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LIHUA INTERNATIONAL S-1/A Filing

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LIHUA INTERNATIONAL  S-1/A Filing Powered By Docstoc
					                               As filed with the Securities and Exchange Commission on August 17, 2009
                                                                                                                           Registration No. 333-159705


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




                                                  FORM S-1
                                               (Amendment No. 2)
                            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933




                                          LIHUA INTERNATIONAL, INC.
                                                      (Exact name of registrant as specified in its charter)


                Delaware                                                    3350                                              14-1961536
        (State or Other Jurisdiction of                         (Primary Standard Industrial                     (I.R.S. Employer Identification Number)
       Incorporation or Organization)                           Classification Code Number)

                                                  Houxiang Five Star Industry District
                                             Danyang City, Jiangsu Province, PR China 212312
                                                             +86 51 86317399
                     (Address, including zip code, and telephone number including area code, of Registrant’s principal executive offices)




                                                               Jianhua Zhu
                                                         Chief Executive Officer
                                                         Lihua International, Inc.
                                                       c/o Lihua Holdings Limited
                                                   Houxiang Five Star Industry District
                                                Danyang City, Jiangsu Province, PRC 212312
                                                             +86 51 86317399
                              (Name, address, including zip code, and telephone number including area code, of agent for service)




                                                                          Copies to:


                 Mitchell S. Nussbaum, Esq.                                                            Douglas S. Ellenoff, Esq.
                     Loeb & Loeb LLP                                                                    Stuart Neuhauser, Esq.
                      345 Park Avenue                                                              Ellenoff Grossman & Schole LLP
                   New York, NY 10154                                                                150 E 42nd Street, 11th Floor
        Tel. No: 212-407-4159 Fax No: 212-407-4990                                                       New York, NY 10017
                                                                                             Tel. No: 212-370-1300 Fax No: 212-370-7889




   Approximate date of commencement of proposed sale to the public: From time to time after this Registration Statement
becomes effective.
   If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, check the following box. 
    If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the
following box and list the Securities Act registration statement number of the earlier effective registration statement for the same
offering. 
     If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 
     If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective registration statement for the same offering. 
   Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a
smaller reporting company. See definitions of ―large accelerated filer‖, ―accelerated filer‖ and ―smaller reporting company‖ in Rule
12b-2 of the Exchange Act.


Large Accelerated Filer            Accelerated Filer               Non-Accelerated Filer                      Smaller Reporting
                                                                                                                   Company 
    If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. 
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                                                   CALCULATION OF REGISTRATION FEE




         Title of each class of securities to be registered                         Proposed                  Amount of
                                                                                    maximum                   registration
                                                                                    aggregate                    fee (1)
                                                                                  offering price
         Common Stock par value $.0001 per share (1) (2) (3)                $            9,200,000      $        513.36
         TOTAL                                                              $            9,200,000      $        513.36 (4)



(1) The registration fee for securities to be offered by the Registrant is based on an estimate of the Proposed Maximum Aggregate
    Offering Price of the securities, and such estimate is solely for the purpose of calculating the registration fee pursuant to Rule
    457(o).
(2) Includes 300,000 shares of Common Stock, which may be sold by a selling stockholder on exercise of a 45-day option granted
    to the Underwriter to cover over-allotments, if any.
(3) Pursuant to Rule 416, there are also being registered such additional securities as may be issued to prevent dilution resulting
    from stock splits, stock dividends or similar transactions as a result of the anti-dilution provisions contained in the warrants.
(4) Previously paid.




The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective
date until the registrant shall file a further amendment which specifically states that this registration statement shall
thereafter become effective in accordance with section 8(a) of the Securities Act of 1933, as amended, or until the
registration statement shall become effective on such date as the Commission, acting pursuant to said section 8(a), may
determine.
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 The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration
 statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities
 and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.



    Preliminary Prospectus                                                     Subject To Completion, dated August 17, 2009

                                    2,000,000 Shares of Common Stock




   Lihua International, Inc. is offering 2,000,000 shares of Common Stock $.0001 par value (the ―Common Stock‖). We are a
reporting company under Section 13 of the Securities Exchange Act of 1934, as amended. Prior to this offering, there has been no
public market for our securities. The public offering price of our Common Stock was determined by negotiation between us and the
underwriters.
   We expect that the public offering price of our Common Stock will be between $3.75 and $4.25 per share. We have applied to
have our Common Stock listed on the NYSE Amex Stock Exchange. If our Common Stock is not approved for listing on NYSE
Amex Stock Exchange, we will not consummate this offering.
    The purchase of the securities involves a high degree of risk. See section entitled ―Risk Factors‖ beginning on page 11 .




                                                                                                         Per Share       Total
    Public offering price                                                                            $               $
    Underwriting discounts and commissions (1)                                                       $               $
    Proceeds, before expenses, to Lihua International, Inc.                                          $               $



(1) Does not include a non-accountable fee in the amount of 1.0% of the gross proceeds of the offering.
   The underwriters have a 45-day option to purchase up to 300,000 additional shares of Common Stock from Vision Opportunity
China LP (the “Selling Stockholder”) solely to cover over-allotments, if any. We will not receive any proceeds from the sale of any
shares of Common Stock by the Selling Stockholder in the over-allotment option.




    The underwriters expect to deliver shares of Common Stock to purchasers on or about            , 2009.
    Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved
of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal
offense.



   Broadband Capital Management LLC                                           Rodman & Renshaw, LLC
                                         The date of this prospectus is       , 2009
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        PROSPECTUS SUMMARY                                                                                      1
        SUMMARY CONSOLIDATED FINANCIAL DATA                                                                     8
        RISK FACTORS                                                                                           11
        NOTE REGARDING FORWARD-LOOKING STATEMENTS                                                              25
        USE OF PROCEEDS                                                                                        25
        DIVIDEND POLICY                                                                                        25
        CAPITALIZATION                                                                                         26
        MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                                               27
        DETERMINATION OF OFFERING PRICE                                                                        27
        DILUTION                                                                                               28
        EXCHANGE RATE INFORMATION                                                                              29
        SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA                                                     30
        MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND                                       32
          RESULTS OF OPERATIONS
        INDUSTRY AND MARKET OVERVIEW                                                                          51
        BUSINESS                                                                                              56
        OUR HISTORY AND CORPORATE STRUCTURE                                                                   68
        DIRECTORS EXECUTIVE OFFICERS AND CERTAIN SIGNIFICANT EMPLOYEES                                        76
        EXECUTIVE COMPENSATION                                                                                80
        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                                        84
        SELLING STOCKHOLDER                                                                                   89
        DESCRIPTION OF CAPITAL STOCK                                                                          91
        SHARES ELIGIBLE FOR FUTURE SALE                                                                       96
        TAXATION                                                                                              98
        UNDERWRITING                                                                                         105
        TRANSFER AGENT AND REGISTRAR                                                                         112
        LEGAL MATTERS                                                                                        112
        EXPERTS                                                                                              112
        WHERE YOU CAN FIND MORE INFORMATION                                                                  112
        INDEX TO CONSOLIDATED FINANCIAL STATEMENTS                                                           Q-1
    You should rely only on information contained in this prospectus or in any free writing prospectus that we may provide
to you. We have not, and the underwriters have not, authorized anyone to provide you with additional information or
information different from that contained in this prospectus or in any free writing prospectus that we may provide to you.
We are not making an offer of these securities in any jurisdiction where the offer is not permitted. The information in this
prospectus may only be accurate as of the date on the front of this prospectus regardless of time of delivery of this
prospectus or any sale of our securities.

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                                                     PROSPECTUS SUMMARY
    This summary highlights selected information appearing elsewhere in this prospectus. While this summary highlights what we
consider to be the most important information about us, you should carefully read this prospectus and the registration statement of
which this prospectus is a part in their entirety before investing in our securities, especially the risks of investing in our securities,
which we discuss later in “Risk Factors,” and our consolidated financial statements and related notes beginning on page Q- 1 .
Unless the context requires otherwise, the words “we,” “ the Company,” “us,” “our” and “Lihua” refer to Lihua International,
Inc. and our subsidiaries. This prospectus assumes the over-allotment has not been exercised, unless otherwise indicated. This
prospectus also assumes: (i) the automatic conversion of 5,958,760 shares of our preferred stock, par value $.0001 per share
(“Preferred Stock”) into 5,958,760 shares of our Common Stock, par value $.0001 per share (“Common Stock”) upon the
consummation of this Offering and (ii) the completion, as of the date of this preliminary prospectus, of the sale of 500,000 shares of
Common Stock by the Selling Stockholder in a private transaction as described in the section entitled “Selling Stockholder.”
Overview
    Lihua is one of the first vertically integrated companies in China to develop, design, manufacture, market and distribute low
cost, high quality, alternatives to pure copper magnet wire, which include copper-clad aluminum wire (―CCA‖) and recycled scrap
copper wire. Primarily because of its high electrical conductivity, pure copper magnet wire is one of the fundamental building
blocks in many components in a wide variety of motorized and electrical appliances such as dishwashers, microwaves and
automobiles. In most instances, Lihua’s CCA and recycled scrap copper are an excellent, less costly substitute for pure copper
magnet wire.
    Lihua sells its products directly to manufacturers in the consumer electronics, white goods, automotive, utility,
telecommunications and specialty cable industries and to distributors in the wire and cable industries. Our track record and
reputation for producing high quality products in large quantities has paved the way for rapid expansion of our customer base. We
have approximately 300 customers and no one customer accounts for more than 7% of our sales. At least in part because the copper
magnet wire industry in China is large and growing, Lihua’s product sales are comprised of approximately 95% domestic sales and
approximately 5% of export sales.
    Prior to 2009, our business focused primarily on CCA. Our CCA business consists of acquiring CCA with a line diameter of
2.05 mm from our suppliers as a raw material, reducing the diameter of the CCA by drawing it and then annealing and coating it.
Our final CCA product typically has diameters from 0.03 mm to 0.18 mm, depending on customer specifications. To meet strong
customer demand, we substantially increased our CCA production capacity from 2,200 tons per annum as of the end of 2006 to
6,000 tons per annum as of June 30, 2009. We plan to further increase our CCA production capacity to 7,500 tons per annum by the
end of 2009. In each of the following periods, our sales of CCA were as follows: 2006 – 2,009 tons, 2007 – 4,065 tons, 2008 –
5,966 tons and six months ended June 30, 2009 – 2,959 tons.
    In addition to our CCA business, in the first quarter of 2009, we began to produce copper rod from recycled scrap copper. As of
June 30, 2009, our scrap copper refinery capacity was approximately 25,000 tons per annum. To the extent our capacity permits,
we process our copper rod into copper magnet wire. Because our output of copper rod exceeds our capacity to process it into
copper magnet wire, we sell our excess copper rod to smaller wire manufacturers for further processing. During the six months
ended June 30, 2009, we sold 3,602 tons of copper magnet wire and 5,559 tons of copper rod. We currently are working to expand
our magnet wire production capacity so that we can use a greater proportion of our copper rod rather than selling it to other
manufacturers, thereby increasing our profit margins and overall profitability. We are exploiting a range of marketing strategies for
the copper magnet wire business, including cross-selling our copper magnet wire to our existing CCA customers.
    Lihua is well positioned to continue to capture further market share in the magnet wire industry. CCA and copper magnet wire
are increasingly being accepted as alternatives to pure copper wire. As a result, our sales and net income have grown substantially
over the last three years. We generated sales of $15.7 million in 2006, $32.7 million in 2007 and $50.0 million in 2008,
representing a Compound Annual Growth Rate (―CAGR‖) of 72.3%. We achieved net income of $4.5 million in 2006, $7.7 million
in 2007 and $11.7 million in 2008, representing a CAGR of 61.2%. Adoption of CCA and recycled copper magnet wire as

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alternatives to pure copper wire will likely increase, and we expect that our sales and net income should continue to grow as a
result. During the six months ended June 30, 2009, we generated sales of $69,365,668 million and net income of $10,693,720
million, up 180% and 83.1% from the same six-month period in 2008.
     We continually pursue technological innovations and improvements in our manufacturing processes. We have obtained one
utility model patent in China and have three pending invention patent applications in China related to our production process. In
addition, we have entered into a technology cooperation agreement with a university in China. We believe that our emphasis on
technological innovations and production efficiency has contributed significantly to our leading industry position in China and will
continue to do so for the foreseeable future.
    Further, significant barriers to entry make it difficult for newcomers to successfully compete with our CCA and copper magnet
wire businesses. For example, with respect to CCA, it is challenging to maintain high quality during the process of drawing,
annealing and coating CCA, especially finer diameter wires. Our knowledge and experience in successfully generating high quality
CCA give us a strong advantage over would-be competitors. With respect to copper magnet wire, our proprietary recycling
technology offers us a unique ability to produce wire of a high enough quality to serve as a substitute to pure copper wire. Our
experience and technology allow us to offer products that are, in most instances, superior and more cost-effective to those potential
competitors can produce. Because we are already an approved vendor for many of our customers and qualifying new vendors can
be time-consuming, we believe we are further advantaged vis-à-vis potential competitors.
    To avoid copper commodity risk exposure, we maintain minimal raw material inventory. We confirm raw material purchase
orders for scrap copper or CCA with suppliers for each sales order only when the applicable sales order has been received. On the
other hand, our principal CCA and scrap copper suppliers usually dedicate portions of their inventories as reserves to meet our
manufacturing requirements. Our most significant supplier of CCA provides approximately 30% of our CCA raw material needs,
but we have built a large network of reliable suppliers that deliver high quality raw materials, and accordingly, are not dependent
upon any one supplier for our success.
    We believe that our experienced management team will continue to leverage our leading technologies and increasing capacity
to manufacture, produce, market and distribute cost-effective, high quality, CCA, recycled copper magnet wire and other
alternatives to pure copper wire. If, as anticipated, worldwide demand for alternatives to pure copper wire grow and we continue to
innovate and improve in our processes, we will be well positioned to compete in the copper wire market on a global scale.
Market Opportunity
    Magnet wire is a basic building block of a wide range of products in information technology, electric motor and home
appliances, and is a sub-category of the cable and wire industry. China is the world’s largest cable & wire producer and has
experienced a growth in its magnet wire market demand that has outpaced the rest of the world in recent years. Demand in China
for magnet wire is expected to continue to grow in the foreseeable future.
    China was the largest copper consuming nation with an exposure of approximately 22% of the global demand in 2006.
Although China’s need for copper continues to grow, China is a net importer of copper due to deficient copper reserves. The
dynamics of constrained supply and growing demand, as well as the resulting price surge, contribute to the continued search and
adoption of alternatives to pure copper that can meet China’s demand in a cost efficient manner. Bimetallic materials (e.g. copper
clad aluminum) are an ideal substitute for pure copper that can satisfy China’s demand. In addition, China has set its industrial
policies to encourage the use of scrap copper. The Chinese government’s 11 th Five-Year Plan (2006-2010) has encouraged the
greater use of scrap metals to help alleviate a shortfall in copper supplies within China. Due to the policy initiatives put in place by
the Chinese government, we have, and expect to continue to benefit from the increase in demand and consumption of CCA magnet
wire and refined copper from secondary sources in China.
Our Strengths
  We believe that the following strengths have contributed to our competitive position in China:

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   •    Leading market position and early-mover advantage;
   •    Proprietary automated and efficient production facility that can be scaled to meet increased demand;
   •    Proprietary production technology;
   •    Rigorous quality control standards;
   •    Strong technological improvement and research and development capabilities; and
   •    Experienced management and operations teams with local market knowledge.
Our Strategies
   We will continue to strive to be a leading supplier of copper replacement products in the PRC cable and wire industry by
pursuing a growth strategy that includes:
   •    Developing market driven new products and processes;
   •    Reliable supplier network for low cost raw materials;
   •    Production capacity expansion;
   •    Selectively pursue acquisition opportunities; and
   •    Strengthening our relationships with key customers and diversifying our customer base.
Our Risks and Challenges
   An investment in our securities involves a high degree of risk that includes risks related to our Company, the industries in
which we operate, the PRC, the ownership of our Common Stock and this Offering, including the following specific risks:
   •    We derive most of our profits from sales of our products in China. The continued development of our business depends, in
        large part, on continued growth in the bimetallic industry in China.
   •    One shareholder owns a large percentage of our outstanding securities and could significantly influence the outcome of our
        corporate matters.
   •    We rely on a limited number of suppliers for most of the raw materials we use. Interruptions or shortages of supplies from
        our key suppliers of raw materials could disrupt production or impact our ability to increase production and sales.
   •    The CCA and scrap copper recycling industries are becoming increasingly competitive. Therefore, we may encounter
        substantial competition in our business and our failure to compete effectively may adversely affect our ability to generate
        revenue.
   See ―Risk factors‖ beginning on page 11 for a more detailed description of these and other risks related to an investment in
securities.
Company Background
    From the date of our incorporation until October 31, 2008, we were a ―blank check‖ company with nominal assets. We were
originally incorporated in the State of Delaware on January 24, 2006 under the name ―Plastron Acquisition Corp. I‖, for the
purpose of raising capital to be used to merge, acquire, or enter into a business combination with an operating business.
    Our wholly owned subsidiary, Ally Profit Investments Limited was incorporated in the British Virgin Islands on March 12,
2008 under the Business Companies Act, 2004 (―Ally Profit‖). In June 2008, Ally Profit became the parent holding company of a
group of companies comprised of Lihua Holdings Limited (―Lihua Holdings‖), a company organized under the laws of Hong Kong
and incorporated on April 17, 2008, which is the 100% shareholder of each of Danyang Lihua Electron Co. Ltd. (―Lihua Electron‖)
and Jiangsu Lihua Copper Industry Co., Ltd., (―Lihua Copper‖), each a limited liability company organized under the existing laws
of the Peoples Republic of China, collectively referred to herein as the ―PRC Operating Companies‖. Lihua Electron and Lihua
Copper were incorporated on December 30, 1999 and August 31, 2007, respectively.

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At the time of their respective formations, Lihua Electron and Lihua Copper were Foreign Invested Enterprises (―FIE‖). Both Lihua
Electon and Lihua Copper have been under the common management, operated on an integrated basis and ultimately controlled by
Mr. Jianhua Zhu (―Mr. Zhu‖), our Chairman and Chief Executive Officer, since their inception.
   From inception until October 2006, Lihua Electron had originally been engaged in the manufacture and sale of audio, video,
and computer plugs and sockets. On October 30, 2006, Lihua Electron changed its business to focus on the manufacture and sale of
wires and cables, brass wires, copper-covered aluminum wires, and copper-covered aluminum special type electromagnetic wires.
Lihua Copper was founded to focus on the development of copper scrap recycling technology and, in March 2009, we launched the
manufacture and sale of low oxygen content copper cable and copper magnet wire by using scrap material.
Restructuring
     In June 2008, Magnify Wealth Enterprise Limited, a British Virgin Islands holding company (―Magnify Wealth‖), which at
such time was 100% owned by Mr. Fo Ho Chu (―Mr. Chu‖), developed a restructuring plan (the ―Restructuring‖). At that time,
Magnify Wealth was the parent company and sole shareholder of Ally Profit, which was the parent company and sole shareholder
of Lihua Holdings. The Restructuring was accomplished in two steps. The first step was for Lihua Holdings to acquire 100% of the
equity interests in the PRC Operating Companies (the ―PRC Subsidiary Acquisition‖). The PRC Operating Companies were owned
at that time by companies controlled by Mr. Zhu, and minority shareholders, Mr. Chu and Imbis Europe B.V. h/o Asia Trading
(―Europe EDC‖, together with Mr. Chu, the ―Minority Shareholders‖). After the PRC Subsidiary Acquisition was consummated,
the second step was for Magnify Wealth to enter into and complete a transaction with a U.S. public reporting company, whereby
that company would acquire Ally Profit, Lihua Holdings and the PRC Operating Companies (the ―Ally Profit Companies‖).
Legal Structure of the PRC Subsidiary Acquisition
    The PRC Subsidiary Acquisition was structured to comply with PRC laws governing mergers and acquisitions (―PRC M&A
Laws‖). Under the PRC M&A laws, the acquisition of PRC companies by foreign companies that are controlled by PRC citizens
who are affiliated with the PRC companies, is strictly regulated and requires approval from the Ministry of Commerce, which can
be burdensome to obtain. Such restrictions, however, do not apply to foreign entities, which are controlled by foreign persons. So
as not to violate the PRC M&A laws, in June 2008, Lihua Holdings acquired 100% of the equity interests in the PRC Subsidiaries
from companies controlled by Mr. Zhu and from the Minority Shareholders.
    Mr. Zhu, a PRC citizen, could not immediately receive shares of Magnify Wealth in a share exchange as consideration for the
sale of his interests in the PRC Subsidiaries. In order for Mr. Zhu to receive consideration for selling his interest in the PRC
Operating Companies to Lihua Holdings and with an aim to provide incentive for Mr. Zhu’s continued contribution to us, Mr. Zhu
and Mr. Chu agreed that they would enter into a share transfer agreement (the ―Share Transfer Agreement‖) to grant Mr. Zhu an
option to acquire Mr. Chu’s shares in Magnify Wealth, provided that certain financial performance thresholds were met by the Ally
Profit Companies. The Share Transfer Agreement was formalized and entered into in October 2008, and amended in March 2009.
Subject to registering with the State Administration of Foreign Exchange prior to the exercise and issuance of the option shares
under the Share Transfer Agreement, which is an administrative task, we have been advised by PRC counsel there is no prohibition
under PRC laws for Mr. Zhu to earn an equity interest in Magnify Wealth after the PRC Subsidiary Acquisition in compliance with
PRC law.
    As consideration for the sale of the interests by the Minority Shareholders to Lihua Holdings, in October 2008, they entered
into subscription agreements with Magnify Wealth. These agreements enabled them to purchase shares in Magnify Wealth for a
nominal price of US$1.00 per share. Magnify Wealth must issue the shares in tranches on February 14, 2009, 2010 and 2011 of
25%, 25% and 50%, respectively.
    In October 2008, the goal of the Restructuring was realized when we entered into a share exchange agreement with Magnify
Wealth and our principal stockholders (the ―Share Exchange Agreement‖), pursuant to which we acquired 100% of the equity of
the Ally Profit Companies in exchange for the issuance of 14,025,000 shares of our Common Stock to Magnify Wealth (the ―Share
Exchange‖). As a result of this transaction, we are a holding company which, through our direct and indirect 100% ownership of
the Ally Profit Companies, now has operations based in the PRC. Magnify Wealth owns 92.4% of our Common Stock

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and is now our majority stockholder. As of the date of this prospectus, the financial thresholds set out in the Share Transfer
Agreement have been met, and once Mr. Zhu exercises all of his options in Magnify Wealth and the Minority Shareholders are
issued all of their shares in Magnify Wealth pursuant to the subscription agreements, Mr. Zhu, Mr. Chu and Europe EDC will own
approximately 81.9%, 17.3% and 0.9% of Magnify Wealth, respectively. The possible future continued dilution of Magnify
Wealth’s equity ownership in us and the PRC Operating Companies will have no legal effect on us or the equity interest in the PRC
Operating Companies held by Mr. Zhu and the Minority Shareholders through their ownership in Magnify Wealth.
Accounting Treatment of the Restructuring.
    The Restructuring is accounted for as a combination of entities under common control and a recapitalization of the PRC
Operating Companies using the ―as if‖ pooling method of accounting, with no adjustment to the historical basis of the assets and
liabilities of the PRC Operating Companies. The operations of the PRC Operating Companies are consolidated as if the
Restructuring occurred as of the beginning of the first accounting period presented in the financial statements provided elsewhere in
this prospectus. The Restructuring is accounted for in this manner because even though Mr. Zhu transferred his equity interest in
the PRC Operating Companies, he maintained legal control by remaining the managing director of the PRC Operating Companies
and continuing to direct the business, operational and decision making functions of the PRC Operating Companies after the PRC
Subsidiary Acquisition. The is further evidenced by Mr. Zhu’s appointment as the sole director of Magnify Wealth, Ally Profit and
Lihua Holdings and Mr. Chu undertook to Mr. Zhu that no future directors would be appointed to Magnify Wealth without the
consent of Mr. Zhu.
Corporate Structure
   We own 100% of Ally Profit, which owns 100% of Lihua Holdings, which owns 100% of the PRC Operating Companies.
Magnify Wealth is a 89.4% shareholder of our Common Stock and other public shareholders own 10.6% of our Common Stock.
The following diagram illustrates our corporate and shareholder structure as of the date of this prospectus.




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   The following diagram illustrates our corporate and shareholder structure immediately after completion of this Offering,
Magnify Wealth will be a 59.1% shareholder of our Common Stock and other public shareholders will own 40.9% of our Common
Stock.




Executive Offices
    Our executive offices are located at Houxiang Five-Star Industry District, Danyang City, Jiangsu Province, PRC 212312. Our
telephone number is +86-511 86317399.

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                                              THE OFFERING
Securities Offered:
                                           2,000,000 shares of Common Stock
Common Stock outstanding before the
  Offering:
                                           15,500,000 shares
Common Stock to be outstanding after the
  Offering:
                                           23,458,760 shares
Offering price:
                                           $3.75 to $4.25 per share (estimated)
Use of proceeds:
                                           We intend to use the net proceeds from the offering for working capital and
                                           general corporate purposes. Additionally, we may choose to expand our
                                           business through the capital expenditure plan we have in place to maintain
                                           existing machinery and to purchase additional manufacturing equipment for
                                           our new production facility.
                                           The amounts and timing of our actual expenditures will depend on numerous
                                           factors, including the status of our development efforts, sales and marketing
                                           activities, the amount of cash generated or used by our operations. We may
                                           find it necessary or advisable to use portions of the proceeds for other
                                           purposes, and we will have broad discretion in the application of the net
                                           proceeds. Additionally, we may choose to expand our current business through
                                           acquisition of other complimentary businesses, products or technologies, using
                                           cash or shares. However, we have not entered into any negotiations,
                                           agreements or commitments with respect to any such acquisitions at this time.
                                           Pending these uses, the proceeds will be invested in short-term, investment
                                           grade, interest-bearing securities.
                                           See ―Use of Proceeds‖ on page 25 for more information on the use of
                                           proceeds.
Risk factors:
                                           Investing in these securities involves a high degree of risk. As an investor you
                                           should be able to bear a complete loss of your investment. You should
                                           carefully consider the information set forth in the ―Risk Factors‖ section
                                           beginning on page 11 .
Listing:
                                           We have applied to have our Common Stock listed on the NYSE Amex Stock
                                           Exchange (―NYSE AMEX‖). If our Common Stock is not approved for listing
                                           on NYSE AMEX, we will not consummate this Offering.

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                                       SUMMARY CONSOLIDATED FINANCIAL DATA
    The following summary of our consolidated statement of income data for the two years ended December 31, 2007 and 2008 and
consolidated balance sheet data as of December 31, 2008 presented below are derived from our audited consolidated financial
statements and related notes thereto included elsewhere in this prospectus. The summary of the consolidated statement of income
data for the year ended December 31, 2006 and consolidated balance sheet data as of December 31, 2006 of the Ally Profit
Companies presented below have been derived from Ally Profit’s audited consolidated financial statements that are included
elsewhere in this prospectus. The audited consolidated financial statements have been prepared in accordance with U.S. GAAP, and
have been audited by AGCA, Inc. (f/k/a Yu and Associates), an independent registered public accounting firm. The consolidated
statement of income data for the three months ended June 30, 2009 and 2008 and the consolidated balance sheet data as of June 30,
2009 have been derived from our unaudited condensed consolidated financial statements that are included elsewhere in this
prospectus.
    The consolidated financial statements are reported in U.S. dollar amounts and are presented in thousands, except share and per
share data. This data should be read in conjunction with our ―Management’s Discussion and Analysis of Financial Condition and
Results of Operations‖ and our audited consolidated financial statements and the related notes included elsewhere in this
prospectus.
    The as adjusted balance sheet data reflects the balance sheet data as of June 30, 2009, as adjusted to reflect our receipt of the
estimated net proceeds from our sale of 2,000,000 shares of Common Stock in this Offering at an assumed initial offering price of
$4.00 per share, the midpoint of the estimated price range set forth on the cover of this prospectus, after deducting the estimated
underwriting discounts and commissions and estimated Offering expenses payable by us.

                                             Consolidated Statement of Income Data
                                              (in thousands, except for percentages)


                                                                                                                     Ally Profit
                                                                                                                    Investments
                                                                                                                    Limited and
                                                                                                                    Subsidiaries
                                                                                                                    For the Year
                                                                                                                       Ended
                                                                                                                    December 31,
                                                                                                                        2006
                                    For the Three Months Ended June 30,        For the Year December 31,
                                         2009                2008               2008                2007
       NET REVENUE                 $       48,827      $        15,038     $      50,006      $       32,677        $    15,750
           Cost of sales                  (39,096 )            (10,328 )         (33,202 )           (22,911 )          (10,649 )

       GROSS PROFIT                         9,732                4,710           16,804                9,766              5,101
          Selling expenses                   (587 )               (172 )           (700 )               (417 )             (230 )

            General and                     (1,093 )              (403 )          (1,907 )                 (455 )          (336 )
               administrative
               expenses
       Income from operations               8,051                4,134           14,197                8,894              4,535
       Other income (expenses):
            Interest income                     47                   8                68                     16               4
            Interest expenses                 (106 )              (106 )            (515 )                  (97 )           (43 )

            Merger cost                          —                   —              (259 )                   —               —

            Change in fair value              (216 )                 —                  —                    —               —
               of warrants
            Other income                        501               (104 )                 4                   —                3
               (expenses), net
         Income before income               8,277                4,030           13,495                8,813              4,499
            taxes
            Provision for income            (1,572 )              (528 )          (1,793 )            (1,089 )               —
               taxes
         NET INCOME                $        6,705      $         3,501     $     11,702       $        7,724        $     4,499
       Earnings per share
            Basic                  $            0.45   $            0.25   $           0.75   $            0.55     $        —
     Diluted               $         0.31   $         0.25   $         0.70   $         0.55   $   —
Shares used in computation
     Basic                     15,000,000       14,025,000       14,187,945       14,025,000       —
     Diluted                   21,818,182       14,025,000       15,327,422       14,025,000       —


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                                                        December 31,                            June 30, 2009
                                                            2008
                                                           Actual                     Actual                    As adjusted
        Consolidated Balance Sheet Data
        Cash and cash equivalents                  $        26,041,849       $         28,144,454       $          34,986,710
        Total assets                                        56,812,888                 70,622,102                  77,464,358
        Total liabilities                                    9,020,926                 14,296,162                  14,296,162
        Total shareholders’ equity                          34,675,334                 43,209,312                  63,116,750
   The table below sets forth additional financial data that we believe is important to an understanding of our operations.




                                                                         For the Year Ended December 31,
                                                              Lihua International, Inc. and                      Ally Profit
                                                                      Subsidiaries                              Investments
                                                                                                                Limited and
                                                                                                                Subsidiaries
                                                              2008                       2007                       2006
        Other Data
        Adjusted EBITDA                             $         15,008,980         $        9,412,900        $        4,867,558
        Capital Expenditures                                   4,852,020                  3,811,851                 4,854,852
    The following table includes a reconciliation of our Adjusted EBITDA to Net Income, the most directly comparable GAAP
financial measure:
                                                                      For the Year Ended December 31,
                                                           Lihua International, Inc. and                     Ally Profit
                                                                   Subsidiaries                             Investments
                                                                                                            Limited and
                                                                                                            Subsidiaries
                                                          2008                        2007                      2006
        Net Income                               $       11,701,879         $         7,723,688         $     4,498,919
          Depreciation and amortization                     812,339                     519,225                 332,456
          Provision for income taxes                      1,792,681                   1,089,107                      —
          Other income                                       (3,741 )                        —                   (2,651 )
          Merger expenses                                   259,225                          —                       —
          Interest expenses                                 514,950                      96,535                  42,859
          Interest income                                   (68,353 )                   (15,655 )                (4,025 )
             Adjusted EBITDA                     $       15,008,980         $         9,412,900         $     4,867,558

Non-GAAP Financial Measure
    This prospectus contains disclosure of EBITDA, which is a non-financial measure within the meaning of Regulation G
promulgated by the Securities and Exchange Commission. Adjusted EBITDA is not a measure of financial performance under
generally accepted accounting principles (GAAP), and should not be considered in isolation or as an alternative to net income
(loss), cash flows from operating activities and other measures determined in accordance with GAAP. Items excluded from
Adjusted EBITDA are significant and necessary components to the operations of our business, and therefore Adjusted EBITDA
should only be used as a supplemental measure of our operating performance.

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    We define Adjusted EBITDA as net income before discontinued operations, interest expense, income taxes, depreciation and
amortization, non-operating income (expense), and non-cash share-based compensation expenses. We believe Adjusted EBITDA is
an important measure of operating performance because it allows management, investors and others to evaluate and compare our
core operating results, including our return on capital and operating efficiencies, from period to period by removing the impact of
our capital structure (interest expense from our outstanding debt), asset base (depreciation and amortization), tax consequences,
non-operating items and non-cash share-based compensation. We also believe Adjusted EBITDA is a measure widely used by
management, securities analysts, investors and others to evaluate the financial performance of the Company and other companies in
our industry. Other companies may calculate Adjusted EBITDA differently, and therefore our Adjusted EBITDA may not be
comparable to similarly titled measures of other companies.

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                                                            RISK FACTORS
    Investing in our securities involves a great deal of risk. Careful consideration should be made of the following factors as well as
other information included in this prospectus before deciding to purchase our securities. You should pay particular attention to the
fact that we conduct all of our operations in China and are governed by a legal and regulatory environment that in some respects
differs significantly from the environment that may prevail in the U.S. and other countries. Our business, financial condition or
results of operations could be affected materially and adversely by any or all of these risks.
  THE FOLLOWING MATTERS MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL
CONDITION, LIQUIDITY, RESULTS OF OPERATIONS OR PROSPECTS, FINANCIAL OR OTHERWISE. REFERENCE TO
THIS CAUTIONARY STATEMENT IN THE CONTEXT OF A FORWARD-LOOKING STATEMENT OR STATEMENTS
SHALL BE DEEMED TO BE A STATEMENT THAT ANY ONE OR MORE OF THE FOLLOWING FACTORS MAY CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN SUCH FORWARD-LOOKING STATEMENT OR
STATEMENTS.
Risks Related to Our Business
We have a limited operating history.
   Our limited operating history and the early stage of development of the CCA industry and the scrap copper recycling industry in
which we operate makes it difficult to evaluate our business and future prospects. Although our revenues have grown rapidly, we
cannot assure you that we will maintain our profitability or that we will not incur net losses in the future. We expect that our
operating expenses will increase as we expand. Any significant failure to realize anticipated revenue growth could result in
operating losses.
We will continue to encounter risks and difficulties in implementing our business model.
    We believe that our business model will allow us to become a leader in the CCA and the scrap copper recycling industries in
which we operate. However, we can not assure you that our business model will be effective. We are susceptible to risks, including
the failure to increase awareness of our products, protect our reputation and develop customer loyalty, the inability to manage our
expanding operations, the failure to maintain adequate control of our expenses, and the inability to anticipate and adapt to changing
conditions in the markets in which we operate as well as the impact of any changes in government regulation, mergers and
acquisitions involving our competitors, technological developments, and other significant competitive and market dynamics. If we
are not successful in addressing any or all of these risks, our business may be materially and adversely affected.
Quarterly operating results may fluctuate.
    Our quarterly results of operations may fluctuate as a result of a number of factors, including fluctuation in the demand for and
shipments of our products and changes in the price of copper which directly affect the price of our products and may influence the
demand for our products. Therefore, quarter-to-quarter comparisons of results of operations have been and will be impacted by the
volume of such orders and shipments. In addition, our operating results could be adversely affected by the following factors, among
others, such as variations in the mix of product sales, price changes in response to competitive factors, increases in raw material
costs and other significant costs, increases in utility costs (particularly electricity) and interruptions in plant operations resulting
from the interruption of raw material supplies and other factors. Our operating results are also impacted during the summer months,
when production at our factory declines due to the hot weather in southern China.
Fluctuating copper prices impact our business and operating results.
   Copper prices, which had increased quite rapidly over the past several years, declined during 2008 and recently increased over
50% to $4,700 per ton from its low during 2008. Such prices may continue to vary significantly in the future because the copper
industry is highly volatile and cyclical in nature. This affects our business both positively and negatively. For example, since our
products are a substitute for pure copper wire, higher copper prices usually increase demand for our CCA products, while lower
copper prices can decrease

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demand for CCA products. Numerous factors, most of which are beyond our control, influence copper price. These factors include
general economic conditions, industry capacity utilization, import duties and other trade restrictions. We cannot predict copper
prices in the future or the effect of fluctuations in the costs of copper on our future operating results. Consequently, fluctuations in
copper prices can significantly affect our business and operating results.
Our failure to address certain deficiencies and material weaknesses in our internal controls noted by our auditors, may result in
improper accounting treatment, possible fraud by employees, litigation or penalties from the government.
    Our auditors, in planning and performing their audit of our financial statements for the year ended December 31, 2008, have
provided us with a letter describing certain matters involving our internal control and operation they consider to be significant
deficiencies or material weaknesses under the standards of the Public Company Accounting Oversight Board. Our failure to
implement sufficient control to ensure all payments are made on statutory retirement systems and social securities was identified as
a material weakness. In addition, the following three significant deficiencies were identified by our auditor:
   •    our controls are not sufficient to ensure proper delivery of inventory;
   •    sufficient controls are not available to ensure that purchases are properly approved; and
   •    our controls are not sufficient to ensure proper reconciliation of perpetual inventory records to our general ledgers.
    We intend to address the issues prior to the end of 2009. However, our failure to address these deficiencies and weaknesses may
lead to improper accounting and may give rise to potential fraud by our employees, litigation or penalties from the government.
We may encounter substantial competition in our business and our failure to compete effectively may adversely affect our
ability to generate revenue.
    The CCA and scrap copper recycling industries are becoming increasingly competitive. Our competitors may have greater
market recognition and substantially greater financial, technical, marketing, distribution, purchasing, manufacturing, personnel and
other resources than we do. Furthermore, some of our competitors have manufacturing and sales forces that are geographically
diversified, allowing them to reduce transportation expenses, tariff costs and currency fluctuations for certain customers in markets
where their facilities are located. The principal elements of competition in the bimetallic industry are, in our opinion, pricing,
product availability and quality. In order to succeed in the bimetallic industry, we must be competitive in our pricing, product
availability and quality. If we fail to do so, we will not be able to compete effectively and will lose market share. In such case we
may be forced to reduce our margins to retain or acquire that business, which could decrease our revenues or slow our future
revenue growth and lead to a decline in profitability. Further, to the extent that, whether as a result of the increased cost of copper,
the relative strength of the Chinese currency, shipping costs or other factors, we are not able to price our products competitively,
our ability to sell our products in both the Chinese domestic and the international markets will suffer.
We may not be able to effectively control and manage our growth.
    If our business and markets grow and develop it may be necessary for us to finance and manage expansion in an orderly
fashion. In addition, we may face challenges in managing expanding product offerings. Such circumstances will increase demands
on our existing management and facilities. Failure to manage this growth and expansion could interrupt or adversely affect our
operations and cause production backlogs, longer product development time frames and administrative inefficiencies.
Shortages or disruptions in the availability of raw materials could have a material adverse effect on our business.
    We expect that raw materials of CCA and scrap copper will continue to account for a significant portion of our cost of goods
sold in the future. The prices of raw materials fluctuate because of general economic conditions, global supply and demand and
other factors causing monthly variations in the costs of our raw

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materials purchases. The macro-economic factors, together with labor and other business interruptions experienced by certain
suppliers, have contributed to periodic shortages in the supply of raw materials, and such shortages may increase in the future. If we
are unable to procure adequate supplies of raw material to meet our future production needs and customer demand, shortages could
result in a material loss of customers and revenues and adversely impact our results of operations. In addition, supply shortages or
disruptions or the loss of suppliers may cause us to procure our raw materials from less cost effective sources and may have a
material adverse affect on our business, revenues and results of operations.
We depend on a few suppliers for a significant portion of our principal raw materials and we do not have any long-term supply
contracts in excess of one year. Interruptions of production at our key suppliers may affect our results of operations and
financial performance.
    We rely on a limited number of suppliers for most of the raw materials we use. Interruptions or shortages of supplies from our
key suppliers of raw materials could disrupt production or impact our ability to increase production and sales. We do not have
long-term or volume purchase agreements in excess of one year with most of our suppliers. Identifying and accessing alternative
sources may increase our costs. Interruptions at our key suppliers could negatively impact our results of operations, financial
performance and the price of our Common Stock.
Due to increased volatility of raw material prices, the timing lag between the raw material purchase and product pricing can
negatively impact our profitability.
    Volatility in the prices of raw materials, among other factors, may adversely impact our ability to accurately forecast demand
and may have a material adverse impact on our results of operations. We mitigate the impact of changing raw material prices by
passing changes in prices to our customers by adjusting prices daily to reflect changes in raw material prices, as is customary in the
industry. We may not be able to adjust our product prices rapidly enough in the short-term to recover the costs of increases in raw
materials. Our future profitability may be adversely affected to the extent we are unable to pass on higher raw material costs to our
customers.
Increases in raw materials prices will increase our need for working capital.
    As the prices of raw materials increase, our working capital requirements increase. Increases in our working capital
requirements can materially adversely impact our results of operations, our cash flow and our available liquidity to fund other
business needs. Furthermore, there is no assurance we would be able to finance additional working capital requirements or finance
such working capital requirements on favorable terms. If we were unable to obtain financing on favorable terms, our business and
results of operations may be adversely affected. See ―Management’s Discussion and Analysis of Financial Condition and Results of
Operations — Liquidity and Capital Resources‖ below.
Increases in raw materials prices may increase credit and default risk with respect to our customers.
    Increases in the price of our products, as raw material prices rise, may place additional demands on the working capital and
liquidity needs of our customers. Accordingly, our customers’ cash flow may be negatively impacted which may have an adverse
affect on the timing and amount of payment on our accounts receivable, which would in turn, negatively affect our results of
operations.
If the CCA industry does not grow or grows at a slower speed than we project, our sales and profitability may be materially
adversely affected.
    We derive most of our profits from sales of our products in China. The continued development of our business depends, in large
part, on continued growth in the bimetallic industry in China. Although China’s CCA industry has grown rapidly in the past, it may
not continue to grow at the same growth rate or at all in the future. Any reduced demand for our products, any downturn or other
adverse changes in China’s CCA or related industries could severely impact the profitability of our business.

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Potential environmental liability could have a material adverse effect on our operations and financial condition.
    As a manufacturer, we are subject to various Chinese environmental laws and regulations on air emission, waste water
discharge, solid wastes and noise. Although we believe that our operations are in substantial compliance with current
environmental laws and regulations, we may not be able to comply with these regulations at all times as the Chinese environmental
legal regime is evolving and becoming more stringent. Therefore, if the Chinese government imposes more stringent regulations in
the future, we may have to incur additional and potentially substantial costs and expenses in order to comply with new regulations,
which may negatively affect our results of operations. Further, no assurance can be given that all potential environmental liabilities
have been identified or properly quantified or that any prior owner, operator, or tenant has not created an environmental condition
unknown to us. If we fail to comply with any of the present or future environmental regulations in any material aspects, we may
suffer from negative publicity and be subject to claims for damages that may require us to pay substantial fines or have our
operations suspended or even be forced to cease operations.
Key employees are essential to growing our business.
    Mr. Jianhua Zhu, Ms. Yaying Wang and Mr. Roy Yu, along with Ms. Zhu Junying, Mr. Yin Falong and Mr. Yu Niu are
essential to our ability to continue to grow our business. Each of these key employees have established relationships within the
industries in which we operate. Each of these employees have agreed to non-solicitation and non-compete restrictions during the
course of their employment with us, however, these restrictions only extend for a one year period from termination. Further, we do
not maintain, or intend to maintain, key person life insurance for any of our officers or key employees. If any of them were to leave
us, our growth strategy might be hindered, which could limit our ability to increase revenue. In addition, we face competition for
attracting skilled personnel. If we fail to attract and retain qualified personnel to meet current and future needs, this could slow our
ability to grow our business, which could result in a decrease in market share.
In the past several years we have derived a significant portion of our revenues from a small group of customers. If we were to
become dependent again upon a few customers, such dependency could negatively impact our business, operating results and
financial condition.
    Previously, our customer base has been highly concentrated. For the three months ended June 30, 2009 and each of the fiscal
years ended December 31, 2006, 2007 and 2008, our five largest customers accounted for 13.7%, 22.5%, 14.5% and 20.2% of our
total sales, respectively, and the single largest customer accounted for 3.3%, 5.0%, 3.0% and 6.6% of our total sales, respectively.
As our customer base may change from year-to-year, during such years that the customer base is highly concentrated, the loss of, or
reduction of our sales to, any of such major customers could have a material adverse effect on our business, operating results and
financial condition.
We may need additional financing, which may not be available on satisfactory terms or at all.
    Our capital requirements may be accelerated as a result of many factors, including timing of development activities,
underestimates of budget items, unanticipated expenses or capital expenditures, future product opportunities with collaborators,
future licensing opportunities and future business combinations. Consequently, we may need to seek additional debt or equity
financing, which may not be available on favorable terms, if at all, and which may be dilutive to our stockholders.
    We may seek to raise additional capital through public or private equity offerings, debt financings or additional corporate
collaboration and licensing arrangements. To the extent we raise additional capital by issuing equity securities, our stockholders
may experience dilution. To the extent that we raise additional capital by issuing debt securities, we may incur substantial interest
obligations, may be required to pledge assets as security for the debt and may be constrained by restrictive financial and/or
operational covenants. Debt financing would also be superior to our stockholders’ interest in bankruptcy or liquidation. To the
extent we raise additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to
our technologies or product candidates, or grant licenses on unfavorable terms.

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If we fail to adequately protect or enforce our intellectual property rights, or to secure rights to patents of others, the value of
our intellectual property rights could diminish.
    Our success, competitive position and future revenues will depend in part on our ability to obtain and maintain patent protection
for our products, methods, processes and other technologies, to preserve our trade secrets, to prevent third parties from infringing
on our proprietary rights and to operate without infringing the proprietary rights of third parties.
    To date, we have one approved utility model patent and three patent applications filed with the State Intellectual Property
Office of the PRC. However, we cannot predict the degree and range of protection patents will afford us against competitors. Third
parties may find ways to invalidate or otherwise circumvent our proprietary technology. Third parties may attempt to obtain patents
claiming aspects similar to our patent applications. If we need to initiate litigation or administrative proceedings, such actions may
be costly whether we win or lose.
   Our success also depends on the skills, knowledge and experience of our scientific and technical personnel, consultants,
advisors, licensors and contractors. To help protect our proprietary know-how and inventions for which patents may be
unobtainable or difficult to obtain, we rely on trade secret protection and confidentiality agreements. If any of our intellectual
property is disclosed, our value would be significantly impaired, and our business and competitive position would suffer.
If we infringe the rights of third parties, we could be prevented from selling products, forced to pay damages and compelled to
defend against litigation.
    If our products, methods, processes and other technologies infringe proprietary rights of other parties, we could incur
substantial costs, and may have to obtain licenses (which may not be available on commercially reasonable terms, if at all),
redesign our products or processes, stop using the subject matter claimed in the asserted patents, pay damages, or defend litigation
or administrative proceedings, which may be costly whether it wins or loses. All of the above could result in a substantial diversion
of valuable management resources.
    We believe we have taken reasonable steps, including comprehensive internal and external prior patent searches, to ensure we
have freedom to operate and that our development and commercialization efforts can be carried out as planned without infringing
others’ proprietary rights. However, we cannot guarantee that no third party patent has been filed or will be filed that may contain
subject matter of relevance to our development, causing a third party patent holder to claim infringement. Resolving such issues has
traditionally resulted, and could in our case result, in lengthy and costly legal proceedings, the outcome of which cannot be
predicted accurately.
One shareholder owns a large percentage of our outstanding stock and could significantly influence the outcome of our
corporate matters.
    Currently, Magnify Wealth beneficially owns approximately 89.4% of our outstanding Common Stock and immediately after
the consummation of this Offering, Magnify Wealth will own 59.1% of our outstanding Common Stock. Mr. Zhu, our Chairman
and CEO, is the sole director of Magnify Wealth. As the sole director of Magnify Wealth, Mr. Zhu has the sole power to vote the
shares of our Common Stock owned by Magnify Wealth, and as a result, is able to exercise significant influence over all matters
that require us to obtain shareholder approval, including the election of directors to our board and approval of significant corporate
transactions that we may consider, such as a merger or other sale of our company or its assets. Additionally, pursuant to the Share
Transfer Agreement, Mr. Zhu has an option that vests over time, the conditions of which have been met as of the date herewith,
allowing Mr. Zhu to purchase up to 3,000 shares of Magnify Wealth from Mr. Chu (the ―Option Shares‖). At such time as Mr. Zhu
exercises and acquires, all of the Option Shares, he will own shares representing 81.9% of Magnify Wealth’s issued and
outstanding shares. As of February 14, 2009, Mr. Zhu was entitled to acquire 25% of the Option Shares, which equals 750 shares.
Once the Option Shares are exercised, Mr. Zhu will then also have a controlling equity interest in Magnify Wealth. This
concentration of ownership in our shares by Magnify Wealth will limit your ability to influence corporate matters and may have the
effect of delaying or preventing a third party from acquiring control over us.

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If we are unable to maintain appropriate internal financial reporting controls and procedures, it could cause us to fail to meet
our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject us to
regulatory scrutiny and sanction, and cause investors to lose confidence in our reported financial information.
    Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud.
    As a public company, we have significant additional requirements for enhanced financial reporting and internal controls. We
will be required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the
Sarbanes-Oxley Act of 2002, which requires annual management assessments of the effectiveness of our internal controls over
financial reporting and a report by our independent registered public accounting firm addressing these assessments. The process of
designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in
our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal
controls that is adequate to satisfy our reporting obligations as a public company.
    We cannot assure you that we will not, in the future, identify areas requiring improvement in our internal control over financial
reporting. We cannot assure you that the measures we will take to remediate any areas in need of improvement will be successful or
that we will implement and maintain adequate controls over our financial processes and reporting in the future as we continue our
growth. If we are unable to establish appropriate internal financial reporting controls and procedures, it could cause us to fail to
comply with Sarbanes-Oxley and meet our reporting obligations, result in the restatement of our financial statements, harm our
operating results, subject us to regulatory scrutiny and sanction, and cause investors to lose confidence in our reported financial
information.
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.
In addition, the Sarbanes-Oxley Act of 2002, as well as new rules subsequently implemented by the SEC, have required changes in
corporate governance practices of public companies. We expect these new rules and regulations 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. We are currently evaluating and monitoring
developments with respect to these new rules, and we cannot predict or estimate the amount of additional costs we may incur or the
timing of such costs.
Due to lower profit margins associated with the sale of copper rods, we expect our overall gross profit margin to initially decline.
    Our gross margin is affected by our product mix. As a result of significant costs associated with production in our scrap
recycling business, copper rod contributes a lower gross profit margin compared to our finished wire products. With the recent
launch of this business, we expect that as the sales of the copper rod increases over time, there will be a decline in our gross margin,
unless we are able to add additional processing capacity which we may not be able to do.
Risks Associated With Doing Business In China
   There are substantial risks associated with doing business in China, as set forth in the following risk factors.
Our operations and assets in China are subject to significant political and economic uncertainties.
    Changes in PRC laws and regulations, or their interpretation, or the imposition of confiscatory taxation, restrictions on currency
conversion, imports and sources of supply, devaluations of currency or the nationalization or other expropriation of private
enterprises could have a material adverse effect on our business, results of operations and financial condition. Under our current
leadership, the Chinese government has been pursuing economic reform policies that encourage private economic activity and
greater economic decentralization.

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There is no assurance, however, that the Chinese government will continue to pursue these policies, or that it will not significantly
alter these policies from time to time without notice.
We derive a substantial portion of our sales from China and a slowdown or other adverse developments in the PRC economy
may materially and adversely affect our customers, demand for our services and our business.
    Substantially all of our sales are generated from China. We anticipate that sales of our products in China will continue to
represent a substantial proportion of our total sales in the near future. Although the PRC economy has grown significantly in recent
years, we cannot assure you that such growth will continue. The industry which we are involved in the PRC is relatively new and
growing, but we do not know how sensitive we are to a slowdown in economic growth or other adverse changes in the PRC
economy which may affect demand for our products. A slowdown in overall economic growth, an economic downturn or recession
or other adverse economic developments in the PRC may materially reduce the demand for our products and materially and
adversely affect our business.
Currency fluctuations and restrictions on currency exchange may adversely affect our business, including limiting our ability to
convert Chinese Renminbi into foreign currencies and, if Chinese Renminbi were to decline in value, reducing our revenue in
U.S. dollar terms.
    Our reporting currency is the U.S. dollar and our operations in China use their local currency as their functional currencies.
Substantially all of our revenue and expenses are in Chinese Renminbi. We are subject to the effects of exchange rate fluctuations
with respect to any of these currencies. For example, the value of the Renminbi depends to a large extent on Chinese government
policies and China’s domestic and international economic and political developments, as well as supply and demand in the local
market. Since 1994, the official exchange rate for the conversion of Renminbi to the U.S. dollar had generally been stable and the
Renminbi had appreciated slightly against the U.S. dollar. However, on July 21, 2005, the Chinese government changed its policy
of pegging the value of Chinese Renminbi to the U.S. dollar. Under the new policy, Chinese Renminbi may fluctuate within a
narrow and managed band against a basket of certain foreign currencies. It is possible that the Chinese government could adopt a
more flexible currency policy, which could result in more significant fluctuation of Chinese Renminbi against the U.S. dollar. We
can offer no assurance that Chinese Renminbi will be stable against the U.S. dollar or any other foreign currency.
    The income statements of our operations are translated into U.S. dollars at the average exchange rates in each applicable period.
To the extent the U.S. dollar strengthens against foreign currencies, the translation of these foreign currencies denominated
transactions results in reduced revenue, operating expenses and net income for our international operations. Similarly, to the extent
the U.S. dollar weakens against foreign currencies, the translation of these foreign currency denominated transactions results in
increased revenue, operating expenses and net income for our international operations. We are also exposed to foreign exchange
rate fluctuations as we convert the financial statements of our foreign subsidiaries into U.S. dollars in consolidation. If there is a
change in foreign currency exchange rates, the conversion of the foreign subsidiaries’ financial statements into U.S. dollars will
lead to a translation gain or loss which is recorded as a component of other comprehensive income. In addition, we have certain
assets and liabilities that are denominated in currencies other than the relevant entity’s functional currency. Changes in the
functional currency value of these assets and liabilities create fluctuations that will lead to a transaction gain or loss. We have not
entered into agreements or purchased instruments to hedge our exchange rate risks, although we may do so in the future. The
availability and effectiveness of any hedging transaction may be limited and we may not be able to successfully hedge our
exchange rate risks.
The application of PRC regulations relating to the overseas listing of PRC domestic companies is uncertain, and we may be
subject to penalties for failing to request approval of the PRC authorities prior to listing our shares in the U.S.
     In recent years several PRC regulatory agencies have adopted merger and acquisition regulations pertaining to the overseas
listing of PRC domestic companies which require the approval of the China Securities Regulatory Commission (―CSRC‖). Because
we have been advised by our PRC legal counsel that we are not subject to these regulations, we do not intend to request approval
from the CSRC prior to listing our shares on the Over the Counter Bulletin Board or a national exchange.

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    However, there are substantial uncertainties regarding the interpretation, application and enforcement of these rules, and CSRC
has yet to promulgate any written provisions or formally to declare or state whether the overseas listing of a PRC-related company
structured similar to ours is subject to the approval of CSRC. Any violation of these rules could result in fines and other penalties
on our operations in China, restrictions or limitations on remitting dividends outside of China, and other forms of sanctions that
may cause a material and adverse effect to our business, operations and financial conditions.
    The new mergers and acquisitions regulations also established additional procedures and requirements that are expected to
make merger and acquisition activities by foreign investors more time-consuming and complex, including requirements in some
instances that the Ministry of Commerce be notified in advance of any change-of-control transaction in which a foreign investor
takes control of a PRC domestic enterprise that owns well-known trademarks or China’s traditional brands. We may grow our
business in part by acquiring other businesses. Complying with the requirements of the new mergers and acquisitions regulations in
completing this type of transactions could be time-consuming, and any required approval processes, including CSRC approval, may
delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our
market share.
We have granted stock options to one of our directors who is a PRC citizen and, our CEO, Mr. Zhu, has options to purchase
shares in our majority shareholder, Magnify Wealth, which may require registration with SAFE. We may also face regulatory
uncertainties that could restrict our ability to issue equity compensation to our directors and employees and other parties who
are PRC citizens or residents under PRC law.
     On April 6, 2007, SAFE issued the ―Operating Procedures for Administration of Domestic Individuals Participating in the
Employee Stock Ownership Plan or Stock Option Plan of An Overseas Listed Company, also know as ―Circular 78.‖ It is not clear
whether Circular 78 covers all forms of equity compensation plans or only those which provide for the granting of stock options.
Further, it is also not clear whether Circular 78 would require SAFE approval for stock options in Magnify Wealth that are granted
to Mr. Zhu. For any equity compensation plan which is so covered and is adopted by a non-PRC listed company after April 6,
2007, Circular 78 requires all participants who are PRC citizens to register with and obtain approvals from SAFE prior to their
participation in the plan. In addition, Circular 78 also requires PRC citizens to register with SAFE and make the necessary
applications and filings if they participated in an overseas listed company’s covered equity compensation plan prior to April 6,
2007. We have adopted an equity compensation plan and have begun to make option grants to some of our directors, one of which
is a PRC citizen. Circular 78 may require PRC citizens who receive option grants to register with SAFE. We believe that the
registration and approval requirements contemplated in Circular 78 will be burdensome and time consuming. If it is determined that
any of our equity compensation plans, or the option grant from Magnify Wealth to Mr. Zhu are subject to Circular 78, failure to
comply with such provisions may subject us and recipients of such options to fines and legal sanctions and prevent us from being
able to grant equity compensation to our PRC employees. In that case, our ability to compensate our employees and directors
through equity compensation would be hindered and our business operations may be adversely affected.
PRC SAFE Regulations regarding offshore financing activities by PRC residents have undertaken continuous changes which
may increase the administrative burden we face and create regulatory uncertainties that could adversely affect our business.
    Recent regulations promulgated by SAFE, regarding offshore financing activities by PRC residents have undergone a number
of changes which may increase the administrative burden we face. The failure by our stockholders and affiliates who are PRC
residents, including Mr. Zhu, who has sole voting power with respect to all shares held by our majority shareholder, Magnify
Wealth, to make any required applications and filings pursuant to such regulations may prevent us from being able to distribute
profits and could expose us and our PRC resident stockholders to liability under PRC law.
    In 2005, SAFE promulgated regulations in the form of public notices, which require registrations with, and approval from,
SAFE on direct or indirect offshore investment activities by PRC resident individuals. The SAFE regulations require that if an
offshore company directly or indirectly formed by or controlled by PRC resident individuals, known as ―SPC,‖ intends to acquire a
PRC company, such acquisition will be subject to

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strict examination by the SAFE. Without registration, the PRC entity cannot remit any of its profits out of the PRC as dividends or
otherwise. This could have a material adverse effect on us given that we expect to be a publicly listed company in the U.S.
Because our principal assets are located outside of the United States and with the exception of one director, our directors and
all our officers reside outside of the United States, it may be difficult for you to enforce your rights based on the United States
Federal securities laws against us and our officers and directors in the United States or to enforce judgments of United States
courts against us or them in the PRC.
    With the exception of one director, all of our officers and directors reside outside of the United States. In addition, our operating
subsidiaries are located in the PRC and all of their assets are located outside of the United States. China does not have a treaty with
United States providing for the reciprocal recognition and enforcement of judgments of courts. It may therefore be difficult for
investors in the United States to enforce their legal rights based on the civil liability provisions of the United States Federal
securities laws against us in the courts of either the United States or the PRC and, even if civil judgments are obtained in courts of
the United States, to enforce such judgments in PRC courts. Further, it is unclear if extradition treaties now in effect between the
United States and the PRC would permit effective enforcement against us or our officers and directors of criminal penalties, under
the United States Federal securities laws or otherwise.
We may have limited legal recourse under PRC law if disputes arise under our contracts with third parties.
    The Chinese government has enacted some laws and regulations dealing with matters such as corporate organization and
governance, foreign investment, commerce, taxation and trade. However, their experience in implementing, interpreting and
enforcing these laws and regulations is limited, and our ability to enforce commercial claims or to resolve commercial disputes is
unpredictable. If our new business ventures are unsuccessful, or other adverse circumstances arise from these transactions, we face
the risk that the parties to these ventures may seek ways to terminate the transactions, or, may hinder or prevent us from accessing
important information regarding the financial and business operations of these acquired companies. The resolution of these matters
may be subject to the exercise of considerable discretion by agencies of the Chinese government, and forces unrelated to the legal
merits of a particular matter or dispute may influence their determination. Any rights we may have to specific performance, or to
seek an injunction under PRC law, in either of these cases, are severely limited, and without a means of recourse by virtue of the
Chinese legal system, we may be unable to prevent these situations from occurring. The occurrence of any such events could have a
material adverse effect on our business, financial condition and results of operations. Although legislation in China over the past 30
years has significantly improved the protection afforded to various forms of foreign investment and contractual arrangements in
China, these laws, regulations and legal requirements are relatively new and their interpretation and enforcement involve
uncertainties, which could limit the legal protection available to us, and foreign investors, including you. The inability to enforce or
obtain a remedy under any of our future agreements could result in a significant loss of business, business opportunities or capital
and could have a material adverse impact on our operations.
We must comply with the Foreign Corrupt Practices Act.
    We are required to comply with the United States Foreign Corrupt Practices Act, which prohibits U.S. companies from
engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Foreign
companies, including some of our competitors, are not subject to these prohibitions. Corruption, extortion, bribery, pay-offs, theft
and other fraudulent practices occur from time-to-time in mainland China. If our competitors engage in these practices, they may
receive preferential treatment from personnel of some companies, giving our competitors an advantage in securing business or from
government officials who might give them priority in obtaining new licenses, which would put us at a disadvantage. Although we
inform our personnel that such practices are illegal, we can not assure you that our employees or other agents will not engage in
such conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices,
we could suffer severe penalties.

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Due to various restrictions under PRC laws on the distribution of dividends by our PRC Operating Companies, we may not be
able to pay dividends to our stockholders.
    The Wholly-Foreign Owned Enterprise Law (1986), as amended and The Wholly-Foreign Owned Enterprise Law
Implementing Rules (1990), as amended and the Company Law of the PRC (2006) contain the principal regulations governing
dividend distributions by wholly foreign owned enterprises. Under these regulations, wholly foreign owned enterprises, such as
Lihua Electron and Lihua Copper, may pay dividends only out of their accumulated profits, if any, determined in accordance with
PRC accounting standards and regulations. Additionally, Lihua Electron and Lihua Copper are required to set aside a certain
amount of their accumulated profits each year, if any, to fund certain reserve funds. These reserves are not distributable as cash
dividends except in the event of liquidation and cannot be used for working capital purposes. The PRC government also imposes
controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. We may experience
difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of
dividends from the profits of Lihua Electron and Lihua Copper.
     Furthermore, if our subsidiaries in China incur debt on their own in the future, the instruments governing the debt may restrict
its ability to pay dividends or make other payments. If we or our subsidiaries are unable to receive all of the revenues from our
operations through these contractual or dividend arrangements, we may be unable to pay dividends on our Common Stock.
Changes in foreign exchange regulations in the PRC may affect our ability to pay dividends in foreign currency or conduct
other foreign exchange business.
    We receive substantially all of our revenues in Renminbi, the Chinese currency, which is currently not a freely convertible
currency. The restrictions on currency exchanges may limit our ability to use revenues generated in RMB to make dividends or
other payments in United States dollars. The PRC government strictly regulates conversion of RMB into foreign currencies. Over
the years, foreign exchange regulations in the PRC have significantly reduced the government’s control over routine foreign
exchange transactions under current accounts. In the PRC, SAFE regulates the conversion of the RMB into foreign currencies.
Pursuant to applicable PRC laws and regulations, foreign invested enterprises incorporated in the PRC are required to apply for
―Foreign Exchange Registration Certificates.‖ Currently, conversion within the scope of the ―current account‖ (e.g. remittance of
foreign currencies for payment of dividends, etc.) can be effected without requiring the approval of SAFE. However, conversion of
currency in the ―capital account‖ (e.g. for capital items such as direct investments, loans, securities, etc.) still requires the approval
of SAFE. In addition, failure to obtain approval from SAFE for currency conversion on the capital account may adversely impact
our capital expenditure plans and our ability to expand in accordance with our desired objectives.
    The PRC government also may at its discretion restrict access in the future to foreign currencies for current account
transactions. If the foreign exchange control system prevents us from obtaining foreign currency, we may be unable to pay
dividends or meet obligations that may be incurred in the future that require payment in foreign currency.
The Chinese government exerts substantial influence over the manner in which we must conduct our business activities.
    We are dependent on our relationship with the local government in the province in which we operate our business. Chinese
government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through
regulation and state ownership. Our ability to operate in China may be harmed by changes in its laws and regulations, including
those relating to taxation, environmental regulations, land use rights, property and other matters. We believe that our operations in
China are in material compliance with all applicable legal and regulatory requirements. However, the central or local governments
of these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional
expenditures and efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government
actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally
planned economy or regional or local variations in the

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implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof,
and could require us to divest ourselves of any interest we then hold in Chinese properties.
    Future inflation in China may inhibit our ability to conduct business in China. In recent years, the Chinese economy has
experienced periods of rapid expansion and high rates of inflation. Rapid economic growth can lead to growth in the money supply
and rising inflation. If prices for our products rise at a rate that is insufficient to compensate for the rise in the costs of supplies, it
may have an adverse effect on profitability. These factors have led to the adoption by Chinese government, from time to time, of
various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. High inflation
may in the future cause Chinese government to impose controls on credit and/or prices, or to take other action, which could inhibit
economic activity in China, and thereby harm the market for our products.
We may have difficulty establishing adequate management, legal and financial controls in the PRC.
    The PRC historically has been deficient in Western style management and financial reporting concepts and practices, as well as
in modern banking, and other control systems. We may have difficulty in hiring and retaining a sufficient number of qualified
employees to work in the PRC. As a result of these factors, and especially given that we expect to be a publicly listed company in
the U.S. and subject to regulation as such, we may experience difficulty in establishing management, legal and financial controls,
collecting financial data and preparing financial statements, books of account and corporate records and instituting business
practices that meet Western standards. We may have difficulty establishing adequate management, legal and financial controls in
the PRC. Therefore, we may, in turn, experience difficulties in implementing and maintaining adequate internal controls as required
under Section 404 of the Sarbanes-Oxley Act of 2002 and other applicable laws, rules and regulations. This may result in
significant deficiencies or material weaknesses in our internal controls which could impact the reliability of our financial statements
and prevent us from complying with SEC rules and regulations and the requirements of the Sarbanes-Oxley Act of 2002. Any such
deficiencies, weaknesses or lack of compliance could have a materially adverse effect on our business and the public announcement
of such deficiencies could adversely impact our stock price.
It may be difficult to protect and enforce our intellectual property rights under PRC law.
    Intellectual property rights in China are still developing, and there are uncertainties involved in the protection and the
enforcement of such rights. We will need to pay special attention to protecting our intellectual property and trade secrets. Failure to
do so could lead to the loss of a competitive advantage that could not be compensated by our damages award.
Under PRC law, we are required to obtain permits and business licenses, and our failure to do so would adversely impact our
ability to conduct business in China.
    We hold various permits, business licenses, and approvals authorizing their operations and activities, which are subject to
periodic review and reassessment by the Chinese authorities. Standards of compliance necessary to pass such reviews change from
time to time and differ from jurisdiction to jurisdiction, leading to a degree of uncertainty. If renewals, or new permits, business
licenses or approvals required in connection with existing or new facilities or activities, are not granted or are delayed, or if existing
permits, business licenses or approvals are revoked or substantially modified, we will suffer a material adverse effect. If new
standards are applied to renewals or new applications, it could prove costly to us to meet any new level of compliance.
If our land use rights are revoked, we would have no operational capabilities.
    Under Chinese law land is owned by the state or rural collective economic organizations. The state issues to tenants the rights to
use property. Use rights can be revoked and the tenants forced to vacate at any time when redevelopment of the land is in the public
interest. The public interest rationale is interpreted quite broadly and the process of land appropriation may be less than transparent.
Each of our two operating subsidiaries rely on these land use rights as the cornerstone of their operations, and the loss of such
rights would have a material adverse effect on our company.

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Because we may not be able to obtain business insurance in the PRC, we may not be protected from risks that are customarily
covered by insurance in the United States.
   Business insurance is not readily available in the PRC. To the extent that we suffer a loss of a type which would normally be
covered by insurance in the United States, such as product liability and general liability insurance, we would incur significant
expenses in both defending any action and in paying any claims that result from a settlement or judgment.
We are subject to the environmental protection law of China.
    Our manufacturing process may produce by-products such as effluent, gases and noise, which are harmful to the environment.
We are subject to multiple laws governing environmental protection, such as ―The Law on Environmental Protection in the PRC‖
and ―The Law on Prevention of Effluent Pollution in the PRC,‖ as well as standards set by the relevant governmental authorities
determining the classification of different wastes and proper disposal. We have properly attained a waste disposal permit for our
manufacturing facility, which details the types and concentration of effluents and gases allowed for disposal.
    China is experiencing substantial problems with environmental pollution. Accordingly, it is likely that the national, provincial
and local governmental agencies will adopt stricter pollution controls. There can be no assurance that future changes in
environmental laws and regulations will not impose costly compliance requirements on us or otherwise subject us to future
liabilities. Our profitability may be adversely affected if additional or modified environmental control regulations are imposed upon
us.
Any recurrence of severe acute respiratory syndrome, or SARS, or another widespread public health problem, could adversely
affect our operations.
    A renewed outbreak of SARS or another widespread public health problem in the PRC, where all of our revenue is derived,
could have an adverse effect on our operations. Our operations may be impacted by a number of health-related factors, including
quarantines or closures of some of our offices that could leave us without many employees to conduct our business which would
materially and adversely affect our operations and financial condition.
Risks Related to our Securities
The market price for our securities may be subject to wide fluctuations and our securities may trade below the initial public
offering price.
     The initial public offering price of our Common Stock will be determined by negotiations between us and representatives of the
underwriters, based on numerous factors we discuss under ―Underwriting.‖ This price may not be indicative of the market price of
our Common Stock after this Offering. We cannot assure you that you will be able to resell your Common Stock at or above the
initial public offering price or our net asset value. The securities of a number of Chinese companies and companies with substantial
operations in China have also experienced wide fluctuations subsequent to their initial public offerings, including trading at prices
substantially below the initial public offering prices. Among the factors that could affect the price of our Common Stock are risk
factors described in this section and other factors, including:
   •    announcements of competitive developments, by our competitors;
   •    regulatory developments of our industry affecting us, our customers or our competitors;
   •    actual or anticipated fluctuations in our quarterly operating results;
   •    failure of our quarterly financial and operating results to meet market expectations or failure to meet our previously
        announced guidance, if any;
   •    changes in financial estimates by securities research analysts;
   •    changes in the economic performance or market valuations of our competitors;
   •    additions or departures of our executive officers and other key personnel;
   •    announcements regarding intellectual property litigation (or potential litigation) involving us or any of our directors and
        officers;

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   •    fluctuations in the exchange rates between the U.S. dollar and the Renminbi; and
   •    release or expiration of the underwriters’ post-offering lock-up or other transfer restrictions on our outstanding Common
        Stock.
    In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are not
related to the operating performance of particular industries or companies. For example, the capital and credit markets have been
experiencing volatility and disruption for more than 12 months. Starting in September 2008, the volatility and disruption have
reached extreme levels, developing into a global crisis. As a result, stock prices of a broad range of companies worldwide, whether
or not they are related to financial services, have declined significantly. These market fluctuations may also have a material adverse
effect on the market price of our securities.
We have never paid cash dividends and are not likely to do so in the foreseeable future.
    We have never declared or paid any cash dividends on our Common Stock. We currently intend to retain any future earnings for
use in the operation and expansion of our business. We do not expect to pay any cash dividends in the foreseeable future but will
review this policy as circumstances dictate.
We have considerable discretion in the use of proceeds from this Offering and we may use these proceeds in ways with which
you may not agree.
    We intend to use the net proceeds from this Offering for general corporate purposes, including capital expenditures and funding
possible future acquisitions. We have not allocated the net proceeds of this Offering to any particular project or acquisition. Rather,
our board of directors and our management will have considerable discretion in the application of the net proceeds received by us.
You will not have the opportunity, as part of your investment decision, to assess whether proceeds are being used appropriately.
You must rely on the judgment of our board of directors and our management regarding the application of the net proceeds of this
Offering. The net proceeds may be used for corporate purposes that do not improve our efforts to maintain profitability or increase
the price of our securities. The net proceeds from this Offering may be placed in investments that do not produce income or that
lose value.
You will experience immediate and substantial dilution in the net tangible book value of your investment and may experience
further dilution in the future.
    The offering price per share of Common Stock in this Offering is substantially higher than the net tangible book value per share
of our outstanding Common Stock prior to this Offering. Consequently, when you purchase our Common Stock in this Offering at
an assumed offering price of $4, the mid-point of the estimated range of the offering price, you will incur immediate dilution of
$1.28 per share.
We may need additional capital and may sell additional securities or other equity securities or incur indebtedness, which could
result in additional dilution to our shareholders or increase our debt service obligations.
    We may require additional cash resources due to changed business conditions or other future developments, including any
investments or acquisitions we may decide to pursue. If our cash resources are insufficient to satisfy our cash requirements, we may
seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity securities or equity-linked
debt securities could result in additional dilution to our shareholders. The incurrence of indebtedness would result in increased debt
service obligations and could result in operating and financing covenants that would restrict our operations. We cannot assure you
that financing will be available in amounts or on terms acceptable to us, if at all.
Substantial future sales of our securities in the public market, or the perception that these sales could occur, could cause the
price of our securities to decline.
    Additional sales of our securities in the public market after this Offering, or the perception that these sales could occur, could
cause the market price of our securities to decline. Upon completion of this Offering, we will have 23,458,760 million shares of our
Common Stock outstanding. Of that amount, approximately 5,958,760 shares of our Common Stock were issued upon the
automatic conversion of most, but not all of our

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outstanding Preferred Stock and are freely transferable without restriction upon resale, and 20,958,760 shares of Common Stock
outstanding after this Offering will be available for sale upon the expiration of varying lock-up periods beginning from the date of
this prospectus, subject to volume and other restrictions as applicable under Rule 144 under the Securities Act. (See ―Shares
Eligible‖). All securities sold in this Offering will be freely transferable without restriction under the Securities Act. Any or all of
these shares may be released prior to expiration of the lock-up period at the discretion of the lead underwriters for this Offering. In
addition, we may grant or sell additional options, restricted shares or other share-based awards in the future under our share
incentive plan to our management, employees and other persons, the settlement and sale of which may further dilute our shares and
drive down the price of our securities.
    As of August 17, 2009 we had stock options outstanding to purchase an aggregate of 60,000 shares of our Common Stock, of
which 15,000 are currently exercisable and warrants to purchase 2,000,000 shares of Common Stock. To the extent that the options
and warrants are exercised, they may be exercised at prices below the price of our shares of Common Stock on the public market,
resulting in a significant number of shares entering the public market and the dilution of our securities.
The possible return of shares to Magnify Wealth pending our achievement of the performance thresholds under the Escrow
Agreement in the October 2008 private placement would result in a non-cash compensation expense of $15,409,091 which will
have a negative impact on our Statement of Income for 2009.
    Under the Escrow Agreement with the holders of the Series A Convertible Preferred Stock, if we meet the 2008 and 2009
Performance Thresholds, the Escrow Shares will be returned to Magnify Wealth and will result in a non-cash compensation
expense of $15,409,091 in fiscal year 2009. Because Magnify Wealth is our controlling stockholder and the return of these shares is
conditioned upon our operating performance, the shares are deemed to be compensation to Magnify Wealth and under applicable
accounting rules, we will have to record a non-cash charge to our earnings for the fiscal year 2009. The charges to our earnings as a
result of the release of the Escrow Shares will have a negative impact on our consolidated statements of income for the fiscal year
ended December 31, 2009, by reducing net income and our earnings per share.
The NYSE AMEX may delist our securities from quotation on its exchange which could limit investors’ ability to make
transactions in our securities and subject us to additional trading restrictions.
    We intend to apply to have our Common Stock listed on the NYSE AMEX, a national securities exchange, upon consummation
of this offering. We cannot assure you that our securities will meet the continued listing requirements be listed on the NYSE
AMEX in the future.
   If the NYSE AMEX delists our Common Stock from trading on its exchange, we could face significant material adverse
consequences including:
   •    a limited availability of market quotations for our securities;
   •    a determination that our Common Stock is a ―penny stock‖ which will require brokers trading in our Common Stock to
        adhere to more stringent rules and possibly resulting in a reduced level of trading activity in the secondary trading market
        for our Common Stock;
   •    a limited amount of news and analyst coverage for our company; and
   •    a decreased ability to issue additional securities or obtain additional financing in the future.
If our shares of Common Stock become subject to the SEC’s penny stock rules, broker-dealers may experience difficulty in
completing customer transactions and trading activity in our securities may be adversely affected.
    If at any time we have net tangible assets of $5,000,000 or less and our shares of Common Stock have a market price per share
of less than $5.00, transactions in our Common Stock may be subject to the ―penny stock‖ rules promulgated under the Securities
Exchange Act of 1934. Under these rules, broker-dealers who recommend such securities to persons other than institutional
accredited investors must:

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   •    make a special written suitability determination for the purchaser;
   •    receive the purchaser’s written agreement to the transaction prior to sale;
   •    provide the purchaser with risk disclosure documents which identify certain risks associated with investing in ―penny
        stocks‖ and which describe the market for these ―penny stocks‖ as well as a purchaser’s legal remedies; and
   •    obtain a signed and dated acknowledgment from the purchaser demonstrating that the purchaser has actually received the
        required risk disclosure document before a transaction in a ―penny stock‖ can be completed.
    If our Common Stock become subject to these rules, broker-dealers may find it difficult to effectuate customer transactions and
trading activity in our securities may be adversely affected. As a result, the market price of our securities may be depressed, and
you may find it more difficult to sell our securities.

                                  NOTE REGARDING FORWARD-LOOKING STATEMENTS
    This prospectus contains forward-looking statements that involve substantial risks and uncertainties. These include statements
about our expectations, beliefs, intentions or strategies for the future, which are indicated by words or phrases such as ―anticipate,‖
―expect,‖ ―intend,‖ ―plan,‖ ―will,‖ ―we believe,‖ ―management believes‖ and similar words or phrases. The forward-looking
statements are based on our current expectations and are subject to certain risks, uncertainties and assumptions. Our actual results
could differ materially from results anticipated in these forward-looking statements. All forward-looking statements included in this
document are based on information available to us on the date hereof, and we assume no obligation to update any such
forward-looking statements.

                                                        USE OF PROCEEDS
    We estimate that the net proceeds from the sale of the 2,000,000 shares Common Stock in the Offering will be approximately
$6,842,256 million, assuming an initial public offering price of $4.00 per share and after deducting the underwriting discounts and
commissions and estimated Offering expenses. We will not receive any proceeds from the sale of any Common Stock by the
Selling Stockholder, if any, pursuant to the over-allotment option.
   We intend to use the net proceeds from the offering for working capital and general corporate purposes. Additionally, we may
choose to expand our business through the capital expenditure plan we have in place to maintain existing machinery and to
purchase additional manufacturing equipment for our new production facility.
    The amounts and timing of our actual expenditures will depend on numerous factors, including the status of our development
efforts, sales and marketing activities, the amount of cash generated or used by our operations. We may find it necessary or
advisable to use portions of the proceeds for other purposes, and we will have broad discretion in the application of the net
proceeds. Additionally, we may choose to expand our current business through acquisition of other complimentary businesses,
products or technologies, using cash or shares. However, we have not entered into any negotiations, agreements or commitments
with respect to any such acquisitions at this time. Pending these uses, the proceeds will be invested in short-term, investment grade,
interest-bearing securities.

                                                           DIVIDEND POLICY
    We have never paid any dividends and we plan to retain earnings, if any, for use in the development of the business. Payment of
future dividends, if any, will be at the discretion of the Board of Directors after taking into account various factors, including
current financial condition, operating results, current and anticipated cash needs and regulations governing dividend distributions
by wholly foreign owned enterprises in China.

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                                                         CAPITALIZATION
    The following table summarizes our capitalization as of June 30, 2009, on an actual basis and as adjusted basis to reflect our
receipt of estimated net proceeds from the sale of 2,000,000 shares of Common Stock (excluding the 300,000 shares of Common
Stock which the underwriters have the option to purchase to cover over-allotments, if any) in this offering at an assumed public
offering price of $4.00 per share, the midpoint of the estimated price range set forth on the cover of this prospectus, and after
deducting estimated underwriting discounts and commissions and estimated offering expenses of approximately $1,157,744.
   You should read this table in conjunction with ―Use of Proceeds,‖ ―Summary Consolidated Financial Information,‖ ―Selected
Consolidated Financial Data,‖ ―Management’s Discussion and Analysis of Financial Condition and Results of Operations‖ and our
consolidated financial statements and related notes included elsewhere in this prospectus.


                                                                                               As of June 30, 2009
                                                                                      Actual                    As adjusted
        Cash and cash equivalents                                                     28,144,454                     34,986,710

        Preferred stock, $0.0001 par, 10,000,000 shares authorized actual             13,116,628                       691,446
          and as adjusted, 6,818,182 and 359,422 shares issued and
          outstanding actual and as adjusted
        Common Stock, $0.0001 par, 75,000,000 shares authorized actual                         1,500                     2,346
          and as adjusted, 15,000,000 and 23,458,760 issued and
          outstanding actual and as adjusted
        Additional paid-in capital                                                     7,474,191                     26,740,783
        Statutory reserves                                                             2,603,444                      2,603,444
        Retained earnings                                                             30,538,879                     30,538,879
        Accumulated other comprehensive income                                         2,591,298                      2,591,298
        Total shareholders’ equity                                                    43,209,312                     62,476,750
        Total capitalization                                                          56,325,940                     63,168,196

   The table above includes the automatic conversion of 6,458,760 shares of Preferred Stock to Common Stock.
   The table above excludes the following shares:
   •    60,000 shares of Common Stock issuable upon the exercise of options outstanding at June 30, 2009 with a weighted
        average exercise price of $2.20 per share;
   •    359,422 shares of Common Stock issuable upon the conversion of Preferred Stock owned by a certain investor, as such
        investor’s ownership of our Common Stock would have exceeded the cap of 9.9% if such 359,422 shares of Preferred
        Stock were to be converted to Common Stock. According to the terms of our Preferred Stock, holders of our Preferred
        Stock are restricted from converting to Common Stock if the number of shares of Common Stock to be issued pursuant to
        such conversion would cause the number of shares of Common Stock owned by such holder and its affiliates at such time
        to equal or exceed 9.9% of our then issued and outstanding shares of Common Stock;
   •    2,000,000 shares of Common Stock issuable upon the exercise of warrants outstanding at June 30, 2009 with a weighted
        average exercise price of $3.50 per share; and
   •    1,440,000 additional shares of Common Stock reserved for issuance under our 2009 Omnibus Securities and Incentive
        Plan.

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                   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
   There is no established public trading market in our securities. Our securities are not listed for trading on any national securities
exchange or over-the-counter quotation service. We have applied to have our Common Stock listed on the NYSE AMEX stock
exchange. If our Common Stock is not approved for listing on NYSE AMEX, we will not consummate this Offering.
Equity Compensation Plan Information
    On April 14, 2009, the Company adopted the Lihua International, Inc. 2009 Omnibus Securities and Incentive Plan (the
―Plan‖). The Plan includes: Distribution Equivalent Rights, Options, Performance Share Awards, Performance Unit Awards,
Restricted Stock Awards, Restricted Stock Unit Awards, Stock Appreciation Rights, Tandem Stock Appreciation Rights,
Unrestricted Stock Awards or any combination of the foregoing.
   The aggregate number of shares of Common Stock that may be reserved for issuance under the Plan shall not exceed ten
percent (10%) of the aggregate number of shares of the Common Stock which are issued and outstanding. Currently, the aggregate
amount of shares of Common Stock that may be reserved for issuance under the Plan is 1.5 million shares.
    Concurrently with the adoption of the Plan, we granted non-qualified stock options to purchase up to 60,000 shares of our
Common Stock in the aggregate to Messrs. Bruce, Serbin and Liu, our newly appointed independent directors. The exercise is
$2.20 and such options shall vest quarterly at the end of each such three month period, in equal installments over the 12 month
period from date of grant. The Compensation Committee of the Board of Directors approved such grant.

                                            DETERMINATION OF OFFERING PRICE
    The representative has advised us that the underwriters propose to offer the Common Stock directly to the public at the public
offering price that appears on the cover page of this prospectus. In addition, the representative may offer some of the Common
Stock to other securities dealers at such price less a concession of $[•] per share. The underwriters may also allow, and such dealers
may reallow, a concession not in excess of $[•] per share to other dealers. After the Common Stock is released for sale to the
public, the representatives may change the offering price and other selling terms at various times.
    Prior to this Offering, there was no public market for any of our securities. The public offering price of our Common Stock was
determined by negotiation between us and the underwriters. The principal factors considered in determining the public offering
price of the Common Stock included:
   •    the information in this prospectus and otherwise available to the underwriters;
   •    the history and the prospects for the industry in which we compete;
   •    the ability of our management;
   •    the prospects for our future earnings;
   •    the present state of our development and our current financial condition;
   •    the general condition of the economy and the securities markets in the United States at the time of this Offering;
   •    the recent market prices of, and the demand for, publicly-traded securities of generally comparable companies; and
   •    other factors as were deemed relevant.
   We cannot be sure that the public offering price will correspond to the price at which our Common Stock will trade in the
public market following this Offering or that an active trading market for our Common Stock will develop or continue after this
Offering.

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                                                              DILUTION
    If you invest in our securities, your investment will be diluted immediately to the extent of the difference between the public
offering price per share of Common Stock you pay in this Offering, and the pro forma net tangible book value per share of
Common Stock immediately after this Offering.
    Pro forma net tangible book value represents the amount of our total tangible assets reduced by our total liabilities, after giving
effect to the conversion of 6,458,760 shares of Preferred Stock. Tangible assets equal our total assets less goodwill and intangible
assets. Pro forma net tangible book value per share represents our pro forma net tangible book value divided by the number of
shares of common stock outstanding after giving effect to the conversion of 6,458,760 shares of Preferred Stock. As of June 30,
2009, our pro forma net tangible book value was $56.3 million and our pro forma net tangible book value per share was $2.62.
    After giving effect to the sale of 2,000,000 shares of common stock in the offering at an assumed public offering price of $4.0
per share, which is the mid-point of the estimated price range set forth on the cover of this prospectus, and after deducting the
underwriting discount and commission and estimated Offering expenses, our adjusted pro forma net tangible book value as of June
30, 2009 would have been $63.2 million, or $2.69 per share. This represents an immediate increase in pro forma net tangible book
value of $0.07 per share to existing stockholders and immediate dilution of $1.31 per share to new investors purchasing shares in
the Offering.
   The following table illustrates this per share dilution:




                                                                                              As of June 30,       As Adjusted
                                                                                                  2009
        Assumed public offering price per share                                                                $        4.00
        Pro forma net tangible book value per share as of June 30, 2009                      $      2.62
        Increase in pro forma net tangible book value per share attributable to new                 0.07
          investors
        Adjusted pro forma net tangible book value per share after the Offering                                         2.69
        Dilution in net tangible book value per share to new investors                                         $        1.31

   The information above is as of June 30, 2009 and excludes the following:
   •    60,000 shares of Common Stock issuable upon the exercise of options outstanding at June 30, 2009 with a weighted
        average exercise price of $2.20 per share;
   •    359,422 shares of Common Stock issuable upon the conversion of Preferred Stock owned by a certain investor, as such
        investor’s ownership of our Common Stock would have exceeded the cap of 9.9% if such 359,422 shares of Preferred
        Stock were also converted to Common Stock. According to the terms of our Preferred Stock, holders of our Preferred
        Stock are restricted from converting to Common Stock if the number of shares of Common Stock to be issued pursuant to
        such conversion would cause the number of shares of Common Stock owned by such holder and its affiliates at such time
        to equal or exceed 9.9% of our then issued and outstanding shares of Common Stock;
   •    2,000,000 shares of Common Stock issuable upon the exercise of warrants outstanding at June 30, 2009 with a weighted
        average exercise price of $3.50 per share; and
   •    1,440,000 additional shares of Common Stock reserved for issuance under our 2009 Omnibus Securities and Incentive
        Plan.
   Our adjusted pro forma net tangible book value after the offering, and the dilution to new investors in the offering, will change
from the amounts shown above if the underwriters’ over-allotment option is exercised.
    A $1.00 increase or decrease in the assumed public offering price per share would increase or decrease our adjusted pro forma
net tangible book value per share after this Offering by approximately $0.08, and dilution per share to new investors by
approximately $0.92, after deducting the underwriting discount and estimated offering expenses payable by us.

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                                              EXCHANGE RATE INFORMATION
    Our business is conducted in China and all of our revenue and the majority of our expenses are denominated in Renminbi. This
prospectus contains translations of Renminbi amounts into U.S. dollars at specified rates. Unless otherwise noted, all translations
from Renminbi to U.S. dollar amounts were made at the noon buying rate in the City of New York for cable transfers of Renminbi
as certified for customs purposes by the Federal Reserve Bank of New York, as of December 31, 2008, which was RMB 6.8225 to
$1.00. We make no representation that the Renminbi or U.S. dollar amounts referred to in this prospectus 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.

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                           SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
    The following selected consolidated statement of income data for the two years ended December 31, 2007 and 2008 and the
selected consolidated balance sheet data (other than percentage of sales data) as of December 31, 2007 and 2008 are derived from
our audited consolidated financial statements included elsewhere in this prospectus. The consolidated statement of income data for
the year ended December 31, 2006 and consolidated balance sheet data as of December 31, 2006 of the Ally Profit Companies
presented below have been derived from Ally Profit’s audited consolidated financial statements that are included elsewhere in this
prospectus. The audited consolidated financial statements have been prepared in accordance with U.S. GAAP, and have been
audited by AGCA, Inc. (f/k/a Yu and Associates), an independent registered public accounting firm. The consolidated statement of
income data for the three months ended June 30, 2009 and 2008 and the consolidated balance sheet data as of June 30, 2009 have
been derived from our unaudited condensed consolidated financial statements that are included elsewhere in this prospectus.
    Our historical results for any period are not necessarily indicative of results to be expected for any future period. You should
read the following selected financial information in conjunction with the consolidated financial statements and related notes and the
information under ―Management’s Discussion and Analysis of Financial Condition and Results of Operations‖ included elsewhere
in this prospectus.




                                                                                                                                              Ally Profit Investments
                                                                                                                                                    Limited and
                                                                                                                                                    Subsidiaries
                             Three Months Ended June 30,                                             Year Ended December 31,                        Year Ended
                                                                                                                                                December 31, 2006
                           2009                            2008                               2008                             2007

                     US$          % of            US$             % of                US$               % of            US$           % of     US$              % of
                                  Sales                           Sales                                 Sales                         Sales                     Sales
                                                                          (in thousands, except for percentages)
Consolidated
  Statement of
  Income Data:
Sales                  48,827      100.0 %    15,038      100.0 %         50,006      100.0 %    32,676      100.0 %    15,750      100.0 %

Cost of sales          (39,096 )   (80.1 )%   (10,328 )   (68.7 )%        (33,202 )   (66.4 )%   (22,910 )   (70.1 )%   (10,649 )   (67.6 )%

Gross profit             9,731      19.9 %      4,710      31.3 %         16,804       33.6 %      9,766      29.9 %      5,101      32.4 %

Selling expenses          (587 )     1.2 %       (172 )     1.1 %            (700 )    (1.4 )%      (417 )    (1.3 )%      (230 )    (1.5 )%

General &               (1,093 )     2.2 %       (403 )     2.7 %          (1,907 )    (3.8 )%      (455 )    (1.4 )%      (336 )    (2.1 )%
   Administrative
   expenses
Income from              8,051      16.5 %      4,135      27.5 %         14,197       28.4 %      8,894      27.2 %      4,535      28.8 %
   operations
Other income
   (expenses):
   Interest income          47       0.1 %          8      0.05 %              68       0.1 %         16      0.05 %          4      0.03 %

  Interest expenses       (106 )    (0.2 )%      (106 )    (0.7 )%           (515 )    (1.0 )%       (97 )    (0.3 )%       (43 )    (0.3 )%

  Merger cost               —        —             —        —                (259 )    (0.5 )%        —        —             —        —

  Change in fair          (216 )    (0.4 )%        —        —
    value of
    warrants
  Other income             501       1.0 %         (6 )   (0.04 )%              4      0.01 %         —        —              3      0.02 %

Total other income         226       0.5 %       (104 )    (0.7 )%           (702 )    (1.4 )%       (81 )   (0.25 )%       (36 )   (0.23 )%
   (expenses)
Income before income     8,277      17.0 %      4,030      26.8 %         13,495       27.0 %      8,813      27.0 %      4,499      28.6 %
   taxes
Provision for income     1,572      (3.2 )%      (528 )    (3.5 )%         (1,793 )    (3.6 )%    (1,089 )    (3.3 )%        —        —
   tax
Net income               6,705      13.7 %      3,501      23.3 %     $   11,702       23.4 %      7,724      23.6 %      4,499      28.6 %


Earnings per share
– Basic                   0.45                   0.25                 $      0.75                   0.55                     —
– Diluted                 0.31                   0.25                 $      0.70                   0.55                     —


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                                                                                                                             Ally Profit
                                                                                                                            Investments
                                                                                                                            Limited and
                            Three Months Ended June 30,                          Year Ended December 31,                    Subsidiaries
                                                                                                                            Year Ended
                                                                                                                         December 31, 2006
                            2009                    2008                      2008                       2007
                      US$          % of       US$          % of          US$          % of         US$          % of      US$        % of
                                   Sales                   Sales                      Sales                     Sales                Sales
                                                 (in thousands, except for percentages and operating data)
Other
  Consolidated
  Financial Data:
Gross profit margin     —          19.9 %        —         31.3 %           —         33.6 %           —        29.9 %       —        32.4 %

Operating profit        —          16.5 %        —         27.5 %           —         28.4 %           —        27.2 %       —        28.8 %
  margin
Net profit margin       —          13.7 %        —         23.3 %           —         23.4 %           —        23.6 %       —        28.6 %

Consolidated
  Operating
  Data:
Shipment volume       8,415          —        1,701          —           5,966          —          4,065          —       2,009         —
  (tons)
Average selling        5,802         —          8,840          —           8,382            —              8,039     —        7,839      —
  price ($ per ton)
Labor cost per           741         —           421           —            930             —              1,183     —        1,289      —
  employee on
  average




                                                        Three Months                                                     Ally Profit
                                                        Ended June 30,                                                  Investments
                                                            2009                                                        Limited and
                                                                                                                        Subsidiaries
                                                                                                                        Year Ended
                                                                                   Year Ended December 31,           December 31, 2006
                                                                                    2008             2007
                                                             US$                    US$                    US$             US$
                                                                                          (in thousands)
          Consolidated Balance Sheet Data:
          Cash and cash equivalents                          28,144                 26,042                   3,214             890
          Total assets                                       70,622                 56,813                  30,075           9,433
          Secured short-term bank loans                       4,391                  6,145                   4,107              —
          Total liabilities                                  14,296                  9,021                  10,992           3,534
          Total shareholders’ equity                         43,209                 34,675                  19,082           5,899
          Total liabilities and shareholders’                70,622                 56,813                  30,075           9,433
            equity

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                    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
                                    AND RESULTS OF OPERATIONS

                             DISCLAIMER REGARDING FORWARD-LOOKING STATEMENTS
    Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such
as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those
anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors,
Cautionary Notice Regarding Forward-Looking Statements and Business sections in this registration statement. We use terms such
as ―anticipate,‖ ―estimate,‖ ―plan,‖ ―project,‖ ―continuing,‖ ―ongoing,‖ ―expect,‖ ―believe,‖ ―intend,‖ ―may,‖ ―will,‖ ―should,‖
―could,‖ and similar expressions to identify forward-looking statements. The following discussion of the financial condition and
results of operation of the Company for the six months ended June 30, 2009 and the fiscal years ended December 31, 2006, 2007
and 2008, should be read in conjunction with the selected financial data, the financial statements and the notes to those statements
that are included elsewhere in this registration statement. The discussion of the results of operations below which include the year
ended December 31, 2006 are of the Ally Profit Companies and have been derived from Ally Profit’s audited consolidated financial
statements that are included elsewhere in this prospectus. Ally Profit is deemed to be the accounting acquirer in the Share Exchange
transaction consummated as of October 31, 2008, which is further described in the section, ―OUR HISTORY AND CORPORATE
STRUCTURE‖ below in this prospectus. The Share Exchange has been accounted for as a reverse acquisition using the purchase
method of accounting, so that our financial statements before the date of Share Exchange are those of Ally Profit with the results of
Lihua International being consolidated from the date of Share Exchange and the equity accounts being retroactively restated to
reflect the reverse acquisition.
OVERVIEW
    Lihua is one of the first vertically integrated companies in China to develop, design, manufacture, market and distribute low
cost, high quality, alternatives to pure copper magnet wire, which include copper-clad aluminum wire (―CCA‖) and recycled scrap
copper wire. Primarily because of its high electrical conductivity, pure copper magnet wire is one of the fundamental building
blocks in many components in a wide variety of motorized and electrical appliances such as dishwashers, microwaves and
automobiles. In most instances, Lihua’s CCA and recycled scrap copper are an excellent, less costly substitute for pure copper
magnet wire.
    Lihua sells its products directly to manufacturers in the consumer electronics, white goods, automotive, utility,
telecommunications and specialty cable industries and to distributors in the wire and cable industries. Our track record and
reputation for producing high quality products in large quantities has paved the way for rapid expansion of our customer base. We
have approximately 300 customers and no one customer accounts for more than 7% of our sales. At least in part because the copper
magnet wire industry in China is large and growing, Lihua’s product sales are comprised of approximately 95% domestic sales and
approximately 5% of export sales.
    Prior to 2009, our business focused primarily on CCA. Our CCA business consists of acquiring CCA with a line diameter of
2.05 mm from our suppliers as a raw material, reducing the diameter of the CCA by drawing it and then annealing and coating it.
Our final CCA product typically has diameters from 0.03 mm to 0.18 mm, depending on customer specifications. To meet strong
customer demand, we substantially increased our CCA production capacity from 2,200 tons per annum as of the end of 2006 to
6,000 tons per annum as of June 30, 2009. We plan to further increase our CCA production capacity to 7,500 tons per annum by the
end of 2009. In each of the following periods, our sales of CCA were as follows: 2006 – 2,009 tons, 2007 – 4,065 tons, 2008 –
5,966 tons and six months ended June 30, 2009 – 2,959 tons.
    In addition to our CCA business, in the first quarter of 2009, we began to produce copper rod from recycled scrap copper. As of
June 30, 2009, our scrap copper refinery capacity was approximately 25,000 tons per annum. To the extent our capacity permits,
we process our copper rod into copper magnet wire. Because our output of copper rod exceeds our capacity to process it into
copper magnet wire, we sell our excess copper rod to smaller wire manufacturers for further processing. During the six months
ended June 30, 2009, we sold 3,602 tons of copper magnet wire and 5,559 tons of copper rod. We currently are working to expand
our magnet wire production capacity so that we can use a greater proportion of our copper rod rather than

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selling it to other manufacturers, thereby increasing our profit margins and overall profitability. We are exploiting a range of
marketing strategies for the copper magnet wire business, including cross-selling our copper magnet wire to our existing CCA
customers.
    Lihua is well positioned to continue to capture further market share in the magnet wire industry. CCA and copper magnet wire
are increasingly being accepted as alternatives to pure copper wire. As a result, our sales and net income have grown substantially
over the last three years. We generated sales of $15.7 million in 2006, $32.7 million in 2007 and $50.0 million in 2008,
representing a Compound Annual Growth Rate (―CAGR‖) of 72.3%. We achieved net income of $4.5 million in 2006, $7.7 million
in 2007 and $11.7 million in 2008, representing a CAGR of 61.2%. Adoption of CCA and recycled copper magnet wire as
alternatives to pure copper wire will likely increase, and we expect that our sales and net income should continue to grow as a
result. During the six months ended June 30, 2009, we generated sales of $69,365,668 million and net income of $10,693,720
million, up 180% and 83.1% from the same six-month period in 2008.
     We continually pursue technological innovations and improvements in our manufacturing processes. We have obtained one
utility model patent in China and have three pending invention patent applications in China related to our production process. In
addition, we have entered into a technology cooperation agreement with a university in China. We believe that our emphasis on
technological innovations and production efficiency has contributed significantly to our leading industry position in China and will
continue to do so for the foreseeable future.
    Further, significant barriers to entry make it difficult for newcomers to successfully compete with our CCA and copper magnet
wire businesses. For example, with respect to CCA, it is challenging to maintain high quality during the process of drawing,
annealing and coating CCA, especially finer diameter wires. Our knowledge and experience in successfully generating high quality
CCA give us a strong advantage over would-be competitors. With respect to copper magnet wire, our proprietary recycling
technology offers us a unique ability to produce wire of a high enough quality to serve as a substitute to pure copper wire. Our
experience and technology allow us to offer products that are, in most instances, superior and more cost-effective to those potential
competitors can produce. Because we are already an approved vendor for many of our customers and qualifying new vendors can
be time-consuming, we believe we are further advantaged vis-à-vis potential competitors.
    To avoid copper commodity risk exposure, we maintain minimal raw material inventory. We confirm raw material purchase
orders for scrap copper or CCA with suppliers for each sales order only when the applicable sales order has been received. On the
other hand, our principal CCA and scrap copper suppliers usually dedicate portions of their inventories as reserves to meet our
manufacturing requirements. Our most significant supplier of CCA provides approximately 30% of our CCA raw material needs,
but we have built a large network of reliable suppliers that deliver high quality raw materials, and accordingly, are not dependent
upon any one supplier for our success.
    We believe that our experienced management team will continue to leverage our leading technologies and increasing capacity
to manufacture, produce, market and distribute cost-effective, high quality, CCA, recycled copper magnet wire and other
alternatives to pure copper wire. If, as anticipated, worldwide demand for alternatives to pure copper wire grow and we continue to
innovate and improve in our processes, we will be well positioned to compete in the copper wire market on a global scale.
Significant Factors Affecting Our Results of Operations
   The most significant factors that affect our financial condition and results of operations are:
   •    economic conditions in China;
   •    the market price for copper;
   •    demand for, and market acceptance of, copper replacement products;
   •    production capacity;
   •    supply and costs of principal raw materials; and
   •    product mix and implications on gross margins.

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Economic conditions in China
    We operate our manufacturing facilities in China and derive the majority of our revenues from sales to customers in China. As
such, economic conditions in China will affect virtually all aspects of our operations, including the demand for our products, the
availability and prices of our raw materials and our other expenses. China has experienced significant economic growth, achieving
a CAGR, of 11% in gross domestic product from 1996 through 2007. Domestic demand for and consumption of copper and CCA
products has increased substantially as a result of this growth. We believe that economic conditions in China will continue to affect
our business and results of operations.
Copper prices
    Generally the price of our products is set at a certain discount to local retail copper prices, and we believe our products replace
or supplement copper. For these reasons, our products are affected by the market price, demand and supply of copper.
    We price our copper and CCA wire products based on the market price for materials plus a fixed mark-up, which is essentially
our gross profit. Despite the implications of copper price volatility on our gross and net profit margins in percentage terms, during
the past three years the markup, or our gross and net profit in absolute dollar terms, has not been materially affected by the change
of copper prices. Shanghai Changjiang Commodity Market, one of the major metal trading markets in China, publishes the copper
trading prices twice daily. These prices typically set the range for the prices of our materials as well as finished products, and are
generally followed by all industry participants.
    Over the past three years, copper prices have fluctuated tremendously, with a high point of $8,730 per ton in April 2008 and a
recent range averaging $3,600 per ton. We believe such volatility has forced industry participants to seek replacement and
supplementary products so as to reduce their reliance on copper, and this has provided us with a unique market opportunity.
Demand for, and market awareness of, copper replacement products
    During the current copper cycle, increases in copper prices from 2003 and pending in April 2008, Chinese companies realized
the potential market opportunity for the production of CCA wire as a replacement to traditional copper wire. This change has lead
to an improved production process and facilitated increased production volumes from China. The major industry players in China
also have moved to get involved in the secondary refining process under the pressure of the copper price uncertainty and
fluctuation. We believe we are one of the innovators in both movements in which China plays an important role in seeking copper
replacement cable and wire products.
    The copper replacement industry segment is still in an early stage of development with a limited production capacity. We
believe demand for our products will continue to grow as demand for copper products grows and as market awareness of copper
replacement products increases. China is an importer of deficient copper reserves, and thus PRC law and government policies are
encouraging the development of copper replacement products. We expect demand for our products to continue to increase over
time.
Production capacity
   In order to capture the market opportunity for our products, we have expanded, and plan to continue to expand, our production
capacity. Increased capacity has had, and could continue to have, a significant effect on our results of operations, by allowing us to
produce and sell more products to generate higher revenues.
Supply and costs of principal raw materials
    Our ability to manage our operating costs depends significantly on our ability to secure affordable and reliable supplies of raw
materials. We have been able to secure a sufficient supply of raw materials, which primarily consist of CCA raw material wire and
scrap copper.
    The price of our primary raw materials varies with reference to copper prices, and changes in copper price affect our cost of
sales. However, we are able to price our copper and CCA products based on our material procurement costs plus a fixed mark-up,
which is essentially our gross profit. Therefore, despite the

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implications of copper price movement on our gross and net profit margin figures, during the past three years the mark-up, or our
gross and net profit in absolute dollars, have not been materially affected by the change of copper prices.
Product mix and effect on gross margins
   Our gross margin is also affected by our product mix. We produce and sell products according to customer orders. CCA magnet
wire and CCA tin plated wire are final products from which we will derive the highest production markup, or gross profit, and these
products account for a majority of our sales. However, we also generate a significant portion of revenue from selling semi-finished
products such as CCA raw wire at a lower production cost markup, or gross profit.
   The launch of our scrap copper refinery business will further change our product mix and gross margins. Generally copper rod
contributes a lower gross profit margin compared to finished wire products. At the initial development stage of this new business,
we believe that we have to sell more copper rod at lower profit margins. However, we expect a gradual ramping up of our wire
production facilities and thus we would be able to produce and sell more copper wire at higher profit margins than copper rod over
time. Nevertheless, depending on the amount of copper rod sales, we expect our overall gross margin to decline in the near future.
PRINCIPAL INCOME STATEMENT COMPONENTS
Sales
    Our sales are derived from our sales of CCA wire, copper rod and wire produced from refined scrap copper, net of value-added
taxes.
   The most significant factors that affect our sales are shipment volume and average selling prices.
    Our collection practices generally consist of cash payment on delivery. We extend credit for 30 days to 60 days to certain of our
established customers.
Cost of sales
   Our cost of sales primarily consists of direct material costs, and, to a lesser extent, direct labor costs and manufacturing
overhead costs. Direct material costs generally accounted for the majority of our cost of sales.
Gross Profit
    Our gross profit is affected primarily by the cost of raw materials, which is defined with reference to the cost of copper. We are
also able to price our products based on the market price for materials plus a fixed mark-up, which is essentially our gross profit.
Despite the implications of copper price volatility on our gross and net profit margins, in percentage terms in 2006, 2007 and 2008,
the mark-up, or our gross and net profit in absolute dollar terms, have increased with our growing scale of production.
    In March 2009, we commenced the production of copper rod and copper magnet wire, which both have lower average selling
prices and contributed lower gross profit margins during the three months ended June 30, 2009.
Operating expenses
   Our operating expenses consist of selling, general and administrative expenses, and research and development expenses.
Selling, general and administrative expenses
    Our selling, general and administrative expenses include salaries, shipping expenses, and traveling expenses for our sales
personnel, administrative staff costs and other benefits, depreciation of office equipment, professional service fees and other
miscellaneous expenses related to our administrative corporate activities.
   Our sales activities are conducted through direct selling by our internal sales staff. Because of the strong demand for our
products, we have not had to start to aggressively market and distribute our products, and our selling expenses have been relatively
small as a percentage of our revenues.

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    We anticipate that our selling, general and administrative expenses will increase with the anticipated growth of our business and
continued upgrades to our information technology infrastructure. We expect that our selling, general and administrative expenses
will also increase as a result of compliance, investor-relations and other expenses associated with being a publicly listed company.
Other income
    Other income includes interest income, interest expense, merger costs, foreign currency translation adjustments, and other
income.
    Our interest expense consisted of expenses related to our short term bank borrowings. We expense all interests incurred. No
interest paid in the costs incurred in the construction of property, plant and equipment during 2006, 2007 and 2008 and the six
months ended June 30, 2009 has been capitalized.
   Interest costs incurred for the years ended December 31, 2007 and 2008, were $96,535 and $514,950, respectively, of which
none were capitalized as part of the cost incurred in the construction of property, plant and equipment in those periods.
Change in fair value of warrants
    The fair value of the Company’s issued and outstanding Series A warrants to purchase 1,500,000 shares of Common Stock, and
Series B warrants to purchase 500,000 shares of Common Stock, increased to $2,646,855 as of June 30, 2009. As such, the
Company recognized a $340,167 loss from the change in fair value of these warrants for the three months ended June 30, 2009.
Merger costs
   Merger costs consisted of the expenses incurred to complete the transaction under which the company reverse merged into a
reporting shell while conducting a concurrent fundraising in 2008. The amount of $259,000 was incurred for this purpose during
2008, including $159,000 legal fees and $100,000 for the purchase of the shell.
Income taxes
    Under the current laws of the Cayman Islands and British Virgin Islands, we are not subject to any income or capital gains tax
and dividend payments we make are not subject to any withholding tax in the Cayman Islands or British Virgin Islands. Under the
current laws of Hong Kong, we are not subject to any income or capital gains tax and dividend payments we make are not subject
to any withholding tax in Hong Kong.
    Our two operating subsidiaries are governed by the PRC income tax laws and are subject to the PRC enterprise income tax
(―EIT‖). Each of the two entities files its own separate tax return. According to the relevant laws and regulations in the PRC,
foreign invested enterprises established prior to January 1, 2008 were entitled to full exemption from income tax for two years
beginning from the first year when enterprises become profitable and have accumulative profits and a 50% income tax reduction
for the subsequent three years. Being converted into a sino-foreign joint equity enterprise in 2005, Lihua Electron was thus entitled
to the EIT exemption in 2005 and 2006, and was subject to 50% income tax reduction during the period from 2007 to 2009. Set out
in the following table are the EIT rates for our two PRC Operating Companies from 2006 to 2011:




                                         2006        2007            2008              2009            2010         2011
        Lihua Electron                    —          12 %            12.50 %           12.50 %         25 %         25 %

        Lihua Copper                      —          25 %               25 %              25 %         25 %         25 %

RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2009 COMPARED TO THREE MONTHS ENDED JUNE 30, 2008
Sales
   Our business for the three months ended June 30, 2009 continued to demonstrate robust growth. Net sales increased by 224.7%
from $15.0 million to $48.8 million compared to the same period in 2008. This

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growth was primarily driven by strong market demand for our CCA copper wire and FRH copper rod products and was offset by
the decline of the average selling price. Our average selling price declined due to the addition of lower-price copper rod in the
product mix.
Cost of Sales and Gross Margin
   The following table sets forth our cost of sales and gross profit, both in amounts and as a percentage of total sales for the three
months ended June 30, 2009 and 2008:




                                                                                                                  Growth in
                                                                                                                three months
                                                                                                               ended June 30,
                                                                                                               2009 compared
                                                                                                                   to three
                                                       Three months ended June 30,                              months ended
                                                                                                                June 30, 2008
                                                2009                                     2008
        In thousands, except         US$                 % of                 US$                % of                %
        for percentage                                   Sales                                   Sales
        Total Sales            $     48,827                100.0 %     $      15,038               100.0 %          224.7 %

        Total cost of sales         (39,096 )           (80.1%)              (10,328 )          (68.7%)             278.5 %

        Gross Profit           $      9,731                 19.9 %     $        4,710               31.3 %          106.6 %


    Total cost of sales for the three months ended June 30, 2009 was $39.1 Million, reflecting an increase of 278.5% from the same
period last year. As a percentage of total sales, our cost of sales increased to 80.1% of total sales for the three months ended June
30, 2009, compared to 68.7% of total sales in the same period last year. Consequently, gross margin as a percentage of total sales
decreased to 19.9% in the three months ended June 30, 2009 from 31.3% for the same period last year, principally due to the
production of refined copper products, which have a lower margin compared to our CCA products.
   Gross profit for the three months ended June 30, 2009 was $9.7 million, up 106.6% from gross profit of $4.7 million for the
same period in 2008.
Selling, General and Administrative Expenses
    The following table sets forth operating expenses and income from operations both in amounts and as a percentage of total sales
for Selling, General and Administrative Expenses for the three months ended June 30, 2009 and 2008:
                                                                                                                        Growth in
                                                                                                                      three months
                                                                                                                     ended June 30,
                                                                                                                     2009 compared
                                                                                                                         to three
                                                                    Three months ended June 30,                       months ended
                                                                                                                      June 30, 2008
                                                             2009                                   2008
        In thousands, except for percentage       US$                    % of             US$              % of           %
                                                                         Sales                             Sales
        Gross profit                          $   9,731                 19.9 %       $    4,710            31.3 %        106.6 %

        Operating Expenses:
          Selling expenses                         (587 )                (1.2 )%           (172 )          (1.1 )%       241.2 %

          General & administrative                (1,093 )               (2.2 )%           (403 )          (2.7 )%       171.1 %
             expenses
        Total operating expense                   (1,680 )               (3.4 )%           (575 )          (3.8 )%       192.1 %

        Income from operations                $   8,051                 16.5 %       $    4,135            27.5 %         94.7 %


   Total selling, general and administrative expenses were approximately $1,680,000 for the three months ended June 30, 2009,
compared to approximately $575,000 for the same period last year, an increase of 192.1%.
    Selling expenses were approximately $587,000 in the three months ended June 30, 2009, an increase of 241.2% compared to
the same period last year. The increase was attributable to:

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   •    Increased costs related to product distribution and insurance as a result of expanded business volume; and
   •    Increased staffing costs as we continued to expand the sales force during the period,
    General & administrative expenses were approximately $1,093,000 in the three months ended June 30, 2009, an increase of
171.1% compared to the same period last year. Factors which caused this increase were higher administrative and professional fees
associated with the Company being a public reporting company and our expanded scale of operations.
Interest Expense
    Interest expense was $105,667 for the three months ended June 30, 2009, compared to $106,337 for the same period last year.
The decrease was mainly due to the repayment of short term bank loans which were used for working capital purposes.
Income tax
    For the three months ended June 30, 2009, income tax expense was $1,572,190, reflecting an effective tax rate of 19.0%. The
effective tax rate for the same period in 2008 was 13.1%.
   In 2008 and 2009, Lihua Electron was subject to an EIT rate of 12.5%, and Lihua Copper was subject to an EIT rate of 25%.
Net Income
   Net income for the three months ended June 30, 2009 was $6.7 million, or 13.7% of net revenue, compared to $3.5 million, or
23.3% of net revenue, in the same period in 2008.
Foreign Currency Translation Gains
    During the three months ended June 30, 2009, the RMB steadily rose against the US dollar, and we recognized a foreign
currency translation gain of $28,259.
YEAR ENDED DECEMBER 31, 2008 COMPARED TO YEAR ENDED DECEMBER 31, 2007
Sales
    Net sales increased by 53% from $32.6 million in 2007 to $50.0 million in 2008. This increase was primarily due to increased
sales volume of CCA magnet wire as driven by strong market demand, facilitated by the increase in our wire production capacity
from 4,200 tons in 2007 to 6,000 tons in 2008. The increase in the overall average selling price from $8,039 in 2007 to $8,382 in
2008 also contributed to our higher revenues in 2008. The average selling price increase year-over-year is a result of larger portion
of CCA magnet wire sales in our sales mix, which increased from 1,735 tons in 2007 to 4,087 tons in 2008. The percentage of our
total sales represented by sales of CCA Magnet wire increased from 43% in 2007 to 69% in 2008 accordingly.
Cost of Sales and Gross Margin
   Total cost of sales for the year ended December 31, 2008 was $33.2 million, reflecting an increase of 40.6% from 2007. As a
percentage of total sales, our cost of sales decreased to 66.4% of total sales for 2008, compared to 70.1% of total sales in 2007.
Consequently, gross margin as a percentage of total sales increased to 33.6% for 2008 from 29.9% for 2007, on the back of higher
average selling prices and lower copper prices. Gross profit for the year ended December 31, 2008 was $16.8 million, up 72.1%
from gross profit of $9.8 million for the same period in 2007.
Selling, General and Administrative Expenses
    The following table sets forth operating expenses and income from operations both in amounts and as a percentage of total sales
for the years ended December 31, 2008 and 2007.

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                                                             Year Ended December 31,                              Growth in
                                                                                                                    2008
                                                                                                                  compared
                                                                                                                  with 2007
                                                      2008                                 2007
                                            US$                % of               US$             % of
                                                               Sales                              Sales
        Gross profit                  $    16,804                33.6 %       $   9,766              29.9 %           72.0 %

        Operating Expenses:
          Selling expenses                   (700 )           (1.4%)              (417 )          (1.3%)              67.9 %

           G & A expenses                  (1,907 )           (3.8%)              (455 )          (1.4%)               3.9 %

          Total operating                  (2,607 )           (5.2%)              (872 )          (2.7%)              19.9 %
            expense
        Income from operations        $    14,197                28.4 %       $   8,894              27.2 %           59.6 %


   Total selling, general and administrative expenses were $2.6 million for the year ended December 31, 2008, compared to
$872,000 for the year ended December 31, 2007.
   Selling expenses were $700,000 in 2008, an increase of 67.9% compared to 2007. The increase was attributable to:
   •    Increased costs related to product distribution and insurance as a result of expanded business volume; and
   •    Increased staffing costs related to a bigger sales team, and an increase to 9 sales offices in 2008 compared to 6 in 2007,
   General & administrative expenses were $1.9 million in 2008, an increased of 319.1% compared to 2007. The increase was
mainly due to:
   •    Increased professional fees incurred in connection with capital-raising and financial reporting activities;
   •    An increase in share-based compensation expenses of $457,250; and
   •    An increase resulting from the increase in our scale of operations.
Interest Expense
    Interest expense was $514,950 for the year ended December 31, 2008, compared to $96,535 for the year ended December 31,
2007. The increase is largely due to accrued interest from additional bank loans utilized during the period. The loans were used for
working capital and capital expenditures for the expansion of production.
Income tax
   For 2008, income tax expense was $1,792,681, reflecting an effective tax rate of 15.3% and an increase of 64.6% from
$1,089,107 for 2007. The effective tax rate for 2007 was 14.1%.
   In 2007 and 2008, Lihua Electron was entitled to a 50% reduction from the EIT and thus was subject to EIT rates of 12.0% and
12.5%, respectively.
Net Income
   Net income for the year ended December 31, 2008 was $11.7 million, or 23.4% of net revenue, compared to $7.7 million, or
23.6% of net revenue, in the same period in 2007.
Foreign Currency Translation Gains
    During the year ended December 31, 2008, the RMB steadily rose against the US dollar. As a result we recognized a foreign
currency translation gain of $1,622,035.
YEAR ENDED DECEMBER 31, 2007 COMPARED TO DECEMBER 31, 2006
Sales
    Sales in 2007 were $32.7 million, an increase of $17 million from sales of $15.7 million in 2006. Our 2007 sales increase was
primarily attributable to an increase in total tons shipped due to strong market

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demand for our products and an increase in the price of our products due to an increase in the price of our main raw material,
copper. Total tons shipped increased 102% year-on-year to 4,065 versus 2,009 tons in 2006. The increase in tons shipped was a
result of strong customer demand associated with the acceleration of CCA as a substitute for pure copper in small size electronic
motors. To keep pace with the strong demand we increased our capacity from 10 lines at year-end 2006 to 19 lines at year-end
2007. In 2007, the average selling price per ton was $8,039, compared to $7,839 in 2006, representing an increase of $200 or 2.6%.
The average selling price increase year-over-year resulted primarily from: (i) the increase in the price of copper, our main raw
material, and (ii) more shipments of our higher selling price product CCA magnet wire which increased from 466 tons in 2006 to
1,735 tons in 2007. Sales of CCA magnet wire accounted for 43% of our total sales versus 23% in 2006.
Cost of Sales and Gross Margin
    Total cost of sales for the year ended December 31, 2007 was $22.9 million, an increase of 115.1% from 2006. As a percentage
of total sales, our cost of sales increased to 70.1% of total sales for 2007, compared to 67.6% of total sales in 2006. Consequently,
gross margin as a percentage of total sales decreased to 29.9% for 2007 from 32.4% for 2006, principally due to higher copper
prices driving an increase in our raw material price. Gross profit for the year ended December 31, 2007 was $9.8 million, up 91.5%
from gross profit of $5.1 million for the same period in 2006.
Selling, General and Administrative Expenses
    The following table sets forth the components of operating expenses and income from operations both in amounts and as a
percentage of total sales for the years ended December 31, 2007 and 2006.




                                                                         Year Ended December 31,
                                                              2007                      Ally Profit Investment Limited and
                                                                                                 Subsidiaries 2006
        (In thousands)                              US$                % of                US$                      % of
                                                                       Sales                                       Sales
        Gross profit                           $    9,766             29.9 %        $      5,101                  32.4 %
        Operating Expenses:
        Selling expenses                             (417 )           (1.3 )%               (230 )                (1.5 )%
        G & A expenses                               (455 )           (1.4 )%               (336 )                (2.1 )%
        Total operating expenses                     (872 )           (2.7 )%               (566 )                (3.6 )%
        Income from operations                 $    8,894             27.2 %        $      4,535                  28.8 %

    Total selling, general and administrative expenses was $872,000 for the year ended December 31, 2007, compared to $566,000
for the year ended December 31, 2006.
   Selling expenses were $417,000 in 2007, an increase of 81.3% compared to 2006. The increase was attributable to:
   •    Increased costs related to product distribution and insurance as a result of expanded business volume; and
   •    Increased staffing costs related to a bigger sales team, and an increase to 6 sales offices in 2007 compared to 2 in 2006,
    General & Administrative expenses were $455,000 million in 2007, an increase of 35.4% compared to 2006. The increase was
partially due to an increase in other selling, general and administrative expenses of $0.1 million resulting from the increase in our
scale of operations.
Interest Expense
   Interest expense was $96,535 for the year ended December 31, 2007, compared to $42,859 for the year ended December 31,
2006. The increase is largely due to accrued interest from additional bank loans utilized during the period. The loans were used for
working capital and capital expenditures for the expansion of production.

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Income tax
   For 2007, income tax expense was $1,089,107, reflecting an effective tax rate of 14.1%, compared to $0 for the same period in
2006.
    The PRC Operating Companies are subject to PRC income taxes on an entity basis on income arising in or derived from the tax
jurisdiction in which they operate, i.e. the PRC. In accordance with the relevant tax laws in the PRC, the Company’s subsidiary,
Danyang Lihua Electron, was subject to an EIT rate of 24% on its taxable income for the years ended December 31, 2007 and 2006
since it is located in economic development zone. However, Danyang Lihua Electron is a production-based foreign investment
enterprise and granted an EIT holiday for the two years ended December 31, 2006 and 2005 and a 50% reduction on the EIT rate
for the three years ended December 31, 2007, 2008 and 2009.
Net Income
   Net income for the twelve-month period ended December 31, 2007 was $7.7 million, or 23.6% of net revenue, compared to
$4.5 million, or 28.6% of net revenue, in the same period in 2006.
Foreign Currency Translation Gains
    During the twelve months ended December 31, 2007, the RMB steadily rose against the US dollar. As a result we recognized a
foreign currency translation gain of $802,502.
LIQUIDITY AND CAPITAL RESOURCES
   The following table summarizes our cash flows for each of the periods indicated:




                              Six Months Ended June 30,                            Year Ended December 31,
                              2009                 2008                2008                  2007                Ally Profit
                                                                                                             Investment Limited
                                                                                                              and Subsidiaries
                                                                                                                    2006
   Net cash provided $       5,745,577      $     8,911,914     $   15,837,702        $     2,123,478        $    5,268,917
     by operating
     activities
   Net cash used in         (2,947,312 )         (1,366,392 )       (4,693,086 )          (11,560,119 )          (4,854,852 )
     investing
     activities
   Net cash provided          (706,466 )            450,963         10,966,675             11,290,295               129,218
     by financing
     activities
   Effect of                    10,806              527,653            716,909                469,516               109,763
     exchange rate
     on cash and
     cash
     equivalents
   Cash and cash           26,041,849             3,213,649          3,213,649                890,479               237,433
     equivalents at
      beginning of
      period
    Cash and cash       $    28,144,454      $    11,737,787      $    26,041,849      $       3,213,649      $       890,479
      equivalents at
      end of period

Operating activities
    For the six months ended June 30, 2009, cash provided by operating activities totaled $5.7 million compared to $8.9 million in
the same period of 2008. This was primarily attributable to: i) a $10.7 million increase in net earnings, ii) a $2.8 million accounts
receivable increase driven by revenue growth; ii) a $7.3 million inventory increase, principally in copper rods, to support planned
expansion and sales growth in copper wire; iii) a $1.2 million increase in income tax payable; and iv) a $3.5 million increase in
account payable as a result of an increase in the purchase of raw material to accommodate growing demand.
    For the year ended December 31, 2008, cash provided by operating activities totaled $15.8 million compared to $2.1 million in
2007. This is principally attributable to: (i) a $4.0 million increase in net earnings; (ii) a decrease in working capital, and in
particular a decrease of $2.0 million in inventory levels resulting from an intentional build up of raw material inventory levels in
2007 in anticipation of copper price increases; iii) better accounts receivable collection; and (iv) the add-back of non cash charges
related to capital raising and financial reporting activities, namely a share-based compensation charge of $0.4 million and a
warrant-related charge of $90,000.

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    For the year ended December 31, 2007, cash provided by operating activities totaled $2.1 million compared to $5.3 million in
2006. This is principally attributable to i) a $3.2 million increase in net earnings; ii) a $4.1 million increase in accounts receivable
and a $0.7 million increase in notes receivable as we revalued the credit of our major customers and extended the collection period
of most of them; and iii) an increase of $1.3 million in inventory levels resulting from an intentional build up of inventory levels in
2007 in anticipation of raw material price increases.
Investing activities
   For the six months ended June 30, 2009 we had a net cash outflow of $2.9 million from investing activities for the purchase of
property, plant and equipment, primarily as a result of capital investment in new equipment and machinery, and building up new
workshops, all being part of our planned expansion.
    For the year ended December 31, 2008, cash outflow for investing activities was approximately $4.7 million, primarily as a
result of capital investment in land-use rights, in new equipment and machinery, and in office building improvements, all being part
of our planned expansion. The capital investment on new equipment and machinery related to the construction of the new Lihua
Copper production facility, which began production in March 2009.
    For the year ended December 31, 2007, cash outflow for investing activities was approximately $11.6 million, primarily due to
our: (i) lending of $3.2 million to a related party, which had been repaid in 2008; (ii) capital investment of $3.8 million in new
equipment and machinery; and (iii) capital investment of $4.5 million in land-use rights. Going forward, the company has no
intention to lend to related parties.
Financing activities
    For the three months ended June 30, 2009 we had a net cash outflow of $706,466 from investing activities which constituted a
repayment of bank loans of $3.2 million, offset by $1,050,000 released from the escrowed cash related to an October 2008 private
placement as the Company satisfied certain legal post-closing conditions, and the borrowing of $1.5 million short term bank loans
for working capital related to recently added production lines.
    Financing activities provided net cash inflow of $11.0 million during the year ended December 31, 2008 primarily as a result of
generating the net proceeds of approximately $12.0 million from the issue of convertible Preferred Stock in a private placement in
October 2008. We drew down approximately $12.0 million from our existing credit facilities to meet working capital needs and
repaid approximately $10.2 million of our existing credit facilities. Our working capital financing carries maturity periods ranging
from three to six months, while the short-term and revolving nature of these credit facilities is common in China. The majority of
these short-term credit facilities are guaranteed by Tianyi Telecom, a related party, as well as our inventories and fixed assets. We
intend to renew these loans once they become due and do not believe we will encounter difficulty in doing so on acceptable terms
because we have pledgable assets and have access to corporate guarantors, and we have a strong credit profile. We expect that the
terms for these loans will be similar, in both interest rate and duration, to the current loans. If for some reason we are not able to
renew those bank loans, we have sufficient funds to execute our business plan.
   Financing activities provided net cash inflow of $0.1 million during the year ended December 31, 2007 primarily from
advances from a related party.
Capital expenditure
   Our capital expenditures are principally comprised of construction and purchases of property, plant and equipment for
expansion of our production facilities. In 2006, 2007 and 2008, we funded our capital expenditures primarily through cash flows
from operating activities and the proceeds of bank borrowings, and equity issuance. We intend to fund our future capital
expenditures through cash flows from operations and the net proceeds from this Offering.
   In 2009, as we accelerate our expansion, we expect continued capital expenditure for maintaining existing machines and adding
manufacturing equipment in our new facility, which is adjacent to our old facility. In the new production facilities we currently
have two horizontal smelters, which can produce 25,000 tons refinery copper per year, we plan to have one new vertical smelter in
2011 while increasing our refinery copper to

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100,000 tons per year. With our current capacity of production lines, we can produce 6,000 tones of CCA wire and 6,000 tons of
copper wire. Therefore, we plan to have six new production lines in production by the end of 2009 while increasing our copper wire
production capacity to 14,000 tons per year. Of that capacity, 10,000 tons per year will be copper magnet wire and 4,000 tons per
year will be copper fine wire. We also plan to have another four production lines in production by the end of 2009, increasing our
CCA wire production capacity to 7,500 tons per year. Of that capacity, 5,500 tons per year will be CCA magnet wire and 2,000 ton
per year will be CCA fine wire. We believe that our existing cash, cash equivalents and cash flows from operations, proceeds from
this Offering, and our revolving credit facility, will be sufficient to meet our presently anticipated future cash needs to bring all of
our facilities into full production. We may, however, require additional cash resources due to changing business conditions or other
future developments, including any investments or acquisitions we may decide to pursue.
    We intend to expand our operations as quickly as reasonably practicable to capitalize on the demand opportunity for our
products. Net investment into facilities, machinery and equipment were $5.9 million, $7.4 million and 7.5 million for the fiscal
years ended December 31, 2006, 2007 and 2008, respectively and were $14.3 million in the aggregate as of the three months ended
March 31, 2009. We estimate that we will require $4.3 million to meet our capital expenditure program over the next twelve
months. We regularly review our cash funding requirements and attempt to meet those requirements through a combination of cash
on hand, cash provided by operations and available borrowings under bank lines of credit. We believe that we can continue to meet
our cash funding requirements for our business in this manner over the next twelve months.
   Our capital expenditures are set forth below for the period as indicated:




                                               Six months ended June 30,               Year Ended December 31,
                                                 2009             2008         2008          2007        Ally Profit Investment
                                                                                                              Limited and
                                                                                                           Subsidiaries 2006
        (In thousands)
        Construction of plant and          $      1,704      $      771    $   3,076     $     994      $            354
          production facilities
        Purchase of machinery and                 1,243           1,048        1,776         2,818                 4,501
          equipment
        Total capital expenditure          $      2,947      $    1,819    $   4,852     $   3,812      $          4,855

Obligations under Material Contracts
   We had the following capital commitment of as of December 31, 2008:
         Purchase of machinery – within one year                                                   $             910,125
         Acquisition or construction of buildings – within one year                                            1,049,895
                                                                                                   $           1,960,020

    Other than the contractual obligations and commercial commitments set forth above, we did not have any other long-term debt
obligations, capital commitments, purchase obligations or other long-term liabilities as of December 31, 2008.
Market Risks
   We are exposed to various types of market risks, including changes in interest rates, foreign exchange rates 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 will increase the cost of new debt. We do not currently use any derivative
instruments to manage our interest rate risk.

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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.
    We are primarily exposed to price risk related to our purchase of copper used in the manufacture of our products. We purchase
most of our raw materials at prevailing market prices. We do not have formal long-term purchase contracts with our suppliers and,
therefore, we are exposed to the risk of fluctuating raw material prices. Our raw material price risk is mitigated because we
generally in excess of one year attempt to pass changes in raw material costs to our customers.
   We did not have any commodity price derivatives or hedging arrangements outstanding at December 31, 2008 and did not
employ any commodity price derivatives during the fiscal year ended December 31, 2008.
Foreign exchange risk
    We carry out the majority of our transactions in Renminbi. Therefore, we have limited exposure to foreign exchange
fluctuations. A substantial portion of our cash is held in China in interest bearing bank deposits and denominated in RMB. The
Renminbi 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. See ―Risk Factors — PRC laws and foreign exchange controls may affect our ability to receive dividends and
other payments from our PRC Operating Companies.‖
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. According to the National Bureau of Statistics of China, inflation as
measured by the consumer price index in China was 1.5%, 4.8% and 5.9% in 2006, 2007 and 2008, respectively.
Off-Balance Sheet Arrangements
   We do not have any off-balance sheet arrangements.
Critical Accounting Policies
    The Company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles,
which require management to make subjective decisions, assessments and estimates about the effect of matters that are inherently
uncertain. As the number of variables and assumptions affecting the judgment increases, such judgments become even more
subjective. While management believes its assumptions are reasonable and appropriate, actual results may be materially different
from estimated. Management has identified certain critical accounting policies, described below, that require significant judgment
to be exercised by management.
Revenue recognition
    Revenue is recognized when the following four revenue criteria are met: persuasive evidence of an arrangement exists, delivery
has occurred, the selling price is fixed or determinable, and collectibility is reasonably assured.
    Sales revenue is recognized net of sales discounts and returns at the time when the merchandise is sold to the customer. Based
on historical experience, management estimates that sales returns are immaterial and has not made allowance for estimated sales
returns. Sales revenue is presented net of value added and sales related taxes in accordance with the guidance in EITF 06-3.
Share-Based Payments
    We account for share-based compensation awards to employees in accordance with SFAS No. 123R, ―Share-based Payment‖
which requires that share-based payment transactions with employees be measured based on the grant-date fair value of the equity
instrument issued and recognized as compensation expense over the requisite service period.

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    We account for share-based compensation awards to non-employees in accordance with SFAS 123R and EITF Issue No. 96-18,
―Accounting for Equity Instruments That Are Issued To Other Than Employees for Acquiring, or in Conjunction with Selling,
Goods or Services‖, or EITF 96-18. Under SFAS 123R and EITF 96-18, stock compensation granted to non-employees has been
determined as the fair value of the consideration received or the fair value of equity instrument issued, whichever is more reliably
measured and is recognized as expenses as the goods or services are received.
   In conjunction with the Private Placement, we entered into a make good escrow agreement with the Investors (the ―Securities
Escrow Agreement‖), pursuant to which Magnify Wealth initially placed 6,818,182 of Common Stock (equal to 100% of the
number of shares of Common Stock underlying the Investor Shares) (the ―Escrow Shares‖) into an escrow account. The Escrow
Shares are being held as security for the achievement of performance thresholds for fiscal years 2008 and 2009.
    According to the Accounting Interpretation and Guidance of the staff of the SEC, the placement of shares in escrow is viewed
as a recapitalization similar to a reverse stock split. The agreement to release the shares upon achievement of certain criteria is
presumed to be a separate compensatory arrangement with the registrant. Accordingly, when the Escrow Shares are released back
to Magnify Wealth, an expense equal to the amount of the grant-date fair value of $2.26 per share of the Company’s Common
Stock as of October 31, 2008, or the date of the Securities Escrow Agreement will be recognized in the Company’s financial
statements in accordance with SFAS No. 123R, ― Accounting for Stock-Based Compensation ‖. Otherwise, if the net income
threshold is not met and the Escrow Shares are released to the investors instead, it will be accounted for as a capital transaction with
the investors resulting in no income or expense being recognized in the Company’s financial statements.
    For the year ended December 31, 2008, our net income was $11,701,879 which achieved 95% of the 2008 performance
threshold. All of the Escrow Shares will continue to be held in escrow and none has yet been released to either Magnify Wealth or
the Investors. As the release of the Escrow Shares requires the attainment of the performance thresholds for both 2008 and 2009,
we will only commence to recognize compensation expense around the middle of fiscal year 2009 when we will be able to evaluate
whether it is probable that we will achieve the 2009 performance threshold to provide for the ultimate release of the Escrow Shares
back to Magnify Wealth. For the year ended December 31, 2008, no compensation expense has been recognized in this regard.
    Our Common Stock is not publicly traded. We have determined that our Common Stock had a fair value of $2.260 per share at
October 31, 2008, or the date of the Securities Escrow Agreement, based on a retrospective valuation of our enterprise fair value
performed by an unrelated valuation firm, Grant Sherman Appraisal Limited. The valuation has been prepared consistent with the
guidance outlined in the American Institute of Certified Public Accountants Practice Aids, ― Valuation of Privately — Held
Company Equity Securities Issued as Compensation ‖.
    We are a group of entities comprising Lihua International Inc., Ally Profit, Lihua Holdings, Lihua Copper and Lihua Electron,
for which different valuation approaches have been considered and used.
   Because Lihua International, Inc., Ally Profit and Lihua Holdings are holding companies only and have no revenue, both
market and income approaches have been considered not applicable, and only an asset-based approach has been applied. Lihua
Copper has not generated revenue and has little expense history. Accordingly, both market and income approaches have been
considered inappropriate and an asset-based approach has been applied.
    Because Lihua Electron has an established financial history of profitable operations and generation of positive cash flows, an
income approach has been applied using the discounted cash flow method. We developed our discounted cash flow analysis based
on our projected cash flows from 2009 through 2011, including, among other things, our estimates of future revenue growth, gross
margins, capital expenditures and working capital requirements, driven by assumed market growth rates, and estimated costs as
well as appropriate discount rates. A market approach was not applied because we concluded that there was significant limitation in
identifying true comparable enterprises with readily determinable fair values.

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Accounting for Series A Convertible Preferred Stock and Warrants
    On October 31, 2008, we entered into and completed a securities purchase agreement (―Purchase Agreement‖) with certain
accredited investors (the ―Investors‖) for the issuance and sale by the Company in a private placement (―Private Placement‖) of
6,818,182 shares of Series A Convertible Preferred Stock (―Preferred Stock‖, or ―Investor Shares‖) and Series A warrants to
purchase 1,500,000 shares of Common Stock (the ―Investor Shares‖). The Company received $13,656,538 in proceeds from this
Private Placement after paying fees and expenses.
    Pursuant to the Securities Escrow Agreement entered into by us in conjunction with the Private Placement, if we fail to achieve
certain net income thresholds for fiscal years 2008 and/or 2009, additional shares of our Common Stock would be released to the
holders of the Preferred Stock. As a result, the holders of the Preferred Stock could acquire a majority of the voting power of our
outstanding Common Stock. In such a situation, we would not be able to control the approval of ―any merger, consolidation or
similar capital reorganization of its Common Stock‖, i.e. events which could trigger the right of Preferred Stock holder to request
for redemption. EITF D-98, ― Classification and Measurement of Redeemable Securities ‖, provides that preferred securities that
are redeemable for cash are to be classified outside of permanent equity if they are redeemable upon the occurrence of an event that
is not solely within the control of the issuer. Therefore, the Preferred Stock have been classified out of permanent equity in
accordance with EITF D-98. For the year ended December 31, 2008, our net income was $11,701,879 which achieved 95% of the
2008 net income threshold and, according to the terms of the Securities Escrow Agreement, all of the escrow shares will continue
to be held in escrow and no Preferred Share has been released to the preferred stockholders. If the 2009 net income threshold is
achieved, the Preferred Stock will be reclassified to permanent equity.
Accounting for allocation of proceeds from Private Placement
    In accordance with EITF 00-27, ― Application of Issue No. 98-5 to Certain Convertible Instruments ‖, the proceeds from the
Private Placement were first allocated between the Preferred Stock and the warrants issued in connection with the Private
Placement based upon their estimated fair values as of the closing date, resulting in an aggregate amount of $539,910 being
allocated to the Series A Warrants and the 250,000 Series B Warrants issued to Broadband.
    Then, we calculated the fair value of the embedded conversion feature of the Preferred Stock of $1,002,115 using EITF 98-5
intrinsic value model in accordance with EITF 00-27, ―Application of Issue No. 98-5 to Certain Convertible Instruments‖. The
intrinsic value of the beneficial conversion feature was calculated by comparing the effective conversion price, which was
determined based on the proceeds from the Private Placement allocated to the convertible Preferred Stock, and the fair value of our
Common Stock of $2.26 at the commitment date, which was determined with the assistance of an unrelated valuation firm as
discussed above. The fair value of $1,002,115 of the beneficial conversion feature has been recognized as a reduction to the
carrying amount of the convertible Preferred Stock and an addition to paid-in capital.
    In accordance with Issue 6 of EITF 00-27, the discount on the Preferred Stock resulting from beneficial conversion feature was
amortized to retained earnings, because the Preferred Stock are immediately convertible upon issuance and have no stated
redemption date. Amortization of the discount resulting from beneficial conversion feature is considered analogous to a return to
holders of perpetual preferred stock and has been accounted for as a reduction to net income available to Common Stock holders
for the purpose of calculation of earnings per share.
    We have evaluated the circumstances under which the Preferred Stock may become redeemable at the option of holders and
concluded it is not probable that the Preferred Stock will become redeemable. Therefore, no accretion charge has been recognized
regarding any change in the redemption value of the Preferred Stock.

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    The fair values of Series A and Series B Warrants were determined using the Black-Scholes option pricing method with the
following assumptions:




        Fair value of Common Stock at October 31, 2008:                                                 $         2.26
        Exercise price:                                                                                 $         3.50
        Contractual life (years):                                                                                    5
        Dividend yield:                                                                                             —
        Expected volatility:                                                                                     31.61 %
        Risk-free interest rate:                                                                                  2.79 %
    Prior to this offering, our Common Stock is not publicly traded. We have determined that our Common Stock had a fair value
of $2.26 per share at October 31, 2008 based on a retrospective valuation performed by an unrelated valuation firm, Grant Sherman
Appraisal Limited, discussed above. The valuation has been prepared consistent with the methods outlined in the American
Institute of Certified Public Accountants Practice Aids, ― Valuation of Privately-Held Company Equity Securities Issued as
Compensation ‖ as discussed above.
    Because prior to this offering, our Common Stock is not publicly traded, historical volatility information is not available. In
accordance with SFAS No. 123R, ― Accounting for Stock-Based Compensation” , with the assistance of an unrelated valuation
firm, Grant Sherman Appraisal Limited, we identified five similar public entities for which share and option price information was
available, and considered the historical volatilities of those public entities’ share prices in calculating the expected volatility
appropriate to us (i.e. the calculated value). The risk-free rate of return reflects the interest rate for United States Treasury Note
with similar time-to-maturity to that of the warrants.
   The fair value of $90,000 of the 250,000 Series B Warrants issued to Penumbra for services was charged to operations for the
year ended December 31, 2008.
Income Taxes
    The Company accounts for income taxes in accordance with SFAS No. 109, ―Accounting for Income Taxes‖, which requires an
asset and liability approach for financial accounting and reporting for income taxes and allows recognition and measurement of
deferred tax assets based upon the likelihood of realization of tax benefits in future years.
    The Company considers current tax laws and its interpretation of them when making judgments, assumptions and estimates
relative to current provision for income tax. The Company also assesses a valuation allowance to offset deferred tax assets if based
on the weight of available evidence, it is more likely than-not that some portion, or all, of the deferred tax assets will not be
realized. Such evidence includes the Company’s estimates of future taxable income and tax planning strategies. Changes in relevant
tax laws, and the Company’s judgments, assumptions and estimates relative to current provision for income tax could have resulted
in material differences in the amount of income taxes provided in the Company’s consolidated financial statements.
    Effective October 1, 2007, the Company adopted FASB Interpretation No. 48, ―Accounting for Uncertainty in Income
Taxes — an interpretation of FASB Statement No. 109,‖ or FIN 48, which clarifies the accounting and disclosure for uncertainty in
tax positions, as defined in that statement. FIN 48 requires that the Company recognizes the impact of a tax position in the financial
statements if that position is more likely than not of being sustained upon audit by the tax authority, based on the technical merits
of the position. The amount recognized is measured as the largest amount of benefit that is more likely than not of being realized
upon ultimate settlement. The final outcome of the tax uncertainty is dependent upon various matters including tax examinations,
interpretation of tax laws or expiration of statutes of limitation. The adoption of FIN 48 had no material effect on the Company’s
financial statements.
Impairment of long-lived assets
    The Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that
the related carrying amounts may not be recoverable. An impairment is considered to exist if the total estimated future cash flows
on an undiscounted basis are less than the carrying amount of

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the assets, including goodwill, if any. An impairment loss is measured and recorded based on discounted estimated future cash
flows. In estimating future cash flows, assets are grouped at the lowest level for which there is identifiable cash flows that are
largely independent of future cash flows from other asset groups.
Accounts receivable
    Accounts receivable is stated at cost, net of allowance for doubtful accounts. The Company maintains allowances for doubtful
accounts for estimated losses resulting from the failure of customers to make required payments. The Company reviews the
accounts receivable on a periodic basis and makes allowances where there is doubt as to the collectibility of individual balances. In
evaluating the collectibility of individual receivable balances, the Company considers many factors, including the age of the
balance, the customer’s payment history, its current credit-worthiness and current economic trends.
Inventories
    Inventories are stated at the lower of cost, determined on a weighted average basis, or market. Costs of inventories include
purchase and related costs incurred in bringing the products to their present location and condition. Market value is determined by
reference to selling prices after the balance sheet date or to management’s estimates based on prevailing market conditions. The
management will write down the inventories to market value if it is below cost. The management also regularly evaluates the
composition of its inventories to identify slow-moving and obsolete inventories to determine if valuation allowance is required.
Foreign currency translation
    The Company uses the United States dollars (―US Dollar‖ or ―US$‖ or ―$‖) for financial reporting purposes. The Company
maintain s books and records in its functional currency, Chinese Renminbi (―RMB‖), being the primary currency of the economic
environment in which its operations are conducted. In general, the Company translates its assets and liabilities into US Dollar using
the applicable exchange rates prevailing at the balance sheet date, and the statement of income is translated at average exchange
rates during the reporting period. Adjustments resulting from the translation of the Company’s financial statements are recorded as
accumulated other comprehensive income.
    The exchange rates used to translate amounts in RMB into US Dollar for the purposes of preparing the consolidated financial
statements were as follows:




                                June 30, 2009          December 31, 2008         December 31, 2007        December 31, 2006
       Balance sheet        US$1=RMB6.8319            US$1=RMB6.8346           US$1=RMB7.3046            US$1=RMB7.8087
         items, except
         for paid-in
         capital and
         retained
         earnings, as
         of year end
       Amounts              US$1=RMB6.8299            US$1=RMB6.9452           US$1=RMB7.6071            US$1=RMB7.9735
         included in
         the statements
         of income,
         and
         statements of
          cash flows for
          the year
   No representation is made that RMB amounts have been, or would be, converted into US$ at the above rates.
Recently issued accounting pronouncements
    In December 2007, the FASB issued SFAS 141(R), ―Business Combinations‖, which replaces SFAS 141, ―Business
Combinations‖. SFAS 141R retains the fundamental requirements in SFAS 141 that the acquisition method of accounting (which
SFAS 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business
combination. SFAS 141R requires an acquirer to recognize the assets acquired, the liabilities assumed, and any non-controlling
interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions. This replaces

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SFAS 141’s cost-allocation process, which required the cost of an acquisition to be allocated to the individual assets acquired and
liabilities assumed based on their estimated fair values. SFAS 141R also requires the acquirer in a business combination achieved
in stages (sometimes referred to as a step acquisition) to recognize the identifiable assets and liabilities, as well as the
non-controlling interest in the acquiree, at the full amounts of their fair values (or other amounts determined in accordance with
SFAS 141R). SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning
of the first annual reporting period beginning on or after December 15, 2008. This statement does not currently affect our financial
statements.
    In December 2007, the FASB issued SFAS No. 160, ―Non-controlling Interests in Consolidated Financial Statements — An
Amendment of ARB No. 51‖ (―SFAS No. 160‖), which establishes new accounting and reporting standards for the non-controlling
interest in a subsidiary and for the deconsolidation of a subsidiary. Specifically, this statement requires the recognition of a
non-controlling interest (minority interest) as equity in the consolidated financial statements and separate from the parent’s equity.
SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008
(that is, fiscal 2009 for the Company). Management does not expect that this Statement will have an effect on our consolidated
financial statements.
    In March 2008, the FASB issued SFAS No. 161, ―Disclosures about Derivative Instruments and Hedging Activities — An
Amendment of FASB Statement No. 133‖ (―SFAS No. 161‖), which changes the disclosure requirements for derivative
instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses
derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its
related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial
performance, and cash flows. This statement will be effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008 (that is, fiscal 2009 for the Company). Management does not expect that this Statement will
have an effect on our consolidated financial statements.
    In May 2008, the FASB issued SFAS No. 162, ―The Hierarchy of Generally Accepted Accounting Principles‖. This Statement
identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of
financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles
(GAAP) in the United States (the GAAP hierarchy). This Statement is effective 60 days following the SEC’s approval of the Public
Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With
Generally Accepted Accounting Principles. Management does not expect that this Statement will have an effect on our consolidated
financial statements.
    In May 2008, the FASB issued SFAS No. 163, ―Accounting for Financial Guarantee Insurance Contracts — an interpretation of
FASB Statement No. 60‖. This Statement interprets Statement 60, ―Accounting and Reporting by Insurance Enterprises‖ and
amends existing accounting pronouncements to clarify their application to the financial guarantee insurance contracts included
within the scope of this Statement. This Statement requires that an insurance enterprise recognize a claim liability prior to an event
of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. This
Statement also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and
measurement to be used to account for premium revenue and claim liabilities. This Statement is effective for financial statements
issued for fiscal years beginning after December 15, 2008 (that is, fiscal 2009 for the Company), and all interim periods within
those fiscal years. Management does not expect that this Statement will have an effect on our consolidated financial statements.
    In June 2008, the FASB issued EITF 08-4, ―Transition Guidance for Conforming Changes to Issue No. 98-5.‖ The objective of
EITF 08-4 is to provide transition guidance for conforming changes made to EITF 98-5, ―Accounting for Convertible Securities
with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios‖, that result from EITF 00-27 ―Application of
Issue No. 98-5 to Certain Convertible Instruments‖, and SFAS 150, ―Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity‖. This Issue is effective for financial statements issued for fiscal years ending after
December 15, 2008 and has no effect on our financial statements.

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    In October 2008, the FASB issued FSP FAS 157-3, ―Determining the Fair Value of a Financial Asset in a Market That Is Not
Active‖ (FSP 157-3), which clarifies the application of SFAS 157 when the market for a financial asset is inactive. Specifically,
FSP 157-3 clarifies how (1) management’s internal assumptions should be considered in measuring fair value when observable data
are not present, (2) observable market information from an inactive market should be taken into account, and (3) the use of broker
quotes or pricing services should be considered in assessing the relevance of observable and unobservable data to measure fair
value. We adopted the provisions of FSP 157-3, which did not impact our financial position or results of operations.
    In December 2008, the FASB issued FSP FAS 140-4 and FIN 46(R)-8, ―Disclosures by Public Entities (Enterprises) about
Transfers of Financial Assets and Interests in Variable Interest Entities‖ (―FSP FAS 140-4 and FIN 46(R)-8‖). FSP FAS 140-4 and
FIN 46(R)-8 amends FAS 140 and FIN 46(R) to require additional disclosures regarding transfers of financial assets and interest in
variable interest entities. FSP FAS 140-4 and FIN 46(R)-8 is effective for interim or annual reporting periods ending after
December 15, 2008. FSP FAS 140-4 and FIN 46(R)-8 did not have any impact on our financial statements.
    In January 2009, the FASB issued FSP EITF 99-20-1, ―Amendments to the Impairment Guidance of EITF Issue No. 99-20, and
EITF Issue No. 99-20, Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in
Securitized Financial Assets‖. FSP EITF 99-20-1 changes the impairment model included within EITF 99-20 to be more consistent
with the impairment model of SFAS 115. FSP EITF 99-20-1 achieves this by amending the impairment model in EITF 99-20 to
remove its exclusive reliance on ―market participant‖ estimates of future cash flows used in determining fair value. Changing the
cash flows used to analyze other-than-temporary impairment from the ―market participant‖ view to a holder’s estimate of whether
there has been a ―probable‖ adverse change in estimated cash flows allows companies to apply reasonable judgment in assessing
whether an other-than-temporary impairment has occurred. The adoption of FSP EITF 99-20-1, which is effective for annual
reporting periods ending after December 15, 2008, will not have a material impact on our consolidated financial statements.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
    On December 16, 2008, we dismissed DeJoya Griffith & Company LLC (―DeJoya‖), as our independent registered public
accounting firm. The reports of DeJoya on our financial statements for each of the past two fiscal years contained no adverse
opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, except
as that the reports of DeJoya for the fiscal years ended December 31, 2007 and 2006 indicated conditions which raised substantial
doubt about the Company’s ability to continue as a going concern. The decision to change independent accountants was approved
by our Board of Directors on December 16, 2008.
    During our two most recent fiscal years and through December 19, 2008, the date of filing our Current Report on Form 8-K
announcing the dismissal of DeJoya, we have had no disagreements with DeJoya on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of
DeJoya, would have caused it to make reference to the subject matter of such disagreements in its report on our financial statements
for such periods.
   During our two most recent fiscal years there have been no reportable events as defined under Item 304(a)(1)(v) of Regulation
S-K adopted by the SEC.
   DeJoya provide us with a letter addressed to the SEC stating that it agreed with the above statements. This letter was filed as an
exhibit to our Current Report on Form 8-K, which was filed with the SEC on December 19, 2008.

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                                            INDUSTRY AND MARKET OVERVIEW
Cable and Wire Market
    According to International Cablemakers’ Federation, China is the world’s largest cable & wire producer. The following chart
illustrates China’s historical industry leading position in global and wire production from 2003 – 2007:




Source: International Cablemakers’ Federation, 2009
Magnet Wire Market
    Magnet wire represents a sub-category in the cable and wire industry. Magnet wire is an insulated copper or aluminum
electrical conductor used in motors, transformers and other electromagnetic equipment. When wound into a coil and energized,
magnet wire creates an electromagnetic field. This effect can be used for a variety of purposes, such as energy generation and
transformation, which has made magnet wire a basic building block of motorized appliances, automobiles, industrial machinery,
residential and commercial heating, ventilating, air conditioning and refrigeration (HVACR) systems, computers, telephones, cell
phones, and televisions.
    According to a publicly available report by Gobi International, a provider of statistical market research reports and forecasts on
insulated wire and cable, in 2006 global consumption of magnet wire was more that $10 billion. The report also indicated that
China has the largest demand for magnet wire in the world, and forecasted demand is expected to grow by 38.3% from 2007 to
2012, the highest among all major economies.
    The growth in China’s magnet wire market has significantly outpaced the global market since 2000. According to Beijing
Kaiboxin Enterprise Consulting Company Ltd (―Kaiboxin‖), a China based provider of industry research reports and forecasts,
from 2000 to 2005, the global demand for magnet wire increased at a CAGR of 3%, while that of China increased at 17% during
the same period. In 2005 China accounted for approximately 29% of the worldwide market, and it is expected to account for 48%
of the global market share in 2015.

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    The following charts indicate the historical and projected growth of the Chinese magnet wire market. As evidenced in the
charts, the information technology sector is projected to experience the largest percentage growth through 2015. On a historical
basis, in 2005, the electric motor sector represented the largest sub-sector with 53% of the overall market.

                                                 China’s Magnet Wire Market




                       Projected Growth by Sector                                2005 Share of Total Demand




Source: Kaiboxin, 2007
Copper
    Copper ranks third in the world consumption of metals after iron and aluminum. Copper’s chemical, physical and aesthetic
properties make it attractive for many applications including electronics and communications, construction, transportation, and
industrial equipment. The chief commercial use of copper is based on its electrical conductivity which is second only to that of
silver among all metals. About three quarters of total consumption is accounted for by electrical uses, including power transmission
and generation, building wiring, telecommunication, and electrical and electronic products.

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    According to International Copper Study Group (―ICSG‖), world refined copper consumption grew from 14.9 million metric
tons (―Mt‖) in 2001 to 18.5 million Mt in 2007, a CAGR of 3.7%, as indicated by the following chart:

                                                 World Copper Consumption
   ( Metric Tons)




Source: Copper Development Association Inc., 2008
    However, ICSG projected copper consumption to be 18.25 million Mt in 2008 and 18.9 million Mt in 2009, with production
projected be 18.4 Mt in 2008 and 19.2 Mt in 2009. This resulted in a supply surplus in 2008 of 109,000 Mt, and the surplus is
projected to increase to 277,000 Mt in 2009.
   The following chart indicates the major global refined copper consuming nations in the world in 2006, as determined by ICSG.
China ranked the largest in the world with a market share of 22%:

                                           Major Copper Consuming Nations, 2006




Source: Copper Development Association Inc., 2008
    According to ICSG, in 2006, China consumed 627,000 more tons of refined copper than it produced from primary sources. The
shortfall in production was satisfied through recycling of scrap copper as well as copper imports, which are more expensive due to
freight costs. We believe that the continued urbanization of China should continue to drive strong copper consumption within
China in the future.

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    }}}The dynamics of constrained supply and growing Chinese demand, as well as the resulting price surge, has contributed to
the continued search for cost effective alternatives to pure copper. Manufacturers in the cable and wire industry have begun
pursuing and adopting alternative technologies, including the use of scrap copper and cheaper metal aluminum.
Scrap Copper
    The secondary copper recovery process is comprised of mature technologies comprised of pyro-metallurgical processes. This
process is divided into four separate operations: scrap pre-treatment, smelting, alloying, and casting. Pre-treatment includes the
cleaning and consolidation of scrap in preparation for smelting. Smelting consists of heating and treating the scrap for separation
and purification of specific metals. Alloying involves the addition of other metals to copper to obtain desirable qualities
characteristic of the combination of metals. In the casting process, the molten metal is poured into moulds for being turned into
different shapes.
    According to ICSG, secondary refined copper accounted for approximately 15.2% of refined copper production in 2007. A
price spread between refined copper and scrap copper, reflecting the profit for the recycling process, fluctuates in relation to the
movement of copper prices, as well as scrap consumption. The following charts illustrate that the price spread increased steadily
together with the copper price and worldwide secondary refined production during 2004 to 2007:




                    Copper Price vs. Price Spread                        Worldwide Secondary Refined Production
                     between Copper and Scrap




        Source: LME, ICSG                                          Source: ICSG
    China is a net exporter of copper and has deficient copper reserves. In recent years, China has significantly grown its refining
capacity. To meet increased demand, China has been importing raw materials including scrap copper to fill the gap. According to
China Metals Information Network, China’s importation of scrap copper increased significantly to 5.58 million Mt in 2007 from
2.5 million Mt in 2000. China’s government has also established industrial policies to encourage the use of scrap copper. In 2007
the import duty on scrap copper in China, historically 1.5%, was removed. In China’s 11th Five-Year (2006 – 2010) Plan it
encouraged the greater use of scrap metals to help alleviate a shortfall in supplies and set the target consumption of secondary
copper at 35% of total national copper consumption.
Copper Clad Aluminum (―CCA‖) Wire
    CCA bimetallic materials are an ideal substitute for pure copper, a major raw material component of magnet wire, and a prime
alternative to satisfy China’s demand. Bimetallic materials have been in existence for decades, but until recently they have only
been selectively adopted due to higher production costs and historically low copper prices. However, as the price of copper
increased in recent years, companies have started to use CCA bimetallic materials as an alternative.

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    CCA wire is enameled magnet wire composed of an inner aluminum core and outer copper cladding. CCA wire has a
significant cost advantage over copper because its main constituent, aluminum is a cheaper metal. In addition to the cost
advantages, the properties of CCA wire include:
   •    Lighter than pure copper wire;
   •    Higher conductivity and strength than pure aluminum wire; and
   •    Better solderability than aluminum, due to the lack of an oxide layer which prevents solder adhesion when soldering bare
        aluminum.
    However, CCA wire has a high fabrication cost, as the cladding process is more complex than conventional wire-drawing. As a
result, developed economies have not widely used CCA.
    As a result of the changes in the market conditions in recent years, Chinese companies perceived a potential market opportunity
and installed capacity for production of CCA wire. This has in turn resulted in improvements in the production process and made
increased production volumes of CCA wire available from China. As a result of the increased production capacity, China has
become leading global supplier in CCA market.

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                                                            BUSINESS
Overview
    Lihua is one of the first vertically integrated companies in China to develop, design, manufacture, market and distribute low
cost, high quality, alternatives to pure copper magnet wire, which include copper-clad aluminum wire (―CCA‖) and recycled scrap
copper wire. Primarily because of its high electrical conductivity, pure copper magnet wire is one of the fundamental building
blocks in many components in a wide variety of motorized and electrical appliances such as dishwashers, microwaves and
automobiles. In most instances, Lihua’s CCA and recycled scrap copper are an excellent, less costly substitute for pure copper
magnet wire.
    Lihua sells its products directly to manufacturers in the consumer electronics, white goods, automotive, utility,
telecommunications and specialty cable industries and to distributors in the wire and cable industries. Our track record and
reputation for producing high quality products in large quantities has paved the way for rapid expansion of our customer base. We
have approximately 300 customers and no one customer accounts for more than 7% of our sales. At least in part because the copper
magnet wire industry in China is large and growing, Lihua’s product sales are comprised of approximately 95% domestic sales and
approximately 5% of export sales.
    Prior to 2009, our business focused primarily on CCA. Our CCA business consists of acquiring CCA with a line diameter of
2.05 mm from our suppliers as a raw material, reducing the diameter of the CCA by drawing it and then annealing and coating it.
Our final CCA product typically has diameters from 0.03 mm to 0.18 mm, depending on customer specifications. To meet strong
customer demand, we substantially increased our CCA production capacity from 2,200 tons per annum as of the end of 2006 to
6,000 tons per annum as of June 30, 2009. We plan to further increase our CCA production capacity to 7,500 tons per annum by the
end of 2009. In each of the following periods, our sales of CCA were as follows: 2006 – 2,009 tons, 2007 – 4,065 tons, 2008 –
5,966 tons and six months ended June 30, 2009 – 2,959 tons.
    In addition to our CCA business, in the first quarter of 2009, we began to produce copper rod from recycled scrap copper. As of
June 30, 2009, our scrap copper refinery capacity was approximately 25,000 tons per annum. To the extent our capacity permits,
we process our copper rod into copper magnet wire. Because our output of copper rod exceeds our capacity to process it into
copper magnet wire, we sell our excess copper rod to smaller wire manufacturers for further processing. During the six months
ended June 30, 2009, we sold 3,602 tons of copper magnet wire and 5,559 tons of copper rod. We currently are working to expand
our magnet wire production capacity so that we can use a greater proportion of our copper rod rather than selling it to other
manufacturers, thereby increasing our profit margins and overall profitability. We are exploiting a range of marketing strategies for
the copper magnet wire business, including cross-selling our copper magnet wire to our existing CCA customers.
    Lihua is well positioned to continue to capture further market share in the magnet wire industry. CCA and copper magnet wire
are increasingly being accepted as alternatives to pure copper wire. As a result, our sales and net income have grown substantially
over the last three years. We generated sales of $15.7 million in 2006, $32.7 million in 2007 and $50.0 million in 2008,
representing a Compound Annual Growth Rate (―CAGR‖) of 72.3%. We achieved net income of $4.5 million in 2006, $7.7 million
in 2007 and $11.7 million in 2008, representing a CAGR of 61.2%. Adoption of CCA and recycled copper magnet wire as
alternatives to pure copper wire will likely increase, and we expect that our sales and net income should continue to grow as a
result. During the six months ended June 30, 2009, we generated sales of $69,365,668 million and net income of $10,693,720
million, up 180% and 83.1% from the same six-month period in 2008.
     We continually pursue technological innovations and improvements in our manufacturing processes. We have obtained one
utility model patent in China and have three pending invention patent applications in China related to our production process. In
addition, we have entered into a technology cooperation agreement with a university in China. We believe that our emphasis on
technological innovations and production efficiency has contributed significantly to our leading industry position in China and will
continue to do so for the foreseeable future.
   Further, significant barriers to entry make it difficult for newcomers to successfully compete with our CCA and copper magnet
wire businesses. For example, with respect to CCA, it is challenging to maintain

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high quality during the process of drawing, annealing and coating CCA, especially finer diameter wires. Our knowledge and
experience in successfully generating high quality CCA give us a strong advantage over would-be competitors. With respect to
copper magnet wire, our proprietary recycling technology offers us a unique ability to produce wire of a high enough quality to
serve as a substitute to pure copper wire. Our experience and technology allow us to offer products that are, in most instances,
superior and more cost-effective to those potential competitors can produce. Because we are already an approved vendor for many
of our customers and qualifying new vendors can be time-consuming, we believe we are further advantaged vis-à-vis potential
competitors.
    To avoid copper commodity risk exposure, we maintain minimal raw material inventory. We confirm raw material purchase
orders for scrap copper or CCA with suppliers for each sales order only when the applicable sales order has been received. On the
other hand, our principal CCA and scrap copper suppliers usually dedicate portions of their inventories as reserves to meet our
manufacturing requirements. Our most significant supplier of CCA provides approximately 30% of our CCA raw material needs,
but we have built a large network of reliable suppliers that deliver high quality raw materials, and accordingly, are not dependent
upon any one supplier for our success.
    We believe that our experienced management team will continue to leverage our leading technologies and increasing capacity
to manufacture, produce, market and distribute cost-effective, high quality, CCA, recycled copper magnet wire and other
alternatives to pure copper wire. If, as anticipated, worldwide demand for alternatives to pure copper wire grow and we continue to
innovate and improve in our processes, we will be well positioned to compete in the copper wire market on a global scale.
Our Strengths
  We believe that the following strengths have contributed to our competitive position in China:
    Leading market position and early-mover advantage. We are one of the leading CCA wire producers in China, as measured
by our current annual superfine wire production capacity of 6,000 tons. We have targeted to increase our annual CCA wire
production capacity to 7,500 tons by the end of 2009 through internal expansion.
    We believe we were one of the first companies in China to produce CCA superfine wire on a commercial scale This
early-mover advantage in China coupled with our reputation for high quality products has enabled us to establish a wide array of
customer and supplier relationships and to expand our relationships with our existing customers. We have recently launched
commercial production of superfine wires that are manufactured from refined scrap copper and are also in the process of
developing a super-micro-fine wire production technology.
    We believe we are well positioned to leverage our increasing production scale and to expand our customer base and product
portfolio, to meet China’s growing demand for cable and wire products.
    Proprietary automated and efficient production facility that can be scaled to meet increased demand. To cope with surging
demand, we have continuously expanded our production facility in a very rapid way: our production capacity increased from 2,200
tons per annum in 2006 to 6,000 tons per annum as of June 30, 2009. We have targeted to increase our annual production capacity
in CCA magnet wire, copper wire, and scrap copper refinery to 7,500, 14,000 and 25,000 tons, respectively, by the end of 2009,
and to 15,000, 50,000 and 100,000 tons, respectively, by the end of 2011. We launched production in our new plant in March 2009,
which occupies about 66,000 sq. meters and is 6 times of the size of our old plant.
    Efficient proprietary production technology. We continually pursue technological improvements to our manufacturing
processes via our strong in-house development teams. We have obtained one utility model patent for our manufacturing process,
and have three other pending invention patents related to our production processes. In addition, we have entered into technology
cooperation agreements with research institutes to develop new techniques and processes. Our research and development (―R&D‖)
efforts have generated technological improvements that have been instrumental in controlling our production costs and increasing
our operational efficiency. The combination of our trade secrets and our proprietary production technology enables us to use
lower-cost recycled copper feedstock and to produce wire with a smaller line diameter.

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     Rigorous quality control standards. Consistent with our continuing commitment to quality, we impose rigorous quality
control standards at each stage of our production process. Since January 2007, our plant has maintained ISO9001:2000, a
certification of quality management systems maintained by the International Organization of Standardization and administered by
certification and accreditation bodies, which is subject to annual review. For copper magnet wire, we obtained a National Industrial
Production License for copper magnet wire in January 2009 and satisfied the UL standard in October 2008. According to a test
report dated April 17, 2008, China’s Machinery Industry Quality Supervision and Test Center For Electrical Material and Special
Wire and Cable, a government inspection and testing agency, recycle copper rod produced by us satisfied the national standard for
electrical copper wire, GB/T3952-1998. We believe these testing results demonstrate our commitment to producing high-quality
products as well as providing us with a competitive advantage over certain domestic competitors in the event China implements
stricter fuel-quality standards in the future.
    Strong technology improvement and R&D capabilities. Our technology improvement and R&D infrastructure includes a team
of more than 30 professionals focusing on quality assurance, equipment maintenance, process maintenance and improvement, and
new product and process R&D. We absorb most of the technology related expenses in our production costs, and thus have only
incurred R&D costs at very low levels in past years. However, we believe our overall technology-related spending is greater than
many of our China-based competitors. We were granted one utility model patent and have three pending invention patents relating
to our production process. We believe our knowledge and experience in R&D are the key reason why we were able to become one
of the earliest and leading CCA manufacturers in China and enabled us the ability to expedite the launch of our refined superfine
copper wire production. As a result, we have been able to take advantage of the emerging market opportunity as a result of copper
price volatility in recent years.
    Experienced management and operations teams with local market knowledge. Our senior management team and key
operating personnel have extensive management skills, relevant operating experience and industry knowledge. Mr. Zhu, our
founder, Chairman and CEO, has extensive experience managing and operating companies in the cable and wire industry. We
believe our management team’s in-depth knowledge of the Chinese market will enable us to formulate sound expansion strategies
and to take advantage of market opportunities.
Our Strategies
   We will continue to strive to be a leading supplier of copper replacement products in the PRC cable and wire industry, while
maximizing shareholder value and pursuing a growth strategy that includes:
    Developing market driven new products and processes. We consistently pursue technological improvements to our
manufacturing processes and new product development through our strong in-house technology development team. Our R&D
efforts have generated technological improvements that have been instrumental in controlling our production costs and increasing
our operational efficiency. Our combination of trade secrets and proprietary production technology enables us to use lower-cost
feedstock and to attain higher product quality. Through innovation and further production efficiencies, we believe our emphasis on
R&D will enable us to maintain our position as a leading copper replacement product supplier in the PRC cable and wire industry.
    Reliable supplier network for low cost raw materials. We maintain a long-term supply relationship with several key suppliers.
We believe many of our suppliers prefer to sell raw materials to us due to our track record for prompt payment as well as our ability
to accept large quantities of raw materials. Our long-standing supplier relationships provide us with a competitive advantage in
China, and we intend to broaden these relationships to parallel our efforts to increase the scale of our production facilities, thereby
maintaining a diverse supplier network while leveraging our purchasing power to obtain favorable price and delivery terms. With
the launch of the scrap copper refinery business, we have also established a scrap copper warehouse in one of the largest scrap
metal markets in China.
    Production capacity expansion. In order to accommodate the rapidly increasing demand of our products, we have expanded,
and plan to continue to expand, our manufacturing capacity. An increase in capacity has a significant effect on our results of
operations, both in allowing us to produce and sell more products and achieve higher revenues, and in lowering our manufacturing
costs resulting from economies of scale. We have

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expanded rapidly since we launched our CCA wire production in 2006. The following table sets forth information on the historical
development of our production facilities:




                                                                     Plant 1                            Plant 2
        Location                                               Danyang, Jiangsu                   Danyang, Jiangsu
        Began construction                                       March 1999                         March 2008
        Began production                                        January 2006                        March 2009
        Capacity as of March 31, 2009 (mt per year)            CCA wire-6,000                   Copper refinery-25,000
                                                                                                  Copper wire-6,000
        Site area (square meteres)                                  11,000                             66,000
    We believe our expansion strategy will enable us to benefit from continued growth in overall copper demand in China. The
following sets out our future plan to ramp up our annual manufacturing capacity:




                                                                                     By the end of
                                                                    2009                 2010                     2011
        Copper wire (MT)                                              14,000              20,000                    50,000
        CCA wire (MT)                                                  7,500              10,000                    15,000
        Copper refinery (MT)                                          25,000              25,000                   100,000
    Selectively pursue acquisition opportunities. Although we have not identified a potential acquisition target(s), we may in the
future look to acquire businesses or assets that may enhance our market position.
    Strengthening our relationships with key customers and diversifying our customer base. We intend to strengthen our existing
relationships with key customers while further expanding our customer base. We plan to continue providing high-quality and
cost-competitive products to our existing customers and use our existing customer network and strong industry reputation to
expand geographically to strategic locations across China. We plan to increase our sales service personnel to further expand our
supplier and customer base and to provide increased coverage of the market. To assist our efforts, we intend to continue to use
customer feedback to improve our service quality and strengthen our long-term customer base.
Manufacturing Process
Copper recycling and wire processing
    Our copper recycling pre-treatment phase utilizes our proprietary cleaning technology with respect to which we have applied
for an invention patent. The process involves manually or mechanically sorting, stripping, shredding and magnetically separating
the scrap copper. The scrap copper is then compacted and pre-treated with numerous chemicals. Following the pre-treatment phase,
the metal is smelted and fire refined in a furnace. The furnace refining process commences with loading the furnace with the
pre-treated metal, smelting it, and then refining and reducing it. Thereafter, the molten copper is continually belt cast and further
treated, and the copper rod is ultimately wound into bundles for further processing or sale.
     Our fine and superfine wire drawing process utilizes either our recycled copper rod or CCA and involves drawing the wire to
the desired final diameter. Whether using recycled copper rod or CCA, the drawing process entails multiple steps, including heat
treating, annealing, baking, cooling, quenching and spooling, as may be necessary to achieve the desired wire diameter and other
customer specifications. The CCA drawing process, however, is more complex than the process for using recycled copper rod, and
utilizes our proprietary trade secrets to ensure that the wire maintains the original bimetallic bond from the raw material. The fine
or superfine wire is either sold to customers or is coated and further processed to become magnet wire.

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   The following illustration is a simplified outline of our process:




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




   Note: The illustration is not drawn to scale.
     Over the past five years, CCA has become a viable and popular alternative to pure copper wire. In comparison with solid
copper wire, CCA raw material costs are generally 35% to 40% lower per ton. CCA and pure copper raw materials are purchased
based on weight. Since aluminum accounts for approximately eighty six percent (86%) by volume of CCA wire, each ton of CCA
wire can yield 2.5 times the length of each ton of solid copper wire. Our CCA products are a cost effective substitute for pure
copper wire in a wide variety of applications such as wire and cable, consumer electronic products, white goods, automotive parts,
utility applications, telecommunications, and specialty cables.
    We produce CCA wire with the line diameter in the range of 0.03 mm to 0.18 mm. We produce and distribute wire in the
following forms:
   •    Raw wire. Raw wire is sold to smaller wire manufacturers for further processing; and
   •    Magnet wire. Magnet wire can be fine or super fine and is the basic building block of a wide range of motorized
        appliances and is mainly used for its electrical conductivity.
   •    Tin plated wire. Tin plated wire is mainly used for the transmission of audio and visual signals.
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    We produce in accordance with customer orders and we customize our products based on customer specifications. Customer
specifications vary depending on the end use of the CCA wire, but are primarily determined based upon two measurements, the
thickness of the copper layer on the aluminum core and the diameter of the CCA wire.
Copper Rod
    In March 2009, we launched the manufacturing of copper rod from our newly acquired continuous production system for fire
refining, melting and rod casting. We use scrap copper as the raw material to manufacture and sell copper rods. In addition, we
produce cable and copper magnet wire from copper rods.
   The following table has set out the end uses of copper rod based wire products:
       Cable
       •         Used for:
             •      telephone drop wire and conductors;
             •      electric utilities; transmission lines, grid wire, fence and structured grounds;
             •      industrial drop wire, magnet wire, battery cables, automotive wiring harnesses; and
             •      electronics: radio frequency shielding
       Magnet wire
       •         Used in:
             •      electronic motors, transformers, water pumps, automobile meters, energy, industrial, commercial, and residential
                    industries.
Quality Control
    We apply rigorous quality control standards and have implemented safety procedures at all phases of our production process.
Since January 2007, our plant has maintained ISO9001:2000, a certification of quality management systems maintained by the
International Organization of Standardization and administered by certification and accreditation bodies.
Quality assurance efforts have been made on various lines of products in the following ways:
  •    Copper magnet wire. We strictly follow the mandatory national product standard in China, and obtained National
       Industrial Production License for copper magnet wire in January 2009 and satisfied UL standards in October 2008.
   •       Scrap copper refinery. According to a test report dated April 17, 2008 of China’s Machinery Industry Quality
           Supervision and Test Center For Electrical Material and Special Wire and Cable, a government inspection and testing
           agency, our copper rods satisfied the national standard for electrical copper wire, GB/T3952-1998.
   •       CCA wire. We strictly follow the industry recommended standards.
    We believe the testing results we have obtained demonstrate our commitment to producing high-quality products and provide
us with a competitive advantage over certain domestic competitors in the event China implements stricter quality standards in the
future.
Raw Materials and Suppliers
    We primarily use CCA wire with a line diameter of 2.05 mm, produced by our bimetallic wire suppliers, to manufacture
superfine CCA wire. Our raw material procurement policy is to use only long-term suppliers who have demonstrated quality
control, reliability and maintain multiple supply sources so that supply problems with any one supplier will not materially disrupt
our operations. In order to avoid copper price volatility exposure, we do not maintain raw material inventory. We confirm raw
material purchase orders with suppliers only when the relevant sales orders are received. On the other hand, our principal suppliers
usually dedicate portions of their inventories as reserves to meet our manufacturing requirements. Suppliers are generally paid with
a credit term of 30 days.

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    For our scrap copper refinery, we primarily use No. 2 scrap copper in our production of two types of recycled copper: cable and
magnet wire. We purchase the materials through dealers and the scrap metal market. We have recently established a scrap copper
raw material warehouse in one of China’s largest scrap metal markets. Scrap copper is generally purchased with cash on delivery
terms. We believe that we will have access to an adequate supply of scrap copper on satisfactory commercial terms due to the
numerous scrap dealers located throughout Guangdong Province in the PRC.
    For each of the fiscal years ended December 31, 2006, 2007 and 2008, and the three months ended June 30, 2009 our five
largest suppliers accounted for 100% of our total purchases, and our single largest supplier accounted for 31.9%, 26.8%, 46.5% and
21.1% of our total purchases, respectively. We believe that we will have access to and an adequate supply of CCA wire on
satisfactory commercial terms. We purchases raw materials needed for our CCA wire from the following principal suppliers:
   •    Fushi International (Dalian) Bimetallic Cable Co., Ltd.
   •    Soviet Cloud Electricity Limited Company
   •    Jiangsu Heyang Wire and Cable Co., Ltd.
   •    Changzhou Jieer Letter Composition Metal Material Limited Company
   •    Suzhou Guoxin Wire and Cable Technology Limited Company
Sales, Marketing and Distribution
    Chinese domestic market sales account for a majority of our revenue. We target our sales efforts primarily in the coastal
provinces of Guangdong, Fujian, Zhejiang, Jiangsu and Shanghai areas, where the majority of our customers are located. We have a
sales staff of approximately 30 employees. We maintain 9 sales offices in China, including 3 in Guangdong, 3 in Zhejiang, 1 in
Fujian, 1 in Shandong, and 1 in Anhui. We participate in industry expositions in which we showcase our products and services and
from which we obtain new customers.
    Beginning in 2008, we launched an export business and generated $0.3 million from overseas markets, We currently have
customers in Brazil, India, Pakistan and Vietnam to which we directly sell our products. For each of 2006, 2007, 2008 and the three
months ended June 30, 2009, we generated $0.8 million, $1.2 million, $2.1 million and $1.3 million, respectively, of our total
revenue from our online market platform operated through Alibaba’s trading site, an online marketplace for both international and
domestic manufacturers and trading companies in a variety of industries.
    We have a small fleet of trucks that deliver merchandise to customers located within three hours from our production facilities.
Alternatively, we contract with independent third-party trucking companies to deliver our products when necessary.
Customers
    We sell our products in China either directly to manufacturers or through distributors in the wire and cable industries and
manufacturers in the consumer electronics, white goods, automotive, utility, telecommunications and specialty cable industries. For
2006, 2007, 2008 and the three months ended June 30, 2009, we did not have any single customer which accounted for over 10% of
our total revenue.
    For the three months ended June 30, 2009 and each of the fiscal years ended December 31, 2006, 2007 and 2008, our five
largest customers accounted for 13.7%, 22.5%, 14.5% and 20.2% of our total sales, respectively, and the single largest customer
accounted for 3.3%, 5.0%, 3.0% and 6.6% of our total sales, respectively. We generally extend unsecured credit for 30 days to
large or established customers with good credit history. Management reviews its accounts receivable on a regular basis to
determine if the allowance for doubtful accounts is adequate at each quarter-end.
Competition
    China is the world’s largest producer and market for cable and wire. Our sales are predominantly in the PRC, and as a result,
our primary competitors are PRC domestic companies. To a lesser degree we face competition from international companies.

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   We believe being located in China provides us with a number of competitive factors within our industry, such as:
   •    Pricing. A producer’s flexibility to control pricing of products and the ability to use economies of scale to secure
        competitive pricing advantages;
   •    Technology. A producer’s ability to manufacture products efficiently, utilize low-cost raw materials, and to achieve better
        production quality; and
   •    Barriers to entry. A producer’s technical knowledge, access to capital, local market knowledge and established
        relationships with suppliers and customers to support the development of commercially viable production facilities.
   Competition in the bimetallic industry, particularly in China, can be characterized by rapid growth and a concentration of
manufacturers. We believe we differentiate ourselves by being an early mover in the industry, and by offering superior product
quality, timely delivery and better value. We believe we have the following advantages over our competitors:
   •    the performance and cost effectiveness of our products;
   •    our ability to manufacture and deliver products in required volumes, on a timely basis, and at competitive prices;
   •    superior quality and reliability of our products;
   •    our after-sale support capabilities, from both an engineering and an operational perspective;
   •    excellence and flexibility in operations;
   •    effectiveness of customer service and our ability to send experienced operators and engineers as well as a seasoned sales
        force to assist our customers; and
   •    overall management capability.
Research and Development
   Our superfine wire manufacturing technology was developed and refined in-house by our technology improvement and R&D
team. This team comprises over 30 professionals focusing on quality assurance, equipment maintenance, process maintenance and
improvement, and new product and process R&D.
    We absorb most of the development technology related expenses in our production costs, and thus have only reported R&D
costs at very low levels in the past years. In the three months ended June 30, 2009, and for each the fiscal years ended December
31, 2006, 2007 and 2008, we reported R&D costs of $35,643, $30,125, $56,143 and $60,041, respectively. However, we believe
our overall technology development related spending is greater than many of our China-based competitors.
    We believe our commitment to, and knowledge and experience in, R&D are the key reasons why we were one of the earliest
and leading CCA wire manufacturers. This expertise has enabled us to expedite the launch and expansion of our superfine copper
wire production. Therefore, we were able to take advantage of the market opportunity that emerged as a result of the recent copper
price volatility.
    We plan to continue our R&D efforts, to maintain and strengthen our leading position in China, and to expand into new
products and markets. We are currently developing a super-micro-fine CCA wire with line diameter below 0.025 mm, which is
used for cell phones, micro-electronic motors, micro-transformers, relays and audiphones. We are in the process of conducting
laboratory testing on these products.
    On December 18, 2006, Lihua Electron entered into a long term technology cooperation agreement (the ―Long Term
Technology Cooperation Agreement‖) with China Jiangsu University whereby Jiangsu University and Lihua Electron agreed to
enter into future technology project agreements and establish a ―Co-Lab Center of Jiangsu University-Danyang Lihua Electron Co.
Ltd.‖, which is the Research Centre and Training Centre for Jiangsu University’s students. The Long Term Technology
Cooperation Agreement commenced on January 1, 2007 and terminates on December 31, 2011. In connection with the Long Term
Technology Cooperation

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Agreement, on February 1, 2008, we entered into a technology project agreement with China Jiangsu University for research on
copper plating aluminum. Under this agreement, we will pay all research expenses. As of the date hereof, we have not made any
such payments. Jiangsu University has agreed to develop the technology, however, the agreement specifies that any intellectual
property that arises from the research will belong to both parties.
Intellectual Property
    Our manufacturing processes are based on technology substantially developed in-house by our R&D and engineering personnel.
We rely on a combination of patent, trade mark, domain names and confidentiality agreements to protect our intellectual property.
We require all members of our senior management and our key R&D personnel to sign agreements with us which stipulate, among
other things, confidentiality obligations and restrictions on the assignment of intellectual property.
    We were granted a utility model patent (patent no.: ZL 2008 2 0034139.8) by the State Intellectual Property Office of the PRC
for our ―Oxygen-free copper rod pressure cut off device,‖ effective as of April 16, 2008. The term of this patent is 10 years from
the effective date. We have no foreign patents. We currently have the following three invention patent applications in China
pending:




        Name of IP right                     Application Number        Company        Date of Application       Status of
                                                                                                               Application
        1. The production process for        200710131529.7         Lihua Electron    September 4,          Patent pending
        copper clad aluminum magnet                                                   2007
        wire
        2. Production technology of          200810023487.X         Lihua Copper      April 16, 2008        Patent pending
        copper clad magnesium
        aluminum wire
        3. A copper cleaning liquid          200810023488.4         Lihua Copper      April 16, 2008        Patent pending
   •    We are currently using the trademark ―Lihua‖ for all our products. We have applied to register the trademarks ‖Mei Lihua‖
        in China.
   •    We are not aware of any material infringement of our intellectual property rights.
Insurance
    We maintain various insurance policies to safeguard against risks and unexpected events. In protecting against work-related
casualties and injuries, we purchase accidental injury insurance policies for our employees. In addition, we provide social security
insurance including pension insurance, unemployment insurance, work related injury insurance and medical insurance for our
employees. We also maintain insurance for our plants, machinery, equipment, inventories and motor vehicles. We do not have
product liability insurance for our products. All of our products have met the relevant regulatory requirements under PRC laws and
we have not been subject to any material fines or legal action involving product non-compliance.
Employees
  We had 290 full-time employees as of June 30, 2009. The following table shows the breakdown of employees by department:
        Function                                                                         Number of         % of total
                                                                                         employees
        Manufacturing                                                                         174             60 %
        Technology and R&D Infrastructure                                                      32             11 %
        General Administration, Purchasing and logistics and Sales and marketing               84             29 %
                                                                                              290            100 %

    From time to time, we also employ third-party consultants for the R&D of our products. We have not experienced any
significant labor disputes and consider our relationship with our employees to be in good standing.

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Legal Proceedings
    We may be subject to legal proceedings, investigations and claims incidental to the conduct of our business from time to time.
We are not currently a party to any litigation or other legal proceedings brought against us. We are also not aware of any legal
proceeding, investigation or claim, or other legal exposure that has a more than remote possibility of having a material adverse
effect on our business, financial condition or results of operations.
Property
    Under the current PRC law, land is owned by the state, and parcels of land in rural areas which is known as collective land is
owned by the rural collective economic organization ―Land use rights‖ are granted to an individual or entity after payment of a land
use right fee is made to the applicable state or rural collective economic organization. Land use rights allow the holder the right to
use the land for a specified long-term period.
    We occupy our properties located in Danyang City, Jiangsu Province, PRC under land use rights for purposes of production,
R&D and employee living quarters. We have land use rights, all expiring in 2058, for a total of approximately 77,000 square meters
of land for all of our existing plants and plants under construction.
    On April 12, 2009, Lihua Copper entered into a lease agreement for a cargo yard located at Liangdong Industrial Development
Area, LiangQingTang, Dali, Nanhai District in China. The lease is for a five year term, which began on May 2, 2009 and terminates
on May 1, 2014. From May 2, 2009 to May 1, 2012, the monthly rent is RMB 28,000 ($4,105), from May 2, 2012 to May 1, 2013,
the monthly rent is RMB 31,000 ($4,544), and from May 2, 2013 to May 1, 2014, the monthly rent is RMB 33,000 ($4,837).
Government Regulation
Overview
Manufacturing
    Our manufacturing operations are subject to numerous laws, regulations, rules and specifications relating to human health and
safety and the environment. These laws and regulations address and regulate, among other matters, wastewater discharge, air
quality and the generation, handling, storage, treatment, disposal and transportation of solid and hazardous wastes and releases of
hazardous substances into the environment. We are in compliance with all material respects of such laws, regulations, rules,
specifications and have obtained all material permits, approvals and registrations relating to human health and safety and the
environment. In addition, third parties and governmental agencies in some cases have the power under such laws and regulations to
require remediation of environmental conditions and, in the case of governmental agencies, to impose fines and penalties. We make
capital expenditures from time to time to stay in compliance with applicable laws and regulations.
Environmental Matters
    Given the nature of our business, we generate waste water, exhaust fumes and noise during our production process. We have
implemented a comprehensive set of environmental protection measures to treat emissions generated during our production process
to minimize the impact of our production process on the environment. These measures include the following:
   •    Waste water. Waste water processed by our facilities meets the Chinese standard for discharge. To conserve water
        resources, we also recycle and reuse waste water generated during our production process, which decreases our
        consumption of water and reduces the discharge of waster water into the environment;
   •    Exhaust fumes. We generate exhaust fumes during our production process. Exhaust fumes generated during our
        production process are filtered to reduce dust, sulfur dioxide, total suspended particulate, nitrogen oxide and organic
        elements. In each case, exhaust fumes are treated to comply with national air quality standards; and

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   •    Noise. We generate noise through the operation of our heating, ventilation and pumping systems. We typically reduce the
        noise generated by these activities to a range of 60 decibels to 80 decibels by employing various noise reduction measures
        that comply with applicable law.
M&A Rules
    On August 8, 2006, six PRC regulatory agencies, namely, the PRC Ministry of Commerce, or MOFCOM, the State Assets
Supervision and Administration Commission, or SASAC, the State Administration for Taxation, the State Administration for
Industry and Commerce, the China Securities Regulatory Commission, or CSRC, and SAFE jointly adopted the Regulations on
Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rule, which became effective on September
8, 2006. According to Rule 55 of the M&A rules and Guidance Manual on Administration of Entry of Foreign Investment issued
by the Department of Foreign Investment Administration of the Ministry of Commerce in December 2008, conversion of a joint
venture to a wholly foreign owned enterprise by way of equity transfer from a Chinese party to a foreign party, shall not be subject
to the M&A rules, and the M&A rules are only applicable to acquisitions of a domestic enterprise or its assets by a foreigner.
   We have been advised by our PRC counsel that the M&A Rule did not apply to the June 2008 restructuring or subsequent share
exchange transaction. The restructuring did not require CSRC approval because we were not a special purpose vehicle formed or
controlled by PRC Operating Companies or PRC individuals, we were owned or substantively controlled by foreigners, and
conversion of our operating entities from a joint venture to a wholly foreign owned enterprise was not and is not subject to the
M&A rules.
     The M&A rules also require offshore companies formed for overseas listing purposes through acquisitions of PRC domestic
companies and controlled by PRC Operating Companies or individuals to obtain the approval of the CSRC prior to the public
listing of their securities on an overseas stock exchange. On September 21, 2006, pursuant to the New M&A Rules and other PRC
Laws, the CSRC published on its official website relevant guidance with respect to the listing and trading of PRC domestic
enterprises’ securities on overseas stock exchanges (―Related Clarifications‖), including a list of application materials regarding the
listing on overseas stock exchanges by special purpose vehicles. However, the CSRC currently has not issued any definitive rule
concerning whether the transactions effected by the overseas listing would be subject to the New M&A Rules and Related
Clarifications. Article 238 of the PRC Securities Law also provides that any domestic enterprise that directly or indirectly issues
any securities abroad or lists its securities abroad for trading shall be subject to the approval of the securities regulatory authority
under the State Council according to the relevant provisions of the State Council.
     The M&A rules do not have express provisions in terms of penalties for failure to obtain CSRC approval prior to the public
listing of our securities. However, there are substantial uncertainties regarding the interpretation, application and enforcement of
the above rules, and CSRC has yet to promulgate any written provisions or formally to declare or state whether the overseas listing
of a PRC-related company similar to ours is be subject to the approval of CSRC. Any violation of these rules could result in fines
and other penalties on our operations in China, restrictions or limitations on remitting dividends outside of China, and other forms
of sanctions that may cause a material and adverse effect to our business, operations and financial conditions.
Foreign Investment in PRC Operating Companies
    The Foreign Investment Industrial Catalogue jointly issued by MOFCOM and the National Development and Reform
Commission (―NDRC‖) in 2007 classified various industries/business into three different categories: (i) encouraged for foreign
investment; (ii) restricted to foreign investment; and (iii) prohibited from foreign investment. For any industry/business not covered
by any of these three categories, they will be deemed industries/business permitted to have foreign investment. Except for those
expressly provided restrictions, encouraged and permitted industries/business are usually 100% open to foreign investment and
ownership. With regard to those industries/business restricted to or prohibited from foreign investment, there is always a limitation
on foreign investment and ownership. The reason that our business is not subject to limitation on foreign investment and ownership
is as follows:
   (i) our business falls under the class of ―manufacturing of materials for processing beryllium copper straps, lines, pipes and
rods‖, which is open to 100% foreign investment and ownership;

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   (ii) our business does not fall under the industry categories that are restricted to, or prohibited from foreign investment; and
    (iii) whether a business is subject to foreign investment restriction is subject to interpretation by MOFCOM and/or the NDRC,
restructuring of each of our operating entities into a wholly foreign owned enterprise, each of which has been approved by the local
MOFCOM, can also directly evidence no limitation on foreign investment and ownership to our business.

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                                      OUR HISTORY AND CORPORATE STRUCTURE
   The following diagram illustrates our corporate and shareholder structure as of the date of this prospectus. All of our
subsidiaries are wholly owned directly by us.




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    The following diagram illustrates our corporate and shareholder structure immediately after completion of this Offering,
assuming: (i) the issuance of shares of Common Stock upon full exercise of the warrants and options outstanding as of the date of
this prospectus; (ii) the exercise of the option held by Mr. Zhu to acquire 3,000 shares of Magnify Wealth from Mr. Chu, and (iii)
the issuance to the Minority Shareholders of 664 shares of Magnify Wealth in the aggregate.




Company Background
    From the date of our incorporation until October 31, 2008, we were a ―blank check‖ company with nominal assets. We were
originally incorporated in the State of Delaware on January 24, 2006 under the name of Plastron Acquisition Corp. for the purpose
of raising capital to be used to merge, acquire, or enter into a business combination with an operating business.
    Ally Profit was incorporated in the British Virgin Islands on March 12, 2008 under the Business Companies Act, 2004. In June
2008, Ally Profit became the parent holding company of a group of companies comprised of Lihua Holdings, a company organized
under the laws of Hong Kong and incorporated on April 17, 2008, which is the 100% shareholder of each of Lihua Electron and
Lihua Copper, each a limited liability company organized under the existing laws of the Peoples Republic of China. Lihua Electron
and Lihua Copper were incorporated on December 30, 1999 and August 31, 2007, respectively. We changed our name from
Plastron Acquisition Corp. to Lihua International, Inc. on September 22, 2008.

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Restructuring
    In June 2008, Magnify Wealth, a British Virgin Islands holding company, which was 100% owned by Mr. Chu, developed the
Restructuring. At that time, Magnify Wealth was the parent company and sole shareholder of Ally Profit, which was the parent
company and sole shareholder of Lihua Holdings. The Restructuring was accomplished in two steps. The first step was the PRC
Subsidiary Acquisition. After the PRC Subsidiary Acquisition, the second step was for Magnify Wealth to enter into and complete
a share exchange transaction with a US public reporting company, whereby the US company would acquire Ally Profit, Lihua
Holdings and the PRC Operating Companies.
PRC Subsidiary Acquisition
    The PRC Subsidiary Acquisition was structured to comply with PRC M&A Laws. Under PRC M&A laws, the acquisition of
PRC Operating Companies by foreign companies that are controlled by PRC citizens who are affiliated with the PRC Operating
Companies, is strictly regulated and requires approval from MOFCOM. However, such restrictions do not apply to foreign entities
controlled by foreign persons. These restrictions apply only at the time that PRC Operating Companies are acquired by a foreign
entity. In our case, this was July 10, 2008 when the PRC Operating Companies were acquired by Lihua Holdings, which was
ultimately beneficially owned by Mr. Chu, a Hong Kong citizen, as the sole shareholder of Magnify Wealth.
    Lihua Holdings acquired 100% of the equity interests in the PRC Operating Companies from companies owned by our current
CEO, Mr. Zhu, and the Minority Shareholders of the PRC Operating Companies. In addition to being the sole shareholder of
Magnify Wealth, Mr. Chu was also a 45.46% owner of Lihua Electron, prior to the consummation of the PRC Subsidiary
Acquisition. The aggregate consideration payable by Lihua Holdings to the shareholders of Lihua Electron was $2,200,000, and the
aggregate consideration payable by Lihua Holdings to the shareholders of Lihua Copper was $4,371,351. The following table sets
forth the manner in which the purchase price for the PRC Operating Companies was allocated among the shareholders. In the PRC,
when entities are formed, the local MOFCOM approves the total amount of the registered capital to be subscribed in an entity by
each shareholder. The purchase price was based on the amount of the registered capital that had been contributed into each PRC
Subsidiary by each shareholder. The notes to this table explain the manner in which each of the parties were paid or agreed to settle
the consideration payable by Lihua Holdings to them.




                                      Lihua Electron
                                      Shareholder                              Purchase
                                                                                Price
                                      Danyang Special Electronics (1)    $       1,150,000
                                      Europe EDC (2)                                50,000
                                      Fo Ho Chu (2)                              1,000,000
                                      Total                              $       2,200,000
                                     Lihua Copper
                                     Shareholder                             Purchase
                                                                              Price
                                     Invest Unicorn Holdings          $        3,599,980
                                       Limited (1)
                                     Lihua Electron (3)                          771,371
                                     Total                            $        4,371,351




(1) The consideration payable to Danyang Special Electronics and Invest Unicorn Holdings Limited, both companies which are
    controlled by Mr. Zhu, was waived. As the controlling shareholder of these companies, Mr. Zhu agreed to waive these amounts
    because as a result of the Share Transfer Agreement, he would be able to earn the right to own a significant interest in a US
    public company, through his eventual ownership of shares in Magnify Wealth. In light of the whole Restructuring, Mr. Zhu
    received a significant benefit in return for his waiver of this consideration.
(2) The consideration payable to Mr. Chu and Europe EDC was waived, and as consideration to such waiver, they will be issued
    certain shares by Magnify Wealth through the subscription agreements (the equivalent of a share exchange) as discussed
    further below.
(3) The consideration payable to Lihua Electron was paid in cash.

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     The Share Transfer Agreement enables Mr. Zhu to receive consideration for selling his interest in the PRC Operating
Companies to Lihua Holdings by allowing him to earn back an indirect interest in the PRC Operating Companies without violating
PRC laws. At the time of the PRC Subsidiary Acquisition, Mr. Zhu did not have any equity interest in Lihua Holdings. As a PRC
citizen, Mr. Zhu would not have been permitted to immediately receive shares in Lihua Holdings or in Magnify Wealth in exchange
for his interests in the PRC Operating Companies. Subject to registering with SAFE prior to the exercise and issuance of the Option
Shares under the Share Transfer Agreement, which is an administrative task, there is no prohibition under PRC laws for Mr. Zhu to
earn an interest in Magnify Wealth after the PRC Subsidiary Acquisition was consummated, in compliance with PRC laws.
Pursuant to the original terms of the Share Transfer Agreement, Mr. Chu granted to Mr. Zhu the option to purchase all of the 3,000
ordinary shares of Magnify Wealth then held by Mr. Chu at the nominal price of $1.00 per share. The Option Shares would vest
and become exercisable upon the PRC Operating Companies attaining consolidated net income performance targets for fiscal 2008,
2009, and 2010 of $8 million (―2008 Target‖), $11 million and $14 million respectively. If each performance target is met, 25% of
the Option Shares would vest and become exercisable forty-five days after December 31, 2008, 25% of the Option Shares would
vest and become exercisable forty-five days after December 31, 2009 and the remaining 50% of the Option Shares would vest and
become exercisable forty five days after December 31, 2010. However, on March 7, 2009, Mr. Zhu and Mr. Chu entered into an
amendment to the Share Transfer Agreement whereby alternate conditions for the achievement of the performance targets were
agreed. Under the amended agreement as long as the audited consolidated net income of Lihua Electron and Lihua Copper for
fiscal 2008 was 10% or more higher than the 2008 Target (―Alternate Performance Target‖) regardless of whether the performance
targets for 2009 and 2010 are met or not, the Option Shares would vest and become exercisable. Mr. Zhu would then be able to
exercise the Option Shares in the same percentages and on the same dates as per the original agreement. Since our consolidated net
income for 2008 was $11,701,879, which achieved the Alternate Performance Target, Mr. Zhu will be entitled to acquire all of the
Option Shares from Mr. Chu pursuant to the following exercise schedule: (i) 25% of the Option Shares are exercisable 45 days after
February 14, 2009; (ii) an additional 25% of the Option Shares are exercisable on February 14, 2010; and (iii) the remaining 50%
of the Option Shares are exercisable on February 14, 2011. Therefore, as of February 14, 2011, 100% of the Option Shares will be
exercisable. As of February 14, 2009, Mr. Zhu was entitled to acquire 25% of the Option Shares, which equals 750 shares.
    Also on October 22, 2008, the Minority Shareholders entered into subscription agreements to purchase shares in Magnify
Wealth at a nominal price of $1.00 per share. Pursuant to these subscription agreements, Mr. Chu and Europe EDC will be issued
the shares of Magnify Wealth for which they subscribed in tranches on February 14, 2009, 2010 and 2011 of 25%, 25% and 50%,
respectively, which are the same dates the Option Shares are exercisable. The number of subscription shares issuable to Mr. Chu
and Europe EDC in the aggregate, are 632 shares and 32 shares, respectively, and was determined based on the proportion of
capital contributed by each of them in the PRC Operating Companies. On February 14, 2009, Mr. Chu was issued 158 shares of
Magnify Wealth and Europe EDC was issued 8 shares of Magnify Wealth, which equals 25% of the shares of Magnify Wealth
which have been issued as per the subscription agreements as of the date herewith. The subscription agreements enable Mr. Chu, a
Hong Kong citizen, and Europe EDC, a Dutch company, to receive an interest in Magnify Wealth in consideration for the sale of
their respective interests in the PRC Operating Companies to Lihua Holdings. Because Mr. Chu is a Hong Kong Citizen and
Europe EDC is a Dutch company, there is no prohibition or restriction under PRC laws against non-PRC residents or citizens
acquiring shares in Magnify Wealth in consideration for the sale of their respective interests in the PRC Operating Companies to
Lihua Holdings.
Share Exchange Agreement
   On October 31, 2008 the purpose of the Restructuring was realized when we entered into and completed the Share Exchange
Agreement with Magnify Wealth and our principal stockholders, pursuant to which we acquired 100% of the ownership of the Ally
Profit Companies in exchange for the issuance of 14,025,000 shares of our Common Stock to Magnify Wealth.

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    The following tables set forth the proportion of equity interests in all entities involved in the Restructuring based on subscribed
registered capital before and after the Restructuring. The ―After‖ column assumes: (i) the issuance of 2,000,000 shares of our
Common Stock upon the consummation of this Offering; (ii) the issuance of shares of our Common Stock upon the exercise of all
options and warrants currently outstanding; (iii) the issuance of all of the subscription shares by Magnify Wealth to the Minority
Shareholders; and (iv) the transfer of all Option Shares to Mr. Zhu.




                                                    Magnify Wealth            Lihua International             Ally Profit
                                                 Before         After        Before         After       Before              After
        Shareholder                                %             %             %                %         %                  %
        Fo Ho Chu                                  100               17.3       —                —         —                  —
        Jianhua Zhu                                 —                81.9       —                —         —                  —
        Europe EDC                                  —                 0.8       —                —         —                  —
        Magnify Wealth                              —                  —        —                —        100                100
        All Other Public Shareholders               —                  —       100               —         —                  —
           Total                                   100                100      100              100       100                100




                                                    Lihua Holdings             Lihua Electron              Lihua Copper
                                                  Before       After         Before          After      Before              After
        Shareholder                                %             %             %                %         %                  %
        Fo Ho Chu                                    —            —            45.46             —          —                 —
        Ally Profit                                 100          100              —              —          —                 —
        Lihua Holdings                               —            —               —             100         —                100
        Danyang Special Electronics Co.,             —            —            52.27             —          —                 —
          Ltd (a)
        Lihua Electron                             —           —                —           —           25           —
        Invest Unicorn Holdings Limited (b)        —           —                —           —           75           —
        Europe EDC                                 —           —              2.27          —           —            —
          Total                                   100         100              100         100         100          100




(a) Equity interests in Danyang Special Electronics Co., Ltd., a PRC domestic company, are held as to 60% by Mr. Zhu and 40%
    by his wife. Mr. Zhu and his wife are acting in concert and considered parties to the same control group.
(b) Invest Unicorn Holdings Limited, incorporated in the British Virgin Islands, is 100% beneficially owned by Mr. Zhu.
Accounting Considerations of the Restructuring
    The Restructuring has been accounted for as a combination of entities under common control and a recapitalization of the PRC
Operating Companies using the ―as if‖ pooling method of accounting, with no adjustment to the historical basis of the assets and
liabilities of the PRC Operating Companies, and the operations were consolidated as if the Restructuring occurred as of, the
beginning of the first accounting period presented in the financial statements provided elsewhere in this prospectus. The basis for
the determination that this accounting method could be used was the following factors, which although not significant to
understanding the PRC legal implications of the Restructuring, were critical in considering the accounting treatment of the
Restructuring.
    1) To provide continuity of management and operational control over the PRC Operating Companies after the PRC Subsidiary
Acquisition, Mr. Chu, appointed Mr. Zhu as the sole director of Magnify Wealth, Ally Profit and Lihua Holdings. Mr. Zhu
continued to act as the managing director of the PRC Operating Companies. Additionally, Mr. Chu undertook to Mr. Zhu that no
further directors would be appointed to the board of either Magnify Wealth, Ally Profit or Lihua Holdings without the prior written
consent of Mr. Zhu. As the sole director of Magnify Wealth, Ally Profit and Lihua Holdings, Mr. Zhu was able to control and
manage the operational, investment and business decisions of these companies, and he had the ability to make the sole decisions
regarding any change in these companies’ capital structure or payment of dividends. Further,

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Mr. Zhu has the ultimate authority to determine the composition of the board of directors for these companies. Therefore, the PRC
Operating Companies, through Mr. Zhu, have remained under common operating, management and financial control. The above
arrangement between Mr. Chu and Mr. Zhu, as well as the Share Transfer Agreement, are each an inseparable and indispensable
part of the Restructuring which enables Mr. Zhu to continue to have residual rewards of the combined entity, which refers to the
Ally Profit Companies.
    2) Also as part of the Restructuring, Lihua Holdings’ capital was established by way of equity contributions in the form of the
transfer of their interest in the PRC Operating Companies from Mr. Zhu and the Minority Shareholders, which in the aggregate
equaled the total transfer price they were entitled to receive for the transfer of their equity interests in Lihua Electron and Lihua
Copper to Lihua Holdings. Therefore, Mr. Zhu and the Minority Shareholders, as the former stockholders of Lihua Electron and
Lihua Copper who gave up legal ownership thereof, have not received any net cash amount. Nor has there been any cash flow out
of the combined entity, which refers to the Ally Profit Companies during the whole period from the date of transfer of legal
ownership of Lihua Electron and Lihua Copper through the expiry of the Share Transfer Agreement and the Subscription
Agreements, at which time it is fully expected Mr. Zhu and the Minority Shareholders will have re-acquired their proportionate
ultimate legal ownership of Lihua Electron and Lihua Copper. As a result, Mr. Zhu and other minority shareholders have continued
to bear the residual risks of the combined entity. There is no requirement under PRC law or for accounting purposes that Mr. Zhu,
and the Minority Shareholders remain the sole shareholders of the PRC Operating Companies or that Magnify Wealth maintain a
specific ownership percentage of the PRC Operating Companies.
Private Placement
    On October 31, 2008, we entered into and completed a securities purchase agreement (―Purchase Agreement‖) with certain
accredited investors (the ―Investors‖) for the issuance and sale by us in a private placement (―Private Placement‖) of 6,818,182
shares of Series A Convertible Preferred Stock (―Preferred Stock‖, or ―Investor Shares‖) and Series A Warrants to purchase
1,500,000 shares of Common Stock, for aggregate gross proceeds of approximately $15,000,000.
Agreements Related to the Private Placement
    We entered into an escrow agreement with the Investors (the ―Closing Escrow Agreement‖), pursuant to which the Investors
deposited the funds in the aggregate amount of $15,000,000 for the purchase and sale of the Investor Shares (the ―Escrowed
Funds‖) into an escrow account which was disbursed at Closing. Pursuant to the Closing Escrow Agreement, $1,000,000 of the
Escrowed Funds were held in the escrow account (the ―Held Back Escrow Funds‖) until the escrow agent received written notice
that we caused Lihua Copper to fulfill one hundred percent of its registered capital obligation of $15,000,000 no later than 90 days
from the Closing Date (Section 3.23 (Registered Capital of Lihua Copper), as well as comply with the covenants in Section 3.35
(Environmental Authority Approval for Lihua Copper ), Section 3.37 (Comply with Relevant Employment Laws in PRC), Section
3.38 (Construction Works Planning Permit and Construction Works Execution Permit for Lihua Copper), Section 3.43 (assign
transfer and cause to be recorded all Intellectual Property and Commercial and Trade Secrets), Section 3.44 (Payment of Stamp
Tax), Section 3.45 (Filing of PRC Certificates) and Section 3.46 (Lihua Copper Pay-Off Loan from Lihua Electron) of the Purchase
Agreement (the ―Held Back Release Conditions‖). On February 11, 2009, the parties to the Escrow Agreement entered into a First
Supplement to the Escrow Agreement pursuant to which it was agreed that $200,000 of the Held Back Escrow Funds would remain
in escrow until June 30, 2010 to cover any contingent liabilities relating to unpaid employee social insurance and housing payments
from periods prior to 2009.
Make Good Escrow
    We also entered into a make good escrow agreement with the Investors (the ―Securities Escrow Agreement‖), pursuant to
which Magnify Wealth initially placed 6,818,182 shares of Common Stock (equal to 100% of the number of shares of Common
Stock underlying the Investor Shares) (the ―Escrow Shares‖) into an escrow account to be held as security for the achievement of
certain net income and earnings per share targets in 2008 and 2009. We targeted $12 million in net income and $0.50 earnings per
share for the fiscal year 2008 (the ―2008 Performance Threshold‖). For the year ended December 31, 2008, the Company’s net

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income was $11,701,879 which achieved 95% of the 2008 performance threshold. Because we achieved at least 95% of the 2008
Performance Threshold the Escrow Shares are continuing to be held in escrow pending the results of the 2009 Performance
Threshold, which is $18 million in audited net income and $0.76 earnings per share. The calculation of earnings per share of $0.76
for the fiscal year 2009 shall exclude up to $5,000,000 in shares of Common Stock issued in a bona fide public offering, however,
any shares issued in excess of $5,000,000 shall be included in the calculation of earnings per share for the fiscal year 2009. If we
achieve the 2008 Performance Threshold and the 2009 Performance Threshold, the Escrow Shares will be released back to Magnify
Wealth. If we had achieved less than 95% of the 2008 Performance Threshold, an aggregate number of Escrow Shares (determined
by the formula set forth in the Securities Escrow Agreement) would have been distributed to the Investors, based upon the number
of Investor Shares (on an as converted basis) purchased in the Private Placement and still beneficially owned by such Investor, or
such successor, assign or transferee, at such time. If any Investor transfers Investor Shares purchased pursuant to the Purchase
Agreement, the rights to the Escrow Shares shall similarly transfer to such transferee, with no further action required by the
Investor, the transferee or us. With respect to the 2008 and 2009 performance thresholds, net income shall be defined in accordance
with US GAAP and reported by us in our audited financial statements for each of 2008 and 2009, plus any amounts that may have
been recorded as charges or liabilities on the 2008 and 2009 audited financial statements, respectively, as a result of: (i) the Private
Placement, including without limitation, as a result of the issuance and/or conversion of the Investor Shares, (ii) the release of the
Escrow Shares to the Magnify Wealth pursuant to the terms of the Escrow Agreement, and (iii) the issuance of ordinary shares held
by the sole shareholder of Magnify Wealth to Mr. Zhu upon the exercise of options granted to Mr. Zhu by the sole shareholder of
Magnify Wealth, as of the date thereof.
Compensation Expense Related to Make Good Escrow
    Our Common Stock is not publicly traded. We have determined that our Common Stock had a fair value of $2.260 per share at
October 31, 2008, or the date of the Securities Escrow Agreement, based on a retrospective valuation of our enterprises fair value
performed by an unrelated valuation firm, Grant Sherman Appraisal Limited. The valuation has been prepared consistent with the
guidance outlined in the American Institute of Certified Public Accountants Practice Aids, “Valuation of Privately-Held Company
Equity Securities Issued as Compensation.”
    We are a group of entities comprising Lihua International Inc., Ally Profit, Lihua Holdings, Lihua Copper and Lihua Electron,
for which different valuation approaches have been considered and used.
   Because Lihua International, Inc., Ally Profit and Lihua Holdings are holding companies only and have no revenue, both
market and income approaches have been considered not applicable, and only an asset-based approach has been applied. Lihua
Copper has not generated revenue and has little expense history. Accordingly, both market and income approaches have been
considered inappropriate and an asset-based approach has been applied.
    Because Lihua Electron has an established financial history of profitable operations and generation of positive cash flows, an
income approach has been applied using the discounted cash flow method. We developed our discounted cash flow analysis based
on our projected cash flows from 2009 through 2011, including, among other things, our estimates of future revenue growth, gross
margins, capital expenditures and working capital requirements, driven by assumed market growth rates, and estimated costs as
well as appropriate discount rates. A market approach was not applied because we concluded that there was significant limitation in
identifying true comparable enterprises with readily determinable fair values.
    For the year ended December 31, 2008, our net income was $11,701,879 which achieved 95% of the 2008 performance
threshold. Under the terms of the escrow agreement, since we achieved 95% of the 2008 performance threshold, all of the Escrow
Shares will continue to be held in escrow and currently none will be released to Magnify Wealth or the Investors. As the release of
the Escrow Shares requires the attainment of the performance thresholds for both 2008 and 2009, we will only commence to
recognize compensation expense around the middle of fiscal year 2009 when we will be able to evaluate whether it is probable that
we will achieve the 2009 performance threshold to provide for the ultimate release of the Escrow Shares back to Magnify Wealth.
For the year ended December 31, 2008, no compensation expense has been recognized

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regarding the make good escrow arrangement. If the 2009 performance threshold is also met and all of the Escrow Shares are
released back to Magnify Wealth, a compensation expense of $15,409,091 will be recognized in fiscal year 2009.
Stock Exchange Listing
    Pursuant to the Private Placement, we have an obligation to have our shares of Common Stock listed on a national securities
exchange no later than October 31, 2009 (the ―Listing Date‖). In the event that we do not list on a national securities exchange in
the prescribed time period and manner provided for in the Purchase Agreement, then Magnify Wealth shall transfer 750,000 of the
shares of our Common Stock it owns (the ―Listing Penalty Shares‖) to the Investors, with no additional consideration due from the
Investors. However, if we are requested by certain Investors to have our shares of Common Stock quoted on the Over-the-Counter
Bulletin Board (―OTCBB Demand‖) prior to the Listing Date, we shall do so and then we will have an additional 18 months to list
on a national securities exchange. If we fail to comply with the OTCBB Demand in a timely manner or, to then list on a national
securities exchange within the 18 month period, the Listing Penalty Shares shall be transferred to the Investors.
Effect of Transfer of the Escrow Shares and Listing Penalty Shares
    The following table sets forth the percentage of ownership by Magnify Wealth and other public shareholders assuming the
transfer by Magnify Wealth of 6,818,182 shares to the Investors under the Securities Escrow Agreement. The ―after‖ column
assumes the issuance of 2,000,000 shares of our Common Stock upon the consummation of this Offering and 500,000 shares of
previously converted Preferred Stock and the issuance of 5,958,760 shares of Common Stock upon automatic conversion of
5,958,760 shares of Preferred Stock upon the consummation of this Offering.




        Lihua International, Inc.
        % Share Ownership
        Shareholder                                                                Make Good Escrow Shares
                                                                              Before                         After
        Magnify Wealth                                                            89.4                          30.0
        All Other Shareholders                                                    10.6                          70.0
        Total                                                                    100.0                         100.0
Public Relations Escrow
    Additionally, we entered into a public relations escrow agreement with the Investors (the ―Public Relations Escrow
Agreement‖), pursuant to which we agreed to deposit $750,000 in an escrow account (the ―Public Relations Escrowed Funds‖). An
amount of $125,000 from the Public Relations Escrowed Funds shall be released to us when we appoint a Vice President of
Investor Relations, an additional $250,000 shall be released to us once we have appointed at least 3 independent directors and
established an Audit Committee, a Compensation Committee and a Nominating Committee, and the remaining $375,000 shall be
released to us as invoices become due for the purpose of any investor and public relations activities. As of April 14, 2009, we
complied with the independent director and committee requests and are entitled to the release of $250,000 from the Public
Relations Escrowed Funds. We were also obligated to hire an internal controls consultant no later than January 31, 2009. If we
failed to comply, we would have been subject to the payment of liquidated damages. On January 15, 2009, we complied with this
requirement and engaged Deloitte Touch Tohmatsu to be our internal controls consultant.

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                   DIRECTORS EXECUTIVE OFFICERS AND CERTAIN SIGNIFICANT EMPLOYEES
    Set forth below is information regarding our current directors and executive officers:




        Name                                    Age                                   Position
        Jianhua Zhu                             47      Chief Executive Officer, President and Director
        Yang ―Roy‖ Yu                           26      Chief Financial Officer and Treasurer
        Yaying Wang                             46      Chief Operating Officer, Secretary and Director
        Robert C. Bruce*                        46      Independent Director
        Jonathan P. Serbin*                     39      Independent Director
        Su Liu*                                 48      Independent Director
        Zhu Junying                             30      VP, Sales and Marketing




*   Indicates member of Audit, Nominating and Corporate Governance Committee and Compensation Committee
   The term of office of each director expires at our annual meeting of stockholders or until their successors are duly elected and
qualified. Our officers serve at the discretion of our Board of Directors.
    Set forth below is information regarding certain significant employees.
        Name                                 Age                                    Position
        Yin Falong                            45      Chief Engineer
        Yu Niu                                36      Chief Engineer
   Below is the five year employment history of each director, executive officer and significant employees listed above.
     Jianhua Zhu, President and Chief Executive Officer of the Company and the Chairman of the Board of Directors, has over 20
years of experience in China’s copper industry. From Lihua Electron’s inception in October 1999 and from Lihua Copper’s
inception in September 2007 until July 30, 2008, Mr. Zhu served as the sole member of the board of directors. Mr. Zhu currently
serves as the Executive Director of Lihua Electron and Lihua Copper. In addition to overall management of the Company, Mr. Zhu
is responsible for corporate and product development and governmental regulations.
    Yang ―Roy‖ Yu, is the Company’s Chief Financial Officer and Treasurer. Mr. Yu served as a member of the Board of
Directors from June 24, 2008 until his resignation on December 8, 2008. Between June 2006 and April 2008, Mr. Yu was the
Executive Vice President at Fushi Copperweld, Inc. (NASDAQ: FSIN). From May 2005 until June 2006, Mr. Yu was the Chief
Financial Officer of Songzai International Holding Group, Inc. (OTCBB: SGZH). From October 2004 until May 2005, Mr. Yu was
the Vice President at Yinhai Technology and Development Co. Mr. Yu attended London Southbank University from 2001 to 2004,
where he holds a degree in accounting and finance.
    Yaying Wang, Chief Operating Officer and a member of the Board of Directors, has over 20 years of experience in China’s
copper industry. Ms. Wang has strong technical knowledge of copper and extensive industry relationships. In addition to her
responsibilities as COO, Ms. Wang is responsible for the Sales and Production Departments.
    Robert C. Bruce, Independent Director. Mr. Bruce has served as an independent member of our Board of Directors since April
8, 2009. Mr. Bruce is President of Oakmont Advisory Group, LLC, a financial management consulting firm located in Portland,
Maine. Prior to founding Oakmont Advisory Group, from 1999 through 2004, Mr. Bruce served as Chief Operating Officer,
Treasurer and Director for Enterix Inc., a privately-held, venture-funded medical device and laboratory services company that was
purchased by Quest Diagnostics. He also previously served as Chief Financial Officer for Advantage Business Services (1997 to
1998), a privately-held national payroll processing and tax filing business that was subsequently acquired by PayChex. Mr. Bruce
received his MBA from the Yale School of Management, and a Bachelor of Arts degree from Princeton University.

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    Jonathan P. Serbin, Independent Director. Mr. Serbin has served as an independent member of our Board of Directors since
April 8, 2009. He is current the Chief Executive Officer of D Mobile, Inc., a seller of mobile content in China. Prior to D Mobile,
Inc., Mr. Serbin was Chief Financial Officer at EBT Mobile from July 2004 through December 2007. He was also previously the
Chief Financial Officer of Hana Biosciences, a biotech development company from January 2004 through July 2004. Mr. Serbin
holds a B.A. from Washington University, St. Louis, a J.D. from Boston University and an MBA from Columbia University
   Su Liu, Independent Director. Mr. Liu has served as an independent member of our Board of Directors since April 8, 2009. Mr.
Liu is a Lawyer in the PRC and has been a Partner at Beijing Zhongying LLP since 2006. He was a Partner at Beijing Zhongkai
LLP from 2002 through 2006. Mr. Liu attended Beijing University.
    Zhu Junying, VP Sales and Marketing. Ms. Zhu has served as the VP of sales of Lihua Electron since its inception in 1999.
Ms. Zhu has more than 10 years working experience in Copper Clad Aluminum magnet wire industry. She had held various
executive management positions since Lihua Electron was established, including VP of operations, from 2001 to 2005. During her
career, Ms. Zhu has focused on the business development, strategic market planning, key account management, contract
negotiation and loss prevention. Ms. Zhu graduated from Changzhou Accounting College with a degree in marketing.
    Yin Falong, Chief Engineer. Mr. Yin has served as the Production Manager of Lihua Copper since its inception in 2008. Mr.
Yin has more than 15 years working experience in copper casting and rolling production line management and has focused on the
fire refinery high conductivity copper industry since the market started in China in 2002. He had held executive management
positions with a number of copper enterprises prior to joining our company from 2003 to 2007, including Executive Vice President
of R&D and production of Hongli Copper Co., Ltd. from 2006 to 2007. During his career, Mr. Yin has focused on the
development, design, and processes of pure copper and fire refinery high conductivity copper production. He has designed a
proprietary technique for the modified processes of fire refinery high conductivity copper production used by Lihua Copper and has
extensive experience in production management. Mr. Yin graduated from Shanghai Smelting Technology College.
    Yu Niu, Chief Engineer. Mr. Yu has served as Production Manager of Lihua Electron since 2008. Mr. Yu has more than 15
years working experience in the enameling wire industry. He has held executive management positions with a number of copper
enterprises prior to joining our company, including Production Manager of Precision Wire Co., Wuxi. From 2007 to 2008. During
his career, Mr. Yu has focused on the development, design, and processes of enameling wire production. Mr. Yu graduated from
Nantong Industrial University with a degree in engineering.
Family Relationships
   Mr. Jianhua Zhu, our Chief Executive Officer, President and Chairman, and Ms. Yaying Wang, our Chief Operating Officer
and a director, are husband and wife. There are no other family relationships among our executive officers, directors or significant
employees.
Involvement in Certain Legal Proceedings
    There have been no events under any bankruptcy act, no criminal proceedings and no judgments, injunctions, orders or decrees
material to the evaluation of the ability and integrity of any director, executive officer, promoter or control person of our Company
during the past five years.
Corporate Governance
Board of Directors
   We have five members serving on our Board of Directors, of which a majority are independent directors. All actions of the
Board of Directors require the approval of a majority of the directors in attendance at a meeting at which a quorum is present.
Board Committees
  The Board of Directors has an Audit Committee, Nominating and Corporate Governance Committee and a Compensation
Committee, each of which was formed on April 14, 2009.

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Audit Committee
    The audit committee members consist of Robert C. Bruce, Jonathan P. Serbin and Su Liu. Each of these members would be
considered ―independent‖ as defined by Section 803 of the Company Guide of the NYSE AMEX stock market as determined by
our board of directors.
    The audit committee oversees our financial reporting process on behalf of the board of directors. The committee’s
responsibilities include the following functions:
   •    approve and retain the independent auditors to conduct the annual audit of our books and records;
   •    review the proposed scope and results of the audit;
   •    review and pre-approve the independent auditors’ audit and non-audited services rendered;
   •    approve the audit fees to be paid;
   •    review accounting and financial controls with the independent auditors and our internal auditors and financial and
        accounting staff;
   •    review and approve transactions between us and our directors, officers and affiliates;
   •    recognize and prevent prohibited non-audit services;
   •    meeting separately and periodically with management and our internal auditor and independent auditors; and
   The Audit Committee operates under a written charter. Robert C. Bruce serves as the Chairman of our Audit Committee.
    Our board of directors has determined that we have at least one audit committee financial expert, as defined by the rules and
regulations of the SEC and the NYSE AMEX, serving on our audit committee, and that Robert C. Bruce is the ―audit committee
financial expert‖.
Nominating and Corporate Governance Committee
   The Nominating and Governance Committee is responsible for identifying potential candidates to serve on our board and its
committees. The committee’s responsibilities include the following functions:
   •    making recommendations to the board regarding the size and composition of the board;
   •    identifying and recommending to the board nominees for election or re-election to the board, or for appointment to fill any
        vacancy;
   •    establishing procedures for the nomination process;
   •    advising the board periodically with respect to corporate governance matters and practices, including periodically
        reviewing corporate governance guidelines to be adapted by the board; and
   •    establishing and administering a periodic assessment procedure relating to the performance of the board as a whole and its
        individual members.
   Each of Messrs. Bruce, Serbin and Liu are the members of the Nominating and Corporate Governance Committee. The
Nominating and Corporate Governance Committee operate under a written charter. Mr. Liu is the Chairman of the Nominating and
Corporate Governance Committee.
Compensation Committee
   The Compensation Committee is responsible for making recommendations to the board concerning salaries and incentive
compensation for our officers and employees and administers our stock option plans. Its responsibilities include the following
functions:

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   •    reviewing and recommending policy relating to the compensation and benefits of our officers and employees, including
        reviewing and approving corporate goals and objectives relevant to the compensation of our chief executive officer and
        other senior officers; evaluating the performance of these officers in light of those goals and objectives; and setting
        compensation of these officers based on such evaluations;
   •    administering our benefit plans and the issuance of stock options and other awards under our stock plans; and reviewing
        and establishing appropriate insurance coverage for our directors and executive officers;
   •    recommending the type and amount of compensation to be paid or awarded to members of our board of directors, including
        consulting, retainer, meeting, committee and committee chair fees and stock option grants or awards; and
   •    reviewing and approving the terms of any employment agreements, severance arrangements, change-of-control protections
        and any other compensatory arrangements for our executive officers.
   Each of Messrs. Bruce, Serbin and Liu are the members of the Compensation Committee. The Compensation Committee
operates under a written charter. Mr. Serbin is Chairman of Compensation Committee.
Code of Ethics
   We adopted a Corporate Code of Ethics and Conduct on December 31, 2007. The Code of Ethics is designed to deter
wrongdoing and to promote ethical conduct and full, fair, accurate, timely and understandable reports that the Company files or
submits to the Securities and Exchange Commission and others. A copy of the Code of Ethics is included as Exhibit 14.1 to our
Annual Report on Form 10-KSB, filed with the SEC on February 26, 2008. A printed copy of the Code of Ethics may also be
obtained free of charge by writing to us at our headquarters located at Houxiang Five-Star Industry District, Danyang City, Jiangsu
Province, PRC 212312.

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                                                 EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
    We strive to provide our named executive officers with a competitive base salary that is in line with their roles and
responsibilities.
    We believe that other peer companies in China which are listed on U.S. stock markets would be the most appropriate to use for
salary comparison purposes. However, none of our direct competitors are public companies in the U.S. We have looked at Fushi
International (Dalian) Bimetallic Cable Co., Ltd., one of our suppliers, which is listed on the Nasdaq Stock Market. The salaries of
Fushi’s CEO and CFO are $240,000 and $180,000 per year, respectively. Fushi has substantially higher revenues than we do and
therefore, taking this into consideration, we believe that the compensation of our executive officers is appropriate.
    It is not uncommon for companies with operations primarily in China, to have base salaries and bonuses as the sole and only
form of compensation. The base salary level is established and reviewed based on the level of responsibilities, the experience and
tenure of the individual and the current and potential contributions of the individual. The base salary is compared to similar
positions within comparable peer companies and with consideration of the executive’s relative experience in his or her position.
Based on an evaluation of available information with respect to the base salaries of executives of our competitors, the base salary
and bonus paid to our named executive officers is in line with our competitors. Base salaries are reviewed periodically and at the
time of promotion or other changes in responsibilities.
    On April 14, 2009, the Company adopted the Lihua International, Inc. 2009 Omnibus Securities and Incentive Plan (the
―Plan‖). The Plan includes: Distribution Equivalent Rights, Options, Performance Share Awards, Performance Unit Awards,
Restricted Stock Awards, Restricted Stock Unit Awards, Stock Appreciation Rights, Tandem Stock Appreciation Rights,
Unrestricted Stock Awards or any combination of the foregoing. We will consider other elements of compensation, including
without limitation, short and long term compensation, cash and non-cash, and other equity-based compensation. We believe our
current compensation package is comparative to our peers in the industry and aimed to retain and attract talented individuals.
   The following table sets forth the compensation paid or accrued by us to our Chief Executive Officer, President and Chief
Financial Officer and each of our other officers whose compensation exceeded $100,000 for each of the Company’s last two
completed fiscal years.
Summary Compensation Table
Name and       Fiscal   Salary      Bonus    Stock         Option     Non-equity      Change in       All Other     Total
Principal      Year      ($) (2)     ($)    Awards         Awards   Incentive Plan     Pension      Compensation     ($)
Position (1)                                  ($)           ($)     Compensation      Value and           ($)
                                                                         ($)         Nonqualified
                                                                                       Deferred
                                                                                     Compensation
                                                                                       Earnings
                                                                                         ($)
Michael Rapp   2008           -0-     -0-            -0-     -0-           -0-             -0-            -0-               -0-
(former
President)
               2007           -0-     -0-            -0-     -0-           -0-             -0-            -0-               -0-
               2006           -0-     -0-            -0-     -0-           -0-             -0-            -0-               -0-
                                                                                                                                  (4)
Mr. Jianhua    2008     30,000        -0-            -0-     -0-           -0-             -0-            -0-        30,000
Zhu
(CEO and
President)
                                                                                                                                  (5)
               2007       2,805       -0-            -0-     -0-           -0-             -0-            -0-         2,805
                                                                                                                                  (5)
               2006       2,805       -0-            -0-     -0-           -0-             -0-            -0-         2,805
                                                                                                                                  (3)
Mr. Yang       2008     25,000        -0-   1,017,000        -0-           -0-             -0-            -0-      1,042,000
                                                                                                                                  (4)
―Roy‖ Yu
Chief
Financial
Officer
               2007           —       —              -0-     —              —               —              —
               2006           —       —              -0-     —              —               —              —                -0-
                                                                                                                                  (4)
Ms. Yaying     2008     25,000        -0-            -0-     -0-           -0-             -0-            -0-        25,000
Wang
Chief
Operating
Officer
                                                                                                                                  (5)
               2007       2,805       -0-            -0-     -0-           -0-             -0-            -0-         2,805
                                                                                                                                  (5)
               2006       2,805       -0-            -0-     -0-           -0-             -0-            -0-         2,805
(1) On October 31, 2008, upon the closing of the Share Exchange, Michael Rapp resigned as President of

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   Lihua and the Lihua Board and appointed Mr. Zhu as Chief Executive Officer, Ms. Wang as Chief Operating Officer and Mr.
   Yu as Chief Financial Officer.
(2) The salary presented was converted into US dollars from RMB at a conversion rate of 6.9452 for the year ended December 31,
    2008. Our named executive officers reside in China and therefore may receive their annual compensation in RMB.
(3) Mr. Yu joined the Company as Chief Financial Officer in April 2008 and was not an executive officer of the Company prior to
    such time. In October 2008, Mr. Yu entered into a contractual agreement with our principal shareholder, Magnify Wealth.
    Under the terms of the agreement, Mr. Yu is entitled to receive up to 450,000 shares of the Company’s Common Stock owned
    by Magnify Wealth. 112,500 of such shares were transferred to Mr. Yu immediately upon consummation of the Share
    Exchange. The remaining 337,500 shares are being held in an escrow account and shall be released to Mr. Yu in three equal
    installments of 112,500 shares issuable on the first, second and third anniversary of the consummation of the Share Exchange.
(4) Messrs. Zhu and Yu and Ms. Wang were not appointed executive officers of the Company until October 31, 2008. Therefore,
    their salaries are pro-rated in U.S. dollars for the year ended December 31, 2008.
(5) Reflects total compensation converted into U.S. Dollars, provided by the PRC Operating Companies for the years ended
    December 31, 2007 and 2006, respectively.
Employment Contracts and Termination of Employment, and Change-In-Control
  The following employment agreements were entered into by the Company and the following executive officers:
Jianhua Zhu
    The PRC Operating Companies entered into an employment agreement with Jianhua Zhu on June 24, 2008 to serve as Chief
Executive Officer and a member of the board of directors for a term of three (3) years. Pursuant to the agreement, Mr. Zhu will
receive annual compensation equal to $180,000. In addition, Mr. Zhu is entitled to participate in any and all benefit plans, from
time to time, in effect for employees, along with vacation, sick and holiday pay in accordance with policies established and in effect
from time to time. In the event that either of the PRC Operating Companies terminate the employment agreement without cause (as
defined therein), Mr. Zhu will be entitled to a severance payment of one year’s salary from the date of termination plus all medical
and dental benefits for that time period as well. In addition, if he is no longer employed by the Company, Mr. Zhu has agreed that
neither he, nor any of his affiliates shall directly or indirectly employ, solicit, or induce any individual, consultant, customer or
supplier who is, or was at any time during the one year period prior to his termination date, an employee or consultant of the
Company, a customer of the Company or a supplier of the Company, cause such employee, consultant, customer or supplier to
refrain from continuing their relationship with the Company. Mr. Zhu has also agreed to a non-compete clause whereby he shall not
engage or assist others to engage in related businesses within Beijing and Danyang, PRC, the prescribed territory, however, he may
own up to 5% of the outstanding shares of a company engaged in a similar business if such shares are listed on a national securities
exchange. On September 26, 2008, Mr. Zhu entered in an amendment to the Employment Agreement with the PRC Operating
Companies whereby certain clerical errors were corrected.
Yang ―Roy‖ Yu
     The PRC Operating Companies entered into an employment agreement with Yang Yu on June 24, 2008 to serve as Chief
Financial Officer and a member of the board of directors for a term of three (3) years. Pursuant to the agreement, Mr. Yu will
receive annual compensation equal to $150,000. In addition, Mr. Yu is entitled to participate in any and all benefit plans, from time
to time, in effect for employees, along with vacation, sick and holiday pay in accordance with policies established and in effect
from time to time. In the event that either of the PRC Operating Companies terminate the employment agreement without cause (as
defined therein), Mr. Yu will be entitled to a severance payment of one years salary from the date of termination plus all medical
and dental benefits for that time period as well. In addition, if he is no longer employed by the Company, Mr. Yu has agreed that
neither he, nor any of his affiliates shall directly or indirectly employ, solicit, or induce any individual, consultant, customer or
supplier who is, or was at any time during the one

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year period prior to his termination date, an employee or consultant of the Company, a customer of the Company or a supplier of
the Company, cause such employee, consultant, customer or supplier to refrain from continuing their relationship with the
Company. Mr. Yu has also agreed to a non-compete clause whereby he shall not engage or assist others to engage in related
businesses within Beijing and Danyang, PRC, the prescribed territory, however, he may own up to 5% of the outstanding shares of
a company engaged in a similar business if such shares are listed on a national securities exchange. On September 26, 2008, Mr. Yu
entered in an amendment to the Employment Agreement with the PRC Operating Companies whereby certain clerical errors were
corrected.
    In October 2008, Mr. Yu entered into a contractual agreement with our principal shareholder, Magnify Wealth. Under the terms
of the agreement, Mr. Yu is entitled to receive up to 450,000 shares of the Company’s Common Stock owned by Magnify Wealth.
112,500 of such shares were transferred to Mr. Yu immediately upon consummation of the Share Exchange. The remaining
337,500 shares are being held in an escrow account and shall be released to Mr. Yu in three equal installments of 112,500 shares
issuable on the first, second and third anniversary of the consummation of the Share Exchange.
Yaying Wang
    The PRC Operating Companies entered into an employment agreement with Yaying Wang on June 24, 2008 to serve as Chief
Operating Officer and a member of the board of directors for a term of three (3) years. Pursuant to the agreement, Ms. Wang will
receive annual compensation equal to $150,000. In addition, Ms. Wang is entitled to participate in any and all benefit plans, from
time to time, in effect for employees, along with vacation, sick and holiday pay in accordance with policies established and in effect
from time to time. In the event that either of the PRC Operating Companies terminate the employment agreement without cause (as
defined therein), Ms. Wang will be entitled to a severance payment of one years salary from the date of termination plus all medical
and dental benefits for that time period as well. In addition, if she is no longer employed by the Company, Ms. Wang has agreed
that neither she, nor any of her affiliates shall directly or indirectly employ, solicit, or induce any individual, consultant, customer
or supplier who is, or was at any time during the one year period prior to her termination date, an employee or consultant of the
Company, a customer of the Company or a supplier of the Company, cause such employee, consultant, customer or supplier to
refrain from continuing their relationship with the Company. Ms. Wang has also agreed to a non-compete clause whereby she shall
not engage or assist others to engage in related businesses within Beijing and Danyang, PRC, the prescribed territory, however, she
may own up to 5% of the outstanding shares of a company engaged in a similar business if such shares are listed on a national
securities exchange. On September 26, 2008, Ms. Wang entered in an amendment to the Employment Agreement with the PRC
Operating Companies whereby certain clerical errors were corrected.
Grants of Plan-Based Awards
   None.
Outstanding Equity Awards at Fiscal Year-End
   None.
Option Exercise and Stock Vested
   None.
Pension Benefits
   We do not sponsor any qualified or non-qualified defined benefit plans.
Nonqualified Deferred Compensation
   We do not maintain any non-qualified defined contribution or deferred compensation plans.
Compensation of Directors
   None of the directors received compensation for their respective services rendered to the Company for the year ended
December 31, 2008.

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    However, pursuant to independent director agreements entered into between the Company and each of the newly appointed
each of Messrs. Bruce, Serbin and Liu on April 14, 2009, shall receive $20,000 in cash and an option grant to purchase 20,000
shares of Common Stock of the Company. When the Company’s stock is listed on a national securities exchange, the cash fee for
each independent director will increase to $25,000. The exercise price of the option grants shall be equal to the fair market value of
a share of the Company’s Common Stock on the date of the grant of the option and such options will vest quarterly at the end of
such three month period, in equal installments over the 12 months period from date of grant. For serving as chair of the Audit
Committee, Mr. Bruce shall receive an additional $7,500 in cash, and Messrs. Serbin and Liu shall receive an additional $5,000 in
cash for serving on the Audit Committee.
   On April 14, 2009, the Compensation Committee approved the issuance to each independent director of options to purchase
20,000 shares of Common Stock at an exercise price of $2.20 per share.
    In addition, each independent director who resides in China, currently Messrs. Serbin and Liu, will receive a $1,000 fee for
each board or committee meeting attended by telephone; a $1,500 fee for each board meeting attended in person within China; and
a $5,000 fee for each board meeting attended in person outside of China. Each eligible director who resides outside of China,
currently Mr. Bruce, will receive a $1,000 fee for each board meeting attended by telephone; a $5,000 fee for each board meeting
attended in person outside of the United States; and a $1,500 fee for each board meeting attended in person within the United
States.

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                   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
    The following table sets forth as of August 17, 2009 the number of shares of our Common Stock beneficially owned by (i) each
person who is known by us to be the beneficial owner of more than five percent of the Company’s Common Stock; (ii) each
director; (iii) each of the named executive officers in the Summary Compensation Table; and (iv) all directors and executive
officers as a group. As of August 17, 2009, we had 15,500,000 shares of Common Stock issued and outstanding.
     Beneficial ownership is determined in accordance with SEC rules and generally includes voting or investment power with
respect to securities. Unless otherwise indicated, the stockholders listed in the table have sole voting and investment power with
respect to the shares indicated. Unless otherwise noted, the principal address of each of the stockholders, directors and officers
listed below is c/o Lihua Holdings Limited, Houxiang Five-Star Industry District, Danyang City, Jiangsu Province, PRC 212312,
China.
    All share ownership figures include shares of our Common Stock issuable upon securities convertible or exchangeable into
shares of our Common Stock within sixty (60) days of August 17, 2009, which are deemed outstanding and beneficially owned by
such person for purposes of computing his or her percentage ownership, but not for purposes of computing the percentage
ownership of any other person.




        Name and Address of Beneficial Owner                           Number of              Approximate Percentage of
                                                                        Shares of             Outstanding Common Stock
                                                                        Common
                                                                         Stock
                                                                       Beneficially
                                                                        Owned (1)
                                                                                              Before             After
                                                                                            Offering (2) (3)    Offering
        Magnify Wealth Enterprises Limited (4) (5)                         13,862,500            89.4 %           59.1 %

        Vision Opportunity China LP (7)                                     1,534,500              9.9 %           9.9 %

        CMHJ Technology Fund II, L.P. (8)                                   1,534,500              9.9 %           9.9 %

        Snow Hill Development Limited (9)                                   1,159,000              7.4 %           4.9 %

        Yang ―Roy‖ Yu (5)                                                     112,500               *                *
        Jianhua Zhu (6)                                                    13,862,500            89.4 %           59.1 %

        Yaying Wang (10)                                                    3,285,413            21.2 %           14.0 %

        Robert C. Bruce (11)                                                    5,000               *                *
        Jonathan P. Serbin (11)                                                 5,000               *                *
        Su Liu (11)                                                             5,000               *                *
        All Directors and Executive Officers, as a group (6                13,990,000            90.2 %           59.6 %
          persons)
*   Less than one percent
(1) Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power
    with respect to securities. Shares of Common Stock subject to securities anticipated to be exercisable or convertible at or
    within 60 days of the date hereof, are deemed outstanding for computing the percentage of the person holding such option or
    warrant but are not deemed outstanding for computing the percentage of any other person. The indication herein that shares are
    anticipated to be beneficially owned is not an admission on the part of the listed stockholder that he, she or it is or will be a
    direct or indirect beneficial owner of those shares.
(2) Based upon 15,500,000 shares of Common Stock issued and outstanding.
(3) As of August 17, 2009 there were 15,500,000 shares of our Common Stock issued and outstanding. In determining the percent
    of Common Stock beneficially owned August 17, 2009, (i) the numerator is the number of shares of Common Stock
    beneficially owned (including shares that he has the right to acquire August 17, 2009; and (ii) the number of shares of
    Common Stock which such stockholder has the right to acquire within 60 days of August 17, 2009.
(4) The address of Magnify Wealth is Quastisky Building, P.O. Box 4389, Road Town, Tortola, British Virgin Islands. As the sole
    director of Magnify Wealth, Mr. Zhu, our CEO and President has sole voting and investment power over the shares.

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(5) Magnify Wealth received 14,025,000 shares of Common Stock in the Share Exchange. Pursuant to a contractual arrangement
    between Magnify Wealth and Mr. Yu, Mr. Yu is entitled to receive up to 450,000 of the shares issued to Magnify Wealth in the
    Share Exchange. 112,500 of such shares were transferred to Mr. Yu immediately upon consummation of the Share Exchange.
    The remaining 337,500 shares have been placed into an escrow account and shall be released to Mr. Yu in three equal
    installments of 112,500 shares issuable on the first, second and third anniversary of the consummation of the Share Exchange.
    Mr. Yu will not become the record or beneficial owner of the shares placed in escrow until such time as the shares are released
    to him. Accordingly, Mr. Yu will not have the right to vote or receive dividends on such shares.
(6) Includes 13,862,500 shares owned by Magnify Wealth, of which Mr. Zhu, as the sole director of Magnify Wealth, has sole
    voting and investment power over the shares. Of the 13,862,500 shares of Common Stock owned by Magnify Wealth, Mr. Zhu
    is deemed to be the beneficial owner of 3,285,413 shares as a result of the vesting of 25% of Mr. Zhu’s Option Shares, equal to
    750 shares of Magnify Wealth, or 23.7% of Magnify Wealth’s equity ownership. Mr. Zhu disclaims beneficial ownership over
    the remaining 10,577,087 shares owned by Magnify Wealth.
    Pursuant to the Share Transfer Agreement, as amended, with Mr. Chu, Mr. Zhu has the option to purchase all of the Option
    Shares at a price of $1.00 per share, pursuant to the attainment of certain performance targets set forth in the agreement. As of
    the date of this prospectus, 25% of the Option Shares have vested, representing 750 ordinary shares of Magnify Wealth;
    however, Mr. Zhu has not exercised such Option Shares. Pursuant to a March 7, 2009 amendment to the Share Transfer
    Agreement, Mr. Zhu has the right to exercise the remaining Option Shares, with an additional 25% of the Option Shares vesting
    and becoming exercisable on February 14, 2010 and the remaining 50% of the Option Shares vesting and becoming exercisable
    on February 14, 2011.
    Also on October 22, 2008, Mr. Chu and Europe EDC, each entered into subscription agreements for the purchase of 632 shares
    and 32 shares, respectively, in Magnify Wealth at a nominal price of US$1.00 per share. Pursuant to these subscription
    agreements, Magnify Wealth will issue the shares in tranches commencing February 14, 2009, 2010, and 2011, of 25%, 25%
    and 50% of the shares, respectively. The date of issuance of the shares is the same date that Mr. Zhu’s Option Shares vest and
    become exercisable, however, there are no conditions precedent to the issuance of these shares to Mr. Chu and Europe EDC.
    If all of the Option Shares are exercised by Mr. Zhu and all of the shares are subscribed for by Mr. Chu and Europe EDC, Mr.
    Zhu, Mr. Chu and Europe EDC would own approximately 81.9%, 17.3% and 0.9% of Magnify Wealth, respectively.
(7) Vision Capital Advisors, LLC, a Delaware limited liability company, which serves as the investment manager to Vision
    Opportunity China LP and Adam Benowitz, the managing member of Vision Capital Advisors share voting and investment
    power with Vision Opportunity China LP with respect to the shares beneficially owned by Vision Opportunity China LP.
    Vision Capital Advisors and Mr. Benowitz may each be deemed to beneficially own the shares of Common Stock held by
    Vision Opportunity China LP. Each disclaims beneficial ownership of such shares. The 1,534,500 shares are based on the
    conversion of Series A Preferred Stock up to the ownership cap of 9.9% imposed by the Series A Preferred Stock and the
    warrants issued to Vision. This amount does not include 1,647,318 shares of our Series A Preferred Stock, which are initially
    convertible into approximately 1,647,318 shares of Common Stock, subject to adjustment, and warrants to purchase up to
    700,000 shares of our Common Stock which cannot be converted or exercised, respectively, because of the ownership
    restrictions of the Series A Preferred Stock and the warrants issued to Vision. Based upon the terms of the Series A Preferred
    Stock and the warrants issued to Vision, holders may not convert the Series A Preferred Stock and/or exercise the warrants, if
    on any date, such holder would be deemed the beneficial owner of more than 9.9% of the then outstanding shares of our
    Common Stock; however, a holder can elect to waive the cap upon 61 days notice to us, except that during the 61 day period
    prior to the expiration date of their warrants, they can waive the cap at any time, but a waiver during such period will not be
    effective until the day immediately preceding the expiration date of the warrant. The address for Vision Opportunity China LP
    is c/o Vision Capital Advisors, LLC, 20 West 55 th Street, 5 th Floor, New York, NY 10019-5373.
(8) CMHJ Partners L.P., a Cayman Islands limited partnership (―CMHJ Partners‖) and the general partners of CMHJ Technology
    Fund II, L.P. (the ―Fund‖), and CMHJ Partners Ltd., a Cayman Islands limited liability company (―CMHJ‖) and the general
    partner of CMHJ Partners, share voting and investment power with the Fund with respect to the shares beneficially owned by
    the Fund. CMHJ Partners and CMHJ may each be deemed to beneficially own the shares of Common Stock held by the Fund.
    CMHJ Partners and CMHJ each disclaims beneficial ownership of such shares. The 1,534,500 shares are based

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    on the conversion of Series A Preferred Stock up to the ownership cap of 9.9% imposed by the Series A Preferred Stock and
    the warrants issued to CMHJ. This amount does not include 738,227 shares of our Series A Preferred Stock, which are initially
    convertible into approximately 738,227 shares of Common Stock, subject to adjustment and warrants to purchase up to 500,000
    shares of our Common Stock which cannot be converted or exercised, respectively, because of the ownership restrictions of the
    Series A Preferred Stock and the warrants issued to CMHJ. Based upon the terms of the Series A Preferred Stock and the
    warrants issued to CMHJ, holders may not convert the Series A Preferred Stock and/or exercise the warrants, if on any date,
    such holder would be deemed the beneficial owner of more than 9.9% of the then outstanding shares of our Common Stock;
    however, a holder can elect to waive the cap upon 61 days notice to us, except that during the 61 day period prior to the
    expiration date of their warrants, they can waive the cap at any time, but a waiver during such period will not be effective until
    the day immediately preceding the expiration date of the warrant. The address for CMHJ is Suite 803, Lippo Plaza 222 Huai
    Hai Zhong Road Shanghai 200021, PRC
(9) Represents 950,000 shares of our Series A Preferred Stock, which is initially convertible into 950,000 shares of Common
    Stock, subject to adjustment and warrants to purchase up to 209,000 shares of Common Stock. Snow Hill Development
    Limited, a British Virgin Islands Company is 100% owned by China Merchants Technology Holdings Company Limited. The
    address of Snow Hill is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands.
(10) As Mr. Zhu’s wife, Ms. Wang is deemed to be the beneficial owner of 3,285,413 shares of Common Stock as a result of the
     vesting of 25% of Mr. Zhu’s Option Shares, equal to 750 shares of Magnify Wealth, or 23.7% of Magnify Wealth’s equity
     ownership. Ms. Wang disclaims beneficial ownership over the remaining 10,577,087 shares owned by Magnify Wealth over
     which Mr. Zhu has sole voting and investment power.
(11) Messrs. Bruce, Serbin and Liu were appointed to the Company’s Board of Directors on April 14, 2009. Each of Messrs.
     Bruce, Serbin and Liu were issued an option to purchase 20,000 shares of Common Stock of the Company. The options vest
     quarterly, in equal installments over the 12 months period from date of grant. As of the date of this prospectus, 5,000 options
     have vested for each of Messrs. Bruce, Serbin and Liu.
Certain Relationships and Related Transactions, and Director Independence
Transactions With Related Persons
    As of June 30, 2009, Tianyi Telecommunication Co., Ltd. (―Tianyi Telecom‖) has guaranteed the Company’s short-term bank
loans with several commercial banks in China in the aggregate amount of $4,391,165. Tianyi Telecom is owned by the brother of
Ms. Yaying Wang, our Chief Operational Officer and director and wife of our CEO.
   For the six months ended June 30, 2009 our sales included $169,847 that were made to Tianyi Telecom and Danyang Special
Electronics Co., Ltd. (―Special Electronics‖). Mr. Zhu owns 60% and his wife, Mrs. Wang owns the sole remaining 40% of Special
Electronics.
   As of June 30, 2008, the Company had advances due to Special Electronics in the amount of $95,931, which were interest-free,
unsecured and had no fixed repayment date and to Mr. Zhu of $53,090, which had an annual interest rate ranging from 6.03% to
6.57%, with no fixed repayment date and was unsecured.
    As of June 30, 2008, the Company had amounts payable to Special Electronics of $1,150,000. Such amount represents the
purchase price for the acquisition by the Company of 52% of the equity interests of Lihua Electron from Special Electronic. The
share acquisition was in connection with the restructuring of the PRC Operating Companies. In connection with the restructuring,
Special Electronics sold its shares of Lihua Electron to Lihua Holdings, the Hong Kong Company. The consideration payable to
Special Electronics was waived by Mr. Zhu.
   As of December 31, 2007, the Company had advances due to related parties in the aggregate amount of $3,521,403. Such
amounts included an advance of $2,258,851 by Tianyi Telecom, and $90,080 from Special Electronic, which were interest-free,
unsecured and had no fixed repayment date, and $22,472 from Mr. Zhu, which had an annual interest rate ranging from 6.03% to
6.57%, with no fixed repayment date and was unsecured. As of December 31, 2008, all such advances due to these related parties
have been repaid.

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   As of December 31, 2007, the Company had advanced $3,244,531 to Danyang Jintao Copper Industry Co., Ltd. (―Jintao
Copper‖). The repayment of such amount was secured by a pledge of 100% of all of the shares of Jintao Copper. As of June 30,
2008 such amounts were repaid to the Company. Jintao Copper is owned by Ms. Wang’s nephew. On April 28, 2009, Lihua
Electron and Jintao Copper agreed to terminate a lease agreement originally entered into on January 24, 2008, whereby Jintao
Copper leased its property located in Five Star Industrial Park to Lihua Electron.
Transactions With Control Persons
    On October 31, 2008, we entered into a Share Exchange Agreement with Ally Profit, a British Virgin Islands company,
Magnify Wealth Enterprise Limited, the sole shareholder of Ally Profit, which owned shares constituting 100% of the issued and
outstanding shares of Ally Profit. Pursuant to the terms of the Share Exchange Agreement, Magnify Wealth transferred all of
Magnify Wealth to us in exchange for the issuance of 14,025,000 shares of our Common Stock. As a result of the share exchange,
Magnify Wealth became our wholly owned subsidiary and Magnify Wealth acquired approximately 93.5% of our issued and
outstanding Common Stock.
Transactions With Promoters
    On March 1, 2006, we entered into Stock Purchase Agreements with each of Michael Rapp, our former President and director,
Philip Wagenheim, our former Secretary and director, and Clifford Chapman, our former director, pursuant to which we issued
2,000,000 shares of Common Stock for an aggregate purchase price of $30,000, or $0.005 per share after giving affect to an
approximately 3.01 forward stock split on September 17, 2008.
    On March 9, 2007, we entered into a loan agreement with Broadband Capital Management (―BCM‖), pursuant to which we
agreed to repay $12,500 on or before the earlier of (i) December 31, 2012 or (ii) the date that we (or a wholly owned subsidiary of
ours) consummates a merger or similar transaction with an operating business (the ―Loan‖). BCM had previously advanced the
$12,500 on our behalf. Interest accrued on the outstanding principal balance of the Loan on the basis of a 360-day year daily from
January 24, 2006, the effective date of the Loan, until paid in full at the rate of four percent (4%) per annum. The Loan was repaid
on October 31, 2008.
    On April 15, 2008, Michael Rapp, our former President and director, Philip Wagenheim, our former Secretary and director, and
Clifford Chapman, our former director, loaned us $5,000, $3,000 and $2,000, respectively. We issued promissory notes (each a
―Note‖ and together, the ―Notes‖) to Messrs Rapp, Wagenheim and Chapman, pursuant to which the principal amounts thereunder
accrued interest at an annual rate of 8.25%, and such principal and all accrued interest were due and payable on or before the earlier
of (i) the fifth anniversary of the date of the Note or (ii) the date the Company consummated a business combination with a private
company in a reverse merger or reverse takeover transaction or other transaction after which the company would cease to be a shell
company. The Notes were repaid on October 31, 2008.
   The foregoing transactions were entered into prior to the Share Exchange with the founders of the company. In June 2008,
Lihua Electron, which is now one of our subsidiaries, engaged BCM as its exclusive placement agent in the Private Placement.
Messrs. Rapp, Wagenheim and Chapman are all employees of BCM. Of the shares that were registered for resale by the Selling
Stockholders, 390,000 shares of Common Stock and 194,000 shares of Common Stock underlying Series B Warrants in the
aggregate, were registered for resale on behalf of Messrs. Rapp, Wagenheim and Chapman. Since a public market for our Common
Stock does not currently exist, based on a sale price of $4.00, which is the exercise price of the Series B Warrants, the estimated
aggregate proceeds to be received by each of Messrs. Chapman, Rapp and Wagenheim following a sale of the shares of Common
Stock they currently own and the shares of Common Stock underlying the Series B Warrants is approximately $816,000, $542,000
and $272,000, respectively.
Review, Approval or Ratification of Transactions with Related Parties
    The transactions with related parties, promoters and control persons described above, were entered into prior to the
consummation of the Share Exchange. We did not have any policies or procedures in place with respect to the review and approval
or ratification of the related party transactions that have been described.

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Pursuant to the Purchase Agreement, we have agreed to not enter into any contracts or engage in any transactions with any related
party without the prior written consent of the holders of a majority of the Preferred Stock then outstanding. However, we are not
required to obtain such consent if, at such time, our Board of Directors is comprised of at least three independent directors serving
on the Audit Committee, which committee shall be responsible for approving such transactions and we are not required to obtain
such consent with respect to any guarantees that any related party shall make in connection with any of our obligations.
    We believe that all transactions with related parties were on terms no less favorable than could have been obtained from third
parties.
Director Independence
   On April 14, 2009, the Board of Directors of the Company appointed Robert C. Bruce, Jonathan P. Serbin and Su Liu (the
―Independent Directors‖) to serve as independent directors. Each of Messrs. Bruce, Serbin and Liu are independent as defined by
Rule 5605(a)(2) of the Marketplace Rules of The Nasdaq Stock Market, Inc., as well as under Section 303A.02 of the NYSE
AMEX Listed Company Manual (the ―Independent Directors‖).

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                                                   SELLING STOCKHOLDER
    The following table sets forth the name of the Selling Stockholder, the number of shares of Common Stock owned by the
Selling Stockholder immediately prior to the date of this prospectus and the number of shares to be offered by the Selling
Stockholder pursuant to this prospectus. The table also provides information regarding the beneficial ownership of our Common
Stock by the Selling Stockholder as adjusted to reflect the assumed sale of all of the shares offered under this prospectus.
Percentage of beneficial ownership before this offering is based on 15,500,000 shares of our Common Stock outstanding as of
August 17, 2009. Beneficial ownership is based on information furnished by the Selling Stockholder. The table below assumes full
exercise of the over-allotment shares. Unless otherwise indicated and subject to community property laws where applicable, the
Selling Stockholder named in the following table has, to our knowledge, sole voting and investment power with respect to the
shares beneficially owned by him.
    On August 14, 2009, the Selling Stockholder entered into a Securities Purchase Agreement to sell 500,000 shares of common
stock (the ―Shares‖), underlying shares of Series A Preferred Stock (the ―Preferred Stock‖) owned by the Selling Stockholder, to
several purchasers (the ―Vision Sale‖). The Shares will be sold at a per share price of $3.55 for an aggregate purchase price of
$1,775,000 (the ―Purchase Price‖). Prior to closing the Vision Sale, the Selling Stockholder will convert up to 500,000 shares of the
Preferred Stock into the Shares. The Selling Stockholder is obligated to convert the Preferred Stock into the Shares and deliver
them into escrow within 14 days of the receipt by the escrow agent of each purchaser’s pro rata portion of the Purchase Price. If the
Selling Stockholder does not deliver the Shares within such 14 day period, the purchaser’s pro rata portion of the Purchase Price
will be returned to the purchaser and the Selling Stockholder and the purchaser will have no further obligations. The closing of the
Vision Sale shall be on or about August 28, 2009.
    The Vision Sale is a privately negotiated transaction among the Selling Stockholder and the purchasers to sell the Shares
pursuant to the ―Plan of Distribution‖ in the prospectus (the ―Prospectus‖) that is part of the Registration Statement that was
declared effective by the Securities and Exchange Commission on May 13, 2009, which registered the Shares. The purchasers will
receive the Shares free of any restrictive legends upon the closing of the Vision Sale. As permitted under the Prospectus,
Broadband Capital Management, LLC, the representative of the underwriters in this Offering, acted as selling agent on behalf of the
Selling Stockholder in the Vision Sale.




                                        Beneficial Ownership              Number of            Beneficial Ownership
                                         Before Offering (1)            Shares Offered            After Offering
        Selling Stockholders           Number           Percentage                            Number            Percentage

        Vision Opportunity              1,534,500           9.9 %           300,000            1,534,500            9.9 %
          China LP (2) (3)
(1) Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power
    with respect to securities. Shares of Common Stock subject to securities anticipated to be exercisable or convertible at or
    within 60 days of the date hereof, are deemed outstanding for computing the percentage of the person holding such option or
    warrant but are not deemed outstanding for computing the percentage of any other person. The indication herein that shares are
    anticipated to be beneficially owned is not an admission on the part of the listed stockholder that he, she or it is or will be a
    direct or indirect beneficial owner of those shares.
(2) Consists of 2,681,818 shares underlying Series A Convertible Preferred Stock and Series A Warrants to purchase up to
    700,000 shares of Common Stock, subject to a 9.9% limitation on beneficial ownership of Common Stock as more fully
    described in note 3 below. Vision Opportunity China acquired these shares of Series A Preferred and Series A Warrants in the
    October 2008 Private Placement, which is described in further detail in the section entitled ―Our History and Corporate
    Structure.‖ Vision Capital Advisors, LLC, a Delaware limited liability company, which serves as the investment manager to
    Vision Opportunity China LP, and Adam Benowitz, the managing member of Vision Capital Advisors, share voting and
    dispositive power over the shares held by Vision Opportunity China LP. Vision Capital Advisors and Mr. Benowitz may each
    be deemed to beneficially own the shares of Common Stock held by Vision Opportunity China LP. Each disclaims beneficial
    ownership of such shares. The address for Vision Opportunity China LP is c/o Vision Capital Advisors, LLC, 20 West 55 th
    Street, 5 th Floor, New York, NY 10019-5373.

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(3) Pursuant to the terms of the Series A Warrants and the Certificate of Designation for the Preferred Shares, at no time may a
    purchaser of Preferred Shares convert such purchaser’s shares into shares of our Common Stock if the conversion would result
    in such purchaser beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules
    thereunder) more than 9.9% of our then issued and outstanding shares of Common Stock; provided, however, that upon a
    purchaser providing us with sixty-one days’ notice that such purchaser wishes to waive the cap, then the cap will be of no force
    or effect with regard to all or a portion of the Preferred Shares referenced in the waiver notice. Similarly under the terms of the
    Series A Warrant, at no time may a holder exercise such holder’s Warrant if the exercise would result in such holder
    beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules thereunder) more than
    9.9% of our then issued and outstanding shares of Common Stock; provided, however, that upon a purchaser providing us with
    sixty-one days’ notice that such purchaser wishes to waive the cap, then the cap will be of no force or effect with regard to all
    or a portion of the shares referenced in the waiver notice. The 9.9% beneficial ownership limitation does not prevent a
    stockholder from selling some of its holdings and then receiving additional shares. Accordingly, each stockholder could
    exercise and sell more than 9.9% of our Common Stock without ever at any one time holding more than this limit.

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                                              DESCRIPTION OF CAPITAL STOCK
General
    Our authorized capital stock consists of 85,000,000 shares, par value $0.0001 per share, consisting of 75,000,000 shares of
Common Stock (―Common Stock‖) and 10,000,000 shares of preferred stock, of which all 10,000,000 have been designated as
Series A Preferred Stock.
Common Stock
   We have 15,500,000 shares of Common Stock issued and outstanding of which 500,000 are from Series A Preferred Stock that
was converted prior to the date of this Prospectus. In addition, we have outstanding warrants to purchase 2,000,000 shares of our
Common Stock at an exercise price of $3.50 per share.
Dividend Rights
    Subject to the rights of the holders of preferred stock, as discussed below, the holders of outstanding Common Stock are
entitled to receive dividends out of funds legally available at the times and in the amounts that the Board of Directors may
determine.
Voting Rights
    Each holder of Common Stock is entitled to one vote for each share of Common Stock held on all matters submitted to a vote
of stockholders. Cumulative voting for the election of directors is not provided for in our certificate of incorporation, as amended
and restated. Any action other than the election of directors shall be authorized by a majority of the votes cast, except where the
Delaware General Corporation Law prescribes a different percentage of votes and/or exercise of voting power.
No Preemptive or Similar Rights
   Holders of our Common Stock do not have preemptive rights, and shares of our Common Stock are not convertible or
redeemable.
Right to Receive Liquidation Distributions
    Subject to the rights of the holders of preferred stock, as discussed below, upon our dissolution, liquidation or winding-up, our
assets legally available for distribution to our stockholders are distributable ratably among the holders of Common Stock.
Preferred Stock
    We have 10,000,000 authorized shares of preferred stock par value $0.0001 per share, of which 10,000,000 shares are
designated as Series A Preferred Stock (the ―Preferred Stock‖), and of which 5,958,760 shares are issued and outstanding.
   The principal terms of the Preferred Stock are as follows:
Conversion
    At any time on or after our issuance of Preferred Stock, each share of our Preferred Stock will be convertible, at the option of
the holder thereof (subject to certain ownership percentage limitations set forth in the Certificate of Designations), into one share of
our Common Stock, subject to adjustment from time to time, upon the occurrence of certain events described below. The rate of
conversion (the ―Conversion Rate‖) is determined by dividing $2.20 per share (the ―Liquidation Preference Amount‖) by the
conversion price of $2.20 (the ―Conversion Price‖), subject to adjustment as discussed below.
    In the event we do not timely convert and deliver Preferred Stock into shares of Common Stock after request of a holder to so
convert, and the holder must purchase shares of Common Stock, in excess of the price for which the holder sold such shares, we
must make a payment in cash to the holder in the amount of the excess paid and we will not honor the conversion request and will
reinstate the number of Preferred Stock for which such conversion was not honored.
    If at any time, we consummate a bona fide offering of shares of our Common Stock of at least $5,000,000, all outstanding
Preferred Stock shall automatically convert to shares of Common Stock (subject to certain ownership percentage limitations set
forth in the Certificate of Designations of the Series A Preferred Stock).

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Liquidation Rights
    The Preferred Stock will, in the event of any distributions or payments in the event of the voluntary or involuntary liquidation,
dissolution or winding up by us, rank senior to our Common Stock and to any other class or series of stock which may be issued by
us not designated as ranking senior to or pari passu with the Preferred Stock in respect of the right to participate in distributions or
payments upon any liquidation, dissolution or winding up of Lihua. In the event of any voluntary or involuntary liquidation,
dissolution or winding up of our affairs, the holders of shares of Preferred Stock will be entitled to receive, out of our assets
available for distribution to stockholders, an amount equal to the Liquidation Preference Amount before any payment shall be made
or any assets distributed to the holders of Common Stock or any stock which ranks junior to the Preferred Stock. In the event of a
liquidation, dissolution or winding up of Lihua, the rights of holders of Preferred Stock to convert such shares into shares of
Common Stock shall terminate prior to the date fixed for the payment to the holders of Preferred Stock of any amounts
distributable to them in the event of any such liquidation, dissolution or winding up.
Redemption Rights
    None of our Preferred Stock may be redeemed by us without the express written consent of each holder of such shares. If we
cannot issue shares of Common Stock upon a conversion because we do not have a sufficient number of shares of Common Stock
authorized and available, then with respect to the unconverted Preferred Stock, the holder of such Preferred Stock, solely at such
holder’s option, may require us to redeem from such holder those Preferred Stock with respect to which we are unable to issue
Common Stock in accordance with such holder’s conversion notice at a price per share payable in cash equal to one hundred thirty
percent of the Liquidation Preference Amount.
   Simultaneously with the occurrence of any merger, consolidation or similar capital reorganization of our Common Stock, each
holder of Preferred Stock shall have the right, at such holder’s option, to require us to redeem all or a portion of such holder’s
Preferred Stock at a price per share equal to one hundred ten percent of the Liquidation Preference Amount.
Dividend Rights
    Our Preferred Stock will not be entitled to receive dividends unless we pay dividends to holders of our Common Stock. If we
pay dividends to holders of Common Stock, our holders of Preferred Stock will be entitled to receive, on each share of Preferred
Stock held by them, dividends of equal amount or value as dividends that would have been payable on the number of underlying
shares of Common Stock into which such Preferred Stock would be convertible, if such Preferred Stock had been converted on the
date for determination of holders of Common Stock entitled to receive such dividends.
Adjustments to Conversion Price; Conversion Rate and Other Similar Adjustments
    The number of shares of Common Stock into which the Series A Preferred shall be converted, or the Conversion Price, as the
case may be, shall be subject to upward or downward adjustment from time to time, as applicable, in the event of a (i) combination,
stock split, recapitalization or reclassification of the Common Stock; (ii) merger, consolidation or similar capital reorganization of
the Common Stock; (iii) distribution of stock dividends; or (iv) issuance of additional shares of Common Stock or securities
convertible into Common Stock at a price less than $2.20. The issuance of the shares of common stock pursuant to the Make Good
Escrow with our private placement investors will not trigger anti-dilution adjustments.
Voting Rights
    Holders of our Preferred Stock shall vote together as a separate class on all matters which impact the rights, value, or ranking of
the Preferred Stock. Holders of our Preferred Stock shall vote on an ―as converted‖ basis, together with holders of our Common
Stock, as a single class, in connection with any proposal submitted to stockholders to: (i) increase the number of authorized shares
of capital stock; (ii) to approve the sale of any of our capital stock; (iii) adopt an employee stock option plan; or (iv) effect any
merger, consolidation, sale of all or substantially all of our assets, or related consolidation or combination transaction.

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Conversion Restriction
    Holders of our Preferred Stock are restricted from converting to Common Stock if the number of shares of Common Stock to be
issued pursuant to such Conversion would cause the number of shares of Common Stock owned by such holder and its affiliates at
such time to equal or exceed 9.9% of the then issued and outstanding shares of Common Stock; provided , however , that upon a
holder of the Series A Preferred providing the Company with sixty-one (61) days notice that such holder wishes to waive this
restriction such holder may be entitled to waive this restriction.
Series A Warrants
    We have Series A Warrants to purchase up to 1,500,000 shares of our Common Stock at an exercise price of $3.50 per share
issued and outstanding. The Series A Warrants at the option of the holder, may be exercised by cash payment of the exercise price
or, commencing 18 months following the closing of the Private Placement, if the per share market value of one share of Common
Stock is greater than the exercise price and a registration statement under the Securities Act of 1933, as amended, covering the
shares of Common Stock underlying the Series A Warrants is not then declared effective by the SEC, in lieu of exercising the
Series A Warrants by payment of cash, a holder may exercise the Series A Warrant by a cashless exercise by surrender of the Series
A Warrant, in which event we will issue to the holder a number of shares of our Common Stock computed using the following
formula:




             Where          X    the number of shares of Common Stock to be issued to the holder.
                            =
                            Y    the number of shares of Common Stock issuable upon exercise of the Series A
                            =    Warrant in accordance with the terms of the Series A Warrant by means of a cash
                                 exercise rather than a cashless exercise.
                            A    the Exercise Price.
                             =
                             B     the per share market value of one share of Common Stock on the trading day
                             =     immediately preceding the date of such election.
   We will not receive any additional proceeds to the extent that the Series A Warrants are exercised by cashless exercise.
    The exercise price and number of shares of our Common Stock issuable upon exercise of the Series A Warrants may be
adjusted in certain circumstance, including in the event of a stock dividend, or our recapitalization, reorganization, merger or
consolidation and the issuance of rights to purchase additional shares of our Common Stock or to receive other securities
convertible into additional shares of Common Stock. The issuance of the shares of common stock pursuant to the Make Good
Escrow with our private placement investors will not trigger anti-dilution adjustments.
    For a period of two years following the original issue date of the Series A Warrants (the ―Full Ratchet Period‖), in the event we
issue any additional shares of Common Stock or securities exercisable, convertible or exchangeable for Common Stock at a price
per share less than the exercise price then in effect or without consideration, then the exercise price upon each such issuance will be
adjusted to a price equal to the consideration per share paid for such additional shares of Common Stock.
    No fractional shares will be issued upon exercise of the Series A Warrants. If, upon exercise of a Series A Warrant, a holder
would be entitled to receive a fractional interest in a share, we will pay to the holder cash equal to such fraction multiplied by the
then fair market value of one full share.

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    Pursuant to the terms of the Series A Warrants, we will not effect the exercise of any Series A Warrant, and no person who is a
holder of any Series A Warrant has the right to exercise the Series A Warrant, to the extent that after giving effect to such exercise,
such person would beneficially own in excess of 9.9% of the then outstanding shares of our Common Stock. However, the holder is
entitled to waive this cap upon 61 days notice to us.
    We have the right to redeem up to 9.9% of the Series A Warrants at a price equal to $0.01 per share of our Common Stock
underlying such warrants if (i) our Common Stock is traded on a national securities exchange; (ii) the daily volume weighted
average price of our Common Stock is above $8.87 for 30 consecutive trading days ending on the date of the notice of redemption;
and (iii) the average daily trading volume for the trading period is greater than 300,000 shares per day provided, that all shares
underlying such Series A Warrants are registered pursuant to an effective registration statement and we simultaneously call all of
the Series A Warrants on the same terms. We will have the right, but not the obligation, to redeem the Series A Warrants at any
time, and from time to time, provided , that at such time, the foregoing conditions have been met, but in no event can we redeem
the Series A Warrants more than once in any thirty (30) trading day period.
Series B Warrants
    We have Series B Warrants to purchase up to 500,000 shares of our Common Stock at an exercise price of $3.50 per share
issued and outstanding. The Series B Warrants, at the option of the holder, may be exercised by cash payment of the exercise price
or by ―cashless exercise‖. We will not receive any additional proceeds to the extent that warrants are exercised by cashless exercise.
    If the per share market value of one share of Common Stock is greater than the exercise price and at the time of election, the
average trading volume of our Common Stock exceeds 100,000 shares for the immediately preceding 30 trading days, in lieu of
exercising the Series B Warrant by payment of cash, the holder may exercise the Series B Warrant by cashless exercise by
surrendering the Series B Warrant, in which event we will issue to the holder a number of shares of our Common Stock computed
using the following formula:
              Where:          X     the number of shares of Common Stock to be issued to the Holder.
                              =
                              Y     the number of shares of Common Stock issuable upon exercise of the Series B
                              =     Warrant in accordance with the terms of the Series B Warrant by means of a cash
                                    exercise rather than a cashless exercise.
                              A     the exercise price.
                              =
                              B     the volume weighted average price of the Common Stock for the 30 trading day
                              =     period immediately preceding the date of such election.
    The exercise price and number of shares of our Common Stock issuable upon exercise of the warrants may be adjusted in
certain circumstances, including in the event of a stock dividend, or our recapitalization, reorganization, merger or consolidation
and the issuance of rights to purchase additional shares of our Common Stock or to receive other securities convertible into
additional shares of Common Stock. The issuance of the shares of common stock pursuant to the Make Good Escrow with our
private placement investors will not trigger anti-dilution adjustments.
    For a period of two years following the original issue date of the Series B Warrant (the ―Weighted Average Period‖), in the
event we issue any additional shares of Common Stock or securities exercisable, convertible or exchangeable for Common Stock at
a price per share less than the exercise price then in effect or without consideration, then the exercise price then in effect shall be
multiplied by a fraction (i) the numerator of which shall be equal to the sum of (x) the number of shares of outstanding Common
Stock immediately prior to the issuance of such additional shares of Common Stock plus (y) the number of shares of Common
Stock (rounded to the nearest whole share) which the aggregate consideration price per share paid for the total number of such
additional shares of Common Stock so issued would purchase at a price per share equal to the

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exercise price then in effect; and (ii) the denominator of which shall be equal to the number of shares of outstanding Common
Stock immediately after the issuance of such additional shares of Common Stock.
    No fractional shares will be issued upon exercise of the warrants. If, upon exercise of a warrant, a holder would be entitled to
receive a fractional interest in a share, we will pay to the holder cash equal to such fraction multiplied by the then fair market value
of one full share.
Anti-Takeover Provisions
Delaware Anti-Takeover Law
     Under Section 203 of the Delaware Corporation Law (the ―Delaware anti-takeover law‖), certain ―business combinations‖ are
prohibited between a Delaware corporation, the stock of which is generally publicly traded or held of record by more than 2,000
stockholders, and an ―interested stockholder‖ of such corporation for a three-year period following the date that such stockholder
became an interested stockholder, unless (i) the corporation has elected in its certificate of incorporation not to be governed by the
Delaware anti-takeover law (the Company has not made such an election); (ii) the business combination was approved by the board
of directors of the corporation before the other party to the business combination became an interested stockholder; (iii) upon
consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the commencement of the transaction (excluding voting
stock owned by directors who are also officers or held in employee benefit plans in which the employees do not have a confidential
right to tender or vote stock held by the plan); or (iv) the business combination was approved by the board of directors of the
corporation and ratified by 66 2/3% of the voting stock which the interested stockholder did not own. The three-year prohibition
also does not apply to certain business combinations proposed by an interested stockholder following the announcement or
notification of certain extraordinary transactions involving the corporation and a person who had not been an interested stockholder
during the previous three years or who became an interested stockholder with the approval of a majority of the corporation’s
directors. The term ―business combination‖ is defined generally to include mergers or consolidations between a Delaware
corporation and an interested stockholder, transactions with an interested stockholder involving the assets or stock of the
corporation or its majority-owned subsidiaries, and transactions which increase an interested stockholder’s percentage ownership of
stock. The term ―interested stockholder‖ is defined generally as those stockholders who become beneficial owners of 15% or more
of a Delaware corporation’s voting stock. These statutory provisions could delay or frustrate the removal of incumbent directors or
a change in control of the Company. They could also discourage, impede, or prevent a merger, tender offer, or proxy contest, even
if such event would be favorable to the interests of stockholders.
     Our Certificate of Incorporation grants the Board of Directors the authority, without any further vote or action by stockholders,
to issue preferred stock in one or more series, fix the number of shares constituting the series and establish the preferences,
limitations and relative rights, including dividend rights, dividend rate, voting rights, terms of redemption, redemption price or
prices, redemption rights and liquidation preferences of the shares of the series. The existence of authorized but unissued preferred
stock could reduce our attractiveness as a target for an unsolicited takeover bid, since we could, for example, issue preferred stock
to parties who might oppose such a takeover bid, or issue shares with terms the potential acquirer may find unattractive. This may
have the effect of delaying or preventing a change in control, discourage bids for the Common Stock at a premium over the market
price, and adversely affect the market price, and voting and other rights of holders of Common Stock. The Board of Directors does
not at present intend to seek stockholder approval prior to any issuance of currently authorized preferred stock, unless otherwise
required by law.

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                                            SHARES ELIGIBLE FOR FUTURE SALE
   Prior to this Offering, there has been no public market for our Common Stock. When a public market develops, future sales of
substantial amounts of our Common Stock in the public market could adversely affect market prices. After the date of this
prospectus we will have 23,458,760 shares of Common Stock issued and outstanding.




        Approximate Number of                                             Date
        Shares Eligible for
        Future Sale
        2,000,000 (1)           After the date of this prospectus, freely tradeable shares sold in this Offering.
        8,318,182               Freely tradeable shares to be sold pursuant to our resale registration statement,
                                Registration No. 333-156120, which was declared effective on May 13, 2009 (the
                                ―Resale Registration Statement‖), subject to the Purchasers Lock-up Agreement
                                described below.
        1,475,000               After the date of this prospectus, these shares will be freely tradeable, subject to the
                                Original Stockholder Lock-Up Agreement described below. These shares consist of (i)
                                975,000 shares owned by our Original Stockholders prior to the Share Exchange and (ii)
                                500,000 shares issuable upon exercise of Series B Warrants.
        14,025,000              On November 6, 2009, which is one year after the filing of a Current Report on Form
                                8-K reporting the closing of the Share Exchange these shares, which were issued in
                                connection with the Share Exchange, may be sold under Rule 144, subject to the
                                Principal Stockholder Lock-Up Agreements described below.
(1) Assumes the underwriters over-allotment to purchase additional shares is not exercised.
Rule 144
    Restricted securities may be sold in the public market only if registered or if they qualify for an exemption from registration
under Rule 144 promulgated under the Securities Act. In general, under Rule 144 as currently in effect, a person, or persons whose
shares are aggregated, who has beneficially owned shares of our Common Stock for at least six months, including the holding
period of any prior owner, except if the prior owner was one of our affiliates, would be entitled to sell within any three-month
period a number of shares that does not exceed the greater of:
   •    1% of the number of shares of our Common Stock then outstanding (which will equal approximately 234,588 shares
        immediately after this Offering); or
   •    the average weekly trading volume of our Common Stock during the four calendar weeks preceding the filing of a notice
        on Form 144 with respect to the sale, assuming that our Common Stock is trading at such time.
   Sales by a person deemed to be our affiliate under Rule 144 are also subject to manner of sale provisions and notice
requirements and to the availability of current public information about us.
     We had 975,000 shares of Common Stock issued and outstanding prior to the Share Exchange. Because we issued these shares
while we were a shell company with no operations, these shares may not be sold until November 6, 2009, which is 12 months after
filing the Current Report on Form 8-K with the SEC reporting the closing of the Share Exchange. However, we agreed to register
all of these shares of Common Stock in the Resale Registration Statement. All of these shares are included in an effective
registration statement and may be freely sold and transferred, subject to the Original Stockholder Lock-Up Agreement described
below.

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Lock-Up Agreements
    On the Closing Date of the Share Exchange, we entered into a lock-up agreement with certain persons who were stockholders
prior to the Share Exchange (the ―Original Stockholder Lock-Up Agreement‖) and a lock-up agreement with members of our
management (the ―Principal Stockholder Lock-Up Agreement‖).
     Pursuant to the Original Stockholder Lock-Up Agreement, and subject to terms and conditions therein, each stockholder has
agreed to not offer, sell, contract to sell, assign, transfer, hypothecate, gift, pledge or grant a security interest in, or otherwise
dispose of, or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition of (each,
a ―Transfer‖), their shares until the earlier of (i) a date that is six months following the date that the Company’s Common Stock is
listed and trading on a national securities exchange, and (ii) the date that is eighteen months following the date that the Resale
Registration Statement is declared effective by the SEC (the ―Lock-Up Period‖). It was also agreed that, during the twelve months
immediately following the Lock-Up Period, the stockholders subject to the Original Stockholder Lock-Up Agreement may not
Transfer more than one-tenth of the total trading volume of the Company’s Common Stock for the preceding thirty day period.
     Pursuant to the Principal Stockholder Lock-Up Agreement, and subject to terms and conditions therein, each stockholder has
agreed to not Transfer, their shares until a date that is twelve months following the date that the Company’s Common Stock is
listed and trading on a national securities exchange (the ―Lock-Up Period‖). It was also agreed that, during the twenty-four months
immediately following the Lock-Up Period, the stockholders subject to the Principal Stockholder Lock-Up Agreement may not
Transfer more than one-twelfth of their total holdings of Common Stock as of the Closing Date during any one calendar month.
    We expect that all of the Investors in the Private Placement will agree to enter into a lock-up agreement with the underwriters
which will prohibit such Investors from offering for sale, selling, contracting to sell, granting any option for the sale of, transferring
or otherwise disposing of any shares of our Common Stock, options or warrants to acquire shares of our Common Stock or any
security or instrument related to such Common Stock until six months after our Common Stock begins trading on an exchange.
Registration Rights
     In connection with the Private Placement, we entered into a registration rights agreement with the Investors in which we agreed
to file on the 45 th day following the Closing Date a registration statement with the SEC to register for resale (i) the Investor Shares;
(ii) shares of our Common Stock underlying the Series A Warrants and Series B Warrants (the ―Registrable Securities‖); (iii) shares
of Common Stock issuable in connection with anti-dilution provisions in the Certificate of Designation and the Series A Warrants
and Series B Warrants; (iv) Common Stock owned by the shareholders of Lihua prior to the Share Exchange; (v) shares of
Common Stock issuable upon any stock split, dividend or other distribution recapitalization or similar event; and (vi) the Listing
Penalty Shares and Escrow Shares upon demand. We have agreed to use our best efforts to have the registration statement declared
effective March 30, 2009 or by April 29, 2009 in the case of a full review by the SEC. We filed the resale registration statement
with the SEC on December 15, 2008 and received a full review. On April, 29, 2009 a majority of the Investors agreed to a Consent
and Waiver pursuant to which we were given until May 13, 2009 to have the registration statement declared effective. On May 13,
2009 the registration statement was declared effective by the SEC. We are required to keep the registration statement continuously
effective under the Securities Act for an effectiveness period to end on the earlier of the date when all of the securities covered by
the registration statement have been sold or the date on which such securities may be sold without any restriction pursuant to Rule
144.

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                                                             TAXATION

                      MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
General
    The following is a general summary of certain material U.S. federal income tax consequences to an investor of the acquisition,
ownership and disposition of the Common Stock purchased by the investor pursuant to this Offering. This discussion assumes that
an investor will hold each share of our Common Stock issued and purchased pursuant to this Offering as a ―capital asset‖ within the
meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the ―Code‖). This discussion does not address all
aspects of U.S. federal income taxation that may be relevant to an investor in light of that investor’s particular circumstances. In
addition, this discussion does not address (a) U.S. federal non-income tax laws, such as estate or gift tax laws, (b) state, local or
non-U.S. tax consequences, or (c) the special tax rules that may apply to certain investors, including, without limitation, banks,
insurance companies, financial institutions, broker-dealers, taxpayers that have elected mark-to-market accounting, taxpayers
subject to the alternative minimum tax provisions of the Code, tax-exempt entities, governments or agencies or instrumentalities
thereof, regulated investment companies, real estate investment trusts, persons whose functional currency is not the U.S. dollar,
U.S. expatriates or former long-term residents of the United States, or investors that acquire, hold, or dispose of our Common Stock
as part of a straddle, hedge, wash sale, constructive sale or conversion transaction or other integrated transaction. Additionally, this
discussion does not consider the tax treatment of entities treated as partnerships or other pass-through entities for U.S. federal
income tax purposes or of persons who hold our Common Stock through such entities. The tax treatment of a partnership and each
partner thereof will generally depend upon the status and activities of the partnership and such partner. Thus, partnerships, other
pass-through entities and persons holding our Common Stock through such entities should consult their own tax advisors.
    This discussion is based on current provisions of the Code, its legislative history, U.S. Treasury regulations promulgated under
the Code, judicial opinions, and published rulings and procedures of the U.S. Internal Revenue Service (―IRS‖), all as in effect on
the date of this prospectus. These authorities are subject to differing interpretations or to change, possibly with retroactive effect.
We have not sought, and will not seek, any ruling from the IRS or any opinion of counsel with respect to the tax consequences
discussed below, and there can be no assurance that the IRS will not take a position contrary to the tax consequences discussed
below or that any position taken by the IRS would not be sustained.
     As used in this discussion, the term ―U.S. person‖ means a person that is, for U.S. federal income tax purposes, (i) an individual
citizen or resident of the United States, (ii) a corporation (or other entity treated as a corporation for U.S. federal income tax
purposes) created or organized (or treated as created or organized) in or under the laws of the United States or of any state thereof
or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source, or
(iv) a trust if (A) a court within the United States is able to exercise primary supervision over the administration of the trust and one
or more U.S. persons have the authority to control all substantial decisions of the trust, or (B) it has in effect a valid election to be
treated as a U.S. person under applicable U.S. Treasury Regulations. As used in this discussion, the term ―U.S. holder‖ means a
beneficial owner of our Common Stock that is a U.S. person, and the term ―non-U.S. holder‖ means a beneficial owner of our
Common Stock (other than an entity that is treated as a partnership or other pass-through entity for U.S. federal income tax
purposes) that is not a U.S. person.
   THIS DISCUSSION IS ONLY A SUMMARY OF CERTAIN MATERIAL U.S. FEDERAL INCOME TAX
CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK. IT IS NOT
TAX ADVICE. EACH PROSPECTIVE INVESTOR IN OUR COMMON STOCK IS URGED TO CONSULT ITS OWN TAX
ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO SUCH INVESTOR OF THE
ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK, INCLUDING THE APPLICABILITY AND
EFFECT OF ANY STATE, LOCAL, AND NON-U.S. TAX LAWS, AS WELL AS U.S. FEDERAL TAX LAWS, AND ANY
APPLICABLE TAX TREATY.

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U.S. Holders
Taxation of Distributions
    If we pay cash distributions to U.S. holders of shares of our Common Stock, the distributions generally will constitute
dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as
determined under U.S. federal income tax principles. Distributions in excess of current and accumulated earnings and profits
generally will constitute a return of capital that will be applied against and reduce (but not below zero) the U.S. holder’s adjusted
tax basis in our Common Stock. Any remaining excess generally will be treated as gain from the sale or other disposition of the
Common Stock and will be treated as described under ―U.S. Holders — Gain or Loss on Sale, Taxable Exchange or Other Taxable
Disposition of Common Stock‖ below.
    Any dividends we pay to a U.S. holder that is treated as a taxable corporation for U.S. federal income tax purposes generally
will qualify for the dividends-received deduction if the applicable holding period and other requirements are satisfied. With certain
exceptions, if the applicable holding period and other requirements are satisfied, dividends we pay to a non-corporate U.S. holder
generally will constitute ―qualified dividends‖ that will be subject to tax at the maximum tax rate accorded to long-term capital
gains for tax years beginning on or before December 31, 2010, after which the tax rate applicable to dividends is scheduled to
return to the tax rate generally applicable to ordinary income.
    If PRC taxes apply to any dividends paid to a U.S. holder on our Common Stock, such taxes may be treated as foreign taxes
eligible for credit against such holder’s U.S. federal income tax liability (subject to certain limitations), and a U.S. holder may be
entitled to certain benefits under the income tax treaty between the United States and the PRC. U.S. holders should consult their
own tax advisors regarding the creditability of any such PRC tax and their eligibility for the benefits of the income tax treaty
between the United States and the PRC.
Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of Common Stock
    In general, a U.S. holder must treat any gain or loss recognized upon a sale, taxable exchange, or other taxable disposition of
our Common Stock as capital gain or loss. Any such capital gain or loss will be long-term capital gain or loss if the U.S. holder’s
holding period for the Common Stock so disposed of exceeds one year. In general, a U.S. holder will recognize gain or loss in an
amount equal to the difference between (i) the sum of the amount of cash and the fair market value of any property received in such
disposition and (ii) the U.S. holder’s adjusted tax basis in the Common Stock so disposed of. Long-term capital gain recognized by
a non-corporate U.S. holder generally will be subject to a maximum tax rate of 15 percent for tax years beginning on or before
December 31, 2010, after which the maximum long-term capital gains tax rate is scheduled to increase to 20 percent. The deduction
of capital losses is subject to various limitations.
    If PRC taxes apply to any gain from the disposition of our Common Stock by a U.S. holder, such taxes may be treated as
foreign taxes eligible for credit against such holder’s U.S. federal income tax liability (subject to certain limitations), and a U.S.
holder may be entitled to certain benefits under the income tax treaty between the United States and the PRC. U.S. holders should
consult their own tax advisors regarding the creditability of any such PRC tax and their eligibility for the benefits of the income tax
treaty between the United States and the PRC.
Non-U.S. Holders
Taxation of Distributions
    In general, any distribution we make to a non-U.S. holder of our Common Stock, to the extent paid out of our current or
accumulated earnings and profits (as determined under U.S. federal income tax principles), will constitute a dividend for U.S.
federal income tax purposes. Provided such dividend is not effectively connected with the non-U.S. holder’s conduct of a trade or
business within the United States, such dividend generally will be subject to U.S. federal withholding tax at a rate of 30 percent of
the gross amount of the dividend, unless we are treated as an ‖80/20 company‖ for U.S. federal income tax purposes, as described
below, or such non-U.S. holder is eligible for a reduced rate of withholding tax under an applicable income tax treaty and provides
proper certification of its eligibility for such reduced rate (usually on an IRS

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Form W-8BEN). Any distribution not constituting a dividend will be treated first as reducing the non-U.S. holder’s adjusted tax
basis in its shares of our Common Stock (but not below zero) and, to the extent such distribution exceeds the non-U.S. holder’s
adjusted tax basis, as gain from the sale or other disposition of the Common Stock, which will be treated as described under
―Non-U.S. Holders — Gain on Sale, Taxable Exchange or Other Taxable Disposition of Common Stock‖ below.
    You should be aware of the possibility that we may qualify as an ―80/20 company‖ for U.S. federal income tax purposes. In
general, a domestic corporation is an 80/20 company if at least 80 percent of its gross income during an applicable testing period is,
directly or through subsidiaries, ―active foreign business income.‖ The 80 percent test is applied on a periodic basis. If we qualify
as an 80/20 company, a percentage of any dividend paid by us generally will not be subject to U.S. federal withholding tax. You
should consult with your own tax advisors regarding the amount of any such dividend subject to withholding tax in this
circumstance.
    Dividends we pay to a non-U.S. holder that are effectively connected with such non-U.S. holder’s conduct of a trade or business
within the United States (and, if certain income tax treaties apply, are attributable to a U.S. permanent establishment or fixed base
maintained by the non-U.S. holder) generally will not be subject to U.S. withholding tax, provided such non-U.S. holder complies
with certain certification and disclosure requirements (usually by providing an IRS Form W-8ECI). Instead, such dividends
generally will be subject to U.S. federal income tax, net of certain deductions, at the same graduated individual or corporate tax
rates applicable to U.S. persons. If the non-U.S. holder is a corporation, dividends that are effectively connected income may also
be subject to a ―branch profits tax‖ at a rate of 30 percent (or such lower rate as may be specified by an applicable income tax
treaty).
Gain on Sale, Taxable Exchange or Other Taxable Disposition of Common Stock
    A non-U.S. holder generally will not be subject to U.S. federal income tax in respect of gain recognized on a sale, exchange or
other disposition of Common Stock, unless:
   •    the gain is effectively connected with the conduct of a trade or business by the non-U.S. holder within the United States.
        (and, under certain income tax treaties, is attributable to a U.S. permanent establishment or fixed base maintained by the
        non-U.S. holder);
   •    the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of
        disposition and certain other conditions are met; or
   •    we are or have been a ―United States real property holding corporation‖ (―USRPHC‖) for U.S. federal income tax purposes
        at any time during the shorter of the five year period ending on the date of disposition or the non-U.S. holder’s holding
        period for the Common Stock disposed of, and, generally, in the case where our Common Stock is regularly traded on an
        established securities market, the non-U.S. holder has owned, directly or indirectly, more than 5 percent of the Common
        Stock disposed of, at any time during the shorter of the five year period ending on the date of disposition or the non-U.S.
        holder’s holding period for the Common Stock disposed of. There can be no assurance that our Common Stock will be
        treated as regularly traded on an established securities market for this purpose.
    Unless an applicable tax treaty provides otherwise, gain described in the first and third bullet points above generally will be
subject to U.S. federal income tax, net of certain deductions, at the same tax rates applicable to U.S. persons. Any gains described
in the first bullet point above of a non-U.S. holder that is a foreign corporation may also be subject to an additional ―branch profits
tax‖ at a 30 percent rate (or a lower applicable tax treaty rate). Any U.S. source capital gain of a non-U.S. holder described in the
second bullet point above (which may be offset by U.S. source capital losses during the taxable year of the disposition) generally
will be subject to a flat 30 percent U.S. federal income tax (or a lower applicable tax treaty rate).
   In connection with the third bullet point above, we generally will be classified as a USRPHC if the fair market value of our
―United States real property interests‖ equals or exceeds 50 percent of the sum of the fair market value of our worldwide real
property interests plus our other assets used or held for use in a trade or

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business, as determined for U.S. federal income tax purposes. We believe that we currently are not a USRPHC, and we do not
anticipate becoming a USRPHC (although no assurance can be given that we will not become a USRPHC in the future).
Information Reporting and Backup Withholding
    We generally must report annually to the IRS and to each holder the amount of dividends and certain other distributions we pay
to such holder on our Common Stock and the amount of tax, if any, withheld with respect to those distributions. In the case of a
non-U.S. holder, copies of the information returns reporting those distributions and withholding may also be made available to the
tax authorities in the country in which the non-U.S. holder is a resident under the provisions of an applicable income tax treaty or
agreement. Information reporting is also generally required with respect to proceeds from the sales and other dispositions of our
Common Stock to or through the U.S. office (and in certain cases, the foreign office) of a broker.
    In addition, backup withholding of U.S. federal income tax, currently at a rate of 28 percent, generally will apply to
distributions made on our Common Stock to, and the proceeds from sales and other dispositions of our Common Stock by, a
non-corporate U.S. holder who:
   •    fails to provide an accurate taxpayer identification number;
   •    is notified by the IRS that backup withholding is required; or
   •    in certain circumstances, fails to comply with applicable certification requirements.
    A non-U.S. holder generally may eliminate the requirement for information reporting (other than with respect to distributions,
as described above) and backup withholding by providing certification of its foreign status, under penalties of perjury, on a duly
executed applicable IRS Form W-8 or by otherwise establishing an exemption.
    Backup withholding is not an additional tax. Rather, the amount of any backup withholding will be allowed as a credit against a
U.S. holder’s or a non-U.S. holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that certain
required information is timely furnished to the IRS. Holders are urged to consult their own tax advisors regarding the application of
backup withholding and the availability of and procedure for obtaining an exemption from backup withholding in their particular
circumstances.

                                 MATERIAL PRC INCOME TAX CONSIDERATIONS
   The following discussion summarizes the material PRC income tax considerations relating to the ownership of our Common
Stock following the consummation of this Offering.
Resident Enterprise Treatment
    On March 16, 2007, the Fifth Session of the Tenth National People’s Congress passed the Enterprise Income Tax Law of the
People’s Republic of China, or the EIT Law, which became effective on January 1, 2008. Under the EIT Law, enterprises are
classified as ―resident enterprises‖ and ―non-resident enterprises.‖ Pursuant to the EIT Law and its implementing rules, enterprises
established outside China whose ―de facto management bodies‖ are located in China are considered ―resident enterprises‖ and
subject to the uniform 25% enterprise income tax rate on global income. According to the implementing rules of the EIT Law, ―de
facto management body‖ refers to a managing body that in practice exercises overall management control over the production and
business, personnel, accounting and assets of an enterprise.
    The EIT Law and the interpretation of many of its provisions, including the definition of ―resident enterprise,‖ are unclear. It is
also uncertain how the PRC tax authorities would interpret and implement the EIT Law and its implementing rules. Generally, the
PRC tax authorities may determine the resident enterprise status of entities organized under the laws of foreign jurisdictions, which
own a 100% equity interest in a PRC operating entity. Our management is substantially based in China and expected to be based in
China in the future, although some of our directors are not PRC nationals. It remains uncertain whether the PRC tax authorities
would determine that we are a ―resident enterprise‖ or a ―non-resident enterprise.‖

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    Given the short history of the EIT law and lack of applicable legal precedent, it remains unclear how the PRC tax authorities
will determine the PRC tax resident treatment of a non-PRC company such as us. If the PRC tax authorities determine that we are a
―resident enterprise‖ for PRC enterprise income tax purposes, a number of tax consequences could follow. First, we could be
subject to the enterprise income tax at a rate of 25% on our global taxable income. Second, the EIT Law provides that dividend
income between ―qualified resident enterprises‖ is exempt from income tax. It is unclear whether the dividends we, Ally Profit, or
Lihua Holdings receive would constitute dividend income between ―qualified resident enterprises‖ and would therefore qualify for
tax exemption.
    As of the date of this prospectus, there has not been a definitive determination as to the ―resident enterprise‖ or ―non-resident
enterprise‖ status of us, Ally Profit or Lihua Holdings. However, since it is not anticipated that we, Ally Profit or Lihua Holdings
would receive dividends or generate other income in the near future, we, Ally Profit and Lihua Holdings are not expected to have
any income that would be subject to the 25% enterprise income tax on global income in the near future. We, Ally Profit and Lihua
Holdings will consult with the PRC tax authorities and make any necessary tax payment if we, Ally Profit or Lihua Holdings
(based on future clarifying guidance issued by the PRC), or the PRC tax authorities, determine that we, Ally Profit or Lihua
Holdings is a resident enterprise under the EIT Law, and if we, Ally Profit or Lihua Holdings were to have income in the future.
Dividends From PRC Operating Companies
    If we, Ally Profit or Lihua Holdings are not treated as resident enterprises under the EIT Law, then dividends that we, Ally
Profit or Lihua Holdings receive may be subject to PRC withholding tax. The EIT Law and the implementing rules of the EIT Law
provide that (A) an income tax rate of 25% will normally be applicable to investors that are ―non-resident enterprises,‖ or
non-resident investors, which (i) have establishments or premises of business inside China, and (ii) the income in connection with
their establishment or premises of business is sourced from China or the income is earned outside China but has actual connection
with their establishments or places of business inside China, and (B) an income tax rate of 10% will normally be applicable to
dividends payable to investors that are ―non-resident enterprises,‖ or non-resident investors, which (i) do not have an establishment
or place of business in the PRC or (ii) have an establishment or place of business in the PRC, but the relevant income is not
effectively connected with the establishment or place of business, to the extent such dividends are derived from sources within the
PRC.
    As described above, the PRC tax authorities may determine the resident enterprise status of entities organized under the laws of
foreign jurisdictions, on a case-by-case basis. We, Ally Profit and Lihua Holdings are holding companies and substantially all of
our income and that of Ally Profit and Lihua Holdings may be derived from dividends. Thus, if we, Ally Profit or Lihua Holdings
are considered as a ―non-resident enterprise‖ under the EIT Law and the dividends paid to us, Ally Profit and Lihua Holdings are
considered income sourced within China, such dividends received may be subject to the income tax described in the foregoing
paragraph.
    The State Council of the PRC or a tax treaty between China and the jurisdictions in which the non-PRC investors reside may
reduce such income tax. Pursuant to the Double Tax Avoidance Arrangement between Hong Kong and Mainland China, if the
Hong Kong resident enterprise owns more than 25% of the equity interest in a company in China, the 10% withholding tax on the
dividends the Hong Kong resident enterprise received from such company in China is reduced to 5%. We are a U.S. holding
company, and we have a subsidiary in the British Virgin Islands (Ally Profit), which in turn owns a 100% equity interest in a
subsidiary in Hong Kong (Lihua Holdings), which in turns owns a 100% equity interest in each of the PRC Operating Companies.
If Lihua Holdings is considered as a Hong Kong resident enterprise under the Double Tax Avoidance Arrangement and is
considered as a ―non-resident enterprise‖ under the EIT Law, the dividends paid to Lihua Holdings by the PRC Operating
Companies may be subject to the reduced income tax rate of 5% under the Double Tax Avoidance Arrangement. However, based
on the Notice on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties, issued on February 20,
2009 by the State Administration of Taxation, if the relevant PRC tax authorities determine, in their discretion, that a company
benefits from such reduced income tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax authorities
may adjust the preferential tax treatment.

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    As of the date of this prospectus, there has not been a definitive determination as to the ―resident enterprise‖ or ―non-resident
enterprise‖ status of us, Ally Profit or Lihua Holdings. As indicated above, however, the PRC Operating Companies are not
expected to pay any dividends in the near future. We, Ally Profit and Lihua Holdings will consult with the PRC tax authorities and
make any necessary tax withholding if, in the future, the PRC Operating Companies were to pay any dividends and we, Ally Profit
or Lihua Holdings (based on future clarifying guidance issued by the PRC), or the PRC tax authorities, determine that we, Ally
Profit or Lihua Holdings is a non-resident enterprise under the EIT Law.
Dividends that Non-Resident Investors Receive From Us; Gain on the Sale or Transfer of Our Common Stock
    If dividends payable to (or gains recognized by) our non-resident investors are treated as income derived from sources within
the PRC, then the dividends that non-resident investors receive from us and any such gain on the sale or transfer of our Common
Stock, may be subject to taxes under PRC tax laws.
     Under the EIT Law and the implementing rules of the EIT Law, PRC income tax at the rate of 10% is applicable to dividends
payable to investors that are ―non-resident enterprises,‖ or non-resident investors, which (i) do not have an establishment or place
of business in the PRC or (ii) have an establishment or place of business in the PRC but the relevant income is not effectively
connected with the establishment or place of business, to the extent that such dividends have their sources within the PRC.
Similarly, any gain realized on the transfer of Common Stock by such investors is also subject to 10% PRC income tax if such gain
is regarded as income derived from sources within the PRC.
    The dividends paid by us to non-resident investors with respect to our Common Stock, or gain non-resident investors may
realize from sale or the transfer of our Common Stock, may be treated as PRC-sourced income and, as a result, may be subject to
PRC tax at a rate of 10%. In such event, we also may be required to withhold a 10% PRC tax on any dividends paid to non-resident
investors. In addition, non-resident investors in our Common Stock may be responsible for paying PRC tax at a rate of 10% on any
gain realized from the sale or transfer of our Common Stock after the consummation of the Offering if such non-resident investors
and the gain satisfies the requirements under the EIT Law and its implementing rules. However, under the EIT Law and its
implementing rules, we would not have an obligation to withhold income tax in respect of the gains that non-resident investors
(including U.S. investors) may realize from the sale or transfer of our Common Stock from and after the consummation of this
Offering.
    If we were to pay any dividends in the future, we would again consult with the PRC tax authorities and if we (based on future
clarifying guidance issued by the PRC), or the PRC tax authorities, determine that we must withhold PRC tax on any dividends
payable by us under the EIT Law, we will make any necessary tax withholding on dividends payable to our non-resident investors.
If non-resident investors as described under the EIT Law (including U.S. investors) realized any gain from the sale or transfer of
our Common Stock and if such gain were considered as PRC-sourced income, such non-resident investors would be responsible for
paying 10% PRC income tax on the gain from the sale or transfer of our Common Stock. As indicated above, under the EIT Law
and its implementing rules, we would not have an obligation to withhold PRC income tax in respect of the gains that non-resident
investors (including U.S. investors) may realize from the sale or transfer of our Common Stock from and after the consummation of
this Offering.
Penalties for Failure to Pay Applicable PRC Income Tax
    Non-resident investors in us may be responsible for paying PRC tax at a rate of 10% on any gain realized from the sale or
transfer of our Common Stock after the consummation of this Offering if such non-resident investors and the gain satisfies the
requirements under the EIT Law and its implementing rules, as described above.
     According to the EIT Law and its implementing rules, the PRC Tax Administration Law (the ―Tax Administration Law‖) and
its implementing rules, the Provisional Measures for the Administration of Withholding of Enterprise Income Tax for Non-resident
Enterprises (the ―Administration Measures‖) and other applicable PRC laws or regulations (collectively the ―Tax Related Laws‖),
where any gain derived by non-resident investors from the sale or transfer of our Securities is subject to any income tax in China,
and such non-resident investors fail to file any tax return or pay tax in this regard pursuant to the Tax Related Laws,

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they may be subject to certain fines, penalties or punishments, including without limitation: (1) if a non-resident investor fails to
file a tax return and present the relevant information in connection with tax payments, the competent tax authorities shall order it to
do so within the prescribed time limit and may impose a fine up to RMB 2,000, and in egregious cases, may impose a fine ranging
from RMB 2,000 to RMB 10,000; (2) if a non-resident investor fails to file a tax return or fails to pay all or part of the amount of
tax payable, the non-resident investor shall be required to pay the unpaid tax amount payable, a surcharge on overdue tax payments
(the daily surcharge is 0.05% of the overdue amount, beginning from the day the deferral begins), and a fine ranging from 50% to
500% of the unpaid amount of the tax payable; (3) if a non-resident investor fails to file a tax return or pay the tax within the
prescribed time limit according to the order by the PRC tax authorities, the PRC tax authorities may collect and check information
about the income items of the non-resident investor in China and other payers (the ―Other Payers‖) who will pay amounts to such
non-resident investor, and send a ―Notice of Tax Issues‖ to the Other Payers to collect and recover the tax payable and impose
overdue fines on such non-resident investor from the amounts otherwise payable to such non-resident investor by the Other Payers;
(4) if a non-resident investor fails to pay the tax payable within the prescribed time limit as ordered by the PRC tax authorities, a
fine may be imposed on the non-resident investor ranging from 50% to 500% of the unpaid tax payable; and the PRC tax
authorities may, upon approval by the director of the tax bureau (or sub-bureau) of, or higher than, the county level, take the
following compulsory measures: (i) notify in writing the non-resident investor’s bank or other financial institution to withhold from
the account thereof for payment of the amount of tax payable, and (ii) detain, seal off, or sell by auction or on the market the
non-resident investor’s commodities, goods or other property in a value equivalent to the amount of tax payable; or (5) if the
non-resident investor fails to pay all or part of the amount of tax payable or surcharge for overdue tax payment, and can not provide
a guarantee to the tax authorities, the tax authorities may notify the frontier authorities to prevent the non-resident investor or their
legal representative from leaving China.

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                                                          UNDERWRITING
    Subject to the terms and conditions in the underwriting agreement, dated [• ], 2009, by and among us and Broadband Capital
Management LLC and Rodman & Renshaw, LLC, who are acting as the representatives of the underwriters of this offering, each
underwriter named below has severally agreed to purchase from us, on a firm commitment basis, the number of shares of common
stock set forth opposite its name below, at the public offering price, less the underwriting discount set forth on the cover page of
this prospectus.




        Underwriter                                                                                          Number of
                                                                                                              Shares
        Broadband Capital Management LLC                                                                            [• ]
        Rodman & Renshaw, LLC                                                                                       [• ]
        Total                                                                                                       [• ]

    The underwriters have agreed to purchase all of the shares offered by this prospectus (other than those covered by the
over-allotment option described below) if any are purchased. Under the underwriting agreement, if an underwriter defaults in its
commitment to purchase shares, the commitments of non-defaulting underwriters may be increased or the underwriting agreement
may be terminated, depending on the circumstances. The underwriting agreement provides that the obligations of the underwriters
to pay for and accept delivery of the shares are subject to the passing upon certain legal matters by counsel and certain conditions
such as confirmation of the accuracy of representations and warranties by us about our financial condition and operations and other
matters, as well as the accuracy of representations and warranties by Vision Opportunity China LP about their ownership of shares
offered for sale as part of the over-allotment option of this offering.
   The shares should be ready for delivery on or about [• ], 2009 against payment in immediately available funds. The
underwriters may reject all or part of any order.
Commissions and Discounts
  The following table provides information regarding the amount of the discount to be paid to
   The Underwriters by us:
                                                                                         Per Share            Total
        Public offering price                                                        $         [•    ]   $        [•   ]
        Underwriting discount                                                        $         [•    ]   $        [•   ]
        Non-accountable expense allowance (1)                                        $         [•    ]   $        [•   ]
        Proceeds, before expenses, to us (2)                                         $         [•    ]   $        [•   ]




(1) The non-accountable expense allowance of 1% of the gross proceeds of the offering is not payable with respect to the shares of
    common stock sold upon exercise of the underwriters’ over-allotment option.
(2) We estimate that the total expense of this offering excluding the underwriters’ discount and the non-accountable expense
    allowance, will be approximately $[• ].
    The Underwriters by Vision Opportunity China LP (with respect to the over-allotment):
                                                                                          Per Share            TOTAL
        Public offering price                                                         $         [• ]      $          [• ]
        Underwriting discount                                                         $         [• ]      $          [• ]
        Proceeds, before expenses, to Vision Opportunity China LP                     $         [• ]      $          [• ]
    We have agreed to sell 2,000,000 shares of common stock to the underwriters at the initial public offering price less the
underwriting discount set forth on the cover page of this prospectus. Vision Opportunity China LP has agreed to sell up to 300,000
shares of common stock to the underwriters at the initial public offering price less the underwriting discount set forth on the cover
page of this prospectus upon exercise of the underwriters’ over-allotment option. The underwriting agreement also provides that
Broadband Capital Management LLC and Rodman & Renshaw, LLC, as the representatives of the underwriters, will be paid a

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non-accountable expense allowance equal to 1% of the gross proceeds from the sale of the shares of common stock offered by this
prospectus, exclusive of any common stock purchased on exercise of the underwriters’ over-allotment option.
Pricing of Securities
    The representatives have advised us that the underwriters propose to offer the shares directly to the public at the public offering
price that appears on the cover page of this prospectus. In addition, the representatives may offer some of the shares to other
securities dealers at such price less a concession of $[• ] per share. The underwriters may also allow, and such dealers may reallow,
a concession not in excess of $[• ] per share to other dealers. After the shares are released for sale to the public, the representatives
may change the offering price and other selling terms at various times.
    Prior to this offering, there was no public market for our common stock. The public offering price of our common stock was
determined by negotiation between us and the underwriters. The principal factors considered in determining the public offering
price of the common stock included:
   •    the information in this prospectus and otherwise available to the underwriters;
   •    the history and the prospects for the industry in which we compete;
   •    the ability of our management;
   •    the prospects for our future earnings;
   •    the present state of our development and our current financial condition;
   •    the general condition of the economy and the securities markets in the United States at the time of this offering;
   •    the recent market prices of, and the demand for, publicly-traded securities of generally comparable companies; and
   •    other factors as were deemed relevant.
   We cannot be sure that the public offering price will correspond to the price at which our common stock will trade in the public
market following this offering or that an active trading market for our common stock will develop and continue after this offering.
Over-allotment Option
    We have granted the underwriters an over-allotment option. This option, which is exercisable for up to 45 days after the date of
this prospectus, permits the underwriters to purchase a maximum of 300,000 additional shares of common stock from a selling
stockholder, Vision Opportunity China LP, at the initial public offering price less the underwriting discount set forth on the cover
page of this prospectus. If this option is exercised in full, the total price to the public will be $[• ] million. The underwriters have
severally agreed that, to the extent the over-allotment option is exercised, they will each purchase a number of additional shares
proportionate to the underwriter’s initial amount reflected in the table above.
Selling Stockholder Private Sale of Common Stock
    On August 14, 2009, the Selling Stockholder entered into a Securities Purchase Agreement to sell 500,000 shares of common
stock (the ―Shares‖), underlying shares of Series A Preferred Stock (the ―Preferred Stock‖) owned by the Selling Stockholder, to
several purchasers (the ―Vision Sale‖). The Shares will be sold at a per share price of $3.55 for an aggregate purchase price of
$1,775,000 (the ―Purchase Price‖). Prior to closing the Vision Sale, the Selling Stockholder will convert up to 500,000 shares of the
Preferred Stock into the Shares. The Selling Stockholder is obligated to convert the Preferred Stock into the Shares and deliver
them into escrow within 14 days of the receipt by the escrow agent of each purchaser’s pro rata portion of the Purchase Price. If the
Selling Stockholder does not deliver the Shares within such 14 day period, the purchaser’s pro rata portion of the Purchase Price
will be returned to the purchaser and the Selling Stockholder and the purchaser will have no further obligations. The closing of the
Vision Sale shall be on or about August 28, 2009.

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    The Vision Sale is a privately negotiated transaction among the Selling Stockholder and the purchasers to sell the Shares
pursuant to the ―Plan of Distribution‖ in the prospectus (the ―Prospectus‖) that is part of the Registration Statement that was
declared effective by the Securities and Exchange Commission on May 13, 2009, which registered the Shares. The purchasers will
receive the Shares free of any restrictive legends upon the closing of the Vision Sale. As permitted under the Prospectus,
Broadband Capital Management, LLC, the representative of the underwriters in this Offering, acted as selling agent on behalf of the
Selling Stockholder in the Vision Sale.
Representatives’ Warrant
    We have also agreed to issue to Broadband Capital Management LLC and Rodman & Renshaw, LLC, for $100, a common
stock purchase warrant to purchase a number of shares of our common stock equal to an aggregate of six (6%) percent of the shares
sold in the offering. The warrant will have an exercise price equal to 120% of the offering price of the shares sold in this offering.
The warrants are exercisable commencing six (6) months after the effective date of the registration statement related to this
offering, and will be exercisable for five (5) years thereafter. The warrant is not redeemable by us, and allows for ―cashless‖
exercise. The warrant also provides for unlimited ―piggyback‖ registration rights at our expense with respect to the underlying
shares of common stock during the five (5) year period commencing six (6) months after the effective date. Pursuant to the rules of
the Financial Industry Regulatory, Inc., or FINRA (formerly the NASD), and in particular Rule 5110, the warrant (and underlying
shares) issued to Broadband Capital Management LLC and Rodman & Renshaw, LLC may not be sold, transferred, assigned,
pledged, or hypothecated, or the subject of any hedging, short sale, derivative, put or call transaction that would result in the
effective disposition of the securities by any person for a period of 180 days immediately following the date of delivery and
payment for the shares offered; provided, however, that the warrant (and underlying shares) may be transferred to officers or
directors of Broadband Capital Management LLC and Rodman & Renshaw, LLC and members of the underwriting syndicate and
their affiliates as long as the warrants (and underlying shares) remain subject to the lockup.
Lock-ups
    Pursuant to the Original Stockholder Lock-Up Agreement, and subject to terms and conditions therein, each stockholder who
signed the Original Stockholder Lock-Up Agreement has agreed to not offer, sell, contract to sell, assign, transfer, hypothecate,
gift, pledge or grant a security interest in, or otherwise dispose of, or enter into any transaction which is designed to, or might
reasonably be expected to, result in the disposition of, their shares until a date that is six months following the date that the
Company’s common stock is listed and trading on a national securities exchange, and the date that is eighteen months following the
date that this Registration Statement is declared effective by the SEC. It was also agreed that, during the twelve months
immediately following the Lock-Up Period, the stockholders subject to the Original Stockholder Lock-Up Agreement may not
Transfer more than one-tenth of the total trading volume of the Company’s Common Stock for the preceding thirty day period.
    Pursuant to the Principal Stockholder Lock-Up Agreement, and subject to terms and conditions therein, each stockholder has
agreed to not Transfer, their shares until a date that is twelve months following the date that the Company’s common stock is listed
and trading on a national securities exchange. It was also agreed that, during the twenty-four months immediately following the
Lock-Up Period, the stockholders subject to the Principal Stockholder Lock-Up Agreement may not Transfer more than
one-twelfth of their total holdings of Common Stock as of the Closing Date during any one calendar month. See ―Shares Eligible
for Future Sale.‖
    We expect that all of the Investors in the Private Placement will agree to enter into a lock-up agreement with the underwriters
which will prohibit such Investors from offering for sale, selling, contracting to sell, granting any option for the sale of, transferring
or otherwise disposing of any shares of our Common Stock, options or warrants to acquire shares of our Common Stock or any
security or instrument related to such Common Stock until six months after our Common Stock begins trading on an exchange.
Other Terms
    The underwriting agreement provides for indemnification between us and the underwriters against specified liabilities,
including liabilities under the Securities Act, and for contribution by us and the underwriters to payments that may be required to be
made with respect to those liabilities. We have been advised that, in the

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opinion of the Securities and Exchange Commission, indemnification liabilities under the Securities Act is against public policy as
expressed in the Securities Act, and is therefore, unenforceable.
Stabilization
    Until the distribution of the shares of common stock offered by this prospectus is completed, rules of the SEC may limit the
ability of the underwriters to bid for and to purchase our shares of common stock. As an exception to these rules, the underwriters
may engage in transactions effected in accordance with Regulation M under the Securities Exchange Act of 1934 that are intended
to stabilize, maintain or otherwise affect the price of our common stock. The underwriters may engage in over-allotment sales,
syndicate covering transactions, stabilizing transactions and penalty bids in accordance with Regulation M.
   •    Stabilizing transactions permit bids or purchases for the purpose of pegging, fixing or maintaining the price of the common
        stock, so long as stabilizing bids do not exceed a specified maximum.
   •    Over-allotment involves sales by the underwriters of shares of common stock in excess of the number of shares of common
        stock the underwriters are obligated to purchase, which creates a short position. The short position may be either a covered
        short position or a naked short position. In a covered short position, the number of shares of common stock over-allotted by
        the underwriters is not greater than the number of shares of common stock that they may purchase in the over-allotment
        option. In a naked short position, the number of shares of common stock involved is greater than the number of shares in
        the over-allotment option. The underwriters may close out any covered short position by either exercising their
        over-allotment option or purchasing shares of our common stock in the open market.
   •    Covering transactions involve the purchase of securities in the open market after the distribution has been completed in
        order to cover short positions. In determining the source of securities to close out the short position, the underwriters will
        consider, among other things, the price of securities available for purchase in the open market as compared to the price at
        which they may purchase securities through the over-allotment option. If the underwriters sell more shares of common
        stock than could be covered by the over-allotment option, creating a naked short position, the position can only be closed
        out by buying securities in the open market. A naked short position is more likely to be created if the underwriters are
        concerned that there could be downward pressure on the price of the securities in the open market after pricing that could
        adversely affect investors who purchase in this offering.
   •    Penalty bids permit the underwriters to reclaim a selling concession from a selected dealer when the shares of common
        stock originally sold by the selected dealer are purchased in a stabilizing or syndicate covering transaction.
    These stabilizing transactions, covering transactions and penalty bids may have the effect of raising or maintaining the market
price of our common stock or preventing or retarding a decline in the market price of our common stock. As a result, the price of
our common stock may be higher than the price that might otherwise exist in the open market.
    Neither we nor the underwriters make any representation or prediction as to the effect that the transactions described above may
have on the prices of our common stock. These transactions may occur on NYSE AMEX or on any other trading market. If any of
these transactions are commenced, they may be discontinued without notice at any time.
    A prospectus in electronic format may be made available on a website maintained by the representatives of the underwriters and
may also be made available on a website maintained by other underwriters. The underwriters may agree to allocate a number of
shares to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the
representatives of the underwriters to underwriters that may make Internet distributions on the same basis as other allocations. In
connection with the offering, the underwriters or syndicate members may distribute prospectuses electronically. No forms of
electronic prospectus other than prospectuses that are printable as Adobe® PDF will be used in connection with this offering.

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   The underwriters have informed us that they do not expect to confirm sales of shares of common stock offered by this
prospectus to accounts over which they exercise discretionary authority.
Foreign Regulatory Restrictions on Purchase of Shares
    We have not taken any action to permit a public offering of the shares outside the United States or to permit the possession or
distribution of this prospectus outside the United States. Persons outside the United States who come into possession of this
prospectus must inform themselves about and observe any restrictions relating to this offering of common stock and the distribution
of the prospectus outside the United States.
    Italy . This offering of the shares has not been cleared by Consob, the Italian Stock Exchanges regulatory agency of public
companies, pursuant to Italian securities legislation and, accordingly, no shares may be offered, sold or delivered, nor may copies
of this prospectus or of any other document relating to the shares be distributed in Italy, except (1) to professional investors
(operatori qualificati); or (2) in circumstances which are exempted from the rules on solicitation of investments pursuant to Decree
No. 58 and Article 33, first paragraph, of Consob Regulation No. 11971 of May 14, 1999, as amended. Any offer, sale or delivery
of the common stock or distribution of copies of this prospectus or any other document relating to the common stock in Italy under
(1) or (2) above must be (i) made by an investment firm, bank or financial intermediary permitted to conduct such activities in Italy
in accordance with the Decree No. 58 and Legislative Decree No. 385 of September 1, 1993, or the Banking Act; and (ii) in
compliance with Article 129 of the Banking Act and the implementing guidelines of the Bank of Italy, as amended from time to
time, pursuant to which the issue or the offer of securities in Italy may need to be preceded and followed by an appropriate notice to
be filed with the Bank of Italy depending, inter alia , on the aggregate value of the securities issued or offered in Italy and their
characteristics; and (iii) in compliance with any other applicable laws and regulations.
    Germany . The offering of the shares is not a public offering in the Federal Republic of Germany. The shares may only be
acquired in accordance with the provisions of the Securities Sales Prospectus Act (Wertpapier-Verkaufsprospektgesetz), as
amended, and any other applicable German law. No application has been made under German law to publicly market the common
stock in or out of the Federal Republic of Germany. The shares are not registered or authorized for distribution under the Securities
Sales Prospectus Act and accordingly may not be, and are not being, offered or advertised publicly or by public promotion.
Therefore, this prospectus is strictly for private use and the offering is only being made to recipients to whom the document is
personally addressed and does not constitute an offer or advertisement to the public. The shares will only be available to persons
who, by profession, trade or business, buy or sell shares for their own or a third party’s account.
    France . The shares offered by this prospectus may not be offered or sold, directly or indirectly, to the public in France. This
prospectus has not been or will not be submitted to the clearance procedure of the Autorité des Marchés Financiers, or the AMF,
and may not be released or distributed to the public in France. Investors in France may only purchase the common stock offered by
this prospectus for their own account and in accordance with articles L. 411-1, L. 441-2 and L. 412-1 of the Code Monétaire et
Financier and decree no. 98-880 dated October 1, 1998, provided they are ―qualified investors‖ within the meaning of said decree.
Each French investor must represent in writing that it is a qualified investor within the meaning of the aforesaid decree. Any resale,
directly or indirectly, to the public of the shares offered by this prospectus may be effected only in compliance with the above
mentioned regulations.
    ―Les actions offertes par ce document d’information ne peuvent pas être, directement ou indirectement, offertes ou vendues au
public en France. Ce document d’information n’a pas été ou ne sera pas soumis au visa de l’Autorité des Marchés Financiers et ne
peut être diffusé ou distribué au public en France. Les investisseurs en France ne peuvent acheter les actions offertes par ce
document d’information que pour leur compte propre et conformément aux articles L. 411-1, L. 441-2 et L. 412-1 du Code
Monétaire et Financier et du décret no. 98-880 du 1 octobre 1998, sous réserve qu’ils soient des investisseurs qualifiés au sens du
décret susvisé. Chaque investisseur doit déclarer par écrit qu’il est un investisseur qualifié au sens du décret susvisé. Toute revente,
directe ou indirecte, des actions offertes par ce document d’information au public ne peut être effectuée que conformément à la
réglementation susmentionnée.‖
    Switzerland . This prospectus may only be used by those persons to whom it has been directly handed out by the offeror or its
designated distributors in connection with the offer described therein. The shares are

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only offered to those persons and/or entities directly solicited by the offeror or its designated distributors, and are not offered to the
public in Switzerland. This prospectus constitutes neither a pubic offer in Switzerland nor an issue prospectus in accordance with
the respective Swiss legislation, in particular but not limited to Article 652A Swiss Code Obligations. Accordingly, this prospectus
may not be used in connection with any other offer, whether private or public and shall in particular not be distributed to the public
in Switzerland.
    United Kingdom . In the United Kingdom, the shares offered by this prospectus are directed to and will only be available for
purchase to a person who is an exempt person as referred to at paragraph (c) below and who warrants, represents and agrees that:
(a) it has not offered or sold, will not offer or sell, any shares offered by this prospectus to any person in the United Kingdom
except in circumstances which do not constitute an offer to the public in the United Kingdom for the purposes of the section 85 of
the Financial Services and Markets Act 2000 (as amended) (―FSMA‖); and (b) it has complied and will comply with all applicable
provisions of FSMA and the regulations made thereunder in respect of anything done by it in relation to the shares offered by this
prospectus in, from or otherwise involving the United Kingdom; and (c) it is a person who falls within the exemptions to Section 21
of the FSMA as set out in The Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (―the Order‖), being
either an investment professional as described under Article 19 or any body corporate (which itself has or a group undertaking has a
called up share capital or net assets of not less than £500,000 (if more than 20 members) or otherwise £5 million) or an
unincorporated association or partnership (with net assets of not less than £5 million) or is a trustee of a high value trust or any
person acting in the capacity of director, officer or employee of such entities as defined under Article 49(2)(a) to (d) of the Order,
or a person to whom the invitation or inducement may otherwise lawfully be communicated or cause to be communicated. The
investment activity to which this document relates will only be available to and engaged in only with exempt persons referred to
above. Persons who are not investment professionals and do not have professional experience in matters relating to investments or
are not an exempt person as described above, should not review nor rely or act upon this document and should return this document
immediately. It should be noted that this document is not a prospectus in the United Kingdom as defined in the Prospectus
Regulations 2005 and has not been approved by the Financial Services Authority or any competent authority in the United
Kingdom.
    Norway . This prospectus has not been produced in accordance with the prospectus requirements laid down in the Norwegian
Securities Trading Act 1997 as amended. This prospectus has not been approved or disapproved by, or registered with, neither the
Oslo Stock Exchange nor the Norwegian Registry of Business Enterprises. This prospectus may not, either directly or indirectly be
distributed to other Norwegian potential investors than the addressees without the prior consent of.
    Denmark . This prospectus has not been prepared in the context of a public offering of securities in Denmark within the
meaning of the Danish Securities Trading Act No. 171 of 17 March 2005 as amended from time to time or any Executive Orders
issued on the basis thereof and has not been and will not be filed with or approved by or filed with the Danish Financial
Supervisory Authority or any other public authorities in Denmark. The offering of shares will only be made to persons pursuant to
one or more of the exemptions set out in Executive Order No. 306 of 28 April 2005 on Prospectuses for Securities Admitted for
Listing or Trade on a Regulated Market and on the First Public Offer of Securities exceeding EUR 2,500,000 or Executive Order
No. 307 of 28 April 2005 on Prospectuses for the First Public Offer of Certain Securities between EUR 100,000 and EUR
2,500,000, as applicable.
    Sweden . Neither this prospectus nor the shares offered hereunder have been registered with or approved by the Swedish
Financial Supervisory Authority under the Swedish Financial Instruments Trading Act (1991:980) (as amended), nor will such
registration or approval be sought. Accordingly, this prospectus may not be made available nor may the shares offered hereunder be
marketed or offered for sale in Sweden other than in circumstances which are deemed not to be an offer to the public in Sweden
under the Financial Instruments Trading Act. This prospectus may not be distributed to the public in Sweden and a Swedish
recipient of the prospectus may not in any way forward the prospectus to the public in Sweden.
   Israel . The shares offered by this prospectus have not been approved or disapproved by the Israeli Securities Authority (ISA).
The shares may not be offered or sold, directly or indirectly, to the public in Israel.

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The ISA has not issued permits, approvals or licenses in connection with the offering of the shares or publishing the prospectus; nor
has it authenticated the details included herein, confirmed their reliability or completeness, or rendered an opinion as to the quality
of the shares being offered. Any resale, directly or indirectly, to the public of the shares offered by this prospectus is subject to
restrictions on transferability and must be effected only in compliance with the Israeli securities laws and regulations.
European Economic Area
    In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a
relevant member state), with effect from and including the date on which the Prospectus Directive is implemented in that relevant
member state (the relevant implementation date) an offer of securities to the public in that relevant member state prior to the
publication of a prospectus in relation to the securities that have been approved by the competent authority in that relevant member
state or, where appropriate, approved in another relevant member state and notified to the competent authority in that relevant
member state, all in accordance with the Prospectus Directive, except that, with effect from and including the relevant
implementation date, an offer of securities maybe offered to the public in that relevant member state at any time:
   •    to any legal entity that is authorized or regulated to operate in the financial markets or, if not so authorized or regulated,
        whose corporate purpose is solely to invest in securities;
   •    to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a
        total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last
        annual or consolidated accounts;
   •    to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to
        obtaining the prior consent of Broadband Capital Management LLC and Rodman & Renshaw, LLC for any such offer; or
   •    in any other circumstances which do not require the publication of a prospectus pursuant to Article 3 of the Prospectus
        Directive.
    Each purchaser of securities described in this prospectus located within a relevant member state will be deemed to have
represented, acknowledged and agreed that it is a ―qualified investor‖ within the meaning of Article 2(1)(e) of the Prospectus
Directive.
    For the purposes of this provision, the expression an ―offer to the public‖ in any relevant member state means the
communication in any form and by any means of sufficient information on the terms of the offer and the securities to be offered so
as to enable an investor to decide to purchase or subscribe the securities, as the expression may be varied in that member state by
any measure implementing the Prospectus Directive in that member state and the expression ―Prospectus Directive‖ means
Directive 2003/71/EC and includes any relevant implementing measure in each relevant member state.
Lock-ups
    Pursuant to the Original Stockholder Lock-Up Agreement, and subject to terms and conditions therein, each stockholder who
signed the Principal Stockholder Lock-Up Agreement has agreed to not offer, sell, contract to sell, assign, transfer, hypothecate,
gift, pledge or grant a security interest in, or otherwise dispose of, or enter into any transaction which is designed to, or might
reasonably be expected to, result in the disposition of (each, a ―Transfer‖), their shares until the earlier of (i) a date that is six
months following the date that the Company’s Common Stock is listed and trading on a national securities exchange, and (ii) the
date that is eighteen months following the date that this Registration Statement is declared effective by the SEC. It was also agreed
that, during the twelve months immediately following the Lock-Up Period, the stockholders subject to the Original Stockholder
Lock-Up Agreement may not Transfer more than one-tenth of the total trading volume of the Company’s Common Stock for the
preceding thirty day period.
    Pursuant to the Principal Stockholder Lock-Up Agreement, and subject to terms and conditions therein, each stockholder has
agreed to not Transfer, their shares until a date that is twelve months following the Lock Up Period. It was also agreed that, during
the twenty-four months immediately following the Lock-Up Period,

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the stockholders subject to the Principal Stockholder Lock-Up Agreement may not Transfer more than one-twelfth of their total
holdings of Common Stock as of the Closing Date during any one calendar month. See ―Shares Eligible for Future Sale.‖
    All of the Investors in the Private Placement have agreed to enter into a lock-up agreement with the underwriters which will
prohibit such Investors from offering for sale, selling, contracting to sell, granting any option for the sale of, transferring or
otherwise disposing of any shares of our Common Stock, options or warrants to acquire shares of our Common Stock or any
security or instrument related to such Common Stock until six months after our Common Stock begins trading on an exchange.
    Vision has agreed to enter into a lock-up agreement with the underwriters, which will prohibit Vision from offering for sale,
selling, contracting to sell, granting any option for the sale of, transferring or otherwise disposing of any shares of our Common
Stock (each a ―Transfer‖), options or warrants to acquire shares of our Common Stock or any security or instrument related to such
Common Stock, option or warrant pursuant to the following schedule:
   The lock-up agreement will not prevent Vision from selling shares of Common Stock to the underwriters pursuant to the
Underwriting Agreement.

                                          TRANSFER AGENT AND REGISTRAR
   The Transfer Agent and Registrar for shares of our Common Stock and Preferred Stock is Corporate Stock Transfer, Inc., 3200
Cherry Creek Drive So., #430, Denver, Colorado 80209. Our Transfer Agent and Registrar’s telephone number is 303-282-4800.

                                                         LEGAL MATTERS
    The validity of the securities offered hereby have been passed upon for us by Loeb & Loeb LLP, New York, New York. Certain
legal matters in connection with this Offering will be passed upon for the underwriters by Ellenoff Grossman & Schole LLP. In
addition, certain legal matters relating to the PRC in connection with this Offering will be passed upon for us by Han Kun Law
Offices.

                                                           EXPERTS
   Our financial statements as of and for the years ended December 31, 2008 and 2007 and Ally Profit’s financial statements as of
and for the year ended December 31, 2006 included in this prospectus and in the registration statement have been audited by
AGCA, Inc., an independent registered public accounting firm, as stated in its reports appearing herein.

                                        WHERE YOU CAN FIND MORE INFORMATION
    We have filed with the SEC a registration statement on Form S-1 under the Securities Act of 1933 with respect to the common
stock offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information
in the registration statement and the exhibits of the registration statement. For further information with respect to us and the
securities being offered under this prospectus, we refer you to the registration statement, including the exhibits and schedules
thereto.
    You may read and copy the registration statement of which this prospectus is a part at the SEC’s Public Reference Room,
which is located at 100 F Street, N.E., Washington, D.C. 20549. You can request copies of the registration statement by writing to
the SEC and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for more information about the operation of
the SEC’s Public Reference Room. In addition, the SEC maintains an Internet web site, which is located at www.sec.gov , which
contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.
You may access the registration statement of which this prospectus is a part at the SEC’s Internet web site. We are subject to the
information reporting requirements of the Securities Exchange Act of 1934, and we will file reports, proxy statements and other
information with the SEC.

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                               INDEX TO CONSOLIDATED FINANCIAL STATEMENTS




                                                                                                  Page
       Financial Statements as of June 30, 2009 and for Three Months Ended June 30,
         2009 and 2008 for Lihua International, Inc. and Subsidiaries
       Condensed Consolidated Balance Sheets as of June 30, 2009 (Unaudited) and                  Q-2
         December 31, 2008 (Audited)
       Condensed Consolidated Statements of Income and Comprehensive Income                       Q-3
         (Unaudited) for the three months ended June 30, 2009 and 2008
       Condensed Consolidated Statement of Stockholders’ Equity (Unaudited) for the three         Q-4
         months ended June 30, 2009
       Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months           Q-5
         ended June 30, 2009 and 2008
       Notes to Unaudited Condensed Consolidated Financial Statements                          Q-6 – Q-25
       Financial Statements as of December 31, 2008 and 2007 and for the Fiscal Years
         Ended December 31, 2008 and 2007 for Lihua International, Inc. and
         Subsidiaries
       Report of Independent Registered Public Accounting Firm                                    F-1
       Consolidated Balance Sheets for Lihua International, Inc. and Subsidiaries as of           F-2
         December 31, 2008 and 2007 (Audited)
       Consolidated Statements of Income and Comprehensive Income for Lihua                       F-3
         International, Inc. and Subsidiaries for the years ended December 31, 2008 and 2007
         (Audited)
       Consolidated Statements of Stockholders’ Equity for Lihua International, Inc. and          F-4
         Subsidiaries for the years ended December 31, 2008 and 2007 (Audited)
       Consolidated Statements of Cash Flows for Lihua International, Inc. and Subsidiaries       F-5
         for the years ended December 31, 2008 and 2007 (Audited)
       Notes to Consolidated Financial Statements                                              F-6 – F-33
       Financial Statements as of December 31, 2006 and for the Fiscal Year Ended
         December 31, 2006 for Ally Profit Investments Limited and Subsidiaries
       Report of Independent Registered Public Accounting Firm                                    F-34
       Consolidated Balance Sheets for Ally Profit Investments Limited and Subsidiaries for       F-35
         the year ended December 31, 2006 (Audited)
       Consolidated Statements of Income and Comprehensive Income for Ally Profit                 F-36
         Investments Limited and Subsidiaries for the year ended December 31, 2006
         (Audited)
       Consolidated Statements of Stockholders’ Equity for Ally Profit Investments Limited        F-37
         and Subsidiaries for the year ended December 31, 2006 (Audited)
       Consolidated Statements of Cash Flows for Ally Profit Investments Limited and              F-38
         Subsidiaries for the year ended December 31, 2006 (Audited)
       Notes to Consolidated Financial Statements                                              F-39 – F-50
Q-1
TABLE OF CONTENTS

                                 LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                                 CONDENSED CONSOLIDATED BALANCE SHEETS
                                    (AMOUNTS EXPRESSED IN US DOLLARS)




                                                                                   June 30,         December 31,
                                                                                    2009                2008
                                                                                 (Unaudited)         (Audited)
       CURRENT ASSETS
        Cash and cash equivalents                                            $     28,144,454   $      26,041,849
        Restricted cash                                                               700,000           1,750,000
        Notes receivable, net                                                              —              321,892
        Accounts receivable, net                                                    7,845,743           5,042,739
        Other receivables and current assets                                          612,071                  —
        Prepaid land use right – current portion                                      172,421             172,353
        Inventories                                                                 7,921,451             586,938
           Total current assets                                                    45,396,140          33,915,771
       OTHER ASSETS
        Buildings, machinery and equipment, net                                    15,261,689           7,440,943
        Construction in progress                                                    1,102,122           6,017,941
        Deposits for buildings, machinery and equipment                               608,823           1,077,892
        Prepaid land use right-long term portion                                    8,249,815           8,332,732
        Intangible assets                                                               3,513               4,214
        Deferred income tax assets                                                         —               23,395
           Total non-current assets                                                25,225,962          22,897,117
           Total assets                                                      $     70,622,102   $      56,812,888

       CURRENT LIABILITIES
         Short term bank loans                                               $      4,391,165   $       6,145,202
         Accounts payable                                                           5,119,202           1,643,544
         Other payables and accruals                                                  572,835             830,744
         Income taxes payable                                                       1,566,105             401,436
            Total current liabilities                                              11,649,307           9,020,926
       OTHER LIABILITIES
         Common stock purchase warrants                                             2,646,855                  —
            Total liabilities                                                      14,296,162           9,020,926
       COMMITMENT AND CONTINGENCIES (Note 21)
       Series A redeemable convertible preferred stock: $0.0001 par value:         13,116,628          13,116,628
         10,000,000 shares authorized (liquidation preference of $2.2 per
         share), 6,818,182 shares issued and outstanding
       SHAREHOLDERS’ EQUITY
Common stock, $0.0001 par value: 75,000,000 shares authorized,              1,500               1,500
  15,000,000 shares issued and outstanding
Additional paid-in capital                                              7,474,191            7,976,976
Statutory reserves                                                      2,603,444            2,603,444
Retained earnings                                                      30,538,879           21,521,937
Accumulated other comprehensive income                                  2,591,298            2,571,477
  Total shareholders’ equity                                           43,209,312           34,675,334
  Total liabilities and shareholders’ equity                     $     70,622,102     $     56,812,888



              See accompanying notes to these condensed consolidated financial statements

                                                 Q-2
TABLE OF CONTENTS

                                  LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                     UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                   AND COMPREHENSIVE INCOME
                                (AMOUNTS EXPRESSED IN US DOLLARS)




                                         For the Three Months                           For the Six Months
                                            Ended June 30,                               Ended June 30,
                                      2009                    2008               2009                        2008
       Revenue                $      48,827,343      $     15,037,603      $    69,365,668         $     24,768,712
       Cost of goods sold           (39,095,534 )         (10,328,094 )        (53,923,184 )            (17,032,015 )

       Gross profit                   9,731,809              4,709,509         15,442,484                    7,736,697
       Selling expenses                (587,356 )             (172,122 )         (790,445 )                   (257,631 )

       General and                   (1,093,499 )             (403,379 )        (1,635,562 )                  (595,310 )
          administrative
          expenses
       Income from                    8,050,954              4,134,008         13,016,477                    6,883,756
          operations
       Other income
          (expenses):
       Interest income                   47,182                  7,608              71,417                      10,234
       Interest expenses               (105,667 )             (106,337 )          (218,796 )                  (182,632 )

       Change in fair value            (215,952 )                    —            (340,167 )                        —
         of warrants
       Other                           500,702                  (5,706 )          500,702                       (5,622 )

       Total other income              226,265                (104,435 )            13,156                    (178,020 )
         (expenses)
       Income before                  8,277,219              4,029,573         13,029,633                    6,705,736
         income tax
       Provision for income          (1,572,190 )             (528,082 )        (2,335,913 )                  (866,641 )
         tax
       Net income                     6,705,029              3,501,491         10,693,720                    5,839,095
       Other comprehensive
         income:
       Foreign currency                  28,259                618,795              19,821                   1,492,445
         translation
         adjustment
Total comprehensive    $      6,733,288      $      4,120,286      $    10,713,541       $      7,331,540
  income

Earnings per share
Basic                  $           0.45      $           0.25      $           0.71      $           0.42

Diluted                $           0.31      $           0.25      $           0.49      $           0.42

Weighted average
  number of shares
  outstanding
Basic                        15,000,000            14,025,000           15,000,000             14,025,000

Diluted                      21,818,182            14,025,000           21,818,182             14,025,000



                 See accompanying notes to these condensed consolidated financial statements

                                                   Q-3
TABLE OF CONTENTS

                                       LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
                                  (AMOUNTS EXPRESSED IN US DOLLARS)




                                                         Additional        Statutory           Retained        Accumulated          Total
                                                          Paid-in          Reserves            Earnings           Other
                                                          Capital                                             Comprehensive
                                                                                                                 Income
                              Common Stock

                           Number of        Amount
                            Shares
At December 31, 2008,      15,000,000      $ 1,500   $   7,976,976     $   2,603,444       $   21,521,937     $   2,571,477   $   34,675,334
  as previously reported
  (Audited)
Cumulative effect of                   —        —         (629,910 )                   —       (1,676,778 )             —         (2,306,688 )
  reclassification of
  common stock
  purchase warrants
At January 1, 2009, as     15,000,000        1,500       7,347,066         2,603,444           19,845,159         2,571,477       32,368,646
  adjusted (Unaudited)
Net income                             —        —                —                     —       10,693,720               —         10,693,720
Foreign currency                       —        —                —                     —               —            19,821            19,821
  translation adjustment
Comprehensive income                                                                                                              10,713,541
Share-based payment to                 —        —          127,125                     —                  —             —            127,125
  employee
At June 30, 2009   15,000,000   $ 1,500   $   7,474,191     $   2,603,444   $   30,538,879   $   2,591,298   $   43,209,312
  (Unaudited)




                   See accompanying notes to these condensed consolidated financial statements

                                                          Q-4
TABLE OF CONTENTS

                                LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (AMOUNTS EXPRESSED IN US DOLLARS)




                                                                           Six months ended June 30,
                                                                       2009                            2008
       CASH FLOWS FROM OPERATING ACTIVITIES
         Net income                                                $   10,693,720        $             5,839,095
         Adjustments to reconcile net income to cash provided by
            operating activities:
            Depreciation and amortization                                 604,419                        346,620
            Share-based compensation expense                              127,125                             —
            Change in fair value of warrants                              340,167                             —
         (Increase) decrease in assets:
            Accounts receivable                                        (2,800,642 )                    2,196,606
            Notes receivables                                             321,976                         47,579
            Other receivables and current assets                         (612,001 )                       10,079
            Inventories                                                (7,333,315 )                     (340,848 )
            Deferred income tax assets                                     23,401                             —
         Increase (decrease) in liabilities:
            Accounts payable                                            3,474,552                        514,095
            Other payables and accruals                                  (258,182 )                      191,390
            Income taxes payable                                        1,164,357                        107,298
              Net cash provided by operating activities                 5,745,577                      8,911,914
       CASH FLOWS FROM INVESTING ACTIVITIES
         Purchase of buildings, machinery and equipment                (2,947,312 )                    (1,819,099 )
         Prepayment for land use right                                         —                       (3,536,768 )
         Proceeds from related parties                                         —                        3,989,475
            Net cash used in investing activities                      (2,947,312 )                    (1,366,392 )
       CASH FLOWS FROM FINANCING ACTIVITIES
         New short-term bank loans                                      1,463,722                       6,366,183
         Repayment to related parties                                          —                       (2,378,452 )
         Release of restricted cash related to Private Placement        1,050,000                              —
            (Note 21)
         Repayments of short-term bank loans                           (3,220,188 )                    (3,536,768 )
            Net cash provided by (used in) financing activities          (706,466 )                       450,963
       Foreign currency translation adjustment                             10,806                         527,653
       INCREASE IN CASH AND CASH EQUIVALENTS                            2,102,605                       8,524,138
       CASH AND CASH EQUIVALENTS, at the beginning of                  26,041,849                       3,213,649
 the period
CASH AND CASH EQUIVALENTS, at the end of the            $        28,144,454       $         11,737,787
 period

SUPPLEMENTAL DISCLOSURE INFORMATION
  Interest paid                                         $           218,796       $           182,632
  Income taxes paid                                     $         1,148,155       $           866,641
MAJOR NON-CASH TRANSACTION:
  Shares-based payment to employee                      $           127,125       $                —


              See accompanying notes to these condensed consolidated financial statements

                                                Q-5
TABLE OF CONTENTS

                                    LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THREE MONTHS ENDED JUNE 30, 2009 AND 2008
NOTE 1 — DESCRIPTION OF BUSINESS AND ORGANIZATION
     Lihua International, Inc. (― the Company ‖) was incorporated in the State of Delaware on January 24, 2006 under the name
Plastron Acquisition Corp. On September 22, 2008, the Company changed its name from Plastron Acquisition Corp. to Lihua
International, Inc. The Company conducts its business through two operating subsidiaries located in the People’s Republic of
China, Danyang Lihua Electron Co., Ltd. and Jiangsu Lihua Copper Industry Co., Ltd.
   As of June 30, 2009, details of the subsidiaries of the Company are as follows:




        Subsidiaries’ names            Domicile and           Paid-up        Effective            Principal activities
                                   date of incorporation      capital       ownership
        Ally Profit Investments    British Virgin Islands       $100          100%       Holding company of the other
          Limited (― Ally Profit   March 12, 2008                                        subsidiaries
          ‖)
        Lihua Holdings Limited     Hong Kong                  HK$100          100%       Holding company of other
          (― Lihua Holdings ‖)     April 17, 2008                                        subsidiaries
        Danyang Lihua Electron     People’s Republic of     $2,200,000        100%       Manufacturing and sales of
          Co., Ltd.                China (―PRC‖)                                         bimetallic composite conductor wire
          (― Lihua Electron ‖)     December 30, 1999                                     such as copper clad aluminum
                                                                                         (CCA) wire and enameled CCA
                                                                                         wire.
        Jiangsu Lihua Copper       PRC August 31, 2007      $15,000,000       100%       Manufacturing and sales of copper
           Industry Co., Ltd. (―                                                         wire and CCA wire.
           Lihua Copper ‖)
NOTE 2 — SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES
Principle of consolidation
   These condensed consolidated financial statements include the financial statements of Lihua International, Inc. and its
subsidiaries. All significant inter-company balances or transactions are eliminated on consolidation.
Basis of preparation
    These interim condensed consolidated financial statements are unaudited. In the opinion of management, all adjustments and
disclosures necessary for a fair presentation of these interim condensed consolidated financial statements have been included. The
results reported in the condensed consolidated financial statements for any interim periods are not necessarily indicative of the
results that may be reported for the entire year. The accompanying condensed consolidated financial statements have been prepared
in accordance with the rules and regulations of the Securities and Exchange Commission and do not include all information and
footnotes necessary for a complete presentation of financial statements in conformity with accounting principles generally accepted
in the United States. These unaudited condensed consolidated financial statements should be read in conjunction with the
consolidated financial statements and accompanying footnotes included in the Company’s Annual Report on Form 10-K for the
year ended December 31, 2008.
Foreign currency translation
    The Company uses United States dollars (―US Dollars‖ or ―US$‖ or ―$‖) for financial reporting purposes. However, the
Company maintains the books and records in its functional currency, Chinese Renminbi (―RMB‖), being the primary currency of
the economic environment in which its operations are conducted. In general, the Company translates its assets and liabilities into
US Dollars using the applicable exchange rates prevailing at the balance sheet date, and the statement of income is translated at
average exchange rates during the reporting period. Equity accounts are translated at historical rates. Adjustments resulting from
the translation of the Company’s financial statements are recorded as accumulated other comprehensive income.

                                                               Q-6
TABLE OF CONTENTS

                                  LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           FOR THREE MONTHS ENDED JUNE 30, 2009 AND 2008
NOTE 2 — SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES – (continued)
    The exchange rates used to translate amounts in RMB into U.S. Dollars for the purposes of preparing the consolidated financial
statements were as follows:




                                                                   As of June 30, 2009            As of December 31, 2008
        Balance sheet items, except for equity accounts          US$1= RMB6.8319                  US$1= RMB6.8346




                                                                                 Three months ended June 30,
                                                                              2009                             2008
        Items in the statements of income and cash flows             US$1= RMB6.8299                US$1= RMB 6.9645
                                                                                    Six months ended June 30,
                                                                                2009                            2008
        Items in the statements of income and cash flows               US$1= RMB6.8328                US$1= RMB 7.0686
Research and development costs
   Research and development costs are expensed as incurred. During the six months ended June 30, 2009 and 2008, research and
development costs were $59,208 and $19,838, respectively.
Advertising costs
   The Company expenses all advertising costs as incurred. The total amounts of advertising costs charged to selling, general and
administrative expense were $13,022 and $7,130 for the six months ended June 30, 2009 and 2008, respectively.
Shipping and handling costs
   Substantially all costs of shipping and handling of products to customers are included in selling, general and administrative
expense. Shipping and handling costs for the six months ended June 30, 2009 and 2008 were $610,212 and $155,701, respectively.
Recent Accounting Pronouncement Adopted
    Effective January 1, 2009, the Company adopted the provisions of EITF 07-5, ―Determining Whether an Instrument (or
Embedded Feature) is Indexed to an Entity’s Own Stock‖ (―EITF 07-5‖). EITF 07-5 applies to any freestanding financial
instruments or embedded features that have the characteristics of a derivative, as defined by SFAS No. 133, ―Accounting for
Derivative Instruments and Hedging Activities,‖ and to any freestanding financial instruments that are potentially settled in an
entity’s own common stock. As a result of adopting EITF 07-5, the Company’s issued and outstanding Series A Warrants to
purchase 1,500,000 shares of Common Stock and Series B Warrants to purchase 500,000 shares of Common Stock which were
previously treated as equity pursuant to the scope exception in paragraph 11(a) of SFAS No. 113, were no longer afforded equity
treatment. These warrants expire in 5 years from October 31, 2008 and have an exercise price of $3.50, which is subject to a
downward adjustment if the Company issues additional shares of Common Stock or securities exercisable, convertible or
exchangeable for Common Stock at a price less than the exercise price for a period of two years from October 31, 2008.
     As such, effective January 1, 2009, the Company reclassified the fair value of the Series A and Series B Warrants from equity
to liability as if these warrants were treated as a derivative liability since their date of issue on October 31, 2008. On January 1,
2009, the Company recognized a cumulative-effect adjustment of $2,306,688, and $1,676,778 was reclassified from beginning
retained earnings and $629,910 from additional paid-in capital to a long-term warrant liability to recognize the fair value of such
warrants on such date. The fair value of these warrants increased to $2,646,855 as of June 30, 2009. As such, the Company
recognized a $340,167 loss from the change in fair value of these warrants for the six months ended June 30, 2009.

                                                                Q-7
TABLE OF CONTENTS

                                    LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THREE MONTHS ENDED JUNE 30, 2009 AND 2008
NOTE 2 — SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES – (continued)
    These 1,500,000 Series A and 250,000 Series B Warrants were initially issued in connection with the October 2008 private
placement of 6,818,182 shares of Series A preferred stock, which are further disclosed in Note 14. 250,000 Series B Warrants were
issued for business and investor relations consulting services. These warrants were not issued with the intent of effectively hedging
any future cash flow, fair value of any asset, liability or any net investment in a foreign operation. These warrants do not qualify for
hedge accounting, and as such, all future changes in the fair value of these warrants will be recognized in statement of income until
such time as the warrants are exercised or expire. These warrants do not trade in an active securities market, and as such, the
Company estimates the fair value of these warrants using the Black-Scholes option pricing model using the following assumptions:




                                                                                           June 30,             January 1,
                                                                                            2009                  2009
         Estimated fair value of common stock:                                       $       3.878         $        3.850
         Exercise price:                                                             $        3.50         $         3.50
         Remaining contractual life (years):                                                  4.34                   4.83
         Dividend yield:                                                                        —                      —
         Expected volatility:                                                                37.15 %                30.58 %
         Risk-free interest rate:                                                             2.22 %                 1.49 %
    The Company’s common stock is not publicly traded. The Company has determined the fair value of its common stock based
on retrospective valuations prepared consistent with the methods outlined in the American Institute of Certified Public Accountants
Practice Aids, ― Valuation of Privately-Held Company Equity Securities Issued as Compensation ‖ and based on a discounted
future cash flow approach that used the Company’s estimates of revenue, driven by assumed market growth rates, and estimated
costs as well as appropriate discount rates.
    As the Company’s stock is not publicly traded, historical volatility information is not available. In accordance with SFAS No.
123R, ― Accounting for Stock-Based Compensation ‖, the Company identified five similar public entities for which share and
option price information was available, and considered the historical volatilities of those public entities’ share prices in calculating
the expected volatility appropriate to the Company (i.e. the calculated value). The risk-free rate of return reflects the interest rate
for United States Treasury Note with similar time-to-maturity to that of the Warrants.
    In September 2006, the FASB issued SFAS No. 157, ―Fair Value Measurements‖ (―SFAS 157‖), which defines fair value,
establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. SFAS 157
does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value
hierarchy used to classify the source of the information. In February 2008, the FASB deferred the effective date of SFAS 157 by
one year for certain non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually). On January 1, 2008, the Company adopted the provisions of SFAS
157, except as it applies to those nonfinancial assets and nonfinancial liabilities for which the effective date has been delayed by
one year, which the Company adopted on January 1, 2009. The adoption of SFAS 157 did not have a material effect on the
Company’s financial position or results of operations. The book values of cash, accounts receivable, accounts payable and
short-term bank loans approximate their respective fair values due to the short-term nature of these instruments.
    The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own
assumptions (unobservable inputs). The hierarchy consists of three levels:
   •    Level one — Quoted market prices in active markets for identical assets or liabilities;

                                                                Q-8
TABLE OF CONTENTS

                                   LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           FOR THREE MONTHS ENDED JUNE 30, 2009 AND 2008
NOTE 2 — SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES – (continued)
  •  Level two — Inputs other than level one inputs that are either directly or indirectly observable; and
   •    Level three — Unobservable inputs developed using estimates and assumptions, which are developed by the reporting
        entity and reflect those assumptions that a market participant would use.
    Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company
evaluates its hierarchy disclosures each quarter. Assets and liabilities measured at fair value on a recurring basis are summarized as
follows (unaudited):




                                                                   Fair value measurement using              Fair value at
                                                                        inputs considered as                   June 30,
                                                                                                                 2009
                                                             Level 1    Level 2           Level 3

        Liabilities:
          Derivative instruments – Warrants                 $ —        $ —         $       2,646,855     $       2,646,855
        Total                                               $ —        $ —         $       2,646,855     $       2,646,855

    A discussion of the valuation techniques used to measure fair value for the warrants listed above is provided above in this
footnote. There were no assets or liabilities measured at fair value on a non-recurring basis during the six months ended June 30,
2009.
    Effective January 1, 2009, the first day of fiscal 2009, the Company adopted FASB Staff Position Financial Accounting
Standard 142-3 (―FSP FAS 142-3‖), ―Determination of the Useful Life of Intangible Assets.‖ FSP FAS 142-3 amends the factors
that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized
intangible asset under SFAS No. 142 (―SFAS 142‖), ―Goodwill and Other Intangible Assets.‖ The Company will apply FSP FAS
142-3 prospectively to intangible assets acquired subsequent to the adoption date, January 1, 2009. The adoption of FSP FAS 142-3
had no impact on the Company’s Condensed Consolidated Financial Statements.
    Effective January 1, 2009, the Company adopted, Statement of Financial Accounting Standards No. 161 (―SFAS 161‖),
―Disclosures about Derivative Instruments and Hedging Activities,‖ which amends and expands Statement of Financial Accounting
Standards No. 133, ―Accounting for Derivative Instruments and Hedging Activities.‖ SFAS 161 requires tabular disclosure of the
fair value of derivative instruments and their gains and losses. SFAS 161 also requires disclosure regarding the credit-risk related
contingent features in derivative agreements, counterparty credit risk, and strategies and objectives for using derivative instruments.
The adoption of SFAS 161 did not have a material impact on the Company’s Condensed Consolidated Financial Statements.
   Effective January 1, 2009, the Company adopted Statement of Financial Accounting Standards No. 160 (―SFAS 160‖),
―Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51.‖ SFAS 160 amends Accounting
Research Bulletin No. 51, ―Consolidated Financial Statements‖ to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a
subsidiary, which is sometimes referred to as minority interest, is an ownership interest in the consolidated entity that should be
reported as equity in the Company’s Consolidated Financial Statements. Among other requirements, this Statement requires that
the consolidated net income attributable to the parent and the noncontrolling interest be clearly identified and presented on the face
of the consolidated income statement. The adoption of SFAS 160 did not have a material impact on the Company’s Condensed
Consolidated Financial Statements.
   Effective January 1, 2009, the Company adopted Statement of Financial Accounting Standards No. 141 (revised 2007) (―SFAS
141R‖), ―Business Combinations.‖ SFAS 141R establishes principles and requirements for how an acquirer recognizes and
measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in an
acquiree and the goodwill acquired. The Company will apply SFAS 141R to any business combinations subsequent to adoption.

                                                                Q-9
TABLE OF CONTENTS

                                   LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           FOR THREE MONTHS ENDED JUNE 30, 2009 AND 2008
NOTE 2 — SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES – (continued)
    In April 2009, the FASB issued FASB Staff Position Financial Accounting Standard 141R-1 (―FSP FAS 141R-1‖),
―Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies.‖ FSP FAS
141R-1 amends SFAS 141R to require that an acquirer recognize at fair value, at the acquisition date, an asset acquired or a liability
assumed in a business combination that arises from a contingency if the acquisition-date fair value of that asset or liability can be
determined during the measurement period. If the acquisition-date fair value of such an asset acquired or liability assumed cannot
be determined, the acquirer should apply the provisions of SFAS 5, ―Accounting for Contingencies‖, to determine whether the
contingency should be recognized at the acquisition date or after such date. FSP FAS 141R-1 is effective for business combinations
whose acquisition date is on or after the first reporting period beginning after December 15, 2008. Accordingly, the Company
adopted this FSP during the first quarter of 2009. The adoption of FSP FAS 141R-1 did not have a material impact on the
Company’s Condensed Consolidated Financial Statements.
New accounting pronouncement to be adopted
    In December 2008, the FASB issued FASB Staff Position FAS 132(R)-1 (―FSP FAS 132(R)-1‖), ―Employers’ Disclosures
about Postretirement Benefit Plan Assets.‖ The FSP expands the disclosure requirements about plan assets for defined benefit
pension plans and postretirement plans. The Company is required to adopt FSP FAS 132(R)-1 in the fourth quarter of 2009. The
Company is currently assessing the impact that this FSP may have on the disclosures in the Company’s Consolidated Financial
Statements.
    In April 2009, the FASB issued FASB Staff Position No. FAS 107-1 and APB 28-1 (―FSP FAS 107-1 and APB 28-1‖),
―Interim Disclosures about Fair Value of Financial Instruments.‖ The FSP amends SFAS 107, ―Disclosure about Fair Value of
Financial Instruments,‖ and Accounting Principles Board Opinion No. 28, ―Interim Financial Reporting,‖ to require disclosures
about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial
statements. The Company is required to adopt FSP FAS 107-1 and APB 28-1 in the second quarter of 2009. The Company does not
currently believe that adopting this FSP will have a material impact on the Company’s Consolidated Financial Statements.
    In April 2009, the FASB issued FASB Staff Position No. FSP FAS 115-2 and FAS 124-2 (―FSP FAS 115-2 and FAS 124-2‖),
―Recognition and Presentation of Other-Than-Temporary Impairments.‖ The FSP amends the other-than-temporary impairment
guidance in U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure
of other-than-temporary impairments on debt and equity securities in the financial statements. This FSP does not amend existing
recognition and measurement guidance related to other-than-temporary impairments of equity securities. The Company is required
to adopt FSP FAS 115-2 and FAS 124-2 in the second quarter of 2009. The Company does not currently believe that adopting this
FSP will have a material impact on the Company’s Consolidated Financial Statements.
    In April 2009, the FASB issued FASB Staff Position No. FAS 157-4 (―FSP FAS 157-4‖), ―Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not
Orderly.‖ The FSP provides additional guidance for estimating fair value in accordance with FASB Statement No. 157, ―Fair Value
Measurements‖, when the volume and level of activity for the asset or liability have significantly decreased. This FSP also includes
guidance on identifying circumstances that indicate a transaction is not orderly. The Company is required to adopt FSP FAS 157-4
in the second quarter of 2009. The Company does not currently believe that adopting this FSP will have a material impact on the
Company’s Consolidated Financial Statements.
   Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require
adoption until a future date are not expected to have a material impact on the Company’s Consolidated Financial Statements upon
adoption.

                                                               Q-10
TABLE OF CONTENTS

                                  LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           FOR THREE MONTHS ENDED JUNE 30, 2009 AND 2008
NOTE 3 — RESTRICTED CASH
   As of June 30, 2009 and December 31, 2008, $700,000 and $1,750,000 in total was held in escrow arising from agreements in
conjunction with the Private Placement, which are further disclosed in Notes 14 and 21.
   Restricted cash consisted of the following:




                                                                                June 30,             December 31,
                                                                                 2009                    2008
                                                                              (Unaudited)             (Audited)
        Guarantee fund for financing agreement                           $              —      $             800,000
        Special fund for listing                                                   500,000                   750,000
        Special fund for employee pensions                                         200,000                   200,000
                                                                         $         700,000     $           1,750,000

NOTE 4 — NOTES RECEIVABLE, NET
    Notes receivable arose from sale of goods and represented commercial drafts issued by customers to the Company that were
guaranteed by bankers of the customers. Notes receivable were interest-free with maturity dates of 3 or 6 months from date of
issuance.
   Notes receivable consisted of the following:
                                                                                June 30,             December 31,
                                                                                 2009                    2008
                                                                              (Unaudited)             (Audited)
        Notes receivable                                                  $            —        $          321,892
        Less: Allowance for doubtful debts                                             —                        —
        Notes receivable, net                                             $            —        $          321,892

NOTE 5 — ACCOUNTS RECEIVABLE, NET
  Accounts receivable consisted of the following:




                                                                           June 30,                 December 31,
                                                                            2009                        2008
                                                                         (Unaudited)                 (Audited)
        Accounts receivable                                          $        7,845,743     $            5,042,739
        Less: Allowance for doubtful debts                                           —                          —
        Accounts receivable, net                                     $        7,845,743     $            5,042,739

NOTE 6 — OTHER RECEIVABLES AND CURRENT ASSETS
  Other receivables and current assets consisted of the following:
                                                                June 30,         December 31,
                                                                 2009                2008
                                                              (Unaudited)         (Audited)
Other receivables                                         $         95,050   $        —
Recoverable value added tax                                        517,021            —
Less: Allowance for valuation and doubtful debts                        —             —
                                                          $        612,071   $        —


                                                   Q-11
TABLE OF CONTENTS

                                 LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

               NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                          FOR THREE MONTHS ENDED JUNE 30, 2009 AND 2008
NOTE 7 — INVENTORIES
  Inventories by major categories are summarized as follows:




                                                                         June 30,           December 31,
                                                                          2009                  2008
                                                                       (Unaudited)           (Audited)
        Raw materials                                          $            3,952,625   $        160,234
        Work in progress                                                      649,936             29,013
        CCA wire                                                            1,176,726            397,691
        Refined copper                                                      2,142,164                 —
                                                               $            7,921,451   $        586,938

NOTE 8 — INTANGIBLE ASSETS




                                                                           June 30,         December 31,
                                                                            2009                2008
                                                                         (Unaudited)         (Audited)
        Computer software, cost                                    $          7,026     $        7,023
        Less: Accumulated amortization                                       (3,513 )           (2,809 )
                                                                                $         3,513        $         4,214

   Amortization expenses for the six months ended June 30, 2009 and 2008 were $702 and $679.
NOTE 9 — PREPAID LAND USE RIGHTS
    The Company has recorded as prepaid land use rights the lump sum payments paid to acquire long-term interest to utilize the
land underlying the Company’s buildings and production facility. This type of arrangement is common for the use of land in the
PRC. The prepaid land use rights are expensed on the straight-line basis over the term of the land use rights of 50 years. As of June
30, 2009, the Company has obtained the relevant PRC property ownership and land use rights certificates.
    The amount expensed on prepaid land use rights for the six months ended June 30, 2009 and 2008 were $86,199 and $34,684,
respectively. The estimated expense of the prepaid land use rights over each of the next five years and thereafter will be $172,421.
NOTE 10 — BUILDINGS, MACHINERY AND EQUIPMENT, NET
  Buildings, machinery and equipment, net consisted of the following:




                                                                             June 30,                   December 31,
                                                                              2009                          2008
                                                                           (Unaudited)                   (Audited)
        Cost:
          Buildings                                                $           7,966,216          $          1,367,189
          Office equipment                                                       272,707                        61,767
          Motor vehicles                                                         256,922                       137,423
          Machinery                                                            9,244,297                     7,834,657
        Total cost                                                            17,740,142                     9,401,036
        Less: Accumulated depreciation                                        (2,478,453 )                  (1,960,093 )
        Net book value                                             $          15,261,689          $          7,440,943

   Depreciation expenses for the six months ended June 30, 2009 and 2008 were $517,518 and $311,257, respectively.

                                                               Q-12
TABLE OF CONTENTS

                                  LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           FOR THREE MONTHS ENDED JUNE 30, 2009 AND 2008
NOTE 11 — CONSTRUCTION IN PROGRESS
  Construction in progress consisted of the following:




                                                                              June 30,                December 31,
                                                                               2009                       2008
                                                                            (Unaudited)                (Audited)
        Construction of equipment                                  $               354,386        $         1,295,315
        Construction of buildings                                                  747,736                  4,722,626
                                                                   $             1,102,122        $         6,017,941

NOTE 12 — SHORT TERM BANK LOANS
  Short-term bank loans consisted of the following:




                                                                                      June 30,            December 31,
                                                                                       2009                   2008
                                                                                    (Unaudited)            (Audited)
        Bank loan granted by Bank of Jiangsu, with an interest rate of          $     2,195,583       $      2,194,715
          6.66% p.a., guaranteed by a related company, Danyang Tianyi
          Telecommunication Co., Ltd. (―Tianyi Telecom‖), and maturing on
  November 18, 2009
Bank loan granted by Agriculture Bank of China, with interest rates            731,861         731,572
  ranging from 6.903% p.a. to 9.711% p.a., guaranteed by Tianyi
  Telecom and maturing on August 21, 2009
Bank loan granted by Agriculture Bank of China, Danyang Branch with            761,135              —
  an interest rate of 5.31% p.a., guaranteed by Tianyi Telecom. The
  bank loan will mature on April 15, 2010, with interest due on the 20
  th
     day of each month and principal
Bank loan granted by Agriculture Bank of China, Danyang Branch with            702,586              —
  an interest rate of 5.31% p.a., guaranteed by Tianyi Telecom. The
  bank loan will mature on May 21, 2010, with interest due on the 20 th
  day of each month and principal
Bank loan granted by China Construction Bank with interest rates                    —         1,170,514
  ranging from 6.372% p.a. to 8.964% p.a., guaranteed by Tianyi
  Telecom, matured and fully repaid on March 6, 2009.
Bank loan granted by Agriculture Bank of China, with interest rates                 —          760,835
  ranging from 6.903% p.a. to 9.711% p.a., guaranteed by
  Tianyi Telecom, matured and fully repaid on April 15, 2009
Bank loan granted by Agriculture Bank of China, with interest rates                 —          702,309
  ranging from 6.903% p.a. to 9.711% p.a., guaranteed by
  Tianyi Telecom and matured and fully repaid on May 20, 2009
Bank loan granted by China Construction Bank, with interest rates                   —          585,257
  ranging from 5.841% p.a. to 8.217% p.a., guaranteed by
  Tianyi Telecom, and matured and fully repaid on April 29, 2009
                                                                          $   4,391,165   $   6,145,202


                                                     Q-13
TABLE OF CONTENTS

                                    LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           FOR THREE MONTHS ENDED JUNE 30, 2009 AND 2008
NOTE 13 — OTHER PAYABLES AND ACCRUALS
  Other payables and accruals consisted of the following:




                                                                                       June 30,             December 31,
                                                                                        2009                    2008
                                                                                     (Unaudited)             (Audited)
        Accrued staff costs                                                     $         111,512       $         380,472
        Other taxes payable                                                                66,608                 335,152
        Other payables                                                                    394,715                 115,120
                                                                                $         572,835       $         830,744

NOTE 14 — SHAREHOLDERS’ EQUITY
    The Company’s Articles of Incorporation grant the Board of Directors the authority, without any further vote or action by
stockholders, to issue preferred stock in one or more series, fix the number of shares constituting the series and establish the
preferences, limitations and relative rights, including dividend rights, dividend rate, voting rights, terms of redemption, redemption
price or prices, redemption rights and liquidation preferences of the shares of the series.
Series A Redeemable Convertible Preferred Stock
    On October 31, 2008, the Company entered into and completed a securities purchase agreement (―Private Placement‖) with
certain accredited investors (the ―Investors‖) for the issuance and sale by the Company in a private placement of 6,818,182 shares
of Series A Convertible Preferred Stock (―Preferred Shares‖) and Series A warrants to purchase 1,500,000 shares of Common
Stock. The Company received $13,656,538 in proceeds from this Private Placement after paying fees and expenses.
   The principal terms of the Preferred Shares are as follows:
    Conversion: At any time on or after our issuance of Preferred Shares, each share of Preferred Shares will be convertible, at the
option of the holder thereof (subject to certain ownership percentage limitations set forth in the Certificate of Designations), into
one share of Common Stock, subject to adjustment from time to time, upon the occurrence of certain events described below. The
rate of conversion (the ―Conversion Rate‖) is determined by dividing $2.20 per share (the ―Liquidation Preference Amount‖) by the
conversion price of $2.20 (the ―Conversion Price ―), subject to adjustment as discussed below.
    In the event the Company does not timely convert and deliver Preferred Shares into shares of Common Stock after request of a
holder to so convert, and the holder must purchase shares of Common Stock, in excess of the price for which the holder sold such
shares, the Company must make a payment in cash to the holder in the amount of the excess paid and the Company will not honor
the conversion request and will reinstate the number of Preferred Shares for which such conversion was not honored.
    If at any time, the Company consummate a bona fide offering of shares of Common Stock of at least $5,000,000, all
outstanding Preferred Shares shall automatically convert to shares of Common Stock (subject to certain ownership percentage
limitations set forth in the Certificate of Designations of the Series A Preferred Shares).
    Liquidation Rights: The Preferred Shares will, in the event of any distributions or payments in the event of the voluntary or
involuntary liquidation, dissolution or winding up of the Company rank senior to Common Stock and to any other class or series of
stock which may be issued not designated as ranking senior to or pari passu with the Preferred Shares in respect of the right to
participate in distributions or payments upon any liquidation, dissolution or winding up of the Company. In the event of any
voluntary or involuntary liquidation, dissolution or winding up, the holders of shares of Preferred Shares will be entitled to receive,
out of assets available for distribution to stockholders, an amount equal to the Liquidation Preference Amount before

                                                                Q-14
TABLE OF CONTENTS

                                    LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THREE MONTHS ENDED JUNE 30, 2009 AND 2008
NOTE 14 — SHAREHOLDERS’ EQUITY – (continued)
any payment shall be made or any assets distributed to the holders of Common Stock or any stock which ranks junior to the
Preferred Shares. In the event of a liquidation, dissolution or winding up of the Company, the rights of holders of Preferred Shares
to convert such shares into shares of Common Stock shall terminate prior to the date fixed for the payment to the holders of
Preferred Shares of any amounts distributable to them in the event of any such liquidation, dissolution or winding up.
    Redemption Rights: None of Preferred Shares may be redeemed without the express written consent of each holder of such
shares. If the Company cannot issue shares of Common Stock upon a conversion because the Company does not have a sufficient
number of shares of Common Stock authorized and available, then with respect to the unconverted Preferred Shares, the holder of
such Preferred Shares, solely at such holder’s option, may require the Company to redeem from such holder those Preferred Shares
with respect to which the Company is unable to issue Common Stock in accordance with such holder’s conversion notice at a price
per share payable in cash equal to one hundred thirty percent of the Liquidation Preference Amount.
   Simultaneously with the occurrence of any merger, consolidation or similar capital reorganization of Common Stock, each
holder of Preferred Shares shall have the right, at such holder’s option, to require the Company to redeem all or a portion of such
holder’s Preferred Shares at a price per share equal to one hundred ten percent of the Liquidation Preference Amount.
    Dividend Rights: Preferred Shares will not be entitled to receive dividends unless the Company pays dividends to holders of
our Common Stock. If the Company pays dividends to holders of Common Stock, holders of Preferred Shares will be entitled to
receive, on each share of Preferred Shares held by them, dividends of equal amount or value as dividends that would have been
payable on the number of underlying shares of Common Stock into which such Preferred Shares would be convertible, if such
shares of Preferred Shares had been converted on the date for determination of holders of Common Stock entitled to receive such
dividends.
    Adjustments to Conversion Price, Conversion Rate and Other Similar Adjustments: The number of shares of Common Stock
into which the Series A Preferred shall be converted, or the Conversion Price, as the case may be, shall be subject to upward or
downward adjustment from time to time, as applicable, in the event of a (i) combination, stock split, recapitalization or
reclassification of the Common Stock, (ii) merger, consolidation or similar capital reorganization of the Common Stock, (iii)
distribution of stock dividends or (iv) issuance of additional shares of Common Stock or securities convertible into Common Stock
at a price less than $2.20.
    Voting Rights: Holders of Preferred Shares shall vote together as a separate class on all matters which impact the rights, value,
or ranking of the Preferred Shares. Holders of Preferred Shares shall vote on an ―as converted‖ basis, together with holders of
Common Stock, as a single class, in connection with any proposal submitted to stockholders to: (i) increase the number of
authorized shares of capital stock, (ii) to approve the sale of any of capital stock, (iii) adopt an employee stock option plan, or (iv)
effect any merger, consolidation, sale of all or substantially all of assets, or related consolidation or combination transaction.
   Conversion Restriction: Holders of Preferred Shares are restricted from converting to Common Stock if the number of shares of
Common Stock to be issued pursuant to such Conversion would cause the number of shares of Common Stock owned by such
holder and its affiliates at such time to equal or exceed 9.9% of the then issued and outstanding shares of Common Stock; provided,
however, that upon a holder of the Series A Preferred providing the Company with sixty-one (61) days notice that such holder
wishes to waive this restriction such holder may be entitled to waive this restriction.
Accounting for Preferred Shares
    Pursuant to the Securities Escrow Agreement entered into by the Company as discussed below, if the Company fails to achieve
certain net income thresholds for fiscal years 2008 and/or 2009, additional shares of

                                                                 Q-15
TABLE OF CONTENTS

                                   LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           FOR THREE MONTHS ENDED JUNE 30, 2009 AND 2008
NOTE 14 — SHAREHOLDERS’ EQUITY – (continued)
the Company’s common stock would be released to the holders of the Preferred Shares. As a result, the holders of the Preferred
Shares could acquire a majority of the voting power of the Company’s outstanding common stock. In such a situation, the
Company would not be able to control the approval of ―any merger, consolidation or similar capital reorganization of its common
stock‖, i.e. events which could trigger the right of Preferred Shares holder to request for redemption. EITF D-98, ―Classification
and Measurement of Redeemable Securities‖, provides that preferred securities that are redeemable for cash are to be classified
outside of permanent equity if they are redeemable upon the occurrence of an event that is not solely within the control of the
issuer. Therefore, the Preferred Shares have been classified out of permanent equity in accordance with EITF D-98. For the year
ended December 31, 2008, the Company’s net income was $11,701,879 which achieved 95% of the 2008 net income threshold and,
according to the terms of the Securities Escrow Agreement, all of the escrow shares will continue to be held in escrow and no
Preferred Share has been released to the holders of the Preferred Shares. When the 2009 net income threshold is also achieved, the
Preferred Shares will be reclassified to permanent equity.
Series A Warrants
    In conjunction with the issuance of the Preferred Shares, the Company issued Series A Warrants to purchase up to 1,500,000
shares of Common Stock at an exercise price of $3.50 per share issued and outstanding. The Series A Warrants have a term of
exercise expiring 5 years from October 31, 2008. The Series A Warrants at the option of the holder, may be exercised by cash
payment of the exercise price or, commencing 18 months following the closing of the Private Placement, if the per share market
value of one share of Common Stock is greater than the exercise price and a registration statement under the Securities Act of 1933,
as amended, covering the shares of Common Stock underlying the Series A Warrants is not then declared ineffective by the SEC, in
lieu of exercising the Series A Warrants by payment of cash, a holder may exercise the Series A Warrant by a cashless exercise by
surrender of the Series A Warrant, in which event the Company will issue to the holder a number of shares of our Common Stock
computed using the following formula:
              Where            X=       the number of shares of Common Stock to be issued to the holder.
                               Y=       the number of shares of Common Stock issuable upon exercise of the Series
                                        A Warrant in accordance with the terms of the Series A Warrant by means of
                                        a cash exercise rather than a cashless exercise.
                               A=       the Exercise Price.
                               B=       the per share market value of one share of Common Stock on the trading day
                                        immediately preceding the date of such election.
   The Company will not receive any additional proceeds to the extent that the Series A Warrants are exercised by cashless
exercise.
    The exercise price and number of shares of our Common Stock issuable upon exercise of the Series A Warrants may be
adjusted in certain circumstances, including in the event of a stock dividend, or our recapitalization, reorganization, merger or
consolidation and the issuance of rights to purchase additional shares of our Common Stock or to receive other securities
convertible into additional shares of Common Stock.

                                                                Q-16
TABLE OF CONTENTS

                                   LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           FOR THREE MONTHS ENDED JUNE 30, 2009 AND 2008
NOTE 14 — SHAREHOLDERS’ EQUITY – (continued)
    For a period of two years following the original issue date of the Series A Warrants (the ―Full Ratchet Period‖), in the event the
Company issues any additional shares of Common Stock or securities exercisable, convertible or exchangeable for Common Stock
at a price per share less than the exercise price then in effect or without consideration, then the exercise price upon each such
issuance will be adjusted to a price equal to the consideration per share paid for such additional shares of Common Stock.
   No fractional shares will be issued upon exercise of the Series A Warrants. If, upon exercise of a Series A Warrant, a holder
would be entitled to receive a fractional interest in a share, the Company will pay to the holder cash equal to such fraction
multiplied by the then fair market value of one full share.
    Pursuant to the terms of the Series A Warrants, the Company will not effect the exercise of any Series A Warrant, and no
person who is a holder of any Series A Warrant has the right to exercise the Series A Warrant, to the extent that after giving effect
to such exercise, such person would beneficially own in excess of 9.9% of the then outstanding shares of our Common Stock.
However, the holder is entitled to waive this cap upon 61 days notice to the Company.
    The Company has the right to redeem up to 9.9% of the Series A Warrants at a price equal to $0.01 per share of Common Stock
underlying such warrants if (i) our Common Stock is traded on a national securities exchange, (ii) the daily volume weighted
average price of our Common Stock is above $8.87 for 30 consecutive trading days ending on the date of the notice of redemption,
and (iii) the average daily trading volume for the trading period is greater than 300,000 shares per day; provided, that all shares
underlying such Series A Warrants are registered pursuant to an effective registration statement and the Company simultaneously
calls all of the Series A Warrants on the same terms. The Company will have the right, but not the obligation, to redeem the Series
A Warrants at any time, and from time to time, provided that at such time, the foregoing conditions have been met, but in no event
can the Company redeem the Series A Warrants more than once in any thirty (30) trading day period.
Series B Warrants
    In connection with the Private Placement, Broadband Capital Management, LLC (―Broadband‖) acted as the Company’s
financial advisor and placement agent. Broadband received Series B warrants to purchase 250,000 shares of the Company’s
Common Stock at an exercise price per share of $3.50.
    On October 31, 2008, the Company issued Series B Warrants to purchase 250,000 shares of the Registrant’s Common Stock at
an exercise price of $3.50 to Penumbra Worldwide Ltd. (―Penumbra‖). Penumbra is not a broker dealer and the Series B Warrants
were not issued as compensation for underwriting activities, but as compensation for business and investor relations consulting
services performed by Penumbra.
    The Series B Warrants have a term of exercise expiring 5 years from October 31, 2008. The Series B Warrants, at the option of
the holder, may be exercised by cash payment of the exercise price or by ―cashless exercise‖. The Company will not receive any
additional proceeds to the extent that warrants are exercised by cashless exercise.

                                                                Q-17
TABLE OF CONTENTS

                                   LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           FOR THREE MONTHS ENDED JUNE 30, 2009 AND 2008
NOTE 14 — SHAREHOLDERS’ EQUITY – (continued)
    If the per share market value of one share of Common Stock is greater than the exercise price and at the time of election, the
average trading volume of Common Stock exceeds 100,000 shares for the immediately preceding 30 trading days, in lieu of
exercising the Series B Warrant by payment of cash, the holder may exercise the Series B Warrant by cashless exercise by
surrendering the Series B Warrant, in which event the Company will issue to the holder a number of shares of our Common Stock
computed using the following formula:




             Where:             X=      the number of shares of Common Stock to be issued to the Holder.
                                Y=      the number of shares of Common Stock issuable upon exercise of the Series
                                        B Warrant in accordance with the terms of the Series B Warrant by means
                                        of a cash exercise rather than a cashless exercise.
                                A=      the exercise price.
                                B=      the volume weighted average price of the Common Stock for the 30 trading
                                        day period immediately preceding the date of such election.
    The exercise price and number of shares of Common Stock issuable upon exercise of the warrants may be adjusted in certain
circumstances, including in the event of a stock dividend, or our recapitalization, reorganization, merger or consolidation and the
issuance of rights to purchase additional shares of Common Stock or to receive other securities convertible into additional shares of
Common Stock.
    For a period of two years following the original issue date of the Series B Warrant (the ―Weighted Average Period‖), in the
event the Company issues any additional shares of Common Stock or securities exercisable, convertible or exchangeable for
Common Stock at a price per share less than the exercise price then in effect or without consideration, then the exercise price then
in effect shall be multiplied by a fraction (i) the numerator of which shall be equal to the sum of (x) the number of shares of
outstanding Common Stock immediately prior to the issuance of such additional shares of Common Stock plus (y) the number of
shares of Common Stock (rounded to the nearest whole share) which the aggregate consideration price per share paid for the total
number of such additional shares of Common Stock so issued would purchase at a price per share equal to the exercise price then in
effect and (ii) the denominator of which shall be equal to the number of shares of outstanding Common Stock immediately after the
issuance of such additional shares of Common Stock.
    No fractional shares will be issued upon exercise of the warrants. If, upon exercise of a warrant, a holder would be entitled to
receive a fractional interest in a share, the Company will pay to the holder cash equal to such fraction multiplied by the then fair
market value of one full share.
Allocation of Proceeds from Private Placement
    In accordance with EITF 00-27, ―Application of Issue No. 98-5 to Certain Convertible Instruments‖, the proceeds from the
Private Placement were first allocated between the Preferred Shares and the warrants issued in connection with the Private
Placement based upon their estimated fair values as of the closing date, resulting in an aggregate amount of $539,910 being
allocated to the Series A Warrants and the 250,000 Series B Warrants issued to Broadband.

                                                                Q-18
TABLE OF CONTENTS

                                   LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           FOR THREE MONTHS ENDED JUNE 30, 2009 AND 2008
NOTE 14 — SHAREHOLDERS’ EQUITY – (continued)
    Then, the fair value of the embedded conversion feature of the Preferred Shares of $1,002,115 was calculated using EITF 98-5
intrinsic value model in accordance with EITF 00-27, ―Application of Issue No. 98-5 to Certain Convertible Instruments‖, limited
to the amount of the proceeds allocated to the convertible instrument. The intrinsic value of the beneficial conversion feature was
calculated by comparing the effective conversion price, which was determined based on the proceeds from the Private Placement
allocated to the convertible Preferred Shares, and the fair value of the Company’s common stock of $2.26 at the commitment date,
which was determined based on retrospective valuations prepared consistent with the methods outlined in the American Institute of
Certified Public Accountants Practice Aids, ― Valuation of Privately-Held Company Equity Securities Issued as Compensation ‖
and based on a discounted future cash flow approach that used the Company’s estimates of revenue, driven by assumed market
growth rates, and estimated costs as well as appropriate discount rates. The fair value of $1,002,115 of the beneficial conversion
feature has been recognized as a reduction to the carrying amount of the convertible Preferred Shares and an addition to paid-in
capital.
   The following table sets out the accounting for the Preferred Shares:




        Proceeds of the Private Placement (net of fees and expenses)                               $        13,656,538
        Allocation of proceeds to Series A Warrants and 250,000 Series B Warrants                             (539,910 )
        Allocation of proceeds to beneficial conversion feature                                             (1,002,115 )
        Amortization of discount resulting from the accounting for a beneficial conversion                   1,002,115
          feature, deemed analogous to a dividend to the Preferred Shares holders

        Series A Convertible Preferred Stock at December 31, 2008 and June 30, 2009                $        13,116,628

NOTE 15 — SHARE-BASED COMPENSATION
Make Good Escrow Agreement
     In conjunction with the Private Placement, the Company also entered into a make good escrow agreement with the Investors
(the ―Securities Escrow Agreement‖), pursuant to which Magnify Wealth Enterprise Limited (―Magnify Wealth‖) initially placed
6,818,182 shares of Common Stock (equal to 100% of the number of shares of Common Stock underlying the Investor Shares) (the
―Escrow Shares‖) into an escrow account. The Escrow Shares are being held as security for the achievement of $12 million in
audited net income and $0.50 earnings per share for the fiscal year 2008 (the ―2008 Performance Threshold‖) and $18 million in
audited net income and $0.76 earnings per share for the fiscal year 2009 (the ―2009 Performance Threshold‖). The calculation of
earnings per share of $0.76 for the fiscal year 2009 shall exclude up to $5,000,000 in shares of Common Stock issued in a bona fide
initial public offering, however, any shares issued in excess of $5,000,000 shall be included in the calculation of earnings per share
for the fiscal year 2009. If the Company achieves the 2008 Performance Threshold and the 2009 Performance Threshold, the
Escrow Shares will be released back to Magnify Wealth. If either the 2008 Performance Threshold or 2009 Performance Threshold
is not achieved, an aggregate number of Escrow Shares (such number to be determined by the formula set forth in the Securities
Escrow Agreement) will be distributed to the Investors, based upon the number of Investor Shares (on an as converted basis)
purchased in the Private Placement and still beneficially owned by such Investor, or such successor, assign or transferee, at such
time. If less than 50% of the 2008 or 2009 Performance threshold is achieved, based on the formula set forth in the Securities
Escrow Agreement, a certain amount of Escrow Shares may be released. If the Company achieves at least 50% but less than 95% of
the 2008 or 2009 performance thresholds, based on the formula set forth in the Securities Escrow Agreement, a certain number of
Escrow shares may be released. If the Company achieves at least 95% of either the 2008 or 2009 performance thresholds, the
Escrow shares will continue to be held in escrow. If any Investor transfers Investor Shares purchased pursuant to the Purchase
Agreement, the rights to the Escrow Shares shall similarly transfer to such transferee, with no further action required by the
Investor, the

                                                             Q-19
TABLE OF CONTENTS

                                    LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THREE MONTHS ENDED JUNE 30, 2009 AND 2008
NOTE 15 — SHARE-BASED COMPENSATION – (continued)
transferee or the Company. Pursuant to the Securities Escrow Agreement, if any Escrow Shares are delivered to Investors as a
result of the Company’s failure to fully achieve the 2008 Performance Thresholds, Magnify Wealth shall deliver that number of
additional shares of Common Stock as is necessary to maintain 100% of the number of original Escrow Shares in the escrow
account at all times. With respect to the 2008 and 2009 performance thresholds, net income shall be defined in accordance with US
GAAP and reported by us in the Company’s audited financial statements for each of 2008 and 2009, plus any amounts that may
have been recorded as charges or liabilities on the 2008 and 2009 audited financial statements, respectively, as a result of (i) the
Private Placement, including without limitation, as a result of the issuance and/or conversion of the Investor Shares, (ii) the release
of the Escrow Shares to the Magnify Wealth pursuant to the terms of the Escrow Agreement, (iii) the issuance of ordinary shares
held by the sole shareholder of Magnify Wealth to Mr. Jianhua Zhu, our Chairman and Chief Executive Officer, upon the exercise
of options granted to Mr. Zhu by shareholders of Magnify Wealth, as of the date thereof.
    According to the Accounting Interpretation and Guidance of the staff of the SEC, the placement of shares in escrow is viewed
as a recapitalization similar to a reverse stock split. The agreement to release the shares upon achievement of certain criteria is
presumed to be a separate compensatory arrangement with the Company. Accordingly, when the Escrow Shares are released back
to Magnify Wealth, an expense equal to the amount of the grant date fair value of $2.26 per share of the Company’s common stock
as of October 31, 2008, or the date of the Securities Escrow Agreement will be recognized in the Company’s financial statements in
accordance with SFAS No. 123R, ―Accounting for Stock-Based Compensation‖. Otherwise, if the net income threshold is not met
and the Escrow Shares are released to the investors instead, it will be accounted for as a capital transaction with the investors
resulting in no income or expense being recognized in the Company’s financial statements.
    For the year ended December 31, 2008, the Company’s net income was $11,701,879 which achieved 95% of the 2008
performance threshold. All of the Escrow Shares will continue to be held in escrow and none has yet been released to either
Magnify Wealth or the Investors. As the release of the Escrow Shares requires the attainment of the performance thresholds for
both 2008 and 2009, the Company will only commence to recognize compensation expense when the Company will be able to
evaluate whether it is probable that the Company will achieve the 2009 performance threshold to provide for the ultimate release of
the Escrow Shares back to Magnify Wealth. For the six months ended June 30, 2009, no compensation expense has been
recognized on the make good arrangement. If the 2009 performance threshold is also met and all of the Escrow Shares are released
back to Magnify Wealth, a compensation expense of $15,409,091 will be recognized in fiscal year 2009.
Share-based payments awarded to employees by a shareholder
     Pursuant to a contractual arrangement between Magnify Wealth and Mr. Yang ―Roy‖ Yu, our Chief Financial Officer, Mr. Yu
is entitled to receive up to 450,000 shares of the Company’s common stock issued to Magnify Wealth in an October 31, 2008 share
exchange between Magnify Wealth and our principal stockholders that time (the ―Share Exchange‖). 112,500 of such shares were
transferred to Mr. Yu immediately upon consummation of the Share Exchange. As of June 30, 2009, the remaining 337,500 shares
have remained in an escrow account and shall be released to Mr. Yu in three equal installments of 112,500 shares issuable on the
first, second and third anniversary of the consummation of the Share Exchange. In connection with these share-based payments to
Mr. Yu, the Company recognized a compensation expense of $127,125, based on the grant-date fair value of the Company’s
common stock of $2.26 per share, for the six months ended June 30, 2009.

                                                                Q-20
TABLE OF CONTENTS

                                   LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           FOR THREE MONTHS ENDED JUNE 30, 2009 AND 2008
NOTE 16 — OTHER INCOME




                                                    For the Three Months                       For the Six Months
                                                       Ended June 30,                           Ended June 30,
                                                  2009                 2008                2009                   2008
                                               (Unaudited)          (Unaudited)         (Unaudited)           (Unaudited)
        Gain on sales of scraps            $       500,702      $          —        $       500,702       $           —
        Others                                          —              (5,706 )                  —                (5,622 )
                                           $       500,702      $      (5,706 )     $       500,702       $       (5,622 )

NOTE 17 — INCOME TAXES
    The Company’s PRC subsidiaries are subject to PRC income taxes on an entity basis on income arising in or derived from the
tax jurisdiction in which they operate, i.e. the PRC. In accordance with the relevant tax laws in the PRC, the Company’s subsidiary,
Danyang Lihua, was subject to an enterprise income tax (―EIT‖) rate of 24% on its taxable income for periods before January 1,
2008 because it is located in an economic development zone. Furthermore, Danyang Lihua is a production-based foreign
investment enterprise and was granted an EIT holiday for the two years ended December 31, 2006 and 2005 and a 50% reduction
on the EIT rate for the three years ended December 31, 2007, 2008 and 2009.
    On March 16, 2007, the PRC government promulgated a new tax law, China’s Unified Enterprise Income Tax Law (―New EIT
Law‖), which took effect from January 1, 2008. Under the New EIT Law, foreign-owned enterprises as well as domestic companies
are subject to a uniform tax rate of 25%. The New EIT Law provides for a five-year transition period from its effective date for
those enterprises which were established before the promulgation date of the New EIT Law and which were entitled to a
preferential EIT treatment. Accordingly, Danyang Lihua has continued to be entitled to the 50% reduction on its EIT rate for the
two years ended December 31, 2008 and 2009.
   The Company’s provision for income taxes consisted of:
                                                      For the three months                      For the six months
                                                         Ended June 30,                           Ended June 30,
                                                    2009                   2008              2009                  2008
                                                 (Unaudited)            (Unaudited)       (Unaudited)           (Unaudited)
        Current – PRC                       $       1,572,190       $      528,082    $      2,312,512      $      866,641
        Deferred                                           —                    —               23,401                  —
                                            $       1,572,190       $      528,082    $      2,335,913      $      866,641

NOTE 18 — EARNINGS PER SHARE
    All per share data including earnings per share has been retroactively restated to reflect the reverse acquisition on October 31,
2008 whereby the 14,025,000 shares of common stock issued by the Company (nominal acquirer) to the shareholder of Ally Profit
(nominal acquiree) are deemed to be the number of shares outstanding for the period prior to the reverse acquisition. For the period
after the reverse acquisition, the number of shares considered to be outstanding is the actual number of shares outstanding during
that period.

                                                                Q-21
TABLE OF CONTENTS

                                   LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           FOR THREE MONTHS ENDED JUNE 30, 2009 AND 2008
NOTE 18 — EARNINGS PER SHARE – (continued)
    The following table is a reconciliation of the net income and the weighted average shares used in the computation of basic and
diluted earnings per share for the periods presented:




                                                 For the three months                             For the six months
                                                   Ended June 30,                                  Ended June 30,
                                              2009                    2008                 2009                         2008
                                           (Unaudited)            (Unaudited)           (Unaudited)               (Unaudited)
        Income available to
          common shareholders:
        – Basic                       $       6,705,029      $       3,501,491      $    10,693,720          $          5,839,095

        – Diluted                     $       6,705,029      $       3,501,491      $    10,693,720          $          5,839,095

        Weighted average number
          of shares:
        – Basic                             15,000,000              14,025,000           15,000,000                    14,025,000
        – Effect of dilutive                 6,818,182                      —             6,818,182                            —
          convertible preferred
          stock
        – Diluted                           21,818,182              14,025,000           21,818,182                    14,025,000

        Net income per share
        – Basic                       $             0.45     $               0.25   $              0.71      $                 0.42

        – Diluted                     $             0.31     $               0.25   $              0.49      $                 0.42

NOTE 19 — RELATED PARTY TRANSACTIONS
(1) Sales
    For the six months ended June 30, 2009 and 2008, the Company’s sales included $169,847 and $182,020, respectively that
were made to Tianyi Telecom and Jiangsu Dongya Electronic Co., Ltd. Tianyi Telecom is owned by the brother of Ms. Yaying
Wang, our Chief Operational Officer and director and wife of the Company’s CEO.
(2) Guarantees
    At June 30, 2009, Tianyi Telecom provided guarantees for the Company’s short-term bank loans of $4,391,165 (see Note 12
above).
NOTE 20 — CONCENTRATION OF RISKS
Credit risk
    As of June 30, 2009 and December 31, 2008, 100% of the Company’s cash included cash on hand and 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, the Company has not experienced any losses in such accounts and believes it is not exposed to
any significant risks on its cash in bank accounts.
    For the six months ended June 30, 2009 and 2008, all of the Company’s sales arose in the PRC. In addition, all accounts
receivable as of June 30, 2009 and December 31, 2008 were due from customers located in the PRC.
    There was no single customer who accounted for more than 10% of the accounts receivable of the Company as of June 30,
2009. As of December 31, 2008, there was one customer who accounted for 14.4% of the accounts receivable of the Company.
Except for the aforementioned customer, there was no other single customer who accounted for more than 10% of the Company’s
accounts receivable as of December 31, 2008. There was no single customer who constituted more than 10% of the Company’s
revenue for the six months ended June 30, 2009 or 2008.

                                                               Q-22
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                                   LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           FOR THREE MONTHS ENDED JUNE 30, 2009 AND 2008
NOTE 20 — CONCENTRATION OF RISKS – (continued)
Risk arising from operations in foreign countries
     Substantially all of the Company’s operations are conducted in China. The Company’s operations are subject to various
political, economic, and other risks and uncertainties inherent in China. Among other risks, the Company’s operations are subject
to the risks of restrictions on transfer of funds; export duties, quotas, and embargoes; domestic and international customs and
tariffs; changing taxation policies; foreign exchange restrictions; and political conditions and governmental regulations.
NOTE 21 — COMMITMENTS AND CONTINGENCIES
Capital commitment




                                                                                                             June 30,
                                                                                                              2009
                                                                                                           (Unaudited)
        Contracted but not provided for:
        Purchase of machinery – within one year                                                       $         188,588
        Acquisition or construction of buildings – within one year                                              519,875
                                                                                                      $         708,463

Agreements in Conjunction with the Private Placement
    Escrow Agreements: In conjunction with the Private Placement discussed in Note 14, the Company entered into an escrow
agreement with the Investors (the ―Closing Escrow Agreement‖), pursuant to which the Investors deposited the funds in the
aggregate amount of $15,000,000 for the purchase and sale of the Investor Shares (the ―Escrowed Funds‖) into an escrow account
which was disbursed at the closing of the Private Placement. Pursuant to the Closing Escrow Agreement, $1,000,000 of the
Escrowed Funds were not released from the escrow account (the ―Held Back Escrow Funds‖) until the escrow agent received
written notice that the Company had caused Lihua Copper to fulfill one hundred percent of its registered capital obligation of
$15,000,000 no later than 90 days from the closing date, as well as comply with other covenants. Before December 31, 2008, the
registered capital of $15,000,000 of Lihua Copper was fully paid, as certified and approved by the relevant PRC business authority.
    Additionally, the Company entered into a public relations escrow agreement with the Investors (the ―Public Relations Escrow
Agreement‖), pursuant to which the Company agreed to deposit $750,000 in an escrow account (the ―Public Relations Escrowed
Funds‖). $125,000 from the Public Relations Escrowed Funds shall be released when the Company appoint a Vice President of
Investor Relations, an additional $250,000 shall be released once the Company has complied with all Nasdaq Corporate
Governance standards, and the remaining $375,000 shall be released as invoices become due for the purpose of any investor and
public relations activities. As negotiated with Vision Opportunity China L.P. (―Vision‖), the lead investor in the Private Placement
who wishes to ensure that quality firms handle certain affairs of the Company, if the Company fails to timely comply with the
foregoing obligations, or fails to fulfill a request to change the Company’s auditor upon such request by any holder of five percent
of our Common Stock in the aggregate on a fully diluted basis, or fails to hire an internal control consultant acceptable to Vision
within three months of the Closing Date, the Company will pay liquidated damages of 0.5% of the aggregate purchase price paid by
for the Investor Shares on the expiration date to comply with such covenant and for each 30 day period thereafter, up to 10% of the
aggregate purchase price, which the Investors may require that the Company pay from the Public Relations Escrowed Funds. In the
event such liquidated payments are made, the Company shall return an amount equal to the amount of liquidated damages paid,
back into the Public Relations Escrow Funds.

                                                              Q-23
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                                   LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           FOR THREE MONTHS ENDED JUNE 30, 2009 AND 2008
NOTE 21 — COMMITMENTS AND CONTINGENCIES – (continued)
    On February 11, 2009, the parties to the Escrow Agreement entered into a First Supplement to the Escrow Agreement pursuant
to which it was agreed (i) to release $800,000 of the Held Back Escrow Funds to the Company for having complied with all of the
Held Back Release Conditions within 90 days of the Closing Date, and (ii) to hold $200,000 of the Held Back Escrow Funds to
cover any contingent liabilities relating to unpaid employee social insurance and housing payments from periods prior to 2009. The
$200,000 is to be held in escrow until June 30, 2010 to cover any claims from employees relating to the unpaid costs. $800,000 was
released from escrow to the Company on March 4, 2009.
    Pursuant to the Private Placement, the Company also has an obligation to have its shares of Common Stock listed on a national
securities exchange no later than October 31, 2009 (the ―Listing Date‖). In the event that the Company does not list on a national
securities exchange in the proscribed time period and manner provided for in the Purchase Agreement, then the Ally Profit
Shareholder shall transfer 750,000 shares (the ―Listing Penalty Shares‖) of Common Stock to the Investors, with no additional
consideration due from the Investors. However, if the Company is requested by certain Investors to have its shares of Common
stock quoted on the Over-the-Counter Bulletin Board (―OTCBB Demand‖) prior to the Listing Date, the Company shall do so and
then the Company will have an additional 18 months to list on a national securities exchange. If the Company fails to comply with
the OTCBB Demand in a timely manner or, to then list on a national securities exchange within the 18-month period, the Listing
Penalty Shares shall be transferred to the Investors.
    The Company’s contingent obligations to pay liquidated damages under the Closing Escrow Agreement, Public Relations
Escrow Agreement and the Securities Purchase Agreement, and to deliver Listing Penalty Shares will be recognized and measured
separately in accordance with SFAS 5, ―Accounting for Contingencies‖, and FASB Interpretation No. 14, ―Reasonable Estimation
of the Amount of a Loss‖. Any loss recognized on a probable delivery of Listing Penalty Shares will be measured based on the
grant-date fair value of the shares as of October 31, 2008, or the date of the Securities Purchase Agreement between the Company
and certain investors. The Company believes that it has fulfilled its obligations under the agreements in conjunction with the
Private Placement up to June 30, 2009, therefore no liquidated damages have been accrued.
    Registration Rights Agreement: In connection with the Private Placement, the Company entered into a registration rights
agreement dated as of October 31, 2008 with the Investors in which the Company agreed to file on the 45 th day following the
Closing Date a registration statement with the SEC to register for resale (i) the Investor Shares, (ii) shares of our Common Stock
underlying the Series A Warrants and Series B Warrants (the ―Registrable Securities), (iii) shares of Common Stock issuable in
connection with anti-dilution provisions in the Certificate of Designation and the Series A Warrants and Series B Warrants, (iv)
Common Stock owned by the shareholders of Lihua prior to the Share Exchange, (v) shares of Common Stock issuable upon any
stock split, dividend or other distribution recapitalization or similar event and (vi) the Listing Penalty Shares and Escrow Shares
upon demand. The Company has agreed to use our best efforts to have the registration statement declared effective within 150
calendar days following the date of the Registration Rights Agreement, or 180 calendar days following the date of the Registration
Rights Agreement in the case of a full review of the initial registration statement by the SEC. The Company is required to keep the
registration statement continuously effective under the Securities Act for an effectiveness period to end on the earlier of the date
when all of the securities covered by the registration statement have been sold or the date on which such securities may be sold
without any restriction pursuant to Rule 144.
    The Company will pay liquidated damages of 1% of the dollar amount of the Preferred Shares sold in the Private Placement per
month, payable in cash, up to a maximum of 10%, if the registration statement is not filed or declared effective within the foregoing
time periods or ceases to be effective prior to the expiration of the effectiveness period. However, no liquidated damages are to be
paid with respect to any Registrable Securities that the Company is not permitted to include in the registration statement due to the
SEC’s application

                                                               Q-24
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                                    LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                           FOR THREE MONTHS ENDED JUNE 30, 2009 AND 2008
NOTE 21 — COMMITMENTS AND CONTINGENCIES – (continued)
of Rule 415. Upon the demand of an Investor or Investors owning in the aggregate at least 50% of the Listing Penalty Shares or
Escrow Shares, the Company shall file another registration statement covering those shares and any other Registrable Securities
that remain unregistered at the time of such demand.
    On April 29, 2009, the Company and the Investors entered into a waiver and consent whereby the investors agreed to waive the
requirement under the Registration Rights Agreement to have the registration statement declared effective prior to the 180 th
calendar day following the date of the Registration Rights Agreement and consented to the extension of the date by which the
Company is required to have the registration statement effective from the 180 th to the 194 th calendar day following the date of the
Registration Rights Agreement. The Registration Statement was declared effective on May 13, 2009.
    The Company accounts for the Registration Rights Agreement in accordance with FSP EITF 00-19-2, ―Accounting for
Registration Payment Arrangements‖. The Company’s contingent obligation to make liquidated damages under the Registration
Rights Agreement will be recognized and measured separately in accordance with SFAS 5, ―Accounting for Contingencies‖, and
FASB Interpretation No. 14, ―Reasonable Estimation of the Amount of a Loss‖. If it is probable that the Company will be required
to make any payments to the investors for non-fulfillment of the conditions provided for in the Registration Rights Agreement, an
estimate of the contingent payment will be made and accrued for in the Company’s financial statements. At March 31, 2009, no
provision for liquidated damages was made.
NOTE 22 — SEGMENT DATA AND RELATED INFORMATION
   The Company operates in one business segment, manufacturing and sale of copper clad aluminum (―CCA‖) superfine wire
produced from refined copper materials. The Company also operates only in one geographical segment — China, as all of the
Company’s products are sold to customers located in China and the Company’s manufacturing operations are located in China.
    The Company’s major product categories are (1) CCA, which is an electrical conductor consisting of an outer sleeve of copper
that is metallurgically bonded to a solid aluminum core, and (2) refined copper produced from scrap copper and used to
manufacture copper rod, raw wire, cable and magnet wire. The manufacturing of refined copper was launched in the first quarter of
2009.
     Management evaluates performance based on several factors, of which net revenue and gross profit by product are the primary
financial measures:




                                                For the three months                             For the six months
                                                  Ended June 30,                                  Ended June 30,
                                             2009                    2008                 2009                         2008
                                          (Unaudited)            (Unaudited)           (Unaudited)               (Unaudited)
        Net revenue from
          unaffiliated customers:
          CCA wire                    $     26,181,152      $      15,037,603     $     42,490,559          $         24,768,712
          Refined copper                    22,646,191                     —            26,875,109                            —
                   $   48,827,343   $     15,037,603   $   69,365,668   $   24,768,712

Gross profit:
  CCA wire         $    7,867,294   $      4,709,509   $   13,033,513   $    7,736,697
  Refined copper        1,864,515                 —         2,408,971               —
                   $    9,731,809   $      4,709,509   $   15,442,484   $    7,736,697


                                        Q-25
TABLE OF CONTENTS




                       REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Lihua International, Inc.
    We have audited the accompanying consolidated balance sheets of Lihua International, Inc. and subsidiaries (the ―Company‖)
as of December 31, 2008 and 2007 and the related consolidated statements of income and comprehensive income, stockholders’
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 the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 audit 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. Accordingly, we express no such opinion. An audit also
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 positions of Lihua International, Inc. and subsidiaries as of December 31, 2008 and 2007, the consolidated 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.
/s/ AGCA, Inc.
Arcadia, California
March 30, 2009

                                                                 F-1
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                                 LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                                         CONSOLIDATED BALANCE SHEETS




                                                                                      As of December 31,
                                                                               2008                        2007
                                   ASSETS
       CURRENT ASSETS
       Cash and cash equivalents                                           $   26,041,849        $          3,213,649
       Restricted cash                                                          1,750,000                          —
       Notes receivable, net                                                      321,892                     748,339
       Accounts receivable, net                                                 5,042,739                   5,385,078
       Other receivables                                                               —                        9,754
       Prepaid land use right – current portion                                   172,353                      89,943
       Inventories                                                                586,938                   2,597,918
       Due from related parties                                                        —                    3,963,591
       Total current assets                                                    33,915,771                  16,008,272
       OTHER ASSETS
       Buildings, machinery and equipment, net                                  7,440,943                   5,948,274
       Construction in progress                                                 6,017,941                   2,482,455
       Deposits for buildings, machinery and equipment                          1,077,892                   1,232,100
       Prepaid land use right-long term portion                                 8,332,732                   4,398,268
       Intangible assets                                                            4,214                       5,257
       Deferred income tax assets                                                  23,395                          —
       Total non-current assets                                                22,897,117                  14,066,354
          Total assets                                                     $   56,812,888        $         30,074,626

             LIABILITIES AND SHAREHOLDERS’ EQUITY
       CURRENT LIABILITIES
       Short term bank loans                                               $    6,145,202        $          4,107,001
       Accounts payable                                                         1,643,544                   2,483,158
       Other payables and accruals                                                830,744                     480,917
       Income taxes payable                                                       401,436                     399,663
       Due to related parties                                                          —                    3,521,403
       Total current liabilities                                                9,020,926                  10,992,142
       Total liabilities                                                   $    9,020,926        $         10,992,142
       Commitment and contingencies (Note 23)
       Series A redeemable convertible preferred stock: $0.0001 par
         value:
       10,000,000 shares authorized (liquidation preference of $2.20 per   $   13,116,628        $                —
         share), 6,818,182 shares and none issued and outstanding
SHAREHOLDERS’ EQUITY
Common Stock, $0.0001 par value: 75,000,000 shares authorized,                1,500            1,403
  15,000,000 and 14,025,000 shares issued and outstanding
Additional paid-in capital                                                7,976,976         4,706,022
Statutory reserves                                                        2,603,444         1,343,338
Retained earnings                                                        21,521,937        12,082,279
Accumulated other comprehensive income                                    2,571,477           949,442
Total shareholders’ equity                                               34,675,334        19,082,484
Total liabilities and shareholders’ equity                       $       56,812,888    $   30,074,626



                         See accompanying notes to consolidated financial statements

                                                    F-2
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                                 LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                   CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                                 (AMOUNTS EXPRESSED IN US DOLLAR)




                                                                               Year Ended December 31,
                                                                        2008                             2007
       NET REVENUE                                           $          50,006,057          $             32,676,834
       Cost of sales                                                   (33,202,344 )                     (22,910,937 )
       GROSS PROFIT                                                     16,803,713                         9,765,897
       Selling expenses                                                   (700,029 )                        (417,314 )
       General and administrative expenses                              (1,907,043 )                        (454,908 )
       Income from operations                                           14,196,641                         8,893,675
       Other income (expenses):
         Interest income                                                    68,353                            15,655
         Interest expenses                                                (514,950 )                         (96,535 )
         Merger expenses                                                  (259,225 )                              —
         Other income                                                        3,741                                —
            Total other income (expenses)                                 (702,081 )                         (80,880 )
       Income before income taxes                                       13,494,560                         8,812,795
       Provision for income taxes                                       (1,792,681 )                      (1,089,107 )
       NET INCOME                                                       11,701,879                         7,723,688
       OTHER COMPREHENSIVE INCOME:
       Foreign currency translation adjustments                          1,622,035                           802,502
       TOTAL COMPREHENSIVE INCOME                            $          13,323,914          $              8,526,190

       Net income per share
         Basic                                               $                   0.75       $                   0.55

         Diluted                                             $                   0.70       $                   0.55

       Weighted average number of shares outstanding
        Basic                                                           14,187,945                       14,025,000

         Diluted                                                        15,327,422                       14,025,000



                                 See accompanying notes to consolidated financial statements

                                                            F-3
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                                       LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                           CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
                                   (AMOUNTS EXPRESSED IN US DOLLAR)




                          Common Stock                Additional        Statutory           Retained            Accumulated          Total
                                                       Paid-in          Reserves            Earnings               other
                                                       Capital                                                 Comprehensive
                                                                                                                  Income
                       Number of         Amount
                        Shares
At January 1, 2007     14,025,000       $ 1,403   $       48,697    $     570,193       $    5,131,736     $        146,940    $    5,898,969
Net income                     —             —                —                —             7,723,688                   —          7,723,688
Foreign currency               —             —                —                —                    —               802,502           802,502
  translation
  adjustment
Comprehensive                      —         —                 —                    —                  —                 —          8,526,190
  income
Capital injection                  —         —         4,657,325                    —                  —                 —          4,657,325
  (Note 16)
Appropriation of                   —         —                 —          773,145             (773,145 )                 —                   —
  statutory reserves
At December 31,        14,025,000         1,403        4,706,022        1,343,338           12,082,279              949,442        19,082,484
  2007
Effect of reverse         975,000            97             1,387                   —                  —                 —              1,484
  acquisition
Net income                    —            —               —                 —         11,701,879                —        11,701,879
Foreign currency              —            —               —                 —                 —          1,622,035        1,622,035
  translation
  adjustment
Comprehensive          13,323,914
  income
Effect of                     —            —         1,270,292               —                 —                —          1,270,292
  Restructuring
  (Note 1)
Beneficial                    —            —         1,002,115               —                 —                —          1,002,115
  conversion feature
  of convertible
  preferred stock
  (Note 14)
Amortization of               —            —               —                 —         (1,002,115 )             —         (1,002,115 )
  preferred stock
  discount resulting
  from accounting
  for a beneficial
  conversion
  feature, deemed
  analogous to a
  dividend (Note
  14)
Warrants for                  —            —          539,910                —                 —                —           539,910
  convertible
  preferred stock
  (Note 14)
Share–based                   —            —          367,250                —                 —                —           367,250
  payments to
  employees (Note
  15)
Warrants issued for           —            —           90,000                —                 —                —             90,000
  services
Appropriation of              —            —               —           1,260,106       (1,260,106 )             —                 —
  statutory reserves
At December 31,        15,000,000     $ 1,500    $   7,976,976    $    2,603,444   $   21,521,937     $   2,571,477   $   34,675,334
  2008




                                    See accompanying notes to consolidated financial statements

                                                                 F-4
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                                 LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    (AMOUNTS EXPRESSED IN US DOLLAR)




                                                                          Year Ended December 31,
                                                                   2008                             2007
       CASH FLOWS FROM OPERATING ACTIVITIES
       Net income                                              $   11,701,879          $              7,723,688
       Adjustments to reconcile net income to cash provided
          by operating activities:
          Depreciation and amortization                               812,339                          519,225
          Merger expenses                                             259,225                               —
          Share-based compensation costs                              367,250                               —
          Warrants issued for services                                 90,000                               —
          Deferred income tax benefits                                (23,022 )                             —
       (Increase) decrease in assets:
          Accounts receivable                                         701,310                        (4,144,162 )
          Notes receivables                                           470,299                          (748,339 )
          Other receivables                                            10,259                            13,411
          Inventories                                               2,154,764                        (1,346,595 )
          Trade receivable due from related parties                        —                           (719,060 )
       Increase (decrease) in liabilities:
          Accounts payable                                           (994,285 )                         561,812
          Other payables and accruals                                 312,986                            (8,103 )
          Income taxes payable                                        (25,302 )                         399,663
          Trade payable due to related parties                             —                           (128,062 )
       Net cash provided by operating activities                   15,837,702                         2,123,478
       CASH FLOWS FROM INVESTING ACTIVITIES
          Payment of merger expenses for reverse acquisition         (259,225 )                              —
          Repayment by (loan to) a related party                    4,168,699                        (3,244,531 )
          Purchase of buildings, machinery and equipment           (4,852,020 )                      (3,811,851 )
          Prepayment for land use right                            (3,750,540 )                      (4,497,166 )
          Purchase of intangible assets                                    —                             (6,571 )
          Net cash used in investing activities                    (4,693,086 )                     (11,560,119 )
       CASH FLOWS FROM FINANCING ACTIVITIES
          New short-term bank loans                                11,950,700                         4,107,001
          Repayment to related parties                             (2,667,675 )                              —
          Advances from related parties                                    —                          2,525,969
          Proceeds from Private Placement, net of restricted       11,906,538                                —
     cash held in escrow
  Issuance of capital of Lihua Electron and Lihua                         —            4,657,325
     Copper
  Repayments of short-term bank loans                           (10,222,888 )                 —
  Net cash provided by financing activities                      10,966,675           11,290,295
Foreign currency translation adjustment                             716,909              469,516
INCREASE IN CASH AND CASH EQUIVALENTS                            22,828,200            2,323,170
CASH AND CASH EQUIVALENTS, at the beginning                       3,213,649              890,479
  of the year
CASH AND CASH EQUIVALENTS, at the end of the             $       26,041,849       $    3,213,649
  year

MAJOR NON-CASH TRANSACTION:
Share-based compensation to employees                    $          367,250       $          —
Warrants issued for services                                         90,000                  —
                                                         $          457,250       $          —

SUPPLEMENTAL DISCLOSURE INFORMATION
Interest paid                                            $          514,950       $      96,535
Income taxes paid                                        $        1,841,005       $     705,336


                        See accompanying notes to consolidated financial statements

                                                   F-5
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                                    LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              FOR THE FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007
NOTE 1: DESCRIPTION OF BUSINESS AND ORGANIZATION
     Lihua International, Inc. (― the Company ‖) was incorporated in the State of Delaware on January 24, 2006 under the name
Plastron Acquisition Corp. The Company is primarily engaged in the value-added manufacturing of bimetallic composite conductor
wire, such as copper clad aluminum (―CCA‖) fine wire, CCA magnet wire and CCA tin plated wire. On September 22, 2008, the
Company changed its name from Plastron Acquisition Corp. to Lihua International, Inc. The Company conducts its business
through two operating subsidiaries, Danyang Lihua Electron Co., Ltd. and Jiangsu Lihua Copper Industry Co., Ltd.
   As of December 31, 2008, details of the subsidiaries of the Company are as follows:




        Subsidiaries’ names            Domicile and           Paid-up       Effective             Principal activities
                                   date of incorporation      capital      ownership
        Ally Profit Investments    British Virgin Islands       $100         100%        Holding company of the other
          Limited (― Ally Profit   March 12, 2008                                        subsidiaries
          ‖)
        Lihua Holdings Limited     Hong Kong                  HK$100         100%        Principally engaged in investment
          (― Lihua Holdings ‖)     April 17, 2008                                        holding
        Danyang Lihua Electron     People’s Republic of     $2,200,000       100%        Manufacturing and sales of
          Co., Ltd.                China (―PRC‖)                                         bimetallic composite conductor wire
          (― Lihua Electron ‖)     December 30, 1999                                     such as copper clad aluminum
                                                                                         (CCA) wire and enameled CCA
                                                                                         wire.
        Jiangsu Lihua Copper       PRC August 31, 2007      $15,000,000      100%        Manufacturing and sales of copper
           Industry Co., Ltd. (―                                                         wire and CCA wire.
           Lihua Copper ‖)
Reverse acquisition
    On October 31, 2008, the Company entered into a share exchange agreement (― Share Exchange Agreement ‖) under which the
Company issued 14,025,000 shares of its Common Stock, par value $0.0001, to Magnify Wealth Enterprise Limited, the sole
shareholder of Ally Profit (the ― Ally Profit Shareholder ,‖ or ― Magnify Wealth ‖) in exchange for all the issued and outstanding
shares of Ally Profit (the ― Share Exchange ‖). As a result of the Share Exchange, Ally Profit has become the Company’s
wholly-owned subsidiary and Ally Profit Shareholder acquired a majority of the Company’s issued and outstanding stock.
Concurrent with the Share Exchange, Mr. Jianhua Zhu (the managing director of Ally Profit and all of its operating subsidiaries, ―
Mr. Zhu ‖) has been appointed the Chief Executive Officer of the Company.
    As a result, the Share Exchange has been accounted for as a reverse acquisition using the purchase method of accounting,
whereby Ally Profit is deemed to be the accounting acquirer (legal acquiree) and the Company to be the accounting acquiree (legal
acquirer). The financial statements before the date of Share Exchange are those of Ally Profit with the results of the Company
being consolidated from the date of Share Exchange. The equity section and earnings per share have been retroactively restated to
reflect the reverse acquisition and no goodwill has been recorded.
    Ally Profit was incorporated in the British Virgin Islands on March 12, 2008. In June 2008, pursuant to a restructuring plan set
out below, Ally Profit has become the holding company of a group of companies comprising Lihua Holdings, a company
incorporated in Hong Kong, which holds 100% equity interests in each of Danyang Lihua and Lihua Copper, each a limited
liability company organized under the existing laws of PRC.
Restructuring
   In June 2008, pursuant to a restructuring plan (― Restructuring ‖) intended to ensure compliance with the PRC rules and
regulations, Ally Profit through its directly wholly-owned subsidiary Lihua Holdings, acquired 100% equity interests in Lihua
Electron and Lihua Copper from companies controlled by Mr. Zhu and other minority shareholders.

                                                                F-6
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                                      LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007
NOTE 1: DESCRIPTION OF BUSINESS AND ORGANIZATION – (continued)
   The table below sets forth the proportion of equity interests in all entities involved before and after the Restructuring based on
subscribed registered capital:




                             Magnify Wealth        Ally Profit       Lihua Holdings      Lihua Electron        Lihua Copper
                             Before     After   Before      After    Before    After    Before      After     Before   After
       Shareholder            %          %        %          %        %         %         %           %        %         %
       Mr. Fo-Ho Chu (―       100       100        —             —     —         —       45.46            —     —         —
         Mr. Chu ‖)
       Magnify Wealth          —          —      100         100                 —          —         —         —        —
       Ally Profit             —          —       —           —       100       100         —         —         —        —
       Lihua Holdings          —          —       —           —        —         —          —        100        —       100
       Danyang Special         —          —       —           —        —         —       52.27        —         —        —
         Electronics
         Co., Ltd. (a)
       Lihua Electron          —          —        —             —     —         —            —           —     25
       Invest Unicorn          —          —        —             —     —         —            —           —     75        —
         Holdings
         Limited (b)
       Imbis Europe            —          —        —             —     —         —         2.27           —     —         —
         B.V. h/o Asia
         Trading (EDC)
         (― Europe EDC
         ‖)
                              100       100      100         100      100       100        100       100       100      100
(a) Equity interests in Danyang Special Electronics Co., Ltd., a PRC domestic company, are held as to 60% by Mr. Zhu and 40%
    by his wife. Mr. Zhu and his wife are acting in concert and considered parties to the same control group.
(b) Invest Unicorn Holdings Limited, incorporated in the British Virgin Islands, is 100% beneficially owned by Mr. Zhu.
   As part of the Restructuring, Mr. Chu, the sole shareholder of Magnify Wealth, appointed Mr. Zhu as the sole director of
Magnify Wealth, Ally Profit as well as Lihua Holdings. Additionally, Mr. Chu undertook to Mr. Zhu that no further directors
would be appointed to the board of either Magnify Wealth, Ally Profit or Lihua Holdings without the prior written consent of Mr.
Zhu. As the sole director of Magnify Wealth, Ally Profit and Lihua Holdings, Mr. Zhu is able to control and manage the
operational, investment and business decisions of these companies, including the ability to make the sole decisions regarding any
change in these companies’ capital structure or payment of dividends. Further, Mr. Zhu has the ultimate authority to determine the
composition of the board of directors for these companies.
    Furthermore, as part of the Restructuring, Mr. Zhu and Mr. Chu entered into a Share Transfer Agreement dated October 22,
2008, pursuant to which Mr. Chu granted to Mr. Zhu the option to purchase all of the 3,000 ordinary shares of Magnify Wealth
held by Mr. Chu at the nominal price of $1.00 per share. The option shares vest and become exercisable upon Lihua Electron and
Lihua Copper attaining consolidated net income performance targets for fiscal 2008, 2009, and 2010 of $8 million (― 2008 Target
‖), $11 million and $14 million respectively. If each performance target is met, 25% of the Option Shares will vest and become
exercisable forty-five days after December 31, 2008, 25% of the Option shares will vest and become exercisable forty-five days
after December 31, 2009 and the remaining 50% of the Option Shares will vest and become exercisable forty five days after
December 31, 2010.
   The purpose of the Share Transfer Agreement is to enable Mr. Zhu to re-acquire the ultimate legal ownership of Lihua Electron
and Lihua Copper in compliance with PRC rules and regulations. For this reason, on

                                                               F-7
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                                   LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007
NOTE 1: DESCRIPTION OF BUSINESS AND ORGANIZATION – (continued)
March 7, 2009, Mr. Zhu and Mr. Chu entered into an amendment to the Share Transfer Agreement whereby alternate conditions for
Mr. Zhu to exercise the Option Shares have been included such that Mr. Zhu will be entitled to exercise all the Option Shares as
long as the audited consolidated net income of Lihua Electron and Lihua Copper for fiscal 2008 is 10% or more higher than 2008
Target (― Alternate Performance Target ‖) no matter whether the performance targets for 2009 and 2010 are met or not.
   For the year ended December 31, 2008, the Company’s net income was $11,701,879, which achieved the Alternate
Performance Target. Therefore, Mr. Zhu will be entitled to exercise all of the Option Shares subject only to the vesting period
which expires forty five days after December 31, 2010.
    The arrangement for Mr. Zhu to act as the sole director of the holding companies of Lihua Electron and Lihua Copper, the
undertaking by Mr. Chu not to appoint additional director, as well as the Share Transfer Agreement are each inseparable and
indispensable part of the Restructuring which enables Mr. Zhu to continue to have residual rewards of the combined entity.
   Also on October 22, 2008, the minority shareholders, namely Mr. Chu and Europe EDC, respectively entered into a
subscription agreement (― Subscription Agreement ‖) to purchase additional shares in Magnify Wealth at a nominal price of
US$1.00 per share. Pursuant to these subscription agreements, Mr. Chu and Europe EDC will only be entitled to exercise their
subscription rights at the same time when Mr. Zhu exercises his Option Shares under the Share Transfer Agreement. The number of
subscription shares exercisable by Mr. Chu and Europe EDC was determined based on the proportion of capital contributed by each
of Mr. Zhu, Mr. Chu and Europe EDC in Lihua Electron and Lihua Copper. The purpose of the subscription agreements, together
with the Share Transfer Agreement, is to enable Mr. Zhu, Mr. Chu and Europe EDC to re-acquire their proportionate ultimate legal
ownership of Lihua Electron and Lihua Copper in compliance with the PRC rules and regulations. As a result, there has been no
ownership change of the minority interests of each of the two PRC Operating Companies.
    Also as part of the Restructuring, Lihua Holdings’ capital was established by way of contributions from Mr. Zhu and other
minority shareholders, which aggregate amount equaled the total transfer price they were entitled to receive for the transfer of their
equity interests in Lihua Electron and Lihua Copper to Lihua Holdings. Therefore, Mr. Zhu and the other minority shareholders, as
the former stockholders of Lihua Electron and Lihua Copper who gave up legal ownership thereof, have not received any net cash
amount. Nor has there been any cash flow out of the combined entity during the whole period from the date of transfer of legal
ownership of Lihua Electron and Lihua Copper through the expiry of the Share Transfer Agreement and the Subscription
Agreements, at which time it is fully expected Mr. Zhu and other minority shareholders will have re-acquired their proportionate
ultimate legal ownership of Lihua Electron and Lihua Copper. As a result, Mr. Zhu and other minority shareholders have continued
to bear the residual risks of the combined entity.
    Mr. Zhu has retained a financial controlling interest in the combined entity through the above-discussed residual risks and
rewards. Furthermore, during and after the Restructuring, there has been no change to the composition of the board of directors of
either Lihua Electron or Lihua Copper and Mr. Zhu continues to act as the managing director of these companies as well as the sole
director of Magnify Wealth, Ally Profit and Lihua Holdings. Lihua Electron and Lihua Copper have remained under common
operating, management and financial control. As a result, the Restructuring has been accounted for as a combination of entities
under common control and recapitalization of Lihua Electron and Lihua Copper using the ―as if‖ pooling method of accounting,
with no adjustment to the historical basis of the assets and liabilities of Lihua Electron and Lihua Copper, and the operations were
consolidated as if the Restructuring occurred as of the beginning of the first accounting period presented in these financial
statements.

                                                                F-8
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                                    LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007
NOTE 2: SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES
Principle of consolidation
    These consolidated financial statements include the financial statements of Lihua International, Inc. and its subsidiaries. All
significant inter-company balances or transactions have been eliminated on consolidation.
Basis of preparation
   These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States of America. These consolidated financial statements, in the opinion of management, include all adjustments
necessary for a fair statement of consolidated results of operations, financial position and cash flows for each period presented.
Use of estimates
    The preparation of these consolidated financial statements in conformity with generally accepted accounting principles requires
the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure
of contingent assets and liabilities at the date of these consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances. Accordingly, actual results may differ from these estimates under
different assumptions or conditions.
Cash and cash equivalents
    Cash and cash equivalents consist of all cash balances and highly liquid investments with an original maturity of three months
or less. Because of the short maturity of these investments, the carrying amounts approximate their fair value. Restricted cash is
excluded from cash and cash equivalents.
Accounts receivable
    Accounts receivable is stated at cost, net of allowance for doubtful accounts. The Company maintains allowances for doubtful
accounts for estimated losses resulting from the failure of customers to make required payments. The Company reviews the
accounts receivable on a periodic basis and makes allowances where there is doubt as to the collectibility of individual balances. In
evaluating the collectibility of individual receivable balances, the Company considers many factors, including the age of the
balance, the customer’s payment history, its current credit-worthiness and current economic trends.
Inventories
    Inventories are stated at the lower of cost, determined on a weighted average basis, or market. Costs of inventories include
purchase and related costs incurred in bringing the products to their present location and condition. Market value is determined by
reference to selling prices after the balance sheet date or to management’s estimates based on prevailing market conditions. The
management will write down the inventories to market value if it is below cost. The management also regularly evaluates the
composition of its inventories to identify slow-moving and obsolete inventories to determine if valuation allowance is required.
Financial instruments
    SFAS 107, ―Disclosures about Fair Value of Financial Instruments‖ requires disclosure of the fair value of financial
instruments held by the Company. The carrying amounts reported in the consolidated balance sheet for cash, accounts and other
receivables, accounts and other payables approximate their fair values based on the short-term maturity of these instruments.
   Effective January 1, 2008, the Company adopted SFAS No. 157, ―Fair Value Measurements.‖ The standard provides enhanced
guidance for using fair value to measure assets and liabilities. The standard also

                                                                 F-9
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                                    LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007
NOTE 2: SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES – (continued)
responds to investors’ requests for expanded information about the extent to which companies measure assets and liabilities at fair
value, the information used to measure fair value, and the effect of fair value measurements on earnings. The standard applies
whenever other standards require (or permit) assets or liabilities to be measured at fair value. The standard does not expand the use
of fair value in any new circumstances. The adoption of SFAS No. 157 with respect to provisions applicable to the Company did
not have a material effect on the accompanying consolidated financial statements.
Buildings, machinery and equipment
    Buildings, machinery and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if
any. Gains or losses on disposals are reflected as gain or loss in the year of disposal. The cost of improvements that extend the life
of buildings, machinery and equipment are capitalized. These capitalized costs may include structural improvements, equipment
and fixtures. All ordinary repair and maintenance costs are expensed as incurred.
    Depreciation for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the
assets as follows:




                                                                                                                 Useful Life
                                                                                                                 (In years)
        Buildings                                                                                                     20
        Machinery                                                                                                     10
        Office equipment & motor vehicles                                                                              5
    The carrying value of buildings, machinery and equipment is assessed annually and when factors indicating impairment is
present, the carrying value of the fixed assets is reduced by the amount of the impairment. The Company determines the existence
of such impairment by measuring the expected future cash flows (undiscounted and without interest charges) and comparing such
amount to the net asset carrying value. An impairment loss, if exists, is measured as the amount by which the carrying amount of
the asset exceeds the fair value of the asset.
Construction in progress
    Construction in progress includes direct costs of construction of buildings, equipments and others. Interest incurred during the
period of construction, if material, is capitalized. Construction in progress is not depreciated until such time as the assets are
completed and put into service.
Prepaid land use right
    Lease prepayments represent lump sum payment for land use rights in the PRC. The amount is expensed over the period of land
use rights of 50 years.
Intangible assets
    The Company’s intangible assets include computer software. The Company’s amortization policy on intangible assets is as
follows:




                                                                                                                Useful Life
                                                                                                                (In years)
        Computer software                                                                                            5
    The Company accounts for its intangible assets pursuant to SFAS No. 142, ―Goodwill and Other Intangible Assets.‖ Under
SFAS 142, intangibles with definite lives continue to be amortized on a straight-line basis over the lesser of their estimated useful
lives or contractual terms. Intangibles with indefinite lives are evaluated at least annually for impairment by comparing the asset’s
estimated fair value with its carrying value, based on cash flow methodology.

                                                                F-10
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                                   LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007
NOTE 2: SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES – (continued)
    Impairment of goodwill is tested at least annually at the reporting unit. The test consists of two steps. Firstly, the Company
identifies potential impairment by comparing the fair value of the reporting unit to its carrying amount, including goodwill. If the
fair value of the reporting unit is greater than its carrying amount, goodwill is not considered impaired. Secondly, if there is
impairment identified in the first step, an impairment loss is recognized for any excess of the carrying amount of the reporting
unit’s goodwill over the implied fair value of goodwill. The implied fair value of goodwill is determined by allocating the fair value
of the reporting unit in a manner similar to a purchase price allocation, in accordance with SFAS No 141, ―Business
Combinations.‖ If the carrying value of a reporting unit exceeds its estimated fair value, the Company compares the implied fair
value of the reporting unit’s goodwill to its carrying amount, and any excess of the carrying value over the fair value is charged to
earnings. The Company’s fair value estimates are based on numerous assumptions and it is possible that actual fair value will be
significantly different than the estimates.
Impairment of long-lived assets
    The Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that
the related carrying amounts may not be recoverable. An impairment is considered to exist if the total estimated future cash flows
on an undiscounted basis are less than the carrying amount of the assets, including goodwill, if any. An impairment loss is
measured and recorded based on discounted estimated future cash flows. In estimating future cash flows, assets are grouped at the
lowest level for which there is identifiable cash flows that are largely independent of future cash flows from other asset groups.
Revenue recognition
    Revenue is recognized when the following four revenue criteria are met: persuasive evidence of an arrangement exists, delivery
has occurred, the selling price is fixed or determinable, and collectibility is reasonably assured.
    Sales revenue is recognized net of sales discounts and returns at the time when the merchandise is sold to the customer. Based
on historical experience, management estimates that sales returns are immaterial and has not made allowance for estimated sales
returns.
Research and development costs
   Research and development costs are expensed as incurred. For the years ended December 31, 2008 and 2007, research and
development costs were $60,041 and $56,143, respectively.
Advertising costs
   The Company expenses all advertising costs as incurred. The total amount of advertising costs charged to selling, general and
administrative expense were $13,640 and $263 for the years ended December 31, 2008 and 2007, respectively.
Shipping and handling costs
   Substantially all costs of shipping and handling of products to customers are included in selling, general and administrative
expense. Shipping and handling costs for the years ended December 31, 2008 and 2007 were $393,321 and $207,773, respectively.
Income taxes
    The Company accounts for income taxes in accordance with SFAS No. 109, ―Accounting for Income Taxes.‖ SFAS No. 109
requires an asset and liability approach for financial accounting and reporting for income taxes and allows recognition and
measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and
liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of
assets and liabilities for

                                                               F-11
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                                     LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             FOR THE FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007
NOTE 2: SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES – (continued)
financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax
assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future
deductibility is uncertain.
    On January 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (―FIN 48‖). FIN 48 prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax
position taken (or expected to be taken) in a tax return. This Interpretation also provides guidance on derecognition of income tax
assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties
associated with tax positions, accounting for income taxes in interim periods and income tax disclosures. The adoption of FIN 48
has not resulted in any material impact on the Company’s financial position or results.
Comprehensive income
    SFAS No.130, ―Reporting Comprehensive Income,‖ establishes standards for reporting and displaying comprehensive income
and its components in the consolidated financial statements. Accumulated other comprehensive income includes foreign currency
translation adjustments.
Foreign currency
    The Company uses United States dollars (―US Dollar‖ or ―US$‖ or ―$‖) for financial reporting purposes. The Company
maintains the books and records in its functional currency, Chinese Renminbi (―RMB‖), being the primary currency of the
economic environment in which its operations are conducted. The Company translates its assets and liabilities into U.S. dollars
using applicable exchange rates prevailing at balance sheet dates, and statements of income are translated at average exchange rates
during the reporting periods. Equity accounts are translated at historical rates. Adjustments resulting from the translation of the
Company’s financial statements are recorded as accumulated other comprehensive income.
    The exchange rates used to translate amounts in RMB into U.S. Dollars for the purposes of preparing the consolidated financial
statements were as follows




                                                                       December 31, 2008                 December 31, 2007
         Balance sheet items, except for paid-in capital and          US$1=RMB6.8346                   US$1=RMB7.3046
           retained earnings, as of year end
         Amounts included in the statements of income,                US$1=RMB6.9452                   US$1=RMB7.6071
           and statements of cash flows for the year
Stock based compensation
    The Company accounts for share-based compensation awards to employees in accordance with SFAS No. 123R, ―Share-based
Payment‖ which requires that share-based payment transactions with employees be measured based on the grant-date fair value of
the equity instrument issued and recognized as compensation expense over the requisite service period.
    The Company accounts for share-based compensation awards to non-employees in accordance with SFAS 123R and EITF
Issue No. 96-18, ―Accounting for Equity Instruments That Are Issued To Other Than Employees for Acquiring, or in Conjunction
with Selling, Goods or Services,‖ or EITF 96-18. Under SFAS 123R and EITF 96-18, stock compensation granted to
non-employees has been determined as the fair value of the consideration received or the fair value of equity instrument issued,
whichever is more reliably measured and is recognized as expenses as the goods or services are received.

                                                             F-12
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                                    LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007
NOTE 2: SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES – (continued)
Business segmentation
    The Company follows SFAS No. 131, ―Disclosures about Segments of an Enterprise and Related Information,‖ which requires
that companies disclose segment data based on how management makes decision about allocating resources to segments and
evaluating their performance.
   The Company believes that during the years ended December 31, 2008 and 2007, it operated mainly in one business
segment — Manufacturing and sales of copper clad aluminum (CCA) wire and the enameled CCA wire, which is widely used for
most electrical conductor applications. Throughout the years ended December 31, 2008 and 2007, all of the Company’s operations
were carried out mainly in one geographical segment — China.
Earnings per common share
    The Company reports earnings per share in accordance with the provisions of SFAS 128, ―Earnings per Share.‖ SFAS 128
requires presentation of basic and diluted earnings per share in conjunction with the disclosure of the methodology used in
computing such earnings per share. Basic earnings per share excludes dilution and is computed by dividing income available to
Common Stock holders by the weighted average common shares outstanding during the period. Diluted earnings per share takes
into account the potential dilution (using the treasury stock method) that could occur if securities or other contracts to issue
Common Stock were exercised and converted into Common Stock.
    All per share data including earnings per share has been retroactively restated to reflect the reverse acquisition on October 31,
2008 whereby the 14,025,000 shares of Common Stock issued by the Company (nominal acquirer) to the shareholder of Ally Profit
(nominal acquiree) are deemed to be the number of shares outstanding for the period prior to the reverse acquisition. For the period
after the reverse acquisition, the number of shares considered to be outstanding is the actual number of shares outstanding during
that period.
Commitments and contingencies
     The Company follows SFAS No. 5, ―Accounting for Contingencies,‖ in determining its accruals and disclosures with respect to
loss contingencies. Accordingly, estimated losses from loss contingencies are accrued by a charge to income when information
available prior to issuance of the financial statements indicates that it is probable that a liability could have been incurred and the
amount of the loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. If a loss
contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the financial statements when it
is at least reasonably possible that a material loss could be incurred.
Recent accounting pronouncements
    In December 2007, the FASB issued SFAS 141(R), ―Business Combinations,‖ which replaces SFAS 141, ―Business
Combinations.‖ SFAS 141R retains the fundamental requirements in SFAS 141 that the acquisition method of accounting (which
SFAS 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business
combination. SFAS 141R requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling
interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions. This replaces
SFAS 141’s cost-allocation process, which required the cost of an acquisition to be allocated to the individual assets acquired and
liabilities assumed based on their estimated fair values. SFAS 141R also requires the acquirer in a business combination achieved
in stages (sometimes referred to as a step acquisition) to recognize the identifiable assets and liabilities, as well as the
noncontrolling interest in the acquiree, at the full amounts of their fair values (or other amounts determined in accordance with
SFAS 141R). SFAS 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning
of the first annual reporting period beginning on or after December 15, 2008. This statement does not currently affect the Company.

                                                                F-13
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                                    LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007
NOTE 2: SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES – (continued)
    In December 2007, the FASB issued SFAS No. 160, ―Noncontrolling Interests in Consolidated Financial Statements — An
Amendment of ARB No. 51‖ (―SFAS No. 160‖), which establishes new accounting and reporting standards for the noncontrolling
interest in a subsidiary and for the deconsolidation of a subsidiary. Specifically, this statement requires the recognition of a
noncontrolling interest (minority interest) as equity in the consolidated financial statements and separate from the parent’s equity.
SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008
(that is, fiscal 2009 for the Company). Management does not expect that this Statement will have an effect on the Company’s
consolidated financial statements.
    In March 2008, the FASB issued SFAS No. 161, ―Disclosures about Derivative Instruments and Hedging Activities — An
Amendment of FASB Statement No. 133‖ (―SFAS No. 161‖), which changes the disclosure requirements for derivative
instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses
derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its
related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial
performance, and cash flows. This statement will be effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008 (that is, fiscal 2009 for the Company). Management does not expect that this Statement will
have an effect on the Company’s consolidated financial statements.
    In May 2008, the FASB issued SFAS No. 162, ―The Hierarchy of Generally Accepted Accounting Principles.‖ This Statement
identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of
financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles
(GAAP) in the United States (the GAAP hierarchy). This Statement is effective 60 days following the SEC’s approval of the Public
Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With
Generally Accepted Accounting Principles. Management does not expect that this Statement will have an effect on the Company’s
consolidated financial statements.
    In May 2008, the FASB issued SFAS No. 163, ―Accounting for Financial Guarantee Insurance Contracts — an interpretation of
FASB Statement No. 60.‖ This Statement interprets Statement 60, ―Accounting and Reporting by Insurance Enterprises‖ and
amends existing accounting pronouncements to clarify their application to the financial guarantee insurance contracts included
within the scope of this Statement. This Statement requires that an insurance enterprise recognize a claim liability prior to an event
of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. This
Statement also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and
measurement to be used to account for premium revenue and claim liabilities. This Statement is effective for financial statements
issued for fiscal years beginning after December 15, 2008 (that is, fiscal 2009 for the Company), and all interim periods within
those fiscal years. Management does not expect that this Statement will have an effect on the Company’s consolidated financial
statements.
    In June 2008, the FASB issued EITF 08-4, ―Transition Guidance for Conforming Changes to Issue No. 98-5.‖ The objective of
EITF 08-4 is to provide transition guidance for conforming changes made to EITF 98-5, ―Accounting for Convertible Securities
with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios,‖ that result from EITF 00-27 ―Application of
Issue No. 98-5 to Certain Convertible Instruments,‖ and SFAS 150, ―Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity.‖ This Issue is effective for financial statements issued for fiscal years ending after
December 15, 2008 and has no effect on the Company’s financial statements.
   In October 2008, the FASB issued FSP FAS 157-3, ―Determining the Fair Value of a Financial Asset in a Market That Is Not
Active‖ (FSP 157-3), which clarifies the application of SFAS 157 when the market for a financial asset is inactive. Specifically,
FSP 157-3 clarifies how (1) management’s internal assumptions should

                                                                F-14
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                                   LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007
NOTE 2: SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES – (continued)
be considered in measuring fair value when observable data are not present, (2) observable market information from an inactive
market should be taken into account, and (3) the use of broker quotes or pricing services should be considered in assessing the
relevance of observable and unobservable data to measure fair value. The Company adopted the provisions of FSP 157-3, which
did not impact the Company’s financial position or results of operations.
    In December 2008, the FASB issued FSP FAS 140-4 and FIN 46(R)-8, ―Disclosures by Public Entities (Enterprises) about
Transfers of Financial Assets and Interests in Variable Interest Entities‖ (―FSP FAS 140-4 and FIN 46(R)-8‖). FSP FAS 140-4 and
FIN 46(R)-8 amends FAS 140 and FIN 46(R) to require additional disclosures regarding transfers of financial assets and interest in
variable interest entities. FSP FAS 140-4 and FIN 46(R)-8 is effective for interim or annual reporting periods ending after
December 15, 2008. FSP FAS 140-4 and FIN 46(R)-8 did not have any impact on the Company’s financial statements.
    In January 2009, the FASB issued FSP EITF 99-20-1, ―Amendments to the Impairment Guidance of EITF Issue No. 99-20, and
EITF Issue No. 99-20, Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in
Securitized Financial Assets.‖ FSP EITF 99-20-1 changes the impairment model included within EITF 99-20 to be more consistent
with the impairment model of SFAS 115. FSP EITF 99-20-1 achieves this by amending the impairment model in EITF 99-20 to
remove its exclusive reliance on ―market participant‖ estimates of future cash flows used in determining fair value. Changing the
cash flows used to analyze other-than-temporary impairment from the ―market participant‖ view to a holder’s estimate of whether
there has been a ―probable‖ adverse change in estimated cash flows allows companies to apply reasonable judgment in assessing
whether an other-than-temporary impairment has occurred. The adoption of FSP EITF 99-20-1, which is effective for annual
reporting periods ending after December 15, 2008, will not have a material impact on the Company’s consolidated financial
statements.
NOTE 3: RESTRICTED CASH
    As of December 31, 2008, $1,750,000 in total was held in escrow arising from agreements in conjunction with the Private
Placement, which are further disclosed in Notes 14 and 23, and is reported as restricted cash, segregated from other cash items, in
accordance with the requirements of paragraphs 18 and 19 of SFAS 5, paragraph 6 of chapter 3A of ARB No. 43, and SAB Topic
6H.
   Restricted cash consisted of the following:




                                                                                             As of December 31,
                                                                                           2008                   2007
        Guarantee fund for financing agreement                                   $              800,000       $      —
        Special fund for listing                                                                750,000              —
        Special fund for employee pensions                                                      200,000              —
                                                                                 $            1,750,000       $      —

NOTE 4: NOTES RECEIVABLE, NET
    Notes receivable arose from sale of goods and represented commercial drafts issued by customers to the Company that were
guaranteed by bankers of the customers. Notes receivable are interest-free with maturity dates of 3 or 6 months from date of
issuance.

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                                 LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          FOR THE FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007
NOTE 4: NOTES RECEIVABLE, NET – (continued)
  Notes receivable consisted of the following:




                                                                                 As of December 31,
                                                                          2008                         2007
        Notes receivable                                       $           321,892          $            748,339
        Less: Allowance for doubtful debts                                      —                             —
        Notes receivable, net                                  $           321,892          $            748,339

NOTE 5: ACCOUNTS RECEIVABLE, NET
  Accounts receivable consisted of the following:




                                                                           As of December 31,
                                                                   2008                               2007
        Accounts receivable                               $         5,042,739           $              5,385,078
        Less: Allowance for doubtful debts                                 —                                  —
        Accounts receivable, net                          $         5,042,739           $              5,385,078
NOTE 6: OTHER RECEIVABLES
  Other receivables consisted of the following:




                                                                                    As of December 31,
                                                                                2008                  2007
        Other receivables                                                 $         —        $            9,754
        Less: Allowance for doubtful debts                                          —                        —
        Other receivables, net                                            $         —        $            9,754

NOTE 7: INVENTORIES
  Inventories by major categories are summarized as follows:




                                                                              As of December 31,
                                                                   2008                            2007
        Raw materials                                          $    160,234             $           1,069,812
        Work in progress                                             29,013                           125,428
        Finished goods                                              397,691                         1,402,678
                                                               $    586,938             $           2,597,918

NOTE 8: INTANGIBLE ASSETS
                                                                                     As of December 31,
                                                                              2008                        2007
    Computer software, cost                                            $        7,023           $           6,571
    Less: Accumulated amortization                                             (2,809 )                    (1,314 )
                                                                       $        4,214           $           5,257

Amortization expenses for the years ended December 31, 2008 and 2007 were $1,382 and $1,314.

                                                       F-16
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                                   LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007
NOTE 9: PREPAID LAND USE RIGHTS
    The Company has recorded as prepaid land use rights the lump sum payments paid to acquire long-term interest to utilize the
land underlying the building and production facility. This type of arrangement is common for the use of land in the PRC. The
prepaid land use rights are expensed on the straight-line basis over the term of the land use rights of 50 years. As of December 31,
2008, the Company has obtained the relevant PRC property ownership and land use rights certificates.
    The amount expensed on prepaid land use right for the years ended December 31, 2008 and 2007 were $101,361 and $8,956,
respectively. The estimated expense of the prepaid land use rights over each of the next five years and thereafter will be $172,353
per annum.
NOTE 10: BUILDINGS, MACHINERY AND EQUIPMENT, NET
  Buildings, machinery and equipment, net consisted of the following:




                                                                                       As of December 31,
                                                                               2008                         2007
        Cost:
        Buildings                                                   $           1,367,189         $          1,279,221
        Office equipment                                                           61,767                       46,436
        Motor vehicles                                                            137,423                       28,749
        Machinery                                                               7,834,657                    5,753,159
        Total cost                                                              9,401,036                    7,107,565
        Less: Accumulated depreciation                                         (1,960,093 )                 (1,159,291 )
        Net book value                                              $           7,440,943         $          5,948,274

   Depreciation expenses for the years ended December 31, 2008 and 2007 were $709,596 and $508,955, respectively.
NOTE 11: CONSTRUCTION IN PROGRESS
  Construction in progress consisted of the following:
                                                                                  As of December 31,
                                                                           2008                           2007
        Construction of equipment                                  $        1,203,401        $             1,053,309
        Construction of buildings                                           4,722,626                      1,410,892
        Others                                                                 91,914                         18,254
                                                                   $        6,017,941        $             2,482,455

NOTE 12: OTHER PAYABLES AND ACCRUALS
  Other payables and accruals consisted of the following:




                                                                                     As of December 31,
                                                                              2008                         2007
        Accrued staff costs                                            $          380,472        $           202,871
        Other taxes payable                                                       335,152                    259,815
        Other payables                                                            115,120                     18,231
                                                                       $          830,744        $           480,917


                                                            F-17
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                                  LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           FOR THE FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007
NOTE 13: SHORT TERM BANK LOANS
  Short-term bank loans consisted of the following:




                                                                                           As of December 31,
                                                                                         2008                   2007
        Bank loan granted by Bank of Jiangsu, Danyang Branch with an interest        $   2,194,715      $              —
          rate of 6.66% p.a. is guaranteed by a related company – Danyang Tianyi
          Telecommunication Co., Ltd (―Tianyi Telecom‖). The bank loan will
          mature on November 18, 2009, with interest due on the 20 th day of each
          month and principal due at date of maturity
        Bank loan granted by China Construction Bank Danyang Branch at an                1,170,514                     —
          interest rate ranging from 6.372% p.a. to 8.964% p.a., guaranteed by
          Tianyi Telecom, matured and fully repaid on March 6, 2009.
        Bank loan granted by Agriculture Bank of China, Danyang Branch at an              760,835                      —
          interest rate ranging from 6.903% p.a. to 9.711% p.a. is guaranteed by
          Tianyi Telecom. The bank loan will mature on April 15, 2009, with
          interest due on the 20 th day of each month and principal due at date of
          maturity.
        Bank loan granted by Agriculture Bank of China, Danyang Branch at an              702,309                      —
          interest rate ranging from 6.903% p.a. to 9.711% p.a. is guaranteed by
          Tianyi Telecom. The bank loan will mature on May 20, 2009, with
          interest due on the 20 th day of each month and principal due at date of
          maturity.
        Bank loan granted by China Construction Bank Danyang Branch at an                 585,257                      —
          interest rate ranging from 5.841% p.a. to 8.217% p.a. is guaranteed by
          Tianyi Telecom. The bank loan will mature on April 29, 2009, with
          interest due on the 20 th day of each month and principal due at date of
          maturity.
        Bank loan granted by Agriculture Bank of China, Danyang Branch at an              731,572                      —
          interest rate ranging from 6.903% p.a. to 9.711% p.a. is guaranteed by
          Tianyi Telecom. The bank loan will mature on August 21, 2009 with
          interest due on the 20 th day of each month and principal due at date of
          maturity.
        Bank loan granted by Agriculture Bank of China, Danyang Branch at an                                    684,500
          interest rate ranging from 9.477% p.a. to 9.711% p.a., guaranteed by
          Tianyi Telecom, matured on August 30, 2008 and fully repaid.
Bank loan granted by Agriculture Bank of China, Danyang Branch at an     —   191,660
  interest rate ranging from 8.307% p.a. to 9.711% p.a., guaranteed by
  Tianyi Telecom, matured on April 27, 2008 and fully repaid.
Bank loan granted by Agriculture Bank of China, Danyang Branch at an     —   191,660
  interest rate ranging from 8.307% p.a. to 9.711% p.a., guaranteed by
  Tianyi Telecom, matured on May 15, 2008 and fully repaid.
Bank loan granted by Agriculture Bank of China, Danyang Branch at an     —   191,660
  interest rate ranging from 8.541% p.a. to 9.711% p.a., guaranteed by
  Tianyi Telecom, matured on May 21, 2008 and fully repaid.
Bank loan granted by Agriculture Bank of China, Danyang Branch at an     —   191,660
  interest rate ranging from 8.541% p.a. to 9.711% p.a., guaranteed by
  Tianyi Telecom, matured on May 27, 2008 and fully repaid.
Bank loan granted by Agriculture Bank of China, Danyang Branch at an     —   191,660
  interest rate ranging from 8.541% p.a. to 9.711% p.a., guaranteed by
  Tianyi Telecom. Matured on May 31, 2008 and fully repaid.

                                                    F-18
TABLE OF CONTENTS

                                 LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          FOR THE FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007
NOTE 13: SHORT TERM BANK LOANS – (continued)




                                                                                       As of December 31,
                                                                                    2008                    2007
       Bank loan granted by Agriculture Bank of China, Danyang Branch at                   —                 136,900
         an interest rate ranging from 8.307% p.a. to 9.711% p.a., guaranteed
         by Tianyi Telecom, matured on April 26, 200 and fully repaid.
       Bank loan granted by Agriculture Bank of China, Danyang Branch at                   —                 136,900
         an interest rate ranging from 8.541% p.a. to 9.711% p.a., guaranteed
         by Tianyi Telecom., matured on June 13, 2008 and fully repaid.
       Bank loan granted by Agriculture Bank of China, Danyang Branch at                   —                 109,520
         an interest rate ranging from 8.541% p.a. to 9.711% p.a., guaranteed
         by Tianyi Telecom, matured on June 19, 2008 and fully repaid.
       Bank loan granted by Agriculture Bank of China, Danyang Branch at                   —                  27,380
         an interest rate ranging from 9.126% p.a. to 9.711% p.a., guaranteed
         by Tianyi Telecom, matured on August 28, 2008 and fully repaid.
       Bank loan granted by Rural Cooperative Bank, Hougang Branch with                    —                1,369,000
         an interest rate of 9.855% p.a. is guaranteed by Tianyi Telecom,
         matured on January 31, 2008, and fully repaid
       Bank loan granted by Bank of Communications, Zhenjiang Branch at                    —                 410,701
         an interest rate ranging from 7.452% p.a. to 7.884% p.a, guaranteed
         by Tianyi Telecom, matured on February 26, 2008, and fully repaid.
       Bank loan granted by Industrial and Commercial Bank of China,                       —                 136,900
         Danyang Branch at an interest rate ranging from 8.208% p.a. to
         8.964% p.a., secured by machinery of $2,026,204, matured on April
         17, 2008, and fully repaid.
       Bank loan granted by Industrial and Commercial Bank of China,                       —                 136,900
         Danyang Branch at an interest rate ranging from 8.508% p.a. to
         8.964% p.a., secured by machinery of $2,026,204, matured on May
         16, 2008, and fully repaid.
                                                                                $   6,145,202     $         4,107,001


                                                            F-19
TABLE OF CONTENTS

                                    LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007
NOTE 14: SHAREHOLDERS’ EQUITY
    The Company’s Article of Incorporation grants the Board of Directors the authority, without any further vote or action by
stockholders, to issue preferred stock in one or more series, fix the number of shares constituting the series and establish the
preferences, limitations and relative rights, including dividend rights, dividend rate, voting rights, terms of redemption, redemption
price or prices, redemption rights and liquidation preferences of the shares of the series.
Series A Redeemable Convertible Preferred Stock
    On October 31, 2008, the Company entered into and completed a securities purchase agreement (― Private Placement ‖) with
certain accredited investors (the ― Investors ‖) for the issuance and sale by the Company in a private placement of 6,818,182 shares
of our Preferred Stock and Series A warrants to purchase 1,500,000 shares of Common Stock. The Company received $13,656,538
in proceeds from this Private Placement after paying fees and expenses.
   The principal terms of the Preferred Stock are as follows:
    Conversion: At any time on or after our issuance of Preferred Stock, each share of Preferred Stock will be convertible, at the
option of the holder thereof (subject to certain ownership percentage limitations set forth in the Certificate of Designations), into
one share of Common Stock, subject to adjustment from time to time, upon the occurrence of certain events described below. The
rate of conversion (the ― Conversion Rate ‖) is determined by dividing $2.20 per share (the ― Liquidation Preference Amount ‖) by
the conversion price of $2.20 (the ― Conversion Price ‖), subject to adjustment as discussed below.
    In the event the Company does not timely convert and deliver Preferred Stock into shares of Common Stock after request of a
holder to so convert, and the holder must purchase shares of Common Stock, in excess of the price for which the holder sold such
shares, the Company must make a payment in cash to the holder in the amount of the excess paid and the Company will not honor
the conversion request and will reinstate the number of Preferred Stock for which such conversion was not honored.
    If at any time, the Company consummates a bona fide offering of shares of Common Stock of at least $5,000,000, all
outstanding Preferred Stock shall automatically convert to shares of Common Stock (subject to certain ownership percentage
limitations set forth in the Certificate of Designations of the Series A Preferred Stock).
    Liquidation Rights: The Preferred Stock will, in the event of any distributions or payments in the event of the voluntary or
involuntary liquidation, dissolution or winding up of Lihua rank senior to Common Stock and to any other class or series of stock
which may be issued not designated as ranking senior to or pari passu with the Preferred Stock in respect of the right to participate
in distributions or payments upon any liquidation, dissolution or winding up of Lihua. In the event of any voluntary or involuntary
liquidation, dissolution or winding up, the holders of shares of Preferred Stock will be entitled to receive, out of assets available for
distribution to stockholders, an amount equal to the Liquidation Preference Amount before any payment shall be made or any assets
distributed to the holders of Common Stock or any stock which ranks junior to the Preferred Stock. In the event of a liquidation,
dissolution or winding up of Lihua, the rights of holders of Preferred Stock to convert such shares into shares of Common Stock
shall terminate prior to the date fixed for the payment to the holders of Preferred Stock of any amounts distributable to them in the
event of any such liquidation, dissolution or winding up.
    Redemption Rights: None of Preferred Stock may be redeemed without the express written consent of each holder of such
shares. If the Company cannot issue shares of Common Stock upon a conversion because the Company does not have a sufficient
number of shares of Common Stock authorized and available, then with respect to the unconverted Preferred Stock, the holder of
such Preferred Stock, solely at such holder’s option, may require the Company to redeem from such holder those Preferred Stock
with respect to which the

                                                                 F-20
TABLE OF CONTENTS

                                    LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007
NOTE 14: SHAREHOLDERS’ EQUITY – (continued)
Company is unable to issue Common Stock in accordance with such holder’s conversion notice at a price per share payable in cash
equal to one hundred thirty percent of the Liquidation Preference Amount.
   Simultaneously with the occurrence of any merger, consolidation or similar capital reorganization of Common Stock, each
holder of Preferred Stock shall have the right, at such holder’s option, to require the Company to redeem all or a portion of such
holder’s Preferred Stock at a price per share equal to one hundred ten percent of the Liquidation Preference Amount.
    Dividend Rights: Preferred Stock will not be entitled to receive dividends unless the Company pays dividends to holders of
our Common Stock. If the Company pays dividends to holders of Common Stock, holders of Preferred Stock will be entitled to
receive, on each share of Preferred Stock held by them, dividends of equal amount or value as dividends that would have been
payable on the number of underlying shares of Common Stock into which such Preferred Stock would be convertible, if such
shares of Preferred Stock had been converted on the date for determination of holders of Common Stock entitled to receive such
dividends.
    Adjustments to Conversion Price; Conversion Rate and Other Similar Adjustments: The number of shares of Common Stock
into which the Series A Preferred shall be converted, or the Conversion Price, as the case may be, shall be subject to upward or
downward adjustment from time to time, as applicable, in the event of a (i) combination, stock split, recapitalization or
reclassification of the Common Stock, (ii) merger, consolidation or similar capital reorganization of the Common Stock, (iii)
distribution of stock dividends or (iv) issuance of additional shares of Common Stock or securities convertible into Common Stock
at a price less than $2.20.
    Voting Rights: Holders of Preferred Stock shall vote together as a separate class on all matters which impact the rights, value,
or ranking of the Preferred Stock. Holders of Preferred Stock shall vote on an ―as converted‖ basis, together with holders of
Common Stock, as a single class, in connection with any proposal submitted to stockholders to: (i) increase the number of
authorized shares of capital stock, (ii) to approve the sale of any of capital stock, (iii) adopt an employee stock option plan, or (iv)
effect any merger, consolidation, sale of all or substantially all of assets, or related consolidation or combination transaction.
    Conversion Restriction: Holders of Preferred Stock are restricted from converting to Common Stock if the number of shares
of Common Stock to be issued pursuant to such Conversion would cause the number of shares of Common Stock owned by such
holder and its affiliates at such time to equal or exceed 9.9% of the then issued and outstanding shares of Common Stock; provided,
however, that upon a holder of the Series A Preferred providing the Company with sixty-one (61) days notice that such holder
wishes to waive this restriction such holder may be entitled to waive this restriction.
Accounting for Preferred Stock
    Pursuant to the Securities Escrow Agreement entered into by the Company as discussed below, if the Company fails to achieve
certain net income thresholds for fiscal years 2008 and/or 2009, additional shares of the Company’s Common Stock would be
released to the holders of the Preferred Stock. As a result, the holders of the Preferred Stock could acquire a majority of the voting
power of the Company’s outstanding Common Stock. In such a situation, the Company would not be able to control the approval of
―any merger, consolidation or similar capital reorganization of its Common Stock,‖ i.e. events which could trigger the right of
Preferred Stock holder to request for redemption. EITF D-98, ― Classification and Measurement of Redeemable Securities ,‖
provides that preferred securities that are redeemable for cash are to be classified outside of permanent equity if they are
redeemable upon the occurrence of an event that is not solely within the control of the issuer. Therefore, the Preferred Stock have
been classified out of permanent equity in accordance with EITF D-98. For the year ended December 31, 2008, the Company’s net
income was $11,701,879 which

                                                                 F-21
TABLE OF CONTENTS

                                    LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           FOR THE FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007
NOTE 14: SHAREHOLDERS’ EQUITY – (continued)
achieved 95% of the 2008 net income threshold and, according to the terms of the Securities Escrow Agreement, all of the escrow
shares will continue to be held in escrow and no Preferred Share has been released to the preferred stockholders. When the 2009 net
income threshold is also achieved, the Preferred Stock will be reclassified to permanent equity.
Series A Warrants
    In conjunction with the issuance of the Preferred Stock, the Company issued Series A Warrants to purchase up to 1,500,000
shares of Common Stock at an exercise price of $3.50 per share issued and outstanding. The Series A Warrants have a term of
exercise expiring 5 years from October 31, 2008. The Series A Warrants at the option of the holder, may be exercised by cash
payment of the exercise price or, commencing 18 months following the closing of the Private Placement, if the per share market
value of one share of Common Stock is greater than the exercise price and a registration statement under the Securities Act of 1933,
as amended, covering the shares of Common Stock underlying the Series A Warrants is not then declared ineffective by the SEC, in
lieu of exercising the Series A Warrants by payment of cash, a holder may exercise the Series A Warrant by a cashless exercise by
surrender of the Series A Warrant, in which event the Company will issue to the holder a number of shares of our Common Stock
computed using the following formula:




             Where             X=      the number of shares of Common Stock to be issued to the holder.
                               Y=      the number of shares of Common Stock issuable upon exercise of the Series
                                        A Warrant in accordance with the terms of the Series A Warrant by means of
                                        a cash exercise rather than a cashless exercise.
                                A=      the Exercise Price.
                                B=      the per share market value of one share of Common Stock on the trading day
                                        immediately preceding the date of such election.
   The Company will not receive any additional proceeds to the extent that the Series A Warrants are exercised by cashless
exercise.
    The exercise price and number of shares of our Common Stock issuable upon exercise of the Series A Warrants may be
adjusted in certain circumstance, including in the event of a stock dividend, or our recapitalization, reorganization, merger or
consolidation and the issuance of rights to purchase additional shares of our Common Stock or to receive other securities
convertible into additional shares of Common Stock.
    For a period of two years following the original issue date of the Series A Warrants (the ―Full Ratchet Period‖), in the event the
Company issues any additional shares of Common Stock or securities exercisable, convertible or exchangeable for Common Stock
at a price per share less than the exercise price then in effect or without consideration, then the exercise price upon each such
issuance will be adjusted to a price equal to the consideration per share paid for such additional shares of Common Stock.
   No fractional shares will be issued upon exercise of the Series A Warrants. If, upon exercise of a Series A Warrant, a holder
would be entitled to receive a fractional interest in a share, the Company will pay to the holder cash equal to such fraction
multiplied by the then fair market value of one full share.

                                                                F-22
TABLE OF CONTENTS

                                   LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007
NOTE 14: SHAREHOLDERS’ EQUITY – (continued)
    Pursuant to the terms of the Series A Warrants, the Company will not effect the exercise of any Series A Warrant, and no
person who is a holder of any Series A Warrant has the right to exercise the Series A Warrant, to the extent that after giving effect
to such exercise, such person would beneficially own in excess of 9.9% of the then outstanding shares of our Common Stock.
However, the holder is entitled to waive this cap upon 61 days notice to the Company.
    The Company has the right to redeem up to 9.9% of the Series A Warrants at a price equal to $0.01 per share of Common Stock
underlying such warrants if (i) our Common Stock is traded on a national securities exchange, (ii) the daily volume weighted
average price of our Common Stock is above $8.87 for 30 consecutive trading days ending on the date of the notice of redemption,
and (iii) the average daily trading volume for the trading period is greater than 300,000 shares per day; provided, that all shares
underlying such Series A Warrants are registered pursuant to an effective registration statement and the Company simultaneously
calls all of the Series A Warrants on the same terms. The Company will have the right, but not the obligation, to redeem the Series
A Warrants at any time, and from time to time, provided that at such time, the foregoing conditions have been met, but in no event
can the Company redeem the Series A Warrants more than once in any thirty (30) trading day period.
Series B Warrants
    In connection with the Private Placement, Broadband Capital Management, LLC (― Broadband ‖) acted as the Company’s
financial advisor and placement agent. Broadband received Series B warrants to purchase 250,000 shares of the Company’s
Common Stock at an exercise price per share of $3.50.
    On October 31, 2008, the Company issued Series B Warrants to purchase 250,000 shares of the Registrant’s Common Stock at
an exercise price of $3.50 to Penumbra Worldwide Ltd. (― Penumbra ‖). Penumbra is not a broker dealer and the Series B Warrants
were not issued as compensation for underwriting activities, but as compensation for business and investor relations consulting
services performed by Penumbra.
    The Series B Warrants have a term of exercise expiring 5 years from October 31, 2008. The Series B Warrants, at the option of
the holder, may be exercised by cash payment of the exercise price or by ―cashless exercise.‖ The Company will not receive any
additional proceeds to the extent that warrants are exercised by cashless exercise.
    If the per share market value of one share of Common Stock is greater than the exercise price and at the time of election, the
average trading volume of Common Stock exceeds 100,000 shares for the immediately preceding 30 trading days, in lieu of
exercising the Series B Warrant by payment of cash, the holder may exercise the Series B Warrant by cashless exercise by
surrendering the Series B Warrant, in which event the Company will issue to the holder a number of shares of our Common Stock
computed using the following formula:

                                                                F-23
TABLE OF CONTENTS

                                   LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007
NOTE 14: SHAREHOLDERS’ EQUITY – (continued)




             Where:             X=       the number of shares of Common Stock to be issued to the Holder.
                                Y=       the number of shares of Common Stock issuable upon exercise of the Series
                                         B Warrant in accordance with the terms of the Series B Warrant by means
                                         of a cash exercise rather than a cashless exercise.
                                A=       the exercise price.
                                B=       the volume weighted average price of the Common Stock for the 30 trading
                                         day period immediately preceding the date of such election.
    The exercise price and number of shares of Common Stock issuable upon exercise of the warrants may be adjusted in certain
circumstances, including in the event of a stock dividend, or our recapitalization, reorganization, merger or consolidation and the
issuance of rights to purchase additional shares of Common Stock or to receive other securities convertible into additional shares of
Common Stock.
    For a period of two years following the original issue date of the Series B Warrant (the ―Weighted Average Period‖), in the
event the Company issues any additional shares of Common Stock or securities exercisable, convertible or exchangeable for
Common Stock at a price per share less than the exercise price then in effect or without consideration, then the exercise price then
in effect shall be multiplied by a fraction (i) the numerator of which shall be equal to the sum of (x) the number of shares of
outstanding Common Stock immediately prior to the issuance of such additional shares of Common Stock plus (y) the number of
shares of Common Stock (rounded to the nearest whole share) which the aggregate consideration price per share paid for the total
number of such additional shares of Common Stock so issued would purchase at a price per share equal to the exercise price then in
effect and (ii) the denominator of which shall be equal to the number of shares of outstanding Common Stock immediately after the
issuance of such additional shares of Common Stock.
    No fractional shares will be issued upon exercise of the warrants. If, upon exercise of a warrant, a holder would be entitled to
receive a fractional interest in a share, the Company will pay to the holder cash equal to such fraction multiplied by the then fair
market value of one full share.
Accounting for the Warrants
    The Company evaluated the warrants under SFAS 133, ―Accounting for Derivatives,‖ and EITF 00-19, ―Accounting for
Derivative Financial Instruments Indexed to and Potentially Settled in a Company’s Own Stock,‖ and determined that the warrants
are freestanding. Both Series A and Series B Warrants require physical settlement. They do not require net-cash settlement nor do
they give the counterparty a choice of net-cash settlement or settlement in shares. Furthermore, the liquidated damages under the
Registration Rights Agreement as discussed in Note 23, which are capped at 10% of the dollar amount of the Preferred Stock sold,
reasonably represent the difference between the value of a registered share and an unregistered share of the Company’s Common
Stock. Therefore, the Company concluded that Series A and Series B Warrants satisfy all criteria for classification as permanent
equity and have been accounted for as such.
Allocation of Proceeds from Private Placement
    In accordance with EITF 00-27, ― Application of Issue No. 98-5 to Certain Convertible Instruments ,‖ the proceeds from the
Private Placement were first allocated between the Preferred Stock and the warrants issued

                                                                F-24
TABLE OF CONTENTS

                                   LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007
NOTE 14: SHAREHOLDERS’ EQUITY – (continued)
in connection with the Private Placement based upon their estimated fair values as of the closing date, resulting in an aggregate
amount of $539,910 being allocated to the Series A Warrants and the 250,000 Series B Warrants issued to Broadband.
    Then, the fair value of the embedded conversion feature of the Preferred Stock of $1,002,115 was calculated using EITF 98-5
intrinsic value model in accordance with EITF 00-27, ―Application of Issue No. 98-5 to Certain Convertible Instruments,‖ limited
to the amount of the proceeds allocated to the convertible instrument. The intrinsic value of the beneficial conversion feature was
calculated by comparing the effective conversion price, which was determined based on the proceeds from the Private Placement
allocated to the convertible Preferred Stock, and the fair value of the Company’s Common Stock of $2.26 at the commitment date,
which was determined with the assistance of an unrelated valuation firm as further discussed below. The fair value of $1,002,115 of
the beneficial conversion feature has been recognized as a reduction to the carrying amount of the convertible Preferred Stock and
an addition to paid-in capital.
   The following table sets out the accounting for the Preferred Stock:




        Proceeds of the Private Placement (net of fees and expenses)                            $           13,656,538
        Allocation of proceeds to Series A Warrants and 250,000 Series B Warrants                             (539,910 )
        Allocation of proceeds to beneficial conversion feature                                             (1,002,115 )
        Amortization of discount resulting from the accounting for a beneficial conversion                   1,002,115
          feature
        Series A Convertible Preferred Stock at December 31, 2008                               $           13,116,628

    In accordance with Issue 6 of EITF 00-27, the discount on the Preferred Stock resulting from the accounting for a beneficial
conversion feature was amortized and charged to retained earnings, because the Preferred Stock are immediately convertible upon
issuance and have no stated redemption date. Amortization of the discount resulting from the accounting for a beneficial conversion
feature is considered analogous to a return to holders of perpetual preferred stock and has been accounted for as a reduction to net
income available to Common Stock holders for the purpose of calculation of earnings per share.
    The Company has evaluated the circumstances under which the Preferred Stock may become redeemable at the option of
holders and concluded it is not probable that the Preferred Stock will become redeemable. Therefore, no accretion charge has been
recognized regarding any change in the redemption value of the Preferred Stock in accordance with EITF D-98.
    The fair values of Series A and Series B Warrants were determined using the Black-Scholes option pricing method with the
following assumptions:
        Fair value of Common Stock at October 31, 2008:                                            $        2.26
        Exercise price:                                                                            $        3.50
        Contractual life (years):                                                                              5
        Dividend yield:                                                                                       —
        Expected volatility:                                                                               31.61 %
        Risk-free interest rate:                                                                            2.79 %
   The Company’s Common Stock is not publicly traded. The Company has determined that its Common Stock had a fair value of
$2.26 per share at October 31, 2008 based on a retrospective valuation performed by an unrelated valuation firm, Grant Sherman
Appraisal Limited. The valuation has been prepared consistent with the methods outlined in the American Institute of Certified
Public Accountants Practice Aids, ― Valuation of Privately-Held Company Equity Securities Issued as Compensation. ‖
   The Company is a group of entities comprising Lihua International Inc., Ally Profit, Lihua Holdings, Lihua Copper and Lihua
Electron, for which different valuation approaches have been considered and used.

                                                             F-25
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                                    LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007
NOTE 14: SHAREHOLDERS’ EQUITY – (continued)
    Because Lihua International, Inc., Ally Profit and Lihua Holding are holding companies only and have no revenue, both market
and income approaches have been considered not applicable, and only an asset-based approach has been applied. Lihua Copper has
not generated revenue and has little expense history. Accordingly, both market and income approaches have been considered
inappropriate and the asset-based approach has been applied.
    Because Lihua Electron has an established financial history of profitable operations and generation of positive cash flows, an
income approach has been applied using the discounted cash flow method. The Company developed a discounted cash flow
analysis based on the Company’s projected cash flows from 2009 through 2011, including, among other things, the Company’s
estimates of future revenue growth, gross margins, capital expenditures and working capital requirements, driven by assumed
market growth rates, and estimated costs as well as appropriate discount rates. The market approach was not applied because it is
concluded that there was significant limitation in identifying true comparable enterprises with readily determinable fair values.
   As the Company’s stock is not publicly traded, historical volatility information is not available. In accordance with SFAS No.
123R, ― Accounting for Stock-Based Compensation ,‖ with the assistance of an unrelated valuation firm, Grant Sherman Appraisal
Limited, the Company identified five similar public entities for which share and option price information was available, and
considered the historical volatilities of those public entities’ share prices in calculating the expected volatility appropriate to the
Company (i.e. the calculated value). The risk-free rate of return reflects the interest rate for United States Treasury Note with
similar time-to-maturity to that of the warrants.
   The fair value of $90,000 of the 250,000 Series B Warrants issued to Penumbra for services was charged to operations for the
year ended December 31, 2008.
NOTE 15: SHARE-BASED COMPENSATION
Make Good Escrow Agreement
    In conjunction with the Private Placement, the Company also entered into a make good escrow agreement with the Investors
(the ― Securities Escrow Agreement ‖), pursuant to which Magnify Wealth initially placed 6,818,182 of Common Stock (equal to
100% of the number of shares of Common Stock underlying the Investor Shares) (the ― Escrow Shares ‖) into an escrow account.
The Escrow Shares are being held as security for the achievement of $12 million in audited net income and $0.50 earnings per
share for the fiscal year 2008 (the ― 2008 Performance Threshold ‖) and $18 million in audited net income and $0.76 earnings per
share for the fiscal year 2009 (the ― 2009 Performance Threshold ‖). The calculation of earnings per share of $0.76 for the fiscal
year 2009 shall exclude up to $5,000,000 in shares of Common Stock issued in a bona fide initial public offering, however, any
shares issued in excess of $5,000,000 shall be included in the calculation of earnings per share for the fiscal year 2009. If the
Company achieves the 2008 Performance Threshold and the 2009 Performance Threshold, the Escrow Shares will be released back
to Magnify Wealth. If either the 2008 Performance Threshold or 2009 Performance Threshold is not achieved, an aggregate number
of Escrow Shares (such number to be determined by the formula set forth in the Securities Escrow Agreement) will be distributed
to the Investors, based upon the number of Investor Shares (on an as converted basis) purchased in the Private Placement and still
beneficially owned by such Investor, or such successor, assign or transferee, at such time. If less than 50% of the 2008 or 2009
Performance threshold is achieved, based on the formula set forth in the Securities Escrow Agreement, a certain amount of Escrow
Shares may be released. If the Company achieves at least 50% but less than 95% of the 2008 or 2009 performance thresholds,
based on the formula set forth in the Securities Escrow Agreement, a certain number of Escrow shares may be released. If the
Company achieves at least 95% of either the 2008 or 2009 performance thresholds, the Escrow shares will continue to be held in
escrow. If any Investor transfers Investor Shares purchased pursuant to the Purchase Agreement, the rights to the Escrow Shares
shall similarly transfer to such transferee, with no further action

                                                                 F-26
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                                    LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007
NOTE 15: SHARE-BASED COMPENSATION – (continued)
required by the Investor, the transferee or the Company. Pursuant to the Securities Escrow Agreement, if any Escrow Shares are
delivered to Investors as a result of the Company’s failure to fully achieve the 2008 Performance Thresholds, Magnify Wealth shall
deliver that number of additional shares of Common Stock as is necessary to maintain 100% of the number of original Escrow
Shares in the escrow account at all times. With respect to the 2008 and 2009 performance thresholds, net income shall be defined in
accordance with US GAAP and reported by us in the Company’s audited financial statements for each of 2008 and 2009, plus any
amounts that may have been recorded as charges or liabilities on the 2008 and 2009 audited financial statements, respectively, as a
result of (i) the Private Placement, including without limitation, as a result of the issuance and/or conversion of the Investor Shares,
(ii) the release of the Escrow Shares to the Magnify Wealth pursuant to the terms of the Escrow Agreement, (iii) the issuance of
ordinary shares held by the sole shareholder of Magnify Wealth to Mr. Zhu upon the exercise of options granted to Mr. Zhu by
shareholder of Magnify Wealth, as of the date thereof.
    According to the Accounting Interpretation and Guidance of the staff of the SEC, the placement of shares in escrow is viewed
as a recapitalization similar to a reverse stock split. The agreement to release the shares upon achievement of certain criteria is
presumed to be a separate compensatory arrangement with the Company. Accordingly, when the Escrow Shares are released back
to Magnify Wealth, an expense equal to the amount of the grant-date fair value of $2.26 per share of the Company’s Common
Stock as of October 31, 2008, or the date of the Securities Escrow Agreement will be recognized in the Company’s financial
statements in accordance with SFAS No. 123R, ― Accounting for Stock-Based Compensation .‖ Otherwise, if the net income
threshold is not met and the Escrow Shares are released to the investors instead, it will be accounted for as a capital transaction with
the investors resulting in no income or expense being recognized in the Company’s financial statements.
    For the year ended December 31, 2008, the Company’s net income was $11,701,879 which achieved 95% of the 2008
performance threshold. All of the Escrow Shares will continue to be held in escrow and none has yet been released to either
Magnify Wealth or the Investors. As the release of the Escrow Shares requires the attainment of the performance thresholds for
both 2008 and 2009, the Company will only commence to recognize compensation expense around the middle of fiscal year 2009
when the Company will be able to evaluate whether it is probable that the Company will achieve the 2009 performance threshold to
provide for the ultimate release of the Escrow Shares back to Magnify Wealth. For the year ended December 31, 2008, no
compensation expense has been recognized on the make good arrangement. If the 2009 performance threshold is also met and all of
the Escrow Shares are released back to Magnify Wealth, a compensation expense of $15,409,091 will be recognized in fiscal year
2009.
Share-based payments awarded to employees by a shareholder
   Pursuant to a contractual arrangement between Magnify Wealth and Mr. Yang ―Roy‖ Yu, our Chief Financial Officer (CFO),
Mr. Yu is entitled to receive up to 450,000 shares of the Company’s Common Stock issued to Magnify Wealth in the Share
Exchange as discussed in Note 1. 112,500 of such shares were transferred to Mr. Yu immediately upon consummation of the Share
Exchange. As of December 31, 2008, the remaining 337,500 shares have remained in an escrow account and shall be released to
Mr. Yu in three equal installments of 112,500 shares issuable on the first, second and third anniversary of the consummation of the
Share Exchange.
  Also immediately upon consummation of the Share Exchange, 50,000 shares of our Common Stock were transferred from
Magnify Wealth to an employee for services rendered to the Company.
    In accordance with paragraph 11 of SFAS 123(R), the Company charged $367,250 to operations based on the grant-date fair
value of $2.26 per share of the Company’s Common Stock as of October 31, 2008, or the

                                                                F-27
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                                   LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007
NOTE 15: SHARE-BASED COMPENSATION – (continued)
date of the Share Exchange, of the 162,500 shares transferred to the Company’s CFO and employee. The fair value of the
remaining 337,500 shares still held in escrow and to be released to Mr. Yu will be charged to operations as and when they vest.
NOTE 16: CAPITAL INJECTION
    The capital injection represented the increase in registered capital of the operating subsidiaries of the Company by way of cash.
It has been classified as a movement of additional paid-in capital in the consolidated statement of equity being an effect of the
Restructuring described in Note 1.
NOTE 17: STATUTORY RESERVES
     In accordance with the PRC Companies Law, the Company’s PRC Operating Companies were required to transfer 10% of their
profits after tax, as determined in accordance with accounting standards and regulations of the PRC, to the statutory surplus reserve
and a percentage of not less than 5%, as determined by management, of the profits after tax to the public welfare fund. With the
amendment of the PRC Companies Law which was effective from January 1, 2006, enterprises in the PRC were no longer required
to transfer any profit to the public welfare fund. Any balance of public welfare fund brought forward from December 31, 2005
should be transferred to the statutory surplus reserve. The statutory surplus reserve is non-distributable.
NOTE 18: OTHER INCOME




                                                                                               Year ended December 31,
                                                                                                 2008               2007
        Sale of metal scraps                                                              $        3,741       $    —
NOTE 19: INCOME TAXES
    The PRC Operating Companies within the Group are subject to PRC income taxes on an entity basis on income arising in or
derived from the tax jurisdiction in which they operate, i.e. the PRC. In accordance with the relevant tax laws in the PRC, the
Company’s subsidiary, Danyang Lihua, is subject to an enterprise income tax (―EIT‖) rate of 24% on its taxable income for the
year ended December 31, 2007 since it is located in economic development zone. However, Danyang Lihua is a production-based
foreign investment enterprise and granted an EIT holiday for the two years ended December 31, 2006 and 2005 and a 50%
reduction on the EIT rate for the three years ended December 31, 2007, 2008 and 2009.
    On March 16, 2007, the PRC government promulgated a new tax law, China’s Unified Enterprise Income Tax Law (―New EIT
Law‖), which took effect from January 1, 2008. Under the New EIT Law, foreign-owned enterprises as well as domestic companies
are subject to a uniform tax rate of 25%. The New EIT Law provides a five-year transition period from its effective date for those
enterprises which were established before the promulgation date of the New EIT Law and which were entitled to a preferential EIT
treatment. Accordingly, Danyang Lihua will continue to be entitled to the 50% reduction on its EIT rate for the two years ended
December 31, 2008 and 2009.
   The Company’s provision for income taxes consisted of:
                              Year ended December 31,
                           2008                         2007
Current – PRC          $   1,815,703        $            1,089,107
Deferred                     (23,022 )                          —
                       $   1,792,681        $            1,089,107


                F-28
TABLE OF CONTENTS

                                   LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           FOR THE FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007
NOTE 19: INCOME TAXES – (continued)
    A reconciliation of the provision for income taxes determined at the local income tax to the Company’s effective income tax
rate is as follows:




                                                                                       Year ended December 31,
                                                                                2008                             2007
        Pre-tax income                                                $        13,494,560           $            8,812,795

        United States statutory corporate income tax rate                                  34 %                          34 %

        Income tax computed at United States statutory corporate                4,588,150                        2,996,350
          income tax rate
        Reconciling items:
        Impact of tax holiday of Danyang Lihua                                 (1,802,095 )                      (1,058,466 )
        Loss not recognized as deferred tax assets                                275,346                                —
        Rate differential for PRC earnings                                     (1,282,406 )                        (881,279 )
        Non-deductible expenses                                                    13,686                            32,502
        Effective tax expense                                         $         1,792,681           $             1,089,107

NOTE 20: EARNINGS PER SHARE
    Basic earnings per common share is computed by dividing income available to common shareholders by the weighted average
number of common shares outstanding for the period. Diluted income per common share is computed similarly to basic income per
common share except that the denominator is increased to include the number of additional common shares that would have been
outstanding if the potentially dilutive common shares had been issued.
    The following table is a reconciliation of the net income and the weighted average shares used in the computation of basic and
diluted earnings per share for the periods presented:
                                                                   Year ended December 31,
                                                                 2008                        2007
Income available to Common Stock holders:
  Net income                                                $   11,701,879       $            7,723,688
  Amortization of Preferred Stock discount resulting from       (1,002,115 )                         —
    beneficial conversion feature (see Note 14)
  Basic                                                     $   10,699,764       $            7,723,688

  Diluted                                                   $   10,699,764       $            7,723,688

Weighted average number of shares:
 Basic                                                          14,187,945                   14,025,000
 Effect of dilutive convertible preferred stock                  1,139,477                           —
 Diluted                                                        15,327,422                   14,025,000

Net income per share
  Basic                                                     $           0.75     $                  0.55

  Diluted                                                   $           0.70     $                  0.55


                                                    F-29
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                                  LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           FOR THE FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007
NOTE 21: RELATED PARTY TRANSACTIONS
(1) Due from/to related parties




                                                                                 Year ended December 31,
                                                                               2008                2007
        Due from related parties:
        Accounts receivable from Jiangsu Dongya Electronic Co.,      (a)   $          —    $          719,060
          Ltd (―Dongya Electronic‖)
        Advance to Danyang Jintao Copper Industry Co., Ltd           (a)              —             3,244,531
          (―Jintao Copper‖)
        Total                                                              $          —    $        3,963,591

        Due to related parties:
        Advances from:
        Tianyi Telecom                                               (a)   $          —    $        2,258,851
        Danyang Special Electronic Co., Ltd (―Special Electronic‖)   (b)              —                90,080
        Mr. Jianhua Zhu                                              (c)              —                22,472
                                                                                      —             2,371,403
        Share acquisition payable to Special Electronic on           (b)              —             1,150,000
          restructuring
        Total                                                              $          —    $        3,521,403
(a) The shareholders of these companies have close relationship with the Company’s key management.
(b) This company is under the same management as the Company.
(c) Mr. Zhu is the CEO and Chairman of the Company.
   Accounts receivable from Dongya Electronic arose from sale of copper clad aluminum (―CCA‖) fine wire.
   Advance to Jintao Copper was interest-free and secured by shares of Jintao Copper.
   Advances from Tianyi Telecom and Special Electronics were interest-free and unsecured.
    Advance from Mr. Zhu bore interest at 6.03% to 6.57% per annum and was unsecured. Interest paid to Mr. Zhu was
insignificant for fiscal years 2008 and 2007.
   By the end of December 2008, all amounts due from (to) related parties were fully settled.
(2) Sales
    For the years ended December 31, 2008 and 2007, the sales included $367,585 and $805,253, respectively that were made from
Tianyi Telecom and Dongya Electronic. The shareholders of these companies have close relationship with the Company’s key
management.
(3) Guarantees
    For the year ended December 31, 2008, Tianyi Telecom provided guarantees for the Company’s short-term bank loans of
$6,145,202. (See Note 13 above)
NOTE 22: CONCENTRATION OF RISKS
Credit risk
   As of December 31, 2008 and 2007, 100% of the Company’s cash included cash on hand and deposits in accounts maintained
within the PRC where there is currently no rule or regulation in place for obligatory

                                                              F-30
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                                   LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           FOR THE FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007
NOTE 22: CONCENTRATION OF RISKS – (continued)
insurance to cover bank deposits in the event of bank failure. However, the Company has not experienced any losses in such
accounts and believes it is not exposed to any significant risks on its cash in bank accounts.
    For the years ended December 31, 2008 and 2007, all of the Company’s sales arose in the PRC. In addition, all accounts
receivable as of December 31, 2008 and 2007 were due from customers located in the PRC.
   As of December 31, 2008, there was one customer who accounted for 14.4% of the accounts receivable of the Company. As of
December 31, 2007, besides Dongya Electronic, a related company, which accounted for 13.4% of the accounts receivable of the
Company, there are four customers who accounted for 14.1%, 12.2%, 12.0% and 10.3% of the accounts receivable of the
Company. Except for the afore-mentioned, there was no other single customer who accounted for more than 10% of the Company’s
accounts receivable as of December 31, 2008 or 2007. There was no single customer who constituted more than 10% of the
Company’s revenue for the years ended December 31, 2008 or 2007.
Risk arising from operations in foreign countries
     Substantially all of the Company’s operations are conducted in China. The Company’s operations are subject to various
political, economic, and other risks and uncertainties inherent in China. Among other risks, the Company’s operations are subject
to the risks of restrictions on transfer of funds; export duties, quotas, and embargoes; domestic and international customs and
tariffs; changing taxation policies; foreign exchange restrictions; and political conditions and governmental regulations.
NOTE 23: COMMITMENTS AND CONTINGENCIES
Capital commitment




        Contracted but not provided for:
        Purchase of machinery – within one year                                                  $             910,125
        Acquisition or construction of buildings – within one year                                           1,049,895
                                                                                                 $           1,960,020

Agreements in Conjunction with the Private Placement
    Escrow Agreements: In conjunction with the Private Placement as discussed in Note 14, the Company entered into an escrow
agreement with the Investors (the ― Closing Escrow Agreement ‖), pursuant to which the Investors deposited the funds in the
aggregate amount of $15,000,000 for the purchase and sale of the Investor Shares (the ―Escrowed Funds‖) into an escrow account
which was disbursed at the closing of the Private Placement. Pursuant to the Closing Escrow Agreement, $1,000,000 of the
Escrowed Funds were not released from the escrow account (the ― Held Back Escrow Funds ‖) until the escrow agent received
written notice that the Company had caused Lihua Copper to fulfill one hundred percent of its registered capital obligation of
$15,000,000 no later than 90 days from the closing date, as well as comply with other covenants.
    Before December 31, 2008, the registered capital of $15,000,000 of Lihua Copper was fully paid up, as certified and approved
by the relevant PRC business authority.
   Additionally, the Company entered into a public relations escrow agreement with the Investors (the ― Public Relations Escrow
Agreement ‖), pursuant to which the Company agreed to deposit $750,000 in an escrow account (the ― Public Relations Escrowed
Funds ‖). $125,000 from the Public Relations Escrowed Funds shall be released when the Company appoint a Vice President of
Investor Relations, an additional $250,000 shall be released once the Company has complied with all Nasdaq Corporate
Governance standards, and the remaining $375,000 shall be released as invoices become due for the purpose of any investor and
public relations activities. As negotiated with Vision Opportunity China L.P. (―Vision‖), the lead investor in

                                                             F-31
TABLE OF CONTENTS

                                    LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007
NOTE 23: COMMITMENTS AND CONTINGENCIES – (continued)
the Private Placement who wishes to ensure that quality firms handle certain affairs of the Company, if the Company fails to timely
comply with the foregoing obligations, or fail to fulfill a request to change the Company’s auditor upon such request by any holder
of five percent of our Common Stock in the aggregate on a fully diluted basis, or fail to hire an internal control consultant
acceptable to Vision within three months of the Closing Date, the Company will pay liquidated damages of 0.5% of the aggregate
purchase price paid by for the Investor Shares on the expiration date to comply with such covenant and for each 30 day period
thereafter, up to 10% of the aggregate purchase price, which the Investors may require that the Company pay from the Public
Relations Escrowed Funds. In the event such liquidated payments are made, the Company shall return an amount equal to the
amount of liquidated damages paid, back into the Public Relations Escrow Funds.
    On February 11, 2009, the parties to the Escrow Agreement entered into a First Supplement to the Escrow Agreement pursuant
to which it was agreed (i) to release $800,000 of the Held Back Escrow Funds to the Company for having complied with all of the
Held Back Release Conditions within 90 days of the Closing Date, and (ii) to hold $200,000 of the Held Back Escrow Funds to
cover any contingent liabilities relating to unpaid employee social insurance and housing payments from periods prior to 2009. The
$200,000 is to be held in escrow until June 30, 2010 to cover any claims from employees relating to the unpaid costs. $800,000 was
released from escrow to the Company on March 4, 2009.
    Pursuant to the Private Placement, the Company also has an obligation to have its shares of Common Stock listed on a national
securities exchange no later than October 31, 2009 (the ― Listing Date ‖). In the event that the Company does not list on a national
securities exchange in the proscribed time period and manner provided for in the Purchase Agreement, then the Ally Profit
Shareholder shall transfer 750,000 shares (the ― Listing Penalty Shares ‖) of Common Stock to the Investors, with no additional
consideration due from the Investors. However, if the Company is requested by certain Investors to have its shares of Common
Stock quoted on the Over-the-Counter Bulletin Board (― OTCBB Demand ‖) prior to the Listing Date, the Company shall do so and
then the Company will have an additional 18 months to list on a national securities exchange. If the Company fails to comply with
the OTCBB Demand in a timely manner or, to then list on a national securities exchange within the 18 month period, the Listing
Penalty Shares shall be transferred to the Investors.
    The Company’s contingent obligations to pay liquidated damages under the Closing Escrow Agreement, Public Relations
Escrow Agreement and the Securities Purchase Agreement, and to deliver Listing Penalty Shares will be recognized and measured
separately in accordance with SFAS 5, ―Accounting for Contingencies,‖ and FASB Interpretation No. 14, ―Reasonable Estimation
of the Amount of a Loss.‖ Any loss recognized on a probable delivery of Listing Penalty Shares will be measured based on the
grant-date fair value of the shares as of October 31, 2008, or the date of the Securities Purchase Agreement between the Company
and certain investors. The Company believes that it has fulfilled its obligations under the agreements in conjunction with the
Private Placement up to December 31, 2008, therefore no liquidated damages have been accrued.
     Registration Rights Agreement: In connection with the Private Placement, the Company entered into a registration rights
agreement with the Investors in which the Company agreed to file on the 45 th day following the Closing Date a registration
statement with the SEC to register for resale (i) the Investor Shares, (ii) shares of our Common Stock underlying the Series A
Warrants and Series B Warrants (the ―Registrable Securities), (iii) shares of Common Stock issuable in connection with
anti-dilution provisions in the Certificate of Designation and the Series A Warrants and Series B Warrants, (iv) Common Stock
owned by the shareholders of Lihua prior to the Share Exchange, (v) shares of Common Stock issuable upon any stock split,
dividend or other distribution recapitalization or similar event and (vi) the Listing Penalty Shares and Escrow Shares upon demand.
The Company has agreed to use our best efforts to have the registration statement declared effective within 105 calendar days of
filing, or 135 calendar days of filing in the case of a full review by the SEC. We are required to keep the registration statement
continuously effective under the Securities Act for an effectiveness period to end on the earlier of the date when all of the securities
covered by the registration statement

                                                                 F-32
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                                   LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            FOR THE FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007
NOTE 23: COMMITMENTS AND CONTINGENCIES – (continued)
have been sold or the date on which such securities may be sold without any restriction pursuant to Rule 144. The Company will
pay liquidated damages of 1% of the dollar amount of the Preferred Stock sold in the Private Placement per month, payable in cash,
up to a maximum of 10%, if the registration statement is not filed or declared effective within the foregoing time periods or ceases
to be effective prior to the expiration of the effectiveness period. However, no liquidated damages are to be paid with respect to any
Registrable Securities that the Company is not permitted to include in the registration statement due to the SEC’s application of
Rule 415. Upon the demand of an Investor or Investors owning in the aggregate at least 50% of the Listing Penalty Shares or
Escrow Shares, the Company shall file another registration statement covering those shares and any other Registrable Securities
that remain unregistered at the time of such demand.
    The Company accounts for the Registration Rights Agreement in accordance with FSP EITF 00-19-2, ―Accounting fro
Registration Payment Arrangements.‖ The Company’s contingent obligation to make liquidated damages under the Registration
Rights Agreement will be recognized and measured separately in accordance with SFAS 5, ―Accounting for Contingencies,‖ and
FASB Interpretation No. 14, ―Reasonable Estimation of the Amount of a Loss.‖ If it is probable that the Company will be required
to make any payments to the investors for non-fulfillment of the conditions provided for in the Registration Rights Agreement, an
estimate of the contingent payment will be made and accrued for in the Company’s financial statements. At December 31, 2008, no
liquidated damages have been accrued.
Restructuring and Share Exchange
   On August 8, 2006, six PRC regulatory agencies, namely the MOFCOM, the State Assets Supervision and Administration
Commission (SASAC), the State Administration for Taxation, the State Administration for Industry and Commerce, the China
Securities Regulatory Commission (CSRC) and SAFE jointly adopted the Regulations on Mergers and Acquisitions of Domestic
Enterprises by Foreign Investors (―M&A Rule‖), which became effective on September 8, 2006. The M&A Rule requires offshore
companies and offshore special vehicles (―SPVs‖) formed for overseas listing purposes through acquisitions of PRC domestic
companies and controlled by PRC companies or individuals, to obtain the approval of the CSRC prior to publicly listing their
securities on an overseas stock exchange.
    The CSRC currently has not issued any definitive rule concerning whether the transactions effected by the Restructuring or the
Share Exchange, as described in Note 1, are subject to the M&A Rule and its related clarifications. The Company believes there are
substantial uncertainties regarding the interpretation and application of the M&A Rule, and CSRC has yet to promulgate any
written provisions or to formally declare whether the overseas listing of a PRC-related company similar to the Company is subject
to the approval of CSRC. If CSRC approval was required in connection with the Share Exchange, the Company’s failure to obtain
or delay in obtaining such approval could result in penalties imposed by CSRC and other PRC regulatory agencies. These penalties
could include fines and penalties on the Company’s operations in China, restrictions or limitations on remitting dividends outside
of China, and other forms of sanctions that may cause a material and adverse effect to the Company’s business, operations and
financial conditions.
      However, the Company does not believe that any of the provisions of the M&A Rule or other PRC laws and regulations would
allow or authorize the CSRC or other PRC governmental departments to unwind the Share Exchange. The Company also believes
that the M&A Rule does not apply to the Restructuring and therefore CSRC approval was not required because (i) the
Restructuring was a purely foreign related transaction governed by foreign laws, not subject to the jurisdiction of PRC laws and
regulations; (ii) Magnify Wealth is not a special purpose vehicle formed or controlled by PRC companies or PRC individuals, (iii)
Magnify Wealth is owned or substantively controlled by foreigners, (iv) conversion of Lihua Electron and Lihua Copper from a
joint venture to a wholly foreign owned enterprise is not subject to the M&A Rule. The Company believes it is not probable that
the CSRC or other PRC regulatory agencies might impose fines and penalties on the Company and therefore the Company has not
accrued any amount related to this contingency.

                                                                F-33
TABLE OF CONTENTS


Yu and Associates CPA Corporation (member of GC Alliance




Group)

Certified Public Accountants, Management Consultants




         Director, Consultant:           Manager:                    Member:                      Registered:
         K.K. YU MBA., CPA .             Aswin Indradjaja            American Institute of CPAs   Public Company Accounting
         Frank T. Murphy CPA .           Debbie Wang MBA .           California Society of CPAs    Oversight Board
                                         Ava Yim CPA .               Center For Audit Quality
                                         Roy Yun CPA .

                      REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Ally Profit Investments Limited and subsidiaries:
    We have audited the accompanying consolidated balance sheets of Ally Profit Investments Limited and subsidiaries (the
―Company‖) as of December 31, 2007 and 2006 and the related consolidated statements of income and comprehensive income,
stockholders’ 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 the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 audit 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. Accordingly, we express no such opinion. An audit also
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 Ally Profit Investments Limited and subsidiaries as of December 31, 2007 and 2006, the consolidated 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.
/s/ Yu and Associates CPA Corporation (presently known as AGCA, Inc.)
Arcadia, California
June 25, 2008 (except for note 14 which is dated February 11, 2009)


                                  411 E. Huntington Drive, Suite 308, Arcadia, CA 91006
         Phone: (626) 446-4000 • Fax: (626) 446-4002 • E-mail: info@yucpausa.com • Web-site: www.yucpausa.com

                                                                F-34
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                           ALLY PROFIT INVESTMENTS LIMITED AND SUBSIDIARIES
                           (predecessor and accounting acquirer of Lihua International, Inc.)

                         CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2006
                                 (AMOUNTS EXPRESSED IN US DOLLAR)




                                            ASSETS
       CURRENT ASSETS:
        Cash and cash equivalents                                                             $     890,479
        Accounts receivable, net                                                                  1,240,916
        Other receivables                                                                            23,164
        Inventories                                                                               1,251,323
          Total current assets                                                                    3,405,882
       OTHER ASSETS:
        Buildings, machinery and equipment, net                                                   5,130,513
        Deposits for buildings, machinery and equipment                                             896,436
          Total non-current assets                                                                6,026,949
          Total assets                                                                        $   9,432,831

                          LIABILITIES AND SHAREHOLDERS’ EQUITY
       CURRENT LIABILITIES:
         Accounts payable                                                                     $   1,921,346
         Other payables and accruals                                                                489,020
         Due to related parties                                                                   1,123,496
           Total current liabilities                                                              3,533,862
           Total liabilities                                                                      3,533,862
       COMMITMENTS AND CONTINGENCIES (Note 13)
       SHAREHOLDERS’ EQUITY:
         Common Stock, $1 par, 50,000 authorized, 100 shares issued and outstanding                     100
         Additional paid-in capital                                                                  50,000
         Statutory reserves                                                                         570,193
         Retained earnings                                                                        5,131,736
         Accumulated other comprehensive income                                                     146,940
           Total shareholders’ equity                                                             5,898,969
           Total liabilities and shareholders’ equity                                         $   9,432,831



                                See accompanying notes to consolidated financial statements
F-35
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                           ALLY PROFIT INVESTMENTS LIMITED AND SUBSIDIARIES
                           (predecessor and accounting acquirer of Lihua International, Inc.)

                 CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
                             FOR THE YEAR ENDED DECEMBER 31, 2006
                               (AMOUNTS EXPRESSED IN US DOLLAR)




       NET REVENUE                                                                    $          15,749,722
       Cost of sales                                                                            (10,648,955 )
       GROSS PROFIT                                                                               5,100,767
       Selling expenses                                                                            (229,620 )
       General and administrative expenses                                                         (336,045 )
       Income from operations                                                                     4,535,102
       Other income                                                                                   2,651
       Interest income                                                                                4,025
       Interest expenses                                                                            (42,859 )
       Income before income taxes                                                                 4,498,919
       Provision for income taxes                                                                        —
       NET INCOME                                                                                 4,498,919
       OTHER COMPREHENSIVE INCOME:
       Foreign currency translation adjustments                                                     142,090
       TOTAL COMPREHENSIVE INCOME                                                     $           4,641,009



                                 See accompanying notes to consolidated financial statements

                                                           F-36
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                           ALLY PROFIT INVESTMENTS LIMITED AND SUBSIDIARIES
                           (predecessor and accounting acquirer of Lihua International, Inc.)

                          CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
                                FOR THE YEAR ENDED DECEMBER 31, 2006
                                  (AMOUNTS EXPRESSED IN US DOLLAR)




                         Common Stock      Additional     Statutory       Retained        Accumulated          Total
                                            Paid-in       Reserves        Earnings           Other
                                            Capital                                      Comprehensive
                                                                                            Income
                        Number   Amount
                          of
                        Shares
BALANCE, January 1,      100     $ 100    $ 50,000      $ 120,301     $   1,082,709     $         4,850   $   1,257,960
 2006
 Net income               —         —             —            —          4,498,919                 —         4,498,919
 Appropriation of         —         —             —       449,892          (449,892 )               —                —
   statutory reserves
 Foreign currency         —         —             —              —               —              142,090        142,090
   translation
   adjustment
BALANCE, December        100     $ 100    $ 50,000      $ 570,193     $   5,131,736     $       146,940   $   5,898,969
31, 2006



           See accompanying notes to consolidated financial statements

                                     F-37
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                            ALLY PROFIT INVESTMENTS LIMITED AND SUBSIDIARIES
                            (predecessor and accounting acquirer of Lihua International, Inc.)

                                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    FOR THE YEAR ENDED DECEMBER 31, 2006
                                     (AMOUNTS EXPRESSED IN US DOLLAR)




       CASH FLOWS FROM OPERATING ACTIVITIES:
       Net income                                                                        $       4,498,919
       Adjustments to reconcile net income to cash provided by operating activities:
          Depreciation and amortization                                                            332,456
       (Increase) decrease in assets:
          Accounts receivable                                                                     (752,099 )
          Other receivables                                                                        106,899
          Inventories                                                                             (439,417 )
          Trade receivables due from related parties                                                31,424
       Increase (decrease) in liabilities:
          Accounts payable                                                                       1,397,978
          Other payables and accruals                                                              436,334
          Trade payable due to related parties                                                    (343,577 )
       Net cash provided by operating activities                                                 5,268,917
       CASH FLOWS FROM INVESTING ACTIVITIES:
       Purchase of buildings, machinery and equipment                                            (4,854,852 )
       Net cash used in investing activities                                                     (4,854,852 )
       CASH FLOWS FROM FINANCING ACTIVITIES:
       Advances from related parties                                                               129,218
       Net cash provided by financing activities                                                   129,218
       Foreign currency translation adjustment                                                     109,763
       INCREASE IN CASH AND CASH EQUIVALENTS                                                       653,046
       CASH AND CASH EQUIVALENTS, at the beginning of the year                                     237,433
       CASH AND CASH EQUIVALENTS, at the end of the year                                 $         890,479

       SUPPLEMENTAL DISCLOSURE INFORMATION
       Interest paid                                                                     $           42,859
       Income taxes paid                                                                 $               —


                                 See accompanying notes to consolidated financial statements

                                                             F-38
TABLE OF CONTENTS

                             ALLY PROFIT INVESTMENTS LIMITED AND SUBSIDIARIES
                             (predecessor and accounting acquirer of Lihua International, Inc.)

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    FOR THE YEAR ENDED DECEMBER 31, 2006
NOTE 1: DESCRIPTION OF BUSINESS AND ORGANIZATION
      Ally Profit Investments Limited (―Ally Profit‖) was incorporated in the British Virgin Island on March 12, 2008 under the
Business Companies Act, 2004. Ally Profit is a BVI investment holding company and has not carried on any substantive operations
of its own. Ally Profit is wholly owned by Magnify Wealth Enterprise Limited (―Magnify Wealth‖), a company also incorporated
in BVI.
    Pursuant to a restructuring plan intended to ensure compliance with regulatory requirements of the People’s Republic of China
(―PRC‖), in June 2008, Ally Profit, through Lihua Holdings Limited (―Lihua Holdings‖, a wholly-owned subsidiary of Ally Profit),
entered into agreements to acquire 100% equity interests in Danyuang Lihua Electron Co., Ltd. and Jiangsu Lihua Copper Industry
Co., Ltd. (together ―Operating Subsidiaries‖) from companies controlled by Mr. Jianhua Zhu (―Mr. Zhu‖) and other minority
shareholders.
    During the restructuring and throughout the year ended December 31, 2006, the Operating Subsidiaries had always been under
the operating and management control of Mr. Zhu, who is also the sole director of both Ally Profit and Lihua Holdings.
    As part of the restructuring plan, Mr. Fo-Ho Chu (―Mr. Chu‖) the sole shareholder of Magnify Wealth undertook to Mr. Zhu
that no further directors would be appointed to the board of Magnify Wealth or Ally Profit or Lihua Holdings without the prior
written consent of Mr. Zhu. Furthermore, Mr. Zhu and Mr. Chu entered into a letter of intent (―Letter of Intent‖), pursuant to which
Mr. Zhu will enter into a formal share transfer agreement (the ―Potential Share Transfer Agreement‖) with Mr. Chu. The Letter of
Intent stipulates that the Potential Share Transfer Agreement will provide for Mr. Chu to grant to Mr. Zhu the option to purchase all
of the issued and outstanding ordinary shares of Magnify Wealth held by Mr. Chu (the ―Option Shares‖) such that the Option
Shares will vest and become exercisable upon the Operating Subsidiaries attaining certain consolidated net income performance
targets for fiscal 2008, 2009, and 2010. If the performance targets are met, the Option Shares will vest and become exercisable
during the period up to 2010. If all of the Option Shares vest and are exercised by Mr. Zhu, Mr. Zhu will become the ultimate sole
shareholder of Ally Profit, thereby regaining the ultimate legal ownership of the Operating Subsidiaries.
    During this reorganization, the Operating Subsidiaries continued to be under the common operating and management control of
Mr. Zhu. Because of this common operating and management control, this restructuring plan has been accounted for as a
recapitalization of the Operating Subsidiaries with no adjustment to the historical basis of their assets and liabilities, and their
results have been consolidated as if the restructuring plan had occurred as of the beginning of the first accounting period presented
in the Company’s financial statements. For the purpose of presenting the financial statements on a consistent basis, the consolidated
financial statements have been prepared as if Ally Profit and Lihua Holdings had been in existence since the beginning of the
earliest period presented and throughout the whole periods covered by these financial statements.

                                                               F-39
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                                ALLY PROFIT INVESTMENTS LIMITED AND SUBSIDIARIES
                                (predecessor and accounting acquirer of Lihua International, Inc.)

                                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                      FOR THE YEAR ENDED DECEMBER 31, 2006
NOTE 1: DESCRIPTION OF BUSINESS AND ORGANIZATION – (continued)
  Details of the subsidiaries of Ally Profit are as follows:




        Subsidiaries’ names         Domicile and          Paid-up         Percentage of             Principal activities
                                       date of            capital           effective
                                    incorporation                          ownership
        Lihua Holdings Ltd.         Hong Kong              US$13             100%         Holding company of the two other
                                   April 17, 2008                                         subsidiaries
        Danyang Lihua                The PRC           US$2,200,000          100%         Manufacturing and sales of bimetallic
          Electron Co., Ltd.       December 30,                                           composite conductor wire such as
          (―Danyang Lihua‖)            1999                                               copper clad aluminum (CCA) wire
                                                                                          and the enameled CCA wire.
        Jiangsu Lihua Copper          The PRC          US$3,599,980          100%         Manufacturing and sales of copper
           Industry Co., Ltd.      August 31, 2007                                        wire and CCA wire. (Business hasn’t
           (―Lihua Copper‖)                                                               been started)
NOTE 2: SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES
    Principle of consolidation
    These consolidated financial statements include the financial statements of Ally Profit and its subsidiaries. All significant
inter-company balances or transactions have been eliminated on consolidation.
   Basis of preparation
   These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States of America. These consolidated financial statements, in the opinion of management, include all adjustments
necessary for a fair statement of consolidated results of operations, financial position and cash flows for each period presented.
    Use of estimates
    The preparation of these consolidated financial statements in conformity with generally accepted accounting principles requires
the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure
of contingent assets and liabilities at the date of these consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances. Accordingly, actual results may differ from these estimates under
different assumptions or conditions.
   Cash and cash equivalents
    Cash and cash equivalents consist of all cash balances and highly liquid investments with an original maturity of three months
or less. Because of the short maturity of these investments, the carrying amounts approximate their fair value. Restricted cash is
excluded from cash and cash equivalents.
    Accounts receivable
    Accounts receivable is stated at cost, net of allowance for doubtful accounts. The Company maintains allowances for doubtful
accounts for estimated losses resulting from the failure of customers to make required payments. The Company reviews the
accounts receivable on a periodic basis and makes allowances where there is doubt as to the collectibility of individual balances. In
evaluating the collectibility of individual receivable balances, the Company considers many factors, including the age of the
balance, the customer’s payment history, its current credit-worthiness and current economic trends.

                                                               F-40
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                              ALLY PROFIT INVESTMENTS LIMITED AND SUBSIDIARIES
                              (predecessor and accounting acquirer of Lihua International, Inc.)

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     FOR THE YEAR ENDED DECEMBER 31, 2006
NOTE 2: SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES – (continued)
    Inventories
    Inventories are stated at the lower of cost, determined on a weighted average basis, or market. Costs of inventories include
purchase and related costs incurred in bringing the products to their present location and condition. Market value is determined by
reference to selling prices after the balance sheet date or to management’s estimates based on prevailing market conditions. The
management will write down the inventories to market value if it is below cost. The management also regularly evaluates the
composition of its inventories to identify slow-moving and obsolete inventories to determine if valuation allowance is required.
    Financial instruments
    The Company values its financial instruments as required by SFAS No. 107, ―Disclosures about Fair Value of Financial
Instruments‖. The estimated fair value amounts have been determined by the Company, using available market information or other
appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates
of fair value. Consequently, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a
current market exchange.
    The Company’s financial instruments primarily consist of cash and cash equivalents, trade accounts receivable, amount due
from related parties and other current assets; trade accounts payable, other payables, accrued expenses, short-term bank loans, other
current liabilities, and amount due to related parties.
    As of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their
carrying values as presented due to the short maturities of these instruments and that the interest rates on the borrowings
approximate those that would have been available for loans of similar remaining maturity and risk profile at respective year ends.
    Buildings, machinery and equipment
    Buildings, machinery and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if
any. Gains or losses on disposals are reflected as gain or loss in the year of disposal. The cost of improvements that extend the life
of buildings, machinery and equipment are capitalized. These capitalized costs may include structural improvements, equipment
and fixtures. All ordinary repair and maintenance costs are expensed as incurred.
    Depreciation for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the
assets as follows:




                                                                                                                 Useful Life
                                                                                                                 (In years)
        Buildings                                                                                                     20
        Machinery                                                                                                     10
        Office equipment & motor vehicles                                                                              5
    The carrying value of buildings, machinery and equipment is assessed annually and when factors indicating impairment is
present, the carrying value of the fixed assets is reduced by the amount of the impairment. The Company determines the existence
of such impairment by measuring the expected future cash flows (undiscounted and without interest charges) and comparing such
amount to the net asset carrying value. An impairment loss, if exists, is measured as the amount by which the carrying amount of
the asset exceeds the fair value of the asset.

                                                             F-41
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                              ALLY PROFIT INVESTMENTS LIMITED AND SUBSIDIARIES
                              (predecessor and accounting acquirer of Lihua International, Inc.)

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     FOR THE YEAR ENDED DECEMBER 31, 2006
NOTE 2: SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES – (continued)
    Construction in progress
    Construction in progress includes direct costs of construction of buildings, equipments and others. Interest incurred during the
period of construction, if material, is capitalized. Construction in progress is not depreciated until such time as the assets are
completed and put into service.
    Intangible assets
    The Company’s intangible assets include computer software. The Company’s amortization policy on intangible assets is as
follows:




                                                                                                                Useful Life
                                                                                                                (In years)
        Computer software                                                                                            5
    The Company accounts for its intangible assets pursuant to SFAS No. 142, ―Goodwill and Other Intangible Assets‖. Under
SFAS 142, intangibles with definite lives continue to be amortized on a straight-line basis over the lesser of their estimated useful
lives or contractual terms. Intangibles with indefinite lives are evaluated at least annually for impairment by comparing the asset’s
estimated fair value with its carrying value, based on cash flow methodology.
    Impairment of goodwill is tested at least annually at the reporting unit. The test consists of two steps. Firstly, the Company
identifies potential impairment by comparing the fair value of the reporting unit to its carrying amount, including goodwill. If the
fair value of the reporting unit is greater than its carrying amount, goodwill is not considered impaired. Secondly, if there is
impairment identified in the first step, an impairment loss is recognized for any excess of the carrying amount of the reporting
unit’s goodwill over the implied fair value of goodwill. The implied fair value of goodwill is determined by allocating the fair value
of the reporting unit in a manner similar to a purchase price allocation, in accordance with SFAS No 141, ―Business
Combinations‖. If the carrying value of a reporting unit exceeds its estimated fair value, the Company compares the implied fair
value of the reporting unit’s goodwill to its carrying amount, and any excess of the carrying value over the fair value is charged to
earnings. The Company’s fair value estimates are based on numerous assumptions and it is possible that actual fair value will be
significantly different than the estimates.
    Prepaid land use right
    Lease prepayments represent lump sum payment for land use rights in the PRC. The amount is expensed over the period of land
use rights of 50 years.
    Impairment of long-lived assets
    The Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that
the related carrying amounts may not be recoverable. An impairment is considered to exist if the total estimated future cash flows
on an undiscounted basis are less than the carrying amount of the assets, including goodwill, if any. An impairment loss is
measured and recorded based on discounted estimated future cash flows. In estimating future cash flows, assets are grouped at the
lowest level for which there is identifiable cash flows that are largely independent of future cash flows from other asset groups.
    Revenue Recognition
    Revenue is recognized when the following four revenue criteria are met: persuasive evidence of an arrangement exists, delivery
has occurred, the selling price is fixed or determinable, and collectibility is reasonably assured.

                                                              F-42
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                              ALLY PROFIT INVESTMENTS LIMITED AND SUBSIDIARIES
                              (predecessor and accounting acquirer of Lihua International, Inc.)

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     FOR THE YEAR ENDED DECEMBER 31, 2006
NOTE 2: SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES – (continued)
    Sales revenue is recognized net of sales discounts and returns at the time when the merchandise is sold to the customer. Based
on historical experience, management estimates that sales returns are immaterial and has not made allowance for estimated sales
returns.
    Research and development costs
    Research and development costs are expensed to operations as incurred. During the year ended December 31, 2006, research
and development costs were $32,504, and charged to selling, general and administrative expense in the accompanying statements of
income.
   Advertising costs
   The Company expenses all advertising costs as incurred. The total amount of advertising costs charged to selling, general and
administrative expense was $75 for the year ended December 31, 2006.
   Shipping and Handling Costs
   Substantially all costs of shipping and handling of products to customers are included in selling, general and administrative
expense. Shipping and handling costs for the years ended December 31, 2006 were $73,296.
    Income taxes
    The Company accounts for income taxes in accordance with SFAS No. 109, ―Accounting for Income Taxes‖. SFAS No. 109
requires an asset and liability approach for financial accounting and reporting for income taxes and allows recognition and
measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and
liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is
provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their
benefits, or that future deductibility is uncertain.
    On January 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty, in
Income Taxes (―FIN 48‖). FIN 48 prescribes a more-likely-than-not threshold for financial statement recognition and measurement
of a tax position taken (or expected to be taken) in a tax return. This Interpretation also provides guidance on derecognition of
income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and
penalties associated with tax positions, accounting for income taxes in interim periods and income tax disclosures. The adoption of
FIN 48 has not resulted in any material impact on the Company’s financial position or results.
    Comprehensive Income
    SFAS No. 130, ―Reporting Comprehensive Income,‖ establishes standards for reporting and displaying comprehensive income
and its components in the consolidated financial statements. Accumulated other comprehensive income includes foreign currency
translation adjustments.
    Foreign Currency
    The Company uses the United States dollars (―US Dollar‖ or ―US$‖ or ―$‖) for financial reporting purposes. The Company
maintains the books and records in its functional currency, Chinese Renminbi (―RMB‖), being the primary currency of the
economic environment in which its operations are conducted. In general, the Company translates its assets and liabilities into U.S.
dollars using the applicable exchange rates prevailing at the balance sheet dates, and the statements of income are translated at
average exchange rates during the reporting periods. Equity accounts are translated at historical rates. Adjustments resulting from
the translation of the Company’s financial statements are recorded as accumulated other comprehensive income.

                                                                 F-43
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                              ALLY PROFIT INVESTMENTS LIMITED AND SUBSIDIARIES
                              (predecessor and accounting acquirer of Lihua International, Inc.)

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    FOR THE YEAR ENDED DECEMBER 31, 2006
NOTE 2: SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES – (continued)
    The exchange rates used to translate amounts in RMB into U.S. Dollars for the purposes of preparing the consolidated financial
statements were as follows:




                                                                                                      December 31, 2006
        Balance sheet items, except for paid-in capital and retained earnings, as of year end       US$1 = RMB7.8087
        Amounts included in the statements of income, statements of stockholders’ equity and        US$1 = RMB7.9735
          statements of cash flows for the year
    Business Segmentation
    The Company follows SFAS No. 131, ―Disclosures about Segments of an Enterprise and Related Information‖, which requires
that companies disclose segment data based on how management makes decision about allocating resources to segments and
evaluating their performance.
    The Company believes that during the year ended December 31, 2006, it operated mainly in one business
segment — Manufacturing and sales of copper clad aluminum (CCA) wire and the enameled CCA wire, which is widely used for
most electrical conductor applications. Throughout the year ended December 31, 2006, all of the Company’s operations were
carried out mainly in one geographical segment — China.
     Commitments and contingencies
     The Company follows SFAS No. 5, ―Accounting for Contingencies,‖ in determining its accruals and disclosures with respect to
loss contingencies. Accordingly, estimated losses from loss contingencies are accrued by a charge to income when information
available prior to issuance of the financial statements indicates that it is probable that a liability could be been incurred and the
amount of the loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. If a loss
contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the financial statements when it
is at least reasonably possible that a material loss could be incurred.
    Recent accounting pronouncements
    In September 2006, the FASB issued Statement of Financial Accounting Standards (―SFAS‖) No. 157, ―Fair Value
Measurements‖. SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about
fair value instruments. SFAS No. 157 does not require any new fair value measurements, but applies under other accounting
pronouncements that require or permit fair value measurements. SFAS 157 is effective for financial statements issued for fiscal
years beginning after November 5, 2007 (the Company’s fiscal 2008). It is believed that implementation of SFAS No. 157 will
have little or no impact on the Company’s consolidated financial statements.
    In September 2006, the FASB issued SFAS No. 158, ―Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106, and 132(R)‖. SFAS No. 158 requires plan sponsors of
defined benefit pension and other postretirement benefit plans (collectively, ―postretirement benefit plans‖) to fully recognize the
funded status of their postretirement benefit plans in the statement of financial position, measure the fair value of plan assets and
benefit obligations as of the date of the fiscal year-end statement of financial position and provide additional disclosures. SFAS 158
is effective for financial statements issued for fiscal years ending after December 15, 2008, and is not expected to apply to the
Company.

                                                                F-44
TABLE OF CONTENTS

                              ALLY PROFIT INVESTMENTS LIMITED AND SUBSIDIARIES
                              (predecessor and accounting acquirer of Lihua International, Inc.)

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     FOR THE YEAR ENDED DECEMBER 31, 2006
NOTE 2: SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES – (continued)
    In February 2007, the FASB issued SFAS No. 159, ―The Fair Value Option for Financial Assets and Financial Liabilities,‖
which allows an entity the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial
assets and liabilities on a contract-by-contract basis. Subsequent changes in fair value of these financial assets and liabilities would
be recognized in earnings when they occur. SFAS No. 159 further establishes certain additional disclosure requirements. SFAS No.
159 is effective as of the beginning of the first fiscal year that begins after November 15, 2007 (fiscal 2008 for the Company) where
earlier adoption is permitted. Management is currently evaluating the impact, if any, and timing of the adoption of SFAS No. 159
on the Company’s financial statements.
    In December, 2007, the FASB issued SFAS No. 141(R), ―Business Combinations‖, and SFAS No. 160, ―Accounting and
Reporting of Noncontrolling interest in Consolidated Financial Statements, an amendment of ARB No. 51‖ (SFAS No. 160). These
new standards will significantly change the financial accounting and reporting of business combination transactions and
noncontrolling (or minority) interests in consolidated financial statements. SFAS No. 141(R) and SFAS No. 160 are effective for
fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008 (that is, fiscal 2009 for the
Company). The Company has not yet determined the effect, if any, that the adoption of SFAS 141(R) and 160 will have on its
consolidated financial statements.
    In December 2007, the FASB issued SFAS No. 160, ―Noncontrolling Interests in Consolidated Financial Statements — An
Amendment of ARB No. 51‖ (―SFAS No. 160‖), which establishes new accounting and reporting standards for the noncontrolling
interest in a subsidiary and for the deconsolidation of a subsidiary. Specifically, this statement requires the recognition of a
noncontrolling interest (minority interest) as equity in the consolidated financial statements and separate from the parent’s equity.
SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008
(that is, fiscal 2009 for the Company). Management does not expect that this Statement will have an effect on the Company’s
consolidated financial statements.
    In March 2008, the FASB issued SFAS No. 161, ―Disclosures about Derivative Instruments and Hedging Activities — An
Amendment of FASB Statement No. 133‖ (―SFAS No. 161‖), which changes the disclosure requirements for derivative
instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses
derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its
related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial
performance, and cash flows. This statement will be effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008 (that is, fiscal 2009 for the Company). Management does not expect that this Statement will
have an effect on the Company’s consolidated financial statements.
    In May 2008, the FASB issued SFAS No. 162, ―The Hierarchy of Generally Accepted Accounting Principles‖. This Statement
identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of
financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles
(GAAP) in the United States (the GAAP hierarchy). This Statement is effective 60 days following the SEC’s approval of the Public
Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With
Generally Accepted Accounting Principles. Management does not expect that this Statement will have an effect on the Company’s
consolidated financial statements.

                                                                F-45
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                              ALLY PROFIT INVESTMENTS LIMITED AND SUBSIDIARIES
                              (predecessor and accounting acquirer of Lihua International, Inc.)

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     FOR THE YEAR ENDED DECEMBER 31, 2006
NOTE 2: SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES – (continued)
    In May 2008, the FASB issued SFAS No. 163, ―Accounting for Financial Guarantee Insurance Contracts-an interpretation of
FASB Statement No. 60‖. This Statement interprets Statement 60, ―Accounting and Reporting by Insurance Enterprises‖ and
amends existing accounting pronouncements to clarify their application to the financial guarantee insurance contracts included
within the scope of this Statement. This Statement requires that an insurance enterprise recognize a claim liability prior to an event
of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. This
Statement also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and
measurement to be used to account for premium revenue and claim liabilities. This Statement is effective for financial statements
issued for fiscal years beginning after December 15, 2008 (that is, fiscal 2009 for the Company), and all interim periods within
those fiscal years. Management does not expect that this Statement will have an effect on the Company’s consolidated financial
statements.
NOTE 3: ACCOUNTS RECEIVABLE, NET
  Accounts receivable consisted of the following:




                                                                                                             As of
                                                                                                          December 31,
                                                                                                              2006
        Accounts receivable                                                                        $            1,240,916
        Less: Bad debt provision                                                                                       —
        Accounts receivable, net                                                                   $            1,240,916

NOTE 4: INVENTORIES
  Inventories by major categories are summarized as follows:
                                                                As of
                                                             December 31,
                                                                 2006
        Raw materials                                    $            199,804
        Work in progress                                              117,331
        Finished goods                                                934,188
                                                         $          1,251,323

NOTE 5: OTHER RECEIVABLES
  Other receivables consisted of the following:




                                                                    As of
                                                                 December 31,
                                                                     2006
        Other receivables                                    $         23,164
        Less: Bad debt provision                                           —
        Other receivables, net                               $         23,164


                                                  F-46
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                            ALLY PROFIT INVESTMENTS LIMITED AND SUBSIDIARIES
                            (predecessor and accounting acquirer of Lihua International, Inc.)

                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   FOR THE YEAR ENDED DECEMBER 31, 2006
NOTE 6: BUILDINGS, MACHINERY AND EQUIPMENT, NET
  Buildings, machinery and equipment, net consisted of the following:




                                                                                                    As of
                                                                                                 December 31,
                                                                                                     2006
        Cost:
          Buildings                                                                    $              1,115,499
          Office equipment                                                                               33,808
          Machinery                                                                                   4,569,842
        Total cost                                                                                    5,719,149
        Less: Accumulated depreciation                                                                 (588,636 )
        Net book value                                                                 $              5,130,513

   Depreciation
   Depreciation expense for the year ended December 31, 2006 was $332,456.
NOTE 7: OTHER PAYABLES AND ACCRUALS
  Other payables and accruals consisted of the following:
                                                                                                               As of
                                                                                                            December 31,
                                                                                                                2006
        Accrued staff costs                                                                         $              66,605
        Advance from customers                                                                                     25,612
        Other taxes payable                                                                                       214,664
        Other payables                                                                                            182,139
                                                                                                    $             489,020

NOTE 8: STATUTORY RESERVES
     In accordance with the PRC Companies Law, the Company’s PRC subsidiaries were required to transfer 10% of their profits
after tax, as determined in accordance with accounting standards and regulations of the PRC, to the statutory surplus reserve and a
percentage of not less than 5%, as determined by management, of the profits after tax to the public welfare fund. With the
amendment of the PRC Companies Law which was effective from January 1, 2006, enterprises in the PRC were no longer required
to transfer any profit to the public welfare fund. Any balance of public welfare fund brought forward from December 31, 2005
should be transferred to the statutory surplus reserve. The statutory surplus reserve is non-distributable.
NOTE 9: OTHER INCOME




                                                                                                              Year ended
                                                                                                             December 31,
                                                                                                                 2006
        Revenue related to metal scraps                                                                 $          2,651

NOTE 10: INCOME TAXES
    The PRC subsidiaries within the Group are subject to PRC income taxes on an entity basis on income arising in or derived from
the tax jurisdiction in which they operate, i.e. the PRC. In accordance with the relevant tax laws in the PRC, the Company’s
subsidiary, Danyang Lihua, is subject to an enterprise income tax (―EIT‖) rate of 24% on its taxable income for the year ended
December 31, 2006 since it is located in

                                                              F-47
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                             ALLY PROFIT INVESTMENTS LIMITED AND SUBSIDIARIES
                             (predecessor and accounting acquirer of Lihua International, Inc.)

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    FOR THE YEAR ENDED DECEMBER 31, 2006
NOTE 10: INCOME TAXES – (continued)
economic development zone. However, Danyang Lihua is a production-based foreign investment enterprise and granted an EIT
holiday for the two years ended December 31, 2006 and 2005 and a 50% reduction on the EIT rate for the three years ended
December 31, 2007, 2008 and 2009.
    A reconciliation of the provision for income taxes determined at the local income tax to the Company’s effective income tax
rate is as follows:




                                                                                                     Year ended
                                                                                                    December 31,
                                                                                                        2006
        Pre-tax income                                                                      $             4,498,919

        United States statutory corporate income tax rate                                                     35 %
        Income tax computed at United States statutory corporate income                                   1,574,622
        Reconciling items:
          Impact of tax holiday of Danyang Lihua                                                         (1,079,741 )
          Rate differential for PRC earnings                                                               (494,881 )
          Non-deductible expenses                                                                                —
        Effective tax expense                                                               $                    —

    On March 16, 2007, the PRC government promulgated a new tax law, China’s Unified Enterprise Income Tax Law (―New EIT
Law‖), which took effect from January 1, 2008. Under the New EIT Law, foreign-owned enterprises as well as domestic companies
are subject to a uniform tax rate of 25%. The New EIT Law provides a five-year transition period from its effective date for those
enterprises which were established before the promulgation date of the New EIT Law and which were entitled to a preferential EIT
treatment. Accordingly, Danyang Lihua will continue to be entitled to the 50% reduction on its EIT rate for the two years ended
December 31, 2008 and 2009.
NOTE 11: RELATED PARTY TRANSACTIONS
(1) DUE FROM (TO) RELATED PARTIES
                                                                                                        As of
                                                                                                     December 31,
                                                                                                         2006
        Due to related parties:
        Accounts payable to Tianyi Telecommunication Co., Ltd. (―Tianyi                (a)    $            128,062
          Telecom‖)
        Advance from –
          Tianyi Telecom                                                               (a)                 312,163
          Mr. Jianhua Zhu                                                              (c)                 533,271
                                                                                                           845,434
        Share acquisition payable to Danyang Special Electronic Co., Ltd. on           (b)                 150,000
          restructuring
        Total                                                                                 $          1,123,496




(a) The shareholders of these companies have close relationship with the Company’s key management.
(b) This company is under the same management as the Company.
(c) Mr. Zhu is the CEO and Chairman of the Company.

                                                             F-48
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                             ALLY PROFIT INVESTMENTS LIMITED AND SUBSIDIARIES
                             (predecessor and accounting acquirer of Lihua International, Inc.)

                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    FOR THE YEAR ENDED DECEMBER 31, 2006
NOTE 11: RELATED PARTY TRANSACTIONS – (continued)
   Advances from Tianyi Telecom and Special Electronic are interest-free, with no fixed repayment date, and is unsecured.
Advance from Mr. Jianhua Zhu bears an annual interest rate ranging from 6.03% to 6.57% with no fixed repayment date and is
unsecured.
(2) SALES
    For the year ended December 31, 2006, the sales included $202,745 made to Tianyi Telecom and Dongya Electronic. The
shareholders of these companies have close relationship with the Company’s key management.
NOTE 12: CONCENTRATION OF CREDIT RISK
    As of December 31, 2006, 100% of the Company’s cash included cash on hand and 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, the Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its
cash in bank accounts.
   For the year ended December 31, 2006, all of the Company’s sales arose in the PRC. In addition, all accounts receivable as of
December 31, 2006 were due from customers located in the PRC.
    As of December 31, 2006, one customer accounted for 12.2% of the accounts receivable of the Company. There was no single
customer that constitutes more than 10% of the Company’s sales for the year ended December 31, 2006.
NOTE 13: COMMITMENTS AND CONTINGENCIES
     Contingencies
     According to the prevailing laws and regulations of the PRC, the Company and its subsidiaries are required to cover its
employees with medical, retirement and unemployment insurance programs. Management believes that due to the transient nature
of its employees, they do not need to provide all employees with such social insurances, and have not paid the social insurances for
all employees.
    In the event that any current or former employee files a complaint with the PRC government, the Company and its subsidiaries
may be subject to making up the social insurances as well as administrative fines. As the Company believes that these fines would
not be material, no provision has been made in this regard.
NOTE 14: SUBSEQUENT EVENTS
    As part of the restructuring plan as more fully described in note 1, on October 22, 2008, Mr. Jianhua Zhu (the former
controlling shareholder of Danyang Lihua and Lihua Copper), entered into a share transfer agreement (the ―Share Transfer
Agreement‖) with Mr. Fu Ho Chu, the sole shareholder of Magnify Wealth Enterprise Limited (―Magnify Wealth‖, the sole
shareholder of Ally Profit). Pursuant to the Share Transfer Agreement, Mr. Chu has granted to Mr. Zhu the option to purchase all of
the 3,000 ordinary shares of Magnify Wealth held by Mr. Chu (the ―Option Shares‖) at a price of $1.00 per share. The Option
Shares vest and become exercisable upon Lihua Electron and Lihua Copper attaining consolidated net income performance targets
for fiscal 2008, 2009, and 2010 of $8 million, $11 million and $14 million respectively. If each performance target is met, 25% of
the Option Shares will vest and become exercisable forty-five days after December 31, 2008, 25% of the Option shares will vest
and become exercisable forty-five days after December 31, 2009 and the remaining 50% of the Option Shares will vest and become
exercisable forty five days after December 31, 2010. On March 7, 2009, Mr. Zhu and Mr. Chu entered into an amendment to the
Share Transfer Agreement whereby alternate conditions for Mr. Zhu to exercise the Option Shares have been included such that
Mr. Zhu will be entitled to exercise all of the Option Shares as long as the audited consolidated net income of Lihua Electron and
Lihua Copper for fiscal 2008 is 10% or more higher than the 2008 performance target, no matter whether the performance targets
for 2009 and 2010 are met or not. However,

                                                               F-49
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                              ALLY PROFIT INVESTMENTS LIMITED AND SUBSIDIARIES
                              (predecessor and accounting acquirer of Lihua International, Inc.)

                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     FOR THE YEAR ENDED DECEMBER 31, 2006
NOTE 14: SUBSEQUENT EVENTS – (continued)
the Option Shares will still be subject to the vesting schedule. If all of the Option Shares vest and are exercised by Mr. Zhu, Mr.
Zhu would own 100% equity interest of Magnify Wealth.
   On October 31, 2008, the Company entered into and completed a Share Exchange Agreement with Lihua International, Inc.
(―Lihua International‖, a company incorporated in the State of Delaware, U.S.), Magnify Wealth, and the principal stockholders of
Lihua International, at that time. Pursuant to the terms of the Share Exchange Agreement, Magnify Wealth transferred all of the
Company’s shares to Lihua International in exchange for the issuance of 14,025,000 shares of Lihua International’ Common Stock.
As a result of the share exchange, the Company became a wholly-owned subsidiary of Lihua International and Magnify Wealth
acquired approximately 93.5% of Lihua International’s issued and outstanding Common Stock. The share exchange resulted in a
change-in-control of Lihua International as Magnify Wealth has acquired the majority ownership of the combined entity.
    In accordance with the Accounting and Financial Reporting Interpretations and Guidance issued by the staff of the U.S.
Securities and Exchange Commission (SEC), the Share Exchange Agreement will be accounted for as a reverse acquisition
whereby Lihua International (the legal acquirer) is considered the accounting acquiree and the Company (the legal acquiree) is
considered the accounting acquirer. The consolidated financial statements of the combined entity will be in substance those of the
Company’s, with the assets and liabilities, and revenues and expenses, of Lihua International being included effective from the date
of consummation of the Share Exchange Agreement. Lihua International will be deemed to be a continuation of the Company’s
business. The outstanding stock of Lihua International prior to the Share Exchange Agreement will be accounted for at their net
book value with no goodwill being recognized.
     On October 31, 2008, Lihua International also entered into and completed a securities purchase agreement with certain
accredited investors in a private placement consisting of, in the aggregate, 6,818,182 shares of Series A Convertible Preferred
Stock, par value $0.0001 per share and Series A warrants to purchase 1,500,000 shares of Common Stock, for aggregate gross
proceeds of approximately $15,000,000 (the ―Private Placement‖).

                                                                F-50
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                                   2,000,000 Shares of Common Stock




Until       , 2009 all dealers that effect transactions in these securities, whether or not participating in this Offering, may
be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.




                                                       PROSPECTUS
Broadband Capital Management LLC       Rodman & Renshaw, LLC



                              , 2009
TABLE OF CONTENTS

                                                             PART II

                                    INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
    The following table sets forth the costs and expenses, other than underwriting discounts and commissions, to be paid by the
Registrant in connection with the issuance and distribution of the Common Stock being registered. All amounts other than the SEC
registration fee are estimates.




        SEC Registration Fees                                                                       $             513.36
        FINRA Fees                                                                                  $           2,230.40
        Printing and Engraving Expenses                                                             $             15,000
        Legal Fees and Expenses                                                                     $            350,000
        Accounting Fees and Expenses                                                                $            100,000
        Miscellaneous                                                                               $             50,000
        Total                                                                                       $            517,744




*   To be included in an amendment
Item 14. Indemnification of Directors and Officers
   Section 145 of the Delaware General Corporation Law authorizes a court to award, or a corporation’s board of directors to
grant, indemnity to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the Securities Act of 1933, as amended (the ―Securities
Act‖).
    The Certificate of Incorporation and By-Laws of the Registrant provide that the registrant shall indemnify any person to the full
extent permitted by the Delaware General Corporation Law (the ―DGCL‖). Section 145 of the DGCL, relating to indemnification,
is hereby incorporated herein by reference.
    In accordance with Section 102(a)(7) of the DGCL, the Certificate of Incorporation of the registrant eliminates the personal
liability of directors to the registrant or its stockholders for monetary damages for breach of fiduciary duty as a director with certain
limited exceptions set forth in Section 102(a)(7).
    In addition, the registrant currently maintains an officers’ and directors’ liability insurance policy which insures, Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling
the registrant, pursuant to the foregoing provisions, the Registrant has been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable.
Item 15. Recent Sales of Unregistered Securities
   The following private placements of the Company’s securities were made in reliance upon the exemption from registration
under Section 4(2) of the Securities Act of 1933, as amended, and/or, Rule 506 of Regulation D promulgated under the Securities
Act. The Company did not use underwriters in any of the following private placements.
    On October 31, 2008 (the ―Closing Date‖), the Registrant entered into a Share Exchange Agreement (the ―Exchange
Agreement‖) with Ally Profit Investments Limited, a British Virgin Islands company (―Ally Profit‖), Magnify Wealth Enterprise
Limited, the sole shareholder of Ally Profit (―Magnify Wealth‖), which owns shares constituting 100% of the issued and
outstanding ordinary shares of Ally Profit (the ―Ally Profit Shares‖), and the principal stockholders of the Registrant set forth on
Schedule I thereto (the ―Lihua Controlling Stockholders‖). Pursuant to the terms of the Exchange Agreement, the Magnify Wealth
transferred all of the Ally Profit Shares to us in exchange (the ―Share Exchange‖) for the issuance of 14,025,000 (the ―Shares‖)
shares of our Common Stock, par value $0.0001 per share (the ―Common Stock‖) to Magnify Wealth.

                                                                 II-1
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    On October 31, 2008, immediately following the Share Exchange, the Registrant consummated a Private Placement for the
issuance and sale of units, consisting of an aggregate of 6,818,182 shares of Series A Convertible Preferred Stock, par value
$0.0001 per share, and series A warrants to purchase up to 1,500,000 shares of Common Stock at an exercise price per share of
$3.50 for gross proceeds in the amount of approximately $15,000,000.
    In connection with the Private Placement, Broadband Capital Management, LLC (―Broadband‖) acted as the Registrant’s
financial advisor and placement agent. Broadband received Series B warrants to purchase 250,000 shares of the Registrant’s
Common Stock at an exercise price per share of $3.50.
   On October 31, 2008 the Registrant also issued Series B Warrants to purchase 250,000 shares of the Registrant’s Common
Stock at an exercise price of $3.50 to Penumbra Worldwide Ltd. (―Penumbra‖). Penumbra is not a broker dealer and the Series B
Warrants were not issued as compensation for underwriting activities, but as compensation for business and investor relations
consulting services performed by Penumbra.

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Item 16. Exhibits and Financial Statement Schedules
EXHIBITS
  The following exhibits are filed as part of this registration statement:




          EXHIBIT                                                  DESCRIPTION
          NUMBER
             1.1+       Form of Underwriting Agreement between the Company, Broadband Capital Management LLC
                        and Rodman & Renshaw, LLC
             2.1        Share Exchange Agreement dated as of October 31, 2008 (2)
             2.2        Agreement and Plan of Merger, dated September 19, 2008 (2)
             3.1        Certificate of Incorporation, as filed with the Delaware Secretary of State on January 24, 2006 (1)
             3.2        By-Laws (1)
             3.3        Certificate of Ownership and Merger, dated September 19, 2008 (2)
             3.4        Certificate of Designations, Preferences, Rights and Limitations of Series A Preferred Stock (2)
             4.1        Speciment Common Stock Certificate (11)
             4.2+       Form of Underwriter Warrant
             5.1+       Opinion of Loeb & Loeb regarding legality of securities.
            10.1        Securities Purchase Agreement, dated as of October 31, 2008 (2)
            10.2        Registration Rights Agreement, dated as of October 31, 2008 (2)
            10.3        Closing Escrow Agreement, dated as of October 31, 2008 (2)
            10.4        Securities Escrow Agreement, dated as of October 31, 2008 (2)
            10.5        Investor and Public Relations Escrow Agreement, dated October 31, 2008 (2)
            10.6        Jianhua Zhu Employment Agreement, dated June 24, 2008 (2)
            10.7        Yang ―Roy‖ Yu Employment Agreement, dated June 24, 2008 (2)
            10.8        Yaying Wang Employment Agreement, dated June 24, 2008 (2)
            10.9        Jianhua Zhu Amendment to Employment Agreement, dated September 26, 2008 (2)
            10.10       Yang ―Roy‖ Yu Amendment to Employment Agreement, dated September 26, 2008 (2)
            10.11       Yaying Wang Amendment to Employment Agreement, dated September 26, 2008 (2)
            10.12       Loan Agreement with Zhenjiang Branch of Bank of Communications, dated August 26, 2008 (2)
            10.13       Loan agreement with Danyang Sub-branch of Agricultural Bank of China, dated April 16, 2007 (2)
            10.14       Loan Agreement with Danyang Sub-branch of Agricultural Bank of China, dated May 21, 2008 (2)
            10.15       Loan Agreement with Danyang Sub-branch of Agricultural Bank of China, dated August 22,
                        2008 (2)
            10.16       Loan Agreement with Danyang Sub-branch of China Construction Bank, dated March 7, 2008 (2)
            10.17       Loan Agreement with Danyang Sub-branch of China Construction Bank, dated April 30, 2008 (2)
            10.18       Loan Agreement with Danyang Sub-branch of Industrial and Commercial Bank of China, dated
                        April 28, 2008 (2)
            10.19       Loan Agreement with Danyang Sub-branch of Bank of Jiangsu, dated June 12, 2008 (2)
            10.20       Loan Agreement with Danyang Sub-branch of Bank of Jiangsu, dated July 27, 2008 (2)
            10.21       Form of Original Stockholder Lock-Up Agreement, dated October 31, 2008 (5)
            10.22       Form of Principal Shareholder Lock-Up Agreement, dated October 31, 2008 (5)
10.23   Placement Agent Agreement with Broadband Capital LLC, dated June 29, 2008 (6)
10.24   Amendment to Placement Agent Agreement with Broadband Capital LLC, dated October 27,
        2008 (6)

                                           II-3
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         EXHIBIT                                          DESCRIPTION
         NUMBER
          10.25     Share Transfer Agreement, dated October 22, 2008 (8)
          10.26     Amendment to the Share Transfer Agreement, dated March 7, 2009 (8)
          10.27     Common Stock Purchase Agreement between the Company and Michael Rapp, dated March 1,
                    2006 (8)
          10.28     Common Stock Purchase Agreement between the Company and Clifford Chapman, dated March
                    1, 2006 (8)
          10.29     Common Stock Purchase Agreement between the Company and Philip Wagenheim, dated March
                    1, 2006 (8)
          10.30     Common Stock Purchase Agreement by and between Plastron Acquisition Corp I and Scheduled
                    Purchasers thereto, dated June 27, 2008. (3)
          10.31     Independent Director Agreement, Robert Bruce (9)
          10.32     Independent Director Agreement, Jonathan Serbin (9)
          10.33     Independent Director Agreement, Su Liu (9)
          10.34     Lihua International, Inc. 2009 Omnibus Securities and Incentive Plan (10)
           14       Code of Business Conduct and Ethics. (4)
          16.1      Letter from DeJoya Griffith & Company LLC (7)
           21       List of Subsidiaries. (2)
          23.1+     Consent of AGCA
          23.2+     Consent of Grant Sherman Appraisal Limited
          24+++     Power of Attorney
+   Filed herewith.
++ To be filed with Amendment.
+++ Previously filed.
(1) Incorporated by reference to the Company’s Annual Report Form 10-SB, filed with the SEC on May 15, 2007
(2) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on November 6, 2008
(3) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on July 3, 2008
(4) Incorporated by reference to the Company’s Annual Report on Form 10-KSB, filed with the SEC on February 26, 2008
(5) Incorporated by reference to the Company’s Registration Statement on Form S-1, Amendment No. 1, filed with the SEC on
    December 15, 2008.
(6) Incorporated by reference to the Company’s Registration Statement on Form S-1, Amendment No. 1, filed with the SEC on
    February 12, 2009.
(7) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on December 19, 2008.
(8) Incorporated by reference to the Company’s Annual Report on Form 10-K, filed with the SEC on April 2, 2009.
(9) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on April 17, 2009.
(10) Incorporated by reference to the Company’s Registration Statement on Form S-1, Amendment No. 4, filed with the SEC on
     April 21, 2009.
(11) Incorporated by reference to the Company’s Registration Statement on Form S-1, Amendment No. 1, filed with the SEC on
     July 13, 2009.

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Item 17. Undertakings
   The undersigned registrant hereby undertakes:
   (1) To file, during any period in which offers or sales are being made pursuant to this Registration Statement, a post-effective
amendment to this registration statement:
       (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933.
       (ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most
   recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the
   information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of
   securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation
   from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the
   Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change
   in the maximum aggregate offering price set forth in the ―Calculation of Registration Fee‖ table in the effective registration
   statement.
       (iii) to include any material information with respect to the plan of distribution not previously disclosed in this Registration
   Statement or any material change to such information in this Registration Statement.
    (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
   (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
    (4) The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant’s annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering
thereof.
    (5) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions described in Item 15 above, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection
with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
    (6) That for the purpose of determining any liability under the Securities Act of 1933 in a primary offering of securities of the
undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the
purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned
registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
      (i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed
   pursuant to Rule 424;

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       (ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or
   referred to by the undersigned registrant;
      (iii) The portion of any other free writing prospectus relating to the offering containing material information about the
   undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
      (iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
   (7) The undersigned registrant hereby undertakes that:
       (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of
   prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by
   the registrant pursuant to Rule 424(b)(I) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration
   statement as of the time it was declared effective.
       (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that
   contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and
   the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

                                                                II-6
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                                                              SIGNATURES
    In accordance with the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing this Form S-1 and has authorized this Form S-1 to be signed on its behalf by
the undersigned in the City of Danyang, People’s Republic of China, on August 17, 2009.




                                                         LIHUA INTERNATIONAL, INC.
                                                         By:
                                                             /s/Jianhua




                                                              Zhu
                                                               Name: Jianhua Zhu
                                                              Title: Chief Executive Officer and President
    Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the
following persons in the capacities and on the dates indicated:
             Signature                            Title                         Date
/s/Jianhua               Chairman, Chief Executive Officer and President   August 17, 2009
Zhu                      (Principal Executive Officer)




 Jianhua Zhu
/s/Jianhua               Chief Financial Officer                           August 17, 2009
Zhu                      (Principal Accounting Officer)
 Yang ―Roy‖ Yu
/s/Jianhua         Director   August 17, 2009
Zhu




 Yaying Wang
/s/Jianhua         Director   August 17, 2009
Zhu




 Jonathan Serbin
/s/Jianhua         Director   August 17, 2009
Zhu
 Robert Bruce
/s/Jianhua      Director          August 17, 2009
Zhu




Su Liu

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                                                   EXHIBIT INDEX




         EXHIBIT                                              DESCRIPTION
         NUMBER
           1.1+     Form of Underwriting Agreement between the Company, Broadband Capital Management LLC
                    and Rodman & Renshaw, LLC
           2.1      Share Exchange Agreement dated as of October 31, 2008 (2)
           2.2      Agreement and Plan of Merger, dated September 19, 2008 (2)
           3.1      Certificate of Incorporation, as filed with the Delaware Secretary of State on January 24, 2006 (1)
           3.2      By-Laws (1)
           3.3      Certificate of Ownership and Merger, dated September 19, 2008 (2)
           3.4      Certificate of Designations, Preferences, Rights and Limitations of Series A Preferred Stock (2)
           4.1      Speciment Common Stock Certificate (11)
           4.2+     Form of Underwriter Warrant
           5.1+     Opinion of Loeb & Loeb regarding legality of securities.
          10.1      Securities Purchase Agreement, dated as of October 31, 2008 (2)
          10.2      Registration Rights Agreement, dated as of October 31, 2008 (2)
          10.3      Closing Escrow Agreement, dated as of October 31, 2008 (2)
          10.4      Securities Escrow Agreement, dated as of October 31, 2008 (2)
          10.5      Investor and Public Relations Escrow Agreement, dated October 31, 2008 (2)
          10.6      Jianhua Zhu Employment Agreement, dated June 24, 2008 (2)
          10.7      Yang ―Roy‖ Yu Employment Agreement, dated June 24, 2008 (2)
          10.8      Yaying Wang Employment Agreement, dated June 24, 2008 (2)
          10.9      Jianhua Zhu Amendment to Employment Agreement, dated September 26, 2008 (2)
          10.10     Yang ―Roy‖ Yu Amendment to Employment Agreement, dated September 26, 2008 (2)
          10.11     Yaying Wang Amendment to Employment Agreement, dated September 26, 2008 (2)
          10.12     Loan Agreement with Zhenjiang Branch of Bank of Communications, dated August 26, 2008 (2)
          10.13     Loan agreement with Danyang Sub-branch of Agricultural Bank of China, dated April 16, 2007 (2)
          10.14     Loan Agreement with Danyang Sub-branch of Agricultural Bank of China, dated May 21, 2008 (2)
          10.15     Loan Agreement with Danyang Sub-branch of Agricultural Bank of China, dated August 22,
                    2008 (2)
          10.16     Loan Agreement with Danyang Sub-branch of China Construction Bank, dated March 7, 2008 (2)
          10.17     Loan Agreement with Danyang Sub-branch of China Construction Bank, dated April 30, 2008 (2)
          10.18     Loan Agreement with Danyang Sub-branch of Industrial and Commercial Bank of China, dated
                    April 28, 2008 (2)
          10.19     Loan Agreement with Danyang Sub-branch of Bank of Jiangsu, dated June 12, 2008 (2)
          10.20     Loan Agreement with Danyang Sub-branch of Bank of Jiangsu, dated July 27, 2008 (2)
          10.21     Form of Original Stockholder Lock-Up Agreement, dated October 31, 2008 (5)
          10.22     Form of Principal Shareholder Lock-Up Agreement, dated October 31, 2008 (5)
          10.23     Placement Agent Agreement with Broadband Capital LLC, dated June 29, 2008 (6)
          10.24     Amendment to Placement Agent Agreement with Broadband Capital LLC, dated October 27,
        2008 (6)
10.25   Share Transfer Agreement, dated October 22, 2008 (8)
10.26   Amendment to the Share Transfer Agreement, dated March 7, 2009 (8)

                                            II-8
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           EXHIBIT                                        DESCRIPTION
           NUMBER
             10.27    Common Stock Purchase Agreement between the Company and Michael Rapp, dated March 1,
                      2006 (8)
             10.28    Common Stock Purchase Agreement between the Company and Clifford Chapman, dated
                      March 1, 2006 (8)
             10.29    Common Stock Purchase Agreement between the Company and Philip Wagenheim, dated
                      March 1, 2006 (8)
             10.30    Common Stock Purchase Agreement by and between Plastron Acquisition Corp I and
                      Scheduled Purchasers thereto, dated June 27, 2008. (3)
            10.31     Independent Director Agreement, Robert Bruce (9)
            10.32     Independent Director Agreement, Jonathan Serbin (9)
            10.33     Independent Director Agreement, Su Liu (9)
            10.34     Lihua International, Inc. 2009 Omnibus Securities and Incentive Plan (10)
              14      Code of Business Conduct and Ethics. (4)
             16.1     Letter from DeJoya Griffith & Company LLC (7)
              21      List of Subsidiaries. (2)
            23.1+     Consent of AGCA
            23.2++    Consent of Grant Sherman Appraisal Limited
            24+++     Power of Attorney




+   Filed herewith.
++ To be filed with Amendment
+++ Previously filed.
(1) Incorporated by reference to the Company’s Annual Report Form 10-SB, filed with the SEC on May 15, 2007
(2) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on November 6, 2008
(3) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on July 3, 2008
(4) Incorporated by reference to the Company’s Annual Report on Form 10-KSB, filed with the SEC on February 26, 2008
(5) Incorporated by reference to the Company’s Registration Statement on Form S-1, Amendment No. 1, filed with the SEC on
    December 15, 2008.
(6) Incorporated by reference to the Company’s Registration Statement on Form S-1, Amendment No. 1, filed with the SEC on
    February 12, 2009.
(7) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on December 19, 2008.
(8) Incorporated by reference to the Company’s Annual Report on Form 10-K, filed with the SEC on April 2, 2009.
(9) Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on April 17, 2009.
(10) Incorporated by reference to the Company’s Registration Statement on Form S-1, Amendment No. 4, filed with the SEC on
     April 21, 2009.
(11) Incorporated by reference to the Company’s Registration Statement on Form S-1, Amendment No. 1, filed with the SEC on
     July 13, 2009.

                                                             II-9
                                                                                                                                   Exhibit 1.1

                                                    2,000,000 Shares of Common Stock

                                                     LIHUA INTERNATIONAL, INC.

                                                    UNDERWRITING AGREEMENT

                                                              August [ ], 2009

Broadband Capital Management LLC
712 Fifth Avenue, 49th Floor
New York, NY 10019

Rodman & Renshaw, LLC
1251 Avenue of the Americas, 20th Floor
New York, NY, 10020

As Representatives of the Underwriters
named on Schedule A hereto

Ladies and Gentlemen:

         Each of Lihua International, Inc., a corporation organized and existing under the laws of Delaware (the ― Company ‖) and Vision
Opportunity China LP (the ― Selling Stockholder ‖), confirms its agreement, subject to the terms and conditions set forth herein, with each of
the underwriters listed on Exhibit A hereto (collectively, the ― Underwriters ‖), for whom Broadband Capital Management LLC (―
Broadband ‖) and Rodman & Renshaw, LLC are acting as representatives (in such capacity, collectively, the ― Representatives ‖), to sell and
issue to the Underwriters an aggregate of two 2,000,000 shares of common stock (the ― Firm Shares ‖) par value $0.0001 per share (the ―
Common Stock ‖).

       The Common Stock is more fully described in the Registration Statement and Prospectus referred to below. The offering and sale of
the Common Stock contemplated by this underwriting agreement (this ― Agreement ‖) is referred to herein as the ― Offering .‖

        1.1        Firm Securities; Over-Allotment Option .

                   (a)        Purchase of Firm Shares . On the basis of the representations and warranties herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to issue and sell to the several Underwriters, an aggregate of 2,000,000 Firm Shares
at a purchase price (net of discounts and commissions) of $[X.XX] per Firm Share. The Underwriters, severally and not jointly, agree to
purchase from the Company the number of Firm Shares set forth opposite their respective names on Schedule A attached hereto and made a
part hereof at a purchase price (net of discounts and commissions) of $[X.XX] per Firm Share.
                                                                                                           Broadband Capital Management LLC
                                                                                                                    Rodman & Renshaw, LLC
                                                                                                                            August [ ], 2009
                                                                                                                                 Page 2 of 45

                  (b)        Payment and Delivery . Delivery and payment for the Firm Shares shall be made at 10:00 A.M., New York time,
on the third Business Day following the effective date (the ―Effective Date‖ ) of the Registration Statement (or the fourth Business Day
following the Effective Date, if the Registration Statement is declared effective after 4:30 p.m.) or at such earlier time as shall be agreed upon
by Broadband and the Company at the offices of Broadband or at such other place as shall be agreed upon by Broadband and the
Company. The hour and date of delivery and payment for the Firm Shares is referred to herein as the ― Closing Date .‖ The closing of the
payment of the purchase price for, and delivery of certificates representing, the Firm Shares is referred to herein as the ― Closing . ‖ Payment
for the Firm Shares shall be made on the Closing Date at Broadband’s election by wire transfer in Federal (same day) funds or by certified or
bank cashier’s check(s) in New York Clearing House funds. Any remaining proceeds (less commissions, expense allowance and actual
expense payments or other fees payable pursuant to this Agreement) shall be paid to the order of the Company and the Selling Stockholder, as
the case may be, upon delivery to you of certificates (in form and substance satisfactory to the Underwriters) representing the Firm Shares (or
through the facilities of the Depository Trust Company (the ― DTC ‖)) for the account of the Underwriters. The Firm Shares shall be
registered in such name or names and in such authorized denominations as Broadband may request in writing at least two Business Days prior
to the Closing Date. The Company will permit the Representatives to examine and package the Firm Shares for delivery, at least one full
Business Day prior to the Closing Date. The Company shall not be obligated to sell or deliver the Firm Shares except upon tender of payment
by the Representatives for all the Firm Shares.

                    (c)        Option Shares . For the purposes of covering any over-allotments in connection with the distribution and sale of
the Firm Shares, the Selling Stockholder hereby grants to Broadband, on behalf of the Underwriters, an option to purchase up to an additional
15% of the number of Firm Shares to be offered solely by the Selling Stockholder (the ― Over-allotment Option ‖). The Company shall not
receive any proceeds from the sale by the Selling Stockholder of any Option Shares (as hereinafter defined). The Option Shares shall be
identical in all respects to the Firm Shares and are hereinafter referred to as ― Option Shares .‖ The Firm Shares and the Option Shares are
hereinafter collectively referred to as the ― Shares. ‖ The Shares and the Representatives’ Securities (as hereinafter defined) are referred to
herein as (the ― Securities ‖). The purchase price to be paid for the Option Shares (net of discounts and commissions) will be $[X.XX] per
share. The Option Shares are to be offered initially to the public at the offering price of $[X.XX] per share.
                                                                                                          Broadband Capital Management LLC
                                                                                                                   Rodman & Renshaw, LLC
                                                                                                                           August [ ], 2009
                                                                                                                                Page 3 of 45

                  (d)         Exercise of Option . The Over-allotment Option granted pursuant to Section 1.1(b) hereof may be exercised by
Broadband as to all (at any time) or any part (from time to time) of the Option Shares within 45 days after the Effective Date. The
Underwriters will not be under any obligation to purchase any Option Shares prior to the exercise of the Over-allotment Option. The
Over-allotment Option granted hereby may be exercised by the giving of oral notice to the Company and the Selling Stockholder from
Broadband, which must be confirmed in writing by overnight mail or facsimile transmission setting forth the number of Option Shares to be
purchased and the date and time for delivery of and payment for the Option Shares, which will not be later than five Business Days after the
date of the notice or such other time as shall be agreed upon by the Company, the Selling Stockholder and Broadband, at the offices of
Broadband or at such other place as shall be agreed upon by the Company, the Selling Stockholder and Broadband. If such delivery and
payment for the Option Shares does not occur on the Closing Date, the date and time of the closing for such Option Shares will be as set forth
in the notice (hereinafter the ― Option Closing Date ‖). Upon exercise of the Over-allotment Option, the Selling Stockholder will become
obligated to convey to the Underwriters, and, subject to the terms and conditions set forth herein, the Underwriters will become obligated to
purchase, the number of Option Shares specified in such notice.

                   (e)       Payment and Delivery of Option Shares . Payment for the Option Shares shall be made on the Option Closing
Date at Broadband’s election by wire transfer in Federal (same day) funds or by certified or bank cashier’s check(s) in New York Clearing
House funds, by deposit of the sum of $[X.XX] per Option Share to the Selling Stockholder upon delivery to the Underwriters of certificates
(in form and substance satisfactory to the Underwriters) representing the Option Shares (or through the facilities of DTC) for the account of the
Underwriters. The certificates representing the Option Shares to be delivered will be in such denominations and registered in such names as
Broadband requests not less than two Business Days prior to the Closing Date or the Option Closing Date, as the case may be, and will be
made available to Broadband for inspection, checking and packaging at the aforesaid office of the Company’s transfer agent or correspondent
not less than one full Business Day prior to such Closing Date or Option Closing Date.

                  (f)        Representatives’ Warrant . As additional consideration, the Company hereby agrees to issue and sell to the
Representatives (and/or their respective designees) on the Effective Date Common Stock purchase warrants (the ― Representatives’ Warrants
‖) for the purchase of an aggregate of 6% of the Shares sold in this Offering (120,000 shares of Common Stock or up to 138,000 shares of
Common Stock if the over-allotment is exercised in full) (the ― Representatives’ Shares ‖) for an aggregate purchase price of $100.00. The
Representatives’ Warrants shall be exercisable, in whole or in part, commencing on the date that is six months from the Effective Date and
expiring on the five-year anniversary of the Effective Date at an initial exercise price per share of $[X.XX], which is equal to one hundred and
twenty percent (120%) of the initial public offering price per Firm Share. The Representatives’ Warrants and the shares of Common Stock
issuable upon exercise of the Warrants are hereinafter referred to collectively as the ― Representatives’ Securities .‖ The Representatives
understand and agree there are significant restrictions against transferring the Representatives’ Warrants during the first six months after the
Effective Date.

 2.       Representations and Warranties of the Company .

                   2.1      The Company represents, warrants and covenants to, and agrees with, each of the Underwriters that, as of the date
hereof and as of the Closing Date:
                                                                                                          Broadband Capital Management LLC
                                                                                                                   Rodman & Renshaw, LLC
                                                                                                                           August [ ], 2009
                                                                                                                                Page 4 of 45

                    (a)       The Company has filed with the Securities and Exchange Commission (the ― Commission ‖) a registration
statement on Form S-1 (Registration No. 333-159705), and amendments thereto, and related preliminary prospectuses for the registration under
the Securities Act of 1933, as amended (the ― Securities Act ‖), of the Securities which registration statement, as so amended (including
post-effective amendments, if any), has been declared effective by the Commission and copies of which have heretofore been delivered to the
Underwriters. The registration statement, as amended at the time it became effective, including the prospectus, financial statements, schedules,
exhibits and other information (if any) deemed to be part of the registration statement at the time of effectiveness pursuant to Rule 430A under
the Securities Act, is hereinafter referred to as the ― Registration Statement .‖ If the Company has filed or is required pursuant to the terms
hereof to file a registration statement pursuant to Rule 462(b) under the Securities Act registering additional shares of Common Stock (a ― Rule
462(b) Registration Statement ‖), then, unless otherwise specified, any reference herein to the term ―Registration Statement‖ shall be deemed
to include such Rule 462(b) Registration Statement. Other than a Rule 462(b) Registration Statement, which, if filed, becomes effective upon
filing, no other document with respect to the Registration Statement has heretofore been filed with the Commission. All of the Securities have
been registered under the Securities Act pursuant to the Registration Statement or, if any Rule 462(b) Registration Statement is filed, will be
duly registered under the Securities Act with the filing of such Rule 462(b) Registration Statement. Based on communications from the
Commission, no stop order suspending the effectiveness of either the Registration Statement or the Rule 462(b) Registration Statement, if any,
has been issued and no proceeding for that purpose has been initiated or threatened by the Commission. The Company, if required by the
Securities Act and the rules and regulations of the Commission (the ― Rules and Regulations ‖), proposes to file the Prospectus with the
Commission pursuant to Rule 424(b) under the Securities Act (― Rule 424(b) ‖). The prospectus, in the form in which it is to be filed with the
Commission pursuant to Rule 424(b), or, if the prospectus is not to be filed with the Commission pursuant to Rule 424(b), the prospectus in the
form included as part of the Registration Statement at the time the Registration Statement became effective, is hereinafter referred to as the ―
Prospectus ,‖ except that if any revised prospectus or prospectus supplement shall be provided to the Underwriters by the Company for use in
connection with the Offering which differs from the Prospectus (whether or not such revised prospectus or prospectus supplement is required to
be filed by the Company pursuant to Rule 424(b)), the term ―Prospectus‖ shall also refer to such revised prospectus or prospectus supplement,
as the case may be, from and after the time it is first provided to the Underwriters for such use. Any preliminary prospectus or prospectus
subject to completion included in the Registration Statement or filed with the Commission pursuant to Rule 424 under the Securities Act is
hereafter called a ― Preliminary Prospectus .‖ Any reference herein to the Registration Statement, any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include the exhibits incorporated by reference therein pursuant to the Rules and Regulations on or
before the effective date of the Registration Statement, the date of such Preliminary Prospectus or the date of the Prospectus, as the case may
be. Any reference herein to the terms ―amend‖, ―amendment‖ or ―supplement‖ with respect to the Registration Statement, any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include: (i) the filing of any document under the Securities Exchange Act of 1934,
as amended, and together with the Rules and Regulations promulgated thereunder (the ― Exchange Act ‖) after the effective date of the
Registration Statement, the date of such Preliminary Prospectus or the date of the Prospectus, as the case may be, which is incorporated therein
by reference, and (ii) any such document so filed. All references in this Agreement to the Registration Statement, the Rule 462(b) Registration
Statement, a Preliminary Prospectus and the Prospectus, or any amendments or supplements to any of the foregoing shall be deemed to include
any copy thereof filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval System (― EDGAR ‖) system.
                                                                                                             Broadband Capital Management LLC
                                                                                                                      Rodman & Renshaw, LLC
                                                                                                                              August [ ], 2009
                                                                                                                                   Page 5 of 45

                  (b)      The Company has filed with the Commission a Form 8-A (File Number 001-________) providing for the
registration under the Securities Exchange Act of 1934, as amended (the ― Exchange Act ‖), of the Shares. The registration of the Shares
under the Exchange Act has been declared effective by the Commission on the date hereof.

                   (c)        At the time of the effectiveness of the Registration Statement or any Rule 462(b) Registration Statement or the
effectiveness of any post-effective amendment to the Registration Statement, when the Prospectus is first filed with the Commission pursuant
to Rule 424(b), when any supplement to or amendment of the Prospectus is filed with the Commission, when any document filed under the
Exchange Act was or is filed and at the Closing Date (as hereinafter defined), if any, the Registration Statement and the Prospectus and any
amendments thereof and supplements or exhibits thereto complied or will comply in all material respects with the applicable provisions of the
Securities Act, the Exchange Act and the Rules and Regulations, and did not and will not contain an untrue statement of a material fact and did
not and will not omit to state any material fact required to be stated therein or necessary in order to make the statements therein: (i) in the case
of the Registration Statement, not misleading, and (ii) in the case of the Prospectus or any related Preliminary Prospectus in light of the
circumstances under which they were made, not misleading. When any Preliminary Prospectus was first filed with the Commission (whether
filed as part of the registration statement for the registration of the Securities or any amendment thereto or pursuant to Rule 424(a) under the
Securities Act) and when any amendment thereof or supplement thereto was first filed with the Commission, such Preliminary Prospectus and
any amendments thereof and supplements thereto complied in all material respects with the applicable provisions of the Securities Act, the
Exchange Act and the Rules and Regulations and did not contain an untrue statement of a material fact and did not omit 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. No representation and warranty is made in this subsection (b), however, with respect to any information contained in or
omitted from the Registration Statement or the Prospectus or any related Preliminary Prospectus or any amendment thereof or supplement
thereto in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of any Underwriter through
the Representatives specifically for use therein. The parties acknowledge and agree that such information provided by or on behalf of any
Underwriter consists solely of the subsections of the ―Underwriting‖ section of the Prospectus captioned ―Stabilization,‖ ―Foreign Regulatory
Restrictions on Purchase of Shares‖ and ―European Economic Area‖(the ―Underwriters’ Information‖ ).
                                                                                                            Broadband Capital Management LLC
                                                                                                                     Rodman & Renshaw, LLC
                                                                                                                             August [ ], 2009
                                                                                                                                  Page 6 of 45

                  (d)        AGCA, Inc. (― AGCA ‖), whose reports relating to the Company are included in the Registration Statement, is an
independent registered public accounting firm as required by the Securities Act and the Rules and Regulations and the Public Company
Accounting Oversight Board (United States) (the ― PCAOB ‖). Except as disclosed in the Registration Statement and as pre-approved in
accordance with the requirements set forth in Section 10A of the Exchange Act, AGCA has not been engaged by the Company to perform any
―prohibited activities‖(as defined in Section 10A of the Exchange Act). The Company has had no material disagreements with AGCA for the
period from its initial engagement by the Company through the Closing Date that were not satisfied in a manner mutually satisfactory to both
the Company and AGCA.

                  (e)       Subsequent to the respective dates as of which information is presented in the Registration Statement and the
Prospectus, and except as disclosed in the Registration Statement and the Prospectus: (i) the Company has not declared, paid or made any
dividends or other distributions of any kind on or in respect of its capital stock, and (ii) there has been no material adverse change (or, to the
knowledge of the Company, any development which has a high probability of involving a material adverse change in the future), whether or
not arising from transactions in the ordinary course of business, in or affecting: (A) the business, condition (financial or otherwise), results of
operations, shareholders’ equity, properties or prospects of the Company and each direct or indirect subsidiary or joint venture of the Company
listed on Exhibit 21.1 of the Registration Statement hereto (the ― Subsidiaries ‖), taken as a whole; (B) the long-term debt or capital stock of
the Company or any of its Subsidiaries; or (C) the Offering or consummation of any of the other transactions contemplated by this Agreement,
the Registration Statement or the Prospectus (a ― Material Adverse Change ‖). Since the date of the latest balance sheet presented in the
Registration Statement and the Prospectus, neither the Company nor any Subsidiary has incurred or undertaken any liabilities or obligations,
whether direct or indirect, liquidated or contingent, matured or unmatured, or entered into any transactions, including any acquisition or
disposition of any business or asset, which are material to the Company and the Subsidiaries taken as a whole, except for liabilities, obligations
and transactions which are disclosed in the Registration Statement and the Prospectus.

                    (f)     As of the dates indicated in the Prospectus, the authorized, issued and outstanding shares of capital stock of the
Company were as set forth in the Prospectus in the column headed ―Actual‖ under the section thereof captioned ―Capitalization‖ and, after
giving effect to the Offering and the other transactions contemplated by this Agreement, the Registration Statement and the Prospectus, will be
as set forth in the column headed ―As Adjusted‖ in such section. After giving effect to the Offering, the other transactions contemplated by this
Agreement, the Registration Statement and the Prospectus, the authorized, issued and outstanding shares of capital stock of the Company will
be as set forth in the column headed ―Pro Forma As Adjusted‖ in the section of the Prospectus captioned ―Capitalization.‖ All of the issued
and outstanding shares of capital stock of the Company are fully paid and non-assessable and have been duly and validly authorized and issued,
in compliance with all applicable state, federal and foreign securities laws and not in violation of or subject to any preemptive or similar right
that does or will entitle any Person (as defined below), upon the issuance or sale of any security, to acquire from the Company or any
Subsidiary any Relevant Security. As used herein, the term ― Relevant Security ‖ means any Common Stock or other security of the Company
or any Subsidiary that is convertible into, or exercisable or exchangeable for Common Stock or equity securities, or that holds the right to
acquire any Common Stock or equity securities of the Company or any Subsidiary or any other such Relevant Security, except for such rights
as may have been fully satisfied or waived prior to the effectiveness of the Registration Statement. As used herein, the term ― Person ‖ means
any foreign or domestic individual, corporation, trust, partnership, joint venture, limited liability company or other entity.
                                                                                                           Broadband Capital Management LLC
                                                                                                                    Rodman & Renshaw, LLC
                                                                                                                            August [ ], 2009
                                                                                                                                 Page 7 of 45

                 (g)       The Securities have been duly and validly authorized and, when issued, delivered and paid for in accordance with
this Agreement and as described in the Prospectus on the Closing Date, will be duly and validly issued, fully paid and non-assessable, will have
been issued in compliance with all applicable state, federal and foreign securities laws and will not have been issued in violation of or subject
to any preemptive or similar right that does or will entitle any Person to acquire any Relevant Security from the Company or any Subsidiary
upon issuance or sale of Securities in the Offering. The Common Stock conform to the descriptions thereof contained in the Registration
Statement and the Prospectus. Except as disclosed in the Registration Statement and the Prospectus, neither the Company nor any Subsidiary
has outstanding warrants, options to purchase, or any preemptive rights or other rights to subscribe for or to purchase, or any contracts or
commitments to issue or sell, any Relevant Security.

                   (h)       The Representatives’ Shares will conform to the description thereof in the Registration Statement and in the
Prospectus and have been validly reserved for future issuance and will, upon exercise of the Representatives’ Warrants and payment of the
exercise price thereof, be duly and validly issued, fully paid and non-assessable and, to our knowledge, will not have been issued in violation of
or subject to preemptive or similar rights to subscribe for or purchase securities of the Company. The issuance of such securities is not subject
to any statutory preemptive rights under the Delaware General Corporate Law (the ― DGCL ‖) or the Certificate of Incorporation as in effect at
the time of issuance or, to our knowledge, other similar rights of any securityholder of the Company (except for such preemptive or contractual
rights as were waived).

                   (i)       The Subsidiaries are the only subsidiaries of the Company within the meaning of Rule 405 under the Securities
Act. Except for the Subsidiaries and as otherwise disclosed in the Registration Statement and the Prospectus, the Company holds no ownership
or other interest, nominal or beneficial, direct or indirect, in any corporation, partnership, joint venture or other business entity. All of the
issued and outstanding shares of capital stock of, or other ownership interests in, each Subsidiary have been duly and validly authorized and
issued and are fully paid and non-assessable and are owned, directly or indirectly, by the Company, free and clear of any lien, charge,
mortgage, pledge, security interest, claim, equity, trust or other encumbrance, preferential arrangement, defect or restriction of any kind
whatsoever (any ― Lien ‖). No director, officer or key employee of the Company named in the Prospectus holds any direct equity, debt or other
pecuniary interest in any Subsidiary or any Person with whom the Company or any Subsidiary does business or is in privity of contract with,
other than, in each case, indirectly through the ownership by such individuals of shares of Common Stock.
                                                                                                               Broadband Capital Management LLC
                                                                                                                        Rodman & Renshaw, LLC
                                                                                                                                August [ ], 2009
                                                                                                                                     Page 8 of 45

                  (j)       Each of the Company and the Subsidiaries has been duly incorporated, formed or organized, and validly exists as a
corporation, partnership or limited liability company in good standing under the laws of its jurisdiction of incorporation, formation or
organization. Each of the Company and the Subsidiaries has all requisite power and authority to carry on its business as it is currently being
conducted and as described in the Prospectus, and to own, lease and operate its respective properties. Each of the Company and the
Subsidiaries is duly qualified to do business and is in good standing as a foreign corporation, partnership or limited liability company in each
jurisdiction in which the character or location of its properties (owned, leased or licensed) or the nature or conduct of its business makes such
qualification necessary, except, in each case, for those failures to be so qualified or in good standing which (individually and in the aggregate)
could not reasonably be expected to have a material adverse effect on: (i) the business, condition (financial or otherwise), results of operations,
shareholders’ equity, properties or prospects of the Company and the Subsidiaries, taken as a whole; (ii) the long-term debt or capital stock of
the Company or any Subsidiary; or (iii) the Offering or consummation of any of the other transactions contemplated by this Agreement, the
Registration Statement or the Prospectus (any such effect being a ― Material Adverse Effect ‖).

                     (k)       Neither the Company nor any Subsidiary: (i) is in violation of its certificate or articles of incorporation, by-laws,
certificate of formation, limited liability company agreement, joint venture agreement, partnership agreement or other organizational
documents, (ii) is in default under, and no event has occurred which, with notice or lapse of time or both, would constitute a default under or
result in the creation or imposition of any Lien upon any of its property or assets pursuant to, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which it is a party or by which it is bound or to which any of its property or assets is subject or
(iii) is in violation in any respect of any law, rule, regulation, ordinance, directive, judgment, decree or order of any judicial, regulatory or other
legal or governmental agency or body, foreign or domestic, except (in the case of clause (ii) above) for any lien, charge or encumbrance
disclosed in the Registration Statement and the Prospectus.

                  (l)       The Company, through its wholly owned Subsidiaries, Ally Profit Investments Limited, corporation organized
under the laws of the British Virgin Islands, and Lihua Holdings Limited, a corporation organized under the laws of Hong Kong, owns 100% of
the Subsidiaries. The Subsidiaries are corporations organized under the laws of the People’s Republic of China (― PRC ‖) and operates in
compliance with all the laws of regulations of the PRC.

                   (m)        The Company has full right, power and authority to execute and deliver this Agreement and all other agreements,
documents, certificates and instruments required to be delivered pursuant to this Agreement. The Company has duly and validly authorized
this Agreement and each of the transactions contemplated by this Agreement. This Agreement has been duly and validly executed and
delivered by the Company and constitutes the legal, valid and binding obligation of the Company and is enforceable against the Company in
accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors’ rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
                                                                                                             Broadband Capital Management LLC
                                                                                                                      Rodman & Renshaw, LLC
                                                                                                                              August [ ], 2009
                                                                                                                                   Page 9 of 45

                    (n)       The execution, delivery, and performance of this Agreement and all other agreements, documents, certificates and
instruments required to be delivered pursuant to this Agreement, and consummation of the transactions contemplated by this Agreement do not
and, to the knowledge of the Company, will not: (i) conflict with, require consent under or result in a breach of any of the terms and provisions
of, or constitute a default (or an event which with notice or lapse of time, or both, would constitute a default) under, or result in the creation or
imposition of any Lien upon any property or assets of the Company or any Subsidiary pursuant to, any indenture, mortgage, deed of trust, loan
agreement or other agreement, instrument, franchise, license or permit to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary or their respective properties, operations or assets may be bound or (ii) violate or conflict with any provision of the
certificate or articles of incorporation, by-laws, certificate of formation, limited liability company agreement, partnership agreement or other
organizational documents of the Company or any Subsidiary, or (iii) violate or conflict with any law, rule, regulation, ordinance, directive,
judgment, decree or order of any judicial, regulatory or other legal or governmental agency or body, domestic or foreign.

                    (o)       Each of the Company and the Subsidiaries has all material consents, approvals, authorizations, orders, registrations,
qualifications, licenses, filings and permits of, with and from all judicial, regulatory and other legal or governmental agencies and bodies and
all third parties, foreign and domestic (collectively, the ― Consents ‖), to own, lease and operate its properties and conduct its business as it is
now being conducted and as disclosed in the Registration Statement and the Prospectus, and each such Consent is valid and in full force and
effect. Neither the Company nor any Subsidiary has received notice of any investigation or proceedings which results in or, if decided
adversely to the Company or any Subsidiary, could reasonably be expected to result in, the revocation of, or imposition of a materially
burdensome restriction on, any Consent. No Consent contains a materially burdensome restriction not adequately disclosed in the Registration
Statement and the Prospectus.

                  (p)       Each of the Company and the Subsidiaries is in compliance with all applicable laws, rules, regulations, ordinances,
directives, judgments, decrees and orders, foreign and domestic. Neither the Company, nor any of its Affiliates (within the meaning of Rule
144 under the Securities Act) (― Affiliates ‖) has received any notice or other information from any regulatory or other legal or governmental
agency relating to any default or potential decertification by the Company, or any of its Affiliates.
                                                                                                             Broadband Capital Management LLC
                                                                                                                      Rodman & Renshaw, LLC
                                                                                                                              August [ ], 2009
                                                                                                                                  Page 10 of 45

                   (q)       No Consent of, with or from any judicial, regulatory or other legal or governmental agency or body or any third
party, foreign or domestic is required for the execution, delivery and performance of this Agreement, or consummation of each of the
transactions contemplated by this Agreement, including the issuance, sale and delivery of the Securities to be issued, sold and delivered
hereunder, except the registration under the Securities Act of the Securities, which has become effective, and such Consents as may be required
under state securities or blue sky laws or the by-laws and rules of the NYSE AMEX LLC (― NYSE AMEX ‖), where the Common Stock has
been approved for listing and the Financial Industry Regulatory Authority, Inc. (― FINRA ‖) in connection with the purchase and distribution
of the Securities by the Underwriters, each of which has been obtained and is in full force and effect.

                   (r)      Except as disclosed in the Registration Statement and the Prospectus, there is no judicial, regulatory, arbitral or
other legal or governmental proceeding or other litigation or arbitration, domestic or foreign, pending to which the Company or any Subsidiary
is a party or of which any property, operations or assets of the Company or any Subsidiary is the subject which, individually or in the
aggregate, if determined adversely to the Company or any Subsidiary, could reasonably be expected to have a Material Adverse Effect. To the
Company’s knowledge, no such proceeding, litigation or arbitration is threatened or contemplated; and the defense of all such proceedings,
litigation and arbitration against or involving the Company or any Subsidiary could not reasonably be expected to have a Material Adverse
Effect.

                   (s)      The financial statements, including the notes thereto, and the supporting schedules included in the Registration
Statement and the Prospectus present fairly the financial position as of the dates indicated and the cash flows and results of operations for the
periods specified of the Company and its consolidated Subsidiaries. Except as otherwise stated in the Registration Statement and the
Prospectus, said financial statements have been prepared in conformity with United States generally accepted accounting principles applied on
a consistent basis throughout the periods involved. The supporting schedules included in the Registration Statement and the Prospectus present
fairly the information required to be stated therein. No other financial statements or supporting schedules are required to be included or
incorporated by reference in the Registration Statement. The other financial and statistical information included in the Registration Statement
and the Prospectus present fairly the information included therein and have been prepared on a basis consistent with that of the financial
statements that are included in the Registration Statement and the Prospectus and the books and records of the respective entities presented
therein.

                    (t)      There are no pro forma or as adjusted financial statements which are required to be included in the Registration
Statement and the Prospectus in accordance with Regulation S-X which have not been included as so required. The pro forma and pro forma as
adjusted financial information included in the Registration Statement and the Prospectus has been properly compiled and prepared in
accordance with the applicable requirements of the Securities Act and the Rules and Regulations and include all adjustments necessary to
present fairly in accordance with generally accepted accounting principles the pro forma and as adjusted financial position of the respective
entity or entities presented therein at the respective dates indicated and their cash flows and the results of operations for the respective periods
specified. The assumptions used in preparing the pro forma and pro forma as adjusted financial information included in the Registration
Statement and the Prospectus provide a reasonable basis for presenting the significant effects directly attributable to the transactions or events
described therein. The related pro forma and pro forma as adjusted adjustments give appropriate effect to those assumptions; and the pro forma
and pro forma as adjusted financial information reflect the proper application of those adjustments to the corresponding historical financial
statement amounts.
                                                                                                           Broadband Capital Management LLC
                                                                                                                    Rodman & Renshaw, LLC
                                                                                                                            August [ ], 2009
                                                                                                                                Page 11 of 45

                  (u)      The statistical, industry-related and market-related data included in the Registration Statement and the Prospectus
are based on or derived from sources which the Company reasonably and in good faith believes are reliable and accurate, and such data agree
with the sources from which they are derived.

                  (v)        The Company is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act and files reports
with the Commission on the EDGAR system. The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act and the
outstanding shares of Common Stock are, and the Shares and Representatives’ Shares will be as of the Closing Date, listed on the NYSE
AMEX, the New York Stock Exchange, or the NASDAQ. The Company has taken no action designed to, or likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act or de-listing the Common Stock from the NYSE AMEX, nor has the
Company received any notification that the Commission or NYSE AMEX is contemplating terminating such registration or listing.

                   (w)        The Company and the Subsidiaries maintain a system of internal accounting and other controls sufficient to
provide reasonable assurances that: (i) transactions are executed in accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial statements in conformity with United States generally accepted
accounting principles and to maintain accountability for assets, (iii) access to assets is permitted only in accordance with management’s general
or specific authorization, and (iv) the recorded accounting for assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.

                   (x)      The Company’s Board of Directors has validly appointed an audit committee whose composition satisfies the
requirements of Section 803 of the NYSE AMEX Company Guide and the Board of Directors and/or audit committee has adopted a charter
that satisfies the requirements of Section 801 through 803 of the NYSE AMEX Company Guide. The audit committee has reviewed the
adequacy of its charter within the past twelve months. Neither the Board of Directors nor the audit committee has been informed, nor is any
director of the Company aware, of: (i) any significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial
information; or (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the
Company’s internal control over financial reporting.

                  (y)         Neither the Company nor any of its Affiliates has taken, directly or indirectly, any action which constitutes or is
designed to cause or result in, or which could reasonably be expected to constitute, cause or result in, the stabilization or manipulation of the
price of any security to facilitate the sale or resale of the Securities.
                                                                                                           Broadband Capital Management LLC
                                                                                                                    Rodman & Renshaw, LLC
                                                                                                                            August [ ], 2009
                                                                                                                                Page 12 of 45

                  (z)       Neither the Company nor any of its Affiliates has, prior to the date hereof, made any offer or sale of any securities
which are required to be ―integrated‖ pursuant to the Securities Act or the Rules and Regulations with the offer and sale of the Securities
pursuant to the Registration Statement. Except as disclosed in the Registration Statement, the Prospectus or in any public filings relating to the
Company filed with the Commission, neither Company nor any of its Affiliates has sold or issued any Relevant Security during the six-month
period preceding the date of the Prospectus, including but not limited to any sales pursuant to Rule 144A or Regulation D or S under the
Securities Act, other than shares of Common Stock issued pursuant to employee benefit plans, qualified stock option plans or the employee
compensation plans or pursuant to outstanding options, rights or warrants as described in the Registration Statement and the Prospectus.

                  (aa)      All information contained in the questionnaires completed by each of the Company’s officers and directors
immediately prior to the Offering and provided to the Representatives as well as the biographies of such individuals in the Registration
Statement is true and correct in all material respects and the Company has not become aware of any information which would cause the
information disclosed in the questionnaires completed by the directors and officers to become inaccurate and incorrect.

                (bb)      No director or officer of the Company is subject to any non-competition agreement or non-solicitation agreement
with any employer or prior employer which could materially affect his ability to be and act in his respective capacity of the Company.

                  (cc)       Except as disclosed in the Registration Statement and the Prospectus, no holder of any Relevant Security has any
rights to require registration of any Relevant Security as part or on account of, or otherwise in connection with, the offer and sale of the
Securities contemplated hereby, and any such rights so disclosed have either been fully complied with by the Company or effectively waived
by the holders thereof, and any such waivers remain in full force and effect.

                  (dd)     The documents, exhibits or other materials incorporated or deemed to be incorporated by reference in the
Prospectus, at the time they were or hereafter are filed with the Commission, complied and will comply in all material respects with the
requirements of the Securities Act, the Exchange Act and the Rules and Regulations, and, when read together with the other information in the
Prospectus, do not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they were made, not misleading.

                   (ee)     The conditions for use of Form S-1 to register the Offering under the Securities Act, as set forth in the General
Instructions to such Form, have been satisfied.
                                                                                                          Broadband Capital Management LLC
                                                                                                                   Rodman & Renshaw, LLC
                                                                                                                           August [ ], 2009
                                                                                                                               Page 13 of 45

                (ff)      The Company is not and, at all times up to and including consummation of the transactions contemplated by this
Agreement, and after giving effect to application of the net proceeds of the Offering, will not be, subject to registration as an ―investment
company‖ under the Investment Company Act of 1940, as amended, and is not and will not be an entity ―controlled‖ by an ―investment
company‖ within the meaning of such act.

                  (gg)     There are no contracts or other documents (including, without limitation, any voting agreement), which are required
to be described in the Registration Statement and the Prospectus or filed as exhibits to the Registration Statement by the Securities Act, the
Exchange Act or the Rules and Regulations and which have not been so described, filed or incorporated by reference.

                  (hh)      No relationship, direct or indirect, exists between or among any of the Company or any Affiliate of the Company,
on the one hand, and any director, officer, shareholder, customer or supplier of the Company or any affiliate of the Company, on the other
hand, which is required by the Securities Act, the Exchange Act or the Rules and Regulations to be described in the Registration Statement or
the Prospectus which is not so described and described as required. There are no outstanding loans, advances (except normal advances for
business expenses in the ordinary course of business) or guarantees of indebtedness by the Company to or for the benefit of any of the officers
or directors of the Company or any of their respective family members, except as disclosed in the Registration Statement and the
Prospectus. The Company is not in violation of the Sarbanes-Oxley Act of 2002 (― Sarb-Ox ‖), directly or indirectly, including through a
Subsidiary (other than as permitted under the Sarb-Ox for depositary institutions), extended or maintained credit, arranged for the extension of
credit, or renewed an extension of credit, in the form of a personal loan to or for any director or executive officer of the Company.

                  (ii)       The Company is in material compliance with the provisions of Sarb-Ox and the Rules and Regulations promulgated
thereunder and related or similar rules and regulations promulgated by NYSE AMEX or any other governmental or self regulatory entity or
agency, except for such violations which, singly or in the aggregate, would not have a Material Adverse Effect. Without limiting the generality
of the foregoing: (i) all members of the Company’s board of directors who are required to be ―independent‖ (as that term is defined under
applicable laws, rules and regulations), including, without limitation, all members of the audit committee of the Company’s board of directors,
meet the qualifications of independence as set forth under applicable laws, rules and regulations and (ii) the audit committee of the Company’s
board of directors has at least one member who is an ―audit committee financial expert‖ (as that term is defined under applicable laws, rules
and regulations).

                   (jj)      Except as disclosed in the Registration Statement and the Prospectus, there are no contracts, agreements or
understandings between the Company and any Person that would give rise to a valid claim against the Company or any Underwriter for a
brokerage commission, finder’s fee or other like payment in connection with the transactions contemplated by this Agreement or, to the
Company’s knowledge, any arrangements, agreements, understandings, payments or issuance with respect to the Company or any of its
officers, directors, shareholders, partners, employees, Subsidiaries or Affiliates that may affect the Underwriters’ compensation as determined
by FINRA.
                                                                                                          Broadband Capital Management LLC
                                                                                                                   Rodman & Renshaw, LLC
                                                                                                                           August [ ], 2009
                                                                                                                               Page 14 of 45

                  (kk)       The Company and each Subsidiary owns or leases all such properties as are necessary to the conduct of its business
as presently operated and as proposed to be operated as described in the Registration and the Prospectus. The Company and the Subsidiaries
have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them, in each
case free and clear of all Liens except such as are described in the Registration Statement and the Prospectus or such as do not (individually or
in the aggregate) materially affect the business or prospects of the Company or any of the Subsidiaries. Any real property and buildings held
under lease or sublease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with such
exceptions as are not material to, and do not interfere with, the use made and proposed to be made of such property and buildings by the
Company and the Subsidiaries. Neither the Company nor any Subsidiary has received any notice of any claim adverse to its ownership of any
real or personal property or of any claim against the continued possession of any real property, whether owned or held under lease or sublease
by the Company or any Subsidiary.

                   (ll)     The Company and each Subsidiary: (i) owns or possesses adequate right to use all patents, patent applications,
trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, formulae, customer lists, and
know-how and other intellectual property (including trade secrets and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures, ― Intellectual Property ‖) necessary for the conduct of their respective businesses as being conducted and
as described in the Registration Statement and Prospectus and (ii) have no knowledge that the conduct of their respective businesses do not or
will not conflict with, and they have not received any notice of any claim of conflict with, any such right of others. To the Company’s
knowledge, all material technical information developed by and belonging to the Company or any Subsidiary which has not been patented
(including, without limitation, the Internet-based, proprietary referral system referred to in the Prospectus) has been kept confidential so as,
among other things, all such information may be deemed proprietary to the Company. Except as set forth in the Registration Statement, the
Prospectus or the Company Filings (as defined below), neither the Company nor any Subsidiary has granted or assigned to any other Person
any right to sell the current products and services of the Company and its Subsidiaries or those products and services described in the
Registration Statement and Prospectus. To the Company’s best knowledge, there is no infringement by third parties of any such Intellectual
Property; there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the
Company’s or any Subsidiary’s rights in or to any such Intellectual Property, and the Company is unaware of any facts which would form a
reasonable basis for any such claim; and there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by
others that the Company or any Subsidiary infringes or otherwise violates any patent, trademark, copyright, trade secret or other proprietary
rights of others, and the Company is unaware of any other fact which would form a reasonable basis for any such claim. As used herein, the
term ― Company Filings ‖ means all of the Company’s filings with the Commission prior to the date hereof via EDGAR.
                                                                                                           Broadband Capital Management LLC
                                                                                                                    Rodman & Renshaw, LLC
                                                                                                                            August [ ], 2009
                                                                                                                                Page 15 of 45

                  (mm)       The agreements and documents described in the Registration Statement, and the Prospectus conform to the
descriptions thereof contained therein and there are no agreements or other documents required to be described in the Registration Statement or
the Prospectus or to be filed with the Commission as exhibits to the Registration Statement, that have not been so described or filed. Each
agreement or other instrument (however characterized or described) to which the Company is a party or by which its property or business is or
may be bound or affected and (i) that is referred to in the Registration Statement or attached as an exhibit thereto, or (ii) is material to the
Company’s business, has been duly and validly executed by the Company, is in full force and effect in all material respects and is enforceable
against the Company and, to the Company’s knowledge, the other parties thereto, in accordance with its terms, except (x) as such enforceability
may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally, (y) as enforceability of any
indemnification or contribution provision may be limited under the foreign, federal and state securities laws, and (z) that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought, and none of such agreements or instruments has been assigned by the Company, and neither the
Company nor, to the Company’s knowledge, any other party is in breach or default thereunder and, to the Company’s knowledge, no event has
occurred that, with the lapse of time or the giving of notice, or both, would constitute a breach or default thereunder. To the Company’s
knowledge, performance by the Company of the material provisions of such agreements or instruments will not result in a violation of any
existing applicable law, rule, regulation, judgment, order or decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its assets or businesses, including, without limitation, those relating to environmental laws and
regulations.

                  (nn)      No securities of the Company have been sold by the Company or by or on behalf of, or for the benefit of, any person
or persons controlling, controlled by, or under common control with the Company since the date of the Company’s formation, except as
disclosed in the Registration Statement.

                   (oo)      The disclosures in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus concerning the
effects of foreign, federal, state and local regulation on the Company’s business as currently contemplated are correct in all material respects
and do not omit to state a material fact necessary to make the statements therein, in light of the circumstances in which they were made, not
misleading.
                                                                                                            Broadband Capital Management LLC
                                                                                                                     Rodman & Renshaw, LLC
                                                                                                                             August [ ], 2009
                                                                                                                                 Page 16 of 45

                   (pp)      Each of the Company and the Subsidiaries has accurately prepared and timely filed all federal, state, foreign and
other tax returns that are required to be filed by it and has paid or made provision for the payment of all taxes, assessments, governmental or
other similar charges, including without limitation, all sales and use taxes and all taxes which the Company or any Subsidiary is obligated to
withhold from amounts owing to employees, creditors and third parties, with respect to the periods covered by such tax returns (whether or not
such amounts are shown as due on any tax return). No deficiency assessment with respect to a proposed adjustment of the Company’s or any
Subsidiary’s federal, state, local or foreign taxes is pending or, to the Company’s knowledge, threatened. The accruals and reserves on the
books and records of the Company and the Subsidiaries in respect of tax liabilities for any taxable period not finally determined are adequate to
meet any assessments and related liabilities for any such period and, since the date of the Company’s most recent audited financial statements,
the Company and the Subsidiaries have not incurred any liability for taxes other than in the ordinary course of its business. There is no tax lien,
whether imposed by any federal, state, foreign or other taxing authority, outstanding against the assets, properties or business of the Company
or any Subsidiary.

                  (qq)     No labor disturbance by the employees of the Company or any Subsidiary currently exists or, to the Company’s
knowledge, is likely to occur.

                   (rr)      The Company and each Subsidiary have at all times operated their respective businesses in material compliance
with all Environmental Laws, and no material expenditures are or will be required in order to comply therewith. Neither the Company nor any
Subsidiary has received any notice or communication that relates to or alleges any actual or potential violation or failure to comply with any
Environmental Laws that will result in a Material Adverse Effect. As used herein, the term ― Environmental Laws ‖ means all applicable
laws and regulations, including any licensing, permits or reporting requirements, and any action by a federal state or local government entity
pertaining to the protection of the environment, protection of public health, protection of worker health and safety, or the handling of hazardous
materials, including without limitation, the Clean Air Act, 42 U.S.C. § 7401, et seq., the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. § 9601, et seq., the Federal Water Pollution Control Act, 33 U.S.C. § 1321, et seq., the
Hazardous Materials Transportation Act, 49 U.S.C. § 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. § 690-1, et seq.,
and the Toxic Substances Control Act, 15 U.S.C. § 2601, et seq. or similar laws and regulations, to the extent applicable, under the Peoples
Republic of China (― PRC ‖)

                  (ss)      Except as set forth in the Registration Statement, the Prospectus or the Company Filings, neither the Company nor
any Subsidiary is a party to an ―employee benefit plan,‖ as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974 (―
ERISA ‖) which: (i) is subject to any provision of ERISA and (ii) is or was at any time maintained, administered or contributed to by the
Company or any Subsidiary and covers any employee or former employee of the Company or any Subsidiary or any ERISA Affiliate (as
defined hereafter). These plans are referred to collectively herein as the ― Employee Plans .‖ For purposes of this Section, ― ERISA Affiliate
‖ of any person or entity means any other person or entity which, together with that person or entity, could be treated as a single employer
under Section 414(m) of the Internal Revenue Code of 1986, as amended (the ― Code ‖), or is an ―affiliate,‖ whether or not incorporated, as
defined in Section 407(d)(7) of ERISA, of the person or entity.
                                                                                                             Broadband Capital Management LLC
                                                                                                                      Rodman & Renshaw, LLC
                                                                                                                              August [ ], 2009
                                                                                                                                  Page 17 of 45

                    (tt)   The Registration Statement and the Prospectus identify each employment, severance or other similar agreement,
arrangement or policy and each material plan or arrangement providing for insurance coverage (including any self-insured arrangements),
workers’ compensation, disability benefits, severance benefits, supplemental unemployment benefits, vacation benefits, retirement benefits or
for deferred compensation, profit-sharing, bonuses, stock options, stock appreciation or other forms of incentive compensation, or
post-retirement insurance, compensation or benefits which: (i) is not an Employee Plan, (ii) is entered into, maintained or contributed to, as the
case may be, by the Company or any Subsidiary or any of their respective ERISA Affiliates, and (iii) covers any employee or former employee
of the Company or any Subsidiary or any of their respective ERISA Affiliates. These contracts, plans and arrangements are referred to
collectively in this Agreement as the ― Benefit Arrangements .‖ Each Benefit Arrangement has been maintained in substantial compliance
with its terms and with requirements prescribed by any and all statutes, orders, rules and regulations that are applicable to that Benefit
Arrangement.

                   (uu)     Except as set forth in the Registration Statement, the Prospectus or the Company Filings, there is no liability in
respect of post-retirement health and medical benefits for retired employees of the Company or any Subsidiary or any of their respective
ERISA Affiliates other than medical benefits required to be continued under applicable law, determined using assumptions that are reasonable
in the aggregate, over the fair market value of any fund, reserve or other assets segregated for the purpose of satisfying such liability (including
for such purposes any fund established pursuant to Section 40 1(h) of the Code). With respect to any of the Company’s or any Subsidiaries’
Employee Plans which are ―group health plans‖ under Section 4980B of the Code and Section 607(1) of ERISA, there has been material
compliance with all requirements imposed there under such that the Company or any Subsidiary or their respective ERISA Affiliates have no
(and will not incur any) loss, assessment, tax penalty, or other sanction with respect to any such plan.

                 (vv)      Except for the Company’s Controller and Chief Accounting Officer as of the Execution Date, neither the Company
nor any Subsidiary is a party to or subject to any employment contract or arrangement providing for annual future compensation, or the
opportunity to earn annual future compensation (whether through fixed salary, bonus, commission, options or otherwise) of more than
$120,000 to any officer, consultant, director or employee.

                   (ww)      The execution of this Agreement, or consummation of the Offering does not constitute a triggering event under any
Employee Plan or any other employment contract, whether or not legally enforceable, which (either alone or upon the occurrence of any
additional or subsequent event) will or may result in any payment (of severance pay or otherwise), acceleration, increase in vesting, or increase
in benefits to any current or former participant, employee or director of the Company or any Subsidiary other than an event that is not material
to the financial condition or business of the Company or any Subsidiary, either individually or taken as a whole.
                                                                                                             Broadband Capital Management LLC
                                                                                                                      Rodman & Renshaw, LLC
                                                                                                                              August [ ], 2009
                                                                                                                                  Page 18 of 45

                  (xx)      No ―prohibited transaction‖ (as defined in either Section 406 of the ERISA or Section 4975 of Code), ―accumulated
funding deficiency‖ (as defined in Section 302 of ERISA) or other event of the kind described in Section 4043(b) of ERISA (other than events
with respect to which the 30-day notice requirement under Section 4043 of ERISA has been waived) has occurred with respect to any employee
benefit plan for which the Company or any Subsidiary would have any liability; each employee benefit plan of the Company or any Subsidiary
is in compliance in all material respects with applicable law, including (without limitation) ERISA and the Code; the Company has not incurred
and does not expect to incur liability under Title IV of ERISA with respect to the termination of, or withdrawal from any ―pension plan‖; and
each employee benefit plan of the Company or any Subsidiary that is intended to be qualified under Section 401(a) of the Code is so qualified
and nothing has occurred, whether by action or by failure to act, which could cause the loss of such qualification.

                  (yy)       Each of the Company and the Subsidiaries, are in compliance with the requirements of the insurance laws and
regulations of their respective states of incorporation or organization and the insurance laws and regulations of other jurisdictions which are
applicable to the Company or such Subsidiaries, and each have filed all notices, reports, documents or other information required to be filed
thereunder, except where the failure to comply with such requirement could not reasonably be expected to have a Material Adverse Effect.

                   (zz)     Neither the Company, any Subsidiary nor, to the Company’s knowledge, any of their respective employees or
agents has at any time during the last five (5) years: (i) made any unlawful contribution to any candidate for foreign office, or failed to disclose
fully any contribution in violation of law, or (ii) made any payment to any federal or state governmental officer or official, or other Person
charged with similar public or quasi-public duties, other than payments that are not prohibited by the laws of the United States of any
jurisdiction thereof.

                   (aaa)      The Company has not offered, or caused the Underwriters to offer, the Firm Shares to any Person or entity with
the intention of unlawfully influencing: (i) a customer or supplier of the Company or any Subsidiary to alter the customer ’ s or supplier ’ s
level or type of business with the Company or any Subsidiary or (ii) a journalist or publication to write or publish favorable information about
the Company, any Subsidiary or its products or services.

                   (bbb)      The Company is in compliance with all applicable Chinese and other foreign and U.S. laws, rules, regulations,
ordinances, directives, judgments, decrees and orders (including, without limitation, all securities and tax laws, rules and regulations of the
Country of China), except for such non-compliance as would not have a Material Adverse Effect. As of the date hereof and as of the Closing
Date, and except as contemplated by this Agreement, the Company does not operate within the jurisdiction of United States or any state or
territory thereof in such a manner so as to subject the Company or its operations or businesses to registration as a foreign company doing
business in any state within the United States or to any of the following laws in any material respect: (i) the Bank Secrecy Act, as amended, (ii)
the Uniting and Strengthening of America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, as
amended, (iii) the Foreign Corrupt Practices Act of 1977, as amended, (iv) the Currency and Foreign Transactions Reporting Act of 1970, as
amended, (v) the Employee Retirement Income Security Act of 1974, as amended, (vi) the Money Laundering Control Act of 1986, as
amended (vii) the rules and regulations promulgated under any such law, or any successor law, or any judgment, decree or order of any
applicable administrative or judicial body relating to such law and (viii) any corresponding law, rule, regulation, ordinance, judgment, decree or
order of any state or territory of the United States or any administrative or judicial body thereof.
                                                                                                           Broadband Capital Management LLC
                                                                                                                    Rodman & Renshaw, LLC
                                                                                                                            August [ ], 2009
                                                                                                                                Page 19 of 45

                 (ccc)     The operations of the Company are and have been conducted at all times in compliance with applicable financial
record keeping and reporting requirements and money laundering statutes of the PRC and, to the Company’s knowledge, all other jurisdictions
to which the Company is subject, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued,
administered or enforced by any applicable governmental agency (collectively, the ― Money Laundering Laws ‖) and no action, suit or
proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company with respect to the
Money Laundering Laws is pending or, to the best knowledge of the Company, threatened.

                    (ddd)    The Company had at the date or dates indicated in each of the Registration Statement and the Prospectus, as the case
may be, duly authorized, issued and outstanding capitalization as set forth in the Registration Statement and the Prospectus. Based on the
assumptions stated in the Registration Statement and the Prospectus, the Company will have on the Closing Date the adjusted stock
capitalization set forth therein. Except as set forth in, or contemplated by, the Registration Statement and the Prospectus, on the Effective Date
and on the Closing Date, there will be no options, warrants, or other rights to purchase or otherwise acquire any authorized, but unissued
Common Stock or any security convertible into Common Stock, or any contracts or commitments to issue or sell Common Stock or any such
options, warrants, rights or convertible securities.

                   (eee)    Except as set forth in the Registration Statement and the Prospectus, no holders of any securities of the Company or
any rights exercisable for or convertible or exchangeable into securities of the Company have the right to require the Company to register any
such securities of the Company under the Act or to include any such securities in a registration statement to be filed by the Company.

                (fff)    Except as set forth in the Registration Statement and the Prospectus, there are no outstanding loans or indebtedness
of the Company and the Subsidiaries.

                  (ggg)   The description of the Company and the Subsidiaries business and products as set forth in the Registration
Statement and Prospectus, and the description of such in the Registration Statement and Prospectus do not contain any material omissions or
puffery that would make the description of the Company’s business and/or products false or misleading.
                                                                                                            Broadband Capital Management LLC
                                                                                                                     Rodman & Renshaw, LLC
                                                                                                                             August [ ], 2009
                                                                                                                                 Page 20 of 45

                 (hhh)   Other than as set forth in the Registration Statement and Prospectus, there are no related party transactions between
the Company, the Subsidiaries and any related party.

                   (iii)      Neither the Company nor, to the knowledge of the Company, any director, officer, agent, employee or affiliate of
the Company (as such term is defined under Rule 144 under the Securities Act, an ― Affiliate ‖) is currently subject to any U.S. sanctions
administered by the Office of Foreign Assets Control of the U.S. Treasury Department (― OFAC ‖); and the Company will not directly or
indirectly use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any joint venture partner or other
person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.

                   (jjj)      As used in this Agreement, references to matters being ― material ‖ with respect to the Company or its Subsidiaries
shall mean a material event, change, condition, status or effect related to the condition (financial or otherwise), properties, assets (including
intangible assets), liabilities, business, prospects, operations or results of operations of the Company or the applicable Subsidiaries, either
individually or taken as a whole, as the context requires.

                   (kkk)     As used in this Agreement, the term ― knowledge of the Company ‖ (or similar language) shall mean the
knowledge of the officers and directors of the Company and the applicable Subsidiaries who are named in the Prospectus, with the assumption
that such officers and directors shall have made reasonable and diligent inquiry of the matters presented (with reference to what is customary
and prudent for the applicable individuals in connection with the discharge by the applicable individuals of their duties as officers, directors or
managers of the Company or the applicable Subsidiaries).

                   Any certificate signed by or on behalf of the Company and delivered to the Underwriters or to Ellenoff Grossman & Schole
LLP (― Underwriters’ Counsel ‖) shall be deemed to be a representation and warranty by the Company to each Underwriter listed on Schedule
A hereto as to the matters covered thereby.

         2.2        Representations of the Selling Stockholder. The Selling Stockholder represents, warrants and agrees that:

               (a)     neither the Selling Stockholder nor any person acting on behalf of the Selling Stockholder (other than, if applicable,
the Company and the Underwriters) has used or referred to any ―free writing prospectus‖ (as defined in Rule 405), relating to the Common
Stock;

                  (b)      the Selling Stockholder has good and valid title to the shares of Common Stock to be sold by the Selling
Stockholder hereunder on such Closing Date, or any Additional Closing Date as applicable, free and clear of all liens, encumbrances, equities
or claims under the Custody Agreement, as hereinafter defined.
                                                                                                           Broadband Capital Management LLC
                                                                                                                    Rodman & Renshaw, LLC
                                                                                                                            August [ ], 2009
                                                                                                                                Page 21 of 45

                 (c)       the Common Stock to be sold by the Selling Stockholder hereunder, which is represented by the certificates held in
custody for the Selling Stockholder, is subject to the interest of the Underwriters thereunder, and the obligations of the Selling Stockholder
hereunder shall not be terminated by any act of the Selling Stockholder, by operation of law, by the death or incapacity of any individual
Selling Stockholder or, in the case of a trust, by the death or incapacity of any executor or trustee or the termination of such trust, or the
occurrence of any other event.

                  (d)       Upon delivery of the Common Stock to be sold by the Selling Stockholder, payment therefor pursuant hereto and
assuming no Underwriter has notice of any ―adverse claim‖ (within the meaning of Section 8-102 of the Uniform Commercial Code (the ―
UCC ‖)) (i) the Underwriters shall be ―protected purchasers‖ of such Common Stock within the meaning of Section 8-303 of the UCC,
(ii) under Section 8-501 of the UCC, the Underwriters will acquire good and valid title and a valid security entitlement in respect of such
Common Stock and (iii) no action based on any ―adverse claim,‖ within the meaning of Section 8-102 of the UCC, to such Common Stock
may be asserted against the Underwriters with respect to such security entitlement.

                 (e)      The Selling Stockholder has placed in custody under a custody agreement (the ― Custody Agreement ‖ with
American Stock Transfer & Trust Company, as custodian (the ― Custodian ‖), for delivery under this Agreement, certificates in negotiable
form (with signature guaranteed by a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Program or the Stock Exchange Medallion Program) representing the shares of Common Stock to be sold by the Selling
Stockholder hereunder.

                 (f)       The Selling Stockholder has duly and irrevocably executed and delivered a power of attorney (the ― Power of
Attorney ‖ appointing [        ] as attorney-in-fact, with full power of substitution, and with full authority (exercisable by any one or more of
them) to take such action as may be necessary or desirable to carry out the provisions of the Custody Agreement on behalf of the Selling
Stockholder in accordance with the provisions of the Custody Agreement and Power of Attorney.

                (g)      The Selling Stockholder has full right, power and authority, corporate or otherwise, to enter into this Agreement,
the Custody Agreement and the Power of Attorney.

                  (h)       This Agreement has been duly and validly authorized, executed and delivered by or on behalf of the Selling
Stockholder.

                  (i)      The Power of Attorney and the Custody Agreement have been duly and validly authorized, executed and delivered
by or on behalf of the Selling Stockholder and constitute valid and legally binding obligations of the Selling Stockholder enforceable against
the Selling Stockholder in accordance with their terms, subject to (i) the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, (ii) general equitable principles (whether
considered in a proceeding in equity or at law) and (iii) an implied covenant of good faith and fair dealing.
                                                                                                              Broadband Capital Management LLC
                                                                                                                       Rodman & Renshaw, LLC
                                                                                                                               August [ ], 2009
                                                                                                                                   Page 22 of 45

                    (j)        The execution, delivery and performance of this Agreement, the Custody Agreement and the Power of Attorney by
the Selling Stockholder and the consummation by the Selling Stockholder of the transactions contemplated hereby and thereby do not and will
not (i) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement, license or other agreement or instrument to which the Selling Stockholder is a party or by which the Selling
Stockholder is bound or to which any of the property or assets of the Selling Stockholder is subject, (ii) result in any violation of the provisions
of the charter or by-laws (or similar organizational documents) of the Selling Stockholder, (iii) result in any violation of the provisions of the
deed of trust (or similar organizational documents) of the Selling Stockholder or (iv) result in any violation of any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over the Selling Stockholder or the property or assets of the Selling
Stockholder.

                   (k)       No consent, approval, authorization or order of, or filing or registration with, any court or governmental agency or
body having jurisdiction over the Selling Stockholder or the property or assets of the Selling Stockholder is required for the execution, delivery
and performance of this Agreement, the Custody Agreement or the Power of Attorney by the Selling Stockholder and the consummation by the
Selling Stockholder of the transactions contemplated hereby and thereby, except for the registration of the Common Stock under the Securities
Act and such consents, approvals, authorizations, registrations or qualifications as may be required under the Exchange Act and applicable state
or foreign securities laws in connection with the purchase and sale of the Common Stock by the Underwriters.

                   (l)       The Registration Statement did not, as of the Effective Date, contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided that the representation
in this paragraph is limited to statements or omissions made in reliance upon and in conformity with information relating to such Selling
Stockholder furnished to the Company in writing by such Selling Stockholder expressly for use in the Registration Statement.

                  (m)       The Prospectus will not, as of its date and on the applicable Delivery Date, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that the representation in this paragraph is limited to statements or
omissions made in reliance upon and in conformity with information relating to such Selling Stockholder furnished to the Company in writing
by such Selling Stockholder expressly for use in the Prospectus.

                  (n)      The Selling Stockholder has not taken and will not take, directly or indirectly, any action that is designed to or that
has constituted or that could reasonably be expected to cause or result in the stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the shares of the Common Stock.
                                                                                                           Broadband Capital Management LLC
                                                                                                                    Rodman & Renshaw, LLC
                                                                                                                            August [ ], 2009
                                                                                                                                Page 23 of 45

                  (o)       The Selling Stockholder has reviewed this Agreement, the Registration Statement and the General Disclosure
Package and has no reason to believe (i) the Registration Statement, as of its effective date, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) the General
Disclosure Package, as of the Applicable Time, contained an untrue statement of a material fact or omitted to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that no
representation or warranty is made as to information contained in or omitted from the Registration Statement or Pricing Disclosure Package in
reliance upon and in conformity with the Underwriters’ Information.

                  (p)      Any certificate signed by any Selling Stockholder and delivered to the Representatives or Underwriters’ Counsel in
connection with the offering of the Common Stock shall be deemed a representation and warranty by such Selling Stockholder, as to matters
covered thereby, to each Underwriter.

                  2.3        Free Writing Prospectus.     Additionally, the Company hereby represents, warrants and covenants as to the
following:

                  (a)       Neither: (i) any Issuer-Represented General Free Writing Prospectus(es) issued at or prior to the Time of Sale and
the Statutory Prospectus, all considered together (collectively, the ― General Disclosure Package ‖), nor (ii) any individual Issuer-Represented
Limited-Use Free Writing Prospectus(es) (as defined below), when considered together with the General Disclosure Package, includes or
included as of the Time of Sale any untrue statement of a material fact or omits or omitted as of the Time of Sale to state any material fact
necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding
sentence does not apply to statements in or omissions from any Statutory Prospectus included in the Registration Statement or any
Issuer-Represented Free Writing Prospectus based upon and in conformity with written information furnished to the Company by the
Representatives specifically for use therein.

                  (b)        Each Issuer-Represented Free Writing Prospectus, as of its issue date and at all subsequent times through the
completion of the public offer and sale of the Securities or until any earlier date that the Company notified or notifies the Representatives as
described in the next sentence, did not, does not and will not include any information that conflicted, conflicts or will conflict with the
information contained in the Registration Statement, any Statutory Prospectus or the Prospectus. If at any time following issuance of an
Issuer-Represented Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer-Represented
Free Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement, any Statutory Prospectus or
the Prospectus relating to the Securities or included or would include an untrue statement of a material fact or omitted or would omit to state a
material fact necessary in order to make the statements therein, in the light of the circumstances prevailing at that subsequent time, not
misleading, the Company has notified or will notify promptly the Representatives so that any use of such Issuer-Represented Free Writing
Prospectus may cease until it is promptly amended or supplemented by the Company, at its own expense, to eliminate or correct such conflict,
untrue statement or omission. The foregoing two sentences do not apply to statements in or omissions from any Issuer-Represented Free
Writing Prospectus based upon and in conformity with the Underwriters’ Information.
                                                                                                            Broadband Capital Management LLC
                                                                                                                     Rodman & Renshaw, LLC
                                                                                                                             August [ ], 2009
                                                                                                                                 Page 24 of 45

                   (c)       The Company has not distributed and will not distribute any prospectus or other offering material in connection
with the offering and sale of the Public Securities other than any Preliminary Prospectus, the General Disclosure Package or the Prospectus or
other materials permitted by the Act to be distributed by the Company. Unless the Company obtains the prior consent of Broadband, and
except as set forth on Exhibit D attached hereto, the Company has not made and will not make any offer relating to the Securities that would
constitute an ―issuer free writing prospectus,‖ as defined in Rule 433 under the Act, or that would otherwise constitute a ―free writing
prospectus,‖ as defined in Rule 405 under the Act, required to be filed with the Commission. The Company has complied and will comply
with the requirements of Rules 164 and 433 under the Act applicable to any Issuer-Represented Free Writing Prospectus as of its issue date and
at all subsequent times through the completion of the public offer and sale of the Securities, including timely filing with the Commission where
required, legending and record keeping. The Company has satisfied and will satisfy the conditions in Rule 433 under the Act to avoid a
requirement to file with the Commission any electronic road show.

                 2.4        Free Writing Prospectus . Each Underwriter agrees that, unless it obtains the prior written consent of the
Company, it will not make any offer relating to the Securities that would constitute an Issuer-Represented Free Writing Prospectus (as defined
in Section 2.2 hereof) or that would otherwise (without taking into account any approval, authorization, use or reference thereto by the
Company) constitute a ―free writing prospectus‖ required to be filed by the Company with the Commission (as defined herein) or retained by
the Company under Rule 433 of the Act (as defined herein); provided that the prior written consent of the Company hereto shall be deemed to
have been given in respect of any Issuer-Represented General Free Writing Prospectuses (as defined in Section 2.2.5 hereof) referenced on
Exhibit D attached hereto

                  2.5        Definitions. As used in this Agreement, the terms set forth below shall have the following meanings:

          (i)      ― Time of Sale ‖ means 10:00 a.m. (Eastern time) on the date of this Agreement.

           (ii)     ― Statutory Prospectus ‖ as of any time means the prospectus that is included in the Registration Statement immediately
prior to that time. For purposes of this definition, information contained in a form of prospectus that is deemed retroactively to be a part of the
Registration Statement pursuant to Rule 430A shall be considered to be included in the Statutory Prospectus as of the actual time that form of
prospectus is filed with the Commission pursuant to Rule 424(b) under the Act.
                                                                                                           Broadband Capital Management LLC
                                                                                                                    Rodman & Renshaw, LLC
                                                                                                                            August [ ], 2009
                                                                                                                                Page 25 of 45

          (iii)     ― Issuer-Represented Free Writing Prospectus ‖ means any ―issuer free writing prospectus,‖ as defined in Rule 433
under the Act, relating to the Securities that (A) is required to be filed with the Commission by the Company, or (B) is exempt from filing
pursuant to Rule 433(d)(5)(i) under the Act because it contains a description of the Securities or of the offering that does not reflect the final
terms or pursuant to Rule 433(d)(8)(ii) because it is a ―bona fide electronic road show,‖ as defined in Rule 433 of the Regulations which is
made available without restriction, in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in
the form retained in the Company’s records pursuant to Rule 433(g) under the Act.

          (iv)      ― Issuer-Represented General Free Writing Prospectus ‖ means any Issuer-Represented Free Writing Prospectus that is
intended for general distribution to prospective investors.

                  (v)        ― Issuer-Represented Limited-Use Free Writing Prospectus ‖ means any Issuer-Represented Free Writing
Prospectus that is not an Issuer-Represented General Free Writing Prospectus. The term Issuer-Represented Limited-Use Free Writing
Prospectus also includes any ―bona fide electronic road show,‖ as defined in Rule 433 of the Regulations, that is made available without
restriction pursuant to Rule 433(d)(8)(ii), even though not required to be filed with the Commission.

         3.        Purchase, Sale and Delivery of the Securities .

                  (a)      On the basis of the representations, warranties, covenants and agreements herein contained, but subject to the terms
and conditions herein set forth, the Company agrees to sell to each Underwriter and each Underwriter, severally and not jointly, agrees to
purchase from the Company, at a purchase price per share of $[X.XX], the number of Firm Shares set forth opposite their respective names on
Schedule A hereto together with any additional number of Shares which such Underwriter may become obligated to purchase pursuant to the
provisions of Section 10 hereof.

                    (b)        Payment of the purchase price for the Firm Shares shall be made by wire transfer in immediately available funds to
or as directed by the Company, as the case may be for the respective Securities which it is offering, upon delivery of certificates for the Firm
Shares to Broadband through the facilities of The Depository Trust Company for the respective accounts of the several
Underwriters. Certificates for the Firm Shares shall be registered in such name or names and shall be in such denominations as Broadband may
request at least two (2) business days before the Closing Date. The Company will permit the Representatives to examine and package such
certificates for delivery at least one (1) full business day prior to the Closing Date.
                                                                                                          Broadband Capital Management LLC
                                                                                                                   Rodman & Renshaw, LLC
                                                                                                                           August [ ], 2009
                                                                                                                               Page 26 of 45

                   (c)       Payment of the purchase price for the Option Shares shall be made by wire transfer in immediately available funds
to or as directed by the Selling Stockholder upon delivery of certificates for the Option Shares to Broadband through the facilities of The
Depository Trust Company for the respective accounts of the several Underwriters. The date and time, as reasonably determined by
Broadband, when the Option Shares are to be delivered is hereinafter referred to as an ― Additional Closing Date. ‖ Certificates for the Option
Shares shall be registered in such name or names and shall be in such denominations as the Representatives may request at least two (2)
business days before the Additional Closing Date. The Company will permit the Representatives to examine and package such certificates for
delivery at least one full business day prior to the Additional Closing Date.

          4.        Offering . Upon authorization of the release of the Firm Shares by Broadband, the Underwriters propose to offer the Shares
for sale to the public upon the terms and conditions set forth in the Prospectus.

         5.       Covenants of the Company . The Company acknowledges, covenants and agrees with the Underwriters that:

                   (a)        The Registration Statement and any amendments thereto have been declared effective, and if Rule 430A is used or
the filing of the Prospectus is otherwise required under Rule 424(b), the Company will file the Prospectus (properly completed if Rule 430A
has been used) pursuant to Rule 424(b) within the prescribed time period and will provide evidence satisfactory to the Representatives of such
timely filing. The Company will notify the Representatives immediately (and, if requested by the Representatives, will confirm such notice in
writing): (i) when the Registration Statement and any amendments thereto become effective, (ii) of any request by the Commission for any
amendment of or supplement to the Registration Statement or the Prospectus or for any additional information, (iii) of the Company’s intention
to file or prepare any supplement or amendment to the Registration Statement or the Prospectus, (iv) of the mailing or the delivery to the
Commission for filing of any amendment of or supplement to the Registration Statement or the Prospectus, including but not limited to Rule
462(b) under the Securities Act, (v) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereto or of the initiation, or the threatening, of any proceedings therefor, it being understood that
the Company shall make every effort to avoid the issuance of any such stop order, (vi) of the receipt of any comments from the Commission,
and (vii) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for that purpose. If the Commission shall propose or enter a stop order at any
time, the Company will make every reasonable effort to prevent the issuance of any such stop order and, if issued, to obtain the lifting of such
order as soon as possible. The Company will not file any amendment to the Registration Statement or any amendment of or supplement to the
Prospectus (including the prospectus required to be filed pursuant to Rule 424(b)) that differs from the prospectus on file at the time of the
effectiveness of the Registration Statement or file any document under the Exchange Act if such document would be deemed to be incorporated
by reference into the Prospectus to which the Representatives shall object in writing after being timely furnished in advance a copy
thereof. The Company will provide the Representatives with copies of all such amendments, filings and other documents a sufficient time prior
to any filing or other publication thereof to permit the Representatives a reasonable opportunity to review and comment thereon.
                                                                                                           Broadband Capital Management LLC
                                                                                                                    Rodman & Renshaw, LLC
                                                                                                                            August [ ], 2009
                                                                                                                                Page 27 of 45

                     (b)      The Company shall comply with the Securities Act, the Exchange Act and all applicable Rules and Regulations to
permit completion of the distribution as contemplated in this Agreement, the Registration Statement and the Prospectus. If, at any time when a
prospectus relating to the Securities is required to be delivered under the Securities Act, the Exchange Act and all applicable Rules and
Regulations in connection with the sales of Shares, any event shall have occurred as a result of which the Prospectus as then amended or
supplemented would, in the judgment of the Underwriters or the Company, include an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances existing at the time of
delivery to the purchaser, not misleading, or if, to comply with the Securities Act, the Exchange Act or the Rules and Regulations, it shall be
necessary at any time to amend or supplement the Prospectus or Registration Statement, or to file any document which is an exhibit to the
Registration Statement or the Prospectus or in any amendment thereof or supplement thereto, the Company will notify the Representatives
promptly and prepare and file with the Commission, subject to Section 5(a) hereof, an appropriate amendment or supplement (in form and
substance satisfactory to the Representatives) which will correct such statement or omission or which will effect such compliance and will use
its best efforts to have any amendment to the Registration Statement declared effective as soon as possible.

                  (c)      The Company will promptly deliver to the Underwriters and Underwriters’ Counsel a signed copy of the
Registration Statement, as initially filed and all amendments thereto, including all consents and exhibits filed therewith, and will maintain in
the Company’s files manually signed copies of such documents for at least five (5) years after the date of filing thereof. The Company will
promptly deliver to each of the Underwriters such number of copies of any Preliminary Prospectus, the Prospectus, the Registration Statement,
and all amendments of and supplements to such documents, if any, and all documents which are exhibits to the Registration Statement and
Prospectus or any amendment thereof or supplement thereto, as the Underwriters may reasonably request. Prior to 10:00 A.M., New York
time, on the business day next succeeding the date of this Agreement and from time to time thereafter, the Company will furnish the
Underwriters with copies of the Prospectus in New York City in such quantities as the Underwriters may reasonably request.

                 (d)       The Company consents to the use and delivery of the Preliminary Prospectus by the Underwriters in accordance
with Rule 430 and Section 5(b) of the Securities Act.

                   (e)       If the Company elects to rely on Rule 462(b) under the Securities Act, the Company shall both file a Rule 462(b)
Registration Statement with the Commission in compliance with Rule 462(b) and pay the applicable fees in accordance with Rule 111 of the
Act by the earlier of: (i) 10:00 p.m., New York City time, on the date of this Agreement, and (ii) the time that confirmations are given or sent,
as specified by Rule 462(b)(2).
                                                                                                            Broadband Capital Management LLC
                                                                                                                     Rodman & Renshaw, LLC
                                                                                                                             August [ ], 2009
                                                                                                                                 Page 28 of 45

                   (f)        The Company will use its best efforts, in cooperation with the Representatives, at or prior to the time of
effectiveness of the Registration Statement, to qualify the Securities for offering and sale under the securities laws relating to the offering or
sale of the Securities of such jurisdictions, domestic or foreign, as the Representatives may designate and to maintain such qualification in
effect for so long as required for the distribution thereof; except that in no event shall the Company be obligated in connection therewith to
qualify as a foreign corporation or to execute a general consent to service of process.

                   (g)      The Company will make generally available to its security holders and to the Underwriters as soon as practicable,
but in any event not later than twelve (12) months after the effective date of the Registration Statement (as defined in Rule 158(c) under the
Securities Act), an audited earnings statement of the Company and the Subsidiaries complying with Section 11(a) of the Securities Act and the
Rules and Regulations (including, at the option of the Company, Rule 158).

                   (h)       Following the Closing Date, the Company and any of the individuals listed on Schedule B hereto (the ― Lock-Up
Parties ‖) shall not sell or otherwise dispose of any securities of the Company, whether publicly or in a private placement during the period
that their respective lock-up agreements are in effect. The Company will deliver to the Representatives the agreements of Lock-Up Parties to
the foregoing effect prior to the Closing Date, which agreements shall be substantially in the form attached hereto as Annex II. For purposes of
this Section 5, the term ― Fair Market Value ‖ shall mean the last sale price of the Common Stock, during normal operating hours, as reported
on NYSE AMEX.

                    (i)     For a period of one (1) year from the effective date of the Registration Statement, the Company, at its expense,
shall provide the Representatives on a weekly basis with a copy of the Company’s weekly transfer sheets from the previous week and securities
positions listings.

                   (j)       If the Company fails to maintain the listing of its Common Stock on a nationally recognized exchange, for a period
of two (2) years from the effective date of the Registration Statement, the Company, at its expense, shall obtain and keep current a listing in the
Standard & Poor’s Corporation Records Services or the Moody’s Industrial Manual; provided that Moody’s OTC Industrial Manual is not
sufficient for these purposes.

                   (k)       During the period of three (3) years from the effective date of the Registration Statement, the Company will furnish
to the Underwriters copies of all reports or other communications (financial or other) furnished to security holders or from time to time
published or publicly disseminated by the Company, and will deliver to the Underwriters: (i) as soon as they are available, copies of any
reports, financial statements and proxy or information statements furnished to or filed with the Commission or any national securities exchange
on which any class of securities of the Company is listed; and (ii) such additional information concerning the business and financial condition
of the Company as the Representatives may from time to time reasonably request (such financial information to be on a consolidated basis to
the extent the accounts of the Company and the Subsidiaries are consolidated in reports furnished to its security holders generally or to the
Commission).
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                   (l)      The Company will not issue press releases or engage in any other publicity, without Broadband’s prior written
consent, for a period ending at 5:00 p.m. Eastern time on the first business day following the forty-fifth (45th) day following the Closing Date,
other than normal and customary releases issued in the ordinary course of the Company’s business.

                  (m)       Prior to the consummation of the Offering, the Company will engage or continue to engage (for no less than two (2)
years from the date of the Closing Date) a financial public relations firm mutually acceptable to the Company and the Representatives. The
Company further agrees to consult with the Representatives as is customary within the securities industry prior to distribution to third parties of
any financial information, news releases, and/or other publicity regarding the Company, its business, or any terms of the proposed Offering, it
being agreed that the Company shall give the Representatives no less than twelve (12) hours prior notice of any such distribution and a
reasonable opportunity during or prior to such period to review the contents of the proposed distribution.

                   (n)       The Company has or will retain Corporate Stock Transfer as transfer agent for the Securities and shall continue to
retain such transfer agent for a period of two (2) years following the Closing Date.

                    (o)      The Company will apply the net proceeds from the sale of the Securities as set forth under the caption ―Use of
Proceeds‖ in the Prospectus. Without the written consent of Broadband, no proceeds of the Offering will be used to pay outstanding loans from
officers, directors or shareholders or to pay any accrued salaries or bonuses to any employees or former employees.

                   (p)        The Company will use its best efforts to effect and maintain the listing of the Securities on the NYSE AMEX for at
least three (3) years after the Closing Date.

                 (q)         The Company, during the period when the Prospectus is required to be delivered under the Securities Act or the
Exchange Act, will file all documents required to be filed with the Commission pursuant to the Securities Act, the Exchange Act and the Rules
and Regulations within the time periods required thereby.

                (r)     The Company will use its best efforts to do and perform all things required to be done or performed under this
Agreement by the Company prior to the Closing Date, and to satisfy all conditions precedent to the delivery of the Firm Shares.
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                                                                                                                      Rodman & Renshaw, LLC
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                   (s)      The Company will not take, and will cause its Affiliates not to take, directly or indirectly, any action which
constitutes or is designed to cause or result in, or which could reasonably be expected to constitute, cause or result in, the stabilization or
manipulation of the price of any security to facilitate the sale or resale of the Securities.

                   (t)      The Company shall cause to be prepared and delivered to the Representatives, at its expense, within one (1)
business day from the effective date of this Agreement, an Electronic Prospectus to be used by the Underwriters in connection with the
Offering. As used herein, the term ― Electronic Prospectus ‖ means a form of prospectus, and any amendment or supplement thereto, that
meets each of the following conditions: (i) it shall be encoded in an electronic format, satisfactory to the Representatives, that may be
transmitted electronically by the other Underwriters to offerees and purchasers of the Securities for at least the period during which a
Prospectus relating to the Securities is required to be delivered under the Securities Act; (ii) it shall disclose the same information as the paper
prospectus and prospectus filed pursuant to EDGAR, except to the extent that graphic and image material cannot be disseminated
electronically, in which case such graphic and image material shall be replaced in the electronic prospectus with a fair and accurate narrative
description or tabular representation of such material, as appropriate; and (iii) it shall be in or convertible into a paper format or an electronic
format, satisfactory to the Representatives, that will allow recipients thereof to store and have continuously ready access to the prospectus at
any future time, without charge to such recipients (other than any fee charged for subscription to the Internet as a whole and for on-line
time). The Company hereby confirms that it has included or will include in the Prospectus filed pursuant to EDGAR or otherwise with the
Commission and in the Registration Statement at the time it was declared effective an undertaking that, upon receipt of a request by an investor
or his or her representative within the period when a prospectus relating to the Securities is required to be delivered under the Securities Act,
the Company shall transmit or cause to be transmitted promptly, without charge, a paper copy of the Prospectus.

                 (u)     The Company shall not take any action that would result in the Underwriters or the Company being required to file
with the Commission pursuant to Rule 433(d) under the Act a Free Writing Prospectus prepared by or on behalf of the Underwriters that the
Underwriters otherwise would not have been required to file.

                 (v)        For a period equal to seven years from the date hereof, the Company will not take any action or actions which
may prevent or disqualify the Company’s use of Form F-1 or F-3 and/or Form S-1 and S-3 (or other appropriate form) for the registration of the
Shares under the Act.

                  (w)       The Company shall have filed with the Commission all Issuer-Represented Free Writing Prospectuses or other
information required to be filed by the Company under the Act and the Regulations.

                 (x)       For a period of 3 years from the Closing Date the Company agrees to hold all special and annual meetings of its
shareholders within the United States.
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                                                                                                                           August [ ], 2009
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                  (y)       The Company acknowledges that the purchasers of the Firm Shares or the Option Shares in the Offering shall be
deemed to be third party beneficiaries of this Section 3.31.

                  (z)       The Company will reserve and keep available that maximum number of its authorized but unissued securities which
are issuable upon exercise of the Representatives’ Warrants outstanding from time to time.

         6.       Consideration; Payment of Expenses .

                  (a)       In consideration of the services to be provided for hereunder, the Company shall pay to the Underwriters or their
respective designees their pro rata portion (based on the Securities purchased) of the following compensation with respect to the Firm Shares
which they are offering:

                           (i)      An underwriting discount of seven percent (7%); and

                           (ii)     An non-accountable expense allowance equal to one percent (1%) of the gross proceeds of the Offering.

                  (b)       In consideration of the services to be provided for hereunder, the Selling Stockholder shall pay to the Underwriters
or their respective designees their portion, as determined by the Representatives, of an underwriting discount of seven percent (7%) with
respect to the Option Shares:

                 (c)        The Representatives reserve the right to reduce any item of compensation or adjust the terms thereof as specified
herein in the event that a determination shall be made by FINRA to the effect that the Underwriters’ aggregate compensation is in excess of
FINRA Rules or that the terms thereof require adjustment.

                  (d)       Whether or not the transactions contemplated by this Agreement, the Registration Statement and the Prospectus are
consummated or this Agreement is terminated, the Company hereby agrees to pay all costs and expenses incident to the performance of its
obligations hereunder, including the following:

                           (i)        all expenses in connection with the preparation, printing, formatting for EDGAR and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and any and all amendments and supplements thereto and the mailing
and delivering of copies thereof to the Underwriters and dealers;

                        (ii)    all fees and expenses in connection with the filing of Corporate Offerings Business & Regulatory Analysis
(― COBRADesk ‖) filings with FINRA;

                           (iii)    all fees and expenses in connection with filing of the Registration Statement and Prospectus with the
Commission;
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                                                                                                                      Rodman & Renshaw, LLC
                                                                                                                              August [ ], 2009
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                             (iv)     the fees, disbursements and expenses of the Company’s counsel and accountants in connection with the
registration of the Securities under the Securities Act and the Offering;

                           (v)       all expenses in connection with the qualifications of the Shares for offering and sale under state or foreign
securities or blue sky laws, including the fees and disbursements of counsel for the Underwriters in connection with such qualification and in
connection with any blue by survey undertaken by such counsel

                           (vi)     all fees and expenses in connection with listing the Securities on NYSE AMEX;

                           (vii)    all travel expenses of the Company’s officers and employees and any other expense of the Company
incurred in connection with attending or hosting meetings with prospective purchasers of the Shares (― Road Show Expenses ‖);

                           (viii)   any stock transfer taxes incurred in connection with this Agreement or the Offering

                           (ix)     the cost of preparing stock certificates representing the Securities;

                           (x)      the cost and charges of any transfer agent or registrar for the Securities;

                            (xi)     any cost and expenses in conducting satisfactory due diligence investigation and analysis of the Company’s
officers, directors, employees, and affiliates; and

                            (xii)     all other costs and expenses incident to the performance of the Company obligations hereunder which are
not otherwise specifically provided for in this Section 6.
                 (e)         In addition to the costs and expenses set forth in Section 6(c), the Company will be responsible for the cost of
bound volumes of the Offering documents and commemorative lucite memorabilia, both as may be reasonably requested by the
Representatives.

                   (f)      It is understood, however, that except as provided in this Section, and Sections 7, 8 and 11 hereof, the Underwriters
will pay all of their own costs and expenses, including the fees of their counsel. Notwithstanding anything to the contrary in this Section 6, in
the event that this Agreement is terminated pursuant to Section 6 or 12(b) hereof, or subsequent to a Material Adverse Change, the Company
will pay all accountable out-of-pocket expenses of the Underwriters (including but not limited to fees and disbursements of counsel to the
Underwriters) incurred in connection herewith which shall be limited to expenses which are actually incurred as allowed under FINRA Rule
5110.
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          7.        Conditions of Underwriters’ Obligations . The obligations of the Underwriters to purchase and pay for the Firm Shares as
provided herein shall be subject to: (i) the accuracy of the representations and warranties of the Company herein contained, as of the date
hereof and as of the Closing Date (ii) the absence from any certificates, opinions, written statements or letters furnished to the Representatives
or to Underwriters’ Counsel pursuant to this Section 7 of any misstatement or omission (iii) the performance by the Company of its obligations
hereunder, and (iv) each of the following additional conditions. For purposes of this Section 7, the terms ―Closing Date‖ and ―Closing‖ shall
refer to the Closing Date for the Firm Shares, and each of the foregoing and following conditions must be satisfied as of each Closing.

                  (a)      The Registration Statement shall have become effective and all necessary regulatory or listing approvals shall have
been received not later than 5:30 P.M., New York time, on the date of this Agreement, or at such later time and date as shall have been
consented to in writing by the Representatives. If the Company shall have elected to rely upon Rule 430A under the Securities Act, the
Prospectus shall have been filed with the Commission in a timely fashion in accordance with the terms hereof and a form of the Prospectus
containing information relating to the description of the Securities and the method of distribution and similar matters shall have been filed with
the Commission pursuant to Rule 424(b) within the applicable time period; and, at or prior to the Closing Date or the actual time of the
Closing, no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereof shall have been
issued and no proceedings therefor shall have been initiated or threatened by the Commission.

                 (b)      The Representatives shall have received (i) the favorable written opinion of Loeb & Loeb LLP, legal counsel for
the Company, dated as of the Closing Date addressed to the Underwriters in the form attached hereto as Annex I, (ii) the favorable written
opinion of Han Kun Law Offices, legal counsel for the Company with respect to the laws of the People’s Republic of China dated as of the
Closing Date, addressed to the Underwriters in the form attached hereto as Annex II, (iii) the favorable opinion of Maples & Calder legal
counsel for the Company with respect to the laws of the British Virgin Islands attached hereto as Annex III and (iv) the favorable opinion of
Hammonds legal counsel for the Company with respect to the laws of Hong Kong attached hereto as Annex IV.

                 (c)       All proceedings taken in connection with the sale of the Firm Shares herein contemplated shall be satisfactory in
form and substance to the Representatives and to Underwriters’ Counsel.
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                  (d)        The Representatives shall have received a certificate of the Chief Executive Officer and Chief Financial Officer of
the Company, dated as of the Closing Date to the effect that: (i) the condition set forth in subsection (a) of this Section 7 has been satisfied, (ii)
as of the date hereof and as of the applicable Closing Date, the representations and warranties of the Company set forth in Sections 1 and 2
hereof are accurate, (iii) as of the applicable Closing Date, all agreements, conditions and obligations of the Company to be performed or
complied with hereunder on or prior thereto have been duly performed or complied with, (iv) the Company and the Subsidiaries have not
sustained any material loss or interference with their respective businesses, whether or not covered by insurance, or from any labor dispute or
any legal or governmental proceeding, (v) no stop order suspending the effectiveness of the Registration Statement or any post-effective
amendment thereof has been issued and no proceedings therefor have been initiated or threatened by the Commission, (vi) there are no pro
forma or as adjusted financial statements that are required to be included or incorporated by reference in the Registration Statement and the
Prospectus pursuant to the Rules and Regulations which are not so included or incorporated by reference and (vii) subsequent to the respective
dates as of which information is given in the Registration Statement and the Prospectus there has not been any Material Adverse Change or any
development involving a prospective Material Adverse Change, whether or not arising from transactions in the ordinary course of business.

                   (e)       On the date of this Agreement and on the Closing Date, the Representatives shall have received a ―cold comfort‖
letter from AGCA as of the date of the date of delivery and addressed to the Underwriters and in form and substance satisfactory to the
Representatives and Underwriters’ Counsel, confirming that they are independent registered public accountants with respect to the Company
and its Subsidiaries within the meaning of the Securities Act, the Rules and Regulations and the PCAOB, and stating, as of the date of delivery
(or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in
the Prospectus, as of a date not more than five (5) days prior to the date of such letter), the conclusions and findings of such firm with respect to
the financial information and other matters relating to the Registration Statement covered by such letter.

                  (f)       Subsequent to the execution and delivery of this Agreement or, if earlier, the dates as of which information is given
in the Registration Statement (exclusive of any amendment thereof) and the Prospectus (exclusive of any supplement thereto), there shall not
have been any change in the capital stock or long-term debt of the Company or any Subsidiary or any change or development involving a
change, whether or not arising from transactions in the ordinary course of business, in the business, condition (financial or otherwise), results of
operations, shareholders’ equity, properties or prospects of the Company and the Subsidiaries, taken as a whole, including but not limited to the
occurrence of any fire, flood, storm, explosion, accident, act of war or terrorism or other calamity, the effect of which, in any such case
described above, is, in the sole judgment of the Representatives, so material and adverse as to make it impracticable or inadvisable to proceed
with the Offering on the terms and in the manner contemplated in the Prospectus (exclusive of any supplement).

                 (g)       The Representatives shall have received a lock-up agreement from each Lock-Up Party, duly executed by the
applicable Lock-Up Party, in each case substantially in the form attached as Annex V.

                  (h)       The Representatives shall have received a duly executed management confirmation letter from the Company’s
directors and officers relating to certain information appearing in the Registration Statement, which letter shall be in the form previously
delivered to the Representatives in connection with the filing of the Preliminary Prospectus.
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                                                                                                                              August [ ], 2009
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                  (i)       The Securities shall have been approved for quotation on NYSE AMEX.

                  (j)     FINRA shall have confirmed that it has not raised any objection with respect to the fairness and reasonableness of
the underwriting terms and arrangements.

                   (k)      No action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued
by any federal, state or foreign governmental or regulatory authority that would, as of the Closing Date, prevent the issuance or sale of the
Securities; and no injunction or order of any federal, state or foreign court shall have been issued that would, as of the Closing Date, prevent the
issuance or sale of the Securities.

                  (l)     The Company shall have furnished the Underwriters and Underwriters’ Counsel with such other certificates,
opinions or other documents as they may have reasonably requested.

                   If any of the conditions specified in this Section 7 shall not have been fulfilled when and as required by this Agreement, or if
any of the certificates, opinions, written statements or letters furnished to the Representatives or to Underwriters’ Counsel pursuant to this
Section 7 shall not be reasonably satisfactory in form and substance to the Representatives and to Underwriters’ Counsel, all obligations of the
Underwriters hereunder may be cancelled by the Representatives at, or at any time prior to, the consummation of the Closing. Notice of such
cancellation shall be given to the Company in writing, or by telephone. Any such telephone notice shall be confirmed promptly thereafter in
writing.
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         8.        Indemnification .

                     (a)     The Company and the Selling Stockholder shall, severally and not jointly indemnify, and hold harmless each
Underwriter and each Person, if any, who controls each Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any and all losses, liabilities, claims, damages and expenses whatsoever as incurred (including but not limited to
attorneys’ fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or
any of them may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or
expenses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact made
by such party contained in the Registration Statement, as originally filed or any amendment thereof, or any related Preliminary Prospectus or
the Prospectus, or in any supplement thereto or amendment thereof, or arise out of or are based upon the omission or alleged omission made by
such party to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided,
however, that the Company and the Selling Stockholder will not be liable in any such case to the extent but only to the extent that any such
loss, liability, claim, damage or expense arises out of or is based upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of any
Underwriter through the Representatives expressly for use therein. The parties agree that such information provided by or on behalf of any
Underwriter through the Representatives consists solely of the Underwriters’ Information. This indemnity agreement will be in addition to any
liability, which the Company or any Selling Stockholder may otherwise have, including but not limited to other liability under this Agreement.

                   (b)        Each Underwriter, severally and not jointly, shall indemnify and hold harmless the Company, each of the directors
of the Company, each of the officers of the Company who shall have signed the Registration Statement, and each other Person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and the Selling Stockholder,
against any losses, liabilities, claims, damages and expenses whatsoever as incurred (including but not limited to attorneys’ fees and any and all
expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim
whatsoever, and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or any of them may become
subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration
Statement, as originally filed or any amendment thereof, or any related Preliminary Prospectus or the Prospectus, or in any amendment thereof
or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that any such loss, liability,
claim, damage or expense arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with the Underwriters’ Information; provided, however, that in no case shall any Underwriter
be liable or responsible for any amount in excess of the underwriting discount applicable to the Securities to be purchased by such Underwriter
hereunder. The parties agree that such information provided by or on behalf of any Underwriter through the Representatives consists solely of
the material referred to in the last sentence of Section 1(b) hereof.
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                                                                                                                     Rodman & Renshaw, LLC
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                    (c)      Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of any claims or the
commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under
such subsection, notify each party against whom indemnification is to be sought in writing of the claim or the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve the indemnifying party from any liability which it may have under this Section 8 to
the extent that it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability that such indemnifying
party may have otherwise than on account of the indemnity agreement hereunder). In case any such claim or action is brought against any
indemnified party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate, at
its own expense in the defense of such action, and to the extent it may elect by written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel satisfactory to such indemnified party;
provided however, that counsel to the indemnifying party shall not (except with the written consent of the indemnified party) also be counsel to
the indemnified party. Notwithstanding the foregoing, the indemnified party or parties shall have the right to employ its or their own counsel in
any such case, but the fees and expenses of such counsel shall be at the expense of such indemnified party or parties unless (i) the employment
of such counsel shall have been authorized in writing by one of the indemnifying parties in connection with the defense of such action, (ii) the
indemnifying parties shall not have employed counsel to have charge of the defense of such action within a reasonable time after notice of
commencement of the action, (iii) the indemnifying party does not diligently defend the action after assumption of the defense, or (iv) such
indemnified party or parties shall have reasonably concluded that there may be defenses available to it or them which are different from or
additional to those available to one or all of the indemnifying parties (in which case the indemnifying parties shall not have the right to direct
the defense of such action on behalf of the indemnified party or parties), in any of which events such fees and expenses shall be borne by the
indemnifying parties. No indemnifying party shall, without the prior written consent of the indemnified parties, effect any settlement or
compromise of, or consent to the entry of judgment with respect to, any pending or threatened claim, investigation, action or proceeding in
respect of which indemnity or contribution may be or could have been sought by an indemnified party under this Section 8 or Section 9 hereof
(whether or not the indemnified party is an actual or potential party thereto), unless (x) such settlement, compromise or judgment (i) includes
an unconditional release of the indemnified party from all liability arising out of such claim, investigation, action or proceeding and (ii) does
not include a statement as to or an admission of fault, culpability or any failure to act, by or on behalf of the indemnified party, and (y) the
indemnifying party confirms in writing its indemnification obligations hereunder with respect to such settlement, compromise or judgment.
                                                                                                          Broadband Capital Management LLC
                                                                                                                   Rodman & Renshaw, LLC
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          9.        Contribution . In order to provide for contribution in circumstances in which the indemnification provided for in Section 8
hereof is for any reason held to be unavailable from any indemnifying party or is insufficient to hold harmless a party indemnified thereunder,
the Company, the Selling Stockholder and the Underwriters shall contribute to the aggregate losses, claims, damages, liabilities and expenses
of the nature contemplated by such indemnification provision (including any investigation, legal and other expenses incurred in connection
with, and any amount paid in settlement of, any action, suit or proceeding or any claims asserted, but after deducting in the case of losses,
claims, damages, liabilities and expenses suffered by the Company, any contribution received by the Company from Persons, other than the
Underwriters, who may also be liable for contribution, including Persons who control the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, officers of the Company who signed the Registration Statement and directors of the
Company) as incurred to which the Company, the Selling Stockholder and one or more of the Underwriters may be subject, in such proportions
as is appropriate to reflect the relative benefits received by the Company, the Selling Stockholder and the Underwriters from the Offering or, if
such allocation is not permitted by applicable law, in such proportions as are appropriate to reflect not only the relative benefits referred to
above but also the relative fault of the Company, the Selling Stockholder and the Underwriters in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company, the Selling Stockholder and the Underwriters shall be deemed to be in the same proportion as (x) the total
proceeds from the Offering (net of underwriting discounts and commissions but before deducting expenses) received by the Company and the
Selling Stockholder bears to (y) the underwriting discount or commissions received by the Underwriters, in each case as set forth in the table on
the cover page of the Prospectus. The relative fault of each of the Company, the Selling Stockholder and of the Underwriters shall be
determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company, the Selling Stockholder or the Underwriters and the parties’
relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Selling
Stockholder and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this Section 9 shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding
by any judicial, regulatory or other legal or governmental agency or body, commenced or threatened, or any claim whatsoever based upon any
such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 9: (i) no Underwriter
shall be required to contribute any amount in excess of the amount by which the discounts and commissions applicable to the Shares
underwritten by it and distributed to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged omission and (ii) no Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 9, each Person, if any, who controls an Underwriter within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act shall have the same rights to contribution as such Underwriter, and each Person, if
any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, each officer of the
Company who shall have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the
Company, subject in each case to clauses (i) and (ii) of the immediately preceding sentence. Any party entitled to contribution will, promptly
after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may
be made against another party or parties, notify each party or parties from whom contribution may be sought, but the omission to so notify such
party or parties shall not relieve the party or parties from whom contribution may be sought from any obligation it or they may have under this
Section 9 or otherwise. The obligations of the Underwriters to contribute pursuant to this Section 9 are several in proportion to the respective
number of Shares to be purchased by each of the Underwriters hereunder and not joint.
                                                                                                           Broadband Capital Management LLC
                                                                                                                    Rodman & Renshaw, LLC
                                                                                                                            August [ ], 2009
                                                                                                                                Page 39 of 45

         10.        Underwriter Default .

                 (a)       If any Underwriter or Underwriters shall default in its or their obligation to purchase Firm Shares hereunder, and if
the Firm Shares with respect to which such default relates (the ― Default Shares ‖) do not (after giving effect to arrangements, if any, made by
the Representatives pursuant to subsection (b) below) exceed in the aggregate 10% of the number of Firm Shares, each non-defaulting
Underwriter, acting severally and not jointly, agrees to purchase from the Company that number of Default Shares that bears the same
proportion of the total number of Default Shares then being purchased as the number of Firm Shares set forth opposite the name of such
Underwriter on Schedule A hereto bears to the aggregate number of Firm Shares set forth opposite the names of the non-defaulting
Underwriters, subject, however, to such adjustments to eliminate fractional shares as the Representatives in its sole discretion shall make.

                   (b)      In the event that the aggregate number of Default Shares exceeds 10% of the number of Firm Shares, the
Representatives may in their discretion arrange for themselves or for another party or parties (including any non-defaulting Underwriter or
Underwriters who so agree) to purchase the Default Shares on the terms contained herein. In the event that within five calendar days after such
a default the Representatives do not arrange for the purchase of the Default Shares as provided in this Section 10, this Agreement shall
thereupon terminate, without liability on the part of the Company with respect thereto (except in each case as provided in Sections 5, 7, 8, 10
and 12(d)) or the Underwriters, but nothing in this Agreement shall relieve a defaulting Underwriter or Underwriters of its or their liability, if
any, to the other Underwriters and the Company for damages occasioned by its or their default hereunder.
                                                                                                           Broadband Capital Management LLC
                                                                                                                    Rodman & Renshaw, LLC
                                                                                                                            August [ ], 2009
                                                                                                                                Page 40 of 45

                  (c)       In the event that any Default Shares are to be purchased by the non-defaulting Underwriters, or are to be purchased
by another party or parties as aforesaid, the Representatives or the Company shall have the right to postpone the Closing Date for a period, not
exceeding five (5) business days, in order to effect whatever changes may thereby be made necessary in the Registration Statement or the
Prospectus or in any other documents and arrangements, and the Company agrees to file promptly any amendment or supplement to the
Registration Statement or the Prospectus which, in the reasonable opinion of Underwriters’ Counsel, may thereby be made necessary or
advisable. The term ―Underwriter‖ as used in this Agreement shall include any party substituted under this Section 10 with like effect as if it
had originally been a party to this Agreement with respect to such Firm Shares.

          11.        Survival of Representations and Agreements . All representations and warranties, covenants and agreements of the
Company and the Underwriters contained in this Agreement or in certificates of officers of the Company or any Subsidiary submitted pursuant
hereto, including the agreements contained in Section 6, the indemnity agreements contained in Section 8 and the contribution agreements
contained in Section 9 hereof, shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any
Underwriter or any controlling Person thereof or by or on behalf of the Company, any of its officers and directors or any controlling Person
thereof, and shall survive delivery of and payment for the Shares to and by the Underwriters. The representations contained in Section 1 and 2
hereof and the covenants and agreements contained in Sections 5, 6, 8, 9, this Section 11 and Sections 15 and 16 hereof shall survive any
termination of this Agreement, including termination pursuant to Section 10 or 12 hereof.

         12.        Effective Date of Agreement; Termination .

                   (a)       This Agreement shall become effective upon the later of: (i) receipt by the Representatives and the Company of
notification of the effectiveness of the Registration Statement or (ii) the execution of this Agreement. Notwithstanding any termination of this
Agreement, the provisions of this Section 12 and of Sections 1, 5, 7, 8 and 12 through 17, inclusive, shall remain in full force and effect at all
times after the execution hereof.
                                                                                                            Broadband Capital Management LLC
                                                                                                                     Rodman & Renshaw, LLC
                                                                                                                             August [ ], 2009
                                                                                                                                 Page 41 of 45

                   (b)       The Representatives shall have the right to terminate this Agreement at any time prior to the consummation of the
Closing if: (i) any domestic or international event or act or occurrence has materially disrupted, or in the opinion of the Representatives will in
the immediate future materially disrupt, the market for the Company’s securities or securities in general; or (ii) trading on the New York Stock
Exchange, the NASDAQ or the NYSE AMEX shall have been suspended or been made subject to material limitations, or minimum or
maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been required, on the New York
Stock Exchange, the NASDAQ or the NYSE AMEX or by order of the Commission or any other governmental authority having jurisdiction;
or (iii) a banking moratorium has been declared by any state or federal authority or if any material disruption in commercial banking or
securities settlement or clearance services shall have occurred; (iv) any downgrading shall have occurred in the Company’s corporate credit
rating or the rating accorded the Company’s debt securities or trust preferred stock by any ―nationally recognized statistical rating
organization‖ (as defined for purposes of Rule 436(g) under the Securities Act) or if any such organization shall have been publicly announced
that it has under surveillance or review, with possible negative implications, its rating of any of the Company’s debt securities; or (v) (A) there
shall have occurred any outbreak or escalation of hostilities or acts of terrorism involving the United States or there is a declaration of a
national emergency or war by the United States or (B) there shall have been any other calamity or crisis or any change in political, financial or
economic conditions if the effect of any such event in (A) or (B), in the judgment of the Representatives, is so material and adverse that such
event makes it impracticable or inadvisable to proceed with the offering, sale and delivery of the Firm Shares on the terms and in the manner
contemplated by the Prospectus.

                  (c)       Any notice of termination pursuant to this Section 12 shall be in writing.

                   (d)        If this Agreement shall be terminated pursuant to any of the provisions hereof (other than pursuant to Section 10(b)
hereof), or if the sale of the Shares provided for herein is not consummated because any condition to the obligations of the Underwriters set
forth herein is not satisfied or because of any refusal, inability or failure on the part of the Company to perform any agreement herein or
comply with any provision hereof, the Company will, subject to demand by the Representatives, reimburse the Underwriters for only those
out-of-pocket expenses (including the fees and expenses of their counsel), actually incurred by the Underwriters in connection herewith.

         13.        Notices . All communications hereunder, except as may be otherwise specifically provided herein, shall be in writing, and:

                   (a)    if sent to the Representatives or any Underwriter, shall be mailed, delivered, or faxed and confirmed in writing,
to Broadband Capital Management LLC, 712 Fifth Avenue, 49th Floor New York, NY 10019, Attention Michael Rapp, with a copy to
Underwriters’ Counsel at Ellenoff Grossman & Schole LLP, 150 East 42 nd Street 11 th Floor, New York, New York, 10017, Attention: Douglas
S. Ellenoff, Esq.; and

                  (b)        if sent to the Company, shall be mailed, delivered, or faxed and confirmed in writing to the Company and its
counsel at the addresses set forth in the Registration Statement,

                 (c)   if sent to the Selling Stockholder, shall be mailed, delivered, or faxed and confirmed in writing to the Selling
Stockholder at [ADDRESS].

provided, however, that any notice to an Underwriter pursuant to Section 8 shall be delivered or sent by mail or facsimile transmission to such
Underwriter at its address set forth in its acceptance facsimile to the Representatives, which address will be supplied to any other party hereto
by the Representatives upon request. Any such notices and other communications shall take effect at the time of receipt thereof.
                                                                                                             Broadband Capital Management LLC
                                                                                                                      Rodman & Renshaw, LLC
                                                                                                                              August [ ], 2009
                                                                                                                                  Page 42 of 45

          14.         Parties; Limitation of Relationship . This Agreement shall inure solely to the benefit of, and shall be binding upon, the
Underwriters, the Company and the controlling Persons, directors, officers, employees and agents referred to in Sections 7 and 8 hereof, and
their respective successors and assigns, and no other Person shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provision herein contained. This Agreement and all conditions and provisions
hereof are intended to be for the sole and exclusive benefit of the parties hereto and said controlling Persons and their respective successors,
officers, directors, heirs and legal Representatives, and it is not for the benefit of any other Person. The term ―successors and assigns‖ shall not
include a purchaser, in its capacity as such, of Shares from any of the Underwriters.

          15.        Governing Law . This Agreement shall be deemed to have been executed and delivered in New York and both this
Agreement and the transactions contemplated hereby shall be governed as to validity, interpretation, construction, effect, and in all other
respects by the laws of the State of New York, without regard to the conflicts of laws principals thereof (other than Section 5-1401 of The New
York General Obligations Law). Each of the Underwriters and the Company: (a) agrees that any legal suit, action or proceeding arising out of
or relating to this Agreement and/or the transactions contemplated hereby shall be instituted exclusively in the Supreme Court of the State of
New York, New York County, or in the United States District Court for the Southern District of New York, (b) waives any objection which it
may have or hereafter to the venue of any such suit, action or proceeding, and (c) irrevocably consents to the jurisdiction of Supreme Court of
the State of New York, New York County, or in the United States District Court for the Southern District of New York in any such suit, action
or proceeding. Each of the Underwriters and the Company further agrees to accept and acknowledge service of any and all process which may
be served in any such suit, action or proceeding in the Supreme Court of the State of New York, New York County, or in the United States
District Court for the Southern District of New York and agrees that service of process upon the Company mailed by certified mail to the
Company’s address or delivered by Federal Express via overnight delivery shall be deemed in every respect effective service of process upon
the Company, in any such suit, action or proceeding, and service of process upon the Underwriters mailed by certified mail to the
Underwriters’ address or delivered by Federal Express via overnight delivery shall be deemed in every respect effective service process upon
the Underwriter, in any such suit, action or proceeding. THE COMPANY (ON BEHALF OF ITSELF, THE SUBSIDIARIES AND, TO THE
FULLEST EXTENT PERMITTED BY LAW, ON BEHALF OF ITS RESPECTIVE EQUITY HOLDERS AND CREDITORS) HEREBY
WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED UPON, ARISING OUT OF OR
IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, THE
REGISTRATION STATEMENT AND THE PROSPECTUS.
                                                                                                           Broadband Capital Management LLC
                                                                                                                    Rodman & Renshaw, LLC
                                                                                                                            August [ ], 2009
                                                                                                                                Page 43 of 45

         16.        Entire Agreement . This Agreement, together with the schedule and exhibits attached hereto and as the same may be
amended from time to time in accordance with the terms hereof, contains the entire agreement among the parties hereto relating to the subject
matter hereof and there are no other or further agreements outstanding not specifically mentioned herein.

        17.         Severability . If any term or provision of this Agreement or the performance thereof shall be invalid or unenforceable to
any extent, such invalidity or unenforceability shall not affect or render invalid or unenforceable any other provision of this Agreement and this
Agreement shall be valid and enforced to the fullest extent permitted by law.

         18.         Amendment . This Agreement may only be amended by a written instrument executed by each of the parties hereto.

         19.         Waiver, etc. The failure of any of the parties hereto to at any time enforce any of the provisions of this Agreement shall
not be deemed or construed to be a waiver of any such provision, nor to in any way effect the validity of this Agreement or any provision
hereof or the right of any of the parties hereto to thereafter enforce each and every provision of this Agreement. No waiver of any breach,
non-compliance or non-fulfillment of any of the provisions of this Agreement shall be effective unless set forth in a written instrument
executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach,
non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, non-compliance or
non-fulfillment.

         20.         No Fiduciary Relationship . The Company and the Selling Stockholder hereby acknowledges that the Underwriters are
acting solely as underwriters in connection with the offering of the Company’s securities. The Company and the Selling Stockholder further
acknowledge that the Underwriters are acting pursuant to a contractual relationship created solely by this Agreement entered into on an arm’s
length basis and in no event do the parties intend that the Underwriters act or be responsible as a fiduciary to the Company, its management,
shareholders, creditors or any other person in connection with any activity that the Underwriters may undertake or have undertaken in
furtherance of the offering of the Company’s securities, either before or after the date hereof, or to the Selling Stockholder. The Underwriters
hereby expressly disclaim any fiduciary or similar obligations to the Company and the Selling Stockholder, either in connection with the
transactions contemplated by this Agreement or any matters leading up to such transactions, and the Company and the Selling Stockholder
hereby confirms its understanding and agreement to that effect. The Company and the Selling Stockholder hereby further confirms its
understand that no Underwriter has assumed an advisory or fiduciary responsibility in favor of the Company or the Selling Stockholder with
respect to the Offering contemplated hereby or the process leading thereto, including any negotiation related to the pricing of the Shares; and
the Company and the Selling Stockholder has consulted its own legal and financial advisors to the extent it has deemed appropriate in
connection with this Agreement and the Offering. The Company, the Selling Stockholder and the Underwriters agree that they are each
responsible for making their own independent judgments with respect to any such transactions, and that any opinions or views expressed by the
Underwriters to the Company and the Selling Stockholder regarding such transactions, including but not limited to any opinions or views with
respect to the price or market for the Company’s securities, do not constitute advice or recommendations to the Company and the Selling
Stockholder. The Company and the Selling Stockholder hereby waives and releases, to the fullest extent permitted by law, any claims that the
Company and the Selling Stockholder may have against the Underwriters with respect to any breach or alleged breach of any fiduciary or
similar duty to the Company and the Selling Stockholder in connection with the transactions contemplated by this Agreement or any matters
leading up to such transactions.
                                                                                                          Broadband Capital Management LLC
                                                                                                                   Rodman & Renshaw, LLC
                                                                                                                           August [ ], 2009
                                                                                                                               Page 44 of 45

          21.         Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same instrument. Delivery of a signed counterpart of this Agreement by
facsimile transmission shall constitute valid and sufficient delivery thereof.

          22.       Headings . The headings herein are inserted for convenience of reference only and are not intended to be part of, or to
affect the meaning or interpretation of, this Agreement.

         23.     Time is of the Essence . Time shall be of the essence of this Agreement. As used herein, the term ―business day‖ shall
mean any day other than a Saturday, Sunday or any day on which the major stock exchanges in New York, New York are not open for
business.

                                                           [Signature Pages Follow]
                                                                                                         Broadband Capital Management LLC
                                                                                                                  Rodman & Renshaw, LLC
                                                                                                                          August [ ], 2009
                                                                                                                              Page 45 of 45

           If the foregoing correctly sets forth your understanding, please so indicate in the space provided below for that purpose, whereupon
this letter shall constitute a binding agreement among us.

                                                                              Very truly yours,

                                                                              LIHUA INTERNATIONAL, INC.

                                                                              By:
                                                                                      Name:
                                                                                      Title:

                                                                              VISION OPPORTUNITY CHINA LP, as Selling
                                                                              Stockholder

                                                                              By:
                                                                                      Name:
                                                                                      Title:

Accepted by the Representatives, acting for themselves and as Representatives of the Underwriters named on Schedule A attached
hereto, as of the date first written above:

BROADBAND CAPITAL MANAGEMENT LLC

By:
      Name: Michael Rapp
      Title: Chairman

RODMAN & RENSHAW, LLC

By:
      Name: Ramnarain J. Jaigobind
      Title: Head of Global Capital Markets
                                           SCHEDULE A

                                           Underwriters

                                                          Number of Firm   Number of Option
                                                           Shares to be      Shares to be
                             Underwriter                    Purchased         Purchased

Broadband Capital Management LLC
Rodman & Renshaw LLC
TOTAL


                                               V-1
SCHEDULE B

Lock-Up Parties

     V-2
                                                                                                                               EXHIBIT 4.2

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE ―SECURITIES ACT‖), OR ANY OTHER SECURITIES LAWS AND MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF (1) AN
EFFECTIVE REGISTRATION STATEMENT COVERING SUCH SECURITIES UNDER THE SECURITIES ACT AND ANY
OTHER APPLICABLE SECURITIES LAWS, OR (2) AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

IN ADDITION, THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED, OR BE THE SUBJECT OF ANY HEDGING, SHORT SALE,
DERIVATIVE, PUT, OR CALL TRANSACTION THAT WOULD RESULT IN THE EFFECTIVE ECONOMIC DISPOSITION OF
SUCH SECURITIES BY ANY PERSON FOR A PERIOD OF SIX (6) MONTHS IMMEDIATELY FOLLOWING THE DATE OF
EFFECTIVENESS OF THE PUBLIC OFFERING OF THE COMPANY’S SECURITIES PURSUANT TO REGISTRATION
STATEMENT NO.: 333-159705 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, EXCEPT IN
ACCORDANCE WITH FINRA RULE 5110(G)(2).

                                                       LIHUA INTERNATIONAL, INC.

                                                   REPRESENTATIVES’ WARRANT

                                                   [           ] shares of Common Stock

                                                            [Month-Date], 2009

         This REPRESENTATIVES’ WARRANT (this ― Warrant ‖) of Lihua International, Inc., a corporation duly organized and validly
existing under the laws of the State of Delaware (the ― Company ‖), is being issued pursuant to that certain Underwriting Agreement, dated as
of August [ ], 2009 (the ― Underwriting Agreement ‖), by and among the Company and Broadband Capital Management LLC and Rodman
& Renshaw, LLC, as the representatives of the underwriters named therein (the ― Representatives ‖) relating to a firm commitment public
offering (the ― Offering ‖) of 2,000,000 shares of common stock, $0.0001 par value per share, of the Company (the ― Common Stock ‖)
underwritten by the Representatives and the underwriters named in the Underwriting Agreement.

          FOR VALUE RECEIVED , the Company hereby grants to [----] and its permitted successors and assigns (collectively, the ― Holder
‖) the right to purchase from the Company up to [----] ([---]) shares of Common Stock (such shares underlying this Warrant, the ― Warrant
Shares ‖), at a per share purchase price equal to $[-.--] (the ― Exercise Price ‖), subject to the terms, conditions and adjustments set forth
below in this Warrant.
         1.       Date of Warrant Exercise . This Warrant shall become exercisable on the date that is six (6) months from the Base Date (the
― Exercise Date ‖). As used in this Warrant, the term ― Base Date ‖ shall mean [----], 2009. Except as otherwise provided for herein or as
permitted by applicable rules of the Financial Industry Regulatory Authority, Inc., this Warrant shall not be sold, transferred, assigned, pledged
or hypothecated prior to the Exercise Date.

         2.        Expiration of Warrant . This Warrant shall expire on the five (5) year anniversary of the Base Date (the ― Expiration Date
‖).

         3.        Exercise of Warrant . This Warrant shall be exercisable pursuant to the terms of this Section 3.

                  3.1       Manner of Exercise .

                  (a)      This Warrant may only be exercised by the Holder hereof on or after the Exercise Date and on or prior to the
Expiration Date, in accordance with the terms and conditions hereof, in whole or in part (but not as to fractional shares) with respect to any
portion of this Warrant, during the Company’s normal business hours on any day other than a Saturday or a Sunday or a day on which
commercial banking institutions in New York, New York are authorized by law to be closed (a ― Business Day ‖), by surrender of this Warrant
to the Company at its office maintained pursuant to Section 10.2(a) hereof, accompanied by a written exercise notice in the form attached as
Exhibit A to this Warrant (or a reasonable facsimile thereof) duly executed by the Holder, together with the payment of the aggregate Exercise
Price for the number of Warrant Shares purchased upon exercise of this Warrant. Upon surrender of this Warrant, the Company shall cancel
this Warrant document and shall, in the event of partial exercise, replace it with a new Warrant document in accordance with Section 3.3

                  (b)       Except as provided for in Section 3.1(c) below, each exercise of this Warrant must be accompanied by payment in
full of the aggregate Exercise Price in cash by check or wire transfer in immediately available funds for the number of Warrant Shares being
purchased by the Holder upon such exercise.

                  (c)        The aggregate Exercise Price for the number of Warrant Shares being purchased may also, in the sole discretion of
the Holder, be paid in full or in part on a ―cashless basis‖ at the election of the Holder:

                (i)      in the form of Common Stock owned by the Holder (based on the Fair Market Value (as defined below) of such
Common Stock on the date of exercise);

                  (ii)      in the form of Warrant Shares withheld by the Company from the Warrant Shares otherwise to be received upon
exercise of this Warrant having an aggregate Fair Market Value on the date of exercise equal to the aggregate Exercise Price of the Warrant
Shares being purchased by the Holder; or

                  (iii)     by a combination of the foregoing, provided that the combined value of all cash and the Fair Market Value of any
shares surrendered to the Company is at least equal to the aggregate Exercise Price for the number of Warrant Shares being purchased by the
Holder.

                                                                        2
                   For purposes of this Warrant, the term ― Fair Market Value ‖ means with respect to a particular date, the average closing
price of the Common Stock for the five (5) trading days immediately preceding the applicable exercise herein as officially reported by the
principal securities exchange on which the Common Stock is then listed or admitted to trading, or, if the Common Stock is not listed or
admitted to trading on any securities exchange as determined in good faith by resolution of the Board of Directors of the Company, based on
the best information available to it.

                   For purposes of illustration of a cashless exercise of this Warrant under Section 3.1(c)(ii) (or for a portion thereof for which
cashless exercise treatment is requested as contemplated by Section 3.1(c)(iii) hereof), the calculation of such exercise shall be as follows:

                  X = Y (A-B)/A

                  where:

                  X=        the number of Warrant Shares to be issued to the Holder (rounded to the nearest whole share).

                  Y=        the number of Warrant Shares with respect to which this Warrant is being exercised.

                  A=        the Fair Market Value of the Common Stock.

                  B=        the Exercise Price.

                 (d)       For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended, understood, and acknowledged that the
Common Stock issuable upon exercise of this Warrant in a cashless exercise transaction as described in Section 3.1(c) above shall be deemed
to have been acquired at the time this Warrant was issued. Moreover, it is intended, understood, and acknowledged that the holding period for
the Common Stock issuable upon exercise of this Warrant in a cashless exercise transaction as described in Section 3.1(c) above shall be
deemed to have commenced on the date this Warrant was issued.

                  3.2        When Exercise Effective . Each exercise of this Warrant shall be deemed to have been effected immediately prior
to the close of business on the Business Day on which this Warrant shall have been duly surrendered to the Company as provided in Sections
3.1 and 12 hereof, and, at such time, the Holder in whose name any certificate or certificates for Warrant Shares shall be issuable upon exercise
as provided in Section 3.3 hereof shall be deemed to have become the holder or holders of record thereof of the number of Warrant Shares
purchased upon exercise of this Warrant.

                                                                        3
                  3.3        Delivery of Common Stock Certificates and New Warrant . As soon as reasonably practicable after each exercise
of this Warrant, in whole or in part, and in any event within five (5) Business Days thereafter, the Company, at its expense (including the
payment by it of any applicable issue taxes), will cause to be issued in the name of and delivered to the Holder hereof or, subject to Sections 9
and 10 hereof, as the Holder (upon payment by the Holder of any applicable transfer taxes) may direct:

                   (a)       a certificate or certificates (with appropriate restrictive legends, as applicable) for the number of duly authorized,
validly issued, fully paid and nonassessable Warrant Shares to which the Holder shall be entitled upon exercise; and

                 (b)       in case exercise is in part only, a new Warrant document of like tenor, dated the date hereof, for the remaining
number of Warrant Shares issuable upon exercise of this Warrant after giving effect to the partial exercise of this Warrant (including the
delivery of any Warrant Shares as payment of the Exercise Price for such partial exercise of this Warrant).

         4.        Certain Adjustments . For so long as this Warrant is outstanding:

                   4.1         Mergers or Consolidations . If at any time after the date hereof there shall be a capital reorganization (other than a
combination or subdivision of Common Stock otherwise provided for herein) resulting in a reclassification to or change in the terms of
securities issuable upon exercise of this Warrant (a ― Reorganization ‖), or a merger or consolidation of the Company with another
corporation, association, partnership, organization, business, individual, government or political subdivision thereof or a governmental agency
(a ― Person ‖ or the ― Persons ‖) (other than a merger with another Person in which the Company is a continuing corporation and which does
not result in any reclassification or change in the terms of securities issuable upon exercise of this Warrant or a merger effected exclusively for
the purpose of changing the domicile of the Company) (a ― Merger ‖), then, as a part of such Reorganization or Merger, lawful provision and
adjustment shall be made so that the Holder shall thereafter be entitled to receive, upon exercise of this Warrant, the number of shares of stock
or any other equity or debt securities or property receivable upon such Reorganization or Merger by a holder of the number of shares of
Common Stock which might have been purchased upon exercise of this Warrant immediately prior to such Reorganization or Merger. In any
such case, appropriate adjustment shall be made in the application of the provisions of this Warrant with respect to the rights and interests of
the Holder after the Reorganization or Merger to the end that the provisions of this Warrant (including adjustment of the Exercise Price then in
effect and the number of Warrant Shares) shall be applicable after that event, as near as reasonably may be, in relation to any shares of stock,
securities, property or other assets thereafter deliverable upon exercise of this Warrant. The provisions of this Section 4.1 shall similarly apply
to successive Reorganizations and/or Mergers.

                                                                         4
                    4.2       Splits and Subdivisions; Dividends . In the event the Company should at any time or from time to time effectuate
a split or subdivision of the outstanding shares of Common Stock or pay a dividend in or make a distribution payable in additional shares of
Common Stock or Common Stock Equivalents without payment of any consideration by such holder for the additional shares of Common
Stock or Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as
of the applicable record date (or the date of such distribution, split or subdivision if no record date is fixed), the per share Exercise Price shall
be appropriately decreased and the number of Warrant Shares shall be appropriately increased in proportion to such increase (or potential
increase) of outstanding shares; provided, however, that no adjustment shall be made in the event the split, subdivision, dividend or distribution
is not effectuated.

                 4.3        Combination of Shares . If the number of shares of Common Stock outstanding at any time after the date hereof is
decreased by a combination of the outstanding shares of Common Stock, the per share Exercise Price shall be appropriately increased and the
number of shares of Warrant Shares shall be appropriately decreased in proportion to such decrease in outstanding shares.

                   4.4         Adjustments for Other Distributions . In the event the Company shall declare a distribution payable in securities
of other Persons, evidences of indebtedness issued by the Company or other Persons, assets (excluding cash dividends or distributions to the
holders of Common Stock paid out of current or retained earnings and declared by the Company’s board of directors) or options or rights not
referred to in Sections 4.2, 4.3 or 4.4, then, in each such case for the purpose of this Section 4.5, upon exercise of this Warrant, the Holder shall
be entitled to a proportionate share of any such distribution as though the Holder was the actual record holder of the number of Warrant Shares
as of the record date fixed for the determination of the holders of Common Stock of the Company entitled to receive such distribution.

         5.         No Impairment . The Company will not, by amendment of its articles of incorporation or by-laws or through any
consolidation, merger, reorganization, transfer of assets, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all of the
terms and in the taking of all actions necessary or appropriate in order to protect the rights of the Holder against impairment.

         6.          Chief Financial Officer’s Report as to Adjustments . With respect to each adjustment pursuant to Section 4 of this Warrant,
the Company, at its expense, will promptly compute the adjustment or re-adjustment in accordance with the terms of this Warrant and cause its
Chief Financial Officer to certify the computation (other than any computation of the fair value of property of the Company, as the case may
be) and prepare a report setting forth, in reasonable detail, the event requiring the adjustment or re-adjustment and the amount of such
adjustment or re-adjustment, the method of calculation thereof and the facts upon which the adjustment or re-adjustment is based, and the
Exercise Price and the number of Warrant Shares or other securities purchasable hereunder after giving effect to such adjustment or
re-adjustment, which report shall be mailed by first class mail, postage prepaid to the Holder. The Company will also keep copies of all
reports at its office maintained pursuant to Section 10.2(a) hereof and will cause them to be available for inspection at the office during normal
business hours upon reasonable notice by the Holder or any prospective purchaser of the Warrant designated by the Holder thereof.

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          7.        Reservation of Shares . The Company shall, solely for the purpose of effecting the exercise of this Warrant, at all times
during the term of this Warrant, reserve and keep available out of its authorized shares of Common Stock, free from all taxes, liens and charges
with respect to the issue thereof and not subject to preemptive rights or other similar rights of shareholders of the Company, such number of its
shares of Common Stock as shall from time to time be sufficient to effect in full the exercise of this Warrant. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect in full the exercise of this Warrant, in addition to such other
remedies as shall be available to Holder, the Company will promptly take such corporate action as may, in the opinion of its counsel, be
necessary to increase the number of authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such
purposes, including without limitation, using its Reasonable Best Efforts (as defined in Section 14 hereof) to obtain the requisite shareholder
approval necessary to increase the number of authorized shares of Common Stock. The Company hereby represents and warrants that all
shares of Common Stock issuable upon exercise of this Warrant shall be duly authorized and, when issued and paid for upon exercise, shall be
validly issued, fully paid and nonassessable.

         8.        Registration and Listing .

                     8.1        Definition of Registrable Securities; Majority . As used herein, the term ― Registrable Securities ‖ means any
shares of Common Stock issuable upon the exercise of this Warrant, until the date (if any) on which such shares shall have been transferred or
exchanged and new certificates for them not bearing a legend restricting further transfer shall have been delivered by the Company and
subsequent disposition of them shall not require registration or qualification of them under the Securities Act or any similar state law then in
force. For purposes of this Warrant, the term ― Majority ‖, in reference to the holders of Registrable Securities, shall mean in excess of fifty
percent (50%) of the then outstanding Warrant Shares (assuming the exercise of the entire Warrant) that: (i) are not held by the Company, an
affiliate, officer, creditor, employee or agent thereof or any of their respective affiliates, members of their family, Persons acting as nominees or
in conjunction therewith and (ii) have not be resold to the public pursuant to a registration statement filed under the Securities Act.

                  8.2         Incidental Registration Rights .

                    (a)       If the Company, at any time on or after the Exercise Date and on or before the five (5) year anniversary of the Base
Date, proposes to register any of its securities under the Securities Act (other than in connection with a registration on Form S-4 or S-8 or any
successor forms) whether for its own account or for the account of any holder or holders of its shares other than Registrable Securities (any
shares of such holder or holders (but not those of the Company and not Registrable Securities) with respect to any registration are referred to
herein as, ― Other Shares ‖), the Company shall each such time give prompt (but not less than thirty (30) days prior to the anticipated
effectiveness thereof) written notice to the holders of Registrable Securities of its intention to do so. Upon the written request of any such
holder of Registrable Securities made within ten (10) days after the receipt of any such notice (which request shall specify the Registrable
Securities intended to be disposed of by such holder), except as set forth in Section 8.2(b), the Company will use its Reasonable Best Efforts to
effect the registration under the Securities Act of all of the Registrable Securities which the Company has been so requested to register by such
holder, to the extent requisite to permit the disposition of the Registrable Securities so to be registered, by inclusion of such Registrable
Securities in the registration statement which covers the securities which the Company proposes to register; provided, however, that if, at any
time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in
connection with such registration, the Company shall determine for any reason in its sole discretion either to not register, to delay or to
withdraw registration of such securities, the Company may, at its election, give written notice of such determination to such holder and,
thereupon: (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection
with such registration (but not from its obligation to pay the Registration Expenses in connection therewith), (ii) in the case of a determination
to delay registration, shall be permitted to delay registering any Registrable Securities for the same period as the delay in registering such other
securities (including the Other Shares), and (iii) in the case of a determination to withdraw registration, shall be permitted to withdraw
registration. The Company will pay all Registration Expenses in connection with each registration of Registrable Securities pursuant to this
Section 8.2.

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                   (b)       If the Company at any time proposes to register any of its securities under the Securities Act as contemplated by
this Section 8.2 and such securities are to be distributed by or through one or more underwriters, the Company will, if requested by a holder of
Registrable Securities, use its Reasonable Best Efforts to arrange for such underwriters to include all the Registrable Securities to be offered
and sold by such holder among the securities to be distributed by such underwriters, provided that if the managing underwriter of such
underwritten offering shall inform the Company by letter of its belief that inclusion in such distribution of all or a specified number of such
securities proposed to be distributed by such underwriters would interfere with the successful marketing of the securities being distributed by
such underwriters (such letter to state the basis of such belief and the approximate number of such Registrable Securities, such Other Shares
and shares held by the Company proposed so to be registered which may be distributed without such effect), then the Company may, upon
written notice to such holder, the other holders of Registrable Securities