----

----

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

| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|-----------------------------------------------------------------------------------------------|

| Nevada                                                        |   | 45-0538522                        |
|---------------------------------------------------------------|--------|-----------------------------------|
| (State or other jurisdictionof incorporation or organization) |   | (IRS Employer Identification No.) |

| Large Accelerated Filer | o |   | Accelerated Filer         | o |
|-------------------------|---|--------|---------------------------|---|
| Non-accelerated filer   | o |   | Smaller reporting company | x |

----

| PART I - FINANCIAL INFORMATION                                                     |          |
|------------------------------------------------------------------------------------|---------------|
|                                                                               |          |
| Item 1.  Financial Statements                                            |          |
|                                                                               |          |
| Report of Independent Registered Public Accounting Firm                            |   1      |
|                                                                               |          |
| Consolidated Balance Sheets                                                        |   2      |
|                                                                               |          |
| Consolidated Statements of Operations and Comprehensive Income (loss)              |   3      |
|                                                                               |          |
| Consolidated Statements of Cash Flows                                              |   4      |
|                                                                               |          |
| Notes to Consolidated Financial Statements                                         |   5 - 22 |
|                                                                               |          |
| Item 2.  Management’s Discussion and Analysis or Plan of Operation |   23     |
|                                                                               |          |
| Item 3.  Quantitative and Qualitative Disclosures About Market Risk      |   31     |
|                                                                               |          |
| Item 4. Controls and Procedures                                                    |   31     |
|                                                                               |          |
|                                                                               |          |
| PART II – OTHER INFORMATION                                                  |          |
|                                                                               |          |
| Item 1.  Legal Proceedings                                               |   33     |
|                                                                               |          |
| Item 1A. Risk Factors                                                              |   33     |
|                                                                               |          |
| Item 2.  Unregistered Sales of Equity Securities And Use Of Proceeds     |   33     |
|                                                                               |          |
| Item 3.  Defaults Upon Senior Securities                                 |   33     |
|                                                                               |          |
| Item 4.  (Removed and Reserved)                                          |   33     |
|                                                                               |          |
| Item 5.  Other Information                                               |   33     |
|                                                                               |          |
| Item 6.  Exhibits                                                        |   33     |
|                                                                               |          |

----

----

|                                                               |   | June 30,    |        |   | December 31, |   |
|--------------------------------------------------------------------|--------|-------------|-------------|--------|--------------|--------|
|                                                               |   | 2010        |        |   | 2009         |   |
|                                                               |   | (Unaudited) |        |   |         |   |
| Current assets:                                                    |   |        |        |   |         |   |
| Cash and cash equivalents                                          |   | $           | 5,522,675   |   |         | $      | 14,030,655 |   |
| Restricted cash                                                    |   |        | 33,808,001  |   |         |   | 6,012,690 |   |
| Trade notes receivable                                             |   |        | 10,338,534  |   |         |   | 400,491 |   |
| Inventories                                                        |   |        | 67,500,925  |   |         |   | 32,595,045 |   |
| Advance payments                                                   |   |        | 13,663,490  |   |         |   | 7,417,202 |   |
| Prepaid tax expense                                                |   |        | 26,555,299  |   |         |   | 15,263,949 |   |
| Due from unrelated parties                                         |   |        | -           |   |         |   | 1,068,741 |   |
| Deferred tax assets                                                |   |        | 1,578,274   |   |         |   | 3,486,922 |   |
| Other current assets                                               |   |        | 476,672     |   |         |   | 581,706 |   |
| Total current assets                                               |   |        | 159,443,870 |   |         |   | 80,857,401 |   |
|                                                               |   |        |        |   |         |   |   |   |
| Property, plant and equipment, net                                 |   |        | 130,367,038 |   |         |   | 131,824,617 |   |
|                                                               |   |        |        |   |         |   |   |   |
| Other assets                                                       |   |        |        |   |         |   |   |   |
| Intangible assets, net                                             |   |        | 6,408,044   |   |         |   | 6,378,316 |   |
|                                                               |   |        |        |   |         |   |   |   |
| Total assets                                                       |   | $           | 296,218,952 |   |         | $      | 219,060,334 |   |
|                                                               |   |        |        |   |         |   |   |   |
| Liabilities and stockholders’ equity                         |   |        |        |   |         |   |   |   |
| Current liabilities:                                               |   |        |        |   |         |   |   |   |
| Accounts payable – trade and accrued expenses                |   | $           | 60,422,125  |   |         | $      | 2,888,860 |   |
| Accounts payable – construction related                      |   |        | 30,633,675  |   |         |   | 45,374,656 |   |
| Short-term bank loans                                              |   |        | 83,961,000  |   |         |   | 82,885,500 |   |
| Current portion of long-term debt                                  |   |        | 20,180,100  |   |         |   | 7,628,400 |   |
| Trade notes payable                                                |   |        | 19,001,700  |   |         |   | 13,719,134 |   |
| Advance from customers                                             |   |        | 13,526,054  |   |         |   | 16,549,644 |   |
| Due to former shareholder                                          |   |        | -           |   |         |   | 733,500 |   |
| Due to unrelated parties                                           |   |        | -           |   |         |   | 953,550 |   |
| Other current liabilities                                          |   |        | 311,718     |   |         |   | 290,631 |   |
| Total current liabilities                                          |   |        | 228,036,372 |   |         |   | 171,023,875 |   |
|                                                               |   |        |        |   |         |   |   |   |
|  Long-term debt                                               |   |        | 23,568,000  |   |         |   | 37,408,500 |   |
|                                                               |   |        |        |   |         |   |   |   |
| Total liabilities                                                  |   |        | 251,604,372 |   |         |   | 208,432,375 |   |
|                                                               |   |        |        |   |         |   |   |   |
| Stockholders’ equity:                                        |   |        |        |   |         |   |   |   |
| Series A preferred stock, $0.001 par value, 20,000,000 shares      |   |        |        |   |         |   |   |   |
|   authorized, 6,738,336 shares issued and outstanding at |   |        |        |   |         |   |   |   |
|   June 30, 2010                                          |   |        | 6,738       |   |         |   | - |   |
| Series M preferred stock, $0.001 par value, 47,658 shares          |   |        |        |   |         |   |   |   |
|   authorized, issued and outstanding at June 30, 2010    |   |        | 48          |   |         |   | 48 |   |
| Common stock, $0.001 par value, 50,000,000 shares authorized,      |   |        |        |   |         |   |   |   |
|   3,181,504 issued and outstanding at June 30,2010       |   |        | 3,182       |   |         |   | - |   |
| Additional paid-in capital                                         |   |        | 43,352,118  |   |         |   | 20,229,949 |   |
| Accumulated deficit                                                |   |        | (9,543      | )      |         |   | (10,664,819 | ) |
| Accumulated other comprehensive income                             |   |        | 1,262,037   |   |         |   | 1,062,781 |   |
| Total stockholders’ equity                                   |   |        | 44,614,580  |   |         |   | 10,627,959 |   |
|                                                               |   |        |        |   |         |   |   |   |
|                                                               |   |        |        |   |         |   |   |   |
| Total liabilities and stockholders' equity                         |   | $           | 296,218,952 |   |         | $      | 219,060,334 |   |

----

|                                                             |   | For the Three Months |        |   | For the Six Months |   |
|------------------------------------------------------------------|--------|----------------------|-------------|--------|--------------------|--------|
|                                                             |   | Ended June 30,       |        |   | Ended June 30,     |   |
|                                                             |   | 2010                 |        |   | 2009               |   |   | 2010 |   |   | 2009 |   |
|                                                             |   |                 |        |   |               |   |   |   |   |   |   |   |
| Sales                                                            |   | $                    | 131,997,217 |   |               | $      | - |   |   | $ | 249,369,103 |   |   | $ | - |   |
|                                                             |   |                 |        |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Cost of sales                                                    |   |                 | 123,351,375 |   |               |   | - |   |   |   | 231,907,817 |   |   |   | - |   |
|                                                             |   |                 |        |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Gross profit                                                     |   |                 | 8,645,842   |   |               |   | - |   |   |   | 17,461,286 |   |   |   | - |   |
|                                                             |   |                 |        |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Operating expenses                                               |   |                 |        |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Selling expenses                                                 |   |                 | 258,901     |   |               |   | - |   |   |   | 343,413 |   |   |   | - |   |
| General and administrative expenses                              |   |                 | 1,088,256   |   |               |   | 709,161 |   |   |   | 1,893,788 |   |   |   | 1,236,593 |   |
| Total operating expenses                                         |   |                 | 1,347,157   |   |               |   | 709,161 |   |   |   | 2,237,201 |   |   |   | 1,236,593 |   |
|                                                             |   |                 |        |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) from operations                                    |   |                 | 7,298,685   |   |               |   | (709,161 | ) |   |   | 15,224,085 |   |   |   | (1,236,593 | ) |
|                                                             |   |                 |        |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Other income (expenses):                                         |   |                 |        |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense, net                                            |   |                 | (1,589,937  | )      |               |   | (274,460 | ) |   |   | (2,663,462 | ) |   |   | (253,179 | ) |
| Non-operating income (expenses)                                  |   |                 | 118,802     |   |               |   | (138,257 | ) |   |   | 9,599 |   |   |   | (140,906 | ) |
| Total other income (expenses)                                    |   |                 | (1,471,135  | )      |               |   | (412,717 | ) |   |   | (2,653,863 | ) |   |   | (394,085 | ) |
|                                                             |   |                 |        |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) before provision for income                        |   |                 |        |   |               |   |   |   |   |   |   |   |   |   |   |   |
|   taxes                                                |   |                 | 5,827,550   |   |               |   | (1,121,878 | ) |   |   | 12,570,222 |   |   |   | (1,630,678 | ) |
|                                                             |   |                 |        |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Provision (benefit) for income taxes                             |   |                 |        |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Current                                                          |   |                 | 903,546     |   |               |   | (280,470 | ) |   |   | 1,914,946 |   |   |   | (407,670 | ) |
| Deferred                                                         |   |                 | -           |   |               |   | - |   |   |   | - |   |   |   | - |   |
|       Total                        |   |                 | 903,546     |   |               |   | (280,470 | ) |   |   | 1,914,946 |   |   |   | (407,670 | ) |
|                                                             |   |                 |        |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Net Income (loss)                                                |   |                 | 4,924,004   |   |               |   | (841,408 | ) |   |   | 10,655,276 |   |   |   | (1,223,008 | ) |
|                                                             |   |                 |        |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive income                                       |   |                 |        |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Foreign currency translation adjustment                          |   |                 | 196,958     |   |               |   | 9,160 |   |   |   | 199,256 |   |   |   | (4,478 | ) |
|                                                             |   |                 |        |   |               |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive Income (loss)                                      |   | $                    | 5,120,962   |   |               | $      | (832,248 | ) |   | $ | 10,854,532 |   |   | $ | (1,227,486 | ) |
|                                                             |   |                 |        |   |               |   |   |   |   |   |   |   |   |   |   |   |
|     Basic earnings (loss) per common share   |   | $                    | 2,06        |   |               | $      | - |   |   | $ | 8.88 |   |   | $ | - |   |
|     Diluted earnings (loss) per common share |   | $                    | 0.11        |   |               | $      | - |   |   | $ | 0.49 |   |   | $ | - |   |
|                                                             |   |                 |        |   |               |   |   |   |   |   |   |   |   |   |   |   |
|   Weighted average number of common shares             |   |                 |        |   |               |   |   |   |   |   |   |   |   |   |   |   |
|     outstanding                              |   |                 |        |   |               |   |   |   |   |   |   |   |   |   |   |   |
|   Basic                                                |   |                 | 2,387,451   |   |               |   | - |   |   |   | 1,200,321 |   |   |   | - |   |
|   Diluted                                              |   |                 | 43,408,945  |   |               |   | - |   |   |   | 21,824,387 |   |   |   | - |   |
|                                                             |   |                 |        |   |               |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                    |   | For the Six Months Ended June 30, |        |
|---------------------------------------------------------|--------|-----------------------------------|-------------|
|                                                    |   | 2010                              |        |   | 2009 |   |
|                                                    |   |                              |        |   |   |   |
| Cash flows from operating activities:                   |   |                              |        |   |   |   |
| Net income (loss)                                       |   | $                                 | 10,655,276  |   |   | $ | (1,223,008 | ) |
| Adjustments to reconcile net income to net cash         |   |                              |        |   |   |   |   |   |
|   provided by (used in) operating activities: |   |                              |        |   |   |   |   |   |
| Depreciation and amortization                           |   |                              | 4,204,754   |   |   |   | 177,867 |   |
| Deferred tax assets                                     |   |                              | 1,914,946   |   |   |   | (407,669 | ) |
| Changes in current assets and current liabilities:      |   |                              |        |   |   |   |   |   |
| Trade notes receivable                                  |   |                              | (9,895,257  | ) |   |   | (14,657 | ) |
| Inventories                                             |   |                              | (34,628,566 | ) |   |   | (10,531,710 | ) |
| Advance payments for raw materials                      |   |                              | (6,190,211  | ) |   |   | - |   |
| Prepaid taxes                                           |   |                              | (11,182,419 | ) |   |   | (4,121,387 | ) |
| Other current assets                                    |   |                              | 106,766     |   |   |   | (557,250 | ) |
| Accounts payable – trade and accrued expenses     |   |                              | 57,283,692  |   |   |   | (44,988 | ) |
| Trade notes payable                                     |   |                              | 5,204,811   |   |   |   | 7,328,500 |   |
| Advances from customers                                 |   |                              | (3,078,476  | ) |   |   | - |   |
| Other current liabilities                               |   |                              | 19,826      |   |   |   | 3,978,757 |   |
| Total adjustments                                       |   |                              | 3,759,866   |   |   |   | (4,192,535 | ) |
|                                                    |   |                              |        |   |   |   |   |   |
| Net cash provided by (used in) operating activities     |   |                              | 14,415,142  |   |   |   | (5,415,543 | ) |
|                                                    |   |                              |        |   |   |   |   |   |
| Cash flows from investing activities:                   |   |                              |        |   |   |   |   |   |
| Advance payments for construction in progress           |   |                              | -           |   |   |   | (817,846 | ) |
| Due from unrelated parties                              |   |                              | 1,068,668   |   |   |   | - |   |
| Additions to property and equipment                     |   |                              | (2,076,103  | ) |   |   | (24,250,885 | ) |
| Additions to intangible assets                          |   |                              | (143,806    | ) |   |   | (51,300 | ) |
| Accounts payable – construction related           |   |                              | (14,864,749 | ) |   |   | (650,608 | ) |
|                                                    |   |                              |        |   |   |   |   |   |
| Net cash used in investing activities                   |   |                              | (16,015,990 | ) |   |   | (25,770,639 | ) |
|                                                    |   |                              |        |   |   |   |   |   |
| Cash flows from financing activities:                   |   |                              |        |   |   |   |   |   |
| Restricted cash                                         |   |                              | (27,655,715 | ) |   |   | (2,543,491 | ) |
| Proceeds from short-term bank loans                     |   |                              | 733,450     |   |   |   | 29,314,000 |   |
| Due to former shareholder                               |   |                              | (733,450    | ) |   |   | 4,236,529 |   |
| Due to unrelated parties                                |   |                              | (953,485    | ) |   |   | - |   |
| Repayment of long-term bank loans                       |   |                              | (1,466,900  | ) |   |   | - |   |
| Additional paid in capital                              |   |                              | 23,132,089  |   |   |   | 9,650,000 |   |
|                                                    |   |                              |        |   |   |   |   |   |
| Net cash provided by (used in) financing activities     |   |                              | (6,944,011  | ) |   |   | 40,657,038 |   |
|                                                    |   |                              |        |   |   |   |   |   |
| Effect of foreign currency translation on cash          |   |                              | 36,879      |   |   |   | (4,090 | ) |
|                                                    |   |                              |        |   |   |   |   |   |
| Net increase (decrease) in cash and cash equivalents    |   |                              | (8,507,980  | ) |   |   | 9,466,766 |   |
|                                                    |   |                              |        |   |   |   |   |   |
| Cash and cash equivalents – beginning of period   |   |                              | 14,030,655  |   |   |   | 9,094,537 |   |
|                                                    |   |                              |        |   |   |   |   |   |
| Cash and cash equivalents – ending of period      |   | $                                 | 5,522,675   |   |   | $ | 18,561,303 |   |
|                                                    |   |                              |        |   |   |   |   |   |

----

----

|                          |   | June 30, 2010 |       |   | December 31, 2009 |   |
|-------------------------------|--------|---------------|------------|--------|-------------------|--------|
|                          |   |          |       |   |              |   |
| Raw materials                 |   | $             | 30,403,055 |   |              | $      | 14,740,077 |   |
| Work in process               |   |          | 2,987,649  |   |              |   | 1,558,588 |   |
| Finished goods                |   |          | 34,110,221 |   |              |   | 16,296,380 |   |
|                          |   |          |       |   |              |   |   |   |
|     Total |   | $             | 67,500,925 |   |              | $      | 32,595,045 |   |
|                          |   |          |       |   |              |   |   |   |

----

|                          |   | June 30, 2010 |       |   | December 31, 2009 |   |
|-------------------------------|--------|---------------|------------|--------|-------------------|--------|
|                          |   |          |       |   |              |   |
| Value-added taxes (VAT)       |   | $             | 16,946,090 |   |              | $      | 15,263,949 |   |
| Customs duties                |   |          | 9,609,209  |   |              |   | - |   |
|                          |   |          |       |   |              |   |   |   |
|     Total |   | $             | 26,555,299 |   |              | $      | 15,263,949 |   |

|                                                                          |   | June 30,2010 |      |   | December 31, 2009 |   |
|-------------------------------------------------------------------------------|--------|--------------|-----------|--------|-------------------|--------|
|                                                                          |   | (unaudited)  |      |   |              |   |
|                                                                          |   |         |      |   |              |   |
| Net operating loss carryforwards                                              |   | $            | 1,578,274 |   |              | $      | 3,486,922 |   |
|                                                                          |   |         |      |   |              |   |   |   |
|                                                                          |   |         |      |   |              |   |   |   |
|             Total |   | $            | 1,578,274 |   |              | $      | 3,486,922 |   |

|                                                                                                                                      |   | Net operating losses |      |
|-------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------|-----------|
| Year of Expiration                                                                                                                        |   | carryforwards        |      |
| 2014                                                                                                                                      |   | $                    | 1,578,274 |   |
|                                                                                                                                      |   |                 |      |   |
|                       Total |   | $                    | 1,578,274 |   |

----

|                           |   | June 30, 2010 |        |   | December 31, 2009 |   |
|--------------------------------|--------|---------------|-------------|--------|-------------------|--------|
|                           |   |          |        |   |              |   |
| Buildings                      |   | $             | 1,517,190   |   |              | $      | 1,511,010 |   |
| Machinery and equipment        |   |          | 132,428,875 |   |              |   | 130,044,758 |   |
| Vehicles                       |   |          | 533,874     |   |              |   | 305,536 |   |
| Office equipment and furniture |   |          | 126,271     |   |              |   | 120,367 |   |
| Subtotal                       |   |          | 134,606,210 |   |              |   | 131,981,671 |   |
| Less: accumulated depreciation |   |          | 4,239,172   |   |              |   | 157,054 |   |
|                           |   |          |        |   |              |   |   |   |
|     Total  |   | $             | 130,367,038 |   |              | $      | 131,824,617 |   |

|                             |   | June 30, 2010 |      |   | December 31, 2009 |   |
|----------------------------------|--------|---------------|-----------|--------|-------------------|--------|
|                             |   |          |      |   |              |   |
| Land use rights                  |   | $             | 5,636,145 |   |              | $      | 5,613,187 |   |
| Software                         |   |          | 148,087   |   |              |   | 3,668 |   |
| Technology                       |   |          | 1,399,350 |   |              |   | 1,393,650 |   |
|     Subtotal |   |          | 7,183,582 |   |              |   | 7,010,505 |   |
| Less: accumulated amortization   |   |          | 775,538   |   |              |   | 632,189 |   |
|                             |   |          |      |   |              |   |   |   |
|     Total    |   | $             | 6,408,044 |   |              | $      | 6,378,316 |   |

|                          |   | June 30, 2010 |       |   | December 31, 2009 |   |
|-------------------------------|--------|---------------|------------|--------|-------------------|--------|
|                          |   |          |       |   |              |   |
| Accounts payable              |   | $             | 60,263,557 |   |              | $      | 2,838,860 |   |
| Accrued expenses              |   |          | 158,568    |   |              |   | 50,000 |   |
|                          |   |          |       |   |              |   |   |   |
|     Total |   | $             | 60,422,125 |   |              | $      | 2,888,860 |   |

----

|                                                                               |   | June 30, |       |   | December 31, |   |
|------------------------------------------------------------------------------------|--------|----------|------------|--------|--------------|--------|
|                                                                               |   | 2010     |       |   | 2009         |   |
|                                                                               |   |     |       |   |         |   |
| On January 12, 2009, the Company obtained a loan from Bank of China,               |   |     |       |   |         |   |
| of which the principal was repaid in full by January 11, 2010.The interest         |   |     |       |   |         |   |
| was calculated using an annual fixed interest rate of 5.31% and paid quarterly.    |   |     |       |   |         |   |
| The loan was guaranteed by a third party entity and an individual person.          |   | $        | -          |   |         | $      | 5,868,000 |   |
|                                                                               |   |     |       |   |         |   |   |   |
| On April 28, 2009, the Company obtained a loan from Bank of China,                 |   |     |       |   |         |   |   |   |
| of which the principal was repaid in full by April 27, 2010.The interest           |   |     |       |   |         |   |   |   |
| is calculated using an annual fixed interest rate of 5.31% and paid quarterly.     |   |     |       |   |         |   |   |   |
| The loan is guaranteed by a third party entity and an individual person.           |   |     | -          |   |         |   | 5,868,000 |   |
|                                                                               |   |     |       |   |         |   |   |   |
| On April 28, 2009, the Company obtained a loan from Agricultural Bank of           |   |     |       |   |         |   |   |   |
| China, of which the principal was repaid in full by April 27, 2010.The interest    |   |     |       |   |         |   |   |   |
| is calculated using an annual fixed interest rate of 5.31% and paid monthly.       |   |     |       |   |         |   |   |   |
| The loan is guaranteed by a third party entity and two individual persons.         |   |     | -          |   |         |   | 5,868,000 |   |
|                                                                               |   |     |       |   |         |   |   |   |
| On May 11, 2009, the Company obtained a loan from Agricultural Bank of             |   |     |       |   |         |   |   |   |
| China, of which the principal was repaid in full by May 10, 2010.The interest      |   |     |       |   |         |   |   |   |
| is calculated using an annual fixed interest rate of 5.31% and paid monthly.       |   |     |       |   |         |   |   |   |
| The loan is guaranteed by a third party entity and two individual persons.         |   |     | -          |   |         |   | 8,802,000 |   |
|                                                                               |   |     |       |   |         |   |   |   |
| On July 15, 2009, the Company obtained a loan from Industrial and                  |   |     |       |   |         |   |   |   |
| Commercial Bank of China, of which the principal is to be repaid in full by        |   |     |       |   |         |   |   |   |
| July 14, 2010.The interest is calculated using an annual fixed interest rate of    |   |     |       |   |         |   |   |   |
| 5.31% and paid monthly. The loan is guaranteed by a third party entity.            |   |     | 1,473,000  |   |         |   | 1,467,000 |   |
|                                                                               |   |     |       |   |         |   |   |   |
| On July 21, 2009, the Company obtained a loan from Industrial Bank Co., Ltd.,      |   |     |       |   |         |   |   |   |
| of which the principal is to be repaid in full by July 20, 2010. The interest is   |   |     |       |   |         |   |   |   |
| calculated using an annual fixed interest rate of 5.31% and paid quarterly.        |   |     |       |   |         |   |   |   |
| The loan is guaranteed by a third party entity.                                    |   |     | -          |   |         |   | 6,601,500 |   |
|                                                                               |   |     |       |   |         |   |   |   |
| On August 12, 2009, the Company obtained a loan from Bank of China,                |   |     |       |   |         |   |   |   |
| of which the principal is to be repaid in full by August 11, 2010.The interest     |   |     |       |   |         |   |   |   |
| is calculated using an annual fixed interest rate of 4.779% and paid quarterly.    |   |     |       |   |         |   |   |   |
| The loan is guaranteed by a third party entity and an individual person.           |   |     | 8,838,000  |   |         |   | 8,802,000 |   |
|                                                                               |   |     |       |   |         |   |   |   |
| On September 1, 2009, the Company obtained a loan from Industrial and              |   |     |       |   |         |   |   |   |
| Commercial Bank of China, of which the principal is to be repaid in full by        |   |     |       |   |         |   |   |   |
| August 20, 2010. The interest is calculated using an annual fixed interest rate    |   |     |       |   |         |   |   |   |
| of 5.31% and paid monthly. The loan is guaranteed by a third party entity.         |   |     | 1,473,000  |   |         |   | 1,467,000 |   |
|                                                                               |   |     |       |   |         |   |   |   |
| On September 22, 2009, the Company obtained a loan from China                      |   |     |       |   |         |   |   |   |
| Construction Bank, of which the principal is to be repaid in full by September 21, |   |     |       |   |         |   |   |   |
| 2010.The interest is calculated using an annual fixed interest rate of 4.779%      |   |     |       |   |         |   |   |   |
| and paid monthly. The loan is guaranteed by a third party entity.                  |   |     | 11,784,000 |   |         |   | 11,736,000 |   |

----

|                                                                                   |   | June 30, |      |   | December 31, |   |
|----------------------------------------------------------------------------------------|--------|----------|-----------|--------|--------------|--------|
|                                                                                   |   | 2010     |      |   | 2009         |   |
|                                                                                   |   |     |      |   |         |   |
| On September 23, 2009, the Company obtained a loan from Huaxia Bank,                   |   |     |      |   |         |   |
| of which the principal is to be repaid in full by September 22, 2010.The interest      |   |     |      |   |         |   |
| is calculated using an annual fixed interest rate of 4.779% and paid quarterly.        |   |     |      |   |         |   |
| The loan is guaranteed by a third party entity and an individual person.               |   |     | 7,365,000 |   |         |   | 7,335,000 |   |
|                                                                                   |   |     |      |   |         |   |   |   |
| On October 29, 2009, the Company obtained a loan from Shanghai Pudong                  |   |     |      |   |         |   |   |   |
| Development Bank, of which the principal is to be repaid in full by April 28,          |   |     |      |   |         |   |   |   |
| 2010.The interest is calculated using an annual fixed interest rate of 4.86%           |   |     |      |   |         |   |   |   |
| and paid quarterly. The loan is guaranteed by a third party entity.                    |   |     | -         |   |         |   | 3,667,500 |   |
|                                                                                   |   |     |      |   |         |   |   |   |
| On November 18, 2009, the Company obtained a loan from China Merchants                 |   |     |      |   |         |   |   |   |
| Bank, of which the principal is to be repaid in full by November 2, 2010.The           |   |     |      |   |         |   |   |   |
| interest is calculated using an annual fixed interest rate of 5.31% and paid           |   |     |      |   |         |   |   |   |
| monthly. The loan is guaranteed by a third party entity and an individual              |   |     |      |   |         |   |   |   |
| person.                                                                                |   |     | 2,946,000 |   |         |   | 2,934,000 |   |
|                                                                                   |   |     |      |   |         |   |   |   |
| On December 1, 2009, the Company obtained a loan from Shanghai Pudong                  |   |     |      |   |         |   |   |   |
| Development Bank, of which the principal is to be repaid in full by May 30,            |   |     |      |   |         |   |   |   |
| 2010.The interest is calculated using an annual fixed interest rate of 4.86%           |   |     |      |   |         |   |   |   |
| and paid quarterly. The loan is secured by a lien on the Company’s rights to use |   |     |      |   |         |   |   |   |
| sea areas.                                                                             |   |     | -         |   |         |   | 3,667,500 |   |
|                                                                                   |   |     |      |   |         |   |   |   |
| On December 1, 2009, the Company obtained a loan from China Merchants                  |   |     |      |   |         |   |   |   |
| Bank, of which the principal is to be repaid in full by November 2, 2010.The           |   |     |      |   |         |   |   |   |
| interest is calculated using an annual fixed interest rate of 5.31% and paid           |   |     |      |   |         |   |   |   |
| monthly. The loan is guaranteed by a third party entity and an individual              |   |     |      |   |         |   |   |   |
| person.                                                                                |   |     | 5,892,000 |   |         |   | 5,868,000 |   |
|                                                                                   |   |     |      |   |         |   |   |   |
| On December 31, 2009, the Company obtained a loan from Bank of China,                  |   |     |      |   |         |   |   |   |
| of which the principal is to be repaid in full by December 30, 2010.The interest       |   |     |      |   |         |   |   |   |
| is calculated using an annual fixed interest rate of 5.0445% and paid quarterly.       |   |     |      |   |         |   |   |   |
| The loan is guaranteed by a third party entity.                                        |   |     | 2,946,000 |   |         |   | 2,934,000 |   |
|                                                                                   |   |     |      |   |         |   |   |   |
| On January 5, 2010, the Company obtained a loan from Bank of China,                    |   |     |      |   |         |   |   |   |
| of which the principal is to be repaid in full by January 4, 2011.The interest         |   |     |      |   |         |   |   |   |
| is calculated using an annual fixed interest rate of 5.0445% and paid quarterly.       |   |     |      |   |         |   |   |   |
| The loan is guaranteed by a third party entity.                                        |   |     | 5,892,000 |   |         |   | - |   |
|                                                                                   |   |     |      |   |         |   |   |   |
| On January 12, 2010, the Company obtained a loan from Shenzhen                         |   |     |      |   |         |   |   |   |
| Development bank, of which the principal is to be repaid in full by January 11,        |   |     |      |   |         |   |   |   |
| 2011.The interest is calculated using an annual fixed interest rate of 5.31%           |   |     |      |   |         |   |   |   |
| and paid monthly. The loan is guaranteed by a third party entity and an                |   |     |      |   |         |   |   |   |
| individual person.                                                                     |   |     | 4,419,000 |   |         |   | - |   |
|                                                                                   |   |     |      |   |         |   |   |   |
| On February 3, 2010, the Company obtained a loan from Bank of China,                   |   |     |      |   |         |   |   |   |
| of which the principal is to be repaid in full by February 2, 2011.The interest        |   |     |      |   |         |   |   |   |
| is calculated using an annual fixed interest rate of 5.0445% and paid quarterly.       |   |     |      |   |         |   |   |   |
| The loan is guaranteed by a third party entity.                                        |   |     | 736,500   |   |         |   | - |   |
|                                                                                   |   |     |      |   |         |   |   |   |

----

|                                                                                 |   | June 30, |      |   | December 31, |   |
|--------------------------------------------------------------------------------------|--------|----------|-----------|--------|--------------|--------|
|                                                                                 |   | 2010     |      |   | 2009         |   |
|                                                                                 |   |     |      |   |         |   |
| On April 15, 2010, the Company obtained a loan from Bank of China,                   |   |     |      |   |         |   |
| of which the principal is to be repaid in full by April 14, 2011.The interest        |   |     |      |   |         |   |
| is calculated using an annual fixed interest rate of 5.0445% and paid quarterly.     |   |     |      |   |         |   |
| The loan is guaranteed by a third party entity and an individual person.             |   |     | 5,155,500 |   |         |   | - |   |
|                                                                                 |   |     |      |   |         |   |   |   |
| On April 19, 2010, the Company obtained a loan from Shanghai Pudong                  |   |     |      |   |         |   |   |   |
| Development Bank, of which the principal is to be repaid in full by October 18,      |   |     |      |   |         |   |   |   |
| 2010.The interest is calculated using an annual fixed interest rate of 4.86%         |   |     |      |   |         |   |   |   |
| and paid quarterly. The loan is guaranteed by a third party entity                   |   |     | 3,682,500 |   |         |   | - |   |
|                                                                                 |   |     |      |   |         |   |   |   |
| On April 21, 2010, the Company obtained a loan from Agricultural Bank of             |   |     |      |   |         |   |   |   |
| China, of which the principal is to be repaid in full by April 20, 2011.The interest |   |     |      |   |         |   |   |   |
| is calculated using an annual fixed interest rate of 5.31% and paid monthly.         |   |     |      |   |         |   |   |   |
| The loan is guaranteed by a third party entity.                                      |   |     | 5,892,000 |   |         |   | - |   |
|                                                                                 |   |     |      |   |         |   |   |   |
| On May 5, 2010, the Company obtained a loan from Agricultural Bank of                |   |     |      |   |         |   |   |   |
| China, of which the principal is to be repaid in full by May 4, 2011.The interest    |   |     |      |   |         |   |   |   |
| is calculated using an annual fixed interest rate of 5.31% and paid monthly.         |   |     |      |   |         |   |   |   |
| The loan is guaranteed by a third party entity.                                      |   |     | 8,838,000 |   |         |   | - |   |

| On May 27, 2010, the Company obtained a loan from Shanghai Pudong                      |   |   |       |   |   |   |
|----------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
| Development Bank, of which the principal is to be repaid in full by November 26,       |   |   |       |   |   |   |
| 2010.The interest is calculated using an annual fixed interest rate of 4.86%           |   |   |       |   |   |   |
| and paid quarterly. The loan is secured by a lien on the Company’s rights to use |   |   |       |   |   |   |
| sea areas.                                                                             |   |   | 3,682,500  |   |   |   | - |   |
|                                                                                   |   |   |       |   |   |   |   |   |
| On June 28, 2010, the Company obtained a loan from Bank of  Hangzhou,        |   |   |       |   |   |   |   |   |
| of which the principal is to be repaid in full by December 28, 2010.                   |   |   |       |   |   |   |   |   |
| The interest is calculated using an annual fixed interest rate of 4.455% and           |   |   |       |   |   |   |   |   |
| Paid quarterly. The loan is guaranteed by a third party entity and  an       |   |   |       |   |   |   |   |   |
| individual person.                                                                     |   | $      | 2,946,000  |   |   | $      | - |   |
|                                                                                   |   |   |       |   |   |   |   |   |
| Total short-term bank loans                                                            |   | $      | 83,961,000 |   |   | $      | 82,885,500 |   |

----

|                                                                                  |   | June 30, |       |   | December 31, |   |
|---------------------------------------------------------------------------------------|--------|----------|------------|--------|--------------|--------|
|                                                                                  |   | 2010     |       |   | 2009         |   |
|                                                                                  |   |     |       |   |         |   |
| On February 5, 2008, the Company obtained a loan from Bank of China,                  |   |     |       |   |         |   |
| of which the principal is to be repaid in full by February 4, 2011. The interest      |   |     |       |   |         |   |
| is calculated using floating interest rate and paid quarterly. For the quarter        |   |     |       |   |         |   |
| ended June 30, 2010, the current interest rate is 5.4%. The loan is                   |   |     |       |   |         |   |
| guaranteed by a third party entity and an individual person.                          |   | $        | 7,365,000  |   |         | $      | 7,335,000 |   |
|                                                                                  |   |     |       |   |         |   |   |   |
| On April 18, 2008, the Company obtained a loan from Bank of China, of which           |   |     |       |   |         |   |   |   |
| the principal is to be repaid in full by January 18, 2011. The interest is calculated |   |     |       |   |         |   |   |   |
| using floating interest rate and paid quarterly. For the quarter ended June 30,       |   |     |       |   |         |   |   |   |
| 2010, the current interest rate is 5.4%. The loan is guaranteed by a third party      |   |     |       |   |         |   |   |   |
| entity and an individual person.                                                      |   |     | 2,946,000  |   |         |   | 2,934,000 |   |
|                                                                                  |   |     |       |   |         |   |   |   |
| On May 20, 2008, the Company obtained a loan from Industrial and                      |   |     |       |   |         |   |   |   |
| Commercial Bank of China, of which the principal is to be repaid in full by           |   |     |       |   |         |   |   |   |
| December 15, 2011. The interest is calculated using floating interest rate and        |   |     |       |   |         |   |   |   |
| paid quarterly. For the quarter ended June 30, 2010, the current interest rate        |   |     |       |   |         |   |   |   |
| is 6.048%. The loan is guaranteed by a third party entity.                            |   |     | 4,419,000  |   |         |   | 4,401,000 |   |
|                                                                                  |   |     |       |   |         |   |   |   |
| On August 15, 2008, the Company obtained a loan from China Construction               |   |     |       |   |         |   |   |   |
| Bank, of which the principal is to be repaid in full by August 14, 2012. The          |   |     |       |   |         |   |   |   |
| interest is calculated using floating interest rate and paid monthly. For the         |   |     |       |   |         |   |   |   |
| quarter ended June 30, 2010, the current interest rate is 5.76%. The loan is          |   |     |       |   |         |   |   |   |
| guaranteed by a third party entity and an individual person.                          |   |     | 4,419,000  |   |         |   | 4,401,000 |   |
|                                                                                  |   |     |       |   |         |   |   |   |
| On September 5, 2008, the Company obtained a loan from Bank of China, of              |   |     |       |   |         |   |   |   |
| which the principal is to be repaid in full by January 4, 2011. The interest is       |   |     |       |   |         |   |   |   |
| calculated using floating interest rate and paid quarterly. For the quarter ended     |   |     |       |   |         |   |   |   |
| June 30, 2010, the current interest rate is 5.4%. The loan is guaranteed by           |   |     |       |   |         |   |   |   |
| a third party entity and an individual person.                                        |   |     | 2,209,500  |   |         |   | 2,200,500 |   |
|                                                                                  |   |     |       |   |         |   |   |   |
| On October 14, 2008, the Company obtained a loan from China Construction              |   |     |       |   |         |   |   |   |
| Bank, of which the principal is to be repaid in full by October 12, 2012. The         |   |     |       |   |         |   |   |   |
| interest is calculated using floating interest rate and paid monthly. For the         |   |     |       |   |         |   |   |   |
| quarter ended June 30, 2010, the current interest rate is 5.76%. The loan is          |   |     |       |   |         |   |   |   |
| guaranteed by a third party entity.                                                   |   |     | 10,752,900 |   |         |   | 10,709,100 |   |

----

|                                                                                 |   | June 30, |       |   | December 31, |   |
|--------------------------------------------------------------------------------------|--------|----------|------------|--------|--------------|--------|
|                                                                                 |   | 2010     |       |   | 2009         |   |
|                                                                                 |   |     |       |   |         |   |
| On October 14, 2008, the Company obtained a loan from China Construction             |   |     |       |   |         |   |
| Bank, of which the principal is to be repaid in full by October 12, 2012. The        |   |     |       |   |         |   |
| interest is calculated using floating interest rate and paid monthly. For the        |   |     |       |   |         |   |
| quarter ended June 30, 2010, the current interest rate is 5.76%. The loan is         |   |     |       |   |         |   |
| guaranteed by a third party entity.                                                  |   |     | 883,800    |   |         |   | 880,200 |   |
|                                                                                 |   |     |       |   |         |   |   |   |
| On October 15, 2008, the Company obtained a loan from China Construction             |   |     |       |   |         |   |   |   |
| Bank, of which the principal is to be repaid in full by September 28, 2012. The      |   |     |       |   |         |   |   |   |
| interest is calculated using floating interest rate and paid monthly. For the        |   |     |       |   |         |   |   |   |
| quarter ended June 30, 2010, the current interest rate is 5.76%. The loan is         |   |     |       |   |         |   |   |   |
| secured by a lien on the Company’s property and equipment.                     |   |     | 3,093,300  |   |         |   | 3,080,700 |   |
|                                                                                 |   |     |       |   |         |   |   |   |
| On October 15, 2008, the Company obtained a loan from Industrial and                 |   |     |       |   |         |   |   |   |
| Commercial Bank of China in the amount of $6,894,900, $5,427,900 of which            |   |     |       |   |         |   |   |   |
| is to be repaid in full by October 15, 2010, and $1,467,000 of which is to berepaid  |   |     |       |   |         |   |   |   |
| in full by November 15, 2011. The interest is calculated using floating interest     |   |     |       |   |         |   |   |   |
| rate and paid quarterly. For the quarter ended June 30, 2010, the current            |   |     |       |   |         |   |   |   |
| average interest rate is 5.76%. The loan is secured by a lien on the Company’s |   |     |       |   |         |   |   |   |
| property and equipment and guaranteed by a third party entity.                       |   |     | 5,450,100  |   |         |   | 6,894,900 |   |
|                                                                                 |   |     |       |   |         |   |   |   |
| On November 21, 2008, the Company obtained a loan from Bank of China,                |   |     |       |   |         |   |   |   |
| of which the principal is to be repaid in full by December 20, 2010. The interest    |   |     |       |   |         |   |   |   |
| is calculated using floating interest rate and paid quarterly. For the quarter       |   |     |       |   |         |   |   |   |
| ended June 30, 2010, the current interest rate is 5.4%. The loan is                  |   |     |       |   |         |   |   |   |
| guaranteed by a third party entity and an individual person.                         |   |     | 2,209,500  |   |         |   | 2,200,500 |   |
|                                                                                 |   |     |       |   |         |   |   |   |
| Total                                                                                |   | $        | 43,748,100 |   |         | $      | 45,036,900 |   |
|                                                                                 |   |     |       |   |         |   |   |   |
| Less: Current portion                                                                |   |     | 20,180,100 |   |         |   | 7,628,400 |   |
|                                                                                 |   |     |       |   |         |   |   |   |
| Total long-term bank loans                                                           |   | $        | 23,568,000 |   |         | $      | 37,408,500 |   |

----

|                             |   |                              |       |
|----------------------------------|--------|-----------------------------------|------------|
|                             |   | For the Six Months Ended June 30, |       |
|                             |   | 2010                              |       |   | 2009 |   |
| Computed tax at statutory rate   |   | (Unaudited)                       |       |   |   |   |
|                             |   |                              |       |   |   |   |
|                             |   | $                                 | 3,142,556  |   |   | $ | (407,670 | ) |
| Non taxable loss                 |   |                              | 49,022     |   |   |   | - |   |
| Tax credit from local government |   |                              | (1,276,632 | ) |   |   | - |   |
| Total provision for income taxes |   | $                                 | 1,914,946  |   |   | $ | (407,670 | ) |
| Effective tax rate               |   |                              | 15         | % |   |   | (25 | %) |

----

|                       |   | For the Six Months Ended June 30, |      |
|----------------------------|--------|-----------------------------------|-----------|
|                       |   | 2010                              |      |   | 2009 |   |
|                       |   |                              |      |   |   |   |
| Cash paid for interest     |   | $                                 | 2,725,817 |   |   | $ | 286,665 |   |
| Cash paid for income taxes |   | $                                 | -         |   |   | $ | - |   |

|                                                     |   | For the Three Months Ended June 30, |       |
|----------------------------------------------------------|--------|-------------------------------------|------------|
|                                                     |   | 2010                                |       |   | 2009 |   |
|                                                     |   |                                |       |   |   |   |
| Net income (loss)                                        |   | $                                   | 4,924,004  |   |   | $ | (841,408 | ) |
|                                                     |   |                                |       |   |   |   |   |   |
| Weighted average common shares                           |   |                                |       |   |   |   |   |   |
|   (denominator for basic earnings per share)   |   |                                | 2,387,451  |   |   |   | - |   |
|                                                     |   |                                |       |   |   |   |   |   |
| Effect of dilutive securities:                           |   |                                |       |   |   |   |   |   |
|    Convertible preferred stock            |   |                                | 41,021,494 |   |   |   | - |   |
|                                                     |   |                                |       |   |   |   |   |   |
| Weighted average common shares                           |   |                                |       |   |   |   |   |   |
|   (denominator for diluted earnings per share) |   |                                | 43,408,945 |   |   |   | - |   |
|                                                     |   |                                |       |   |   |   |   |   |
| Basic earnings (loss) per share                          |   | $                                   | 2.06       |   |   | $ | - |   |
| Diluted earnings (loss) per share                        |   | $                                   | 0.11       |   |   | $ | - |   |

|                                                     |   | For the Six Months Ended June 30, |       |
|----------------------------------------------------------|--------|-----------------------------------|------------|
|                                                     |   | 2010                              |       |   | 2009 |   |
|                                                     |   |                              |       |   |   |   |
| Net income (loss)                                        |   | $                                 | 10,655,276 |   |   | $ | (1,223,008 | ) |
|                                                     |   |                              |       |   |   |   |   |   |
| Weighted average common shares                           |   |                              |       |   |   |   |   |   |
|   (denominator for basic earnings per share)   |   |                              | 1,200,321  |   |   |   | - |   |
|                                                     |   |                              |       |   |   |   |   |   |
| Effect of dilutive securities:                           |   |                              |       |   |   |   |   |   |
|    Convertible preferred stock            |   |                              | 20,624,066 |   |   |   | - |   |
|                                                     |   |                              |       |   |   |   |   |   |
| Weighted average common shares                           |   |                              |       |   |   |   |   |   |
|   (denominator for diluted earnings per share) |   |                              | 21,824,387 |   |   |   | - |   |
|                                                     |   |                              |       |   |   |   |   |   |
| Basic earnings (loss) per share                          |   | $                                 | 8.88       |   |   | $ | - |   |
| Diluted earnings (loss) per share                        |   | $                                 | 0.49       |   |   | $ | - |   |

----

----

| ·   | A registration rights agreement (the “Registration Rights Agreement”) with the investors, in which we agreed to file this registration statement (the “Registration Statement”) with the SEC to register for resale the Shares, the Common Stock issuable upon conversion of the Series A Preferred Stock, the Series A Warrant Shares and the Series B Warrant Shares, within 30 calendar days of the Closing Date, and to have this registration statement declared effective within 150 calendar days of the Closing Date or within 180 calendar days of the Closing Date in the event of a full review of the registration statement by the SEC. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | A securities escrow agreement with the Investors (the “Securities Escrow Agreement”), pursuant to which, we delivered into an escrow account 5,000 shares of our Series M Preferred Stock convertible into 5,000,000 shares of Common Stock to be used as escrow shares (the “Escrow Shares”) after we amend our Articles of Incorporation to increase our authorized Common Stock to one hundred million (100,000,000) shares. With respect to the 2010 performance year, if we achieve less than 95% of the 2010 performance threshold, then the Escrow Shares for such year will be delivered to the investors in the amount of 500,000 shares of Common Stock. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Stock for each full percentage point by which such threshold was not achieved up to a maximum of 5,000,000 shares of Common Stock. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------|

| ·   | On the Closing Date, we and the Keyuan International Shareholder, entered into a lock-up agreement whereby Keyuan International is prohibited from selling our securities until six (6) months after the effective date of the registration statement required to be filed under the Registration Rights Agreement. For one (1) year thereafter, it will be permitted to sell up to 1/12 of its initial holdings every month. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (a) | pay a cumulative dividend at an annual rate of 6%, payable quarterly, at our option, in cash or in shares of Common Stock;                                                                                                                                                                                                                                                                                                                                           |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (b) | have a preference over the Common Stock on liquidation, dissolution or winding up of the Company equal to the original purchase price per Series A Preferred Share;                                                                                                                                                                                                                                                                                                  |
| (c) | be convertible at any time after issuance, at the option of the holder, into shares of Common Stock, without the payment of additional consideration, at an initial conversion ratio of one-to-one (subject to anti-dilution adjustment);                                                                                                                                                                                                                            |
| (d) | automatically convert into shares of Common Stock at $3.50 per share, at the earlier to occur of the following: (i) the twenty four (24) month anniversary of the Closing of the Private Placement, and (ii) at such time that the Volume Weighted Average Price (“VWAP”) of the Common Stock is no less than $5.00 for a period of ten (10) consecutive trading days with the daily volume of the Common Stock equal to at least 50,000 shares per day; |

----

| (e) | the conversion price and the number of common shares underlying the Series A Preferred Stock are subject to customary adjustments, including weighted average broad-based anti-dilution protection for a period of twelve (12) months after the effective date of this registration statement; and |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (f) | requires that we, prior to taking certain corporate actions (including certain issuances or redemptions of its securities or changes in its organizational documents), obtain the approval of more than 50% of the Series A Preferred Shares then issued and outstanding, voting as a group.       |

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

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

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

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

----

| Cash proceeds of the Private Placement (net of fees and expenses)    |   | $      | 19,867,774  |   |
|----------------------------------------------------------------------|--------|--------|-------------|--------|
| Reduction for escrowed share arrangement                             |   |   | (11,900,000 | )      |
| Net proceeds allocated to securities issued in the Private Placement |   | $      | 7,967,774   |   |
| Allocated to:                                                        |   |   |        |   |
| Issued Common Shares                                                 |   | $      | 542,917     |   |
| Series A Preferred Stock                                             |   |   | 7,314,219   |   |
| Series A Warrants                                                    |   |   | 66,133      |   |
| Series B Warrants                                                    |   |   | 44,506      |   |
|                                                                 |   | $      | 7,967,774   |   |

----

| Cash proceeds of the Private Placement (net of fees and expenses)    |   | $      | 3,044,315 |   |
|----------------------------------------------------------------------|--------|--------|-----------|--------|
| Reduction for escrowed share arrangement                             |   |   | -         |   |
| Net proceeds allocated to securities issued in the Private Placement |   | $      | 3,044,315 |   |
| Allocated to:                                                        |   |   |      |   |
| Issued Common Shares                                                 |   | $      | 242,611   |   |
| Series A Preferred Stock                                             |   |   | 2,732,642 |   |
| Series A Warrants                                                    |   |   | 40,490    |   |
| Series B Warrants                                                    |   |   | 28,572    |   |
|                                                                 |   | $      | 3,044,315 |   |

----

|                              |   | Number of options |      |   | Weighted Average Exercise Price |   |
|-----------------------------------|--------|-------------------|-----------|--------|---------------------------------|--------|
| Outstanding, December 31, 2010    |   |              | -         |   |                            |   | - |   |
|     Granted   |   |              | 3,000,000 |   |                            | $      | 4.20 |   |
|     Exercised |   |              | -         |   |                            |   | - |   |
|     Forfeited |   |              | -         |   |                            |   | - |   |
|     Expired   |   |              | -         |   |                            |   | - |   |
| Outstanding, June 30, 2010        |   |              | 3,000,000 |   |                            | $      | 4.20 |   |
| Exercisable, June 30, 2010        |   |              | -         |   |                            | $      | - |   |

|                              |   | Number of Warrants |      |   | Weighted Average Exercise Price |   |
|-----------------------------------|--------|--------------------|-----------|--------|---------------------------------|--------|
| Outstanding, December 31, 2010    |   |               | --        |   |                            |   | -- |   |
|     Granted   |   |               | 2,216,163 |   |                            |   | 4.50 |   |
|     Exercised |   |               | --        |   |                            |   | -- |   |
|     Forfeited |   |               | --        |   |                            |   | -- |   |
|     Expired   |   |               | --        |   |                            |   | -- |   |
| Outstanding, June 30, 2010        |   |               | 2,216,163 |   |                            | $      | 4.50 |   |
| Exercisable, June 30, 2010        |   |               | 2,216,163 |   |                            | $      | 4.50 |   |

| (a)   | On July 1, 2010, the Company granted 80,000 five-year options to two outside directors to purchase up to 80,000 shares of the Company’s common stock at an exercise price of US$4.20 per share, in consideration of their services to the Company. Of these options, 40,000 of the options shall vest immediately after one year of the issuance and the remaining 40,000 of the options shall vest immediately after two years of the issuance, provided that the optionee is re-elected for successive one year terms at the end of 12 months of the issuance. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (b)   | On July 1, 2010, the Company granted 40,000 five-year options to a consultant to purchase an aggregate of 40,000 shares of the Company’s common stock at an exercise price of US$4.20 per share, in consideration of their services to the Company. Of these options, all 40,000 of the options shall vest immediately. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (c)   | On July 27, 2010, the Company granted 420,000 three-year options to a consultant to purchase an aggregate of  420,000 shares of the Company’s common stock at an exercise price of US$4.20 per share, in consideration of their services to the Company. Of these options, 70,000 of the options shall vest immediately, 31,818 shall vest monthly beginning on September 1, 2010 and the remaining balance of 95,456 shall vest on May 1, 2011. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (d)   | On August 4, 2010, the Company granted 700,000 five-year options to 79 managers and employees to purchase in the aggregate 700,000 shares of the Company’s common stock at an exercise price of US$4.50 per share, in consideration of their services to the Company. Of these options, 30% of the Options shall vest immediately after one year of the issuance, 40% of the options shall vest immediately after two years of the issuance and 30% of the options shall vest immediately after three years of the issuance.  . |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| · | heavy oil catalytic pyrolysis processing equipment- risers/generators/precipitators, fuel gas boilers, fractionating tower, absorbing re-absorbing and desorbing towers, heat exchangers, pumps, a stabilizing tower; |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | gas fractionation processing equipment- de-propanizing tower, refining propylene tower, de-ethanizination tower, heat exchangers, pumps; |
|--------|------------------------------------------------------------------------------------------------------------------------------------------|

| · | ethylbenzene processing equipment- alkylation reactor, anti-alkylation reactor, dehydrogenation reactor, propylene absorbing tower, de-ethylene tower, ethylbenzene recovering tower, heating furnace for benzene, heating furnace for gas, steam overheating furnace, tail gas compressor, washing tower; and |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | liquefied petroleum gas (LPG) and sulfur recovery process- LPG desulfurization extraction tower, dry gas desulfurization tower, regenerating tower, LPG de-mecaptan extraction tower. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| · | BTX Aromatics: consisting of benzene, toluene, xylene and other chemical components for further processing into oil resin, gasoline and solvents materials widely used in paint, ink, construction coating and pesticide. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| · | Styrene: a precursor to polystyrene and several copolymers widely used for packaging materials, construction materials, electronic parts, home appliances, household goods, home furnishings, toys, sporting goods and others.  |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | LPG:  a mixture of hydrocarbon gases used as fuel in heating appliances and vehicles. A replacement for chlorofluorocarbons as an aerosol propellant and a refrigerant which reduces damage to the ozone layer.            |
|   |                                                                                                                                                                                                                                 |
| · | MTBE & Other Chemicals: MTBE, oil slurry, sulphur and others are used for a variety of applications including fuel components, refrigeration systems, fertilizers, insecticides and fungicides, etc.                             |

| ·       |  Complete land purchase by September 30, 2010;                            |
|--------------|--------------------------------------------------------------------------------|
| ·       |  Commence construction in the quarter ended December 31, 2010;            |
|  · |  Complete equipment installation by March 31, 2012;                       |
|  · |  Begin trial production in the quarter ended June 30, 2012;               |
|  · |  Start full production and sales in the quarter ended September 30, 2012. |

----

| ·   | Lower market prices due to a general economic slowdown: the European debt crisis that began in mid-May and extended to June drove down prices for all petrochemical products. The lower market prices together with higher historical inventory costs put the downward pressure on our margin.  We have seen prices start to rebound in late July. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Startup cost carryover: we have been ramping our production lines since the fourth quarter of 2009. We had 2009 startup costs carried over, resulting in approximately $1.8 million higher cost of goods sold at beginning of 2010. In addition, because the equipment, processes and workers are new, we have not been operating at optimal efficiency levels. The company continues to optimize product mix and improve efficiency and yield. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Temporary mandatory factory shutdown: in the months of March, May and June, we were forced to shut down all production lines due to a mandatory shutdown ordered by the local utility agency for power grid upgrade. Because we were forced to power down and subsequently power up our manufacturing facilities over several days, we lost a combined 23 days of production (8 days in the first quarter, 15 days in the second quarter), equating to 42,000 MT of production, approximately $33.8 million of revenues, $2.4 million in gross profit and $1.5 million in net income. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| VehiclesFurniture, machinery and equipmentBuildings and improvements | 5 years5 to 10 years45 years |
|----------------------------------------------------------------------|------------------------------|

| Rights to use landSoftwareTechnology | 15-50 years10 years9-20 years |
|--------------------------------------|-------------------------------|

----

|                                                                                   |   | For the three monthsEnded June 30, |        |   | For the six monthsEnded June 30, |   |
|----------------------------------------------------------------------------------------|--------|------------------------------------|-------------|--------|----------------------------------|--------|
|                                                                                   |   | 2010                               |        |   | 2009                             |   |   | 2010 |   |   | 2009 |   |
|                                                                                   |   |                               |        |   |                             |   |   |   |   |   |   |   |
| Sales                                                                                  |   | $                                  | 131,997,217 |   |                             | $      | -- |   |   | $ | 249,369,103 |   |   | $ | -- |   |
| Cost of sales                                                                          |   |                               | 123,351,375 |   |                             |   | - |   |   |   | 231,907,817 |   |   |   | - |   |
| Gross profit                                                                           |   |                               | 8,645,842   |   |                             |   | - |   |   |   | 17,461,286 |   |   |   | - |   |
|                                                                                   |   |                               |        |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Operating expenses                                                                     |   |                               |        |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Selling expenses                                                                       |   |                               | 258,901     |   |                             |   | - |   |   |   | 343,413 |   |   |   | - |   |
| General and administrative expenses                                                    |   |                               | 1,088,256   |   |                             |   | 709,161 |   |   |   | 1,893,788 |   |   |   | 1,236,593 |   |
| Total operating expenses                                                               |   |                               | 1,347,157   |   |                             |   | 709,161 |   |   |   | 2,237,201 |   |   |   | 1,236,593 |   |
|                                                                                   |   |                               |        |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Gain (loss) from operations                                                            |   |                               | 7,298,685   |   |                             |   | (709,161 | ) |   |   | 15,224,085 |   |   |   | (1,236,593 | ) |
|                                                                                   |   |                               |        |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Other income (expenses):                                                               |   |                               |        |   |                             |   |   |   |   |   |   |   |   |   |   |   |
|       Interest expense, net                              |   |                               | (1,589,937  | )      |                             |   | (274,460 | ) |   |   | (2,663,462 | ) |   |   | (253,179 | ) |
| Non-operating expenses                                                                 |   |                               | 118,802     |   |                             |   | (138,257 | ) |   |   | 9,599 |   |   |   | (140,906 | ) |
|            Total other expenses |   |                               | (1,471,135  | )      |                             |   | (412,717 | ) |   |   | 12,570,222 |   |   |   | (394,085 | ) |
|                                                                                   |   |                               |        |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) before provision for income tax                                          |   |                               | 5,827,550   |   |                             |   | (1,21,878 | ) |   |   | 1.914,946 |   |   |   | (407,669 | ) |
| Provision(benefit) for income tax                                                      |   |                               | 903.546     |   |                             |   | (280,469 | ) |   |   | - |   |   |   | (407,669 | ) |
| Income (net) loss                                                                      |   |                               | 4,924,004   |   |                             |   | (841,408 | ) |   |   | 10,655,276 |   |   |   | (1,223,008 | ) |
| Other comprehensive income                                                             |   |                               |        |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Foreign currency translation adjustment                                                |   |                               | 196,958     |   |                             |   | 9,160 |   |   |   | 199,256 |   |   |   | (4,478 | ) |
|                                                                                   |   |                               |        |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive income (loss)                                                            |   | $                                  | 5,120,962   |   |                             | $      | (832,248 | ) |   | $ | 10,854,532 |   |   | $ | (1,227,486 | ) |

|  Product       | Total Sale for Jan. 2010 to Jun 2010 (Unit: Metric Ton) |
|---------------------|---------------------------------------------------------|
| BTX Light Aromatics | 137,304                                                 |
| BTX Heavy Aromatics | 71,246                                                  |
| LPG                 | 8,413                                                   |
| MTBE and Others     | 45,328                                                  |
| Styrene             | 18,131                                                  |
| Propylene           | 20,278                                                  |
| Total               | 300,700                                                 |

----

----

|                                                |   | For the Six Months Ending June 30, |        |
|-----------------------------------------------------|--------|------------------------------------|-------------|
|                                                |   | 2010                               |        |   | 2009 |   |
|                                                |   |                               |        |   |   |   |
| Net cash provided by (used in) operating activities |   |                               | 14,415,142  |   |   |   | (5,415,543 | ) |
| Net cash used in investing activities               |   |                               | (16,015,980 | ) |   |   | (25,770,639 | ) |
| Net cash provided by financing activities           |   |                               | (6,944,001  | ) |   |   | 40,657,038 |   |

----

| ·       | investors’ perception of, and demand for, securities of petrochemical manufacturing and supply companies; |
|--------------|-----------------------------------------------------------------------------------------------------------------|
| ·       | conditions of the U.S. and other capital markets in which we may seek to raise funds;                           |
| ·       | our future results of operations, financial condition and cash flow;                                            |
| ·       | PRC governmental regulation of foreign investment in petrochemical manufacturing companies in China;            |
|  · | economic, political and other conditions in China; and                                                          |
| ·       | PRC governmental policies relating to foreign currency borrowings.                                              |

----

| ● | Reliance on financial reporting consultants for review of critical accounting areas and disclosures and material non-standard transactions; |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------|
| ● | Lack of sufficient accounting staff which results in a lack of segregation of duties necessary for a good system of internal control.       |

----

----

|  Exhibit No. |           Document                                                                                                       |
|-------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|              |                                                                                                                                                                  |
| 3.1               | Articles of Incorporation, as amended (Incorporated by reference to Exhibit 3.1 to the Company’s Amendment No.1 to Form S-1 filed on July 23, 2010).            |
|              |                                                                                                                                                                  |
| 3.2               | Articles of Merger (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on May 19, 2010)                                                |
|              |                                                                                                                                                                  |
| 3.3               | Amended Bylaws of Keyuan Petrochemicals, Inc. dated June 29, 2010 (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on July 7, 2010) |
|              |                                                                                                                                                                  |
| 31.1              | Certification  of  Chief  Executive  Officer  required  by Rule 13a-14/15d-14(a) under the Exchange Act   |
|              |                                                                                                                                                                  |
| 31.2              | Certification of  Chief Financial Officer required by Rule 13a-14/15d-14(a) under the Exchange Act                                                          |
|              |                                                                                                                                                                  |
| 32.1              | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.               |
|              |                                                                                                                                                                  |
| 32.2              | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.     |

----

| Date:   August 16,  2010 | Keyuan Petrochemicals, Inc.             |   |
|----------------------------------------------|-----------------------------------------|--------|
|                                         |                                    |   |
|                                         | By:   /s/ Chunfeng Tao   |   |
|                                         | Chunfeng Tao                            |   |
|                                         | Chief Executive Officer & President |   |
|                                         |                                    |   |
|                                         | By:   /s/ Aichun Li      |   |
|                                         | Aichun LiChief Financial Officer        |   |