dispose the goods at its own discretion and not refund the performance bond to Party A. Party A shall indemnify Party B for the damage to or the loss of Party B caused by the disposal of the goods by Party B as above mentioned.
(2) Payment of the Goods
Party A shall pay off the payment of the goods, the commission and the relevant miscellaneous fees to Party B within 75 days from the date when Party B effects the payment of the goods to Shanxi Taigang. The title to the goods shall remain with Party B before Party A pays off the said amount.
Method of Payment: As Party B effects the payment to Shanxi Taigang Stainless Steel Co., Ltd. by different methods, Party A may effect the payment to Party B in cash or by bank acceptance bill with a maturity term of less than three months if Party B adopts the bank acceptance bill with a maturity term of six months; Party A shall effect the payment to Party B in cash if Party B adopts the bank acceptance bill with a maturity term of three months; and Party A shall effect the payment to Party B in cash and undertake the interests and the taxes arising from the date when Party B effects the payment to Shanxi Taigang Stainless Steel Co., Ltd. in cash to the date when Party A effects the payment to Party B in cash if Party B effects the payment in cash.
Method of Settlement: one ___  The settlement price between Party B and Party A is: the settlement price between Shanxi Taigang Stainless Steel Co., Ltd. and Party B + (1+1.0%) + the interest and the taxes arising from the payment in cash effected by Party B to Shanxi Taigang Stainless Steel Co., Ltd. + the interest and the taxes arising from overdue payment. The interest rate involved in the settlement, if any, shall be subject to the then-current interest rate (which is 7.2% currently).
8. Pickup
Party A may pick up the goods by itself after it pays all the amounts to Party B. Party A shall take the initiative to contact Party B, to enquire about the price and to confirm the arrival of the goods, the delivery of the goods and the pickup of delivery within the period of delivery and pickup. Where Party A effects the payment and picks up the delivery in installment, Party B will distribute the goods to Party A in the quantity corresponding to the amount paid by Party A.
 
 
 
 
 
9. Method of Weight Measurement, Standards of Inspection and Acceptance, Quality, Quantity and Disputes in Delivery
The weight shall be subject to the weight sheet issued by Shanxi Taigang Stainless Steel Co., Ltd., Party A shall inspect and accepts the goods as per the factory material list based on the State standards. The exact quantity, specifications and other matters of the goods at the time of delivery shall be subject to the contract concluded by and between Party B and Shanxi Taigang Stainless Steel Co., Ltd. as well as the quantity actually delivered by Shanxi Taigang Stainless Steel Co., Ltd.. Party A and Shanxi Taigang Stainless Steel Co., Ltd. shall directly settle and be responsible for the disputes in such matters as the quantity, the weight, the quality and the delivery of the goods and Party B shall render any and all the necessary assistance. Party B shall not refuse to effect the payment of the goods or to pay the various fees to Party B by the excuse of the disputes in such matters as the quantity, the weight, the quality and the delivery of the goods.
10. Reservation of Rights related to the Goods
In case of payment by Party A in installment, Party B has the right to control the goods in the value equivalent to the amount unpaid by Party A, deliver the goods in the corresponding quantity and proportion based on the amount paid by Party A and the proportion thereof and directly settle with Party A the payment of the goods, the overdue interests, the warehousing fees and the other relevant fees and charges.
11. Special Responsibilities and Liabilities
As Party A determines to purchase the goods from Shanxi Taigang Stainless Steel Co., Ltd. solely based on its own contact and negotiations with Shanxi Taigang Stainless Steel Co., Ltd. and its own investigation in the credit status of Shanxi Taigang Stainless Steel Co., Ltd., Party B is informed by Party A of the supply and credit status of Shanxi Taigang Stainless Steel Co., Ltd. and Party A entrusts Party B to conclude the purchase and sale contract with Shanxi Taigang Stainless Steel Co., Ltd. in the name of Party A and for and on behalf of Party A and requires Party B to effect the payment for Party A in advance, Party A is obligated to effect the payment to Party B and to pick up the goods as agreed herein as long as Party B performs its obligations under the purchase and sales contract and effects the advance payment. Party B is not obligated to undertake any and all the risks related to the supply of the goods, including but not limited to the non-delivery, the non-conforming delivery, the non-conforming quality and the late delivery. Party A has no right to claim against Party B for the same. Where Shanxi Taigang Stainless Steel Co., Ltd. breaches the contract, Party A shall claim directly against Shanxi Taigang Stainless Steel Co., Ltd. rather than claiming against Party B. In addition, Party A hereto and Shanxi Taigang Stainless Steel Co., Ltd. shall be jointly and severally liable to indemnify Party B in relation to any and all the claims raised by Party B hereto against Shanxi Taigang Stainless Steel Co., Ltd. for the pertinent matters including but not limited to the delivery, the refund, the liquidated damages and the interests.

 
 
 

12. Liabilities for Breaching the Contract
(1) Where Party A fails to pay the performance bond to Party B within the period agreed herein, Party B has the right to rescind the Contract and Party A shall pay the liquidated damages to Party B at 10% of the total amount of the Contract and Party B has the right to raise the further claims if the liquidated damages are insufficient to remedy the damage or the loss so suffered by Party B.
(2) Where Party A delays in paying any and all the amount payable to Party B such as the payment of the goods, the commission and the freight and miscellaneous charges, Party A shall obtain the written consent from Party B and shall pay the liquidated damages to Party B at 5%0 of the total outstanding amount for each day of delay as well as any and all the warehousing charges and other fees arising during the period of delay in pickup.
(3) Where Party A delays in payment without the written consent from Party B or still fails to pay any and all the amount payable to Party B such as the payment of the goods, the commission and the freight and miscellaneous charges during the grace period agreed by Party B, Party A shall be deemed to have materially breached the Contract and Party B has the right to rescind the Contract, dispose the goods at its own discretion and confiscate the performance bond. In such cases, Party A shall not require Party B to refund the performance bond and shall indemnify Party B for the damage or loss suffered by Party B due to its disposal of the goods as above mentioned (including direct loss and indirect loss) as well as the loss of interest caused by the overdue payment.
13. Third Party Liabilities
Where the parties are unable to perform the Contract or delay in performing the Contract in whole or in part or causes damage to or loss of the goods, the non-conformity in quality at the time of delivery, the quality defects of the goods or the other similar issues by the reasons attributable to the third party or the liabilities of the third party, Party B shall undertake no liabilities for the same and may assist Party A at the cost of Party A in requiring the third party to undertake the relevant liabilities
14. Disputes Settlement

 
 
 

Any and all the disputes arising out of or in connection with the performance of the Contract shall be settled by the parties through friendly negotiations. Where no agreement may be reached through such negotiations, the parties shall submit the disputes to the local court in Beijing where the Contract is executed. Any and all the reasonable fees caused by the winning party in order to settle the disputes including but not limited to attorney fees as well as the reasonable fees arising out of the efforts to minimize the damage or loss shall be borne by the failing party.
15. Transfer of the Obligations hereunder
Neither party may transfer any of its obligations hereunder to others without the prior written consent from the other party.
16. Counterparts and Effectiveness
The Contract shall be made in two counterparts. Each party shall hold one counterpart. The Contract shall take effect after the respective legal representatives or authorized representatives of the parties duly sign and stamp the Contract. No amendment to or rescission of the Contract shall take effect unless agreed by the parties in writing through negotiations. The original provisions of the Contract shall remain in effect before the parties agree on the amendment or rescission hereof. The facsimile copies of the documents generated by the parties during the execution or the performance of the Contract shall be valid; provided, however, that the party shall submit the original copies to the other party in due time.
 
Party A: Shanxi Guolian Pipe Industry Group Co., Ltd.
Party B: Sinosteel Iron & Steel Co., Ltd.
Authorized Representative
Authorized Representative
September 28, 2009
September 28, 2009
 
 
 
 

Purchase Contract of Shanxi Jiugang Jialijin Trade Co., Ltd. in May, 2008

May 26, 2008, Taiyuan                       Contract No.: 08005JPB001

Name
Brand
Specifications
(mm)
Quantity
(t)
Price (RMB YUAN/t)
Quality and Technical Standards
Pipeline Steel
X52
7.6*1380
3350
____
GB/T14164-2005, PSL2
Seller: Shanxi Jiugang Jialijin Trade Co., Ltd.
  
Purchaser (Stamp)
Shanxi Guolian Pipe Industry Group Co. Ltd.
Region No. and Tel. No.
  
Fax
(0351) 03516358276
Contract Personnel
Receiver
Shanxi 525 Warehousing and Transportation Co., Ltd.
Opening Bank
Bank of Communication
Account No.
41
Settled by
    
Tax Registration Certificate No.
142622751508155
Authorized Representative
 
 
  
Settlement Bank
Agricultural Bank of china, Jinzhong Branch, Daobei Sub-Branch
 
Station of Shipment
      
Account No.
380001040009399
Region No. and Tel. No.
38
Zip Code
03
Address
Taiyuan, Shanxi Province
Telex and Registered Mail
  
Tax ID
142401748578718
Zip Code
  
    1. Standards of Measurement: by grams
Address
  Building 1 Yuci Industrial Park
 
 
 
 
 
2. Disagreement Settlement: The purchaser shall raise the claim in writing with the Supplier regarding the quantity with the handover certificate, the reviewed weight list and the other relevant supporting documents issued by the transportation departments within 10 days upon the arrival of the goods and shall handle the pertinent matters as stipulated by the Supplier. The purchaser shall raise the claim in writing with the Supplier regarding the quality within 30 days upon the arrival of the goods. If the Purchaser fails to raise the claims regarding the quantity or the quality within the specified period, the quality or the quantity shall be deemed to be conforming to the Contract.
Station of Destination
Taiyuan Bureau Yuci Station
Special Line for Shanxi 525 Warehousing and Transportation Co., Ltd
Purchaser
  
3. Where the Purchaser intends to amend, supplement, rescind or terminate the Contact, the Purchaser shall notify the Supplier in writing 10 days before the shipment.
Remarks
1. The price hereunder shall be paid equally by two methods, i.e. 50% by acceptance and 50% in cash. The payment of the goods in excessive of the said proportion shall be increased or decreased based on the then-current interest rate promulgated by the bank. The price includes the tax. The price is CIF price and all the amounts shall be settled in one invoice.
2. The shipment shall be completed before June 20.
4. Method of Transportation: rail transportation
5. The Purchaser shall effect the payment to the Supplier within three days upon the execution of the Contract; or otherwise the Supplier has the right to terminate the Contract or postpone the performance of the Contract. The Purchaser shall also indemnify the Supplier for the damage or loss so suffered by it. Where the Supplier is affected by significant accidents or transportation, the Supplier may postpone the performance of the Contract.
6. The goods shall be sold based on the principle of “payment first and goods later”. Where the payment effected by the Purchase fails to be fully applied during the term of the Contract or the funds of the Purchaser is hold up for a long time by other reasons, Party A shall undertake no liabilities.
 
 
 
 
 
7. Any and all the disputes arising during the performance of the Contract shall be settled by the parties through negotiations.
 
 
 
8. The Contract shall take effect after signed and stamped by the parties. The valid term of the Contract is from May 26, 2008 to June 20, 2008.
 
 
 
 

Purchase and Sale Contract
Contract No.: LY-0800819005
Place of Execution: Handan
Date of Execution: August 19, 2008
 Party A (Purchaser): Shanxi Guolian Pipe Industry Group Co., Ltd.
 Party B (Seller): Handan Lianying Materials Co., Ltd.
 I. Name, Materials, Model, Manufacturer, Quantity, Unit Price and Amount
Name
Material
Specifications and Model
Manufacturer
Unit
Quantity
Unit Price
Total Amount
Remarks
Rolled Plate
Q235B
14*1500
Tiantie
Ton
1300
____
_____
48 pieces
In total
      
Ton
1300
____
_____
48 pieces
Total Amount (in capital): ____________(subject to the actual settlement amount)
Remarks: The price is the tax-inclusive unit price in cash. Party B shall issue the value-added tax invoice. The advance payment is RMB ____. (in case of acceptance, a discount of RMB 35/ton will be granted in the first month; a discount of RMB 70/ton will be granted in the second month; a discount of RMB 100/ton will be granted in the third month, and later the price will be increased by RMB 30/ton each month.
II. Date of Delivery: set rolling and delivery at the end of the month. A deviation of +/- 2% is allowed in the quantity actually delivered.
III. Standards of Quality: subject to the State standards. The target thickness is 13.8mm to 13.9mm. Party A shall raise the disagreement within thirty days upon its receipt of the goods and Party B shall assist Party A in raising the claims regarding the quality with the manufacturer; or otherwise the goods shall be deemed as conforming upon inspection. (See the attached materials list.)
IV. Place and Method of Delivery (Pickup): Tiantie Warehouse. Party B is responsible for the transportation. The freight is RMB 85/ton (not including the transportation invoice).
V. Standards of Reasonable Loss and Method of Calculation: 3%0 shall be deemed as normal loss as per the international standards.
VI. The ownership to the subject matter, of which the payment has not been effected, shall remain with Party B before Party A effects all the payment to Party B.
 
 
 
 
 
VII. Method of Transportation, Arrival at the Station (Port) and the Fees: Party A shall pay the deposit of RMB ____ which shall be applied in the last payment. The resources and the price shall be fixed upon the execution of the Contract.
VIII. Method, Time and Place of Settlement: shipment upon payment.
IX. Conditions of Rescission: The Contract shall be automatically rescinded upon the completion of all the matters stipulated herein.
X. Liabilities for Breaching the Contract: In accordance with the Contract Law, Party A and Party B shall perform their respective obligations in strict accordance with the Contract and the breaching party shall undertake the liabilities for breaching the Contract. Where Party B is unable to deliver all the goods within the term of delivery stipulated herein, Party B shall return the payment and pay the liquidated damages to Party A within two days except for the events of force majeure. The disputes shall be settled by Party A and Party B through friendly negotiations. Where no agreement may be reached through such friendly negotiations, the parties shall legally raise the litigation with the People’s court.
XI. The Contract shall take effect on and from the date when the parties sign and stamp the Contract. The facsimile copy of the Contract shall have the same legal force and effect as the original copy. The Contract shall become invalid if altered without consent. The Contract shall be made in two counterparts. Each party shall hold one counterpart.
Seller
Purchaser
  
Name: Handan Lianying Materials Co., Ltd.
Address:
Legal Representative:
Authorized Representative:
Mobile: 13832092075
Fax: 0310-5521621
Opening Bank: Agricultural Bank, Hanshan Sub-Branch
Account No.: 113001040015986
Account No. for Large Amount: 103127011309
Zip Code: 056003
Name: Shanxi Guolian Pipe Industry Group Co., Ltd.
Address: No.
Legal Representative:
Authorized Representative:
Mobile:
Fax
Opening Bank
Account No.
Zip Code
Comments of Certification (Public Notary)
 
 
Certification Organ (Public Notary) (Stamp)
Handled by:
 
August 19, 2008
 Account No. in Agricultural Bank: 62284 6175 00020 16612   Account Holder: Xu Lijuan
 
 
 
 
 
Purchase and Sale Contract of Tai’an Luzhong Taichang Trade Co., Ltd.
TCNO. 080927010
Place of Execution: Tai’an
Date of Execution: September 17, 2008
 Seller: Tai’an Luzhong Taichang Trade Co., Ltd.
 Purchaser: Shanxi Guolian Pipe Industry Group Co., Ltd.
 I. Details of the Steel Materials Purchased by the Purchaser
Name
Specifications and Model
Material
Place of Original
Quantity (Ton)
Unit Price (RMB YUAN/ton)
Total Amount
Hot Rolled Plate
12.1*1440
Q235B
Jigang
2060
    
Hot Rolled Plate
9.05*1440
Q235B
Jigang
840
    
Hot Rolled Plate
7.7*1440
Q235B
Jigang
40
    
Hot Rolled Plate
7.5 *1440
Q235B
Jigang
60
    
Hot Rolled Plate
6.0 *1440
Q235B
Jigang
100
    
Hot Rolled Plate
8.7 *1440
Q345B
Jigang
100
    
Hot Rolled Plate
5.8 *1440
Q345B
Jigang
40
____
_____
Freight
      
3240
    
In total
      
3240
    
In total
(in capital) ____(including tax and in cash)
 
 
 
 
 
II. Requirements on Quality: subject to the international standards. In case of any disagreement in the quality, the Purchaser shall raise the disagreement in writing within seven days. The Supplier shall render all the necessary assistance.
III. Method and Period of Payment: The Purchaser shall pay RMB ____ in advance before September 28, 2008 as the deposit. The Supplier will apply with the manufacturer to arrange the production upon the arrival of the deposit. The Purchaser shall effect all the payment before October 05, 2008, The Supplier will arrange the shipment after all the payment arrives. In case of any default by either party, the breaching party shall undertake any and all the fees so caused.
IV. Price: The price is fixed.
V. Address and Date of Delivery: Jigang. The Supplier shall deliver the goods on and before October 10, 2008 (provided that the delivery may be postponed for the special reasons of the manufacturer or the events of force majeure.)
VI. Method of Transportation: The Supplier shall transport the goods. The freight and the payment of the goods shall be settled separated in two invoices. (The freight shall be RMB 150/ton.)
VII. Standard of Inspection and Acceptance: subject to the weight list of Jigang. The deviation in the weight shall be subject to the international standards (+/- 3%),
VIII. Weight of Delivery: the weight to be delivered shall be the contractual weight plus or minus 10%.
IX. Disputes Settlement: Any economic disputes arising out of the Contract shall be settled by the parties through friendly negotiations. Where no agreement may be reached through such friendly negotiations, either party has the right to the local People’s court of the competent jurisdiction in Tai’an.
X. Other Agreements: The Contract shall take effect after duly signed and stamped by the parties. (The facsimile copy shall be valid.)
XI. Goods shall be delivered with positive deviation.
Seller
Purchaser
Name: Tai’an Luzhong Taichang Trade Co., Ltd.
Address:
Legal Representative:
Authorized Representative:
Tel. No.
Fax: 0538-8100559
Opening Bank:
Account No.:
Zip Code:
Name: Shanxi Guolian Pipe Industry Group Co., Ltd.
Address:
Legal Representative:
Authorized Representative:
Tel. No.
Fax
Opening Bank
Account No.
Zip Code

 
 
 

Purchase and Sale Contract
TCNO. 2008-10T-07
Place of Execution: Taiyuan, Shanxi
Date of Execution: October 16, 2008
 Seller: Shanxi Xinbang Trade Co., Ltd.
 Purchaser: Shanxi Guolian Pipe Industry Group Co., Ltd.
 Party A and Party B agree to conclude the Contract as below through friendly negotiations.
 I. Name, Trademark, Type, Model, Manufacturer, Quantity and Amount
 
Name
Type and Trademark
Specifications and Model
Manufacturer
Unit
Quantity
Tax-inclusive Unit Price of Taigang
Total Amount
Remarks
Hot Rolled Plate
Q345B
8.9 * 1600
Er Lian Ya
ton
150
    
No alteration without consent.
Hot Rolled Plate
Q345B
13.7 * 1500
Er Lian Ya
ton
240
    
Hot Rolled Plate
Q235B
12.3 * 1600
Er Lian Ya
ton
150
    
 
In total
    
540
        
In total (in capital) ____    
II. Requirements on Quality and Technology: subject to the standards of Taigang.
(in case of the goods of Q345B 13.7*1500, the order may be made as per the provision for Q345B in GB/T3274. S≤0.01%; Rel≥ 360MPa, Rm: 510-640Mpa, 00C Impact Force ≥341
    
 
 
 
 
 
III. Method and Period of Payment: The Purchaser shall fully effect the payment before October 31. In case of bank acceptance bill, the relevant policies of Taigang on discounting shall apply.
IV. The goods shall be shipped in and before October, 2008 except for force majeure. The freight shall be borne by the Purchaser.
V. The Purchaser shall pick up the goods by itself.
VI. The quantity of the goods shall be subject to the quality warranty issued by Taigang.
VII. Disputes Settlement. The claims regarding quantity shall be raised within ten days and the claims regarding quality shall be raised within twenty days in writing upon the arrival of the goods. The Supplier shall assist the Purchaser in requiring the manufacturer to settle the problems. The Purchaser shall not refuse to pay the payment of the goods and the freight by the excuse of the claims regarding quantity or quality.
VIII. No amendment to or rescission of the Contract shall be valid unless and until agreed by the parties in writing through negotiations.
IX. Liabilities for Breaching the Contract; subject to the Contract Law.
X. Disputes Settlement: Any economic disputes arising out of the Contract shall be settled by the parties through friendly negotiations. Where no agreement may be reached through such friendly negotiations, either party has the right to the local People’s court in Jiancaoping District in Taiyuan.
XI. Other Agreements: The facsimile copy shall be valid.
XII. The Contract shall be made in two counterparts. Each party shall hold one counterpart.
    

 
 
 

Seller
Purchaser
  
Name: Shanxi Xinbang Trade Co., Ltd.
Address: #38 Fuxi Road, Taiyuan
Legal Representative:
Authorized Representative:
Opening Bank:
Account No.:
Zip Code:
Tel. No.: 0351-3555255
Name: Shanxi Guolian Pipe Industry Group Co., Ltd.
Address:
Legal Representative:
Authorized Representative:
Opening Bank
Account No.
 
  

 The Contract shall remain in valid until November 1, 2008.

 
 
 
 
 EX-4.5 9 v230348_ex4-5.htm
Steel and Iron Products SaleContract of Shanxi Taigang Stainless Steel Co., Ltd.

Type of the Order: Y002
Order No.: 160408
Date of Execution
Jul.28, 2009
Place of Execution:
Tai Yuan
Date of Delivery:, 2009
Factory of Delivery: Hot Strip Rolling Factory(2250)

Seller
Name: Shanxi Taigang Stainless Steel Co., Ltd.
Address: #113 North Jiefang Road, Taiyuan
Zip Code: 030003 Fax: 0391-3130793 Tel.
Opening Bank: Industrial and Commercial Bank of China, Taiyuan Branch
Bank Account: 0502125109022
Tax I.D.: 140116701011888
Legal Representative or Authorized Representative of the Seller
Stamp
Purchaser
Name: Shanxi Guolian Pipe Industry Group Co., Ltd.
Address:
Zip Code: 030600
Fax:
Tel.: 0354-3966238
Opening Bank:
Bank Account:
Tax I.D.
Legal Representative or Authorized Representative of the Purchaser
Stamp
Other Contents
1. where the overage and shortage is +/- 3% of the total weight, …     ; where the increase or the decrease in the actual weight per piece exceeds the scope of overage and shortage, the quantity actually delivered shall prevail. The scales difference ≤3%.
2. The special requirements in technical conditions, if any, shall be specified in the Contract; and where the Seller handle the rail transportation for and on behalf of the Purchaser, the freight and miscellaneous charges shall be borne by the Purchaser.
 
 
 
 
 
 
3. In case of any inconsistence between the delivery and the Contract, the Purchaser shall launch the claim with the Seller within 10 days upon its receipt of the goods and shall keep the goods under the conditions existing at the time of delivery.
4. In case of any dispute, the parties shall raise the litigation with the local People’s court of the competent jurisdiction in the place where the Seller is located.
5. The Contract shall not be amended or rescinded unless agreed by the parties in writing through negotiations.
Remarks:
Terms of Payment: payment before the 10th day of the month; subject to the planned order.
Line No.
Name
Steel No.
Specifications
Ordered Quantity (Ton)
Standards
Tax-inclusive Price (RMB YUAN/Ton)
0010
Pipeline Steel Strip
X52
10,300 mm X1, 350,000 ,,
2100.000
Q/TX3406-2609
Market Price prevailing in Taiyuan at the time of delivery
Receiver
Shanxi Guolian Pipe Industry Group Co., Ltd.
  
Special Line
  
Station of Destination
Self-pickup
Notes: packing code: ordinary; maximum weight: 30.0 TON, minimum weight: 20.0 TON; ex factory upper deviation in thickness: 0.000 mm; ex factory lower deviation in thickness: -0.500 mm; special requirements of the client on thickness: none
0020
Pipeline Steel Strip
X52
0.300 mm X1, 500.000 mm
2700.000
Q/TX3405-2008
Market Price prevailing in Taiyuan at the time of delivery
 
 
 
 
 
 
Receiver
Shanxi Guolian Pipe Industry Group Co., Ltd.
  
Special Line
  
Station of Destination
Self-pickup
Notes: (/km)<=0.82, packing code: ordinary; maximum weight: 30.0 TON, minimum weight: 20.0 TON; ex factory upper deviation in thickness: 0.000 mm; ex factory lower deviation in thickness: -0.500 mm; special requirements of the client on thickness: yes
             
Receiver
    
Special Line
  
Station of Destination
  
 
In Total
  
Total weight in order (ton)
Amount (RMB YUAN)
  
Notes: This Contract is a standard contract. The Purchaser is advised to carefully review the contract.
 
 
 
 
 
2009 Purchase and Sale Agreement on Hot Rolled Steel Strip (850mm Unit)

Party A: Delong Steel Co., Ltd.
Party B: Shanxi Guolian Pipe Industry Group Co., Ltd.

In consideration of the purchase and sales of hot rolled steel strips in 2009, Party A and Party B agree to conclude the Agreement as below through adequate negotiations and based on the principles of “mutual benefits, risks sharing, long-term cooperation and interests sharing”.
I.
Allocation of Resources
1.
Party B purchases the hot rolled steel strips in a total quantity of 6,000 tons from Party A from January 2009 to December 2009. Party B shall order the goods in equal quantity in each month. The agreed quantity per month is 5,000 tons. The parties allow a deviation of +/- 10% in the annual quantity and the quantity delivered in each month.
2.
Due to the equipment of Party A, the specifications of the hot rolled steel strips supplied by Party A shall be subject to the specifications which Party A may produce currently. The other specifications shall be subject to the separate agreement by the parties.

II.
Security Deposit and Price
1.
Party B shall pay the security deposit as per the agreed total quantity (subject to the attached details of security deposit). Upon the achievement of the agreement total quantity, Party A will refund the security deposit in the form of goods.
2.
Party B shall effect about 70% monthly payment before the 25th day of each month to confirm the production plan of next month. The parties shall determine such details as specifications, quantity and date of delivery through negotiations. Party B shall pay the remaining amount before the 5th day of next month.
3.
The price shall be subject to the sale price of Party A prevailing on the date of payment arrival. Upon the arrival of the payment, the price shall not be increased if the sale price of Party A is raised but shall be decreased if the sale price of Party A is decreased. In case of any significant fluctuation in the market, the parties shall settle the problems so arising based on the principles of  “mutual benefits and risks sharing”. The funds in excess of the amount for the agreed monthly quantity may be carried forward to the next month; provided that the price shall be subject to the then-current sale price of Party A.
 
 
 
 
 
4.
The preferential policies granted by Party A to the contractual clients shall apply to the hot rolled steel strips purchased by Party B within the agreed quantity based on the polices of Party A on hot rolled steel strips.

III.
Responsibilities and Obligations
1.
In case of any quality problem arising during the time when Party B uses the products of Party A, Party A shall arrive at the site of Party B in the possibly shortest time to confirm and settle the problems through negotiations.
2.
Party A is responsible and obligated to serve Party B for the whole process. Party A shall dispatch the business personnel on a regular basis to Party B to carry out the relevant marketing services.
3.
Party A and Party B shall frequently exchange the relevant information and communicate with each other based on the principles of “sharing market and information” so that Party A may better serve Party B.

IV.
Liabilities for Breaching the Agreement
 
1.
Party A agrees that one-month agreed quality may be waived for the benefits of Party B during the term of the Agreement taking full account of the overhaul of the equipment and the other pertinent factors of Party B. Where Party B fails to achieve the agreed quantity for two months (including the month when the agreed quantity may be waived), Party A will deduct 50% security deposit. Where Party B fails to achieve the agreed quantity for three months (including the month when the agreed quantity may be waived), Party A will deduct 100% security deposit, cancel the qualification of Party B under the Agreement and charge the fees originally exempted under the preferential policies.
 
2.
One-month agreed quantity may also be waived for the benefits of Party A. Where Party A fails to deliver the agreed quantity for two months (including the month when the agreed quantity may be waived), Party A shall indemnify Party B at 50% of the security deposit. Where Party A fails to deliver the agreed quantity for three months (including the month when the agreed quantity may be waived), Party A shall indemnify Party B at 100% of the security deposit.
V.
Miscellaneous
 
1.
The Agreement shall be performed in Xingtai, Hebei Province.
 
 
 
 
 
 
2.
Any and all the disputes arising out of or in connection with the Agreement shall be settled by Party A and Party B through negotiations. Where no agreement may be reached by the parties through such negotiations, the parties shall submit the disputes to the local arbitration institution in the place where Party A in located for arbitration.
 
3.
Matters not mentioned herein shall be settled by Party A and Party B through negotiations.
 
4.
The Agreement shall be made in two counterparts. Party A and Party B shall hold one counterpart respectively. The Agreement shall take effect after duly signed and stamped by Party A and Party B and shall remain in effect from January 1, 2009 to December 31, 2009. Party A and Party B shall separately negotiate with each other regarding the renewal of the Agreement upon the expiry of the valid term hereof.

For and on behalf of
For and on behalf of
Party A: Delong Steel Co., Ltd.
Party B: Shanxi Guolian Pipe Industry Group Co., Ltd.
Signed by:
Signed by
   
January 1, 2009
January 1, 2009
 
 
 
 
 
2010 Warehousing, Purchase and Sale Agreement on Medium-Width Steel Strips

Party A: Lingyuan Iron & Steel Co., Ltd.
Party B: Shanxi Guolian Spiral Tubulation Co., Ltd.

In consideration of the warehousing, purchase and sales of medium-width steel strips in 2010, Party A and Party B agree to conclude the Agreement as below through adequate negotiations and based on the principles of “mutual benefits, risks sharing, long-term cooperation and interests sharing”.
1. Quantity to be warehoused
1.1 Party B purchases the medium-width steel strips in a total quantity of 36,000 - 60,000 tons from Party A for the whole year. Party B shall order 3,000 - 5,000 tons in each month.
1.2 Party A guarantees that the stock to be warehoused by it for and on behalf of Party B will not be less than 3,000 tons.
1.3 The specifications of the goods available for ordering shall be subject to the common specifications of the products of Party A. The special specifications shall be subject to the separate agreement by the parties.
1.4 Party A shall timely send the medium-width steel strips to the designated warehouses based on the plan of resources submitted by Party B.

2. Performance and Price
2.1 For the purpose of guaranteeing the performance of the warehousing agreement, Party B shall pay the performance bond (in cash or by acceptance) in an amount of RMB 500/ton based on the total monthly quantity (or RMB 2,500,000 in total). The performance bond is interest free and Party A shall refund the same in the form of goods upon the achievement of the total annual quantity.
2.2 Party B shall submit the purchase plan of medium-width steel strips for the next month in writing and specify the place of warehousing (Yuci, Taiyuan or Xi’an) before the 25th day of each month.
2.3 Party A entrusts Shanxi 525 Warehousing and Transportation Co., Ltd., Taiyuan East (address pending) and Shaanxi Assets Warehousing and Transportation Corporation to respectively store, keep, load and unload and transport the medium-width steel strips of Lingyuan Iron & Steel Co., Ltd.. Party A shall deliver the medium-width steel strips to the designated warehouses in due time as required by Party B.
 
 
 
 
 
2.4 Upon the achievement of the quantity to be picked up in the month as agreed herein, the preferential sales policies of Lingyuan Iron & Steel Co., Ltd. shall apply to the goods so picked up. (i.e. the price shall be decreased by at least RMB 20/ton (including tax) based on the sale price of Party A and the preferential amount shall be reduced at the time of settlement in the month where Party A notifies Party B of its adjustment to the preferential extent based on the market conditions before the settlement of the month.)
2.5 Party A shall determine the actual settlement price based on the market conditions in the month and the steel strips meetings of East China Region and shall promulgate the actual settlement price, in principle, before the 28th day of each month.
2.6 The funds for the quantity in excessive of the agreed quantity of supply of the month may be carried forward to the next month; provided, however, that the price shall be subject to the price policies of Lingyuan Iron & Steel Co., Ltd. in the next month rather than being locked.
2.7 The transportation subsidy of RMB 30/ton shall apply and shall be paid by bank acceptance bill without discount.
2.8 Party B shall effect the payment to the local business personnel of Lingyuan Iron & Steel Co., Ltd. and shall pick up the goods based on the valid delivery voucher issued by Lingyuan Iron & Steel Co., Ltd.. The payment shall be settled directly with Lingyuan Iron & Steel Co., Ltd.. Party B shall pick up the goods in an equal quantity in each month. The warehousing fee and the transportation fee shall be borne by Party B. Party A shall collect the warehousing fee and settle the same with the warehouse owners.
2.9 Where Party B requires for increased quantity, Party B shall buy out the quantity of warehousing before Party A may send the goods.
2.10 Party B shall buy out the one-month quantity of warehousing in due time if the quantity is within the agreed quantity. Party B shall be deemed to have breached the Agreement if it fails to buy out the stocks in the warehouses, which are within the agreed quantity, upon the expiry of the term of warehousing.

3. Responsibilities and Obligations
Party A and Party B shall confirm the plan of next month on the 25th day of each month (the planned quantity is 3,000 – 5,000 tons) and Party B shall guarantee the achievement of the monthly quantity of purchase upon its payment of the security deposit; provided however, that the following rules shall prevail upon the full consideration of the overhaul of the equipment and the other relevant factors of Party B:
 
 
 
 
 
3.1 Where Party B fails to achieve the agreed quantity in the first month, Party B will be relieved from its liabilities.
3.2 Where Party B fails to achieve the agreed quantity in the second month, a certain amount shall be deducted from the security deposit at RMB 10/ton based on the quantity not achieved in the month. i.e. amount to be deducted from the security quantity X RMB 10/ton.
3.3 Where Party B fails to achieve the agreed quantity in the third month, Party A will implement the policies for the non-contractual clients when settling the payments for the goods sent in the month and shall deduct the security deposit at RMB20/ton based on the agreed quantity of the month.
3.4 Where Party B fails to achieve the agreed quantity in the fourth month, Party A will implement the policies for the non-contractual clients when settling the payments for the goods sent in the month, deduct all the security deposit for the agreed quantity of the whole year, terminate the Agreement and require Party B to return all the amounts which have been exempted under the relevant preferential policies.
3.5 Where Party B fails to achieve the agreed quantity by the reasons attributable to Party A, Party B will be relieved from its liabilities.
3.6 In case of the goods of special specifications, which may be delayed in arrear in another month, the parties shall be deemed to have duly performed the Contract.
4. Miscellaneous
4.1
The Agreement shall be performed in Lingyuan, Liaoning Province.
4.2 Matters not mentioned herein shall be settled by Party A and Party B through negotiations. Where no agreement may be reached by the parties through such negotiations, the parties shall submit the matters to the Chaoyang arbitration commission in located for arbitration.
4.2
The Agreement shall be made in two counterparts. Party A and Party B shall hold one counterpart respectively. The Agreement shall take effect on and from April 1, 2010 after duly signed and stamped by Party A and Party B and the security deposit duly arrives at the account and shall end on March 31, 2011. Where either party intends to change the Agreement, it shall notify the other party one month in advance. The Agreement may not be changed unless and until otherwise agreed by the parties through negotiations.
 
 
 
 
 
For and on behalf of
For and on behalf of
Party A: Lingyuan Iron & Steel Co., Ltd.
Party B: Shanxi Guolian Spiral Tubulation Co., Ltd.
Signed by:
Signed by:
March 31, 2010
March 31, 2010
 
 
 
 
 
Purchase and Sale Contract
Contract No.: BGGL2009004
Place of Execution: Dalian
Date of Execution: September 17, 2009
Seller: Dalian Binggong Trade Co., Ltd.
Purchaser: Shanxi Guolian Pipe Industry Group Co., Ltd.
I. Name, Trademark, Model, Manufacturer, Quantity, Amount, Date of Supply and Quantity of Supply
Name
Trademark
Specifications and Model
Manufacturer
Unit
Quantity (ton)
Unit Price (RMB YUAN)
Total Amount (RMB YUAN)
Date and Quantity of Delivery and Pickup
Hot Rolled Medium-Width Strip
Q235B
(5.5-11.6) * (520-750)
Lingang
Ton
5827.105
___________
Tax-inclusive ex warehouse price
_____
Subject to the Agreement (No.: BGGL09001)
Total Amount (in capital): ____________(subject to the actual settlement amount)
II. Quality Standards: with reference to GB3274-88/GB700-88/GB709-88
III, Place of Delivery: to be transported by rail to the station of Yuci, Shanxi Province and the warehouse owned by Shanxi 525 Warehousing and Transportation Co., Ltd..
IV. Method of Transportation and Fees: Rail Transportation
V. Reasonable Loss and Method of Measurement: subject to the weight list of Lingang with the reasonable deviation of 0.3% in weight.
VI. Packing Standards: subject to the ex factory packing provided by Lingang.
VII. Standards and Methods of Inspection and Acceptance: with reference to Article 2 of the Contract.
 
 
 
 
 
VIII. Method and Period of Payment: The Purchaser shall pay the performance bond at 30% of the total amount in advance and effect all the payment of the goods before March 15, 2010 subject to the provisions on the practice and the period stipulated in the agreement between the parties (No.: BGGL09001).
IX. Liabilities for Breaching the Contract: subject to the agreement between the parties (No.: BGGL09001).
X. Execution and Performance of the Contract: The Contract shall become legally binding and the parties shall strictly perform the Contract on and from the date when the Contract is duly executed. The Contract shall be made in four counterparts. Each party shall hold two counterparts.
XI. Disputes Settlement: Any and all the disputes arising out of the performance of the Contract shall be settled by the parties through friendly negotiations. Where no agreement may be reached through such negotiations, the parties may launch litigation with the local People’s court in the place where the Seller is located.
XII. The Contract shall take effect after the parties duly sign and stamp the Contract.
Seller
Purchaser
Name (Stamp): Dalian Binggong Trade Co., Ltd.
Address: #158 Youhao Road, Zhongshan District, Dalian
Legal Representative:
Authorized Representative: Wang Zhe
Tel.: 0411-82520161
Telex and Registered Mail:
Opening Bank: Industrial and Commercial Bank, Dalian Zhongshan Square Sub-Branch
Account No.: 3400200129006435850
Zip Code: 116001
Name (Stamp): Shanxi Guolian Pipe Industry Group Co., Ltd.
Address: No. 1 Road, Yuci Industrial Park, Jinzhong
Legal Representative: Liu Xudong
Authorized Representative: Li Dehong
Tel.: 0354-3966170
Telex and Registered Mail:
Opening Bank: Agricultural Bank, Jinzhong Branch, Daobei Sub-branch
Account No.: 3800001040009399
Zip Code: 030600
In 4 counterparts                                                       Valid Term: September 17, 2009 to March 16, 2010
 
 
 
 
 
Steel and Iron Products Sale Contract of Qian’an Steel Co., Ltd.

Order No.: 231792  Valid Term of the Order: 2009-06-17 – 2009-07-05

The Contract is the sales contract between the Seller and the Purchaser regarding the sales of the steel products by the Seller to the Purchaser. The parties agree as below based on the principles of friendly and equal negotiations.
 
I.
Subject Matter, Quantity, Price, Technical Standards, Conditions of Transportation and the other relevant matters are specified in the attachment.
 
II.
The price of the subject matter is the listing price of the Seller less the discount of the batch corresponding to the quantity so ordered. The actual settlement price is subject to the policies promulgated by the Seller on the sales price in the month.
 
III.
Place of Performance: the place where the Seller is located. The place of delivery (pickup) is the place where the factory of the Seller is located.
 
IV.
Inspection and Acceptance upon Delivery: The Purchaser (or the person designated by it to pick up the goods) shall inspect the quantity based on the delivery list provided by the Seller upon its receipt of the steel products and the other products delivered by the Seller. In case of any difference between the quantity determined upon the inspection and the quantity so delivered exceeding 0.3%, the Purchaser shall keep the goods under the original conditions and raise the objection with the Seller within ten days. The parties shall settle such objections through negotiations.
 
V.
Amendment: The parties may not amend the Contract unless and until the parties so agree through negotiations.
 
VI.
The station of destination specified herein shall not be changed without the consent from the Seller. In case of any difference between the original price and the sales price adopted by the Seller in the region due to the change to the station of destination by the Purchaser without consent, the Seller has the right to settle the payment based on the price prevailing in the region where the actual station of destination is located.
 
VII.
Conditions of Effectiveness: The Contract shall take effect after the parties sign and stamp the Contract with the contract chop.
 
VIII.
Neither party may transfer the Contract without the consent from the other party.
 
 
 
 
 
 
IX.
Matters not mentioned herein shall be settled according to the Contract Law.
 
X.
In case of any dispute between the parties under the Contract, the parties shall launch the litigations with the local People’s court in the place where the Seller is located.
 
XI.
The transaction hereunder is expected to use RMB ______ and require for 4574.000 tons in total.
 
XII.
The receiver (or the person to pick up the goods): Shanxi Guolian Pipe Industry Group Co., Ltd.
 
XIII.
Method of Transportation: rail transportation
 Station of Designation: Yuci
 Special Line: Shanxi 525 Warehousing and Transportation Co., Ltd..
 Expected freight: RMB ___/ton
 Settlement method of Freight: to be collected and paid by the Seller for and on behalf of the Purchaser.

 Seller: Qian’an Steel Co., Ltd.
 Address: Binhe Village, Yang Dian Zi Township, Qian’an, Tangshan
 Zip Code: 064404      Tel., No.: 0315-7703063
 Opening Bank: Huaxia Bank, Shijingshan Sub-branch  Account No.: 801111960
 Legal Representative or Authorized Representative

 Purchaser：Shanxi Guolian Pipe Industry Group Co., Ltd.
 Address: Yuci Industrial Park, Jinzhong
 Zip Code: 030600 Tel. No.: 0654-3966200  Fax: 0354-3967668
 Tax ID: CN1412401748578718
 Opening Bank: Agricultural Bank, Jinzhong Branch, Daobei Sub-branch Account No.: 380001040009399
 Legal Representative or Authorized Representative

 Remarks:
 Date of Execution: June 17, 2009      Place of Execution: Shijingshan Beijing
 
 
 
 
 
Order No.: 231792        Unit of Specifications: mm           Unit of Quantity: ton Unit of Price: RMB YUAN/ton

Item
Brand Name
Brand
Specifications
Quantity
Tax-exclusive price
Standards
10
Hot rolled steel strip
L360NB
L*1250*7.10
1034.000
  
GB/T 14164-2005
Notes: 23.00 t 21.00 t 0.00 mm -0.30 mm
Item
Brand Name
Brand
Specifications
Quantity
Tax-exclusive price
Standards
20
Hot rolled steel strip
L360NB
L*1680*7.10
870.000
  
GB/T 14164-2005
Notes: 30.00 t 28.00 t 0.00 mm -0.30 mm
Item
Brand Name
Brand
Specifications
Quantity
Tax-exclusive price
Standards
 
30
Hot rolled steel strip
L360NB
L*1680*9.90
1050.000
  
GB/T 14164-2005
Notes: 30.00 t 28.00 t 0.00 mm -0.30 mm
Item
Brand Name
Brand
Specifications
Quantity
Tax-exclusive price
Standards
40
Hot rolled steel strip
L360NB (X52)
L*1500*9.00
520.000
  
GB/T 14164-2005
Notes: 30.00 t 28.00 t 0.00 mm -0.30 mm
Item
Brand Name
Brand
Specifications
Quantity
Tax-exclusive price
Standards
50
Hot rolled steel strip
L415
L*1250*11.90
1100.000
  
GB/T 14164-2005
Notes: 23.00 t 21.00 t 0.00 mm -0.30 mm
             
             
 
 
 
 
 
EX-4.6 10 v230348_ex4-6.htm
独家业务合作协议
Exclusive Business Cooperation Agreement

本独家业务合作协议（下称“本协议”）由以下双方于2011年4月3日在中华人民共和国（下称“中国”）晋中市签署。
This Exclusive Business Cooperation Agreement (this “Agreement”) is made and entered into by and between the following Parties on April 3rd, 2011 in Jinzhong City the People's Republic of China (“China” or the “PRC”).

甲方：山西瑞兴通商务咨询有限公司
地址： 山西省太原市高新区创新街3号盈和科技103A号
Party A: Shanxi Ruixingtong Business Consulting Co., Ltd.
Address:
Room103A, Yinghe Building, No. 3 Chuangye Street, High-Tech EmpolderZone, Taiyuan, Shanxi, P.R.C.
 
 
乙方：山西中联燃气发展有限公司
地址：山西省太原市高新区创新街3号盈和科技103A号
Party B:   Shanxi Zhonglian Gas Development Co., Ltd.
Address:
Room103A, Yinghe Building, No. 3 Chuangye Street, High-Tech EmpolderZone, Taiyuan, Shanxi, P.R.C.

甲方和乙方以下各称为“一方”，统称为“双方”。
Each of Party A and Party B shall be hereinafter referred to as a "Party" respectively, and as the "Parties" collectively.

鉴于：
Whereas,

1.
甲方为依据中国法律设立的外商独资企业，专业提供企业管理咨询服务；

Party A is a wholly foreign-owned limited company duly incorporated under the laws of China which is engaged in business management consulting service;

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1
 

2.
乙方是一家注册于中国太原市的有限责任公司，主要从事管材、管件、阀门、各种燃气天然气等设备的生产和销售（“业务”）；
Party B is a limited liability company established in Taiyuan City, China, and is engaged in the design, development, manufacturing, and commercializing of pipe, pipe fitting, kinds of gas equipment, etc.  (the “Business”),

3.
甲方同意利用其人力、管理、资金优势，在本协议期间向乙方提供员工培训、管理咨询、融资服务等独家全面业务支持服务，乙方同意接受甲方或其指定方按本协议条款的规定提供咨询和服务。
Party A is willing to provide Party B with exclusive and comprehensive business support such as staff training, management consultation, financial services etc. during the term of this Agreement utilizing its own advantages in human resources, capital, management and Party B is willing to accept such services provided by Party A or Party A's designee(s), each on the terms set forth herein.

据此，甲方和乙方经协商一致，达成如下协议：
Now, therefore, through mutual discussion, the Parties have reached the following agreements:

1.
服务提供
Services Provided by Party A

 
1.1
按照本协议条款和条件，乙方在此委任甲方在本协议期间作为乙方的独家服务提供者向乙方提供全面的管理咨询、员工培训、业务支持，融资等相关服务，具体内容包括所有在乙方营业范围内由甲方视情况决定的服务，包括但不限于以下方面管理服务：
Party B hereby appoints Party A as Party B's exclusive services provider to provide Party B with complete management consultation, staff training, business support, financing and related services during the term of this Agreement, in accordance with the terms and conditions of this Agreement, of which the management services may include all services within the business scope of Party B as may be determined by Party A, such as but not limited to the following respects:
 
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a)
乙方日常经营方面,包括乙方与客户关系的管理，与任意方协议或安排的履行，是否符合现行法律法规要求；
All aspects of the day-to-day operation of Party B, including its relationships with its customers, its performance under agreements or other arrangements with any other parties, its compliance with applicable laws and regulations;

 
b)
乙方员工、顾问、代理或其他代表（包括乙方的董事和其他高级管理人员或者乙方的员工）的委派、雇佣、薪酬（包括任何奖金、非货币薪酬、附加福利和其他福利、以股权为基础的酬劳），解雇和纪律；
The appointment, hiring, compensation (including any bonuses, non-monetary compensation, fringe and other benefits, and equity-based compensation), firing and discipline of all employees, consultants, agents and other representatives of Party B, including the directors and all other executive officers or employees of Party B;

 
c)
为了乙方任何员工、顾问、代理、代表或者其他人员的利益，建立、维护、终止或者解除合同或者其他安排；Establishment, maintenance, termination or elimination of any plan or other arrangement for the benefit of any employees, consultants, agents, representatives or other personnel of Party B;

 
d)
管理、控制和授权乙方任何应收账款、应付账款和所有资金提供和投资行为；
Management, control and authority over all accounts receivables, accounts payable and all funds and investments of Party B;

 
e)
管理、控制和授权公司银行账户；
Management, control and authority over Company Bank Accounts;
 
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f)
乙方任何支出，包括任何资本性支出；
Any expenditure, including any capital expenditure, of Party B

 
g)
乙方作为一方的任何合同、协议和/或其他安排的订立、修改或解除；
The entry into， amendment or modification, or termination of any contract, arrangement and/or other arrangement to which Party is, was, or would become a party;

 
h)
乙方对任何资产、存货、不动产或动产、其他知识产权或无形资产的收购、租赁或许可；
The acquisition, lease or license by Party B of any assets, supplies, real or personal property, or intellectual or other intangible property;

 
i)
乙方作为一方与他方达成收购或合资或其他安排；
The acquisition of or entry into any joint venture or other arrangement by Party with any other Person;

 
j)
乙方任何借款或任何性质的债务或义务，或者乙方的任意资产被留置；
Any borrowing or assumption by Party B of any liability or obligation of any nature, or the subjection of any asset of Party B to any Lien:

 
k)
乙方对其所拥有的或实际受益拥有或控制的任何资产的销售、租赁、许可或其他处置；
Any sale, lease, license or other disposition of any asset owned, beneficially owned or controlled by Party B;
 
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l)
申请、更新、采取任何措施以有效维持乙方经营所需的任何许可证、执照或其他授权和批准；
Applying for, renewing, and taking any action to maintain in effect, any permits, licenses or other authorizations and approvals necessary for the operation of Party’s business;

 
m)
乙方作为一方，通过调解、仲裁、诉讼或申诉方式提起诉讼或者任何纠纷解决机制或对任何诉讼或纠纷达成和解；
The commencement, prosecution or settlement by Party B of any litigation or other dispute with any other Person, through mediation, arbitration, lawsuit or appeal;

 
n)
乙方宣布分配或者支付股息或者分配利润；
The declaration or payment of any dividend or other distribution of profits of Party B;

 
o)
准备和提交纳税申报表，支付或者结算所有纳税，以及办理与纳税有关的政府手续；
The preparation and filing of all Tax Returns, the payment or settlement of any and all Taxes, and the conduct of any proceedings with any Governmental Authority with respect to any Taxes.

 
1.2
乙方接受甲方的咨询和服务。乙方进一步同意，除非经甲方事先书面同意，在本协议期间，就本协议约定事宜，乙方不得接受任何第三方提供的任何类似服务和/或支持，不得与任何第三方建立任何类似合作。双方同意，甲方可以指定其他方（该被指定方可以与乙方签署本协议第1.3条描述的某些协议）为乙方提供本协议约定的服务和/或支持。
Party B agrees to accept all the consultations and services provided by Party A. Party B further agrees that unless with Party A's prior written consent, during the term of this Agreement, Party B shall not accept any similar consultations and/or services provided by any third party and shall not establish similar cooperation relationship with any third party regarding the matters contemplated by this Agreement. Party A may appoint other parties, who may enter into certain agreements described in Section 1.3 with Party B, to provide Party B with the consultations and/or services under this Agreement.
 
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1.3           服务的提供方式
The Providing Methodology of Service

 
1.3.1
甲、乙双方同意在本协议有效期内，乙方可以与甲方或甲方指定的其他方进一步签订员工培训协议和咨询服务协议，对各项员工培训和咨询服务的具体内容、方式、人员、收费等进行约定。
Party A and Party B agree that during the term of this Agreement, Party B may enter into further staff training agreements or consulting service agreements with Party A or any other party designated by Party A, which shall provide the specific contents, manner, personnel, and fees for the specific services.

 
1.3.2
为更好地履行本协议，甲乙双方同意在本协议有效期内将直接或通过其关联方根据乙方业务进展需要随时签署其他相关协议，由甲方向乙方提供支持性服务。
To fulfill this Agreement, Party A and Party B agree that during the term of this Agreement, both Parties, directly or through their respective affiliates, may enter into other relevant documents or agreements which provide that Party A shall provide support services to Party B based on the needs of the business of Party B.
 
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2.
服务的价格和支付方式
The Calculation and Payment of the Service Fees

双方约定服务的费用为乙方每年的100%税后利润。

The Parties agree that Party B shall pay the 100% Net Profit After Tax as the fees for the Services under this Agreement.

双方约定支付方式按本协议第1.3条中甲乙双方后续另行签订的协议确定。

The Parties agree that the fees for the Services under this Agreement shall be paid based on the methods set forth in the separate agreement to be entered into between Party A and Party B described in Section 1.3.

3.
知识产权和保密条款
Intellectual Property Rights and Confidentiality Clauses

 
3.1
甲方对履行本协议而产生或创造的任何权利、所有权、权益和所有知识产权包括但不限于著作权、专利权、专利申请权、软件、技术秘密、商业机密及其他均享有独占的和排他的权利和利益。
Party A shall have exclusive and proprietary rights and interests in all rights, ownership, interests and intellectual properties arising out of or created during the performance of this Agreement, including but not limited to copyrights, patents, patent applications, software, technical secrets, trade secrets and others.
 
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3.2
双方承认及确定有关本协议、本协议内容，以及彼此就准备或履行本协议而交换的任何口头或书面资料均被视为保密信息。双方应当对所有该等保密信息予以保密，而在未得到另一方书面同意前，不得向任何第三者披露任何保密信息，惟下列信息除外：(a)公众人士知悉或将会知悉的任何信息（惟并非由接受保密信息之一方擅自向公众披露）；(b)根据适用法律法规、股票交易规则、或政府部门或法院的命令而所需披露之任何信息；或(c)由任何一方就本协议所述交易而需向其股东、投资者、法律或财务顾问披露之信息，而该股东、法律或财务顾问亦需遵守与本条款相类似之保密责任。任何一方工作人员或聘请机构的泄密均视为该方的泄密，需依本协议承担违约责任。无论本协议以任何理由终止，惟本条款仍然生效。
The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in connection with the preparation and performance of this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential information to any third party, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or financial advisors shall  be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff members or agencies hired by any Party shall be deemed as disclosure of such confidential information by such Party, which Party shall be held liable for the breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.

 
3.3
双方同意，不论本协议是否变更、解除或终止，本条款将持续有效。
The Parties agree that this Section shall survive changes to, and rescission or termination of, this Agreement.
 
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4.           陈述和保证
Representations and Warranties

 
4.1
甲方陈述和保证如下：
Party A hereby represents and warrants as follows:

 
4.1.1
甲方是按照中国法律合法注册并有效存续的一家公司。
Party A is one company legally registered and validly existing in accordance with the laws of China.

 
4.1.2
甲方签署并履行本协议在其公司权力和营业范围中；已采取必要的公司行为和适当授权并取得第三方和政府部门的同意及批准；并不违反对其有约束力或影响的法律和其他的限制。
Party A's execution and performance of this Agreement is within its corporate capacity and the scope of its business operations; Party A has taken necessary corporate actions and given appropriate authorization and has obtained the consent and approval from third parties and government agencies, and will not violate any restrictions in law or otherwise binding or having an impact on Party A.

 
4.1.3
本协议构成对其合法、有效、有约束力并依本协议之条款对其强制执行的义务。
This Agreement constitutes Party A's legal, valid and binding obligations, enforceable in accordance with its terms.

 
4.2
乙方陈述和保证如下：
Party B hereby represents and warrants as follows:

 
4.2.1
乙方是按照中国法律合法注册且有效存续的公司。
Party B is a company legally registered and validly existing in accordance with the laws of China;
 
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4.2.2
乙方签署并履行本协议在其公司权力和营业范围中；已采取必要的公司行为和适当授权并取得第三方或政府的同意和批准；并不违反对其有约束力影响的法律和其他的限制。
Party B's execution and performance of this Agreement is within its corporate capacity and the scope of its business operations; Party B has taken necessary corporate actions and given appropriate authorization and has obtained the consent and approval from third parties and government agencies, and will not violate any restrictions in law or otherwise binding or having an impact on Party B.

 
4.2.3
本协议构成对其合法、有效、有约束力并依本协议之条款对其强制执行的义务。
This Agreement constitutes Party B's legal, valid and binding obligations, and shall be enforceable against it.

5.           生效和有效期
Effectiveness and Term

 
5.1
本协议于文首标明的协议日期签署并同时生效。除非依本协议或双方其他协议的约定而提前终止，本协议有效期为30年，但甲、乙双方应自本协议签署后，每3个月对本协议的内容做一次审查，以决定是否需要根据当时的情况对本协议作出相应修改和补充。
This Agreement is executed on the date first above written and shall take effect as of such date. Unless earlier terminated in accordance with the provisions of this Agreement or relevant agreements separately executed between the Parties, the term of this Agreement shall be 30 years. After the execution of this Agreement, both Parties shall review this Agreement every 3 months to determine whether to amend or supplement the provisions in this Agreement based on the actual circumstances at that time.
 
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5.2
协议期满前，经甲方书面确认，本协议可以延期。延期的期限由甲方决定，乙方必须无条件地同意该延期。
The term of this Agreement may be extended if confirmed in writing by Party A prior to the expiration thereof. The extended term shall be determined by Party A, and Party B shall accept such extension unconditionally.

6.           终止
Termination

 
6.1
除非依据本协议续期，本协议于到期之日终止。
Unless renewed in accordance with the relevant terms of this Agreement, this Agreement shall be terminated upon the date of expiration hereof.

 
6.2
本协议有效期内，除非甲方对乙方有重大过失或存在欺诈行为，乙方不得提前终止本协议。尽管如此，甲方可在任何时候通过提前30天向乙方发出书面通知的方式终止本协议。
During the term of this Agreement, unless Party A commits gross negligence, or a fraudulent act, against Party B, Party B shall not terminate this Agreement prior to its expiration date. Nevertheless, Party A shall have the right to terminate this Agreement upon giving 30 days' prior written notice to Party B at any time.

 
6.3
在本协议终止之后，双方在第3、7和8条项下的权利和义务将继续有效。
The rights and obligations of the Parties under Articles 3, 7 and 8 shall survive the termination of this Agreement.
 
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7.           适用法律和争议解决
Governing Law and Resolution of Disputes

 
7.1
本协议的订立、效力、解释、履行、修改和终止以及争议的解决适用中国的法律。
The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes hereunder shall be governed by the laws of China.

 
7.2
因解释和履行本协议而发生的任何争议，本协议双方应首先通过友好协商的方式加以解决。如果在一方向其他方发出要求协商解决的书面通知后30天之内争议仍然得不到解决，则任何一方均可将有关争议提交给中国国际经济贸易仲裁委员会，由该会按照其仲裁规则仲裁解决。仲裁应在北京进行，使用之语言为中文。仲裁裁决是终局性的，对各方均有约束力。
In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party's request to the other Parties for the resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in Beijing, and the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.

 
7.3
因解释和履行本协议而发生任何争议或任何争议正在进行仲裁时，除争议的事项外，本协议双方仍应继续行使各自在本协议项下的其他权利并履行各自在本协议项下的其他义务。
Upon the occurrence of any dispute arising from the construction and performance of this Agreement or during the pending arbitration of any dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this Agreement and perform their respective obligations under this Agreement.
  
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8.           补偿
Indemnification

就甲方根据本协议向乙方提供的咨询和服务内容所产生或引起的针对甲方的诉讼、请求或其他要求而招致的任何损失、损害、责任或费用都应由乙方补偿给甲方，以使甲方不受损害，除非该损失、损害、责任或费用是因甲方的重大过失或故意而产生的。
Party B shall indemnify and keep Party A from any losses, injuries, obligations or expenses caused by any lawsuit, claims or other demands against Party A arising from or caused by the consultations and services provided by Party A to Party B pursuant to this Agreement, except where such losses, injuries, obligations or expenses arise from the gross negligence or willful misconduct of Party A.

9.           通知
Notices

 
9.1
本协议项下要求或发出的所有通知和其他通信应通过专人递送、挂号邮寄、邮资预付或商业快递服务或传真的方式发到该方下列地址。每一通知还应再以电子邮件送达。该等通知视为有效送达的日期按如下方式确定：
All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such Party set forth below.  A confirmation copy of each notice shall also be sent by email.  The dates on which notices shall be deemed to have been effectively given shall be determined as follows:

 
9.1.1
通知如果是以专人递送、快递服务或挂号邮寄、邮资预付发出的，则以于设定为通知的地址在送达或拒收之日为有效送达日。
Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the date of arrival or refusal at the address specified for notices.
 
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9.1.2
通知如果是以传真发出的，则以成功传送之日为有效送达日（应以自动生成的传送确认信息为证）。
Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an automatically generated confirmation of transmission).

10.         协议的分割性
Severability

如果本协议有任何一条或多条规定根据任何法律或法规在任何方面被裁定为无效、不合法或不可执行，本协议其余规定的有效性、合法性或可执行性不应因此在任何方面受到影响或损害。双方应通过诚意磋商，争取以法律许可以及双方期望的最大限度内有效的规定取代那些无效、不合法或不可执行的规定，而该等有效的规定所产生的经济效果应尽可能与那些无效、不合法或不能强制执行的规定所产生的经济效果相似。
In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance with any law or regulation, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any aspect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.
 
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11.          协议的修改、补充
Amendments and Supplements

双方可以书面协议方式对本协议作出修改和补充。经过双方签署的有关本协议的修改协议和补充协议是本协议组成部分，具有与本协议同等的法律效力。
Any amendments and supplements to this Agreement shall be in writing. The amendment agreements and supplementary agreements that have been signed by the Parties and that relate to this Agreement shall be an integral part of this Agreement and shall have the same legal validity as this Agreement.

12.         语言和副本
Language and Counterparts

本协议以中文和英文书就，一式两份，甲、乙双方各持一份，具有同等效力；中英文版本如有冲突，应以中文版为准。
This Agreement is written in both Chinese and English language in two copies, each of Party A and Party B shall have one copy, which has equal legal validity; in case there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.

有鉴于此，双方已使得经其授权的代表于文首所述日期签署了本独家业务合作协议并即生效，以昭信守。
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Exclusive Business Cooperation Agreement as of the date first above written.
 
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签字页  (The page of Signature)

甲方：
山西瑞兴通商务咨询有限公司
Party A:
Shanxi Ruixingtong Business Consulting Co., Ltd.

签署(公章)
By (seal):           ____________________

公司授权代表或法定代表人（签字）
(The signature of The Representative): ____________________

乙方：山西中联燃气发展有限公司
Party B:  Shanxi Zhonglian Gas Development Co., Ltd.

签署(公章)
By (seal):         ____________________

公司授权代表或法定代表人（签字）
(The signature of The Representative): ____________________

[Signature Page to Exclusive Business Cooperation Agreement]

 
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EX-4.7 11 v230348_ex4-7.htm

独家购买权合同
Exclusive Option Agreement

本独家购买权合同（下称“本合同”）由以下各方于2011年 4月3日在中华人民共和国（下称“中国”）山西省晋中市签订：
This Exclusive Option Agreement (this "Agreement") is executed by and among the following Parties as of April 3rd, 2011, in Jinzhong city, ShanXi Province, the People’s Republic of China (“China” or the “PRC”):

甲方：山西瑞兴通商务咨询有限公司
地址：山西省太原市高新区创业街3号盈和科技103A号
Party A:
Shanxi Ruixingtong Business Consulting Co., Ltd.
Address:Room103A, Yinghe Building, No. 3 Chuangye Street, High-Tech EmpolderZone, Taiyuan, Shanxi, P.R.C.

乙方：  孔娟
身份证号：140102197711241486
     
Party B:
Kong Juan
National Identification Number: 140102197711241486
 
丙方：  山西中联燃气发展有限公司
地址：山西省太原市高新区创业街3号盈和科技103A号
Party C:   Shanxi Zhonglian Gas Development Co., Ltd.
Address:Room103A, Yinghe Building, No. 3 Chuangye Street, High-Tech EmpolderZone, Taiyuan, Shanxi, P.R.C.

在本合同中，甲方、乙方和丙方以下各称“一方”，合称“各方”。
In this Agreement, each of Party A, Party B and Party C shall be referred to as a "Party" respectively, and they shall be collectively referred to as the "Parties".

 
- 1 -
 

鉴于：
    Whereas:

 
1.
甲方与丙方于2011年4月 3 日签订了《独家合作协议》，甲方向丙方提供管理咨询、员工培训等方面服务，并以法律所允许的方式向丙方提供财务支持。
The Exclusive Business Cooperation Agreement is made and entered into by and between Party A and Party C on the date of April 3rd, 2011 . Party A will provide Party C with management consultation, staff training and other services, and provide finance assistances to Party C by means allowed by applicable laws.

 
2.
乙方合计持有丙方100%的股权权益。
Party B holds 100 % of the equity interest in Party C.

 
3.
乙方同意授予甲方以最优惠的价格购买其股权的独家购买权，同时乙方中的各方均同意放弃对其他方股权的优先购买权。
Party B agrees to grant Party A an exclusive right to purchase the equity interests in Party C then held by Party B at the best possible price. Each person in Party B agrees not to exercise the first right of refusal to purchase the equity interests to be transferred by other persons.

 
4.
丙方同意授予甲方以最优惠的价格购买其资产的独家购买权。
Party C agrees to grant Party A an exclusive right to purchase the assets at the best possible price.

现各方协商一致，达成如下协议：
Now therefore, upon mutual discussion and negotiation, the Parties have reached the following agreement:

 
- 2 -
 

1.        股权及资产买卖
Sale and Purchase of Equity Interests and/or Assets

1.1授予权利
Option Granted

鉴于甲方向乙方支付了人民币100元作为对价，且乙方确认收到并认为该对价足够，乙方在此不可撤销地授予甲方在中国法律允许的前提下，按照甲方自行决定的行使步骤，并按照本合同第1.3条所述的价格，随时一次或多次从乙方购买或指定一人或多人(“被指定人”)从乙方购买其所持有的丙方的全部或部分股权的一项不可撤销的专有权(“股权购买权”)。除甲方和被指定人外，任何第三人均不得享有股权购买权或其他与乙方股权有关的权利。丙方特此同意乙方向甲方授予股权购买权。
In consideration of the payment of RMB 100 by Party A, the receipt and adequacy of which is hereby acknowledged by Party B, Party B hereby irrevocably grants Party A an irrevocable and exclusive right to purchase, or designate one or more persons (each, a "Designee") to purchase the equity interests in Party C then held by Party B once or at multiple times at any time in part or in whole at Party A's sole and absolute discretion to the extent permitted by Chinese laws and at the price described in Section 1.3 herein (such right being the "Equity Interests Purchase Option"). Except for Party A and the Designee(s), no other person shall be entitled to the Equity Interest Purchase Option or other rights with respect to the equity interests of Party B. Party C hereby agrees to the grant by Party B of the Equity Interests Purchase Option to Party A.

鉴于甲方向丙方支付了人民币100元作为对价，且丙方确认收到并认为该对价足够，丙方在此不可撤销地授予甲方在中国法律允许的前提下，按照甲方自行决定的行使步骤，并按照本合同第1.3条所述的价格，随时一次或多次从丙方购买或指定一人或多人(“被指定人”)从丙方购买其资产（包括但不限于固定资产、流动资产、知识产权、所持有的中国境内外公司的股权及丙方与其他方所签订的合同项下的受益权）的一项不可撤销的专有权（“资产购买权”）。除甲方和被指定人外，任何第三人均不得享有资产购买权或其他与丙方资产有关的权利。乙方特此同意丙方向甲方授予资产购买权。
In consideration of the payment of RMB 100 by Party A, the receipt and adequacy of which is hereby acknowledged by Party C, Party C hereby irrevocably grants Party A an irrevocable and exclusive right to purchase, or designate one or more persons (each, a "Designee") to purchase the asset of Party C (including but not limited to fixed assets, current assets, intellectual property rights, ownership of equity interests in any person within or outside the PRC and the benefits under all contracts entered into by Party C once or at multiple times at any time in part or in whole at Party A's sole and absolute discretion to the extent permitted by Chinese laws and at the price described in Section 1.3 herein (such right being the "Assets Purchase Option"). Except for Party A and the Designee(s), no other person shall be entitled to the Asset Purchase Option or other rights with respect to the assets of Party C. Party B hereby agrees to the grant by Party C of the Assets Purchase Option to Party A.

 
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本款及本合同所规定的“人”指个人、公司、合伙、企业、信托 或其他非公司组织。
The term "person" as used herein shall refer to individuals, corporations, partnerships, enterprises, trusts or other non-corporate organizations.

1.2   行使步骤
Steps for Exercise of Purchase Option

甲方行使其购买权以符合中国法律和法规的规定为前提。甲方行使股权购买权时，应向乙方和/或丙方发出书面通知(“购买通知”)，购买通知应载明以下事项：(a)甲方关于行使购买权的决定；(b)甲方拟从乙方和/或丙方购买的股权份额和/或资产(“被购买股权和/或资产”) ；和(c) 被购买股权和/或资产的购买日/转让日。
Subject to the provisions of the laws and regulations of China, Party A may exercise the Purchase Option by issuing a written notice to Party B and/or Party C (the "Purchase Option Notice"), specifying: (a) Party A's decision to exercise the Purchase Option; (b) the portion of equity interests to be purchased from Party B and/or all or part of assets to be purchased from Party C ("Optioned Equity Interests and/or Assets"); and (c) the date for purchasing the Optioned Equity Interests and/or Assets, and the date for transfer of the Optioned Equity Interests and/or Assets.

1.3    买价
Purchase Price

除非甲方行权时中国法律要求评估外，被购买股权和/或资产的买价(“买价”)应是法律允许的范围内甲方指定的价格。
Unless an appraisal is required by the laws of China applicable to the Equity Interests Purchase Option and/or Assets Purchase Option when exercised by Party A, the purchase price of the Optioned Equity Interests and/or Assets (the "Purchase Price") shall equal the price designated by Party A to the extent allowed by relevant laws and regulations.

 
- 4 -
 

1.4     转让被购买股权和/或资产
Transfer of Optioned Interests and/or Assets

1.4.1   甲方每次行使股权购买权时：
For each exercise of the Equity Interest Purchase Option:

 
1.4.1.1
乙方应责成丙方及时召开股东会会议，在该会议上，应通过批准乙方 向甲方和/或被指定人转让被购买股权的决议；
Party B shall cause Party C to promptly convene a shareholders’ meeting, at which a resolution shall be adopted approving Party B's transfer of the Optioned Interests to Party A and/or the Designee(s);

 
1.4.1.2
乙方应就其向甲方和/或被指定人转让被购买股权取得丙方其他股东 同意该转让并放弃优先购买权的书面声明。
Party B shall obtain written statements from the other shareholders of Party C giving consent to the transfer of the equity interest to Party A and/or the Designee(s)  and waiving any right of first refusal related thereto.

 
1.4.1.3
乙方应与甲方和/或 (在适用的情况下)被指定人按照本合同及股权 购买通知的规定，为每次转让签订股权转让合同；
Party B shall execute a share transfer contract with respect to each transfer with Party A and/or each Designee (whichever is applicable), in accordance with the provisions of this Agreement and the Equity Interest Purchase Option Notice regarding the Optioned Interests;
 
 
- 5 -
 
 
 
1.4.1.4 
有关方应签署所有其他所需合同、协议或文件，取得全部所需的政府批准和同意，并采取所有所需行动，在不附带任何担保权益的情况下，将被购买股权的有效所有权转移给甲方和/或被指定人并使甲方和/或被指定人成为被购买股权的登记在册所有人。为本款及本合同的目的，“担保权益”包括担保、抵押、第三方权利或权益，任何购股权、收购权、优先购买权、抵销权、所有权扣留或其他担保安排等；但为了明确起见，不包括在本合同、乙方股权质押合同项下产生的任何担保权益。本款及本合同所规定的“乙方股权质押合同”指甲方、乙方和丙方于本合同签署之日签订的股权质押合同（下称“股权质押合同”），根据股权质押合同，乙方为担保丙方能履行丙方与甲方签订的独家业务合作协议项下的义务，而向甲方质押其在丙方的全部乙方股权。
The relevant Parties shall execute all other necessary contracts, agreements or documents, obtain all necessary government licenses and permits and take all necessary actions to transfer valid ownership of the Optioned Interests to Party A and/or the Designee(s), unencumbered by any security interests, and cause Party A and/or the Designee(s) to become the registered owner(s) of the Optioned Interests. For the purpose of this Section and this Agreement, "security interests" shall include securities, mortgages, third party's rights or interests, any stock options, acquisition right, right of first refusal, right to offset, ownership retention or other security arrangements, but shall be deemed to exclude any security interest created by this Agreement and Party B's Share Pledge Agreement. "Party B's Share Pledge Agreement" as used in this Section and this Agreement shall refer to the Share Pledge Agreement ("Share Pledge Agreement") executed by and among Party A, Party B and Party C as of the date hereof, whereby Party B pledges all of its equity interests in Party C to Party A, in order to guarantee Party C's performance of its obligations under the Exclusive Business Corporation Agreement executed by and between Party C and Party A.

1.4.2甲方每次行使资产购买权时：
For each exercise of the Assets Purchase Option:

 
1.4.2.1
乙方应责成丙方及时召开股东会会议，在该会议上，应通过批准丙方向甲方和/或被指定人转让被购买资产的决议（如果适用）；
Party B shall cause Party C to promptly convene a shareholders’ meeting, at which a resolution shall be adopted approving Party C's transfer of the Assets to Party A and/or the Designee(s)（whichever is applicable）;

 
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1.4.2.2
丙方应与甲方和/或 (在适用的情况下)被指定人按照本合同及购买通知的规定，为每次转让签订资产转让合同；
Party C shall execute a asset transfer contract with respect to each transfer with Party A and/or each Designee (whichever is applicable), in accordance with the provisions of this Agreement and the Purchase Option Notice regarding the Optioned Assets;

 
1.4.2.3 
有关方应签署所有其他所需合同、协议或文件，取得全部所需的政府批准和同意，并采取所有所需行动，在不附带任何担保权益的情况下，将被购买资产的有效所有权转移给甲方和/或被指定人并使甲方和/或被指定人成为被购买资产的登记在册所有人。“担保权益”的解释见本条第1.4.1.4款。
The relevant Parties shall execute all other necessary contracts, agreements or documents, obtain all necessary government licenses and permits and take all necessary actions to transfer valid ownership of the Optioned Assets to Party A and/or the Designee(s), unencumbered by any security interests, and cause Party A and/or the Designee(s) to become the registered owner(s) of the Optioned Assets. The "security interests" shall have the meaning ascribed to it in 1.4.1.4.
 
2.        承诺
Covenants

2.1  有关丙方的承诺
Covenants regarding Party C

乙方（作为丙方的股东）和丙方在此承诺：
Party B (as the shareholders of Party C) and Party C hereby covenant as follows:

 
2.1.1
未经甲方的事先书面同意，不以任何形式补充、更改或修改丙方公司章程文件，增加或减少其注册资本，或以其他方式改变其注册资本结构；
Without the prior written consent of Party A, they shall not in any manner supplement, change or amend the articles of association and bylaws of Party C, increase or decrease its registered capital, or change its structure of registered capital in other manners;

 
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2.1.2
按照良好的财务和商业标准及惯例，保持丙方的存续，审慎地及有效地经营其业务和处理事务；
They shall maintain Party C's corporate existence in accordance with good financial and business standards and practices by prudently and effectively operating its business and handling its affairs;

 
2.1.3
未经甲方的事先书面同意，不在本合同签署之日起的任何时间出售、转让、抵押或以其他方式处置丙方的任何资产、业务或收入的合法或受益权益，或允许在其上设置任何其他担保权益；
Without the prior written consent of Party A, they shall not at any time following the date hereof, sell, transfer, mortgage or dispose of in any manner any assets of Party C or legal or beneficial interest in the business or revenues of Party C, or allow the encumbrance thereon of any security interest;

 
2.1.4
未经甲方的事先书面同意，不发生、继承、保证或容许存在任何债务，但(i)正常或日常业务过程中产生而不是通过借款方式产生的债务；和(ii)已向甲方披露和得到甲方书面同意的债务除外；
Without the prior written consent of Party A, they shall not incur, inherit, guarantee or suffer the existence of any debt, except for (i) debts incurred in the ordinary course of business other than through loans; and (ii) debts disclosed to Party A and for which Party A's written consent has been obtained;

 
2.1.5
一直在正常业务过程中经营所有业务，以保持丙方的资产价值，不进行任何足以影响其经营状况和资产价值的作为/不作为；
They shall always operate all of Party C's businesses during the ordinary course of business to maintain the asset value of Party C and refrain from any action/omission that may affect Party C's operating status and asset value;

 
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2.1.6
未经甲方的事先书面同意，不得让丙方签订任何重大合同，但在正常业务过程中签订的合同除外(就本段而言，如果一份合同的价值超过人民币100万元，即被视为重大合同)；
Without the prior written consent of Party A, they shall not cause Party C to execute any material contract, except the contracts in the ordinary course of business (for purpose of this subsection, a contract with a value exceeding RMB1Million shall be deemed as a material contract);

 
2.1.7
未经甲方的事先书面同意，丙方不得向任何人提供贷款或信贷；
Without the prior written consent of Party A, they shall not cause Party C to provide any person with any loan or credit;

 
2.1.8
 应甲方要求，向其提供所有关于丙方的营运和财务状况的资料；
They shall provide Party A with information on Party C's business operations and financial conditions at Party A's request;

 
2.1.9
如甲方提出要求，丙方应从甲方接受的保险公司处购买和持有有关其资产和业务的保险，该保险的金额和险种应与经营类似业务的公司一致；
If requested by Party A, they shall procure and maintain insurance in respect of Party C's assets and business from an insurance carrier acceptable to Party A, at an amount and type of coverage typical for companies that operate similar businesses;

 
2.1.10
未经甲方的事先书面同意，丙方不得与任何人合并或联合，或对任何人进行收购或投资；
Without the prior written consent of Party A, they shall not cause or permit Party C to merge, consolidate with, acquire or invest in any person;

 
2.1.11
将发生的或可能发生的与丙方资产、业务或收入有关的诉讼、仲裁或行政程序立即通知甲方；
They shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating to Party C's assets, business or revenue;

 
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2.1.12
为保持丙方对其全部资产的所有权，签署所有必要或适当的文件，采取所有必要或适当的行动和提出所有必要或适当的控告或对所有索偿进行必要和适当的抗辩；
To maintain the ownership by Party C of all of its assets, they shall execute all necessary or appropriate documents, take all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defenses against all claims;

 
2.1.13
未经甲方事先书面同意，不得以任何形式派发股息予各股东，但一经甲方书面要求，丙方应立即将其所有可分配利润全部立即分配给其各股东；及
Without the prior written consent of Party A, they shall ensure that Party C shall not in any manner distribute dividends to its shareholders, provided that upon Party A's written request, Party C shall immediately distribute all distributable profits to its shareholders; and

 
2.1.14
根据甲方的要求，委任由其指定的任何人士出任丙方的董事。
At the request of Party A, they shall appoint any persons designated by Party A as directors of Party C.

2.2      乙方的承诺
Covenants of Party B

乙方承诺：
Party B hereby covenants as follows:

 
2.2.1
未经甲方的事先书面同意，不出售、转让、抵押或以其他方式处置其拥有的丙方的股权的合法权益或受益权，或允许在其上设置任何其他担保权益，但根据乙方股权质押合同在该股权上设置的质押则除外；
Without the prior written consent of Party A, Party B shall not sell, transfer, mortgage or dispose of in any other manner any legal or beneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance thereon of any security interest, except for the pledge placed on these equity interests in accordance with Party B's Share Pledge Agreement;

 
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2.2.2
促使丙方股东会和/或董事会不批准在未经甲方的事先书面同意的情况下，出售、转让、抵押或以其他方式处置任何乙方持有之丙方的股权的合法权益或受益权，或允许在其上设置任何其他担保权益，但批准根据乙方股权质押合同在乙方股权上设置的质押则除外；
Party B shall cause the shareholders' meeting and/or the board of directors of Party C not to approve the sale, transfer, mortgage or disposition in any other manner of any legal or beneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance thereon of any security interest, without the prior written consent of Party A, except for the pledge placed on these equity interests in accordance with Party B's Share Pledge Agreement;

 
2.2.3
未经甲方的事先书面同意的情况下，对于丙方与任何人合并或联 合，或对任何人进行收购或投资，乙方将促成丙方股东会或董事 会不予批准；
Party B shall cause the shareholders' meeting or the board of directors of Party C not to approve the merger or consolidation with any person, or the acquisition of or investment in any person, without the prior written consent of Party A;

 
2.2.4
将发生的或可能发生的任何关于其所拥有的股权的诉讼、仲裁或行政程序立即通知甲方；
Party B shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating to the equity interests in Party C held by Party B;

 
2.2.5
促使丙方股东会或董事会表决赞成本合同规定的被购买股权和/或资产的转让并应甲方之要求采取其他任何行动；
Party B shall cause the shareholders' meeting or the board of directors of Party C to vote their approval of the transfer of the Optioned Interests and/or Assets as set forth in this Agreement and to take any and all other actions that may be requested by Party A;

 
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2.2.6
为保持其对股权的所有权，签署所有必要或适当的文件，采取所有必要或适当的行动和提出所有必要或适当的控告或对所有索偿进行必要和适当的抗辩；
To the extent necessary to maintain Party B's ownership in Party C, Party B shall execute all necessary or appropriate documents, take all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defenses against all claims;

 
2.2.7
应甲方的要求，委任由其指定的任何人士出任丙方的董事；
Party B shall appoint any designee of Party A as director of Party C, at the request of Party A;
 
 
2.2.8
经甲方随时要求，应向其指定的代表在任何时间无条件地根据本合同的股权购买权立即转让其股权，并放弃其对另一现有股东进行其相应股权转让所享有的优先购买权（如有的话）；和
At the request of Party A at any time, Party B shall promptly and unconditionally transfer its equity interests in Party C to Party A's Designee(s) in accordance with the Equity Interest Purchase Option under this Agreement, and Party B hereby waives its right of first refusal to the respective share transfer by the other existing shareholder of Party C (if any); and

 
2.2.9
严格遵守本合同及乙方、丙方与甲方共同或分别签订的其他合同的各项规定，切实履行该等合同项下的各项义务，并不进行任何足以影响该等合同的有效性和可执行性的作为/不作为。如果乙方对于本合同项下或本合同各方签署的股权质押合同下或对甲方的授权委托书中的股权，还留存有任何权利，除非甲方书面指示，否则乙方仍不得行使该权利。
Party B shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by and among Party B, Party C and Party A, perform the obligations hereunder and thereunder, and refrain from any action/omission that may affect the effectiveness and enforceability thereof. To the extent that Party B has any remaining rights with respect to the equity interests subject to this Agreement hereunder or under the Share Pledge Agreement among the same parties hereto or under the Power of Attorney granted in favor of Party A, Party B shall not exercise such rights except in accordance with the written instructions of Party A.

 
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3.    陈述和保证
Representations and Warranties

乙方和丙方特此在本合同签署之日和每一个转让日向甲方共同及分别陈述和保证如下：
Party B and Party C hereby represent and warrant to Party A, jointly and severally, as of the date of this Agreement and each date of transfer of the Optioned Interests, that:

 
3.1
其具有签订和交付本合同和其为一方的、根据本合同为每一次转让被购买股权而签订的任何股权转让合同(各称为“转让合同”)，并履行其在本合同和任何转让合同项下的义务的权力和能力。乙方和丙方同意在甲方行使购买权时，他们将签署与本合同条款一致的转让合同。本合同和其是一方的各转让合同一旦签署后，构成或将对其构成合法、有效及具有约束力的义务并可按照其条款对其强制执行；
They have the authority to execute and deliver this Agreement and any share transfer contracts to which they are parties concerning the Optioned Interests to be transferred thereunder (each, a "Transfer Contract"), and to perform their obligations under this Agreement and any Transfer Contracts. Party B and Party C agree to enter into Transfer Contracts consistent with the terms of this Agreement upon Party A’s exercise of the Equity Interest Purchase Option. This Agreement and the Transfer Contracts to which they are parties constitute or will constitute their legal, valid and binding obligations and shall be enforceable against them in accordance with the provisions thereof;

 
3.2
无论是本合同或任何转让合同的签署和交付还是其在本合同或任何转让合同项下的义务的履行均不会：(i)导致违反任何有关的中国法律；(ii)与丙方章程或其他组织文件相抵触；(iii)导致违反其是一方或对其有约束力的任何合同或文件，或构成其是一方或对其有约束力的任何合同或文件项下的违约；(iv)导致违反有关向任何一方颁发的任何许可或批准的授予和(或)继续有效的任何条件；或(v)导致向任何一方颁发的任何许可或批准中止或被撤销或附加条件；
The execution and delivery of this Agreement or any Transfer Contracts and the performance of the obligations under this Agreement or any Transfer Contracts shall not: (i) cause any violation of any applicable laws of China; (ii) be inconsistent with the articles of association, bylaws or other organizational documents of Party C; (iii) cause the violation of any contracts or instruments to which they are a party or which are binding on them, or constitute any breach under any contracts or instruments to which they are a party or which are binding on them; (iv) cause any violation of any condition for the grant and/or continued effectiveness of any licenses or permits issued to either of them; or (v) cause the suspension or revocation of or imposition of additional conditions to any licenses or permits issued to either of them;

 
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3.3
乙方对其在丙方拥有的股权拥有良好和可出售的所有权，除乙方股权质押合同外，乙方在上述股权上没有设置任何担保权益；
Party B has a good and merchantable title to the equity interests in Party C he holds. Except for Party B's Share Pledge Agreement, Party B has not placed any security interest on such equity interests;

 
3.4
丙方对所有资产拥有良好和可出售的所有权，丙方在上述资产上没有设置任何担保权益；
Party C has a good and merchantable title to all of its assets, and has not placed any security interest on the aforementioned assets;
 
 
3.5
丙方没有任何未偿还债务，除(i)在其正常的业务过程中发生的债务，及(ii)已向甲方披露及经甲方书面同意债务除外；
Party C does not have any outstanding debts, except for (i) debt incurred in the ordinary course of business; and (ii) debts disclosed to Party A for which Party A's written consent has been obtained.

 
3.6
丙方遵守适用于资产的收购的所有法律和法规；和
Party C has complied with all laws and regulations of China applicable to asset acquisitions; and

 
3.7
目前没有悬而未决的或构成威胁的与股权、丙方资产有关的或与丙方有关的诉讼、仲裁或行政程序。
There is no pending or threatened litigation, arbitration or administrative proceedings relating to the equity interests in Party C, assets of Party C or Party C.

 
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4. 生效日
 Effective Date

本合同于各方签署本合同之日生效，有效期30年，经甲方选择可再延长。
This Agreement shall become effective upon the date hereof, and remain effective for a term of 30 years, and may be renewed at Party A's election.

5. 适用法律与争议解决
Governing Law and Resolution of Disputes

5.1   适用法律
Governing law

本合同的订立、效力、解释、履行、修改和终止以及争议解决均适用中国正式公布并可公开得到的法律。对中国正式公布并可公开得到的法律没有规定的事项，将适用国际法律原则和惯例。
The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes hereunder shall be governed by the formally published and publicly available laws of China. Matters not covered by formally published and publicly available laws of China shall be governed by international legal principles and practices.

5.2   争议的解决方法
Methods of Resolution of Disputes

因解释和履行本合同而发生的任何争议，本合同各方应首先通过友好协商的方式加以解决。如果在一方向其他方发出要求协商解决的书面通知后30天之内争议仍然得不到解决，则任何一方均可将有关争议提交给中国国际经济贸易仲裁委员会，由该会按照其仲裁规则仲裁解决。仲裁应在北京进行，使用之语言为中文。仲裁裁决是终局性的，对各方均有约束力。
In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations.  In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party's request to the other Parties for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in Beijing, and the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.

 
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6.        税款、费用
Taxes and Fees

每一方应承担根据中国法律因准备和签署本合同和各转让合同以及完成本合同和各转让合同拟定的交易而由该方发生的或对其征收的任何和全部的转让和注册的税、花费和费用。
Each Party shall pay any and all transfer and registration tax, expenses and fees incurred thereby or levied thereon in accordance with the laws of China in connection with the preparation and execution of this Agreement and the Transfer Contracts, as well as the consummation of the transactions contemplated under this Agreement and the Transfer Contracts.

7.         通知
Notices

 
7.1
本合同项下要求或发出的所有通知和其他通信应通过专人递送、挂号邮寄、邮资预付或商业快递服务或传真的方式发到该方下列地址。每一通知还应再以电子邮件送达。该等通知视为有效送达的日期按如下方式确定：
All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such Party set forth below.  A confirmation copy of each notice shall also be sent by email.  The dates on which notices shall be deemed to have been effectively given shall be determined as follows:

 
7.1.1
通知如果是以专人递送、快递服务或挂号邮寄、邮资预付发出的，则以于设定为通知的地址在到达或拒收之日为有效送达日。
Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the date of arrival or refusal at the address specified for notices.

 
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7.1.2
通知如果是以传真发出的，则以成功传送之日为有效送达日（应以自动生成的传送确认信息为证）。
Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an automatically generated confirmation of transmission).

 
7.3
任何一方可按本条规定随时给其他方发出通知来改变其接收通知的地址。
Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms hereof.

8.        保密责任
Confidentiality

各方承认及确定有关本协议、本协议内容，以及彼此就准备或履行本协议而交换的任何口头或书面资料均被视为保密信息。各方应当对所有该等保密信息予以保密，而在未得到另一方书面同意前，不得向任何第三者披露任何保密信息，惟下列信息除外：(a)公众人士知悉或将会知悉的任何信息（惟并非由接受保密信息之一方擅自向公众披露）；(b)根据适用法律法规、股票交易规则、或政府部门或法院的命令而所需披露之任何信息；或(c)由任何一方就本协议所述交易而需向其股东、投资者、法律或财务顾问披露之信息，而该股东、法律或财务顾问亦需遵守与本条款相类似之保密责任。如任何一方工作人员或聘请机构的泄密均视为该方的泄密，需依本协议承担违约责任。无论本协议以任何理由终止，惟本条款仍然生效。
The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or financial advisors shall  be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which Party shall be held liable for breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.

 
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9.        进一步保证
Further Warranties

各方同意迅速签署为执行本合同的各项规定和目的而合理需要的或对其有利的文件，以及为执行本合同的各项规定和目的而采取合理需要的或对其有利的进一步行动。
The Parties agree to promptly execute documents that are reasonably required for or are conducive to the implementation of the provisions and purposes of this Agreement and take further actions that are reasonably required for or are conducive to the implementation of the provisions and purposes of this Agreement.

10.      其他
Miscellaneous

10.1     修订、修改与补充
Amendment, change and supplement

对本合同作出修订、修改与补充，必须经每一方签署书面协议。
Any amendment, change and supplement to this Agreement shall require the execution of a written agreement by all of the Parties.

10.2     完整合同
Entire agreement

除了在本合同签署后所作出的书面修订、补充或修改以外，本合同构成本合同各方就本合同标的物所达成的完整合同，取代在此之前就本合同标的物所达成的所有口头或书面的协商、陈述和合同。
Except for the amendments, supplements or changes in writing executed after the execution of this Agreement, this Agreement shall constitute the entire agreement reached by and among the Parties hereto with respect to the subject matter hereof, and shall take the place of all prior oral and written consultations, representations and contracts reached with respect to the subject matter of this Agreement.

 
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10.3     标题
Headings

本合同的标题仅为方便阅读而设，不应被用来解释、说明或在其他方面影响本合同各项规定的含义。
The headings of this Agreement are for convenience only, and shall not be used to interpret, explain or otherwise affect the meanings of the provisions of this Agreement.

10.4     语言
Language

本合同以中文和英文书就，一式四份，甲丙双方各持一份，乙方每人各执一份，具有同等效力；中英文版本如有冲突，应以中文版为准。
This Agreement is written in both Chinese and English language in four copies. Each of Party A and Party C has one copy. Each of Party B has one copy. Each copy has equal legal validity; in case there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.

10.5     可分割性
Severability

如果本合同有任何一条或多条规定根据任何法律或法规在任何方面被裁定为无效、不合法或不可执行，本合同其余规定的有效性、合法性或可执行性不应因此在任何方面受到影响或损害。各方应通过诚意磋商，争取以法律许可以及各方期望的最大限度内有效的规定取代那些无效、不合法或不可执行的规定，而该等有效的规定所产生的经济效果应尽可能与那些无效、不合法或不能强制执行的规定所产生的经济效果相似。
In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.

 
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10.6    继任者
Successors

本合同对各方各自的继任者和各方所允许的受让方应具有约束力并对其有利。
This Agreement shall be binding on and shall inure to the interest of the respective successors of the Parties and the permitted assigns of such Parties.

10.7     继续有效
Survival

10.7.1
合同期满或提前终止前因本合同而发生的或到期的任何义务在本合同期满或提前终止后继续有效。
Any obligations that occur or that are due as a result of this Agreement upon the expiration or early termination of this Agreement shall survive the expiration or early termination thereof.

10.7.2
本合同第5、7、8条和本第10.8条的规定在本合同终止后继续有效。
The provisions of Sections 5, 7, 8 and this Section 10.8 shall survive the termination of this Agreement.

10.8
弃权
Waivers

任何一方可以对本合同的条款和条件作出弃权，但必须经书面作出并经各方签字。一方在某种情况下就其他方的违约所作的弃权不应被视为该方在其他情况下就类似的违约已经对其他方作出弃权。
Any Party may waive the terms and conditions of this Agreement, provided that such a waiver must be provided in writing and shall require the signatures of the Parties. No waiver by any Party in certain circumstances with respect to a breach by other Parties shall operate as a waiver by such a Party with respect to any similar breach in other circumstances.

 
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10.9  补偿
 Indemnification

10.9.1
各方同意并确认，如任一公司现有股东（以下称“违约方”）实质性地违 反本合同项下所作的任何一项约定，或实质性地未履行本合同项下的任何一项义务，即构成本合同项下的违约（以下称“违约”），甲方有权要求违约方在合理期限内补正或采取补救措施。如违约方在合理期限内或在甲方书面通知违约方并提出补正要求后十（10）天内仍未补正或采取补救措施的，则甲方有权自行决定选择以下的任一种违约救济方式：（1）终止本协议，并要求违约方给予全部的损害赔偿；（2）要求强制履行违约方在本协议项下的义务，并要求违约方给予全部的损害赔偿；或者（3）按照股权质押协议的约定以质押股权折价，拍卖或者变卖，并以折价、拍卖或者变卖的价款优先受偿，并要求违约方承担由此造成的全部损失。
Each Party agrees and acknowledges that any material breach or material non-performance of any section by a shareholder of the Company (the “Breaching Party”) under this Agreement shall constitute a breach of contract under this Agreement (the “Breach”), and Party A shall be entitled to request the Breaching Party to cure such Breach or adopt remedial steps within reasonable period.  In the event the Breaching Party fails to cure or to adopt remedial steps within the reasonable period or within ten (10) days after written notice of Breach to the Breaching Party by Party A, then Party A shall be entitled to exercise any of the following remedial methods: (i) to terminate this Agreement and request all liquidated damages; or (ii) to enforce the Breaching Party to perform his obligations under this Agreement and request all liquidated damages as well; or (iii) to convert, auction or sell the pledged equity interests in accordance with the share pledge agreement, and to be compensated on a preferential basis with the conversion, auction or sales price of the pledged equity interests, in addition to requesting the Breaching Party to bear liquidated damages in connection with the Breach.

10.9.2
各方同意并确认，公司现在股东在任何情况下，均不得以任何理由要求终止本合同。
Both Parties agree and acknowledge that under no circumstances shall the shareholders of the Company be entitled to terminate this Agreement by any reasons.
 
 
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10.9.3
本合同规定的权利和救济是累积的，并不排斥法律规定的其他权利或者救济。
Any right and remedy under this Agreement is cumulative and shall not restrict other rights and remedies under the law.

10.9.4
尽管有本合同其它规定，本条规定的效力不受本合同中止或者终止的影响。
Notwithstanding other provisions under this Agreement, this Section shall survive the suspension or termination of this Agreement.

有鉴于此，双方已使得经其授权的代表于文首所述日期签署了本独家购买权合同并即生效，以昭信守。
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Exclusive Option Agreement as of the date first above written.

 
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签字页  (The page of Signature)

甲方：山西瑞兴通商务咨询有限公司
Party A:        Shanxi Ruixingtong Business Consulting Co., Ltd.
签署(公章)
By (seal):       ____________________

公司授权代表或法定代表人（签字）
(The signature of The Representative): ____________________

乙方：
Party B: 孔娟
        Kong Juan
签署(签字)：
By (signature):       ________________

丙方：  山西中联燃气发展有限公司
Party C:
Shanxi Zhonglian Gas Development Co., Ltd.
签署(公章)
By (seal):       ____________________

公司授权代表或法定代表人（签字）
(The signature of The Representative): ____________________

 
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EX-4.8 12 v230348_ex4-8.htm
股权质押合同
Share Pledge Agreement

本股权质押合同 (下称“本合同”)由下列各方于2011年4月 3 日在中华人民共和国（下称“中国”）晋中市签订：
This Share Pledge Agreement (this "Agreement") has been executed by and among the following parties on July 1st, 2010 in Jinzhong City, the People’s Republic of China (“China” or the “PRC”):

甲方：山西瑞兴通商务咨询有限公司（下称“质权人”）
地址：山西省太原市高新区创新街3号盈和科技103A号 
Party A:
Shanxi Ruixingtong Business Consulting Co., Ltd. (hereinafter "Pledgee")
Address:Room103A, Yinghe Building, No. 3 Chuangye Street, High-Tech EmpolderZone, Taiyuan, Shanxi, P.R.C.
 
乙方： 孔娟
身份证号：140102197711241486
                       （下称为“出质人”）
Party B:
Kong Juan
National Identification Number: 140102197711241486
          (hereinafter referred to as “Pledgor” ）
 
丙方：  山西中联燃气发展有限公司
地址：   山西省太原市高新区创新街3号盈和科技103A号
Party C:   Shanxi Zhonglian Gas Development Co., Ltd.
Address:Room103A, Yinghe Building, No. 3 Chuangye Street, High-Tech EmpolderZone, Taiyuan, Shanxi, P.R.C.

在本合同中，质权人、出质人和丙方以下各称“一方”，合称“各方”。
In this Agreement, each of Pledgee, Pledgor and Party C shall be referred to as a "Party" respectively, and they shall be referred to as the "Parties" collectively.
 
秘密文件 Strictly Confidential
 
 
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鉴于：
Whereas:

1.
出质人合计拥有丙方100 %的股权。丙方是一家在中国太原市注册成立的、从事管材、管件、阀门、各种燃气天然气等设备的生产和销售的有限责任公司。丙方有意在此确认出质人和质权人在本合同下的权利和义务并提供必要的协助登记该质权；
Pledgor holds 100% of the equity interest in Party C. Party C is a limited liability company registered in Taiyuan, China engaging in the design, development, manufacturing, and commercializing of pipe, pipe fitting, kinds of gas equipment, etc. Party C acknowledges the respective rights and obligations of Pledgor and Pledgee under this Agreement, and intends to provide any necessary assistance in registering the Pledge;

2.
质权人是一家在山西省太原市注册的外商独资企业。质权人与出质人所拥有的丙方于2011年4月3日签订了独家业务合作协议；
Pledgee is a wholly foreign-owned enterprise registered in Taiyuan City, Shanxi Province, China. Pledgee and Party C owned by Pledgor have executed an Exclusive Business Cooperation Agreement on April 3rd, 2011;

3.
为了保证丙方履行独家业务合作协议项下的义务，按照约定向质权人支付咨询和服务费等到期款项，出质人以其在丙方中拥有的全部股权向质权人做出业务合作协议项下丙方付款义务的质押担保。
To ensure that Party C fully performs its obligations under the Exclusive Business Cooperation Agreement and pay the consulting and service fees thereunder to the Pledgee when the same becomes due, Pledgor hereby pledges to the Pledgee all of the equity interest he holds in Party C as security for payment of the consulting and service fees by Party C under the Business Cooperation Agreement.

为了履行业务合作协议的条款，各方商定按照以下条款签订本合同。
To perform the provisions of the Business Cooperation Agreement, the Parties have mutually agreed to execute this Agreement upon the following terms.
 
秘密文件 Strictly Confidential
 
 
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1.
定义
Definitions

除非本合同另有规定，下列词语含义为：
Unless otherwise provided herein, the terms below shall have the following meanings:

 
1.1
质权：指出质人根据本合同第2条给予质权人的担保物权，即指质权人所享有的，以出质人质押给质权人的股权折价或拍卖、变卖该股权的价款优先受偿的权利。
Pledge shall refer to the security interest granted by Pledgor to Pledgee pursuant to Article 2 of this Agreement, i.e., the right of Pledgee to be compensated on a preferential basis with the conversion, auction or sales price of the Equity Interest.

 
1.2
股权：指出质人现在和将来合法持有的其在丙方的全部股权权益。
Equity Interest shall refer to all of the equity interest lawfully now held and hereafter acquired by Pledgor in Party C.

 
1.3
质押期限：指本合同第3条规定的期间。
Term of Pledge shall refer to the term set forth in Section 3 of this Agreement.

 
1.4
业务合作协议：指丙方与质权人于2011年4月3日签订的独家业务合作协议。
Business Cooperation Agreement shall refer to the Exclusive Business Cooperation Agreement executed by and between Party C and Pledgee on April 3rd, 2011.

 
1.5
违约事件：指本合同第7条所列任何情况。
Event of Default shall refer to any of the circumstances set forth in Article 7 of this Agreement.
 
秘密文件 Strictly Confidential
 
 
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1.6
违约通知：指质权人根据本合同发出的宣布违约事件的通知。
Notice of Default shall refer to the notice issued by Pledgee in accordance with this Agreement declaring an Event of Default.

2 
质权
The Pledge

作为及时完整地支付业务合作协议项下质权人应得的任何或全部的丙方欠付的款项，包括但不限于业务合作协议中咨询服务费的担保，出质人特此将其现有或将拥有的丙方的全部股权权益质押给质权人，无论该等费用的到期应付是由于到期日的到来、提前收款的要求或其它原因。
As collateral security for the prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of any or all the payments due by Party C, including without limitation the consulting and services fees payable to the Pledgee under the Business Cooperation Agreement, Pledgor hereby pledges to Pledgee a first security interest in all of Pledgor's right, title and interest, whether now owned or hereafter acquired by Pledgor, in the Equity Interest of Party C.

3.
质押期限
Term of Pledge

 
3.1
本质权自本合同项下股权出质在相应的工商行政管理机关登记之日起生效，质权有效期持续到业务合作协议下所有丙方欠付质权人的款项结清为止。各方同意，自本合同签署之日起3个工作日内，出质人和丙方应将本合同的质权登记在丙方股东名册上，并在相关工商行政管理机关开始正式受理股权质押登记申请后的10个工作日内将本合同项下的股权出质在相应的工商行政管理机关进行登记。
The Pledge shall become effective as of the date when the pledge of the Equity Interest is registered with relevant administration for industry and commerce (the “AIC”). The Pledge shall be continuously valid until all payments due under the Business Cooperation Agreement have been fulfilled by Party C. The parties agree that Pledgor and Party C shall register the Pledge in the shareholders' register of Party C within 3 business days following the execution of this Agreement, and within 10 business days after the competent AIC has formally begun accepting applications for the registration of equity interest pledge, Pledgor and Party C shall file the pledge of the Equity Interest contemplated herein with such AIC for registration.
 
秘密文件 Strictly Confidential
 
 
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3.2
质押期限内，如丙方未按业务合作协议交付咨询服务费等费用，质权人有权但无义务按本合同的规定处分质权。
During the Term of Pledge, in the event Party C fails to pay the exclusive consulting or service fees in accordance with the Business Cooperation Agreement, Pledgee shall have the right, but not the obligation, to dispose of the Pledge in accordance with the provisions of this Agreement.

4.
质权凭证的保管
Custody of Records for Equity Interest subject to Pledge

 
4.1
在本合同规定的质押期限内，出质人应将其在丙方的股权出资证明书及记载质权的股东名册交付质权人保管。出质人应在本合同签订之日起一周内将上述股权出资证明书及股东名册交付给质权人。质权人将在本合同规定的全部质押期间一直保管这些项目。
During the Term of Pledge set forth in this Agreement, Pledgor shall deliver to Pledgee's custody the capital contribution certificate for the Equity Interest and the shareholders' register containing the Pledge within one week from the execution of this Agreement. Pledgee shall have custody of such items during the entire Term of Pledge set forth in this Agreement.

 
4.2
在质押期限内，质权人有权收取股权所产生的红利。
Pledgee shall have the right to collect dividends generated by the Equity Interest during the Term of Pledge.

5.
出质人的声明和保证
Representations and Warranties of Pledgor
 
秘密文件 Strictly Confidential
 
 
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5.1
出质人是股权唯一的合法所有人。
Pledgor is the sole legal and beneficial owner of the Equity Interest.

 
5.2
质权人有权以本合同规定的方式处分并转让股权。
Pledgee shall have the right to dispose of and transfer the Equity Interest in accordance with the provisions set forth in this Agreement.

 
5.3
除本质权之外，出质人未在股权上设置任何其他质押权利或其他担保权益。
Except for the Pledge, Pledgor has not placed any security interest or other encumbrance on the Equity Interest.

6.
出质人的承诺和确认
Covenants and Further Agreements of Pledgor

 
6.1
在本合同存续期间，出质人向质权人承诺，出质人将：
Pledgor hereby covenants to the Pledgee, that during the term of this Agreement, Pledgor shall:

 
6.1.1
除履行由出质人与质权人、丙方于2011年4月3日签订的《独家购买权合同》外，未经质权人事先书面同意，不得转让股权，不得在股权上设立或允许存在任何担保或其他债务负担；
not transfer the Equity Interest, place or permit the existence of any security interest or other encumbrance on the Equity Interest, without the prior written consent of Pledgee, except for the performance of the Exclusive Option Agreement executed by Pledgor, Pledgee and Party C on April 3rd, 2011;
 
秘密文件 Strictly Confidential
 
 
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6.1.2
遵守并执行所有有关权利质押的法律、法规的规定，在收到有关主管机关就质权发出或制定的通知、指令或建议时，于五日内向质权人出示上述通知、指令或建议，同时遵守上述通知、指令或建议，或按照质权人的合理要求或经质权人同意就上述事宜提出反对意见和陈述；
comply with the provisions of all laws and regulations applicable to the pledge of rights, and within 5 days of receipt of any notice, order or recommendation issued or prepared by relevant competent authorities regarding the Pledge, shall present the aforementioned notice, order or recommendation to Pledgee, and shall comply with the aforementioned notice, order or recommendation or submit objections and representations with respect to the aforementioned matters upon Pledgee's reasonable request or upon consent of Pledgee;

 
6.1.3
将任何可能导致对出质人股权或其任何部分的权利产生影响的事件或收到的通知，以及可能改变出质人在本合同中的任何保证、义务或对出质人履行其在本合同中义务可能产生影响的任何事件或收到的通知及时通知质权人。
promptly notify Pledgee of any event or notice received by Pledgor that may have an impact on Pledgee's rights to the Equity Interest or any portion thereof, as well as any event or notice received by Pledgor that may change or have an impact on any guarantees and other obligations of Pledgor arising out of this Agreement.

 
6.2
出质人同意，质权人按本合同条款取得的对质权享有的权利，不应受到出质人或出质人的继承人或出质人之委托人或任何其他人通过法律程序的中断或妨害。
Pledgor agrees that the rights acquired by Pledgee in accordance with this Agreement with respect to the Pledge shall not be interrupted or harmed by Pledgor or any heirs or representatives of Pledgor or any other persons through any legal proceedings.
 
秘密文件 Strictly Confidential
 
 
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6.3
出质人向质权人保证，为保护或完善本合同对偿付业务合作协议项下咨询服务费等费用的担保，出质人将诚实签署、并促使其他与质权有利害关系的当事人签署质权人所要求的所有的权利证书、契约和/或履行并促使其他有利害关系的当事人履行质权人所要求的行为，并为本合同赋予质权人之权利、授权的行使提供便利，与质权人或其指定的人(自然人/法人)签署所有的有关股权所有权的文件，并在合理期间内向质权人提供其认为需要的所有的有关质权的通知、命令及决定。
To protect or perfect the security interest granted by this Agreement for payment of the consulting and service fees under the Business Cooperation Agreement, Pledgor hereby undertakes to execute in good faith and to cause other parties who have an interest in the Pledge to execute all certificates, agreements, deeds and/or covenants required by Pledgee.  Pledgor also undertakes to perform and to cause other parties who have an interest in the Pledge to perform actions required by Pledgee, to facilitate the exercise by Pledgee of its rights and authority granted thereto by this Agreement, and to enter into all relevant documents regarding ownership of Equity Interest with Pledgee or designee(s) of Pledgee (natural persons/legal persons).  Pledgor undertakes to provide Pledgee within a reasonable time with all notices, orders and decisions regarding the Pledge that are required by Pledgee.

 
6.4
出质人向质权人保证，出质人将遵守、履行本合同项下所有的保证、承诺、协议、陈述及条件。如出质人不履行或不完全履行其保证、承诺、协议、陈述及条件，出质人应赔偿质权人由此遭受的一切损失。
Pledgor hereby undertakes to comply with and perform all guarantees, promises, agreements, representations and conditions under this Agreement. In the event of failure or partial performance of its guarantees, promises, agreements, representations and conditions, Pledgor shall indemnify Pledgee for all losses resulting therefrom.

7.
违约事件
Event of Breach

 
7.1
下列事项均被视为违约事件：
The following circumstances shall be deemed Event of Default:
 
秘密文件 Strictly Confidential
 
 
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7.1.1
丙方未能按期足额支付业务合作协议项下的应付的咨询服务费等费用或有违反该协议其他义务的行为；
Party C fails to pay in full any of the consulting and service fees payable under the Business Cooperation Agreement or breaches any other obligations of Party C thereunder;

 
7.1.2
出质人在本合同第5条所作的任何声明或保证有实质性的误导或错误，和/或出质人违反本合同第5条的声明和保证；
Any representation or warranty by Pledgor in Article 5 of this Agreement contains material misrepresentations or errors, and/or Pledgor violates any of the warranties in Article 5 of this Agreement;

 
7.1.3
出质人和丙方没有按第3.1条将本质权登记在丙方股东名册上；
Pledgor and Party C fail to register the Pledge in the shareholders' register of Party C stipulated in Section 3.1;

 
7.1.4
出质人或丙方违反本合同的任何条款；如果出质人中任何一人违反本合同项下的义务，其他人对此承担连带责任。
Pledgor or Party C breaches any provisions of this Agreement; Each person of Pledgor shall bear the joint and several liabilities as to the obligations of other persons of Pledgor thereunder.

 
7.1.5
除本合同第6.1.1条的约定外，出质人未获得质权人书面同意而擅自转让或意图转让出质的股权或舍弃出质的股权；
Except as expressly stipulated in Section 6.1.1, Pledgor transfers or purports to transfer or abandons the Equity Interest pledged or assigns the Equity Interest pledged without the written consent of Pledgee;

 
7.1.6
出质人本身对外的任何借款、担保、赔偿、承诺或其他偿债责任(1)因违约被要求提前偿还或履行；或(2)已到期但不能如期偿还或履行；
Any of Pledgor's own loans, guarantees, indemnifications, promises or other debt liabilities to any third party or parties (1) become subject to a demand of early repayment or performance due to default on the part of Pledgor; or (2) become due but are not capable of being repaid or performed in a timely manner;
 
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7.1.7
本合同可被执行或使之合法或生效所须之一切政府部门同意、许可、批准或授权被撤回、中止、失效或有实质性修改；
Any approval, license, permit or authorization of government agencies that makes this Agreement enforceable, legal and effective is withdrawn, terminated, invalidated or substantively changed;

 
7.1.8
适用的法律的发布使得本合同非法或使得出质人不能继续履行其在本合同项下的义务；
The promulgation of applicable laws renders this Agreement illegal or renders it impossible for Pledgor to continue to perform its obligations under this Agreement;

 
7.1.9
出质人因其所拥有的财产出现不利变化，致使质权人认为出质人履行本合同项下的义务的能力已受到影响；
Adverse changes in properties owned by Pledgor, which lead Pledgee to believe that that Pledgor's ability to perform its obligations under this Agreement has been affected;

 
7.1.10
丙方的继承人或代管人只能履行部分或拒绝履行业务合作协议项下的支付责任；和
The successor or custodian of Party C is capable of only partially perform or refuses to perform the payment obligations under the Business Cooperation Agreement; and

 
7.1.11
按有关法律规定质权人不能或可能不能行使处分质权的其他情况。
Any other circumstances occur where Pledgee is or may become unable to exercise its right with respect to the Pledge.
 
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7.2
如知道或发现本第7.1条所述的任何事项或可能导致上述事项的事件已经发生，出质人应立即以书面形式通知质权人。
Upon notice or discovery of the occurrence of any circumstances or event that may lead to the aforementioned circumstances described in Section 7.1, Pledgor shall immediately notify Pledgee in writing accordingly.

 
7.3
除非本第7.1条所列的违约事项已在质权人感到满意的情况下获得完满解决，否则质权人可在出质人违约事项发生时或发生后的任何时间以书面形式向质权人发出违约通知，要求出质人立即支付全部业务合作协议项下的欠款及其他应付款项或/和按本合同第8条的规定处分质权。
Unless an Event of Default set forth in this Section 7.1 has been successfully resolved to Pledgee's satisfaction, Pledgee may issue a Notice of Default to Pledgor in writing upon the occurrence of the Event of Default or at any time thereafter and demand that Pledgor immediately pay all outstanding payments due under the Business Cooperation Agreement and all other payments due to Pledgee, and/or dispose of the Pledge in accordance with the provisions of Article 8 of this Agreement.

8.
质权的行使
Exercise of Pledge

 
8.1
在业务合作协议所述的咨询服务费等费用未全部偿还前，未经质权人书面同意，出质人不得转让其拥有的丙方股权。
Prior to the full payment of the consulting and service fees described in the Business Cooperation Agreement, without the Pledgee's written consent, Pledgor shall not assign the Equity Interest in Party C.

 
8.2
质权人行使质权时可向出质人发出违约通知。
Pledgee may issue a Notice of Default to Pledgor when exercising the Pledge.
 
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8.3
受限于第7.3条的规定，质权人可在按第7.2条发出违约通知的同时或在发出违约通知之后的任何时间里对质权行使处分的权利。质权人决定行使处分质权的权利时，出质人即不再拥有任何与股权有关的权利和利益。
Subject to the provisions of Section 7.3, Pledgee may exercise the right to enforce the Pledge concurrently with the issuance of the Notice of Default in accordance with Section 7.2 or at any time after the issuance of the Notice of Default. Once Pledgee elects to enforce the Pledge, Pledgor shall cease to be entitled to any rights or interests associated with the Equity Interest.

 
8.4
在违约时，在法律许可的范围内并根据有关法律的规定，质权人有权按照法定程序处置质押股权，对于处置的所得，质权人无需给付出质人；出质人特此放弃其可能有的能向质权人要求任何质押股权处置所得的权利。同样，出质人对质权人在该质押股权处置后的亏空也不承担任何义务。
In the event of default, Pledgee is entitled to dispose of the Equity Interest pledged, to the extent permitted by and in accordance with applicable laws, without obligation to account to Pledgor for proceeds of disposition and Pledgor hereby waives any rights it may have to demand any such accounting from Pledgee. Likewise, in such circumstance Pledgor shall have no obligation to Pledgee for any deficiency remaining after such disposition of the Equity Interest pledged.

 
8.5
质权人依照本合同处分质权时，出质人和丙方应予以必要的协助，以使质权人实现其质权。
When Pledgee disposes of the Pledge in accordance with this Agreement, Pledgor and Party C shall provide necessary assistance to enable Pledgee to enforce the Pledge in accordance with this Agreement.

9.
转让
Assignment

 
9.1
除非经质权人事先同意，出质人无权赠予或转让其在本合同项下的权利义务。
Without Pledgee's prior written consent, Pledgor shall not have the right to assign or delegate its rights and obligations under this Agreement.
 
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9.2
本合同对出质人及其继任人和经许可的受让人均有约束力，并且对质权人及每一继任人和受让人有效。
This Agreement shall be binding on Pledgor and its successors and permitted assigns, and shall be valid with respect to Pledgee and each of its successors and assigns.

 
9.3
质权人可以在任何时候将其在业务合作协议项下的所有或任何权利和义务转让给其指定的人（自然人/法人），在这种情况下，受让人应享有和承担本合同项下质权人享有和承担的权利和义务，如同其作为原合同方应享有和承担的一样。质权人转让业务合作协议项下的权利和义务时，应质权人要求，出质人应就此转让签署有关协议和/或文件。
At any time, Pledgee may assign any and all of its rights and obligations under the Business Cooperation Agreement to its designee(s) (natural/legal persons), in which case the assigns shall have the rights and obligations of Pledgee under this Agreement, as if it were the original party to this Agreement. When the Pledgee assigns the rights and obligations under the Business Cooperation Agreement, upon Pledgee's request, Pledgor shall execute relevant agreements or other documents relating to such assignment.

 
9.4
因转让所导致的质权人变更后，应质权人要求，出质人应与新的质权人签订一份内容与本合同一致的新质押合同，并在相应的工商行政管理机关进行登记。
In the event of a change in Pledgee due to an assignment, Pledgor shall, at the request of Pledgee, execute a new pledge agreement with the new pledgee on the same terms and conditions as this Agreement, and register the same with the relevant AIC.
 
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9.5
出质人应严格遵守本合同和各方单独或共同签署的其他有关合同的规定，包括独家购买权合同和对质权人的授权委托书，履行各合同项下的义务，并不进行任何足以影响合同的有效性和可强制执行性的作为/不作为。除非根据质权人的书面指示，出质人不得行使其对质押股权还留存的权利。
Pledgor shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by the Parties hereto or any of them, including the Exclusive Option Agreement and the Power of Attorney granted to Pledgee, perform the obligations hereunder and thereunder, and refrain from any action/omission that may affect the effectiveness and enforceability thereof. Any remaining rights of Pledgor with respect to the Equity Interest pledged hereunder shall not be exercised by Pledgor except in accordance with the written instructions of Pledgee.

10.
终止
Termination

在业务合作协议项下的咨询服务费等费用偿还完毕，并且丙方不再承担业务合作协议项下的任何义务之后，本合同终止，在尽早合理可行的时间内，质权人应协助出质人解除质押。
Upon the full payment of the consulting and service fees under the Business Cooperation Agreement and upon termination of Party C's obligations under the Business Cooperation Agreement, this Agreement shall terminate, and Pledgee shall assist the Pledgor to remove the pledge registration as soon as reasonably practicable。

11.
手续费及其他费用
Handling Fees and Other Expenses

一切与本合同有关的费用及实际开支，其中包括但不限于法律费用、工本费、印花税以及任何其他税收、费用等全部由丙方承担。
All fees and out of pocket expenses relating to this Agreement, including but not limited to legal costs, costs of production, stamp tax and any other taxes and fees, shall be borne by Party C.
 
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12.
保密责任
Confidentiality

各方承认及确定有关本协议、本协议内容，以及彼此就准备或履行本协议而交换的任何口头或书面资料均被视为保密信息。各方应当对所有该等保密信息予以保密，而在未得到另一方书面同意前，不得向任何第三者披露任何保密信息，惟下列信息除外：(a)公众人士知悉或将会知悉的任何信息（惟并非由接受保密信息之一方擅自向公众披露）；(b)根据适用法律法规、股票交易规则、或政府部门或法院的命令而所需披露之任何信息；或(c)由任何一方就本协议所述交易而需向其股东、投资者、法律或财务顾问披露之信息，而该股东、法律或财务顾问亦需遵守与本条款相类似之保密责任。如任何一方工作人员或聘请机构的泄密均视为该方的泄密，需依本协议承担违约责任。无论本协议以任何理由终止，惟本条款仍然生效。
The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or financial advisors shall  be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which Party shall be held liable for breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.
 
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13.
适用法律和争议的解决
Governing Law and Resolution of Disputes

 
13.1
本合同的订立、效力、解释、履行、修改和终止以及争议的解决均适用中国法律。
The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes hereunder shall be governed by the laws of China.

 
13.2
因解释和履行本合同而发生的任何争议，本合同各方应首先通过友好协商的方式加以解决。如果在一方向其他方发出要求协商解决的书面通知后30天之内争议仍然得不到解决，则任何一方均可将有关争议提交给中国国际经济贸易仲裁委员会，由该会按照其仲裁规则仲裁解决。仲裁应在北京进行，使用之语言为中文。仲裁裁决是终局性的，对各方均有约束力。
In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party's request to the other Parties for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in Beijing, and the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.

因解释和履行本合同而发生任何争议或任何争议正在进行仲裁时，除争议的事项外，本合同各方仍应继续行使各自在本合同项下的其他权利并履行各自在本合同项下的其他义务。
Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration of any dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this Agreement and perform their respective obligations under this Agreement.
 
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14.
通知
 
Notices

本合同项下要求或发出的所有通知和其他通信应通过专人递送、挂号邮寄、邮资预付或商业快递服务或传真的方式发到该方下列地址。每一通知还应再以电子邮件送达。该等通知视为有效送达的日期按如下方式确定：
All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such party set forth below. A confirmation copy of each notice shall also be sent by E-mail. The dates on which notices shall be deemed to have been effectively given shall be determined as follows:

通知如果是以专人递送、快递服务或挂号邮寄、邮资预付发出的，则以于设定为通知的地址在到达或拒收之日为有效送达日。
Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the date of arrival or refusal at the address specified for notices.

通知如果是以传真发出的，则以成功传送之日为有效送达日（应以自动生成的传送确认信息为证）。
Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an automatically generated confirmation of transmission).

15.
分割性
Severability

如果本合同有任何一条或多条规定根据任何法律或法规在任何方面被裁定为无效、不合法或不可执行，本合同其余规定的有效性、合法性或可执行性不应因此在任何方面受到影响或损害。各方应通过诚意磋商，争取以法律许可以及各方期望的最大限度内有效的规定取代那些无效、不合法或不可执行的规定，而该等有效的规定所产生的经济效果应尽可能与那些无效、不合法或不能强制执行的规定所产生的经济效果相似。
In the event that one or several of the provisions of this Contract are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Contract shall not be affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.
 
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16.
附件
Attachments

本合同所列附件，为本合同不可分割的组成部分。
The attachments set forth herein shall be an integral part of this Agreement.

17.
生效
Effectiveness

 
17.1
本合同的任何修改、补充或变更，均须采用书面形式，经各方签字或盖章并按规定办理政府登记（如需）后生效。
Any amendments, changes and supplements to this Agreement shall be in writing and shall become effective upon completion of the governmental filing procedures (if applicable) after the affixation of the signatures or seals of the Parties.

 
17.2
本合同以中文和英文书就，一式四份，质权人、丙方各持一份，每位出质人各持一份，具有同等效力；中英文版本如有冲突，应以中文版为准。
This Agreement is written in Chinese and English in four copies. Pledgee, Party C shall hold one copy respectively. Each of Pledgors shall hold one copy. Each copy of this Agreement shall have equal validity. In case there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.
 
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有鉴于此，各方已使得经其授权的代表于文首所述日期签署了本股权质押合同并即生效，以昭信守。本合同签订后，应及时到当地工商局备案，质权方设立。
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Share Pledge Agreement as of the date first above written. While after the conclusion of the contract, the parties shall go to the local Administration for Industry and Commerce for records, until then the right of Pledge is established.
 
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签字页  (The page of Signature)

甲方：山西瑞兴通商务咨询有限公司
Party A:    Shanxi Ruixingtong Business Consulting Co., Ltd.
签署(公章)
By (seal):     ____________________

公司授权代表或法定代表人（签字）
(The signature of The Representative): ____________________

乙方：
Party B: 孔娟
       Kong Juan
签署(签字)：
By (signature):    ________________
     
丙方：      山西中联燃气发展有限公司
Party C:    Shanxi Zhonglian Gas Development Co., Ltd.
签署(公章)
By (seal):    ____________________

公司授权代表或法定代表人（签字）
(The signature of The Representative): ____________________
 
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EX-4.9 13 v230348_ex4-9.htm
授权委托书
Power of Attorney

本人，孔娟，中国公民，身份证号码为140102197711241486，系拥有山西中联燃气发展有限公司（“公司”）100%的股权（“本人股权”）的股东，就本人股权，特此不可撤销地授权山西瑞兴通商务咨询有限公司（“WFOE”）在本授权委托书的有效期内行使如下权利：
Kong Juan, a Chinese citizen with Chinese Identification Card No.: 140102197711241486, and a holder of 100% of the entire registered capital in Shanxi Zhonglian Gas Development Co., Ltd. (the " Company ") ("My Shareholding"), hereby irrevocably authorize Shanxi Ruixingtong Business Consulting Co., Ltd. ("WFOE") to exercise the following rights relating to My Shareholding during the term of this Power of Attorney:

授权WFOE作为本人唯一的排他的代理人就有关本人股权的事宜全权代表本人行使包括但不限于如下的权利：1）参加公司的股东会；2）行使按照法律和公司章程规定本人所享有的全部股东权和股东表决权，包括但不限于出售或转让或质押或处置本人股权的全部或任何一部分；以及3）作为本人的授权代表指定和任命公司的法定代表人（董事长）、董事、监事、总经理以及其他高级管理人员等。
WFOE is hereby authorized to act on behalf of myself as my exclusive agent and attorney with respect to all matters concerning My Shareholding, including without limitation to: 1) attend shareholders' meetings of the Company; 2) exercise all the shareholder's rights and shareholder's voting rights I am entitled to under the laws of China and the Company’s Articles of Association, including but not limited to the sale or transfer or pledge or disposition of My Shareholding in part or in whole; and 3) designate and appoint on behalf of myself the legal representative (chairperson), the director, supervisor, the chief executive officer and other senior management members of the Company.
 
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WFOE将有权在授权范围内代表本人签署独家购买权合同（本人应要求作为合同方）中约定的转让合同，如期履行本人作为合同一方的与本授权委托书同日签署的股权质押合同和独家购买权合同，该权利的行使将不对本授权形成任何限制。
Without limiting the generality of the powers granted hereunder, WFOE shall have the power and authority under this Power of Attorney to execute the Transfer Contracts stipulated in Exclusive Option Agreement, to which I am required to be a party, on behalf of myself, and to effect the terms of the Share Pledge Agreement and Exclusive Option Agreement, both dated the date hereof, to which I am a party.

WFOE就本人股权的一切行为均视为本人的行为，签署的一切文件均视为本人签署，本人会予以承认。
All the actions associated with My Shareholding conducted by WFOE shall be deemed as my own actions, and all the documents related to My Shareholding executed by WFOE shall be deemed to be executed by me.  I hereby acknowledge and ratify those actions and/or documents by WFOE.

WFOE有转委托权，可以就上述事项的办理自行再委托其他人或单位而不必事先通知本人或获得本人的同意。
WFOE is entitled to re-authorize or assign its rights related to the aforesaid matters to any other person or entity at its own discretion and without giving prior notice to me or obtaining my consent.

在本人为公司的股东期间，本授权委托书不可撤销并持续有效，自授权委托书签署之日起算。
This Power of Attorney is coupled with an interest and shall be irrevocable and continuously valid from the date of execution of this Power of Attorney, so long as I am a shareholder of the Company.

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本授权委托书期间，本人特此放弃已经通过本授权委托书授权给WFOE的与本人股权有关的所有权利，不再自行行使该等权利。
During the term of this Power of Attorney, I hereby waive all the rights associated with My Shareholding, which have been authorized to WFOE through this Power of Attorney, and shall not exercise such rights by myself.

本授权委托书以中文和英文书就，中英文版本如有冲突，应以中文版为准。
This Power of Attorney is written in Chinese and English; in case there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.
 
 
孔娟
 
Kong Juan
 
签署：
 
By:
    
   
 
2011年4月3日
 
April 3rd, 2011

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 EX-4.11 14 v230348_ex4-11.htm

独家购买权合同
Exclusive Option Agreement

本独家购买权合同（下称“本合同”）由以下各方于2011年4月3日在中华人民共和国（下称“中国”）山西省晋中市签订：
This Exclusive Option Agreement (this "Agreement") is executed by and among the following Parties as of April 3rd, 2011, in Jinzhong City, ShanXi Province, the People’s Republic of China (“China” or the “PRC”):

甲方：山西势派普商务咨询有限公司
地址：山西省晋中市榆次108国道寇村段
Party A: Shanxi Shipaipu Business Consulting Co., Ltd.
Address: Koucun Part, National Road 108, Yuci District Jinzhong City, Shanxi Province, P.R.C.

乙方：  刘旭东
身份证号：14010319810718333X
刘利子
身份证号：142401196603173110
（以上合称“乙方”）
     
Party B:
Liu Xudong
National Identification Number: 14010319810718333X
           Liu Lizi
National Identification Number: 142401196603173110

        (hereinafter collectively referred to as “Party B” ）
  
丙方：  山西国联管业集团有限公司
地址：山西省晋中市榆次108国道寇村段
Party C:   Shanxi Guolian Pipe Industry Group Co., Ltd.
Address:
Koucun Part, National Road 108, Yuci District Jinzhong City, Shanxi Province, P.R.C.
 
 
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在本合同中，甲方、乙方和丙方以下各称“一方”，合称“各方”。
In this Agreement, each of Party A, Party B and Party C shall be referred to as a  "Party" respectively, and they shall be collectively referred to as the "Parties".

鉴于：
Whereas:

 
1.
甲方与丙方于2011年4月3日签订了《独家合作协议》，甲方向丙方提供管理咨询、员工培训等方面服务，并为丙方提供财务支持。
The Exclusive Business Cooperation Agreement is made and entered into by and between Party A and Party C on the date of April 3rd, 2011. Party A will provide Party C with management consultation，staff training and other services，and provide finance assistances to Party C by means allowed by applicable laws.

 
2.
乙方合计持有丙方100%的股权权益，其中刘旭东持有89%的股权权益；刘利子持有11%的股权权益。
Party B holds100 % of the equity interest in Party C, of which Liu Xudong holds 89%, Yu Dan holds 11% respectively.

 
3.
乙方同意授予甲方以最优惠的价格购买其股权的独家购买权，同时乙方中的各方均同意放弃对其他方股权的优先购买权。
Party B agrees to grant Party A an exclusive right to purchase the equity interests in Party C then held by Party B at the best possible price. Each person in Party B agrees not to exercise the first right of refusal to purchase the equity interests to be transferred by other persons.

 
4.
丙方同意授予甲方以最优惠的价格购买其资产的独家购买权。
Party C agrees to grant Party A an exclusive right to purchase the assets at the best possible price.

 
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现各方协商一致，达成如下协议：

Now therefore, upon mutual discussion and negotiation, the Parties have reached the following agreement:

1.        股权及资产买卖
Sale and Purchase of Equity Interests and/or Assets

1.1      授予权利
Option Granted

鉴于甲方向乙方支付了人民币100元作为对价，且乙方确认收到并认为该对价足够，乙方在此不可撤销地授予甲方在中国法律允许的前提下，按照甲方自行决定的行使步骤，并按照本合同第1.3条所述的价格，随时一次或多次从乙方购买或指定一人或多人(“被指定人”)从乙方购买其所持有的丙方的全部或部分股权的一项不可撤销的专有权(“股权购买权”)。除甲方和被指定人外，任何第三人均不得享有股权购买权或其他与乙方股权有关的权利。丙方特此同意乙方向甲方授予股权购买权。
In consideration of the payment of RMB 100 by Party A, the receipt and adequacy of which is hereby acknowledged by Party B, Party B hereby irrevocably grants Party A an irrevocable and exclusive right to purchase, or designate one or more persons (each, a "Designee") to purchase the equity interests in Party C then held by Party B once or at multiple times at any time in part or in whole at Party A's sole and absolute discretion to the extent permitted by Chinese laws and at the price described in Section 1.3 herein (such right being the "Equity Interests Purchase Option"). Except for Party A and the Designee(s), no other person shall be entitled to the Equity Interest Purchase Option or other rights with respect to the equity interests of Party B. Party C hereby agrees to the grant by Party B of the Equity Interests Purchase Option to Party A.

 
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鉴于甲方向丙方支付了人民币100元作为对价，且丙方确认收到并认为该对价足够，丙方在此不可撤销地授予甲方在中国法律允许的前提下，按照甲方自行决定的行使步骤，并按照本合同第1.3条所述的价格，随时一次或多次从丙方购买或指定一人或多人(“被指定人”)从丙方购买其资产（包括但不限于固定资产、流动资产、知识产权、所持有的中国境内外公司的股权及丙方与其他方所签订的合同项下的受益权）的一项不可撤销的专有权（“资产购买权”）。除甲方和被指定人外，任何第三人均不得享有资产购买权或其他与丙方资产有关的权利。乙方特此同意丙方向甲方授予资产购买权。
In consideration of the payment of RMB 100 by Party A, the receipt and adequacy of which is hereby acknowledged by Party C, Party C hereby irrevocably grants Party A an irrevocable and exclusive right to purchase, or designate one or more persons (each, a "Designee") to purchase the asset of Party C (including but not limited to fixed assets, current assets, intellectual property rights, ownership of equity interests in any person within or outside the PRC and the benefits under all contracts entered into by Party C once or at multiple times at any time in part or in whole at Party A's sole and absolute discretion to the extent permitted by Chinese laws and at the price described in Section 1.3 herein (such right being the "Assets Purchase Option"). Except for Party A and the Designee(s), no other person shall be entitled to the Asset Purchase Option or other rights with respect to the assets of Party C. Party B hereby agrees to the grant by Party C of the Assets Purchase Option to Party A.

本款及本合同所规定的“人”指个人、公司、合伙、企业、信托 或其他非公司组织。
The term "person" as used herein shall refer to individuals, corporations, partnerships, enterprises, trusts or other non-corporate organizations.

1.2       行使步骤
Steps for Exercise of Purchase Option

甲方行使其购买权以符合中国法律和法规的规定为前提。甲方行使股权购买权时，应向乙方和/或丙方发出书面通知(“购买通知”)，购买通知应载明以下事项：(a)甲方关于行使购买权的决定；(b)甲方拟从乙方和/或丙方购买的股权份额和/或资产(“被购买股权和/或资产”) ；和(c) 被购买股权和/或资产的购买日/转让日。
Subject to the provisions of the laws and regulations of China, Party A may exercise the Purchase Option by issuing a written notice to Party B and/or Party C (the "Purchase Option Notice"), specifying: (a) Party A's decision to exercise the Purchase Option; (b) the portion of equity interests to be purchased from Party B and/or all or part of assets to be purchased from Party C ("Optioned Equity Interests and/or Assets"); and (c) the date for purchasing the Optioned Equity Interests and/or Assets, and the date for transfer of the Optioned Equity Interests and/or Assets.

 
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1.3      买价
Purchase Price

除非甲方行权时中国法律要求评估外，被购买股权和/或资产的买价(“买价”)应是法律允许的范围内甲方指定的价格。
Unless an appraisal is required by the laws of China applicable to the Equity Interests Purchase Option and/or Assets Purchase Option when exercised by Party A, the purchase price of the Optioned Equity Interests and/or Assets (the "Purchase Price") shall equal the price designated by Party A to the extent allowed by relevant laws and regulations.

1.4       转让被购买股权和/或资产
Transfer of Optioned Interests and/or Assets

1.4.1    甲方每次行使股权购买权时：
For each exercise of the Equity Interest Purchase Option:

 
1.4.1.1
乙方应责成丙方及时召开股东会会议，在该会议上，应通过批准乙方
向甲方和/或被指定人转让被购买股权的决议；
Party B shall cause Party C to promptly convene a shareholders’ meeting, at which a resolution shall be adopted approving Party B's transfer of the Optioned Interests to Party A and/or the Designee(s);

 
1.4.1.2
乙方应就其向甲方和/或被指定人转让被购买股权取得丙方其他股东
 
同意该转让并放弃优先购买权的书面声明。
Party B shall obtain written statements from the other shareholders of Party B giving consent to the transfer of the equity interest to Party A and/or the Designee(s)  and waiving any right of first refusal related thereto.

 
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1.4.1.3
乙方应与甲方和/或 (在适用的情况下)被指定人按照本合同及股权 购买通知的规定，为每次转让签订股权转让合同；
Party B shall execute a share transfer contract with respect to each transfer with Party A and/or each Designee (whichever is applicable), in accordance with the provisions of this Agreement and the Equity Interest Purchase Option Notice regarding the Optioned Interests;

 
1.4.1.4 
有关方应签署所有其他所需合同、协议或文件，取得全部所需的政府批准和同意，并采取所有所需行动，在不附带任何担保权益的情况下，将被购买股权的有效所有权转移给甲方和/或被指定人并使甲方和/或被指定人成为被购买股权的登记在册所有人。为本款及本合同的目的，“担保权益”包括担保、抵押、第三方权利或权益，任何购股权、收购权、优先购买权、抵销权、所有权扣留或其他担保安排等；但为了明确起见，不包括在本合同、乙方股权质押合同项下产生的任何担保权益。本款及本合同所规定的“乙方股权质押合同”指甲方、乙方和丙方于本合同签署之日签订的股权质押合同（下称“股权质押合同”），根据股权质押合同，乙方为担保丙方能履行丙方与甲方签订的独家业务合作协议项下的义务，而向甲方质押其在丙方的全部乙方股权。
The relevant Parties shall execute all other necessary contracts, agreements or documents, obtain all necessary government licenses and permits and take all necessary actions to transfer valid ownership of the Optioned Interests to Party A and/or the Designee(s), unencumbered by any security interests, and cause Party A and/or the Designee(s) to become the registered owner(s) of the Optioned Interests. For the purpose of this Section and this Agreement, "security interests" shall include securities, mortgages, third party's rights or interests, any stock options, acquisition right, right of first refusal, right to offset, ownership retention or other security arrangements, but shall be deemed to exclude any security interest created by this Agreement and Party B's Share Pledge Agreement. "Party B's Share Pledge Agreement" as used in this Section and this Agreement shall refer to the Share Pledge Agreement ("Share Pledge Agreement") executed by and among Party A, Party B and Party C as of the date hereof, whereby Party B pledges all of its equity interests in Party C to Party A, in order to guarantee Party C's performance of its obligations under the Exclusive Business Corporation Agreement executed by and between Party C and Party A.

 
1.4.2
甲方每次行使资产购买权时：
For each exercise of the Assets Purchase Option:

 
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1.4.2.1
乙方应责成丙方及时召开股东会会议，在该会议上，应通过批准丙方向甲方和/或被指定人转让被购买资产的决议（如果适用）；
Party B shall cause Party C to promptly convene a shareholders’ meeting, at which a resolution shall be adopted approving Party C's transfer of the Assets to Party A and/or the Designee(s)（whichever is applicable）;

 
1.4.2.2
丙方应与甲方和/或 (在适用的情况下)被指定人按照本合同及购买通知的规定，为每次转让签订资产转让合同；
Party C shall execute a asset transfer contract with respect to each transfer with Party A and/or each Designee (whichever is applicable), in accordance with the provisions of this Agreement and the Purchase Option Notice regarding the Optioned Assets;

 
1.4.2.3 
有关方应签署所有其他所需合同、协议或文件，取得全部所需的政府批准和同意，并采取所有所需行动，在不附带任何担保权益的情况下，将被购买资产的有效所有权转移给甲方和/或被指定人并使甲方和/或被指定人成为被购买资产的登记在册所有人。“担保权益”的解释见本条第1.4.1.4款。
The relevant Parties shall execute all other necessary contracts, agreements or documents, obtain all necessary government licenses and permits and take all necessary actions to transfer valid ownership of the Optioned Assets to Party A and/or the Designee(s), unencumbered by any security interests, and cause Party A and/or the Designee(s) to become the registered owner(s) of the Optioned Assets. The "security interests" shall have the meaning ascribed to it in 1.4.1.4.

2.         承诺
Covenants

2.1   有关丙方的承诺
Covenants regarding Party C

乙方（作为丙方的股东）和丙方在此承诺：
Party B (as the shareholders of Party C) and Party C hereby covenant as follows:

 
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2.1.1
未经甲方的事先书面同意，不以任何形式补充、更改或修改丙方公司章程文件，增加或减少其注册资本，或以其他方式改变其注册资本结构；
Without the prior written consent of Party A, they shall not in any manner supplement, change or amend the articles of association and bylaws of Party C, increase or decrease its registered capital, or change its structure of registered capital in other manners;

 
2.1.2
按照良好的财务和商业标准及惯例，保持丙方的存续，审慎地及有效地经营其业务和处理事务；
They shall maintain Party C's corporate existence in accordance with good financial and business standards and practices by prudently and effectively operating its business and handling its affairs;

 
2.1.3
未经甲方的事先书面同意，不在本合同签署之日起的任何时间出售、转让、抵押或以其他方式处置丙方的任何资产、业务或收入的合法或受益权益，或允许在其上设置任何其他担保权益；
Without the prior written consent of Party A, they shall not at any time following the date hereof, sell, transfer, mortgage or dispose of in any manner any assets of Party C or legal or beneficial interest in the business or revenues of Party C, or allow the encumbrance thereon of any security interest;

 
2.1.4
未经甲方的事先书面同意，不发生、继承、保证或容许存在任何债务，但(i)正常或日常业务过程中产生而不是通过借款方式产生的债务；和(ii)已向甲方披露和得到甲方书面同意的债务除外；
Without the prior written consent of Party A, they shall not incur, inherit, guarantee or suffer the existence of any debt, except for (i) debts incurred in the ordinary course of business other than through loans; and (ii) debts disclosed to Party A and for which Party A's written consent has been obtained;

 
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2.1.5
一直在正常业务过程中经营所有业务，以保持丙方的资产价值，不进行任何足以影响其经营状况和资产价值的作为/不作为；
They shall always operate all of Party C's businesses during the ordinary course of business to maintain the asset value of Party C and refrain from any action/omission that may affect Party C's operating status and asset value;

 
2.1.6
未经甲方的事先书面同意，不得让丙方签订任何重大合同，但在正常业务过程中签订的合同除外(就本段而言，如果一份合同的价值超过人民币100万元，即被视为重大合同)；
Without the prior written consent of Party A, they shall not cause Party C to execute any material contract, except the contracts in the ordinary course of business (for purpose of this subsection, a contract with a value exceeding RMB1Million shall be deemed as a material contract);

 
2.1.7
未经甲方的事先书面同意，丙方不得向任何人提供贷款或信贷；
Without the prior written consent of Party A, they shall not cause Party C to provide any person with any loan or credit;

 
2.1.8
应甲方要求，向其提供所有关于丙方的营运和财务状况的资料；
They shall provide Party A with information on Party C's business operations and financial conditions at Party A's request;

 
2.1.9
如甲方提出要求，丙方应从甲方接受的保险公司处购买和持有有关其资产和业务的保险，该保险的金额和险种应与经营类似业务的公司一致；
If requested by Party A, they shall procure and maintain insurance in respect of Party C's assets and business from an insurance carrier acceptable to Party A, at an amount and type of coverage typical for companies that operate similar businesses;

 
2.1.10
未经甲方的事先书面同意，丙方不得与任何人合并或联合，或对任何人进行收购或投资；
Without the prior written consent of Party A, they shall not cause or permit Party C to merge, consolidate with, acquire or invest in any person;

 
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2.1.11
将发生的或可能发生的与丙方资产、业务或收入有关的诉讼、仲裁或行政程序立即通知甲方；
They shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating to Party C's assets, business or revenue;

 
2.1.12
为保持丙方对其全部资产的所有权，签署所有必要或适当的文件，采取所有必要或适当的行动和提出所有必要或适当的控告或对所有索偿进行必要和适当的抗辩；
To maintain the ownership by Party C of all of its assets, they shall execute all necessary or appropriate documents, take all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defenses against all claims;

 
2.1.13
未经甲方事先书面同意，不得以任何形式派发股息予各股东，但一经甲方书面要求，丙方应立即将其所有可分配利润全部立即分配给其各股东；及
Without the prior written consent of Party A, they shall ensure that Party C shall not in any manner distribute dividends to its shareholders, provided that upon Party A's written request, Party C shall immediately distribute all distributable profits to its shareholders; and

 
2.1.14
根据甲方的要求，委任由其指定的任何人士出任丙方的董事。
At the request of Party A, they shall appoint any persons designated by Party A as directors of Party C.

2.2      乙方的承诺
Covenants of Party B

乙方承诺：
Party B hereby covenants as follows:

 
2.2.1
未经甲方的事先书面同意，不出售、转让、抵押或以其他方式处置其拥有的丙方的股权的合法权益或受益权，或允许在其上设置任何其他担保权益，但根据乙方股权质押合同在该股权上设置的质押则除外；
Without the prior written consent of Party A, Party B shall not sell, transfer, mortgage or dispose of in any other manner any legal or beneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance thereon of any security interest, except for the pledge placed on these equity interests in accordance with Party B's Share Pledge Agreement;

 
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2.2.2
促使丙方股东会和/或董事会不批准在未经甲方的事先书面同意的情况下，出售、转让、抵押或以其他方式处置任何乙方持有之丙方的股权的合法权益或受益权，或允许在其上设置任何其他担保权益，但批准根据乙方股权质押合同在乙方股权上设置的质押则除外；
Party B shall cause the shareholders' meeting and/or the board of directors of Party C not to approve the sale, transfer, mortgage or disposition in any other manner of any legal or beneficial interest in the equity interests in Party C held by Party B, or allow the encumbrance thereon of any security interest, without the prior written consent of Party A, except for the pledge placed on these equity interests in accordance with Party B's Share Pledge Agreement;

 
2.2.3
未经甲方的事先书面同意的情况下，对于丙方与任何人合并或联 合，或对任何人进行收购或投资，乙方将促成丙方股东会或董事 会不予批准；
Party B shall cause the shareholders' meeting or the board of directors of Party C not to approve the merger or consolidation with any person, or the acquisition of or investment in any person, without the prior written consent of Party A;

 
2.2.4
将发生的或可能发生的任何关于其所拥有的股权的诉讼、仲裁或行政程序立即通知甲方；
Party B shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating to the equity interests in Party C held by Party B;

 
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2.2.5
促使丙方股东会或董事会表决赞成本合同规定的被购买股权和/或资产的转让并应甲方之要求采取其他任何行动；
Party B shall cause the shareholders' meeting or the board of directors of Party C to vote their approval of the transfer of the Optioned Interests and/or Assets as set forth in this Agreement and to take any and all other actions that may be requested by Party A;

 
2.2.6
为保持其对股权的所有权，签署所有必要或适当的文件，采取所有必要或适当的行动和提出所有必要或适当的控告或对所有索偿进行必要和适当的抗辩；
To the extent necessary to maintain Party B's ownership in Party C, Party B shall execute all necessary or appropriate documents, take all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defenses against all claims;

 
2.2.7
应甲方的要求，委任由其指定的任何人士出任丙方的董事；
Party B shall appoint any designee of Party A as director of Party C, at the request of Party A;
 
 
2.2.8
经甲方随时要求，应向其指定的代表在任何时间无条件地根据本合同的股权购买权立即转让其股权，并放弃其对另一现有股东进行其相应股权转让所享有的优先购买权（如有的话）；和
At the request of Party A at any time, Party B shall promptly and unconditionally transfer its equity interests in Party C to Party A's Designee(s) in accordance with the Equity Interest Purchase Option under this Agreement, and Party B hereby waives its right of first refusal to the respective share transfer by the other existing shareholder of Party C (if any); and

 
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2.2.9
严格遵守本合同及乙方、丙方与甲方共同或分别签订的其他合同的各项规定，切实履行该等合同项下的各项义务，并不进行任何足以影响该等合同的有效性和可执行性的作为/不作为。如果乙方对于本合同项下或本合同各方签署的股权质押合同下或对甲方的授权委托书中的股权，还留存有任何权利，除非甲方书面指示，否则乙方仍不得行使该权利。
Party B shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by and among Party B, Party C and Party A, perform the obligations hereunder and thereunder, and refrain from any action/omission that may affect the effectiveness and enforceability thereof. To the extent that Party B has any remaining rights with respect to the equity interests subject to this Agreement hereunder or under the Share Pledge Agreement among the same parties hereto or under the Power of Attorney granted in favor of Party A, Party B shall not exercise such rights except in accordance with the written instructions of Party A.

3.    陈述和保证
Representations and Warranties

乙方和丙方特此在本合同签署之日和每一个转让日向甲方共同及分别陈述和保证如下：
Party B and Party C hereby represent and warrant to Party A, jointly and severally, as of the date of this Agreement and each date of transfer of the Optioned Interests, that:

 
3.1
其具有签订和交付本合同和其为一方的、根据本合同为每一次转让被购买股权而签订的任何股权转让合同(各称为“转让合同”)，并履行其在本合同和任何转让合同项下的义务的权力和能力。乙方和丙方同意在甲方行使购买权时，他们将签署与本合同条款一致的转让合同。本合同和其是一方的各转让合同一旦签署后，构成或将对其构成合法、有效及具有约束力的义务并可按照其条款对其强制执行；
They have the authority to execute and deliver this Agreement and any share transfer contracts to which they are parties concerning the Optioned Interests to be transferred thereunder (each, a "Transfer Contract"), and to perform their obligations under this Agreement and any Transfer Contracts. Party B and Party C agree to enter into Transfer Contracts consistent with the terms of this Agreement upon Party A’s exercise of the Equity Interest Purchase Option. This Agreement and the Transfer Contracts to which they are parties constitute or will constitute their legal, valid and binding obligations and shall be enforceable against them in accordance with the provisions thereof;

 
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3.2
无论是本合同或任何转让合同的签署和交付还是其在本合同或任何转让合同项下的义务的履行均不会：(i)导致违反任何有关的中国法律；(ii)与丙方章程或其他组织文件相抵触；(iii)导致违反其是一方或对其有约束力的任何合同或文件，或构成其是一方或对其有约束力的任何合同或文件项下的违约；(iv)导致违反有关向任何一方颁发的任何许可或批准的授予和(或)继续有效的任何条件；或(v)导致向任何一方颁发的任何许可或批准中止或被撤销或附加条件；
The execution and delivery of this Agreement or any Transfer Contracts and the performance of the obligations under this Agreement or any Transfer Contracts shall not: (i) cause any violation of any applicable laws of China; (ii) be inconsistent with the articles of association, bylaws or other organizational documents of Party C; (iii) cause the violation of any contracts or instruments to which they are a party or which are binding on them, or constitute any breach under any contracts or instruments to which they are a party or which are binding on them; (iv) cause any violation of any condition for the grant and/or continued effectiveness of any licenses or permits issued to either of them; or (v) cause the suspension or revocation of or imposition of additional conditions to any licenses or permits issued to either of them;

 
3.3
乙方对其在丙方拥有的股权拥有良好和可出售的所有权，除乙方股权质押合同外，乙方在上述股权上没有设置任何担保权益；
Party B has a good and merchantable title to the equity interests in Party C he holds. Except for Party B's Share Pledge Agreement, Party B has not placed any security interest on such equity interests;

 
3.4
丙方对所有资产拥有良好和可出售的所有权，丙方在上述资产上没有设置任何担保权益；
Party C has a good and merchantable title to all of its assets, and has not placed any security interest on the aforementioned assets;
 
 
3.5
丙方没有任何未偿还债务，除(i)在其正常的业务过程中发生的债务，及(ii)已向甲方披露及经甲方书面同意债务除外；
Party C does not have any outstanding debts, except for (i) debt incurred in the ordinary course of business; and (ii) debts disclosed to Party A for which Party A's written consent has been obtained.

 
3.6
丙方遵守适用于资产的收购的所有法律和法规；和
Party C has complied with all laws and regulations of China applicable to asset acquisitions; and

 
- 14 -
 

 
3.7
目前没有悬而未决的或构成威胁的与股权、丙方资产有关的或与丙方有关的诉讼、仲裁或行政程序。
There is no pending or threatened litigation, arbitration or administrative proceedings relating to the equity interests in Party C, assets of Party C or Party C.

4.    生效日
Effective Date

本合同于各方签署本合同之日生效，有效期30年，经甲方选择可再延长。
This Agreement shall become effective upon the date hereof, and remain effective for a term of 30 years, and may be renewed at Party A's election.

5. 适用法律与争议解决
Governing Law and Resolution of Disputes

5.1   适用法律
Governing law

本合同的订立、效力、解释、履行、修改和终止以及争议解决均适用中国正式公布并可公开得到的法律。对中国正式公布并可公开得到的法律没有规定的事项，将适用国际法律原则和惯例。
The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes hereunder shall be governed by the formally published and publicly available laws of China. Matters not covered by formally published and publicly available laws of China shall be governed by international legal principles and practices.

 
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5.2   争议的解决方法
Methods of Resolution of Disputes

因解释和履行本合同而发生的任何争议，本合同各方应首先通过友好协商的方式加以解决。如果在一方向其他方发出要求协商解决的书面通知后30天之内争议仍然得不到解决，则任何一方均可将有关争议提交给中国国际经济贸易仲裁委员会，由该会按照其仲裁规则仲裁解决。仲裁应在北京进行，使用之语言为中文。仲裁裁决是终局性的，对各方均有约束力。
In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations.  In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party's request to the other Parties for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in Beijing, and the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.

6.        税款、费用
Taxes and Fees

每一方应承担根据中国法律因准备和签署本合同和各转让合同以及完成本合同和各转让合同拟定的交易而由该方发生的或对其征收的任何和全部的转让和注册的税、花费和费用。
Each Party shall pay any and all transfer and registration tax, expenses and fees incurred thereby or levied thereon in accordance with the laws of China in connection with the preparation and execution of this Agreement and the Transfer Contracts, as well as the consummation of the transactions contemplated under this Agreement and the Transfer Contracts.

7.        通知
Notices

 
7.1
本合同项下要求或发出的所有通知和其他通信应通过专人递送、挂号邮寄、邮资预付或商业快递服务或传真的方式发到该方下列地址。每一通知还应再以电子邮件送达。该等通知视为有效送达的日期按如下方式确定：
All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such Party set forth below.  A confirmation copy of each notice shall also be sent by email.  The dates on which notices shall be deemed to have been effectively given shall be determined as follows:

 
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7.1.1
通知如果是以专人递送、快递服务或挂号邮寄、邮资预付发出的，则以于设定为通知的地址在到达或拒收之日为有效送达日。
Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the date of arrival or refusal at the address specified for notices.

 
7.1.2
通知如果是以传真发出的，则以成功传送之日为有效送达日（应以自动生成的传送确认信息为证）。
Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an automatically generated confirmation of transmission).

 
7.3
任何一方可按本条规定随时给其他方发出通知来改变其接收通知的地址。
Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms hereof.
 
8.        保密责任
Confidentiality

各方承认及确定有关本协议、本协议内容，以及彼此就准备或履行本协议而交换的任何口头或书面资料均被视为保密信息。各方应当对所有该等保密信息予以保密，而在未得到另一方书面同意前，不得向任何第三者披露任何保密信息，惟下列信息除外：(a)公众人士知悉或将会知悉的任何信息（惟并非由接受保密信息之一方擅自向公众披露）；(b)根据适用法律法规、股票交易规则、或政府部门或法院的命令而所需披露之任何信息；或(c)由任何一方就本协议所述交易而需向其股东、投资者、法律或财务顾问披露之信息，而该股东、法律或财务顾问亦需遵守与本条款相类似之保密责任。如任何一方工作人员或聘请机构的泄密均视为该方的泄密，需依本协议承担违约责任。无论本协议以任何理由终止，惟本条款仍然生效。
The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or financial advisors shall  be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which Party shall be held liable for breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.

 
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9.    进一步保证
Further Warranties

各方同意迅速签署为执行本合同的各项规定和目的而合理需要的或对其有利的文件，以及为执行本合同的各项规定和目的而采取合理需要的或对其有利的进一步行动。
The Parties agree to promptly execute documents that are reasonably required for or are conducive to the implementation of the provisions and purposes of this Agreement and take further actions that are reasonably required for or are conducive to the implementation of the provisions and purposes of this Agreement.

10.  其他
Miscellaneous

10.1 修订、修改与补充
Amendment, change and supplement

对本合同作出修订、修改与补充，必须经每一方签署书面协议。
Any amendment, change and supplement to this Agreement shall require the execution of a written agreement by all of the Parties.

 
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10.2    完整合同
Entire agreement

除了在本合同签署后所作出的书面修订、补充或修改以外，本合同构成本合同各方就本合同标的物所达成的完整合同，取代在此之前就本合同标的物所达成的所有口头或书面的协商、陈述和合同。
Except for the amendments, supplements or changes in writing executed after the execution of this Agreement, this Agreement shall constitute the entire agreement reached by and among the Parties hereto with respect to the subject matter hereof, and shall take the place of all prior oral and written consultations, representations and contracts reached with respect to the subject matter of this Agreement.

10.3    标题
Headings

本合同的标题仅为方便阅读而设，不应被用来解释、说明或在其他方面影响本合同各项规定的含义。
The headings of this Agreement are for convenience only, and shall not be used to interpret, explain or otherwise affect the meanings of the provisions of this Agreement.

10.4    语言
Language

本合同以中文和英文书就，一式四份，甲丙双方各持一份，乙方每人各执一份，具有同等效力；中英文版本如有冲突，应以中文版为准。
This Agreement is written in both Chinese and English language in four copies. Each of Party A and Party C has one copy. Each of Party B has one copy. Each copy has equal legal validity; in case there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.

 
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10.5    可分割性
Severability

如果本合同有任何一条或多条规定根据任何法律或法规在任何方面被裁定为无效、不合法或不可执行，本合同其余规定的有效性、合法性或可执行性不应因此在任何方面受到影响或损害。各方应通过诚意磋商，争取以法律许可以及各方期望的最大限度内有效的规定取代那些无效、不合法或不可执行的规定，而该等有效的规定所产生的经济效果应尽可能与那些无效、不合法或不能强制执行的规定所产生的经济效果相似。
In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.

10.6 继任者
Successors

本合同对各方各自的继任者和各方所允许的受让方应具有约束力并对其有利。
This Agreement shall be binding on and shall inure to the interest of the respective successors of the Parties and the permitted assigns of such Parties.

10.7    继续有效
Survival

10.7.1
合同期满或提前终止前因本合同而发生的或到期的任何义务在本合同期满或提前终止后继续有效。
Any obligations that occur or that are due as a result of this Agreement upon the expiration or early termination of this Agreement shall survive the expiration or early termination thereof.

10.7.2 本合同第5、7、8条和本第10.8条的规定在本合同终止后继续有效。
The provisions of Sections 5, 7, 8 and this Section 10.8 shall survive the termination of this Agreement.

 
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10.8     弃权
Waivers

任何一方可以对本合同的条款和条件作出弃权，但必须经书面作出并经各方签字。一方在某种情况下就其他方的违约所作的弃权不应被视为该方在其他情况下就类似的违约已经对其他方作出弃权。
Any Party may waive the terms and conditions of this Agreement, provided that such a waiver must be provided in writing and shall require the signatures of the Parties. No waiver by any Party in certain circumstances with respect to a breach by other Parties shall operate as a waiver by such a Party with respect to any similar breach in other circumstances.

10.9    补偿
Indemnification

10.9.1
各方同意并确认，如任一公司现有股东（以下称“违约方”）实质性地违 反本合同项下所作的任何一项约定，或实质性地未履行本合同项下的任何一项义务，即构成本合同项下的违约（以下称“违约”），甲方有权要求违约方在合理期限内补正或采取补救措施。如违约方在合理期限内或在甲方书面通知违约方并提出补正要求后十（10）天内仍未补正或采取补救措施的，则甲方有权自行决定选择以下的任一种违约救济方式：（1）终止本协议，并要求违约方给予全部的损害赔偿；（2）要求强制履行违约方在本协议项下的义务，并要求违约方给予全部的损害赔偿；或者（3）按照股权质押协议的约定以质押股权折价，拍卖或者变卖，并以折价、拍卖或者变卖的价款优先受偿，并要求违约方承担由此造成的全部损失。
Each Party agrees and acknowledges that any material breach or material non-performance of any section by a shareholder of the Company (the “Breaching Party”) under this Agreement shall constitute a breach of contract under this Agreement (the “Breach”), and Party A shall be entitled to request the Breaching Party to cure such Breach or adopt remedial steps within reasonable period.  In the event the Breaching Party fails to cure or to adopt remedial steps within the reasonable period or within ten (10) days after written notice of Breach to the Breaching Party by Party A, then Party A shall be entitled to exercise any of the following remedial methods: (i) to terminate this Agreement and request all liquidated damages; or (ii) to enforce the Breaching Party to perform his obligations under this Agreement and request all liquidated damages as well; or (iii) to convert, auction or sell the pledged equity interests in accordance with the share pledge agreement, and to be compensated on a preferential basis with the conversion, auction or sales price of the pledged equity interests, in addition to requesting the Breaching Party to bear liquidated damages in connection with the Breach.

 
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10.9.2
各方同意并确认，公司现在股东在任何情况下，均不得以任何理由要求终止本合同。
Both Parties agree and acknowledge that under no circumstances shall the shareholders of the Company be entitled to terminate this Agreement by any reasons.

10.9.3
本合同规定的权利和救济是累积的，并不排斥法律规定的其他权利或者救济。
Any right and remedy under this Agreement is cumulative and shall not restrict other rights and remedies under the law.

10.9.4
尽管有本合同其它规定，本条规定的效力不受本合同中止或者终止的影响。
Notwithstanding other provisions under this Agreement, this Section shall survive the suspension or termination of this Agreement.

有鉴于此，双方已使得经其授权的代表于文首所述日期签署了本独家购买权合同并即生效，以昭信守。
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Exclusive Option Agreement as of the date first above written.

 
- 22 -
 

签字页  (The page of Signature)

甲方：山西势派普商务咨询有限公司
Party A:         Shanxi Shipaipu Business Consulting Co., Ltd.
签署(公章)
By (seal):     ____________________

公司授权代表或法定代表人（签字）
(The signature of The Representative): ____________________

乙方：
Party B: 刘旭东
        Liu Xudong
签署(签字)：
By (signature):     ________________

刘利子
Liu Lizi
签署(签字)：
By (signature):     ________________

丙方： 山西国联管业集团有限公司
Party C:
Shanxi Guolian Pipe Industry Group Co., Ltd
签署(公章)
By (seal):      ____________________

公司授权代表或法定代表人（签字）
(The signature of The Representative): ____________________

 
- 23 -
 
EX-4.12 15 v230348_ex4-12.htm
股权质押合同
Share Pledge Agreement

本股权质押合同 (下称“本合同”)由下列各方于2011年4月3日在中华人民共和国（下称“中国”） 晋中市签订：
This Share Pledge Agreement (this "Agreement") has been executed by and among the following parties on April 3rd , 2011 in Jinzhong City, the People’s Republic of China (“China” or the “PRC”):

甲方：山西势派普商务咨询有限公司（下称“质权人”）
地址：山西省晋中市榆次108国道寇村段
Party A:
Shanxi Shipaipu Business Consulting Co., Ltd. (hereinafter "Pledgee")
 
Address: Koucun Part, National Road 108, Yuci District Jinzhong City, Shanxi Province, P.R.C.

乙方：   刘旭东
身份证号：14010319810718333X
刘利子
身份证号：142401196603173110
                  （以上合称为“出质人”）
       
Party B:
Liu Xudong
National Identification Number: 14010319810718333X
Liu Lizi
National Identification Number: 142401196603173110
(hereinafter collectively referred to as “Pledgor” ）
  
丙方：   山西国联管业集团有限公司
地址：
山西省晋中市榆次108国道寇村段
Party C:   Shanxi Guolian Pipe Industry Group Co., Ltd.
Address:
Koucun Part, National Road 108, Yuci District Jinzhong City, Shanxi Province, P.R.C.
 
秘密文件 Strictly Confidential
 
 
- 1 -
 

在本合同中，质权人、出质人和丙方以下各称“一方”，合称“各方”。
In this Agreement, each of Pledgee, Pledgor and Party C shall be referred to as a "Party" respectively, and they shall be referred to as the "Parties" collectively.

鉴于：
Whereas:

1.
出质人合计拥有丙方100 %的股权，其中刘旭东持有89%的股权权益；刘利子持有11%的股权权益。丙方是一家在中国晋中市注册成立的、从事管道的生产和销售的有限责任公司。丙方有意在此确认出质人和质权人在本合同下的权利和义务并提供必要的协助登记该质权；
Pledgor holds 100% of the equity interest in Party C, of which Liu Xudong holds 89 %, Liu Lizi holds 11% respectively. Party C is a limited liability company registered in Jinzhong City, China engaging in the manufacture and sale of pipes. Party C acknowledges the respective rights and obligations of Pledgor and Pledgee under this Agreement, and intends to provide any necessary assistance in registering the Pledge;

2.
质权人是一家在山西省晋中市注册的外商独资企业。质权人与出质人所拥有的丙方于2011年4月3日签订了独家业务合作协议；
Pledgee is a wholly foreign-owned enterprise registered in Jinzhong City, Shanxi Province, China. Pledgee and Party C owned by Pledgor have executed an Exclusive Business Cooperation Agreement on April 3rd , 2011;

3.
为了保证丙方履行独家业务合作协议项下的义务，按照约定向质权人支付咨询和服务费等到期款项，出质人以其在丙方中拥有的全部股权向质权人做出独家业务合作协议项下丙方付款义务的质押担保。
To ensure that Party C fully performs its obligations under the Exclusive Business Cooperation Agreement and pay the consulting and service fees thereunder to the Pledgee when the same becomes due, Pledgor hereby pledges to the Pledgee all of the equity interest he holds in Party C as security for payment of the consulting and service fees by Party C under the Exclusive Business Cooperation Agreement.
 
秘密文件 Strictly Confidential
 
 
- 2 -
 

为了履行独家业务合作协议的条款，各方商定按照以下条款签订本合同。
To perform the provisions of the Exclusive Business Cooperation Agreement, the Parties have mutually agreed to execute this Agreement upon the following terms.

1.     定义
Definitions

除非本合同另有规定，下列词语含义为：
Unless otherwise provided herein, the terms below shall have the following meanings:

 
1.1
质权：指出质人根据本合同第2条给予质权人的担保物权，即指质权人所享有的，以出质人质押给质权人的股权折价或拍卖、变卖该股权的价款优先受偿的权利。
Pledge shall refer to the security interest granted by Pledgor to Pledgee pursuant to Article 2 of this Agreement, i.e., the right of Pledgee to be compensated on a preferential basis with the conversion, auction or sales price of the Equity Interest.

 
1.2
股权：指出质人现在和将来合法持有的其在丙方的全部股权权益。
Equity Interest shall refer to all of the equity interest lawfully now held and hereafter acquired by Pledgor in Party C.

 
1.3
质押期限：指本合同第3条规定的期间。
Term of Pledge shall refer to the term set forth in Section 3.2 of this Agreement.

 
1.4
业务合作协议：指丙方与质权人于2011年4月 3日签订的独家业务合作协议。
Business Cooperation Agreement shall refer to the Exclusive Business Cooperation Agreement executed by and between Party C and Pledgee on April 3rd, 2011.
 
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1.5
违约事件：指本合同第7条所列任何情况。
Event of Default shall refer to any of the circumstances set forth in Article 7 of this Agreement.

 
1.6
违约通知：指质权人根据本合同发出的宣布违约事件的通知。
Notice of Default shall refer to the notice issued by Pledgee in accordance with this Agreement declaring an Event of Default.

2     质权
The Pledge

作为及时完整地支付业务合作协议项下质权人应得的任何或全部的丙方欠付的款项，包括但不限于业务合作协议中咨询服务费的担保，出质人特此将其现有或将拥有的丙方的全部股权权益质押给质权人，无论该等费用的到期应付是由于到期日的到来、提前收款的要求或其它原因。
As collateral security for the prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of any or all the payments due by Party C, including without limitation the consulting and services fees payable to the Pledgee under the Business Cooperation Agreement, Pledgor hereby pledges to Pledgee a first security interest in all of Pledgor's right, title and interest, whether now owned or hereafter acquired by Pledgor, in the Equity Interest of Party C.

3.     质押期限
Term of Pledge

 
3.1
本质权自本合同项下股权出质在相应的工商行政管理机关登记之日起生效，质权有效期持续到业务合作协议下所有丙方欠付质权人的款项结清为止。各方同意，自本合同签署之日起3个工作日内，出质人和丙方应将本合同的质权登记在丙方股东名册上，并在相关工商行政管理机关开始正式受理股权质押登记申请后的10个工作日内将本合同项下的股权出质在相应的工商行政管理机关进行登记。
 
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The Pledge shall become effective as of the date when the pledge of the Equity Interest is registered with relevant administration for industry and commerce (the “AIC”). The Pledge shall be continuously valid until all payments due under the Business Cooperation Agreement have been fulfilled by Party C. The parties agree that Pledgor and Party C shall register the Pledge in the shareholders' register of Party C within 3 business days following the execution of this Agreement, and within 10 business days after the competent AIC has formally begun accepting applications for the registration of equity interest pledge, Pledgor and Party C shall file the pledge of the Equity Interest contemplated herein with such AIC for registration.

 
3.2
质押期限内，如丙方未按业务合作协议交付咨询服务费等费用，质权人有权但无义务按本合同的规定处分质权。
During the Term of Pledge, in the event Party C fails to pay the exclusive consulting or service fees in accordance with the Business Cooperation Agreement, Pledgee shall have the right, but not the obligation, to dispose of the Pledge in accordance with the provisions of this Agreement.

4.
质权凭证的保管
Custody of Records for Equity Interest subject to Pledge

 
4.1
在本合同规定的质押期限内，出质人应将其在丙方的股权出资证明书及记载质权的股东名册交付质权人保管。出质人应在本合同签订之日起一周内将上述股权出资证明书及股东名册交付给质权人。质权人将在本合同规定的全部质押期间一直保管这些项目。
During the Term of Pledge set forth in this Agreement, Pledgor shall deliver to Pledgee's custody the capital contribution certificate for the Equity Interest and the shareholders' register containing the Pledge within one week from the execution of this Agreement. Pledgee shall have custody of such items during the entire Term of Pledge set forth in this Agreement.

 
4.2
在质押期限内，质权人有权收取股权所产生的红利。
Pledgee shall have the right to collect dividends generated by the Equity Interest during the Term of Pledge.
  
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5.
出质人的声明和保证
Representations and Warranties of Pledgor

 
5.1
出质人是股权唯一的合法所有人。
Pledgor is the sole legal and beneficial owner of the Equity Interest.

 
5.2
质权人有权以本合同规定的方式处分并转让股权。
Pledgee shall have the right to dispose of and transfer the Equity Interest in accordance with the provisions set forth in this Agreement.

 
5.3
除本质权之外，出质人未在股权上设置任何其他质押权利或其他担保权益。
Except for the Pledge, Pledgor has not placed any security interest or other encumbrance on the Equity Interest.

6.
出质人的承诺和确认
Covenants and Further Agreements of Pledgor

 
6.1
在本合同存续期间，出质人向质权人承诺，出质人将：
Pledgor hereby covenants to the Pledgee, that during the term of this Agreement, Pledgor shall:

 
6.1.1
除履行由出质人与质权人、丙方于2011年4月3日签订的《独家购买权合同》外，未经质权人事先书面同意，不得转让股权，不得在股权上设立或允许存在任何担保或其他债务负担；
not transfer the Equity Interest, place or permit the existence of any security interest or other encumbrance on the Equity Interest, without the prior written consent of Pledgee, except for the performance of the Exclusive Option Agreement executed by Pledgor, Pledgee and Party C on April 3rd, 2011;
 
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6.1.2
遵守并执行所有有关权利质押的法律、法规的规定，在收到有关主管机关就质权发出或制定的通知、指令或建议时，于五日内向质权人出示上述通知、指令或建议，同时遵守上述通知、指令或建议，或按照质权人的合理要求或经质权人同意就上述事宜提出反对意见和陈述；
comply with the provisions of all laws and regulations applicable to the pledge of rights, and within 5 days of receipt of any notice, order or recommendation issued or prepared by relevant competent authorities regarding the Pledge, shall present the aforementioned notice, order or recommendation to Pledgee, and shall comply with the aforementioned notice, order or recommendation or submit objections and representations with respect to the aforementioned matters upon Pledgee's reasonable request or upon consent of Pledgee;

 
6.1.3
将任何可能导致对出质人股权或其任何部分的权利产生影响的事件或收到的通知，以及可能改变出质人在本合同中的任何保证、义务或对出质人履行其在本合同中义务可能产生影响的任何事件或收到的通知及时通知质权人。
promptly notify Pledgee of any event or notice received by Pledgor that may have an impact on Pledgee's rights to the Equity Interest or any portion thereof, as well as any event or notice received by Pledgor that may change or have an impact on any guarantees and other obligations of Pledgor arising out of this Agreement.

 
6.2
出质人同意，质权人按本合同条款取得的对质权享有的权利，不应受到出质人或出质人的继承人或出质人之委托人或任何其他人通过法律程序的中断或妨害。
Pledgor agrees that the rights acquired by Pledgee in accordance with this Agreement with respect to the Pledge shall not be interrupted or harmed by Pledgor or any heirs or representatives of Pledgor or any other persons through any legal proceedings.
 
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6.3
出质人向质权人保证，为保护或完善本合同对偿付业务合作协议项下咨询服务费等费用的担保，出质人将诚实签署、并促使其他与质权有利害关系的当事人签署质权人所要求的所有的权利证书、契约和/或履行并促使其他有利害关系的当事人履行质权人所要求的行为，并为本合同赋予质权人之权利、授权的行使提供便利，与质权人或其指定的人(自然人/法人)签署所有的有关股权所有权的文件，并在合理期间内向质权人提供其认为需要的所有的有关质权的通知、命令及决定。
To protect or perfect the security interest granted by this Agreement for payment of the consulting and service fees under the Business Cooperation Agreement, Pledgor hereby undertakes to execute in good faith and to cause other parties who have an interest in the Pledge to execute all certificates, agreements, deeds and/or covenants required by Pledgee.  Pledgor also undertakes to perform and to cause other parties who have an interest in the Pledge to perform actions required by Pledgee, to facilitate the exercise by Pledgee of its rights and authority granted thereto by this Agreement, and to enter into all relevant documents regarding ownership of Equity Interest with Pledgee or designee(s) of Pledgee (natural persons/legal persons).  Pledgor undertakes to provide Pledgee within a reasonable time with all notices, orders and decisions regarding the Pledge that are required by Pledgee.

 
6.4
出质人向质权人保证，出质人将遵守、履行本合同项下所有的保证、承诺、协议、陈述及条件。如出质人不履行或不完全履行其保证、承诺、协议、陈述及条件，出质人应赔偿质权人由此遭受的一切损失。
Pledgor hereby undertakes to comply with and perform all guarantees, promises, agreements, representations and conditions under this Agreement. In the event of failure or partial performance of its guarantees, promises, agreements, representations and conditions, Pledgor shall indemnify Pledgee for all losses resulting therefrom.
 
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7.
违约事件
Event of Breach

 
7.1
下列事项均被视为违约事件：
The following circumstances shall be deemed Event of Default:

 
7.1.1
丙方未能按期足额支付业务合作协议项下的应付的咨询服务费等费用或有违反该协议其他义务的行为；
Party C fails to pay in full any of the consulting and service fees payable under the Business Cooperation Agreement or breaches any other obligations of Party C thereunder;

 
7.1.2
出质人在本合同第5条所作的任何声明或保证有实质性的误导或错误，和/或出质人违反本合同第5条的声明和保证；
Any representation or warranty by Pledgor in Article 5 of this Agreement contains material misrepresentations or errors, and/or Pledgor violates any of the warranties in Article 5 of this Agreement;

 
7.1.3
出质人和丙方没有按第3.1条将本质权登记在丙方股东名册上；
Pledgor and Party C fail to register the Pledge in the shareholders' register of Party C stipulated in Section 3.1;

 
7.1.4
出质人或丙方违反本合同的任何条款；如果出质人中任何一人违反本合同项下的义务，其他人对此承担连带责任。
Pledgor or Party C breaches any provisions of this Agreement; Each person of Pledgor shall bear the joint and several liabilities as to the obligations of other persons of Pledgor thereunder.

 
7.1.5
除本合同第6.1.1条的约定外，出质人未获得质权人书面同意而擅自转让或意图转让出质的股权或舍弃出质的股权；
Except as expressly stipulated in Section 6.1.1, Pledgor transfers or purports to transfer or abandons the Equity Interest pledged or assigns the Equity Interest pledged without the written consent of Pledgee;
 
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7.1.6
出质人本身对外的任何借款、担保、赔偿、承诺或其他偿债责任(1)因违约被要求提前偿还或履行；或(2)已到期但不能如期偿还或履行；
Any of Pledgor's own loans, guarantees, indemnifications, promises or other debt liabilities to any third party or parties (1) become subject to a demand of early repayment or performance due to default on the part of Pledgor; or (2) become due but are not capable of being repaid or performed in a timely manner;

 
7.1.7
本合同可被执行或使之合法或生效所须之一切政府部门同意、许可、批准或授权被撤回、中止、失效或有实质性修改；
Any approval, license, permit or authorization of government agencies that makes this Agreement enforceable, legal and effective is withdrawn, terminated, invalidated or substantively changed;

 
7.1.8
适用的法律的发布使得本合同非法或使得出质人不能继续履行其在本合同项下的义务；
The promulgation of applicable laws renders this Agreement illegal or renders it impossible for Pledgor to continue to perform its obligations under this Agreement;

 
7.1.9
出质人因其所拥有的财产出现不利变化，致使质权人认为出质人履行本合同项下的义务的能力已受到影响；
Adverse changes in properties owned by Pledgor, which lead Pledgee to believe that that Pledgor's ability to perform its obligations under this Agreement has been affected;

 
7.1.10
丙方的继承人或代管人只能履行部分或拒绝履行业务合作协议项下的支付责任；和
The successor or custodian of Party C is capable of only partially perform or refuses to perform the payment obligations under the Business Cooperation Agreement; and
 
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7.1.11
按有关法律规定质权人不能或可能不能行使处分质权的其他情况。
Any other circumstances occur where Pledgee is or may become unable to exercise its right with respect to the Pledge.

 
7.2
如知道或发现本第7.1条所述的任何事项或可能导致上述事项的事件已经发生，出质人应立即以书面形式通知质权人。
Upon notice or discovery of the occurrence of any circumstances or event that may lead to the aforementioned circumstances described in Section 7.1, Pledgor shall immediately notify Pledgee in writing accordingly.

 
7.3
除非本第7.1条所列的违约事项已在质权人感到满意的情况下获得完满解决，否则质权人可在出质人违约事项发生时或发生后的任何时间以书面形式向质权人发出违约通知，要求出质人立即支付全部业务合作协议项下的欠款及其他应付款项或/和按本合同第8条的规定处分质权。
Unless an Event of Default set forth in this Section 7.1 has been successfully resolved to Pledgee's satisfaction, Pledgee may issue a Notice of Default to Pledgor in writing upon the occurrence of the Event of Default or at any time thereafter and demand that Pledgor immediately pay all outstanding payments due under the Business Cooperation Agreement and all other payments due to Pledgee, and/or dispose of the Pledge in accordance with the provisions of Article 8 of this Agreement.

8.
质权的行使
Exercise of Pledge

 
8.1
在业务合作协议所述的咨询服务费等费用未全部偿还前，未经质权人书面同意，出质人不得转让其拥有的丙方股权。
Prior to the full payment of the consulting and service fees described in the Business Cooperation Agreement, without the Pledgee's written consent, Pledgor shall not assign the Equity Interest in Party C.

 
8.2
质权人行使质权时可向出质人发出违约通知。
Pledgee may issue a Notice of Default to Pledgor when exercising the Pledge.
 
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8.3
受限于第7.3条的规定，质权人可在按第7.2条发出违约通知的同时或在发出违约通知之后的任何时间里对质权行使处分的权利。质权人决定行使处分质权的权利时，出质人即不再拥有任何与股权有关的权利和利益。
Subject to the provisions of Section 7.3, Pledgee may exercise the right to enforce the Pledge concurrently with the issuance of the Notice of Default in accordance with Section 7.2 or at any time after the issuance of the Notice of Default. Once Pledgee elects to enforce the Pledge, Pledgor shall cease to be entitled to any rights or interests associated with the Equity Interest.

 
8.4
在违约时，在法律许可的范围内并根据有关法律的规定，质权人有权按照法定程序处置质押股权，对于处置的所得，质权人无需给付出质人；出质人特此放弃其可能有的能向质权人要求任何质押股权处置所得的权利。同样，出质人对质权人在该质押股权处置后的亏空也不承担任何义务。
In the event of default, Pledgee is entitled to dispose of the Equity Interest pledged, to the extent permitted by and in accordance with applicable laws, without obligation to account to Pledgor for proceeds of disposition and Pledgor hereby waives any rights it may have to demand any such accounting from Pledgee. Likewise, in such circumstance Pledgor shall have no obligation to Pledgee for any deficiency remaining after such disposition of the Equity Interest pledged.

 
8.5
质权人依照本合同处分质权时，出质人和丙方应予以必要的协助，以使质权人实现其质权。
When Pledgee disposes of the Pledge in accordance with this Agreement, Pledgor and Party C shall provide necessary assistance to enable Pledgee to enforce the Pledge in accordance with this Agreement.
 
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9.
转让
Assignment

 
9.1
除非经质权人事先同意，出质人无权赠予或转让其在本合同项下的权利义务。
Without Pledgee's prior written consent, Pledgor shall not have the right to assign or delegate its rights and obligations under this Agreement.

 
9.2
本合同对出质人及其继任人和经许可的受让人均有约束力，并且对质权人及每一继任人和受让人有效。
This Agreement shall be binding on Pledgor and its successors and permitted assigns, and shall be valid with respect to Pledgee and each of its successors and assigns.

 
9.3
质权人可以在任何时候将其在业务合作协议项下的所有或任何权利和义务转让给其指定的人（自然人/法人），在这种情况下，受让人应享有和承担本合同项下质权人享有和承担的权利和义务，如同其作为原合同方应享有和承担的一样。质权人转让业务合作协议项下的权利和义务时，应质权人要求，出质人应就此转让签署有关协议和/或文件。
At any time, Pledgee may assign any and all of its rights and obligations under the Business Cooperation Agreement to its designee(s) (natural/legal persons), in which case the assigns shall have the rights and obligations of Pledgee under this Agreement, as if it were the original party to this Agreement. When the Pledgee assigns the rights and obligations under the Business Cooperation Agreement, upon Pledgee's request, Pledgor shall execute relevant agreements or other documents relating to such assignment.

 
9.4
因转让所导致的质权人变更后，应质权人要求，出质人应与新的质权人签订一份内容与本合同一致的新质押合同，并在相应的工商行政管理机关进行登记。
In the event of a change in Pledgee due to an assignment, Pledgor shall, at the request of Pledgee, execute a new pledge agreement with the new pledgee on the same terms and conditions as this Agreement, and register the same with the relevant AIC.
 
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9.5
出质人应严格遵守本合同和各方单独或共同签署的其他有关合同的规定，包括独家购买权合同和对质权人的授权委托书，履行各合同项下的义务，并不进行任何足以影响合同的有效性和可强制执行性的作为/不作为。除非根据质权人的书面指示，出质人不得行使其对质押股权还留存的权利。
Pledgor shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by the Parties hereto or any of them, including the Exclusive Option Agreement and the Power of Attorney granted to Pledgee, perform the obligations hereunder and thereunder, and refrain from any action/omission that may affect the effectiveness and enforceability thereof. Any remaining rights of Pledgor with respect to the Equity Interest pledged hereunder shall not be exercised by Pledgor except in accordance with the written instructions of Pledgee.

10.
终止
Termination

在业务合作协议项下的咨询服务费等费用偿还完毕，并且丙方不再承担业务合作协议项下的任何义务之后，本合同终止，在尽早合理可行的时间内，质权人应协助出质人解除质押。
Upon the full payment of the consulting and service fees under the Business Cooperation Agreement and upon termination of Party C's obligations under the Business Cooperation Agreement, this Agreement shall terminate, and Pledgee shall assist the Pledgor to remove the pledge registration as soon as reasonably practicable。

11.
手续费及其他费用
Handling Fees and Other Expenses

一切与本合同有关的费用及实际开支，其中包括但不限于法律费用、工本费、印花税以及任何其他税收、费用等全部由丙方承担。
All fees and out of pocket expenses relating to this Agreement, including but not limited to legal costs, costs of production, stamp tax and any other taxes and fees, shall be borne by Party C.
 
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12.
保密责任
Confidentiality

各方承认及确定有关本协议、本协议内容，以及彼此就准备或履行本协议而交换的任何口头或书面资料均被视为保密信息。各方应当对所有该等保密信息予以保密，而在未得到另一方书面同意前，不得向任何第三者披露任何保密信息，惟下列信息除外：(a)公众人士知悉或将会知悉的任何信息（惟并非由接受保密信息之一方擅自向公众披露）；(b)根据适用法律法规、股票交易规则、或政府部门或法院的命令而所需披露之任何信息；或(c)由任何一方就本协议所述交易而需向其股东、投资者、法律或财务顾问披露之信息，而该股东、法律或财务顾问亦需遵守与本条款相类似之保密责任。如任何一方工作人员或聘请机构的泄密均视为该方的泄密，需依本协议承担违约责任。无论本协议以任何理由终止，惟本条款仍然生效。
The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or financial advisors shall  be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which Party shall be held liable for breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.
 
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13.
适用法律和争议的解决
Governing Law and Resolution of Disputes

13.1
本合同的订立、效力、解释、履行、修改和终止以及争议的解决均适用中国法律。
The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes hereunder shall be governed by the laws of China.

13.2
因解释和履行本合同而发生的任何争议，本合同各方应首先通过友好协商的方式加以解决。如果在一方向其他方发出要求协商解决的书面通知后30天之内争议仍然得不到解决，则任何一方均可将有关争议提交给中国国际经济贸易仲裁委员会，由该会按照其仲裁规则仲裁解决。仲裁应在北京进行，使用之语言为中文。仲裁裁决是终局性的，对各方均有约束力。
In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party's request to the other Parties for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in Beijing, and the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.

因解释和履行本合同而发生任何争议或任何争议正在进行仲裁时，除争议的事项外，本合同各方仍应继续行使各自在本合同项下的其他权利并履行各自在本合同项下的其他义务。
Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration of any dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this Agreement and perform their respective obligations under this Agreement.
 
秘密文件 Strictly Confidential
 
 
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14.
通知
Notices

本合同项下要求或发出的所有通知和其他通信应通过专人递送、挂号邮寄、邮资预付或商业快递服务或传真的方式发到该方下列地址。每一通知还应再以电子邮件送达。该等通知视为有效送达的日期按如下方式确定：
All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such party set forth below. A confirmation copy of each notice shall also be sent by E-mail. The dates on which notices shall be deemed to have been effectively given shall be determined as follows:

通知如果是以专人递送、快递服务或挂号邮寄、邮资预付发出的，则以于设定为通知的地址在到达或拒收之日为有效送达日。
Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the date of arrival or refusal at the address specified for notices.

通知如果是以传真发出的，则以成功传送之日为有效送达日（应以自动生成的传送确认信息为证）。
Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an automatically generated confirmation of transmission).
 
秘密文件 Strictly Confidential
 
 
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15.
分割性
Severability

如果本合同有任何一条或多条规定根据任何法律或法规在任何方面被裁定为无效、不合法或不可执行，本合同其余规定的有效性、合法性或可执行性不应因此在任何方面受到影响或损害。各方应通过诚意磋商，争取以法律许可以及各方期望的最大限度内有效的规定取代那些无效、不合法或不可执行的规定，而该等有效的规定所产生的经济效果应尽可能与那些无效、不合法或不能强制执行的规定所产生的经济效果相似。
In the event that one or several of the provisions of this Contract are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Contract shall not be affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.

16.
附件
Attachments

本合同所列附件，为本合同不可分割的组成部分。
The attachments set forth herein shall be an integral part of this Agreement.

17.
生效
Effectiveness

 
17.1
本合同的任何修改、补充或变更，均须采用书面形式，经各方签字或盖章并按规定办理政府登记（如需）后生效。
Any amendments, changes and supplements to this Agreement shall be in writing and shall become effective upon completion of the governmental filing procedures (if applicable) after the affixation of the signatures or seals of the Parties.
 
秘密文件 Strictly Confidential
 
 
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17.2
本合同以中文和英文书就，一式四份，质权人、丙方各持一份，每位出质人各持一份，具有同等效力；中英文版本如有冲突，应以中文版为准。
This Agreement is written in Chinese and English in four copies. Pledgee, Party C shall hold one copy respectively. Each of Pledgors shall hold one copy. Each copy of this Agreement shall have equal validity. In case there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.

有鉴于此，各方已使得经其授权的代表于文首所述日期签署了本股权质押合同并即生效，以昭信守。本合同签订后，应及时到当地工商局备案，质权方设立。
IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Share Pledge Agreement as of the date first above written. While after the conclusion of the contract, the parties shall go to the local Administration for Industry and Commerce for records, until then the right of Pledge is established.

签字页  (The page of Signature)

甲方：山西势派普商务咨询有限公司
Party A:          Shanxi Shipaipu Business Consulting Co., Ltd.
签署(公章)
By (seal):      ____________________
 
秘密文件 Strictly Confidential
 
 
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公司授权代表或法定代表人（签字）
(The signature of The Representative): ____________________

乙方：
Party B: 刘旭东
       Liu Xudong
签署(签字)：
By (signature):     ________________

      刘利子
       Liu Lizi
签署(签字)：
By (signature):     ________________

丙方：  山西国联管业集团有限公司
Party C:
Shanxi Guolian Pipe Industry Group Co., Ltd.
签署(公章)
By (seal):      ____________________

公司授权代表或法定代表人（签字）
(The signature of The Representative): ____________________
 
秘密文件 Strictly Confidential
 
 
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EX-4.13 16 v230348_ex4-13.htm
授权委托书
Power of Attorney

本人，刘旭东，中国公民，身份证号码为14010319810718333X，系拥有山西国联管业集团有限公司（“公司”）89%的股权（“本人股权”）的股东，就本人股权，特此不可撤销地授权山西势派普商务咨询有限公司（“WFOE”）在本授权委托书的有效期内行使如下权利：
Liu Xudong, a Chinese citizen with Chinese Identification Card No.: 14010319810718333X, and a holder of 89% of the entire registered capital in Shanxi Guolian Pipe Industry Group Co., Ltd. (the " Company ") ("My Shareholding"), hereby irrevocably authorize Shanxi Shipaipu Business Consulting Co., Ltd. ("WFOE") to exercise the following rights relating to My Shareholding during the term of this Power of Attorney:

授权WFOE作为本人唯一的排他的代理人就有关本人股权的事宜全权代表本人行使包括但不限于如下的权利：1）参加公司的股东会；2）行使按照法律和公司章程规定本人所享有的全部股东权和股东表决权，包括但不限于出售或转让或质押或处置本人股权的全部或任何一部分；以及3）作为本人的授权代表指定和任命公司的法定代表人（董事长）、董事、监事、总经理以及其他高级管理人员等。
WFOE is hereby authorized to act on behalf of myself as my exclusive agent and attorney with respect to all matters concerning My Shareholding, including without limitation to: 1) attend shareholders' meetings of the Company; 2) exercise all the shareholder's rights and shareholder's voting rights I am entitled to under the laws of China and the Company’s Articles of Association, including but not limited to the sale or transfer or pledge or disposition of My Shareholding in part or in whole; and 3) designate and appoint on behalf of myself the legal representative (chairperson), the director, supervisor, the chief executive officer and other senior management members of the Company.

秘密文件 Strictly Confidential
 
 
1
 
 
WFOE将有权在授权范围内代表本人签署独家购买权合同（本人应要求作为合同方）中约定的转让合同，如期履行本人作为合同一方的与本授权委托书同日签署的股权质押合同和独家购买权合同，该权利的行使将不对本授权形成任何限制。
Without limiting the generality of the powers granted hereunder, WFOE shall have the power and authority under this Power of Attorney to execute the Transfer Contracts stipulated in Exclusive Option Agreement, to which I am required to be a party, on behalf of myself, and to effect the terms of the Share Pledge Agreement and Exclusive Option Agreement, both dated the date hereof, to which I am a party.

WFOE就本人股权的一切行为均视为本人的行为，签署的一切文件均视为本人签署，本人会予以承认。
All the actions associated with My Shareholding conducted by WFOE shall be deemed as my own actions, and all the documents related to My Shareholding executed by WFOE shall be deemed to be executed by me.  I hereby acknowledge and ratify those actions and/or documents by WFOE.

WFOE有转委托权，可以就上述事项的办理自行再委托其他人或单位而不必事先通知本人或获得本人的同意。
WFOE is entitled to re-authorize or assign its rights related to the aforesaid matters to any other person or entity at its own discretion and without giving prior notice to me or obtaining my consent.

在本人为公司的股东期间，本授权委托书不可撤销并持续有效，自授权委托书签署之日起算。
This Power of Attorney is coupled with an interest and shall be irrevocable and continuously valid from the date of execution of this Power of Attorney, so long as I am a shareholder of the Company.

秘密文件 Strictly Confidential
 
 
2
 
 
本授权委托书期间，本人特此放弃已经通过本授权委托书授权给WFOE的与本人股权有关的所有权利，不再自行行使该等权利。
During the term of this Power of Attorney, I hereby waive all the rights associated with My Shareholding, which have been authorized to WFOE through this Power of Attorney, and shall not exercise such rights by myself.

本授权委托书以中文和英文书就，中英文版本如有冲突，应以中文版为准。
This Power of Attorney is written in Chinese and English; in case there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.
 
 
刘旭东
 
Liu Xudong
 
签署：
 
By:
    
   
 
2011年4月3日
 
April 3rd, 2011
   
秘密文件 Strictly Confidential
 
 
3
 
 EX-4.14 17 v230348_ex4-14.htm
授权委托书
Power of Attorney

本人，刘利子，中国公民，身份证号码为142401196603173110，系拥有山西国联管业集团有限公司（“公司”）11%的股权（“本人股权”）的股东，就本人股权，特此不可撤销地授权山西势派普商务咨询有限公司（“WFOE”）在本授权委托书的有效期内行使如下权利：
Liu Lizi, a Chinese citizen with Chinese Identification Card No.: 142401196603173110, and a holder of 11% of the entire registered capital in Shanxi Guolian Pipe Industry Group Co., Ltd. (the " Company ") ("My Shareholding"), hereby irrevocably authorize Shanxi Shipaipu Business Consulting Co., Ltd. ("WFOE") to exercise the following rights relating to My Shareholding during the term of this Power of Attorney:

授权WFOE作为本人唯一的排他的代理人就有关本人股权的事宜全权代表本人行使包括但不限于如下的权利：1）参加公司的股东会；2）行使按照法律和公司章程规定本人所享有的全部股东权和股东表决权，包括但不限于出售或转让或质押或处置本人股权的全部或任何一部分；以及3）作为本人的授权代表指定和任命公司的法定代表人（董事长）、董事、监事、总经理以及其他高级管理人员等。
WFOE is hereby authorized to act on behalf of myself as my exclusive agent and attorney with respect to all matters concerning My Shareholding, including without limitation to: 1) attend shareholders' meetings of the Company; 2) exercise all the shareholder's rights and shareholder's voting rights I am entitled to under the laws of China and the Company’s Articles of Association, including but not limited to the sale or transfer or pledge or disposition of My Shareholding in part or in whole; and 3) designate and appoint on behalf of myself the legal representative (chairperson), the director, supervisor, the chief executive officer and other senior management members of the Company.

秘密文件 Strictly Confidential
 
 
1
 
 
WFOE将有权在授权范围内代表本人签署独家购买权合同（本人应要求作为合同方）中约定的转让合同，如期履行本人作为合同一方的与本授权委托书同日签署的股权质押合同和独家购买权合同，该权利的行使将不对本授权形成任何限制。
Without limiting the generality of the powers granted hereunder, WFOE shall have the power and authority under this Power of Attorney to execute the Transfer Contracts stipulated in Exclusive Option Agreement, to which I am required to be a party, on behalf of myself, and to effect the terms of the Share Pledge Agreement and Exclusive Option Agreement, both dated the date hereof, to which I am a party.

WFOE就本人股权的一切行为均视为本人的行为，签署的一切文件均视为本人签署，本人会予以承认。
All the actions associated with My Shareholding conducted by WFOE shall be deemed as my own actions, and all the documents related to My Shareholding executed by WFOE shall be deemed to be executed by me.  I hereby acknowledge and ratify those actions and/or documents by WFOE.
 
WFOE有转委托权，可以就上述事项的办理自行再委托其他人或单位而不必事先通知本人或获得本人的同意。
WFOE is entitled to re-authorize or assign its rights related to the aforesaid matters to any other person or entity at its own discretion and without giving prior notice to me or obtaining my consent.

在本人为公司的股东期间，本授权委托书不可撤销并持续有效，自授权委托书签署之日起算。
This Power of Attorney is coupled with an interest and shall be irrevocable and continuously valid from the date of execution of this Power of Attorney, so long as I am a shareholder of the Company.

秘密文件 Strictly Confidential
 
 
2
 
 
本授权委托书期间，本人特此放弃已经通过本授权委托书授权给WFOE的与本人股权有关的所有权利，不再自行行使该等权利。
During the term of this Power of Attorney, I hereby waive all the rights associated with My Shareholding, which have been authorized to WFOE through this Power of Attorney, and shall not exercise such rights by myself.

本授权委托书以中文和英文书就，中英文版本如有冲突，应以中文版为准。
This Power of Attorney is written in Chinese and English; in case there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.


 
刘利子
 
Liu Lizi
 
签署：
 
By:
    
   
 
2011年4月3日
 
April 3rd, 2011

秘密文件 Strictly Confidential
 
 
3
 

 EX-8.1 18 v230348_ex8-1.htm
Exhibit 8.1

List of Subsidiaries of Sino Oil & Gas Pipe Holdings Limited

Name
Country of Incorporation
Rise King Management Limited
British Virgin Islands
Sound Way Enterprises Limited
British Virgin Islands
Brave King Enterprises Limited
Hong Kong
Major Aim Enterprises Limited
Hong Kong
Shanxi Shipaipu Business Consulting Co., Ltd.
People’s Republic of China
Shanxi Ruixingtong Business Consulting Co., Ltd.
People’s Republic of China
Shanxi Guolian Pipe Industry Group Co., Ltd.
People’s Republic of China
Shanxi Zhonglian Gas Development Co., Ltd.
People’s Republic of China
Shanxi Guolian Spiral Tubulation Co., Ltd.
People’s Republic of China
Xi’an Guolian Spiral Tubulation Co., Ltd
People’s Republic of China
Shanxi Guolian Pipe Technology Co., Ltd.
People’s Republic of China

 
 
 
 
 EX-15.1 19 v230348_ex15-1.htm Unassociated Document





CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the Board of Directors of
Rise King Management Limited


We hereby consent to the inclusion in the foregoing Form 20-F (No. 000-53939) of our report dated July 30, 2011, with respect to our audits of the consolidated financial statements of Rise King Management Limited and subsidiaries as of and for the years ended April 30, 2010 and 2009.  We also consent to the reference to our firm under the caption “Experts”.
 

 
 
WEINBERG & COMPANY, P.A.
Certified Public Accountants
 


Boca Raton, Florida
August 1, 2011