UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





Form
20-F





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





OR





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


For
the fiscal year ended December 31, 2008





OR





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


For the
transition period from ________ to _________





OR





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


Date
of event requiring this shell company report _________








For
      the month of:
              December
      2008
            Commission
      File Number:
              001-34149





CHARDAN
2008 CHINA ACQUISITION CORP.


(Translation
of registrant’s name into English)





Suite
18E, Tower A


Oriental
Kenzo Plaza


48
Dongzhimenwai Street


Beijing,
100027, China


Tel:
86-10-84477148


Fax:86-10-84477246


(Address
of principal executive office)





Securities registered or to be
registered pursuant to Section 12(b) of the Act:


Units,
consisting of one Ordinary Share and one Warrant


Ordinary
Shares, par value $0.001 per share


Warrants
to purchase Ordinary Shares


(Title of
Class)




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





Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None




The
number of the registrant’s units, ordinary shares and warrants outstanding as of
the close of the period covered by the annual report was 9,166,666, 9,166,666
and 11,166,666, respectively.


Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.


o
Yes     x No




If this
is an annual or transition report, indicate by check mark if the registrant is
not required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. o
Yes      x No




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




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer” and “large accelerated filer” in Rule 126-2 of the Exchange Act. (Check
one): Large accelerated filer o     Accelerated
filer o     Non-accelerated
filer x




Indicate
by check mark which basis of accounting the registrant has used to prepare the
financial statements included in this filing. U.S. GAAP x   International
Financial Reporting Standards as issued by the International Accounting
Standards Board o
Other o




Indicate
by check mark which financial statement item the registrant has elected to
follow. o Item
17     x Item 18




If
“other” has been checked in response to the previous question, indicate by check
mark which financial statement item the registrant has elected to follow. Item
17 o     Item
18 o






If this
is an annual report, indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act). x
Yes     o No




EXPLANATORY
NOTE





This Form
20-F is comprised of the audited financial statements of Chardan 2008 China
Acquisition Corp. (the “Company”, “we”, “us” or “our”) for the period from
February 19, 2008 (inception) to December 31, 2008, and as of December 31, 2008,
together with a “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” for such period, and a section entitled “Other
Items”.





INDEXTO AUDITED FINANCIAL
STATEMENTS




PageTablePART
      I
                          
                          1ITEM
      1.
                          IDENTITY
      OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
                          1ITEM
      2.
                          OFFER
      STATISTICS AND EXPECTED TIMETABLE
                          1ITEM
      3.
                          KEY
      INFORMATION
                          1ITEM
      4.
                          INFORMATION
      ON THE COMPANY
                          33ITEM
      5.
                          OPERATING
      AND FINANCIAL REVIEW AND PROSPECTS
                          53ITEM
      6.
                          DIRECTORS,
      SENIOR MANAGEMENT AND EMPLOYEES
                          54ITEM
      7.
                          MAJOR
      SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
                          63ITEM
      8.
                          FINANCIAL
      INFORMATION
                          67ITEM
      9.
                          THE
      OFFER AND LISTING
                          67ITEM
      10.
                          ADDITIONAL
      INFORMATION
                          67ITEM
      11.
                          QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
                          75ITEM
      12.
                          DESCRIPTION
      OF SECURITIES OTHER THAN EQUITY SECURITIES
                          76PART
      II
                          
                          76ITEM
      13.
                          DEFAULTS,
      DIVIDEND ARREARAGES AND DELINQUENCIES
                          76ITEM
      14.
                          MATERIAL
      MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
                          76ITEM
      15.
                          CONTROLS
      AND PROCEDURES
                          76ITEM
      16A.
                          AUDIT
      COMMITTEE FINANCIAL EXPERT
                          77ITEM
      16B.
                          CODE
      OF ETHICS
                          77ITEM
      16C.
                          PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
                          77ITEM
      16D.
                          EXEMPTIONS
      FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
                          78ITEM
      16E.
                          PURCHASE
      OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
    PURCHASERS
                          78PART
      III
                          
                          79ITEM
      17.
                          FINANCIAL
      STATEMENTS
                          79ITEM
      18.
                          FINANCIAL
      STATEMENTS
                          79ITEM
      19.
                          EXHIBIT
                          79


CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS




This
annual report contains forward-looking statements as defined in Section 27A of
the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These
forward-looking statements include information about our possible or assumed
future results of operations or our performance. Words such as “expects,”
“intends,” “plans,” “believes,” “anticipates,” “estimates,” and variations of
such words and similar expressions are intended to identify the forward-looking
statements. Although we believe that the expectations reflected in such
forward-looking statements are reasonable, no assurance can be given that such
expectations will prove to be correct. These statements involve known and
unknown risks and are based upon a number of assumptions and estimates which are
inherently subject to significant uncertainties and contingencies, many of which
are beyond our control. Actual results may differ materially from those
expressed or implied by such forward-looking statements.




We
undertake no obligation to publicly update or revise any forward-looking
statements contained in this annual report, or the documents to which we refer
you in this annual report, to reflect any change in our expectations with
respect to such statements or any change in events, conditions or circumstances
on which any statement is based.




Chardan
2008 China Acquisition Corp. is a newly organized British Virgin Islands (“BVI)
company that is referred to in this annual report on Form 20-F, as “Chardan”
“the company,” “we,” “us,” or “our.” When used in this annual report, the term,
“initial shareholders” shall mean the shareholders of the company immediately
prior to our initial public offering, unless the context otherwise requires.
This annual report should be read in conjunction with our audited consolidated
financial statements and the accompanying notes thereto, which are included in
Item 18 to this annual report.









PART
I




ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND
ADVISERS




Not
applicable.




ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE




Not
applicable.




ITEM 3. KEY INFORMATION




A.
Selected Financial Data




The
selected financial information set forth below has been derived from our audited
financial statements for the periods for the period from February 19, 2008
(inception) to December 31, 2008. The information is only a summary and should
be read in conjunction with our audited financial statements and notes thereto
contained elsewhere herein. The financial results should not be construed as
indicative of financial results for subsequent periods. See “Item 4. Information
on the Company” and “Item 5. Operating and Financial Review and
Prospects.”




Selected
Financial Data




Balance Sheet Data
                
                From inception (February
      19, 2008) to
                  Year Ended December 31, 2008
                  (audited)Working
      capital (deficiency)
                
                $
                45,413Investment
      in Trust  Account
                
                
                54,564,894Total
      assets
                
                $
                54,610,307Deferred
      underwriters’ fee
                
                
                1,430,000Total
      liabilities
                
                $
                1,439,854Value
      of ordinary shares which may be converted to cash ($7.89 per
      share)
                
                
                18,985,305Shareholders’
      equity
                
                $
                34,185,148Total
      liabilities and shareholders’ equity
                
                $
                54,610,307Statement
      of Operations DataFormation
      and operating costs
                
                $
                544,683Net
      income (loss)
                
                $
                (59,789
                )Net
      income (loss) per ordinary share, basic and diluted, excluding shares
      subject to possible redemption
                
                $
                (0.01
                )





B.
            Capitalization
      and IndebtednessNot
      applicable.C.
            Reasons
      for the Offer and Use of ProceedsNot
      applicable.D.
            Risk
      Factors




1




An investment in our securities
involves a high degree of risk. You should consider carefully all of the risks
described below, together with the other information contained in this annual
report on Form 20-F before making a decision to invest in our
securities.




Risks
Associated with our Business




We
are a development stage company with no operating history and, accordingly, you
will not have any basis on which to evaluate our ability to achieve our business
objective.





We are a
newly incorporated development stage company with no operating results to date.
Since we do not have any operations or an operating history, you will have no
basis upon which to evaluate our ability to achieve our business objective,
which is to identify and potentially acquire a prospective business in China.
Our efforts in identifying a prospective target business will be limited
geographically to China (although we may acquire an entity that is not
incorporated in China but has its principal business and/or material operations
in China) but not to any particular industry sector. We have not conducted any
discussions and we have no plans, arrangements or understandings with any
prospective target business with respect to a business combination. We will not
generate any revenues or income (other than interest income on the proceeds from
our initial public offering) until, at the earliest, after the consummation of a
business combination. We cannot assure you as to when or if a business
combination will occur.




We
may not be able to consummate a business combination within the required time
frame, in which case, we would dissolve and liquidate our assets.




Pursuant
to our amended and restated memorandum and articles of association we must
complete a business combination with a fair market value equal to at least the
80% net asset threshold within 18 months after the consummation of our initial
public offering (or within 30 months after the consummation of our initial
public offering if a letter of intent, agreement in principle or a definitive
agreement has been executed within 18 months after the consummation of our
initial public offering and the business combination relating thereto has not
yet been consummated within such 18-month period, or, if extended pursuant to a
shareholder vote as described in this prospectus, within 36 months from the
consummation of our initial public offering). Unless extended to 36 months, if
we fail to consummate a business combination within the required time frame, we
will, in accordance with our amended and restated memorandum and articles of
association liquidate and subsequently dissolve. We may not be able to find
suitable target businesses within the required time frame. In addition, our
negotiating position and our ability to conduct adequate due diligence on any
potential target may be reduced as we approach the deadline for the consummation
of a business combination. We do not have any specific business combination
under consideration, and neither we, nor any representative acting on our
behalf, has had any contacts with any target businesses regarding a business
combination, nor taken any direct or indirect actions to locate or search for a
target business.




Unlike
other blank check companies, we are permitted, pursuant to our amended and
restated memorandum and articles of association, to seek to extend the date
before which we must complete an initial business combination to 36 months. As a
result, your funds may be held in the trust account for at least three
years.




Unlike
other blank check companies, if we have entered into a letter of intent,
agreement in principle or definitive agreement within 18 months following the
consummation of our initial public offering we will have until 30 months
following the consummation of our initial public offering to complete our
initial business combination, unlike most blank check companies that typically
have 24 months to complete their business combination. Additionally, we may seek
to extend the date before which we must complete our business combination, to
avoid being required to liquidate, beyond the more typical 24 months to 36
months by calling a general or annual meeting of our shareholders for the
purpose of soliciting their approval for such extension. We believe that an
extension could be necessary due to the circumstances involved in the evaluation
and closing of a business combination in China, including obtaining audited U.S.
GAAP financial statements, or financial statements prepared in accordance with
International GAAP, of potential targets that have previously kept their
accounts in accordance with PRC GAAP, the possible need for restructuring and
reorganizing corporate entities and assets (particularly with respect to PRC
state-owned enterprises) and the requirements of complex Chinese regulatory
filings and approvals. Without the option of extending to 36 months, if we enter
into such agreement near the end of the initial 18 month period, we would have
approximately 12 months in which to accomplish the necessary accounting
reconciliations, satisfy U.S. and PRC regulatory requirements, secure the
approval of our shareholders and provide for customary closing conditions. If
the proposal for the extension to 36 months is approved by our shareholders as
described in this prospectus, we will have an additional 12 months beyond the
more usual 24 month period with which to complete our initial business
combination. As a result we may be able to hold your funds in the trust account
for more than three years and thus delay the receipt by you of your funds from
the trust account on redemption or liquidation.




2





You
will not have any rights or interest in funds from the trust account, except
under certain limited circumstances.





Our
public shareholders will be entitled to receive funds from the trust account
only in the event of our liquidation or in connection with a shareholder vote if
they seek to redeem their respective ordinary shares for cash upon a business
combination which the shareholder voted against and which is completed by us. In
no other circumstances will a shareholder have any right or interest of any kind
in the trust account.





If
we are forced to liquidate before the completion of a business combination and
distribute the trust account, our public shareholders may receive significantly
less than $8.00 per ordinary share and our warrants will expire
worthless.





We must
complete a business combination with a fair market value equal to at least the
80% net asset threshold within 18 months after consummation of our initial
public offering (or within 30 months from the consummation of our initial public
offering if a letter of intent, agreement in principle or definitive agreement
has been executed within 18 months after consummation of our initial public
offering and the business combination has not yet been consummated within such
18 month period). If we are unable to complete a business combination within the
prescribed time frame and are forced to liquidate the trust account, the
per-ordinary share liquidation price received by our public shareholders from
the trust account will be less than $8.00 because of the expenses of our initial
public offering, our general and administrative expenses and the anticipated
costs of seeking a business combination. Upon the liquidation of the trust
account, public shareholders will be entitled to receive (unless there are
claims not otherwise satisfied by the amount not held in the trust account, the
funds made available under the indemnification provided by our officers and
directors) approximately $7.89 per ordinary share plus interest earned on their
pro rata portion of the trust account (net of taxes payable and amounts of trust
account interest we are permitted to draw for working capital), which includes
$1,100,000 ($0.16 per unit) of deferred underwriting discounts and commissions,
$1,100,000 ($0.16 per unit) of deferred non-accountable expense allowance and
the entire purchase price of the private placement warrants. Our officers and
directors have agreed to indemnify us for all creditor claims to the extent we
do not obtain valid and enforceable waivers from vendors, service providers,
prospective target businesses or other entities, in order to protect the amounts
held in the trust account. In the event that we liquidate and it is subsequently
determined that the reserve for claims and liabilities is insufficient,
shareholders who received a return of funds from the liquidation of our trust
account could be liable for claims made by our creditors. We assume that in the
event we liquidate we will not have to adopt a plan to provide for payment of
claims that may potentially be brought against us. Should this assumption prove
to be incorrect, we may have to adopt such a plan upon our liquidation, which
could result in the per-ordinary share liquidation amount to our shareholders
being significantly less than $8.00 per ordinary share. Furthermore, there will
be no distribution with respect to our outstanding warrants, which will expire
worthless if we liquidate the trust account in the event we do not complete a
business combination within the prescribed time periods. For a more complete
discussion of the effects on our shareholders if we are unable to complete a
business combination, see the section below entitled “Proposed
Business—Effecting a Business Combination—Voluntary liquidation and subsequent
dissolution if no business combination”.





Additionally,
if we are forced to enter insolvent liquidation or a petition to wind up the
company is filed against us which is not dismissed, the funds held in our trust
account will be subject to applicable British Virgin Islands insolvency law, and
may be included in our insolvent estate and subject to the claims of third
parties with priority over claims of our public shareholders. To the extent any
such claims deplete the trust account we cannot assure you we will be able to
return to public shareholders the amounts payable to them upon a liquidation of
the trust account.





Under
British Virgin Islands law, the requirements and restrictions relating to our
initial public offering contained in our amended and restated memorandum and
articles of association may be amended, which could reduce or eliminate the
protection afforded to our shareholders by such requirements and
restrictions.




3




Our
amended and restated memorandum and articles of association set forth certain
requirements and restrictions relating to our initial public offering that shall
apply to us until the consummation of our initial business combination.
Specifically, our amended and restated memorandum and articles of association
provides among other things, that:





·
            if
      we have entered into a letter of intent or definitive agreement with
      respect to a business combination within 18 months of the consummation of
      our initial public offering, and we anticipate that we will not be able to
      consummate a business combination within 30 months, we can seek
      shareholder approval to extend the period of time to consummate a business
      combination by an additional 6 months. In such case, we will present such
      proposal to our shareholders. In order to approve the extended period, we
      must receive shareholder approval of a majority of our ordinary shares
      voted by our public shareholders and shareholders owning up to one
      ordinary share less than 35% of the ordinary shares purchased by the
      public shareholders in our initial public offering exercise their
      redemption rights;





·
            if
      the extended period is approved, public shareholders who voted against
      such proposal and exercised their redemption rights will receive $7.89 per
      ordinary share from the trust
account;





·
            prior
      to the consummation of our initial business combination, we shall submit
      our initial business combination to our shareholders for
      approval;





·
            we
      may consummate our initial business combination if: (i) approved by a
      majority of the ordinary shares voted by our public shareholders, and (ii)
      shareholders owning less than 35% of the ordinary shares purchased by the
      public shareholders in our initial public offering exercise their
      redemption rights (on a cumulative basis, including ordinary shares
      redeemed in connection with our seeking shareholder approval for the
      extended period, if applicable);





·
            if
      our initial business combination is approved and consummated, public
      shareholders who voted against the business combination and exercised
      their redemption rights will receive $7.89 per ordinary share from the
      trust account;





·
            if
      a business combination is not consummated or a letter of intent, an
      agreement in principle or a definitive agreement is not signed within the
      time periods specified in this prospectus, or if the extended period is
      not approved and we are unable to complete the business combination before
      August 11, 2010, then we will be dissolved and distribute to all of our
      public shareholders their pro rata share of the trust
    account;





·
            our
      management will take all actions necessary to liquidate our trust account
      to our public shareholders in connection with our voluntary liquidation if
      a business combination is not consummated or a letter of intent, an
      agreement in principle or a definitive agreement is not signed within the
      time periods specified herein;





·
            our
      shareholders’ rights to receive a portion of the trust account are limited
      such that they may only receive a portion of the trust account upon
      liquidation of our trust account to our public shareholders as part of our
      voluntary liquidation or upon the exercise of their redemption rights;
      and





·
            we
      may not consummate any other merger, share exchange, stock purchase, asset
      acquisition or similar transaction or control through contractual
      arrangements other than a business combination that meets the conditions
      specified in this prospectus, including the requirement that our initial
      business combination be with one or more operating businesses whose fair
      market value, either individually or collectively, is equal to at least
      the 80% net asset threshold.


The
foregoing provisions may be amended by a vote of our board and the vote of at
least 80% of the voting power of our outstanding ordinary shares. If any of
these provisions are amended, our shareholders:





·
            may
      lose the right to redeem their ordinary shares if they vote against a
      business combination;


4


·
            may
      lose the right to prevent a business combination if 35% of our
      shareholders vote against the extended period or the business combination,
      on a cumulative basis;





·
            might
      not receive the amount anticipated in connection with a redemption or
      liquidation; or





·
            might
      not receive amounts from trust in the time frames specified in this
      prospectus.





Being
a foreign private issuer exempts us from certain Securities and Exchange
Commission requirements that provide shareholders the protection of information
that must be made available to shareholders of United States public companies,
including with respect to our business combination.





We are a
“foreign private issuer” within the meaning of the rules promulgated under the
Securities Exchange Act of 1934, as amended. As such, we are exempt from certain
provisions applicable to United States public companies including:





·
            The
      rules requiring the filing with the SEC of quarterly reports on Form 10-Q
      or Current Reports on Form 8-K (although we have agreed with the
      underwriters of our initial public offering to comply with the rules and
      regulations under the Exchange Act prescribing the requirements and filing
      deadlines for Current Reports on Form 8-K and will file reports on
      Form 6-K complying with those rules and
  regulations);





·
            The
      sections of the Exchange Act regulating the solicitation of proxies,
      consents or authorizations with respect to a security registered under the
      Exchange Act;





·
            Provisions
      of Regulation FD aimed at preventing issuers from making selective
      disclosures of material information;
and





·
            The
      sections of the Exchange Act requiring insiders to file public reports of
      their ordinary share ownership and trading activities and establishing
      insider liability for profits realized from any “short swing” trading
      transactions (i.e., a purchase and sale, or a sale and purchase, of the
      issuer’s equity securities within less than six
  months).





Because
of these exemptions, our shareholders will not be afforded the same protections
or information generally available to investors holding shares in public
companies organized in the United States. In particular, we are exempt from the
rules under the Exchange Act prescribing the furnishing and content of proxy
statements. Because of this exemption, at the time we seek approval from our
shareholders of our initial business combination, we will not be required to
file with the SEC preliminary proxy solicitation materials regarding our
business combination, but rather will prepare and deliver proxy solicitation
materials to our shareholders in accordance with: (i) British Virgin Islands
law, which contains no specific proxy laws, rules or regulations, and (ii) the
relevant provisions of our amended and restated memorandum and articles of
association, and, as required, file such materials with the SEC after mailing.
Although we anticipate that such materials will contain many of the same
disclosures as proxy materials prepared in conformance with the U.S. proxy
rules, investors are cautioned that such materials will not have been reviewed
by the SEC and may not have all of the material disclosures required under U.S.
proxy rules. For a more detailed discussion of the material provisions of the
U.S. proxy rules from which we are exempt, see the section entitled “British
Virgin Islands Company Considerations—Certain Material Protections Provided by
the Exchange Act with Respect to Proxy Solicitations that are not Afforded to
our Shareholders”.





We
may have insufficient resources to cover our operating expenses and the expenses
of pursuing a business combination and, if necessary, effecting our dissolution
and liquidation.




As of
December 31, 2008 we had $45,413 outside of the trust account for working
capital purposes and we may withdraw all of the interest earned on the funds
held in the trust account to provide us with working capital to enable us to
fund our expenses, including the expenses associated with the pursuit of a
business combination and, if necessary, expenses with respect to our potential
dissolution and liquidation. Our estimates of these expenses are based upon our
management’s estimate of the amount required for these purposes. However, these
estimates may prove inaccurate, especially if a portion of the available
proceeds is used to make a down payment or pay exclusivity or similar fees in
connection with a business combination or if we expend a significant portion of
the available proceeds in pursuit of a business combination that is not
consummated. If we do not have sufficient proceeds available to cover our
expenses, we may be forced to obtain additional financing from our management or
third parties. We may not be able to obtain additional financing on favorable
terms, if at all, and our management is not obligated to provide any additional
financing.


5


We
will depend upon interest earned on the trust account to fund our search for a
target company and otherwise fulfill our business purposes.





Before we
complete a business combination, we may withdraw all of the interest earned on
the funds held in the trust account to fund our working capital needs and
expenses, including expenses associated with the pursuit of a business
combination and, if necessary, with our potential dissolution and liquidation,
which we currently estimate will be approximately $2,000,000. We will depend
upon sufficient interest being earned on the proceeds held in the trust account
to provide us with the working capital we will need to engage in these
activities. If interest rates were to decline substantially, we may not have
sufficient funds available to fulfill our business purpose. In such event, we
would need to find other sources of funds, which may not be available on
favorable terms, if at all, or be forced to liquidate.





We
may choose to redeem our outstanding warrants at a time that is disadvantageous
to our warrant holders.





Subject
to there being a current prospectus under the Securities Act of 1933, as
amended, with respect to the ordinary shares issuable upon exercise of our
warrants, we may redeem our warrants issued as a part of our units at any time
after such warrants become exercisable in whole and not in part, at a price of
$.01 per warrant, upon a minimum of 30 days prior written notice of
redemption, if and only if, the last sales price of our ordinary shares equals
or exceeds $10.00 per ordinary share for any 20 trading days within a 30 trading
day period ending three business days before we send the notice of redemption.
In addition, we may not redeem the warrants unless the warrants and the ordinary
shares underlying those warrants are covered by an effective registration
statement from the beginning of the measurement period through the date fixed
for the redemption.





Redemption
of the warrants could force the warrant holders: (i) to exercise the
warrants and pay the exercise price at a time when it may be disadvantageous for
the holders to do so, (ii) to sell the warrants at the then-current market
price when they might otherwise wish to hold the warrants, or (iii) to
accept the nominal redemption price which, at the time the warrants are called
for redemption, is likely to be substantially less than the market value of the
warrants. We expect most purchasers of our warrants will hold their securities
through one or more intermediaries and consequently you are unlikely to receive
notice directly from us that the warrants are being redeemed. If you fail to
receive notice of redemption from a third party and your warrants are redeemed
for nominal value, you will not have recourse to us.





Although
we are required to use our best efforts to have an effective registration
statement covering the issuance of the ordinary shares underlying our warrants
at the time that our warrant holders exercise their warrants, we cannot
guarantee that a registration statement will be effective, in which case our
warrant holders may not be able to exercise our warrants and therefore such
warrants could expire worthless.





Holders
of our warrants will be able to exercise the warrants only if: (i) a
current registration statement under the Securities Act of 1933, as amended,
relating to the ordinary shares underlying the warrants is then effective and
(ii) such ordinary shares are qualified for sale or exempt from
qualification under the applicable securities laws of the states in which the
various holders of warrants reside. Although we have undertaken in the warrant
agreement between us, the underwriters and our transfer agent, and therefore
have a contractual obligation, to use our best efforts to maintain a current
registration statement covering the ordinary shares underlying the warrants
following completion of our initial public offering to the extent required by
federal securities laws, and we intend to comply with our undertaking, we cannot
assure you that we will be able to do so and therefore the warrants could expire
worthless. Such expiration would result in each holder paying the full unit
purchase price solely for the ordinary shares underlying the unit. In addition,
we have agreed to use our reasonable efforts to register the ordinary shares
underlying the warrants under the blue sky laws of the states of residence of
the existing warrant holders, to the extent an exemption is not available. The
value of the warrants may be greatly reduced if a registration statement
covering the ordinary shares issuable upon the exercise of the warrants is not
kept current or if the securities are not qualified, or exempt from
qualification, in the states in which the holders of warrants reside. Moreover,
pursuant to the warrant agreement, the holders of warrants will not be entitled
to net cash settlement as a remedy for our failure to maintain a current
registration statement covering the ordinary shares underlying the warrants.
Also, holders of warrants who reside in jurisdictions in which the ordinary
shares underlying the warrants are not qualified and in which there is no
exemption will be unable to exercise their warrants and would either have to
sell their warrants in the open market or allow them to expire unexercised. If
and when the warrants become redeemable by us, we may exercise our redemption
right even if we are unable to qualify the underlying securities for sale under
all applicable state securities laws.


6


Because
there are numerous companies with a business plan similar to ours seeking to
effectuate a business combination, it may be more difficult for us to complete a
business combination.




Based
upon publicly-available information, approximately 156 similarly structured
blank check companies (24 China and 29 Asia) have completed initial public
offerings since August 2003 and numerous others have filed registration
statements. Of these companies, only 50 companies have consummated a business
combination, while 20 other companies have announced they have entered into a
definitive agreement for a business combination, but have not consummated such
business combination. Accordingly, there are approximately 72 blank check
companies (15 China and 17 Asia/Pacific) with approximately $13.4 billion in
trust that are seeking to carry out a business plan similar to our business
plan. Furthermore, based upon publicly available information, there are 87
similarly structured blank check companies (11 China and 15 Asia/Pacific) with a
planned $15.7 billion of gross proceeds currently in registration and waiting to
complete initial public offerings. There are likely to be more blank check
companies filing registration statements for initial public offerings after the
date of this report and prior to our completion of a business combination. While
some of those companies have specific industries in which they must complete a
business combination, a number of them may consummate a business combination in
any industry they choose. We may therefore be subject to competition from these
and other companies seeking to consummate a business plan similar to ours which
will, as a result, increase demand for privately-held companies to combine with
companies structured similarly to ours. Further, the fact that only 50 of such
companies have completed a business combination and 20 of such companies have
entered into a definitive agreement for a business combination may be an
indication that there are only a limited number of attractive target businesses
available to such entities or that many privately-held target businesses may not
be inclined to enter into business combinations with publicly held blank check
companies like us. We cannot assure you that we will be able to successfully
compete for an attractive business combination. Additionally, because of this
competition, we cannot assure you that we will be able to effectuate a business
combination within the required time periods. If we are unable to find a
suitable target business within such time periods, our corporate existence will
cease by operation of law and we will distribute only to our public shareholders
the amount in our trust account (including interest) plus any remaining
assets.




If
third parties bring claims against us, the proceeds held in trust could be
reduced and the per-share liquidation redemption price received by public
shareholders will be less than $7.89 per share.




Our
placing of funds in trust may not protect those funds from third party claims
against us. Although we will seek to have all creditors, prospective target
businesses or other entities with which we execute agreements waive any right,
title, interest or claim of any kind in or to any monies held in the trust
account for the benefit of our public shareholders, there is no guarantee that
they will execute such agreements, or even if they execute such agreements that
they would be prevented from bringing claims against the trust account. If any
third party refused to execute an agreement waiving such claims to the monies
held in the trust account, we would perform an analysis of the alternatives
available to us if we chose not to engage such third party and evaluate if such
engagement would be in the best interest of our shareholders if such third party
refused to waive such claims.




Examples
of possible instances where we may engage a third party that refused to execute
a waiver include the engagement of a third party consultant whose particular
expertise or skills are believed by management to be significantly superior to
those of other consultants that would agree to execute a waiver or in cases
where management is unable to find a provider of required services willing to
provide the waiver. In any event, our management would perform an analysis of
the alternatives available to it and would only enter into an agreement with a
third party that did not execute a waiver if management believed that such third
party’s engagement would be significantly more beneficial to us than any
alternative. In addition, there is no guarantee that such entities will agree to
waive any claims they may have in the future as a result of, or arising out of,
any negotiations, contracts or agreements with us and not seek recourse against
the trust account for any reason. Accordingly, the proceeds held in trust could
be subject to claims that could take priority over the claims of our public
shareholders and the per-share liquidation price could be less than the $7.89
per share held in the trust account, plus interest (net of any taxes due on such
interest, which taxes, if any, shall be paid from the trust account), due to
claims of such creditors. If we are unable to complete a business combination
and are forced to dissolve and subsequently liquidate the trust account, and a
creditor or other third party does not waive any rights or claims to the trust
account, our directors will be personally liable to ensure that the proceeds in
the trust account are not reduced by the claims of various creditors,
prospective target businesses or other entities that are owed money by us for
services rendered or products sold to us, to the extent necessary to ensure that
such claims do not reduce the amount in the trust account. Based on
representations made to us by our directors, we currently believe that they are
of substantial means and capable of funding a shortfall in our trust account to
satisfy their foreseeable indemnification obligations, but we have not asked
them to reserve for such eventuality. The indemnification obligations may be
substantially higher than our directors currently foresee or expect and their
financial reserves may deteriorate in the future. Hence, we cannot assure you
that our directors will be able to satisfy those obligations. We believe the
likelihood of our directors having to indemnify the trust account is limited
because we will endeavor to have all creditors and prospective target businesses
as well as other entities execute agreements with us waiving any right, title,
interest or claim of any kind in or to monies held in the trust
account.


7




Additionally,
if we are forced to declare insolvency or a case for involuntary liquidation is
filed against us which is not dismissed, the funds held in our trust account
will be subject to applicable BVI insolvency law, and may be included in our
estate and subject to the claims of third parties with priority over the claims
of our shareholders. To the extent any claims deplete the trust account we
cannot assure you we will be able to return to our public shareholders the
liquidation amounts payable to them.




If
we liquidate, distributions, or part of them, may be delayed while the
liquidator determined the extent of potential creditor claims.




Pursuant
to, among other documents, our amended and restated memorandum and articles of
association, if we do not complete a business combination within 18 months after
the consummation of our initial public offering, or within 30 months after the
consummation of our initial public offering if the extension criteria described
below have been satisfied (or 36 months if the extended period is approved) this
will trigger a voluntary liquidation procedure under the BVI Business Companies
Act, 2004 (the “Act”), resulting in our voluntary liquidation and dissolution.
Our liquidator would give notice to our creditors inviting them to submit their
claims for payment, by notifying known creditors (if any) who have not submitted
claims and by placing a public advertisement in the British Virgin Islands
Official Gazette and a BVI newspaper, and taking any other steps he considers
appropriate, after which our assets would be distributed. We view this
obligation to liquidate and dissolve as an obligation to our public shareholders
and neither we nor our board of directors will take any action to propose,
endorse or support any shareholder proposal to amend or waive any provision of
our amended and restated memorandum and articles of association to allow us to
survive for a longer period of timeifit does not appear that
we will be able to consummate a business combination within the foregoing time
periods.





As soon
as our affairs are fully wound-up, the liquidator must complete his final report
and accounts which must be filed with the Registrar of Corporate Affairs in the
BVI (the “Registrar”), together with his resolutions to distribute our assets.
We will be formally dissolved once the Registrar issues a Certificate of
Dissolution. However, we anticipate that the liquidator will instruct the
trustee to liquidate the trust account to our public shareholders as soon as he
deems it appropriate and our directors and officers have agreed to take any such
action necessary to liquidate the trust account as soon as reasonably
practicable if we do not complete a business combination within the required
time periods. However, we cannot assure you that the liquidator will not
determine that he or she requires additional time to evaluate creditors’ claims
(particularly if there is uncertainty over the validity or extent of the claims
of any creditors). We also cannot assure you that a creditor or shareholder will
not file a petition with the BVI court which, if successful, may result in our
liquidation being subject to the supervision of that court. Such events might
delay distribution of some or all of our assets to our public
shareholders.





Upon
liquidation, we anticipate that the liquidator will instruct the trustee to
distribute to all of our public shareholders, in proportion to their respective
equity interest, an aggregate sum equal to the amount in the trust account,
inclusive of any interest (net of taxes payable). Our existing shareholders have
waived their rights to participate in any liquidation distribution with respect
to their initial units (and the securities included therein). There will be no
distribution from the trust account with respect to our warrants which will
expire worthless. We will pay the costs of our liquidation and distribution of
the trust account from our remaining assets outside of the trust account. In
addition, our directors and officers have agreed to indemnify us for all claims
of creditors to the extent that we fail to obtain valid and enforceable waivers
from such entities in order to protect the amounts held in trust.




8





In any
liquidation proceedings of the company under BVI law, the funds held in our
trust account may be included in our estate and subject to the claims of third
parties with priority over the claims of our shareholders. To the extent any
such claims deplete the trust account we cannot assure you we will be able to
return to our public shareholders the liquidation amounts payable to
them.




If we
enter into either a letter of intent, an agreement in principle or a definitive
agreement to complete a business combination prior to the expiration of 18
months after the consummation of our initial public offering, but are unable to
complete the business combination within the 18-month period, then we will have
an additional 12 months in which to complete the business combination
contemplated by the letter of intent, agreement in principle or definitive
agreement. If we subsequently believe that we will need additional time to
complete the business combination, we may call a general (or annual) meeting of
our shareholders to vote on the extended period. If we are unable to consummate
a transaction within the required time frames our purpose and powers will be
limited to winding up our affairs and liquidating. As discussed above, upon
notice from the liquidator, the trustee of the trust account will liquidate the
investments constituting the trust account and will turn over the proceeds to
our transfer agent for distribution to our public shareholders as part of our
voluntary liquidation, distribution and dissolution, although we cannot assure
you that there will be sufficient funds for such purpose. Concurrently, we shall
pay, or reserve for payment, from funds not held in trust, our liabilities and
obligations, although we cannot assure you that there will be sufficient funds
for such purpose. If there are insufficient funds held outside the trust account
for such purpose, our directors and officers have agreed to indemnify us for all
claims of creditors to the extent we obtain valid and enforceable waivers from
such entities in order to protect the amounts held in trust. However, we have
not independently verified the ability of our directors and officers to satisfy
those obligations and cannot assure you that our directors and officers will be
able to satisfy such obligations should they arise.





However,
because we are a blank check company, rather than an operating company, and our
operations will be limited to searching for prospective target businesses to
acquire, the only likely claims to arise would be from our vendors and service
providers (such as accountants, lawyers, investment bankers, etc.) or potential
target businesses. As described above, we intend to have all vendors, service
providers and prospective target businesses execute agreements with us waiving
any right, title, interest or claim of any kind in or to any monies held in the
trust account. Our directors and officers have agreed to indemnify us, to the
extent we do not obtain valid and enforceable waivers from vendors, prospective
target businesses or other entities, for all creditor claims in order to protect
the amounts held in the trust account. In the event that the board approves a
liquidation plan where it is subsequently determined that the reserve for claims
and liabilities is insufficient, shareholders who received a return of funds
from the liquidation of our trust account could be liable for claims made by
creditors.





Our
public shareholders will be entitled to receive funds from the trust account
only in the event of our voluntary liquidation or if they seek to redeem their
respective ordinary shares for cash upon a business combination which the
shareholder voted against and which is completed by us. In no other
circumstances will a shareholder have any right or interest of any kind to or in
the trust account.





If we are
forced to enter insolvent liquidation or a petition to wind up the company is
filed against us which is not dismissed, any distributions received by
shareholders could in certain circumstances be viewed by applicable laws
(including insolvency laws and certain equitable and/or restitution principles)
as either fraudulent transfers or mistaken or otherwise wrongful payments. In
those circumstances, a BVI court could order that amounts received by our
shareholders be repaid to us. We cannot assure you that claims will not be
brought against us for these reasons.




Our
placing of funds in the trust account may not protect those funds from third
party claims against us.





Third
party claims may include contingent or conditional claims and claims of
directors and officers entitled to indemnification under our amended and
restated memorandum and articles of association. We intend to pay any claims, to
the extent sufficient to do so, from our funds not held in trust. Although we
will seek to have all vendors, service providers and prospective target
businesses or other entities with which we execute agreements waive any right,
title, interest or claim of any kind in or to any monies held in the trust
account for the benefit of our public shareholders, there is no guarantee that
they will execute such agreements. Even if they execute such agreements, they
could bring claims against the trust account including but not limited to
fraudulent inducement, breach of fiduciary responsibility or other similar
claims, as well as claims challenging the enforceability of the waiver, in each
case in order to gain an advantage with a claim against our assets, including
the funds held in the trust account. If any third party refused to execute an
agreement waiving such claims to the monies held in the trust account, we would
perform an analysis of the alternatives available to us if we chose not to
engage such third party and evaluate if such engagement would be in the best
interest of our shareholders if such third party refused to waive such
claims.


9


Examples
of possible instances where we may engage a third party that refused to execute
a waiver include the engagement of a third party consultant whose particular
expertise or skills are believed by management to be significantly superior to
those of other consultants that would agree to execute a waiver or in cases
where management is unable to find a provider of required services willing to
provide the waiver. In any event, our management would perform an analysis of
the alternatives available to it and would only enter into an agreement with a
third party that did not execute a waiver if management believed that such third
party’s engagement would be significantly more beneficial to us than any
alternative. In addition, there is no guarantee that such entities will agree to
waive any claims they may have in the future as a result of, or arising out of,
any negotiations, contracts or agreements with us and not seek recourse against
the trust account for any reason. Accordingly, the proceeds held in the trust
account could be subject to claims that could take priority over the claims of
our public shareholders and the per-ordinary share liquidation price could be
less than the $7.89 per ordinary share held in the trust account, plus interest
(net of any taxes due on such interest and franchise taxes, which taxes shall be
paid from the trust account), due to claims of such creditors. If we are unable
to complete a business combination and liquidate the company, our officers and
directors will be liable if we did not obtain a valid and enforceable waiver
from any vendor, service provider, prospective target business or other entity
of any rights or claims to the trust account, to the extent necessary to ensure
that such claims do not reduce the amount in the trust account. We cannot assure
you that our officers and directors will be able to satisfy those obligations.
The indemnification provisions are set forth in letter agreements executed by
our officers and directors. The letter agreement specifically sets forth that in
the event we obtain a valid and enforceable waiver of any right, title, interest
or claim of any kind in or to any monies held in the trust account for the
benefit of our shareholders from a vendor, service provider, prospective target
business or other entity, the indemnification from our officers and directors
will not be available. We have not independently verified the ability of our
officers and directors to fulfill their indemnification
obligations.





Additionally,
if we are forced to enter insolvent liquidation or a petition for winding up the
company is filed against us which is not dismissed, the funds held in our trust
account will be subject to applicable British Virgin Islands insolvency law, and
may be included in our estate and subject to the claims of third parties with
priority over the claims of our shareholders. To the extent any such claims
deplete the trust account, we cannot assure you we will be able to return to our
public shareholders their pro rata share of the liquidation amount otherwise
payable to them.




All
of our officers and directors own shares of our securities that will not
participate in the liquidation of the trust account and therefore they may have
a conflict of interest in determining whether a particular target business is
appropriate for a business combination




All of
our officers and directors, directly or indirectly, own ordinary shares in our
company that were issued prior to our initial public offering but have waived
their right to receive distributions with respect to these shares upon a
liquidation of the trust account if we are unable to complete a business
combination. Additionally, our officers and directors have purchased $1,000,000
of warrants directly from us in a private placement transaction prior to the
closing of our initial public offering at a purchase price of $0.50 per warrant.
The purchase of founding director warrants, together with any other acquisitions
of our shares (or warrants which are subsequently exercised), could allow the
initial shareholders to influence the outcome of matters requiring shareholder
approval, including the election of directors and approval of significant
corporate transactions after completion of our initial business combination. The
warrants owned by our officers and directors will be worthless if we do not
consummate a business combination. The personal and financial interests of these
individuals may influence their motivation in identifying and selecting a target
business and completing a business combination in a timely manner. Consequently,
our officers and directors’ discretion in identifying and selecting a suitable
target business may result in a conflict of interest when determining whether
the terms, conditions and timing of a particular business combination are
appropriate and in our shareholders’ best interest.


10




Our
initial shareholders will not receive reimbursement for any out-of-pocket
expenses incurred by them to the extent that such expenses exceed the portion of
net proceeds of our initial public offering that is not placed in the trust
account, unless the business combination is consummated, and therefore they may
have a conflict of interest.




Our
initial shareholders, including our officers and directors will not receive
reimbursement for any out-of-pocket expenses incurred by them to the extent that
such expenses exceed the portion of net proceeds of our initial public offering
that is not placed in the trust account, unless the business combination is
consummated. The financial interest of such persons could influence their
motivation in selecting a target business and thus, there may be a conflict of
interest when determining whether a particular business combination is in the
best interest of our shareholders.




The
obligation that we have to seek shareholder approval of a business combination
may delay the consummation of a transaction.




The
obligation that we have to seek shareholder approval of a business combination
may delay the consummation of a transaction. Additionally, our outstanding
warrants, and the future dilution they potentially represent, may not be viewed
favorably by certain target businesses. Any of these obligations may place us at
a competitive disadvantage in successfully negotiating a business combination.
Furthermore, our negotiating position with any potential target may be harmed as
we approach the deadline for the consummation of a business combination, as such
target business will know that our deadline cannot be extended. Because only
approximately 70 of the approximately 156 blank checks companies that have gone
public in the United States since August 2003 have either consummated a business
combination or entered into a definitive agreement for a business combination,
it may indicate that there are fewer attractive target businesses available to
such entities like our company or that many privately held target businesses are
not inclined to enter into these types of transactions with publicly held blank
check companies like us. If we are unable to consummate a business combination
with a target business within the prescribed time periods, we will be forced to
liquidate.




If
the net proceeds of our initial public offering and the private placement not
being placed in the trust account together with interest earned on the trust
account available to us are insufficient to allow us to operate for at least the
next 24 months, or 36 months if the extended period is approved, we may not be
able to complete a business combination.





We
currently believe that, upon consummation of our initial public offering and the
private placement, the funds available to us outside of the trust account will
be sufficient to allow us to operate for at least the next 24 months, or 36
months if the extended period is approved, assuming that a business combination
is not consummated during that time. Based upon the experience of the members of
our board and consultation with them regarding a reasonable budget for
consummating a transaction of this kind and nature, and a review of budgets
publicly disclosed by blank-check companies, we determined that this was an
appropriate approximation of the expenses. If costs are higher than expected we
might not have sufficient funds to continue searching for, or conduct due
diligence with respect to, any potential target acquisitions. In such event, we
would need to obtain additional funds from our existing shareholders or another
source to continue operating. The $100,000 initially held outside of the trust
account and the additional funds that may be disbursed to us out of interest
earned on the trust account, which we currently estimate to be approximately
$2,000,000, will be reserved for working capital purposes. We could use a
portion of these funds to pay due diligence costs in connection with a potential
business combination or to pay fees to consultants to assist us with our search
for a target acquisition. We could also use a portion of these funds as a down
payment, “reverse break-up fee” (a provision in a merger agreement designed to
compensate the target for any breach by the buyer which results in a failure to
close the transaction), or to fund a “no-shop” provision (a provision in letters
of intent designed to keep target acquisitions from “shopping” around for
transactions with others on terms more favorable to such target acquisitions)
with respect to a particular proposed business combination, although we do not
have any current intention to do so. If we entered into such a letter of intent
where we paid for the right to receive exclusivity from a target acquisition and
were subsequently required to forfeit such funds (whether as a result of our
breach or otherwise) or if we agree to a reverse break-up fee and subsequently
were required to pay such fee as a result of our breach of the merger agreement,
we might not have sufficient funds to continue searching for, or conduct due
diligence with respect to any other potential target acquisitions. In such
event, we would need to obtain additional funds from our existing shareholders
or another source to continue operations.


11


Our
existing shareholders and their affiliates may become subject to conflicts of
interest if they elect to purchase ordinary shares from shareholders who would
otherwise choose to vote against a proposed business combination and elect
redemption of their ordinary shares.





Our
existing shareholders own ordinary shares and warrants that will be worthless if
we do not consummate a business combination. In addition, certain of our
officers and directors, or their affiliates, are purchasing warrants exercisable
for our ordinary shares which will also be worthless if we do not consummate a
business combination. We believe the current equity value for the ordinary
shares owned by our existing shareholders is significantly lower than the value
of such ordinary shares calculated at the $8.00 per unit offering price because:
(i) the units being sold in this offering include a warrant which the existing
shareholders did not receive, (ii) the offering may not succeed and even if it
does succeed, the holders of these ordinary shares will not be able to sell or
transfer them while such ordinary shares remain in escrow, except in certain
limited circumstances and (iii) these ordinary shares are not entitled to any
proceeds in case we liquidate if we do not consummate a business
combination.





Given the
interest that our existing shareholders and their affiliates have in a business
combination being consummated, it is possible that we or our existing
shareholders, officers, directors or their respective affiliates will acquire
ordinary shares from public shareholders who have elected to redeem their
ordinary shares in order to obtain the requisite level of approval for the
business combination (which could result in a business combination being
approved even if, after the announcement of the business combination, 35% or
more of our public shareholders would have elected to exercise their redemption
rights and more than 50% of our public shareholders would have voted against the
business combination, but for the purchases made by our existing shareholder).
In making such acquisitions and negotiating the terms thereof, there is a risk
that the purchaser of such securities may value their own interest in the
consummation of a business combination more than the interests of our public
shareholders, resulting in a conflict of interest, which may not necessarily be
resolved in the best interests of our public shareholders (including that the
proposed business combination may more likely be consummated).





Our
existing shareholders and their affiliates could effect the outcome of a
business combination vote if they elect to purchase, or if they choose not to or
are precluded from purchasing, ordinary shares from shareholders who would
otherwise choose to vote against a proposed business combination.





Any
privately negotiated transaction to purchase the ordinary shares of a
shareholder who would otherwise choose to vote against a proposed business
combination would include a contractual acknowledgement that such shareholder,
although still the record holder of our ordinary shares, is no longer the
beneficial owner thereof and therefore agrees to vote the applicable ordinary
shares as directed by our existing shareholders. In the event that we or our
existing shareholders, officers, directors or their respective affiliates
purchase ordinary shares in privately negotiated transactions from public
shareholders who have already cast votes against a proposed business acquisition
and requested redemption of their ordinary shares, such selling shareholders
would be required to revoke their prior votes against the proposed acquisition
and to revoke their prior elections to redeem their ordinary shares and to cast
new votes in favor of the proposed acquisition. The revocation of prior negative
votes and substitution therefor of votes in favor of the proposed acquisition
would have the effect of reducing redemptions and increasing votes in favor of
the proposed acquisition, thereby making it more likely that a proposed business
combination would be approved. In addition, we have agreed with the underwriters
that if we enter into any such privately negotiated transactions, we may only
pay to applicable public shareholders funds up to the per ordinary share
redemption price set forth in this prospectus; negotiated premiums, if any, to
such per ordinary share redemption price would thus need to be paid by someone
other than us, which would most likely be our existing shareholders, officers,
directors, their respective affiliates or third parties and would not be paid by
us.





Investors
are cautioned that neither we nor our existing shareholders, officers, directors
and their respective affiliates nor any third parties have agreed to purchase
any such ordinary shares or pay any such premiums, and the failure to so agree
at the applicable time could adversely impair our ability to effect a business
combination. Moreover, even if we or our existing shareholders, officers,
directors, their respective affiliates were to undertake such purchases, such
purchases could be subject to limitations under applicable securities laws and
regulations, including Regulation M and regulations regarding tender offers. The
inability of such persons to effect such purchases could adversely impair our
ability to effect a business combination.





We
may issue authorized but unissued ordinary shares to complete a business
combination, which would reduce the equity interest of our shareholders and
likely cause a change in control of our ownership.


12


Our
amended and restated memorandum and articles of association authorizes the
issuance of up to 60,000,000 ordinary shares, par value $0.0001 per share, and
5,000,000 preferred shares, par value $0.0001 per share. There are 38,891,668
authorized but unissued ordinary shares available for issuance (after
appropriate reservation for the issuance of ordinary shares upon full exercise
of our outstanding warrants and the unit purchase option granted to the
underwriters and for the issuance of up to 500,000 ordinary shares pursuant to
our Equity Incentive Plan) and all of the 5,000,000 preferred shares available
for issuance. Although we have no commitment as of the date hereof, we are
likely to issue a substantial number of additional shares of our ordinary or
preferred shares, or a combination of ordinary and preferred shares, to complete
a business combination. The issuance of additional shares of our ordinary shares
or any number of shares of our preferred shares:





·
            may
      significantly reduce the equity interest of our
    shareholders;





·
            may
      subordinate the rights of holders of ordinary shares if preferred shares
      are issued with rights senior to those afforded to the holders of our
      ordinary shares;





·
            will
      likely cause a change in control if a substantial number of our ordinary
      shares are issued, which will likely also result in the resignation or
      removal of our present officers and directors;
  and





·
            may
      adversely affect prevailing market prices for our ordinary
      shares.





·
            our
      immediate payment of all principal and accrued interest, if any, if the
      debt security is payable on demand;





·
            covenants
      that limit our ability to acquire capital assets or make additional
      acquisitions;





·
            our
      inability to obtain additional financing, if necessary, if the debt
      security contains covenants restricting our ability to obtain additional
      financing while such security is
outstanding;





·
            our
      inability to pay dividends on our ordinary
  shares;





·
            using
      a substantial portion of our cash flow to pay principal and interest on
      our debt, which will reduce the funds available for dividends on our
      ordinary shares, working capital, capital expenditures, acquisitions and
      other general corporate purposes;





·
            limitations
      on our flexibility in planning for and reacting to changes in our business
      and in the industry or country in which we
  operate;





·
            increased
      vulnerability to adverse changes in general economic, industry and
      competitive conditions and adverse changes in government regulation;
      and





·
            limitations
      on our ability to borrow additional amounts for working capital, capital
      expenditures, acquisitions, debt service requirements, execution of our
      strategy and other purposes; and other disadvantages compared to our
      competitors who have less debt.





We
may face particular risks if we try to acquire several assets or properties
simultaneously.





In the
event we ultimately determine to simultaneously acquire several assets or
properties and such assets or properties are owned by different sellers, we may
need for each of such sellers to agree that our purchase is contingent on the
simultaneous closings of the other acquisitions, which may make it more
difficult for us, and consequently delay our ability, to complete the business
combination. If we choose to effect multiple acquisitions, we could also face
additional risks, including additional burdens and costs with respect to
possible multiple negotiations and due diligence investigations (if there are
multiple sellers) and the additional risks associated with the subsequent
integration of the multiple assets or properties into a single operating
entity.


13


Our
ability to effect a business combination and to operate our business thereafter
will be totally dependent upon the efforts of our key personnel, including our
officers, directors and others, none of whom have entered into employment or
consulting agreements with us, and who may leave us prior to completion of a
business combination.





Our
ability to effect a business combination is dependent upon the efforts of our
key personnel. Our key personnel will also be officers, directors, and/or
members of other entities, to whom we anticipate we will have access on an as
needed basis, although there are no assurances that any such personnel will be
able to devote either sufficient time, effort or attention to us when we need
it. None of our key personnel, including our executive officers will have
entered into employment or consultant agreements with us, and they may leave us
prior to our effecting a business combination. Further, although we presently
anticipate that our officers will remain associated in senior management,
advisory or other positions with us following a business combination, some or
all of the management associated with a target acquisition may also remain in
place. As such, our key personnel may not continue to provide services to us
after the consummation of a business combination if we are unable to negotiate
employment or consulting agreements with them in connection with or subsequent
to the business combination, the terms of which would be determined at such time
between the respective parties. Such negotiations would take place
simultaneously with the negotiation of the business combination and could
provide for such individuals to receive compensation in the form of cash
payments and/or our securities for services they would render to us after the
consummation of the business combination. While the personal and financial
interests of such individuals may influence their motivation in identifying and
selecting a target acquisition, the ability of such individuals to remain with
us after the consummation of a business combination will not be the determining
factor in our decision as to whether or not we will proceed with any potential
business combination.





For a
more complete discussion of the possible structure of a business combination,
see the section below entitled “Proposed Business—Effecting a Business
Combination—We have Not Identified a Target Acquisition.”





We will not be
limited to a particular industry or area in China and may acquire a
business operating in an industry in China that is beyond the expertise of our
management.





Our
efforts in identifying a prospective target business will be limited
geographically to China (although we may acquire an entity that is not
incorporated in China but has its principal business and/or material operations
in China) but not to any particular industry or area in China. Our management
will not rule out pursuing attractive business opportunities in industries in
China outside of its expertise if our management determines that it is in the
best interests of our company and shareholders.





Should a
favorable business opportunity present itself in an industry or area in China
that is outside of our management’s expertise, our ability to assess the growth
potential, financial condition, experience and skill of incumbent management,
competitive position, regulatory environment and other criteria in evaluating
such a business opportunity may be adversely affected. If we determine to
acquire a prospective target business which is outside of the expertise of our
management, no assurance can be given that we will be able to complete such an
acquisition, and an unsuccessful attempt to do so could result in the
liquidation of the trust account and dissolution of our company.





We
will have only limited ability to evaluate the management of the target
business.





While we
intend to closely scrutinize any individuals we engage after a business
combination, we cannot assure you that our assessment of these individuals will
prove to be correct. These individuals may be unfamiliar with the requirements
of operating a public company which could cause us to have to expend time and
resources helping them become familiar with such requirements. This could be
expensive and time-consuming and could lead to various operational issues which
may adversely affect our operations.


14


Our
officers and directors are required to allocate only a portion of their time to
other businesses, thereby creating the potential for conflicts of interest in
their determination as to how much time to devote to our affairs. This conflict
of interest could have a negative impact on our ability to consummate a business
combination.





Our
officers and directors are not required to commit their full time to our
affairs, which could create a conflict of interest when allocating their time
between our operations and their other commitments. We do not intend to have any
full time employees prior to the consummation of a business combination. Our
executive officers and directors are currently employed by other entities and
are not obligated to devote any specific number of hours to our affairs. If
other entities require them to devote more substantial amounts of time to their
business and affairs, it could limit their ability to devote time to our affairs
and could have a negative impact on our ability to consummate a business
combination. We cannot assure you that these conflicts will be resolved in our
favor. For a discussion of potential conflicts of interest that you should be
aware of see the section below entitled “Management—Conflicts of
Interest.”





We
may engage in a business combination with one or more target businesses that
have relationships or are affiliated with our existing shareholders, directors
or officers, which may raise potential conflicts.





We may
engage in a business combination with one or more target businesses that have
relationships or are affiliated (within the meaning of Rule 405 of the
Securities Act) with our existing shareholders, directors or officers, which may
raise potential conflicts. Also, the completion of a business combination
between us and an entity owned by a business in which one of our directors or
officers may have an interest could enhance their prospects for future business
from such client. To minimize potential conflicts of interest, we have agreed
not to consummate a business combination with an entity that is affiliated with
our existing shareholders, officers or directors, unless we obtain an opinion
from an unaffiliated, independent investment banking firm that is a member of
the Financial Industry Regulatory Authority (formerly the NASD), that the
business combination is fair to our shareholders from a financial point of view.
For a more detailed discussion of our management’s business affiliations and the
potential conflicts of interest of which you should be aware, see the sections
entitled “Management—Directors and Executive Officers” and “Certain
Relationships and Related Party Transactions.”





Our
officers and directors currently are, and may in the future become affiliated
with additional entities that are, engaged in business activities similar to
those intended to be conducted by us and, accordingly, may have conflicts of
interest in determining to which entity a particular business opportunity should
be presented.





Certain
of our officers or directors have been or currently are a principal of, or are
affiliated or associated with, other blank check companies, as well as other
companies that provide financing for companies operating in China and companies
that may seek acquisitions in China. Additionally, our officers and directors
may in the future become affiliated with additional entities, including other
“blank check” companies which may engage in activities similar to those intended
to be conducted by us. Our officers and directors may also become aware of
business opportunities which may be appropriate for presentation to us and the
other entities to which they owe fiduciary duties or other contractual
obligations. As a result of Mr. Kerry Propper’s pre-existing relationships with
each of Shine Media, HLS Systems International Ltd. and Origin Agritech Limited,
we expect that any conflict that arises between our company and any of those
entities will be resolved in favor of such entities. Additionally, as a result
of Mr. Zhang’s affiliation with Chardan China Investments, LLC, we expect that
any conflict that arises between our company and Chardan China Investments, LLC
will be resolved in their favor. Similarly, any other companies with which our
officers and directors are, or may become, affiliated with, and with respect to
which they have not signed a letter agreement granting us a right of first
refusal with respect to suitable business opportunities, may be presented with
such opportunities before they are presented to us for our consideration. No
procedures have been established to determine how conflicts of interest that may
arise due to duties or obligations owed to other entities will be resolved,
however, under BVI law, each of our officers and directors has a fiduciary duty
to act in our best interests, although that fiduciary duty does not require that
they devote their entire business time and effort to us. For a more complete
discussion of the fiduciary duties of our officers and directors, see the
section entitled “British Virgin Islands Company Considerations”.





Our
existing shareholders currently own ordinary shares which will not participate
in the liquidation of the trust account and warrants that will expire worthless
if the trust account is liquidated and a conflict of interest may arise in
determining whether a particular target acquisition is appropriate for a
business combination.


15


Our
existing shareholders have waived their right to receive distributions with
respect to the ordinary shares owned by them prior to our initial public
offering and the warrants owned by them prior to our initial public offering
will expire worthless upon the liquidation of the trust account if we are unable
to consummate a business combination. Additionally, our officers and directors,
or their affiliates, have purchased an aggregate of 2,000,000 warrants directly
from us in a private placement transaction in accordance with Regulation D or
Regulation S, as applicable, under the Securities Act of 1933, as amended, in
connection with our initial public offering at a purchase price of $0.50 per
warrant for a total purchase price of $1,000,000. The ordinary shares acquired
prior to our initial public offering and any warrants owned by our officers and
directors will be worthless if we do not consummate a business combination.
Under BVI law each of our officers and directors has a fiduciary duty to act in
our best interests, however, the personal and financial interests of our
officers and directors may influence their motivation in timely identifying and
selecting a target acquisition and completing a business combination.
Consequently, our officers’ discretion, and the discretion of our directors, in
identifying and selecting a suitable target acquisition may result in a conflict
of interest when determining whether the terms, conditions and timing of a
particular business combination are appropriate and in our shareholders’ best
interest and, as a result of such conflicts, management may choose a target
acquisition that is not in the best interests of our shareholders. For a more
complete discussion of the fiduciary duties of our officers and directors, see
the section entitled “British Virgin Islands Company
Considerations”.





The
requirement that we complete a business combination within 18 months from the
date of our initial public offering, or 30 months if we have entered into a
letter of intent, agreement in principle or definitive agreement with a target
business, may give potential target businesses leverage over us in negotiating a
business combination.





We will
liquidate and promptly distribute only to our public shareholders the amount in
our trust account (subject to our obligations under British Virgin Islands law
for claims of creditors) plus any remaining net assets if we do not effect a
business combination within 18 months from the date of our initial public
offering, or 30 months if we have entered into a letter of intent, agreement in
principle or definitive agreement with a target business. Any potential target
business with which we enter into negotiations concerning a business combination
will be aware of this requirement. Consequently, such target businesses may
obtain leverage over us in negotiating a business combination, knowing that if
we do not complete a business combination with that particular target business,
we may be unable to complete a business combination with any target business.
This risk will increase as we get closer to the time limits referenced
above.





The
requirement that we complete a business combination within 18 months from the
date of our initial public offering, or 30 months if we have entered into a
letter of intent, agreement in principle or definitive agreement with a target
business, may motivate our officers and directors to approve a business
combination during that time period so that they may get their out-of-pocket
expenses reimbursed.





Each of
our officers and directors may receive reimbursement for out-of-pocket expenses
incurred by him in connection with activities on our behalf such as identifying
potential target businesses and performing due diligence on suitable business
combinations. The funds for such reimbursement will be provided from the money
not held in the trust account. In the event that we do not effect a business
combination within 18 months from the date of our initial public offering, or 30
months if we have entered into a letter of intent, agreement in principle or
definitive agreement with a target business, then any expenses incurred by such
individuals in excess of the money being held outside of the trust account will
not be repaid as we will liquidate at such time. On the other hand, if we
complete a business combination within such time period, those expenses will be
repaid by the target business. Consequently, even though under BVI law each of
our officers and directors has a fiduciary duty to act in our best interests,
such officers and directors may have an incentive to complete a business
combination for reasons other than what is in our best interests and the best
interest of our shareholders. For a more complete discussion of the fiduciary
duties of our officers and directors, see the section entitled “British Virgin
Islands Company Considerations”.





Other
than with respect to the business combination, our officers and directors, and
their respective affiliates, may have a pecuniary interest in certain
transactions in which we are involved, and may also compete with
us.





Other
than with respect to the business combination, we have not adopted a policy that
expressly prohibits our directors, officers, shareholders or affiliates from
having a direct or indirect pecuniary interest in any investment to be acquired
or disposed of by us or in any transaction to which we are a party or have an
interest. Nor do we have a policy that expressly prohibits any such persons from
engaging for their own account in business activities of the types conducted by
us.


16


Initially,
we may only be able to complete one business combination, which will cause us to
be solely dependent on a single asset or property.





The net
proceeds from our initial public offering and the private placement (excluding
$2,200,000 held in the trust account which represents deferred underwriting
discounts and commissions and non-accountable expense allowance) provided us
with approximately $52,100,000 which is held in the trust account and may be
used by us to complete a business combination. We currently have no restrictions
on our ability to seek additional funds through the sale of securities or
through loans. As a consequence, we could seek to acquire a target business that
has a fair market value significantly in excess of the 80% net asset threshold.
We could seek to fund such a business combination by raising additional funds
through the sale of our securities or through loan arrangements. However, if we
were to seek such additional funds, any such arrangement would only be
consummated simultaneously with our consummation of a business combination.
Consequently, it is probable that we will have the ability to complete only a
single business combination, although this may entail the simultaneous
acquisitions of several assets or closely related operating businesses at the
same time. However, should our management elect to pursue more than one
acquisition of target businesses simultaneously, our management could encounter
difficulties in consummating all or a portion of such acquisitions due to a lack
of adequate resources, including the inability of management to devote
sufficient time to the due diligence, negotiation and documentation of each
acquisition. Furthermore, even if we complete the acquisition of more than one
target business at substantially the same time, there can be no assurance that
we will be able to integrate the operations of such target businesses.
Accordingly, the prospects for our ability to effect our business strategy may
be:





·
            solely
      dependent upon the performance of a single business;
  or





·
            dependent
      upon the development or market acceptance of a single or limited number of
      products, processes or services.





In this
case, we will not be able to diversify our operations or benefit from the
possible spreading of risks or offsetting of losses, unlike other entities which
may have the resources to complete several business combinations in different
industries or different areas of a single industry. Furthermore, since our
business combination may entail the simultaneous acquisitions of several assets
or operating businesses at the same time and may be with different sellers, we
will need to convince such sellers to agree that the purchase of their assets or
businesses is contingent upon the simultaneous closings of the other
acquisitions.





We
may be unable to obtain additional financing, if required, to complete a
business combination or to fund the operations and growth of the target
business, which could compel us to restructure the transaction or abandon a
particular business combination.





Although
we believe that the net proceeds of our initial public offering and the private
placement will be sufficient to allow us to consummate a business combination,
because we have not yet identified any prospective target acquisition to
acquire, we cannot ascertain the capital requirements for any particular
transaction. If the net proceeds of our initial public offering and the private
placement prove to be insufficient, either because of the size of the business
combination, the depletion of the available net proceeds in the course of
searching for suitable target acquisition that we can afford to acquire, or the
obligation to redeem for cash a significant number of ordinary shares from
dissenting shareholders, we will be required to seek additional financing. We
cannot assure you that any additional financing will be available to us on
acceptable terms, if at all. To the extent that additional financing proves to
be unavailable when needed to consummate a particular business combination, we
would be compelled to either restructure the transaction or abandon that
particular business combination and seek an alternative target acquisition
candidate. In addition, it is possible that we could use a portion of the funds
not in the trust account to make a deposit, down payment or fund a “no-shop”
provision with respect to a proposed business combination or to pay reverse
break up fees (a provision in an acquisition agreement which requires a payment
to the target company if the financing for an acquisition is not obtained),
although we do not have any current intention to do so. In the event that we
were ultimately required to forfeit such funds (whether as a result of our
breach of the agreement relating to such payment or otherwise), we may not have
a sufficient amount of working capital available outside of the trust account to
conduct due diligence and pay other expenses related to finding a suitable
business combination without securing additional financing. If we are unable to
secure additional financing, we would most likely fail to consummate a business
combination in the allotted time and would liquidate the trust account,
resulting in a loss of a portion of your investment. In addition, if we
consummate a business combination, we may require additional financing to fund
continuing operations and/or growth. The failure to secure additional financing
if required could have a material adverse effect on our ability to continue to
develop and grow, even if we consummate a business combination. None of our
officers, directors or shareholders are required to provide any financing to us
in connection with or after a business combination. For a more complete
discussion regarding the liquidation of our trust account if we cannot
consummate a business combination, see “Proposed Business—Effecting a Business
Combination—Voluntary liquidation and subsequent dissolution if no business
combination”.


17


Companies
with similar business plans to ours have had limited success in completing a
business transaction. There can be no assurance that we will successfully
identify a potential target business, or complete a business
combination.





Based on
publicly available information, approximately 159 similarly structured blank
check companies have completed initial public offerings since August 2003, and
numerous others have filed registration statements.  Of these companies,
only 53 companies have consummated a business combination, while 26 other
companies have announced that they have entered into definitive agreements or
letters of intent with respect to potential business combinations, but have not
yet consummated such business combinations and another 20 have liquidated or
have announced that are liquidating.  Accordingly, there are approximately
60 blank check companies with approximately $10.8 billion in trust have filed
registration statements and are or will be seeking to enter into a business
combination.  While some of these companies have specific industries in
which they must identify a potential target business, a number of these
companies may consummate a business combination in any industry and/or
geographic location they choose.  As a result, we may be subject to
competition from these and other companies seeking to consummate a business
combination within any of our target sectors, which, in turn, will result in an
increased demand for privately-held companies in these industries.  Because
of this competition, we cannot assure you that we will be able to effectuate a
business combination within the required time period.





We expect
to encounter intense competition from other entities having a business objective
similar to ours, including private investors (which may be individuals or
investment partnerships), other blank check companies, and other entities,
domestic and international, competing for the type of businesses that we may
intend to acquire.  With respect to blank check companies, we believe there
are currently approximately 16 blank check companies with approximately $983.8
million in trust that are seeking to carry out a business plan similar to our
business plan and there are likely to be more blank check companies filing
registration statements for initial public offerings after the date of this
prospectus and prior to our completion of a business combination.  Many of
these individuals and entities are well established and have extensive
experience in identifying and effecting, directly or indirectly, acquisitions of
companies operating in Asian countries, including China.  Many of these
competitors possess greater technical, human and other resources, or more local
knowledge, than we do and our financial resources will be relatively limited
when contrasted with those of many of these competitors.  While we believe
that there are numerous target acquisitions that we could potentially acquire
with the net proceeds of our initial public offering, our ability to compete
with respect to the acquisition of certain target acquisitions that are sizable
will be limited by our available financial resources.  This inherent
competitive limitation gives others an advantage in pursuing the acquisition of
certain target acquisitions.  Furthermore, the obligation we have to seek
shareholder approval of a business combination may delay the consummation of a
transaction.  Additionally, our outstanding warrants and the future
dilution they potentially represent may not be viewed favorably by certain
target acquisitions.  Also, our obligation to redeem our ordinary shares
for cash in certain instances may reduce the resources available for a business
combination.  Any of these obligations may place us at a competitive
disadvantage in negotiating a business combination.





We may be
unable to compete for an attractive business combination.  Additionally,
because of this competition, we cannot assure you we will be able to effectuate
a business combination within the prescribed time period.  If we are unable
to consummate a business combination within the prescribed time period, we will
be forced to liquidate.





Our
existing shareholders control a substantial interest in us and thus may
influence certain actions requiring a shareholder vote.





Our
existing shareholders own 25% of our issued and outstanding ordinary shares.
This ownership interest, together with any other acquisitions of our ordinary
shares (or warrants which are subsequently exercised), could allow the existing
shareholders to influence the outcome of matters requiring shareholder approval,
including the election of directors and approval of significant corporate
transactions after completion of our initial business combination. The interests
of our existing shareholders and your interests may not always align, and taking
actions which require approval of a majority of our shareholders, such as
selling our company, may be more difficult to accomplish.


18


We
could be liable for up to the amount of the purchase price of the private
placement warrants plus interest to our officers and directors, who purchased
the private placement warrants in a private placement conducted concurrently
with our initial public offering.





We sold
in a private placement, in accordance with Regulation D or Regulation S, as
applicable, under the Securities Act of 1933, as amended, an aggregate of
2,000,000 private placement warrants to certain of our officers and directors,
and their affiliates. This private placement was made in reliance on an
exemption from registration under the Securities Act. This exemption required
that there be no general solicitation of investors with respect to the sales of
the private placement warrants. If our initial public offering were deemed to be
a general solicitation with respect to the private placement warrants, the offer
and sale of such securities would not be exempt from registration and the
purchasers of those securities could have a right to rescind their purchases.
Rescinding purchasers could seek to recover the purchase price paid, with
interest, or if they no longer own the securities, to receive damages. The
subscription agreement for the private placement warrants contains provisions
under which the purchasers waive any and all rights to assert present or future
claims, including the right of rescission, against us with respect to their
purchase of the private placement warrants and agree to indemnify and hold us
and the underwriters harmless from all losses, damages or expenses that relate
to claims or proceedings brought against us or the underwriters by the
purchasers of the private placement warrants, although it is unclear whether
these waivers and indemnifications would be enforceable.





If
we redeem our warrants, the private placement warrants and the insider warrants,
which are non redeemable, could provide the purchasers thereof with the ability
to realize a larger gain than the public warrant holders.





The
warrants held by our public warrant holders may be called for redemption at any
time after the warrants become exercisable:





·
            in
      whole and not in part,




·
            at
      a price of $0.01 per warrant at any time after the warrants become
      exercisable,




·
            upon
      not less than 30 days’ prior written notice of redemption,
    and




·
            if,
      and only if, the last sales price of our ordinary shares equals or exceeds
      $10.00 per ordinary share for any 20 trading days within a 30 trading day
      period ending three business days before we send the notice of
      redemption.




In
addition, we may not redeem the warrants unless such warrants and the ordinary
shares underlying those warrants are covered by an effective registration
statement from the beginning of the measurement period through the date fixed
for the redemption.





As a
result of the private placement warrants and the insider warrants not being
subject to the redemption feature that our publicly-held warrants are subject
to, holders of the private placement warrants and insider warrants, or their
permitted assigns, could realize a larger gain than our public warrant holders
in the event we redeem our public warrants.





Our
outstanding warrants may have an adverse effect on the market price of ordinary
shares and make it more difficult to effect a business combination.





In
connection our initial public offering, we issued warrants to purchase up to an
aggregate of 6,875,000 ordinary shares. In addition, we: (a) have issued
2,291,666 insider warrants to our existing shareholders, (b) will sold to our
officers and directors warrants to purchase up to 2,000,000 ordinary shares
prior to the date of our initial public offering, and (c) granted to the
underwriters a unit purchase option to purchase up to 137,500 units which
include 137,500 ordinary shares, 137,500 warrants and 137,500 ordinary shares
underlying such warrants. To the extent we issue ordinary shares to effect a
business combination, the potential for the issuance of a substantial number of
additional ordinary shares upon exercise of these warrants could make us a less
attractive acquisition vehicle in the eyes of a target acquisition. Such
securities, when exercised, will increase the number of issued and outstanding
shares of our ordinary shares and reduce the value of the ordinary shares issued
to complete the business combination. Therefore, our warrants may make it more
difficult to effectuate a business combination or increase the cost of acquiring
the target acquisition. Additionally, the sale, or even the possibility of sale,
of the ordinary shares underlying the warrants could have an adverse effect on
the market price for our securities or on our ability to obtain future
financing. If and to the extent these warrants are exercised, you may experience
dilution to your holdings.


19


We
may issue notes or other debt securities, or otherwise incur substantial debt,
to complete a business combination, which may adversely affect our leverage and
financial condition.





Although
we have no commitments as of the date of this report to issue any notes or other
debt securities, or to otherwise incur outstanding debt, we may choose to incur
substantial debt to complete a business combination. The incurrence of debt
could result in:





·
            default
      and foreclosure on our assets if our operating cash flow after a business
      combination is insufficient to pay our debt
  obligations;





·
            acceleration
      of our obligations to repay the indebtedness even if we have made all
      principal and interest payments when due if the debt security contains
      covenants that require the maintenance of certain financial ratios or
      reserves and any such covenant is breached without a waiver or
      renegotiation of that covenant;





The
Nasdaq Capital Market may delist our securities, which could limit investors’
ability to transact in our securities and subject us to additional trading
restrictions.




Although
our securities are currently listed on the Nasdaq Capital Market, we cannot
assure you that our securities will continue to be listed on the Nasdaq Capital
Market. Additionally, it is likely that the Nasdaq Capital Market would require
us to file a new initial listing application and meet its initial listing
requirements, as opposed to its more lenient continued listing requirements, at
the time of our initial business combination. We cannot assure you that we will
be able to meet those initial listing requirements at that time.





If the
Nasdaq Capital Market delists our securities from trading, we could face
significant consequences, including:





·
            a
      limited availability for market quotations for our
    securities;




·
            reduced
      liquidity with respect to our
securities;




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




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




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




In
addition, we would no longer be subject to Nasdaq Capital Market rules,
including rules requiring us to have a certain number of independent directors
and to meet other corporate governance standards.


20


We or, should we form one, our
Foreign Subsidiary, will likely be classified as a passive foreign investment
company, which could result in adverse U.S. tax consequences to U.S.
investors.





We
believe we, or any foreign (non-U.S. or non-Cayman) subsidiary we form, will
likely be classified as a PFIC for United States federal income tax purposes. As
a result of being classified as a PFIC, a U.S. Holder (as defined in the section
of this prospectus captioned “Taxation—United States Federal Income Taxation”)
of our ordinary shares and warrants may be subject to increased United States
federal income tax liability and may be subject to additional reporting
requirements. A U.S. Holder may be able to mitigate this potential increased
United States federal income tax liability by making a qualified electing fund
(a “QEF”) election in respect of our ordinary shares. The QEF election will not,
however, shield a U.S. Holder from imposition of such tax and interest charge on
gain recognized on the disposition of an investment in our warrants. Each
prospective investor is urged to consult his tax advisor regarding the possible
application of the PFIC rules. For a summary of the tax consequences of PFIC
classification to U.S. Holders, see the section of this prospectus captioned
“Taxation—United States Federal Income Taxation—U.S. Holders—Tax Consequences if
we are a Passive Foreign Investment Company.”





A U.S. Holder of
a warrant may have adverse U.S. federal income tax consequences if such warrant
becomes exercisable into shares of a Foreign Subsidiary and the Foreign
Subsidiary were to be classified as a PFIC.




As
discussed in the section of this prospectus captioned “Taxation—United States
Federal Income Taxation—U.S. Holders—Tax Consequences if we are a Passive
Foreign Investment Company Rules,” if a warrant held by a U.S. Holder
becomes exercisable into shares of a Foreign Subsidiary and the Foreign
Subsidiary were to be classified as a PFIC, the U.S. Holder of the warrant
generally will be subject to adverse U.S. federal income tax consequences.
Unlike a U.S. Holder of our ordinary shares (who will be deemed to own a
portion of the shares of the Foreign Subsidiary), a U.S. Holder of warrants
generally will not be able to mitigate these adverse tax consequences by making
a qualified electing fund (“QEF”) election with respect to its warrants. A
U.S. Holder of warrants is urged to consult its own tax advisor concerning
the adverse tax consequences that may result to such holder by reason of the
application of the PFIC rules to a warrant under such holder’s particular
circumstances.




A
U.S. Holder of our warrants may have adverse U.S. federal income tax
consequences if we were to liquidate pursuant to a shareholder vote following
the formation of and the transfer of our assets to the Foreign
Subsidiary.




As
discussed in the section of this prospectus captioned “Taxation—United States
Federal Income Taxation—U.S. Holder—Tax and Reporting Issues as to Formation of
Foreign Subsidiary,” in the event we form and transfer all or substantially all
of our assets to the Foreign Subsidiary in connection with a proposed business
combination, under certain circumstances (particularly if we were to then
liquidate our company or merge our company into the Foreign Subsidiary pursuant
to a separate shareholder vote in which our warrant holders would not
participate), the Foreign Subsidiary will assume our obligations under such
warrants, and a U.S. Holder of such warrants will have the right, under certain
conditions, to exercise such warrants for shares in the Foreign Subsidiary (and
not for an Interest in us). While we expect that this assumption and right
(which is provided for under the original terms of the warrants) should not
result in a taxable event to a U.S. Holder of such warrants, such U.S. Holder
should nevertheless consult its own tax advisor concerning the tax consequences
of such transaction under such holder’s particular circumstances.





An
investment in our securities may involve adverse U.S. federal income tax
consequences because the redemption or liquidation price per ordinary share is
greater than an investor’s initial tax basis in our ordinary
shares.





There is
a risk that an investor’s entitlement to receive payments in excess of the
investor’s initial tax basis in our ordinary shares (see “Taxation—United States
Federal Income Taxation—U.S. Holders—Allocation of Purchase Price Between
Ordinary Shares and Warrants”) upon exercise of the investor’s redemption right
or upon our liquidation will result in constructive income to the investor,
which could affect the timing and character of income recognition and result in
an immediate U.S. federal income tax liability to the investor without the
investor’s receipt of cash from us. Prospective investors are urged to consult
their own tax advisors with respect to these tax risks, as well as the specific
tax consequences to them of purchasing, holding or disposing of our
units.


21


An
investor may be subject to adverse U.S. federal income tax consequences in the
event the Internal Revenue Service (“IRS”) were to disagree with the U.S.
federal income tax consequences described herein.





As
described in the section of this report captioned “Taxation—United States
Federal Income Taxation—U.S. Holders”, we have not sought a ruling from the IRS
or an opinion of counsel as to any U.S. federal income tax consequences
described herein. The IRS may disagree with the descriptions of
U.S. federal income tax consequences contained herein, and its
determination may be upheld by a court. Any such determination could subject an
investor or our company to adverse U.S. federal income tax consequences
that would be different than those described herein. Accordingly, each
prospective investor is urged to consult a tax advisor with respect to the
specific tax consequences of the acquisition, ownership and disposition of our
ordinary shares and warrants, including the applicability and effect of state,
local or non-U.S. tax laws, as well as U.S. federal tax
laws.





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





If our
ordinary shares become subject to the “penny stock” rules promulgated under the
Securities Exchange Act of 1934, broker-dealers may find it difficult to
effectuate customer transactions and trading activity in our securities may be
adversely affected. As a result, the market price of our securities may be
depressed, and you may find it more difficult to sell our
securities.





If at any
time we have net tangible assets of $5,000,000 or less and our ordinary shares
has a market price per ordinary share of less than $5.00, transactions in our
ordinary shares will be subject to these “penny stock” rules. Under these rules,
broker-dealers who recommend such securities to persons other than institutional
accredited investors must:





·
            make
      a special written suitability determination for the
    purchaser;




·
            receive
      the purchaser’s written agreement to the transaction prior to
      sale;




·
            provide
      the purchaser with risk disclosure documents which identify certain risks
      associated with investing in “penny stocks” and which describe the market
      for these “penny stocks” as well as a purchaser’s legal remedies;
      and




·
            obtain
      a signed and dated acknowledgment from the purchaser demonstrating that
      the purchaser has actually received the required risk disclosure document
      before a transaction in a “penny stock” can be
  completed.




If
our existing shareholders and/or the holders of the private placement warrants
exercise their registration rights, and/or if the underwriters elect to exercise
their unit purchase option, it may have an adverse effect on the market price of
our ordinary shares and warrants and the existence of the registration rights
and the purchase option may make it more difficult to effect a business
combination.




Our
existing shareholders are entitled to require us to register the resale of their
ordinary shares, insider warrants and ordinary shares underlying their insider
warrants at any time after the date on which their ordinary shares and insider
warrants are released from escrow, which, except in limited circumstances, will
not be before the earlier of one year from the consummation of a business
combination or thirty (30) months from the date of this prospectus (or
thirty-six (36) months if the extended period is approved). If our existing
shareholders exercise their registration rights with respect to all ordinary
shares and insider warrants beneficially owned by them as of the date of this
prospectus, then there will be an additional 2,291,666 ordinary shares,
2,291,666 warrants and 2,291,666 ordinary shares issuable upon exercise of the
insider warrants eligible for trading in the public market. Further, prior to
the date of this prospectus, our officers and directors will purchase in a
private placement an aggregate of 2,000,000 private placement warrants that are
identical to the warrants being sold in our initial public offering, except
that: (i) the private placement warrants will not have a claim to the funds
held in the trust account, (ii)  the private placement warrants are being
purchased pursuant to an exemption from the registration requirements of the
Securities Act and will become freely tradable only after they are registered
pursuant to a registration rights agreement to be signed on or before the date
of this prospectus, (iii) the private placement warrants will be non-redeemable
so long as they are held by the initial holders or their permitted assigns and
(iv) the private placement warrants are exercisable on a “cashless” basis at any
time after the later to occur of a business combination or one year from the
date of this prospectus, if held by the initial holders or their permitted
assigns. The private placement warrants may be released from escrow upon
consummation of a business combination. If the holders of the private placement
warrants exercise their registration rights with respect to all private
placement warrants and ordinary shares underlying the private placement warrants
beneficially owned by them as of the date of this prospectus, then there will be
an additional 2,000,000 warrants eligible for trading in the public market and
upon exercise of all the private placement warrants there will be an additional
2,000,000 of our ordinary shares eligible for trading in the public
market.


22


In
addition, we have agreed to sell to the underwriters a unit purchase option to
purchase up to a total of 137,500 units identical to those units offered by this
prospectus except the unit purchase option has a per unit price of $8.80.
Although the purchase option and its underlying securities have been registered
on the registration statement of which this prospectus forms a part, the option
grants holders demand and “piggy back” registration rights for periods of five
years from the date of this prospectus. These rights apply to all of the
securities directly and indirectly issuable upon exercise of the option. If this
unit purchase option is exercised, and all of the underlying warrants are also
exercised, there will be an additional 275,000 of our ordinary shares eligible
for trading in the public market. The presence of these additional numbers of
securities eligible for trading in the public market may have an adverse effect
on the market price of our ordinary shares. In addition, the existence of these
rights may make it more difficult to effectuate a business combination or
increase the cost of the target business, as the shareholders of the target
business may be discouraged from entering into a business combination with us or
will request a higher price for their securities as a result of these
registration rights and the potential future effect their exercise may have on
the trading market for our ordinary shares.





If
we are deemed to be an investment company, we may be required to institute
burdensome compliance requirements and our activities may be restricted, which
may make it difficult for us to complete a business combination, or we may be
required to incur additional expenses if we are unable to liquidate after the
expiration of the allotted time periods.





If we are
deemed to be an investment company under the Investment Company Act of 1940, we
may be subject to certain restrictions that may make it more difficult for us to
complete a business combination, including:





·
            restrictions
      on the nature of our investments;
and




·
            restrictions
      on the issuance of securities.




In
addition, we may have imposed upon us certain burdensome requirements,
including:




·
            registration
      as an investment company;




·
            adoption
      of a specific form of corporate structure;
and




·
            reporting,
      record keeping, voting, proxy, compliance policies and procedures and
      disclosure requirements and other rules and
  regulations.




We do not
believe that our anticipated principal activities will subject us to the
Investment Company Act of 1940, as amended. To this end, the proceeds held in
the trust account may be invested by the trust account agent only in United
States “government securities” within the meaning of Section 2(a)(16) of
the Investment Company Act of 1940 with a maturity of 180 days or less, or
in money market funds meeting certain conditions under Rule 2a-7
promulgated under the Investment Company Act of 1940. By restricting the
investment of the proceeds to these instruments, we intend to avoid being deemed
an investment company within the meaning of the Investment Company Act of 1940.
Our securities are not intended for persons who are seeking a return on
investments in government securities. The trust account and the purchase of
government securities for the trust account is intended as a holding place for
funds pending the earlier to occur of either: (i) the consummation of our
primary business objective, which is a business combination, or (ii) absent
a business combination, liquidation and return of the funds held in this trust
account to our public shareholders.


23


If we are
deemed to be an investment company at any time, we will be required to comply
with additional regulatory requirements under the Investment Company Act of
1940, as amended, which would require additional expenses for which we have not
budgeted.





Uncertainties
in management’s assessment of a target business could cause us not to realize
the benefits anticipated to result from an acquisition.





It is
possible that, following our initial acquisition, uncertainties in assessing the
value, strengths and potential profitability of, and identifying the extent of
all weaknesses, risks, contingent and other liabilities (including environmental
liabilities) of, acquisition or other transaction candidates could cause us not
to realize the benefits anticipated to result from an acquisition.





The
potential loss of key customers, management and employees of a target business
could cause us not to realize the benefits anticipated to result from an
acquisition.





It is
possible that, following our initial acquisition, the potential loss of key
customers, management and employees of an acquired business could cause us not
to realize the benefits anticipated to result from an acquisition.





The
lack of synergy from an acquisition could cause us not to realize the benefits
anticipated to result from an acquisition.





It is
possible that, following our initial acquisition, the inability to achieve
identified operating and financial synergies anticipated to result from an
acquisition or other transaction could cause us not to realize the benefits
anticipated to result from an acquisition.





Our
directors may not be considered “independent” and we thus may not have the
benefit of independent directors examining our financial statements and the
priority of expenses incurred on our behalf subject to
reimbursement.




Our
existing shareholders hold 2,291,666 ordinary shares which our officers and
directors purchased at our inception for a purchase price of approximately
$0.011 per ordinary share (assuming no value is attributed to the insider
warrants), which is significantly lower than our initial public offering price.
No salary or other compensation will be paid to our officers or directors for
services rendered by them on our behalf prior to or in connection with a
business combination. Although we believe that Li Zhang and Dr. Jianjun Shi,
members of our board of directors, are “independent” under the rules of the
Nasdaq Capital Market, because they may receive reimbursement for out-of-pocket
expenses incurred by them in connection with activities on our behalf such as
identifying potential target businesses and performing due diligence on suitable
business combinations, it is likely that state securities administrators would
take the position that we do not have the benefit of independent directors
examining the propriety of expenses incurred on our behalf and subject to
reimbursement. Additionally, there is no limit on the amount of out-of-pocket
expenses that could be incurred and there will be no review of the
reasonableness of the expenses by anyone other than our board of directors,
which would include persons who may seek reimbursement, or a court of competent
jurisdiction if such reimbursement is challenged. Although we believe that all
actions taken by our directors on our behalf will be in our best interests,
whether or not any directors are deemed to be “independent,” we cannot assure
you that this will actually be the case. If actions are taken or expenses are
incurred that are actually not in our best interests, it could have a material
adverse effect on our business and operations and the price of our ordinary
shares held by the public shareholders.





We
may not obtain an opinion from an unaffiliated third party as to the fair market
value of the target acquisition or that the price we are paying for the business
is fair to our shareholders.





We are
not required to obtain an opinion from an unaffiliated third party that either
the target acquisition we select has a fair market value equal to or in excess
of the 80% net asset threshold or that the price we are paying is fair to
shareholders unless: (i) our board is not able to independently determine
that a target acquisition has a sufficient market value or (ii) there is a
conflict of interest with respect to the transaction. If no opinion is obtained,
our shareholders will be relying on the judgment or our board of
directors.


24


You
may face difficulties in protecting your interests, and your ability to protect
your rights through the U.S. federal courts may be limited, because we are
incorporated under British Virgin Islands law.





We are a
company incorporated under the laws of the British Virgin Islands, and
substantially all of our assets are located outside the United States. In
addition, certain of our directors and officers are nationals or residents of
jurisdictions other than the United States, such as China, and all or a
substantial portion of their assets are located outside the United States. As a
result, it may be difficult for investors to effect service of process within
the United States upon our directors or executive officers, or enforce judgments
obtained in the United States courts against our directors or
officers.





Our
corporate affairs will be governed by our amended and restated memorandum and
articles of association, the BVI Business Companies Act, 2004 (as the same may
be supplemented or amended from time to time) (the “Act”) and the common law of
the British Virgin Islands. The rights of shareholders to take action against
the directors, actions by minority shareholders and the fiduciary
responsibilities of our directors to us under British Virgin Islands law are to
a large extent governed by the Act and the common law of the British Virgin
Islands. The common law of the British Virgin Islands is derived in part from
comparatively limited judicial precedent in the British Virgin Islands as well
as from English common law, the decisions of whose courts are of persuasive
authority, but are not binding on a court in the British Virgin Islands. The
rights of our shareholders and the fiduciary responsibilities of our directors
under British Virgin Islands law are not as clearly established as they would be
under statutes or judicial precedent in some jurisdictions in the United States.
In particular, the British Virgin Islands has a less developed body of
securities laws as compared to the United States, and some states, such as
Delaware, have more fully developed and judicially interpreted bodies of
corporate law. In addition, British Virgin Islands companies may not have
standing to initiate a shareholder derivative action in a federal court of the
United States. The circumstances in which any such action may be brought, and
the procedures and defenses that may be available in respect to any such action,
may result in the rights of shareholders of a British Virgin Islands company
being more limited than those of shareholders of a company organized in the
United States. Accordingly, shareholders may have fewer alternatives available
to them if they believe that corporate wrongdoing has occurred.





The
British Virgin Islands courts are also unlikely:





·
            to
      recognize or enforce against us judgments of courts of the United States
      based on certain civil liability provisions of U.S. securities laws;
      and




·
            to
      impose liabilities against us, in original actions brought in the British
      Virgin Islands, based on certain civil liability provisions of U.S.
      securities laws that are penal in
nature.




There is
no statutory recognition in the British Virgin Islands of judgments obtained in
the United States, although the courts of the British Virgin Islands will in
certain circumstances recognize and enforce a non-penal judgment of a foreign
court of competent jurisdiction without retrial on the merits provided that in
respect of the U.S. judgment:





·
            the
      U.S. court issuing the judgment had jurisdiction in the matter and the
      company either submitted to such jurisdiction or was resident or carrying
      on business within such jurisdiction and was duly served with
      process;




·
              the
      judgment given by the U.S. court was not in respect of penalties, taxes,
      fines or similar fiscal or revenue obligations of the
    company;·
              in
      obtaining judgment there was no fraud on the part of the person in whose
      favour judgment was given or on the part of the
  court;




·
            recognition
      or enforcement of the judgment in the BVI would not be contrary to public
      policy; and


25


·
            the
      proceedings pursuant to which judgment was obtained were not contrary to
      natural justice.




As a
result of all of the above, public shareholders may have more difficulty in
protecting their interests in the face of actions taken by management, members
of the board of directors or controlling shareholders than they would as public
shareholders of a U.S. company. For a discussion of certain differences between
the provisions of the BVI Business Companies Act, remedies available to
shareholders and the laws applicable to companies incorporated in the United
States and their shareholders, see “British Virgin Islands Company
Considerations.”





Under
British Virgin Islands law, the requirements and restrictions contained in our
amended and restated memorandum and articles of association may be amended,
which could reduce or eliminate the protection afforded to our shareholders by
such requirements and restrictions.





Our
amended and restated memorandum and articles of association sets forth certain
requirements and restrictions that shall apply to us until the consummation of a
business combination. Specifically, Article 24 of our amended and restated
memorandum and articles of association will provide among other things,
that:





·
            prior
      to the consummation of our initial business combination, we shall submit
      such business combination to our shareholders for
  approval;




·
            we
      may only consummate our initial business combination if: (i) approved by a
      majority of the ordinary shares voted by the public shareholders and (ii)
      public shareholders not owning more than one ordinary share less than 35%
      of the ordinary shares purchased by the public shareholders in our initial
      public offering exercise their redemption
  rights.




·
            if
      our initial business combination is approved and consummated, public
      shareholders who voted against the business combination and exercised
      their redemption rights will receive $7.89 per ordinary share from the
      trust account;




·
            if
      a business combination is not consummated or a letter of intent, an
      agreement in principle or a definitive agreement is not signed within the
      time period specified in this prospectus, or if the extended period is not
      approved and we are unable to complete the business combination before
      August 11, 2011 then we will go into voluntary liquidation and we will
      distribute to all of our public shareholders their pro rata cash portion
      of the trust account (net of
taxes);




·
            a
      majority of our shareholders voting at a general (or annual) meeting may
      agree to extend the time until which we may consummate our initial
      business combination to 36 months, provided less than 35% of the public
      shareholders do not both vote against such extended period and exercise
      their redemption rights; and




·
            we
      may not consummate any merger, share exchange, share purchase, asset
      acquisition, contractual control arrangement or similar transaction other
      than a business combination that meets the conditions specified in this
      prospectus, including the requirement that our initial business
      combination be with one or more operating businesses whose fair market
      value, either individually or collectively, is equal to at least the 80%
      net asset threshold.




Our
amended and restated memorandum and articles of association expressly prohibits
the amendment of the above-described provisions, without the approval of 80% or
more of our shareholders. However, we view the foregoing provisions as
obligations to our shareholders and we will not take any actions to amend,
propose, endorse or support any proposal by the shareholders to waive or amend
any of these provisions, without the approval of 80% or more of our
shareholders.





26
  Risks
Related to Our Target Business


Because any
target business with which we attempt to complete a business combination may be
required to provide our shareholders with financial statements prepared in
accordance with and reconciled to United States generally accepted accounting
principles, or International Financial Reporting Standards, prospective target
businesses may be limited.




In
accordance with requirements of United States federal securities laws, in order
to seek shareholder approval of a business combination, a proposed target
business may be required to have certain financial statements which are prepared
in accordance with, or which can be reconciled to, U.S. generally accepted
accounting principles, or GAAP, or International Financial Reporting Standards,
as issued by the International Accounting Standards Board, or International
GAAP, and audited in accordance with the standards of the Public Company
Accounting Oversight Board (United States), or PCAOB. To the extent that a
proposed target business does not have financial statements which have been
prepared with, or which can be reconciled to, U.S. GAAP, or International GAAP,
and audited in accordance with the standards of the PCAOB, we may not be able to
complete a business combination with that proposed target business. These
financial statement requirements may limit the pool of potential target
businesses with which we may complete a business combination. Furthermore, to
the extent that we seek to acquire a target business that does not have
financial statements prepared in accordance with United States GAAP, or
International GAAP, it could make it more difficult for our management to
analyze such target business and determine whether it has a fair market value
equal to or in excess of the 80% net asset threshold. It could also delay our
preparation of our 6-K or our proxy statement in the event we are required to
seek shareholder approval and which we will send to shareholders relating
to the proposed business combination with such a target business, thereby
making it more difficult for us to consummate such a business
combination.





After
a business combination, substantially all of our assets are likely to be located
in China and substantially all of our revenue is likely to be derived from our
operations in China. Accordingly, our results of operations and prospects will
be subject, to a significant extent, to the economic, political and legal
developments in China.





China’s
economic, political and social conditions, as well as government policies, could
affect our business. The Chinese economy differs from the economies of most
developed countries in many respects, including:





·
            the
      amount of government involvement;




·
            the
      level of development;




·
            the
      growth rate;




·
            the
      control of foreign exchange; and




·
            the
      allocation of resources.




Our
ability to find an attractive target business with which to consummate a
business combination is based on the assumption that the Chinese economy will
continue to grow. China’s economic growth has been uneven, both geographically
and among various sectors of the economy. China’s government has implemented
various measures to encourage economic growth and guide the allocation of
resources. Some of these measures benefit the overall China economy, but may
also have a negative effect on us, depending on the industry in which we engage
in a business combination. For example, our financial condition and results of
operations may be adversely affected by China’s government control over capital
investments or changes in tax regulations that are applicable to a potential
target business and a business combination.





China’s
economy has been transitioning from a planned economy to a more market-oriented
economy. Although in recent years China’s government has implemented measures
emphasizing the use of market forces for economic reform, the reduction of state
ownership of productive assets and the establishment of sound corporate
governance in business enterprises, a substantial portion of productive assets
in China is still owned by China’s government. In addition, China’s government
continues to play a significant role in regulating industry development by
imposing industrial policies. It also exercises significant control over China’s
economic growth through the allocation of resources, controlling payment of
foreign currency-denominated obligations, setting monetary policy and providing
preferential treatment to particular industries or companies. We cannot assure
you that China’s economic, political or legal systems will not develop in a way
that becomes detrimental to our business, results of operations and prospects.
For example, China’s government has in the past implemented a number of measures
intended to slow down certain segments of China’s economy that the government
believed to be overheating, including placing additional limitation on the
ability of commercial banks to make loans by raising bank
reserve-against-deposit rates. Our activities may be materially and adversely
affected by changes in China’s economic and social conditions and by changes in
the policies of China’s government, such as measures to control inflation,
changes in the rates or method of taxation and the imposition of additional
restrictions on currency conversion.


27


If
political relations between China and the United States or Europe deteriorate,
it could cause potential target businesses or their goods or services to become
less attractive.





The
relationship between China and the United States and Europe is subject to sudden
fluctuation and periodic tension. Relations may also be compromised if the U.S.
or Europe becomes a more vocal advocate of Taiwan or proceeds to sell certain
military weapons and technology to Taiwan. Changes in political conditions in
China and changes in the state of Sino-U.S. relations and Sino-Europe relations
are difficult to predict and could adversely affect our operations or cause
potential target businesses or their goods and services to become less
attractive. Because we are not limited to any specific industry, there is no
basis for investors in our initial public offering to evaluate the possible
extent of any impact on our ultimate operations if relations are strained
between China and either the United States or Europe.





We
may not be able to enforce our rights in China.





The laws
of China are likely to govern all of our target business’ material agreements.
We cannot assure you that the target business will be able to enforce any of its
material agreements or that remedies will be available outside of the target
regions. For example, the system of laws and the enforcement of existing laws in
the People’s Republic of China may not be as certain in implementation and
interpretation as in the United States. The Chinese judiciary is relatively
inexperienced in enforcing corporate and commercial law, leading to a higher
than usual degree of uncertainty as to the outcome of any litigation. The
inability to enforce or obtain a remedy under any of our future agreements may
have a material adverse impact on our operations.





If
China imposes restrictions to reduce inflation, future economic growth in China
could be severely curtailed, which could lead to a significant decrease in our
profitability following a business combination.





While the
economy of China has experienced rapid growth, this growth has been uneven among
various sectors of the economy and in different geographical areas of the
country. Rapid economic growth can lead to growth in the supply of money and
rising inflation. If prices for the products of our ultimate target business
rise at a rate that is insufficient to compensate for the rise in the costs of
supplies, it may have an adverse effect on profitability. In order to control
inflation in the past, China has imposed controls on bank credits, limits on
loans for fixed assets and restrictions on state bank lending. If similar
restrictions are imposed, it may lead to a slowing of economic growth. Because
we are not limited to any specific industry, the ultimate industry that we
operate in may be affected more severely by such a slowing of economic
growth.





Many
industries in China are subject to government regulations that limit or prohibit
foreign investments in such industries, which may limit the potential number of
acquisition candidates.





The
Chinese government has imposed regulations in various industries that would
limit foreign investors’ equity ownership or prohibit foreign investments
altogether in companies that operate in such industries. As a result, the number
of potential acquisition candidates available to us may be limited.




If
we acquire a target business through contractual arrangements with one or more
operating businesses in China, such contracts may not be as effective in
providing operational control as direct ownership of such businesses and may be
difficult to enforce.





To comply
with applicable Chinese regulations, we may effect a business combination by
paying consideration to the owners of the target business and then making
contractual arrangements between our company, subsidiaries and/or affiliates and
Chinese companies holding the licenses required to engage in the specific
industry of the target business and its shareholders. In that case, the target
business would be owned by Chinese residents (most likely designated by our
company) rather than directly by our company. If we choose to effect this type
of business combination, we would expect to negotiate agreements that are
designed to give us the full economic benefits and control comparable to those
we would enjoy with full direct ownership. However, these contractual
arrangements may not be as effective in providing us with the same economic
benefits or control over a target business as direct ownership would. For
example, if the target business or any other entity fails to perform its
obligations under these contractual arrangements, we may have to incur
substantial costs and expend substantial resources to enforce such arrangements,
and rely on legal remedies under Chinese law, including seeking specific
performance or injunctive relief, and claiming damages, which we cannot assure
will be sufficient to off-set the cost of enforcement and may adversely affect
the benefits we expect to receive from the business combination.


28


Moreover,
we expect that the contractual arrangements upon which we would be relying would
be governed by Chinese law and would be the only basis of providing resolution
of disputes which may arise through either arbitration or litigation in China.
Accordingly, these contracts would be interpreted in accordance with Chinese law
and any disputes would be resolved in accordance with Chinese legal procedures.
Uncertainties in the Chinese legal system could limit our ability to enforce
these contractual arrangements. In the event we are unable to enforce these
contractual arrangements, we may not be able to exert the effective level of
control or receive the full economic benefits of full direct ownership over the
target business, see the section of this prospectus captioned “Proposed
Business—Effecting a Business Combination—Contractual
arrangements”.





If
the PRC government finds that the agreements we entered into to acquire control
of a target business through contractual arrangements do not comply with
governmental restrictions on foreign investment, or if these regulations or
their existing interpretations change in the future, we could be subject to
significant penalties or be forced to relinquish our interests in those
operations.





The
government of the PRC has restricted or limited foreign ownership of certain
kinds of assets and companies operating in a wide variety of industries,
including certain aspects of telecommunications, advertising, food production
and heavy equipment manufacturers, and there are uncertainties as to whether
obtaining a majority interest through contractual arrangements will comply with
regulations prohibiting or restricting foreign ownership in such
industries.





If we or
any of our prospective target businesses are found to be in violation of any
existing or future PRC laws or regulations (for example, if we are deemed to be
holding equity interests in certain of our affiliated entities in which direct
foreign ownership is prohibited) the relevant regulatory authorities may have
the discretion to:





·
            revoke
      the business and operating licenses of our prospective target
      businesses;





·
            confiscate
      relevant income and impose fines and other
  penalties;





·
            discontinue
      or restrict our prospective target businesses’
  operations;





·
            require
      us or our prospective target businesses to restructure the relevant
      ownership structure or operations;





·
            restrict
      or prohibit our use of the proceeds of our initial public offering to
      finance our businesses and operations in China;
  or





·
            impose
      conditions or requirements with which we or our prospective target
      businesses may not be able to
comply.




In many
cases, existing regulations with regard to investments from foreign investors
and domestic private capital lack detailed explanations and operational
procedures, and are subject to interpretation, which may change over time. We
thus cannot be certain how the regulations will be applied to our business,
either currently or in the future. Moreover, new regulations may be adopted or
the interpretation of existing regulations may change, any of which could result
in similar penalties, resulting in a material and adverse effect on our ability
to conduct our business.


29


Contractual
arrangements we enter into with prospective target businesses or acquisitions of
offshore entities that conduct PRC operations through affiliates in China may be
subject to a high level of scrutiny by the PRC tax authorities.





Under the
laws of PRC, arrangements and transactions among related parties may be subject
to audit or challenge by the PRC tax authorities. If any of the transactions we
enter into with prospective target businesses are found not to be on an
arm’s-length basis, or to result in an unreasonable reduction in tax under PRC
law, the PRC tax authorities have the authority to disallow any tax savings,
adjust the profits and losses of such prospective target businesses and assess
late payment interest and penalties. A finding by the PRC tax authorities that
we are ineligible for any such tax savings, or that any of our prospective
target businesses are not eligible for tax exemptions, would substantially
increase our possible future taxes and thus reduce our net income and the value
of a shareholder’s investment. In addition, in the event that in connection
with an acquisition of an offshore entity that conducted its operations through
affiliates in China, the sellers of such entities failed to pay any taxes
required under local law, the relevant tax authorities could require us to
withhold and pay the tax, together with late-payment interest and penalties. The
occurrence of any of the foregoing could have a negative impact on our operating
results and financial condition.





If
China enacts regulations in more industry segments which forbid or restrict
foreign investment, our ability to consummate a business combination could be
severely impaired.





Many of
the rules and regulations that companies face in China are not explicitly
communicated. If new laws or regulations forbid foreign investment in industries
in which we want to complete a business combination, they could severely impair
our choice of candidate pool of potential target businesses. Additionally, if
the relevant Chinese authorities find us or the target business with which we
ultimately complete a business combination to be in violation of any existing or
future Chinese laws or regulations, they would have broad discretion in dealing
with such a violation, including, without limitation:





·
            levying
      fines;




·
            revoking
      our business and other licenses;




·
            requiring
      that we restructure our ownership or operations;
  and




·
            requiring
      that we discontinue any portion or all of our
  business.




Recent
changes in China’s currency policies may cause a target business’ ability to
succeed in the international markets to be diminished.





Historically,
China “pegged” its currency to the United States dollar. This meant that each
unit of Chinese currency had a set ratio for which it could be exchanged for
United States currency, as opposed to having a floating value like other
countries’ currencies. Many countries argued that this system of keeping the
Chinese currency low when compared to other countries gave Chinese companies an
unfair price advantage over foreign companies. Due to mounting pressure from
outside countries, China recently reformed its economic policies to establish a
floating value. As a result of this policy reform, potential target companies
may be adversely affected since the competitive advantages that existed as a
result of the former policies will cease. We cannot assure you that a target
business with which we consummate a business combination will be able to compete
effectively with the new policies in place.




Restrictions
on currency exchange may limit our ability to utilize our cash flow effectively
following a business combination.





Following
a business combination, we will be subject to China’s rules and regulations on
currency conversion. In China, the State Administration for Foreign Exchange
(“SAFE”) regulates the conversion of the Chinese Renminbi into foreign
currencies. Currently, foreign investment enterprises (“FIEs”) are required to
apply to the SAFE for “Foreign Exchange Registration Certificates for FIEs.”
Following a business combination, the entity in which we invest in China will
likely be a FIE as a result of our ownership structure. FIEs holding such
registration certificates, which must be renewed annually, are allowed to open
foreign currency accounts including a “basic account” and “capital account.”
Currency translation within the scope of the “basic account,” such as remittance
of foreign currencies for payment of dividends, can be effected without
requiring the approval of the SAFE. However, conversion of currency in the
“capital account,” including capital items such as direct investments, loans,
and securities, require approval of the SAFE. We cannot assure you that the
Chinese regulatory authorities will not impose further restrictions on the
convertibility of the Chinese currency. Any future restrictions on currency
exchanges may limit our ability to use our cash flow for the distribution of
dividends to our shareholders or to fund operations we may have outside of
China.


30


If
any dividend is declared in the future and paid in a foreign currency, you may
be taxed on a larger amount in U.S. dollars than the U.S. dollar amount that you
will actually ultimately receive.





If you
are a U.S. holder, you will be taxed on the U.S. dollar value of your dividends,
if any, at the time you receive them, even if you actually receive a smaller
amount of U.S. dollars when the payment is in fact converted into U.S. dollars.
Specifically, if a dividend is declared and paid in a foreign currency, the
amount of the dividend distribution that you must include in your income as a
U.S. holder will be the U.S. dollar value of the payments made in the foreign
currency, determined at the spot rate of the foreign currency to the U.S. dollar
on the date the dividend distribution is includible in your income, regardless
of whether the payment is in fact converted into U.S. dollars. Thus, if the
value of the foreign currency decreases before you actually convert the currency
into U.S. dollars, you will be taxed on a larger amount in U.S. dollars than the
U.S. dollar amount that you will actually ultimately receive.





Regulations
relating to the transfer of state-owned property rights in enterprises may
increase the cost of our acquisitions and impose an additional administrative
burden on us.





The
legislation governing the acquisition of a China state-owned company contains
stringent governmental regulations. The transfer of state-owned property rights
in enterprises must take place through a government approved “state-owned asset
exchange”, and the value of the transferred property rights must be evaluated by
those Chinese appraisal firms qualified to do “state-owned assets evaluation”.
The final price must not be less than 90% of the appraisal price. Additionally,
bidding/auction procedures are essential in the event that there is more than
one potential transferee. In the case of an acquisition by foreign investors of
state-owned enterprises, the acquirer and the seller must make a resettlement
plan to properly resettle the employees, and the resettlement plan must be
approved by the Employees’ Representative Congress. The seller must pay all
unpaid wages and social welfare payments from the existing assets of the target
company to the employees. These regulations may adversely effect our ability to
acquire a state-owned business or assets.





Since
some of our directors and officers will live outside the United States and
substantially all of our assets will be located outside the United States,
investors may not be able to enforce federal securities laws or their other
legal rights.




Several
of our directors and officers reside outside of the United States and after the
consummation of a business combination, substantially all of our assets will be
located outside of the United States. As a result, it may be difficult, or in
some cases not possible, for investors in the United States to enforce their
legal rights, to effect service of process upon all of our directors or officers
or to enforce judgments of United States courts predicated upon civil
liabilities and criminal penalties on our directors and officers under United
States laws.




Cultural
and managerial differences may result in the reduction of our overall
performance after the consummation of a business combination.





While
Chinese mergers and acquisitions are increasing in frequency, assimilating
cultural and managerial differences are still problematic. Friction may also
result with the consolidation of management teams from different cultural
backgrounds. These factors may make effecting a business combination and running
the acquired business more difficult.





Political
instability in China could harm our business.





We may
target businesses in China that have operations associated with developing
countries in Asia where political, economic and social transition is taking
place. Some Asian countries, including China, have experienced political
instability, expropriation or nationalization of property, civil strife,
strikes, acts of war and insurrections. Any of these conditions occurring could
disrupt or terminate our operations, causing our operations to be curtailed or
terminated in these areas or our operations to decline and could cause us to
incur additional costs.


31


Fluctuations
in the value of the Renminbi relative to foreign currencies could affect our
operating results.





We will
prepare our financial statements in United States dollars, but payroll and other
costs of non-United States operations will be payable in foreign currencies,
primarily Renminbi, the Chinese currency. To the extent future revenue is
denominated in non-United States currencies, we would be subject to increased
risks relating to foreign currency exchange rate fluctuations that could have a
material adverse affect on our business, financial condition and operating
results. The value of Renminbi against the United States dollar and other
currencies may fluctuate and is affected by, among other things, changes in
China’s political and economic conditions. As our operations will be primarily
in China, any significant revaluation of the Renminbi may materially and
adversely affect our cash flows, revenues and financial condition. For example,
to the extent that we need to convert United States dollars into Chinese
Renminbi for our operations, appreciation of this currency against the United
States dollar could have a material adverse effect on our business, financial
condition and results of operations. Conversely, if we decide to convert our
Renminbi into United States dollars for other business purposes and the United
States dollar appreciates against this currency, the United States dollar
equivalent of the Renminbi we convert would be reduced.





If we were to
acquire assets, there are no requirements under BVI law that proxy materials
provided to our shareholders include historical financial statements and,
accordingly, investors will not have historical financial statements on which to
rely in making their decision whether to vote for the
acquisition.





Given
that we are a British Virgin Islands company, any proxy statement we utilize
will be prepared and delivered to our shareholders in accordance with: (i) BVI
law, which contains no specific proxy laws, rules or regulations and (ii) the
relevant provisions of our amended and restated memorandum and articles of
association. As such, if we were to acquire assets, there are no requirements
under BVI law that the proxy statement we prepare and deliver to our
shareholders contain historical financial statements with respect to the
operation of such assets, and, therefore, shareholders voting on a proposed
transaction would not have the benefit of financial statements of past
operations. Although we would not be required to include financial information
in the proxy statement, we would send to our shareholders the same information
that would typically be provided in the prospectus for an initial public
offering of a start-up company, such as: (i) historical and prevailing
market rates for assets on the basis of type, age and proposed employment;
(ii) our expectations of future market trends and proposed strategy for
operation of the assets; (iii) our anticipated operational (overhead)
expenses; and (iv) the valuation of the assets generally, all of which, in
turn, depend on the sector and country in which we consummate such a business
combination. Thus, you would not necessarily be able to rely on historical
financial statements when deciding whether to approve a business combination
involving the acquisition of assets. For a more detailed discussion of the
material provisions of the U.S. proxy rules from which we are exempt, see the
section entitled “British Virgin Islands Company Considerations—Certain Material
Protections Provided by the Exchange Act with Respect to Proxy Solicitations
that are not Afforded to our Shareholders”.





To the
extent that our business combination consists of the acquisition of assets that
do not have historical financial information, we will determine whether such
business combination has a fair market value equal to at least the 80% net asset
threshold based on the value of the assets, as determined by the experience and
advice of our management and financial advisors consistent with industry
valuation practice.




Uninsured
claims and litigation could adversely impact our operating results.





After a
business combination, we expect to secure insurance coverage against operating
hazards. However, we may not be able to procure insurance for the particular
risks associated with our target business on favorable economic terms if at all,
and the nature and amount of that insurance may not be sufficient to fully
indemnify us against liabilities arising out of pending and future claims and
litigation. This insurance typically has deductibles or self-insured retentions
and contains certain coverage exclusions. In addition, this insurance typically
does not cover damages from breach of contract by us or based on alleged fraud,
grossnegligence,misrepresentationor otherdeceptive trade
practices. Insurance and customer agreements do not provide complete protection
against losses and risks, and our results of operations could be adversely
affected by unexpected claims not covered by insurance.


32


We
may re-incorporate in another jurisdiction in connection with a business
combination, and the laws of such jurisdiction will likely govern all of our
material agreements and we may not be able to enforce our legal
rights.





In
connection with a business combination, we may relocate the home jurisdiction of
our business from the British Virgin Islands to another jurisdiction. If we
determine to do this, the laws of such jurisdiction would likely govern all of
our material agreements. We cannot assure you that the system of laws and the
enforcement of existing laws in such jurisdiction would be as certain in
implementation and interpretation as in the United States. The inability to
enforce or obtain a remedy under any of our future agreements could result in a
significant loss of business, business opportunities or capital. Any such
reincorporation and the international nature of our business will likely subject
us to foreign regulation.





British
Virgin Islands anti-money laundering laws might cause us to refuse a redemption
payment to shareholders





We
reserve the right to refuse to make any shareholder redemption payment to a
shareholder if our directors or officers suspect or are advised that the payment
of shareholder redemption proceeds to such shareholder might result in a breach
of applicable anti-money laundering or other laws or regulations by any person
in any relevant jurisdiction, or if such refusal is considered necessary or
appropriate to ensure compliance with any such laws or regulations in any
applicable jurisdiction.




ITEM
4. INFORMATION ON THE COMPANY




Overview




Chardan
2008 China Acquisition Corp. is a newly incorporated British Virgin Islands
business company with limited liability. We are a blank check company formed for
the purpose of acquiring, engaging in a merger, share exchange or contractual
control arrangement with, purchasing all or substantially all of the assets of,
or engaging in any other similar business combination with an unidentified
operating business (a “Business
Combination”).





We have a
period of 18 months from the consummation of our initial public offering (the
“IPO”) which occurred on
August 11, 2008, to effect our Business Combination, with an additional
twelve-month period (for a total of 30 months) if a letter of intent, agreement
in principle or definitive agreement has been executed within such 18 month
period but as to which the combination is not yet complete. Further, if we have
entered into a letter of intent, agreement in principle or definitive agreement
within such 18 month period, we may, prior to the expiration of the 30 month
period, call a meeting of our shareholders for the purpose of soliciting their
approval to extend the date before which we must complete our Business
Combination by an additional 6 months to avoid being required to liquidate (the
“Extended Period”). If
the Extended Period is approved by our shareholders we would have a total of 36
months from the consummation of the IPO to complete a Business
Combination.





We intend
to focus on identifying a target business having its primary operations in the
People’s Republic of China, but our efforts will not be limited to a particular
industry. To date, our efforts have been limited to organizational activities,
completion of our IPO and the evaluation of possible Business Combinations, none
of which is yet probable to occur.




We
consummated an IPO of 6,875,000 units (the “Units”) on August 11, 2008.
Each Unit consists of one ordinary share, $0.0001 par value per share (the
“Public Ordinary
Shares”) and one warrant (the “Public Warrants”) entitling
the holder to purchase one Public Ordinary Share at a price of $5.00. The Units
were sold at an offering price of $8.00 per unit, generating gross proceeds of
$55,000,000. The Public Warrants will become exercisable on the later of: (i)
the completion of a Business Combination; or (ii) August 11, 2009, and will
expire on August 11, 2012, or earlier upon redemption or our
liquidation.





Prior to
the consummation of the IPO, we had issued 2,291,666 insider units (the “Insider Units”), each
consisting of one ordinary share (the “Insider Ordinary Shares”) and
one warrant (the “Insider
Warrants”) to certain of our officers, directors and existing
shareholders at a price of $0.01091 per Insider Unit, generating gross proceeds
of $25,000. The holders of the Insider Ordinary Shares have agreed to vote such
shares in the same manner as the majority of the Public Ordinary Shares included
in the Units sold in the IPO. The terms of the Insider Warrants are identical to
those of the Public Warrants.




33








Additionally,
prior to the consummation of the IPO, certain of our officers, directors and
existing shareholders purchased 2,000,000 warrants from us at a price of $0.50
per warrant (the “Private
Placement Warrants”) in a private placement (the “Private Placement”),
generating gross proceeds of $1,000,000. The Private Placement Warrants are
identical to the Public Warrants included in the Units sold in the IPO, except
that the Private Placement Warrants are non-redeemable and may be exercised on a
“cashless” basis on the later of: (i) the completion of a Business Combination;
or (ii) August 11, 2009, and they will expire on August 11, 2012, or earlier
upon our liquidation.





The sale
of the Insider Units, the Units in the IPO and the Private Placement Warrants
generated gross proceeds to the Company in the aggregate amount of $56,025,000.
We intend to use the proceeds from those issuances, less offering expenses (both
paid and deferred) and the expenses of operations, an aggregate of $52,200,000
(the “Net Proceeds”), to
engage in a Business Combination with a business that has its principal
operations in the People’s Republic of China. Our efforts will not be limited to
a particular industry in China.





The Net
Proceeds (together with deferred offering expenses) have been deposited into a
trust account (the “Trust
Account”) at JPMorgan Chase, London branch, maintained by Continental
Stock Transfer & Trust Company acting as trustee. The holders of the Insider
Ordinary Shares have waived their right to receive any share of the Trust
Account upon distribution of the funds in the event we fail to consummate a
Business Combination. The holders of the Public Warrants, Insider Warrants and
Private Placement Warrants have no right to receive any share of the Trust
Account upon distribution of the funds in the event we fail to consummate a
Business Combination, in which event the Public Warrants, Insider Warrants and
Private Placement Warrants will expire worthless.




We are
not presently engaged in, and we will not engage in, any substantive commercial
business for an indefinite period of time following our initial public offering.
We intend to utilize cash derived from the proceeds of our initial public
offering, our share capital, debt or a combination of these in effecting a
business combination. Although substantially all of the net proceeds of our
initial public offering are intended to be generally applied toward effecting a
business combination as described in this Form 20-F, the proceeds are not
otherwise being designated for any more specific purposes. Accordingly,
prospective investors will invest in us without an opportunity to evaluate the
specific merits or risks of any one or more business combinations. A business
combination may involve the acquisition of a company that does not need
substantial additional capital but desires to establish a public trading market
for its shares, while avoiding what it may deem to be adverse consequences of
undertaking a public offering itself. These include time delays, significant
expense, loss of voting control and compliance with various US. federal and
state securities laws. In the alternative, we may seek to consummate a business
combination with a company that may be financially unstable or in its early
stages of development or growth. While we may seek to effect business
combinations with more than one target business, we will probably have the
ability, as a result of our limited resources, to initially effect only a single
business combination.




Effecting
a Business Combination




General





We are
not presently engaged in, and we will not engage in, any substantive commercial
business for an indefinite period of time following our initial public offering.
We intend to utilize cash derived from the proceeds of our initial public
offering, our unissued authorized shares, debt or a combination of these in
effecting a business combination. Although substantially all of the net proceeds
of our initial public offering are intended to be applied generally toward
effecting a business combination as described herein, the proceeds are not
otherwise being designated for any more specific purposes. Accordingly,
investors are investing without first having an opportunity to evaluate the
specific merits or risks of any one or more business combinations.





Subject
to the requirement that our business combination must be with a target
acquisition having a fair market value that is equal to at least the 80% net
asset threshold, there are no limitations on the type of investments we can make
or the percentage of our total assets that may be invested in any one
investment. Accordingly, other than the requirement that our business
combination must be with a target acquisition having a fair market value that is
equal to at least the 80% net asset threshold, our investment policies may be
changed from time to time at the discretion of our board of directors, without a
vote of our shareholders. Additionally, no limits have been set on the
concentration of investments in any location or product type.


34


We
have not identified a target acquisition





To date,
we have not selected any target acquisition with which to complete a business
combination.  As a result, we cannot assure you that we will be able
to locate a target acquisition or that we will be able to engage in a business
combination on favorable terms.





Subject
to the limitation that a target acquisition have a fair market value equal to at
least the 80% net asset threshold, we have virtually unrestricted flexibility in
identifying and selecting a prospective transaction candidate. Accordingly,
there is no basis for investors to evaluate the possible merits or risks of any
target acquisition with which we may ultimately complete a business combination.
To the extent we effect a business combination with a financially unstable asset
or property, including entities without established records of sales or
earnings, we may be affected by numerous risks inherent in the business and
operations of such financially unstable property or asset. Although our
management will endeavor to evaluate the risks inherent in a particular target
acquisition, we cannot assure you that we will properly ascertain or assess all
significant risk factors.





Sources
of target acquisitions





While we
have not yet identified any candidates for a business combination, we believe
that there are numerous acquisition candidates for us to target. We continue to
review business plans presented to us relating to potential target opportunities
from a host of different sources. Target acquisitions have been and we expect
will continue to be brought to our attention by our officers and directors,
through their network of joint venture partners and other industry relationships
located in China and elsewhere that regularly, in the course of their daily
business activities, see numerous varied opportunities. Target acquisitions may
also continue to be brought to our attention by such unaffiliated sources such
as brokers or others as a result of being solicited by us through calls or
mailings. Unaffiliated sources, such as brokers may also introduce us to target
acquisitions they think we may be interested in on an unsolicited basis, since
many of these sources will have read this prospectus and know what types of
businesses we are targeting. In no event will any of our existing shareholders,
officers or directors or any entity with which they are affiliated, be paid any
finder’s fee, consulting fee or other compensation prior to, or for any services
they render, in order to effectuate the consummation of a business
combination.




Selection
of a target acquisition and structuring of a business combination





Subject
to the requirement that our business combination must be with a target
acquisition having a fair market value equal to at least the 80% net asset
threshold, our management will have virtually unrestricted flexibility in
identifying and selecting prospective target acquisitions. We anticipate
structuring a business combination to acquire 100% of the equity interests or
assets of a prospective target business. We may, however, structure a business
combination to acquire less than 100% of such interests or assets of a
prospective target business, but in all instances we would acquire control of
such prospective target business. The key factors that we will rely on in
determining control would be our acquisition of more than 50% of the voting
equity interests of a prospective target business and/or control of the majority
of any governing body of such prospective target business through contractual
arrangements or otherwise.





Our
preferred method of acquisition of a target business is through obtaining legal
title to the equity interests of such target business, and we do not anticipate
any legal issues in acquiring legal title to shares of an offshore holding
company that is the parent company of a PRC operating company. However, due to
certain features of Chinese law, it is possible that the offshore parent company
of a PRC operating company will hold its control of the PRC operating company
through contractual arrangements that confer on the offshore parent company all
of the incidents of ownership other than legal title and provide that legal
title would be transferred, without further consideration, when it became
possible to do so under Chinese law. Reliance upon any such contractual
arrangements would be supported by an opinion of a China-based law firm that
under Chinese law these contractual arrangements are lawful, enforceable in
accordance with their terms and effective to transfer control over the PRC
operating company to us.


35


If we
acquire only a controlling interest in a prospective target business, the
portion of such business that we acquire must have a fair market value equal to
at least the 80% net asset threshold.





We have
not established any other specific attributes or criteria (financial or
otherwise) for prospective target acquisitions. In evaluating a prospective
target acquisition, our management will consider, among other factors, the
following factors likely to affect the performance of the
investment:





·
            earnings
      and growth potential;





·
            experience
      and skill of management and availability of additional
      personnel;





·
            capital
      requirements;





·
            competitive
      position;





·
            financial
      condition and results of operation;





·
            barriers
      to entry;





·
            stage
      of development of the products, processes or
  services;





·
            breadth
      of services offered;





·
            degree
      of current or potential market acceptance of the products or
      services;





·
            regulatory
      environment of the industry; and





·
            costs
      associated with effecting the business
  combination.





These
criteria are not intended to be exhaustive. Any evaluation relating to the
merits of a particular business combination will be based, to the extent
relevant, on the above factors as well as other considerations deemed relevant
by our management in effecting a business combination consistent with our
business objective. In evaluating a prospective target acquisition, we will
conduct an extensive due diligence review which will encompass, among other
things, a review of all relevant financial and other information which is made
available to us. This due diligence review will be conducted either by our
management or by unaffiliated third parties we may engage, although we have no
current intention to engage any such third parties. We will also seek to have
all owners of any prospective target acquisition execute agreements with us
waiving any right, title, interest or claim of any kind in or to any monies held
in the trust account. If any prospective business or owner refused to execute
such agreement, it is unlikely we would continue negotiations with such business
or owner.





In the
case of all possible acquisitions, we will seek to determine whether the
transaction is advisable and in the best interests of us and our shareholders.
We believe it is possible that our attractiveness as a potential buyer of
businesses may increase after the consummation of an initial transaction, and
there may or may not be additional acquisition opportunities as we grow and
integrate our acquisitions. We may or may not make future acquisitions.
Fundamentally, however, we believe that, following an initial transaction, we
could learn of, identify and analyze acquisition targets in the same way after
an initial transaction as we will before an initial transaction. To the extent
we are able to identify multiple acquisition targets and options as to which
business or assets to acquire as part of an initial transaction, we intend to
seek to consummate the acquisition which is most attractive and provides the
greatest opportunity for creating shareholder value. The determination of which
entity is the most attractive would be based on our analysis of a variety of
factors, including whether such acquisition would be in the best interests of
our shareholders, the purchase price, the terms of the sale, the perceived
quality of the assets and the likelihood that the transaction will
close.


36


In
structuring the transaction, we may elect to form a Foreign Subsidiary in
connection with a proposed business combination, which may be used to make the
acquisition. In that event, we would either merge into such Foreign Subsidiary
(with the Foreign Subsidiary being the surviving entity) or we would dissolve
and liquidate our assets to our shareholders, which would include the equity
securities we own in the Foreign Subsidiary. In the event that we do choose to
merge into such a Foreign Subsidiary or dissolve and liquidate our ownership of
such Foreign Subsidiary to our shareholders, the agreement relating to the
transaction would provide: (i) for each issued and outstanding ordinary share to
be converted into a similar right to receive ordinary shares or their
equivalents in the subsidiary and (ii) that each of our outstanding warrants of
whatever class will be assumed by the subsidiary with the same terms and
restrictions, except that they will be exercisable for ordinary shares or their
equivalents of the subsidiary. This alternative is discussed in greater detail
in the section “Taxation—U.S. Holders—Tax and Reporting Issues as to Formation
of Foreign Subsidiary.”





The time
and costs required to select and evaluate a target acquisition and to structure
and complete the business combination cannot presently be ascertained with any
degree of certainty. Any costs incurred with respect to the identification and
evaluation of a prospective target acquisition with which a business combination
is not ultimately completed will result in a loss to us and reduce the amount of
capital available to otherwise complete a business combination. While we may pay
fees or compensation to third parties for their efforts in introducing us to a
potential target business, in no event, however, will we pay any of our existing
shareholders, officers or directors or any entity with which they are affiliated
any finder’s fee or other compensation for services rendered to us or in
connection with the consummation of the initial business
combination.





Contractual
arrangements





The
government of the PRC has restricted or limited foreign ownership of certain
kinds of assets and companies operating in a wide variety of industries,
including certain aspects of telecommunications, advertising, food production,
and heavy equipment manufacturers. The PRC may apply these restrictions in other
industries in the future. In addition, there can be restrictions on the foreign
ownership of businesses that are determined from time to time to be in
“important industries” that may affect the national economic security or having
“famous Chinese brand names” or “well established Chinese brand names.” Subject
to the review requirements of the Ministry of Commerce and other relevant
agencies as discussed elsewhere for acquisitions of assets and companies in the
PRC and subject to the various percentage ownership limitations that exist from
time to time, acquisitions involving foreign investors and parties in the
various restricted categories of assets and industries may nonetheless sometimes
be consummated using contractual arrangements with permitted Chinese parties. To
the extent that such agreements are employed, they may be for control of
specific assets such as intellectual property or control of blocks of the equity
ownership interests of a company. The agreements would be designed to provide
our company with the economic benefits of and control over the subject assets or
equity interests similar to the rights of full ownership, while leaving the
technical ownership in the hands of Chinese parties who would likely be
designated by our company.





These
types of contractual arrangements could arise in two different contexts. The
first is in acquiring the equity interests in the PRC operating company directly
from the Chinese owners. In such a case, the contractual arrangements would be
directly between the Company and the Chinese owners, and they would replace the
more traditional stock purchase agreement that is used in instances where legal
title may transfer. A legal opinion regarding the validity, effectiveness and
enforceability of such arrangements under PRC law would be obtained by us from a
China-based law firm before we relied on any such arrangements.





The other
setting in which such contractual arrangements may be the means for obtaining
control over the PRC operating company is where the ownership has previously
been transferred to an offshore holding company using these arrangements. In
such a case, we would enter into a traditional share exchange or similar
customary transaction with the shareholders of the offshore holding company.
However, we would do so again only after obtaining a legal opinion from a
China-based law firm supporting the validity, effectiveness and enforceability
of such arrangements in accordance with applicable PRC law.





For
example, these contracts could result in a structure where, in exchange for our
payment of the acquisition consideration, the target company would remain
majority owned by Chinese residents but with whom we would enter into operating
and/or proxy agreements pursuant to which we would acquire control of a majority
of the target company’s governing body and the authority to exercise all of the
rights of ownership with respect to the equity interests of such designees,
including, without limitation, any voting rights, rights to appoint executive
officers and directors and rights to sell or transfer any or all of such equity
interests. Under such circumstances, the target company would continue to hold
the requisite licenses for the target business, but we might establish a new,
wholly-owned subsidiary in China which would provide technology, technical
support, consulting and related services to the target company in exchange for
fees, which would transfer to us substantially all of the economic benefits of
ownership of the target company.


37


These
contractual arrangements would be designed to provide the
following:





·
            Our
      exercise of effective control over the target
  company;





·
            Transfer
      of a substantial portion of the economic benefits of the target company
      would be transferred to us (sufficient in amount to meet the 80% net asset
      threshold); and





·
            We,
      or our designee, would have an exclusive option to purchase all or part of
      the equity interests in the target company, or all or part of the assets
      of the target company, in each case when and to the extent permitted by
      Chinese regulations and for nominal or no additional
      consideration.





While we
cannot predict the terms of any such contract that we will be able to negotiate,
at a minimum, any contractual arrangement would need to provide us with: (i)
effective control over the target’s operations and management either directly
through board control or through affirmative and/or negative covenants and veto
rights with respect to matters such as entry into material agreements,
management changes and issuance of debt or equity securities, among other
potential control provisions and (ii) a sufficient level of economic interest to
ensure that we satisfy the 80% net asset threshold required for our initial
business combination. We have not, however, established specific provisions
which must be in an agreement in order to meet the definition of business
combination. We would obtain an independent appraisal from an investment bank or
industry expert for the purpose of determining the fair value of any contractual
arrangement.





If we
choose to effect a business combination that employs the use of these types of
control arrangements, we may have difficulty in enforcing our rights,
notwithstanding the fact that we will have received a legal opinion from a
China-based law firm to the contrary. Therefore, these contractual arrangements
may not be as effective in providing us with the same economic benefits,
accounting consolidation or control over a target business as would direct
ownership through a merger or share exchange. For example, if the target
business or any other entity fails to perform its obligations under these
contractual arrangements, we may have to incur substantial costs and expend
substantial resources to enforce such arrangements and rely on legal remedies
under Chinese law, including seeking specific performance or injunctive relief,
and claiming damages, which we cannot assure will be sufficient to offset the
cost of enforcement and may adversely affect the benefits we expect to receive
from the business combination.





Moreover,
we expect that the contractual arrangements upon which we would be relying would
be governed by Chinese law and would be the only basis of providing resolution
of disputes which may arise through either arbitration or litigation in China.
Accordingly, these contracts would be interpreted in accordance with Chinese law
and any disputes would be resolved in accordance with Chinese legal procedures.
Uncertainties in the Chinese legal system could limit our ability to enforce
these contractual arrangements. In the event we are unable to enforce these
contractual arrangements, we may not be able to exert the effective level of
control over the target business.





There are
also uncertainties as to whether obtaining a majority interest through
contractual arrangements will comply with regulations prohibiting or restricting
foreign ownership in certain PRC assets and industries, and if we or any of our
prospective target businesses are found to be in violation of existing or future
PRC laws or regulations (for example, if we are deemed to be holding equity
interests in certain of our affiliated entities in which direct foreign
ownership is prohibited) the relevant regulatory authorities may have the
discretion to:





·
            revoke
      the business and operating licenses of our prospective target
      businesses;


38


·
            confiscate
      relevant income and impose fines and other
  penalties;





·
            discontinue
      or restrict our prospective target businesses’
  operations;





·
            require
      us or our prospective target businesses to restructure the ownership or
      operations;





·
            restrict
      or prohibit our use of the proceeds of our initial public offering to
      finance our businesses and operations in China;
  or





·
            impose
      conditions or requirements with which we or our prospective target
      businesses may not be able to
comply.





In many
cases, existing regulations with regard to investments from foreign investors
and domestic private capital lack detailed explanations and operational
procedures and are subject to interpretation, which may change over time. We
thus cannot be certain how the regulations will be applied to our business,
either currently or in the future. Moreover, new regulations may be adopted or
the interpretation of existing regulations may change, any of which could result
in similar penalties, resulting in a material and adverse effect on our ability
to conduct our business.





Further,
arrangements and transactions among related parties may be subject to audit or
challenge by the PRC tax authorities. If any of the transactions we enter into
with prospective target businesses are found not to be on an arm’s-length basis,
or to result in an unreasonable reduction in tax under PRC law, the PRC tax
authorities have the authority to disallow any tax savings, adjust the profits
and losses of such prospective target businesses and assess late payment
interest and penalties. A finding by the PRC tax authorities that we are
ineligible for any such tax savings, or that any of our prospective target
businesses are not eligible for tax exemptions, would substantially increase our
possible future taxes and thus reduce our net income and the value of a
shareholder’s investment.





We have
not selected any target business or target industry on which to concentrate our
search for a business combination and we are, therefore, unable to determine at
this time what form an acquisition of a target business will take.





Fair
market value of target acquisition





The
initial target acquisition that we acquire must have a fair market value equal
to at least the 80% net asset threshold, subject to the redemption rights
described below, although we may acquire a target acquisition whose fair market
value significantly exceeds the 80% net asset threshold. To accomplish this, we
may seek to raise additional funds through credit facilities or other secured
financings or a private offering of debt or equity securities if such funds are
required to consummate such a business combination, although we have not entered
into any such fund raising arrangement and do not currently anticipate effecting
such a financing other than in connection with the consummation of the business
combination.





Prior to
entering into an agreement for a target acquisition, the fair market value of
such target acquisition will be determined by our board of directors based upon
standards generally accepted by the financial community, such as actual and
potential sales, earnings and cash flow and book value. If our board is not able
to independently determine that the target acquisition has a sufficient fair
market value (for instance if the financial analysis is too complex for them to
perform), we will obtain an opinion from an unaffiliated, independent investment
banking firm that is a member of the Financial Industry Regulatory Authority
(formerly the NASD), stating whether the fair market value meets the 80% net
asset threshold. If such an opinion is obtained, we anticipate distributing
copies, or making a copy of such opinion available, to our shareholders.
However, we do not anticipate that shareholders will be entitled to rely on any
such opinion. If the independent investment banking firm takes the view that
shareholders may not rely on the opinion, we will not consider such a view as a
factor in deciding which investment banking firm to hire. We will not be
required to obtain an opinion from a third party as to the fair market value if
our board of directors independently determines that the target acquisition
complies with the 80% net asset threshold unless there is a conflict of interest
with respect to the transaction.


39


Our
officers and directors have experience evaluating target acquisitions based upon
generally accepted financial standards and have performed such evaluations for
transactions valued in the range contemplated by our initial public offering.
Satisfaction of the 80% net asset threshold is determined by calculating the
fair market value of what our shareholders receive in the business combination
and comparing it to the 80% net asset threshold. Whether assets or shares of a
target business are acquired, such assets or shares would be evaluated based
upon generally accepted valuation standards in order to determine if the fair
market value of such assets or shares are at least equal to the 80% net asset
threshold.





Possible
lack of business diversification





Our
business combination must be with a target acquisition which satisfies the
minimum valuation standard at the time of such acquisition, as discussed above.
Consequently, we expect to have the ability to effect only a single business
combination, although this process may entail the simultaneous acquisitions of
several businesses. Therefore, at least initially, the prospects for our ability
to generate revenue and profit may be entirely dependent upon the future
performance of a single business operation. Unlike other entities that may have
the resources to complete several business combinations of entities or assets
operating in multiple industries or multiple areas of a single industry, it is
probable that we will not have the resources to diversify our operations or
benefit from the possible spreading of risks or offsetting of losses. By
consummating a business combination with only a single entity or asset, our lack
of diversification may:





·
            subject
      us to numerous economic, competitive and regulatory developments, any or
      all of which may have a substantial adverse impact upon the particular
      industry in which we may operate subsequent to a business combination;
      and





·
            result
      in our dependency upon the development or market acceptance of a single or
      limited number of products, processes or
  services.





In the
event we ultimately determine to simultaneously acquire several businesses or
assets and such businesses or assets are owned by different sellers, we may need
for each of such sellers to agree that our purchase of its business or assets is
contingent on the simultaneous closings of the other acquisitions, which may
make it more difficult for us, and delay our ability, to complete the business
combination. With multiple acquisitions, we could also face additional risks,
including additional burdens and costs with respect to possible multiple
negotiations and due diligence investigations (if there are multiple sellers)
and the additional risks associated with the subsequent assimilation of the
businesses or assets into a single operating business.





Limited
ability to evaluate the target business’s management





Although
we intend to closely scrutinize the incumbent management of a prospective target
business when evaluating the desirability of effecting a business combination,
we cannot assure you that our assessment will prove to be correct. In addition,
we cannot assure you that new members that join our management following a
business combination will have the necessary skills, qualifications or abilities
to manage a public company. Furthermore, the future role of our officers and
directors, if any, in the target business following a business combination
cannot presently be stated with any certainty. While our current officers and
directors may remain associated in senior management or advisory positions with
us following a business combination, they may not devote their full time and
efforts to our affairs subsequent to a business combination. Moreover, they
would only be able to remain with the company after the consummation of a
business combination if they are able to negotiate employment or consulting
agreements in connection with such business combination, which would be
negotiated at the same time as the business combination negotiations are being
conducted and which may be a term of the business combination. Such negotiations
would take place simultaneously with the negotiation of the business combination
and could provide for such individuals to receive compensation in the form of
cash payments and/or our securities for services they would render to the
company after the consummation of the business combination. While the personal
and financial interests of such individuals may influence their motivation in
identifying and selecting a target business, the ability of such individuals to
remain with the company after the consummation of a business combination will
not be the determining factor in our decision as to whether or not we will
proceed with any potential business combination. Additionally, we cannot assure
you that our officers and directors will have significant experience or
knowledge relating to the operations of the particular target
business.


40


Following
a business combination, we may seek to recruit additional managers to supplement
or replace the incumbent management of the target business. We cannot assure you
that we will have the ability to recruit such managers, or that any such
managers we do recruit will have the requisite skills, knowledge or experience
necessary to enhance the incumbent management, if any.





Opportunity
for shareholder approval of business combination




Prior to
the completion of a business combination, we will submit the transaction to our
shareholders for approval, even if the nature of the acquisition is such as
would not ordinarily require shareholder approval under British Virgin Islands
law. If a majority of the ordinary shares voted by the public shareholders are
not voted in favor of a proposed initial business combination, we may continue
to seek other target businesses with which to effect our initial business
combination that meet the criteria set forth in this prospectus until the
expiration of 18 months from consummation of our initial public offering (or 30
months if a letter of intent, agreement in principle or definitive agreement has
been executed within such 18 month period but as to which a combination is not
yet complete, or 36 months if the extended period is approved).





In
connection with seeking shareholder approval of a business combination, we will
furnish our shareholders with proxy solicitation materials prepared in
accordance with: (i) British Virgin Islands law, which contains no specific
proxy laws, rules or regulations and (ii) the relevant provisions of our amended
and restated memorandum and articles of association. Although we anticipate that
our proxy statement and other proxy solicitation materials will contain many of
the same disclosures as proxy materials prepared in accordance with U.S. proxy
rules, investors are cautioned that such materials will not be reviewed by the
SEC and may not have all of the material disclosures required under U.S. proxy
rules.





In
connection with the vote required for any business combination, all of our
existing shareholders, including all of our officers and directors, have agreed
to vote their respective initial ordinary shares in accordance with the
majority of the ordinary shares voted by the public shareholders. This voting
arrangement shall not apply to ordinary shares included in units purchased
in our initial public offering or purchased following our initial public
offering in the open market by any of our existing shareholders, officers and
directors which they have agreed to vote in favor of a proposed business
combination. Accordingly, any purchase of our units by our existing shareholders
in our initial public offering or in the aftermarket would make it more likely
that a business combination would be approved. We are not aware of any intention
on the part of our officers, directors or existing shareholders to make any
purchases in our initial public offering or in the aftermarket, although they
will not be prohibited from doing so. Although we do not know for certain the
factors that would cause our existing shareholders to purchase our securities,
we believe that some of the factors they would consider are: (i) the trading
price of our securities, (ii) their aggregate investment in our securities,
(iii) whether it appears that a substantial number of public shareholders are
voting against a proposed business combination, and (iv) their interest in the
target business once the target business has been identified.





We will
proceed with the business combination only if a majority of the ordinary shares
voted by the public shareholders (including our existing shareholders with
respect to ordinary shares purchased in our initial public offering or
otherwise acquired in the aftermarket by them) are voted in favor of the
business combination and public shareholders owning less than 35% of the
aggregate ordinary shares sold in our initial public offering vote against
the business combination and exercise their redemption rights on a cumulative
basis, including any shareholders who previously exercised their redemption
rights in connection with the shareholder vote required to approve the extended
period, if any. Voting against the business combination alone will not result in
redemption of a shareholder’s ordinary shares for a $7.89 per
ordinary share in cash portion from the trust account. To do so, a
shareholder must have also exercised the redemption rights described below. The
requirements that we seek shareholder approval before effecting our initial
business combination and not consummate our initial business combination if
public shareholders owning 35% or more of the ordinary shares sold in our
initial public offering exercise their redemption rights below (on a cumulative
basis), are set forth in Article 24 of our amended and restated memorandum and
articles of association, which requires the affirmative vote of at least 80% of
the voting power of our outstanding voting ordinary shares to amend.
Management will not request that the board consider such a proposal to eliminate
or amend this provision. In addition, we will not seek shareholder approval to
extend this 18, 30 or 36 month period, as the case may be.





In
addition, given the interest that they have in a business combination being
consummated, it is possible that we or our existing shareholders, officers,
directors and their respective affiliates may acquire securities from public
shareholders who have elected to redeem their ordinary shares (as described
below) in order to obtain the requisite level of approval for the business
combination(which could result in a business combination being approved even if,
after the announcement of the business combination, 35% or more of our public
shareholders elected or would have elected to vote against the business
combination and exercise their redemption rights and more than 50% of our public
shareholders elected or would have elected to voted against the business
combination, but for the purchases made by us or our existing shareholders,
officers, directors or their respective affiliates). We expect that each of such
purchases, should they occur at all, would be: (i) isolated, privately
negotiated transactions with one or a discrete group of shareholders who have
elected to exercise their redemption rights and (ii) negotiated after the time
when shareholders have voted against the proposed business combination and
elected to redeem their ordinary shares.


41


Although
we and our existing shareholders, officers, directors and their respective
affiliates have no intention of entering into purchase arrangements with any of
our shareholders subsequent to our initial public offering and have not entered
into any agreements, arrangements or understandings (formal or otherwise) with
respect to any such purchases, we and they may do so in the future both as an
expression of confidence in the value of our ordinary shares following the
initial business combination and as a means of increasing the likelihood that
the initial business combination will be approved.





Any
ordinary shares purchased from shareholders by us or our existing shareholders,
officers, directors, their respective affiliates would be purchased for cash or
other consideration at a price to be negotiated between such shareholders on the
one hand and us, our existing shareholders, officers, directors or their
respective affiliates on the other hand. Such price would depend on a variety of
factors including, but not limited to, the size of the shareholders’ position in
our company and the method and timing of payment to such shareholder. Should
such purchases be negotiated, it is possible that the value of the purchase
price for such ordinary shares would exceed the per ordinary share amount to be
distributed from trust upon liquidation. We have agreed with the underwriters,
however, that if we enter into any such privately negotiated transactions, we
may only pay to applicable public shareholders funds up to the per ordinary
share redemption price set forth in this prospectus; negotiated premiums above
the redemption price, if any, would thus need to be paid by someone other than
us, which would most likely be our existing shareholders, officers, directors,
their respective affiliates or third parties and would not be paid by us. Even
if we or our existing shareholders, officers, directors, their respective
affiliates were to undertake such purchases, such purchases could be subject to
limitations under applicable securities laws and regulations, including
Regulation M and regulations regarding tender offers.





We expect
that any such purchases would be conducted in conformance with applicable
securities laws.





Extension
of time to complete a business combination to 36 months





We have a
period of 18 months from the consummation of our initial public offering within
which to effect our initial business combination, with an additional
twelve-month period (for a total of 30 months) if a letter of intent, agreement
in principle or definitive agreement has been executed within such 18 month
period but as to which the combination is not yet complete. However, unlike
other blank check companies, if we have entered into such letter of intent,
agreement in principle or definitive agreement within such 18 month period, we
may, prior to the expiration of the 30 month period, call a meeting of our
shareholders for the purpose of soliciting their approval to extend the date
before which we must complete our business combination by an additional 6 months
to avoid being required to liquidate. If the extended date is approved by
shareholders we would have a total of 36 months from the consummation of our
initial public offering to complete a business combination. In connection with
seeking shareholder approval for the extended period, we will furnish our
shareholders with proxy solicitation materials prepared in accordance with: (i)
British Virgin Islands law, which contains no specific proxy laws, rules or
regulations and (ii) the relevant provisions of our amended and restated
memorandum and articles of association. In connection with the vote required for
any extended period all of our existing shareholders, including all of our
officers and directors, have agreed to vote their respective initial
ordinary shares in accordance with the majority of the ordinary shares
voted by the public shareholders. This voting arrangement shall not apply to
ordinary shares included in units purchased in our initial public offering
or purchased following our initial public offering in the open market by any of
our existing shareholders, officers and directors which they have agreed to vote
in favor of any extended period.





We
believe that extending the date before which we must complete our business
combination to 36 months may be advisable due to the circumstances involved in
the evaluation and closing of a business combination in China, including
obtaining audited U.S. financial statements prepared in accordance with GAAP, or
financial statements prepared in accordance with International GAAP, of
potential targets that have previously kept their accounts in accordance with
PRC GAAP, the possible need for restructuring and reorganizing corporate
entities and assets (particularly with respect to state-owned enterprises) and
the requirements of complex Chinese regulatory filings and approvals. If we
enter into an agreement near the end of this 18 month period, we would have
approximately twelve months in which to accomplish the necessary accounting
reconciliations, complete the restructuring of the company, satisfy U.S. and
applicable regulatory requirements, secure the approval of our shareholders and
provide for customary closing conditions.


42


While
such 30 month period may be sufficient to accomplish all of these necessary
tasks prior to effectuating the business combination, if, in the course of this
process, we conclude that it may be insufficient, we may, pursuant to our
amended and restated memorandum and articles of association, call a general or
annual meeting of our shareholders or raise the vote at an annual meeting for
the purpose of extending by an additional 6 months the date before which we must
complete our business combination.





If
holders of 35% or more of the ordinary shares sold in our initial public
offering vote against the proposed extension to 36 months and elect to redeem
their ordinary shares for a pro rata cash portion of the trust account, we
will not extend the date before which we must complete our business combination
beyond 30 months. In such event, if we cannot complete the initial business
combination within such 30 month period, we will be required to liquidate, with
the amount remaining in the trust account returned to all public shareholders.
Subject to the foregoing, approval of the extension to 36 months will require
the affirmative vote of a majority of the votes cast by our shareholders who
vote at the special or annual meeting called for the purpose of approving such
extension. In connection with the vote required for the extension to 36 months,
our existing shareholders have agreed to vote their ordinary shares acquired
prior to our initial public offering in accordance with the majority of ordinary
shares voted by the public shareholders and have agreed to waive their
redemption rights.





If the
holders of at least a majority of the votes cast by our shareholders at the
general (or annual) meeting called for the purpose of approving such extension
in favor of such extension and holders of less than 35% of the
ordinary shares sold in our initial public offering vote against the
proposed extension and elect to redeem their ordinary shares, we will then
have an additional 6 months in which to complete the initial business
combination.





If the
proposal for the extension to 36 months is approved, we will still be required
to seek shareholder approval before effectuating our initial business
combination, even if the business combination would not ordinarily require
shareholder approval under applicable law. Unless a shareholder voted against
the proposal to extend to 36 months and exercised such shareholder’s redemption
rights, such shareholder will be able to vote on the initial business
combination. We will consummate our initial business combination only if a
majority of the ordinary shares voted by the public shareholders (including
ordinary shares purchased in our initial public offering or otherwise
acquired in the public markets by our existing shareholders, officers and
directors) are voted in favor of our initial business combination and public
shareholders owning 35% or more of the ordinary shares sold in our initial
public offering, on a cumulative basis, including any shareholders who
previously exercised their redemption rights in connection with the general or
annual meeting of shareholders called for the purpose of approving the extended
period, if any, do not vote against the extended period or the initial business
combination exercise their redemption rights, as described below.





Redemption
rights for shareholders voting to reject the extended period or our initial
business combination





Public
shareholders voting against the extended period or our initial business
combination, as the case may be, will be entitled to cause us to redeem their
ordinary shares for $7.89 per ordinary share. Shareholders voting against:
(i) the extended period will only have the right to cause us to redeem their
ordinary shares if the extended period is approved and (ii) the business
combination will only have the right to cause us to redeem their
ordinary shares if our initial business combination is approved and
completed. Public shareholders who cause us to redeem their ordinary shares for
$7.89 per ordinary share from the trust account will be paid their
redemption price as promptly as practicable after the date of the general or
annual meeting for the extended period or upon consummation of a business
combination, as the case may be, and will continue to have the right to exercise
any warrants they own.





Notwithstanding
the foregoing, our amended and restated memorandum and articles of association
provide that a public shareholder, together with any affiliate or other person
with whom such public shareholder is acting in concert or as a “group”, will be
restricted from seeking redemption rights with respect to more than 10% of the
ordinary shares sold in our initial public offering (but only with respect
to more than 10% of the ordinary shares sold in our initial public
offering). A group will be deemed to exist if public shareholders: (i) file a
Schedule 13D or 13G indicating the presence of a group, or (ii) acknowledge to
us that they are acting, or intend to act, as a group. Such public shareholders
would still be entitled to vote against a proposed business combination or the
extended period, as applicable, with respect to all ordinary shares owned,
whether directly or indirectly through one or more affiliates. We believe this
restriction will discourage investors from accumulating large blocks of our
ordinary shares prior to a vote on either a proposed business combination or the
extended period in an attempt to use their redemption right as a means to force
us or our management to purchase their ordinary shares at a significant
premium to the then current market price or on other undesirable terms. Absent
this provision, a public shareholder holding more than 10% of the ordinary
shares sold in our initial public offering could threaten to vote against a
proposed business combination or the extended period and seek redemption,
regardless of the merits of the transaction, if such public shareholder’s
ordinary shares are not purchased by us or our management at a premium to
the then current market price. By limiting a public shareholder’s ability to
redeem only 10% of the ordinary shares sold in our initial public offering,
we believe we will limit the ability of a small group of investors to
unreasonably attempt to block a transaction which is favored by our other public
shareholders. However, nothing in our amended and restated memorandum and
articles of association or otherwise, restricts the ability of any public
shareholder from voting all of their ordinary shares against a proposed
business combination or the extended period.


43


We view
the right to seek redemption as an obligation to our shareholders and will not
take any action to amend or waive this provision in our amended and restated
memorandum and articles of association. Our existing shareholders will not have
such redemption rights with respect to any ordinary shares owned by them prior
to our initial public offering (including any insider warrants or
ordinary shares they or their designees have acquired). The actual per-
ordinary share redemption price in each case will be equal to $7.89 per
ordinary share, of which $0.32 per ordinary share is attributable to
the deferred underwriting discount and the deferred non-accountable expense
allowance. The per-ordinary share redemption price in both cases would be
approximately $7.89, or $0.10 less than the per-ordinary share offering
price of $8.00 (assuming that the entire purchase price of the units was
allocated to the ordinary shares). The proceeds held in the trust account may be
subject to claims which would take priority over the claims of our public
shareholders and, as a result, the per-ordinary share liquidation price
could be less than $7.89 due to claims of such creditors. Our existing
shareholders have agreed to vote their ordinary shares for the extended
period and business combination in the same manner as a majority of public
shareholders who vote at the general or annual meeting, and have forfeited any
right to cause us to redeem any ordinary shares owned by them (regardless
of when acquired) in connection with the extended period or our initial business
combination.





An
eligible shareholder may request redemption at any time after the mailing to our
shareholders of the proxy statement and prior to the vote taken with respect to
the extended period or a proposed business combination, but the request will not
be granted unless the shareholder votes against the extension or business
combination and the extension or business combination is approved and, in the
case of the business combination, it is consummated. If a shareholder votes
against the business combination or extension but fails to properly exercise
such shareholder’s redemption rights, such shareholder will not have its
ordinary shares redeemed for cash from the trust account. Any request for
redemption, once made, may be withdrawn at any time up to the date of the
applicable meeting. The funds to be distributed to shareholders who elect
redemption will be distributed as promptly as practicable after the general or
annual meeting of shareholders approving the extended period, if any, or after
the consummation of the business combination. Public shareholders who cause us
to redeem their ordinary shares for $7.89 per ordinary share will
still have the right to exercise the warrants that they received as part of the
units and that they still own. We will not complete our proposed initial
business combination, and similarly will not extend the time to complete the
business combination to 36 months, if public shareholders owning 35% or more of
the ordinary shares sold in our initial public offering both vote against
and exercise their redemption rights with respect to the extended period or, on
a cumulative basis, in the case of the business combination. We intend to
structure and consummate any potential business combination in a manner such
that an aggregate of one ordinary share less than 35% of the ordinary
shares purchased by the public shareholders in our initial public offering could
cause us to redeem the public shareholders’ ordinary shares for $7.89 per
ordinary share from the trust account, and the business combination could
still be consummated. Many other blank check companies have a redemption
threshold of 20%, which makes it more difficult for such companies to consummate
their initial business combination. We have increased the redemption percentage
to 35% from the more typical 20% in order to reduce the likelihood that a small
group of investors holding a large block of our ordinary shares will be
able to stop us from completing a business combination that is otherwise
approved by a large majority of our public shareholders and to be competitive
with other offerings by blank check companies currently in the
market.


44


We may
require public shareholders, whether they are a record holder or hold their
ordinary shares in “street name,” to either tender their ordinary share
certificates to our transfer agent at any time prior to the special or annual
meeting or to deliver their ordinary shares to the transfer agent electronically
using Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) system.
In connection with a shareholder vote with respect to our initial business
combination or the extended period, the proxy solicitation materials that we
will furnish to shareholders in connection with the vote for any proposed
business combination or extended period will indicate whether we are requiring
shareholders to satisfy such certification and delivery requirements.
Accordingly, a shareholder would have from the time we send out our proxy
statement through the vote on the business combination to tender his ordinary
shares if such shareholder wishes to seek to exercise their redemption rights, a
period that will not be less than 10 days. This time period is expected to vary
depending on the specific facts of each transaction. However, as the delivery
process can be accomplished by the shareholder, whether or not he is a record
holder or his ordinary shares are held in “street name,” in a matter of hours
(because the transfer is made electronically once final instruction is given to
Depository Trust Company) by simply contacting the transfer agent or his broker
and requesting delivery of his ordinary shares through the DWAC system, we
believe this time period is sufficient for an average investor. However, because
we do not have any control over this process, it may take significantly longer
than we anticipated. Additionally, if the ordinary shares cannot be transferred
through the DWAC system, the process may take such number of days required to
complete the proper paperwork, obtain the necessary authorizations and consents
and to locate and deliver physical ordinary share certificates, if
any.





Traditionally,
in order to perfect redemption rights in connection with a blank check company’s
business combination, a holder could simply vote against a proposed business
combination and check a box on the proxy card indicating such holder was seeking
to redeem. After the business combination was approved, the company would
contact such shareholder to arrange for him to deliver his certificate to verify
ownership. As a result, the shareholder then had an “option window” after the
consummation of the business combination during which he, she or it could
monitor the price of the shares in the market. If the price rose above the
redemption price, the shareholder could sell his, her or its shares in the open
market before actually delivering his shares to the company for cancellation.
Thus, the redemption right, to which shareholders were aware they needed to
commit before the shareholder meeting, would become a right of redemption
surviving past the consummation of the business combination and which the
company would be obligated to honor until the redeeming holder delivered the
share certificate. The requirement for physical or electronic delivery prior to
the meeting ensures that a redeeming holder’s election to redeem is irrevocable
once the business combination is approved. There is a nominal cost associated
with the above-referenced tendering process and the act of certificating the
shares or delivering them through the DWAC system. The transfer agent will
typically charge the tendering broker $35 and it would be up to the broker
whether or not to pass this cost on to the redeeming holder. This fee would be
incurred regardless of whether or not we require holders seeking to exercise
redemption rights to tender their ordinary shares prior to the meeting. The need
to deliver ordinary shares is a requirement of redemption regardless of the
timing of when such delivery must be effectuated. Accordingly, this would not
result in any increased cost to shareholders when compared to the traditional
process; however, in the event a shareholder elects redemption of their ordinary
shares but the proposed business combination is not approved, a shareholder will
have paid $35 to elect redeem but would not actually have their ordinary shares
redeemed. Further, it is possible this tendering process will be
cost-prohibitive for shareholders in the event their aggregate holdings of our
ordinary shares do not exceed $35.





Any
request for redemption, once made, may be withdrawn at any time up to the date
of the meeting. Furthermore, if a shareholder delivered its certificate for
redemption and subsequently decided prior to the meeting not to elect
redemption, such shareholder may simply request that the transfer agent return
the certificate (physically or electronically). It is anticipated that the funds
to be distributed to shareholders entitled to redeem their ordinary shares who
elect redemption will be distributed promptly after completion of a business
combination or the approval of the extended period, as the case may be. Public
shareholders who redeem their ordinary shares into their share of the trust
account still have the right to exercise any warrants they still
hold.





If a vote
on our initial business combination is held and the business combination is not
approved, we may continue to try to consummate a business combination with a
different target until 30 months from the date of this prospectus. If the
initial business combination is not approved or completed for any reason, then
public shareholders voting against our initial business combination who
exercised their redemption rights would not be entitled to redeem their ordinary
shares for cash. Likewise, if a vote on the extended period is held and not
approved, then public shareholders voting against the extended period would not
be entitled to redeem their ordinary shares for cash. In such case, if we have
required public shareholders to tender their certificates prior to the meeting,
we will promptly return such certificates to the tendering public shareholder.
Public shareholders would be entitled to receive $7.89 per ordinary share inform
the trust account only in the event that: (i) the initial business combination
they voted against was duly approved and subsequently completed, (ii) the
extended period they voted against was duly approved, or (iii) in connection
with our dissolution and liquidation, in which case the public shareholders will
be entitled to receive their pro rata cash portion of the aggregate amount then
on deposit in the trust account (net of taxes payable and amounts of trust
account interest we may withdraw to complete our liquidation). If a shareholder
redeems its ordinary shares, such shareholder will still have the right to
exercise the warrants received as part of the units purchased in our initial
public offering in accordance with the terms hereof, provided they still hold
such warrants. If the proposed business combination is not consummated or if the
extended period is not approved, as the case may be, then a shareholder’s
ordinary shares will not be redeemed for cash, even if such shareholder elected
to redeem.


45


Voluntary
liquidation and subsequent dissolution if no business combination





If we do
not enter into a letter of intent, agreement in principle or a definitive
agreement within 18 months after the consummation of our initial public
offering, or if 35% or more of the ordinary shares sold in our initial public
offering that are voted against a proposed extension, if any, beyond 30 months
to 36 months and elect to redeem their ordinary shares for a pro rata cash
portion of the trust account or we do not receive shareholder approval for such
extension and we are not be able to complete our initial business combination
within such 30 month period, we will liquidate the trust account and distribute
to all of our public shareholders, in proportion to their respective equity
interests, an aggregate sum equal to the amount in the trust account, inclusive
of any interest (net of taxes payable and amounts of trust account interest we
may withdraw to complete our liquidation).





Pursuant
to our amended and restated memorandum and articles of association, if we do not
complete a business combination within 18 months after the consummation of our
initial public offering, or within 30 months after the consummation of our
initial public offering if the extension criteria described below have been
satisfied this will trigger a voluntary liquidation procedure under the BVI
Business Companies Act, 2004 (the “Act”), resulting in our voluntary
liquidation and dissolution. Our liquidator would give notice to creditors
inviting them to submit their claims for payment, by notifying known creditors
(if any) who have not submitted claims and by placing a public advertisement in
the British Virgin Islands Official Gazette and a BVI newspaper, and taking any
other steps he considers appropriate, after which our assets would be
distributed. We anticipate that the liquidator would instruct the trustee to
liquidate the trust account shortly following expiration of the relevant notice
period. As soon as the affairs of the company are fully wound-up, the liquidator
must complete his final report and accounts which must be filed with the
Registrar, together with his resolutions to distribute our assets. We will be
dissolved once the Registrar issues a Certificate of Dissolution.





Upon
liquidation, we anticipate that the liquidator will instruct the trustee to
distribute to all of our public shareholders, in proportion to their respective
equity interest, an aggregate sum equal to the amount in the trust account,
inclusive of any interest (net of taxes payable and amounts of trust account
interest we may withdraw to complete our liquidation). Our existing shareholders
have waived their rights to participate in any liquidation distribution with
respect to their initial units (and the securities included therein). There will
be no distribution from the trust account with respect to our warrants which
will expire worthless. We will pay the costs of our liquidation of the trust
account from our remaining assets outside of the trust account or from interest
not previously withdrawn from the trust account. In addition, our directors and
officers have agreed to indemnify us for all claims of creditors to the extent
that we fail to obtain valid and enforceable waivers from such entities in order
to protect the amounts held in trust. However, we cannot assure you that the
liquidator will not determine that he or she requires additional time to
evaluate creditors’ claims (particularly if there is uncertainty over the
validity or extent of the claims of any creditors). We also cannot assure you
that a creditor or shareholder will not file a petition with the BVI court
which, if successful, may result in our liquidation being subject to the
supervision of that court. Such events might delay distribution of some or all
of our assets to our public shareholders.





Additionally,
in any liquidation proceedings of the company under British Virgin Islands law,
the funds held in our trust account may be included in our estate and subject to
the claims of third parties with priority over the claims of our shareholders.
To the extent any such claims deplete the trust account we cannot assure you we
will be able to return to our public shareholders the liquidation amounts
payable to them.





Upon our
liquidation, the underwriters have agreed to waive any right they may have to
the deferred underwriting discount and deferred non-accountable expense
allowance to be held in the trust account, all of which shall be distributed to
the public shareholders. There will be no redemption with respect to our
warrants, regardless of class, upon such liquidation, which will expire
worthless. We will pay the costs of the dissolution and liquidation of the trust
account which are estimated to be $15,000 from our remaining assets outside of
the trust account or from interest not previously withdrawn from the trust
account.


46


If we
were to expend all of the net proceeds of our initial public offering and the
private placement, other than the proceeds deposited in the trust account, and
without taking into account interest, if any, earned on the trust account, the
initial per-ordinary share liquidation redemption price would be $7.89. The
proceeds deposited in the trust account could, however, become subject to the
claims of our creditors which could be prior to the claims of our public
shareholders. We cannot assure you that the actual per-ordinary share
liquidation redemption price will not be less than $7.89, plus interest (net of
taxes payable, which taxes, if any, shall be paid from the trust account, and
amounts of trust account interest we are permitted to draw for working capital),
due to claims of creditors. Although we will seek to have all creditors,
prospective target businesses or other entities we engage execute agreements
with us waiving any right, title, interest or claim of any kind in or to any
monies held in the trust account for the benefit of our public shareholders,
there is no guarantee that they will execute such agreements or even if they
execute such agreements that they would be prevented from bringing claims
against the trust account. If any third party refused to execute an agreement
waiving such claims to the monies held in the trust account, we would perform an
analysis of the alternatives available to us if we chose not to engage such
third party and evaluate if such engagement would be in the best interest of our
shareholders if such third party refused to waive such claims. Examples of
possible instances where we may engage a third party that refused to execute a
waiver include the engagement of a third party consultant whose particular
expertise or skills are believed by management to be significantly superior to
those of other consultants that would agree to execute a waiver or in cases
where management is unable to find a provider of required services willing to
provide the waiver. In any event, our management would perform an analysis of
the alternatives available to it and would only enter into an agreement with a
third party that did not execute a waiver if management believed that such third
party’s engagement would be significantly more beneficial to us than any
alternative. In addition, there is no guarantee that such entities will agree to
waive any claims they may have in the future as a result of, or arising out of,
any negotiations, contracts or agreements with us and will not seek recourse
against the trust account for any reason. Our officers and directors have agreed
pursuant to agreements with us and the representatives of the underwriters,
that, if we distribute the proceeds held in the trust account to our public
shareholders, they will be personally liable if a creditor or a prospective
target business does not waive any rights or claims to the trust account to pay
debts and obligations to creditors, prospective target businesses or other
entities that are owed money by us for services rendered or products sold to us
in excess of the net proceeds of our initial public offering not held in the
trust account, to the extent necessary to ensure that such claims do not reduce
the amount in the trust account. We cannot assure you, however, that they would
be able to satisfy those obligations.





However,
because we are a blank check company, rather than an operating company, and our
operations will be limited to searching for prospective target businesses to
acquire, the only likely claims to arise would be from our vendors and service
providers (such as accountants, lawyers, investment bankers, etc.) or potential
target businesses. As described above, we intend to have all vendors, service
providers and prospective target businesses execute agreements with us waiving
any right, title, interest or claim of any kind in or to any monies held in the
trust account. Our directors and officers have agreed to indemnify us, to the
extent we do not obtain valid and enforceable waivers from vendors, prospective
target businesses or other entities, for all creditor claims in order to protect
the amounts held in the trust account. In the event that the board approves a
liquidation plan where it is subsequently determined that the reserve for claims
and liabilities is insufficient, shareholders who received a return of funds
from the liquidation of our trust account could be liable for claims made by
creditors.





If we are
unable to enter into a letter of intent, agreement in principle or definitive
agreement by the expiration of the 18 month period from the consummation of our
initial public offering, or complete a business combination by the expiration of
the 30 or 36 month period from the consummation of our initial public offering,
we will enter into a voluntary liquidation procedure and subsequently liquidate
the trust account. Pursuant to the terms of the investment trust agreement
between us and Continental Stock Transfer & Trust Company, as trustee, the
trustee of the trust account will, upon receiving instructions from the
liquidator, commence liquidating the investments constituting the trust account
and will turn over the proceeds to our transfer agent for distribution to our
public shareholders. Concurrently, we shall pay, or reserve for payment, from
funds not held in trust, our liabilities and obligations, although we cannot
assure you that there will be sufficient funds for such purpose.





Our
public shareholders will be entitled to receive funds from the trust account
only in the event of a liquidation and subsequent distribution of the trust
account or if the shareholders seek to redeem their respective ordinary shares
for cash upon a business combination which the shareholder voted against and
which is actually completed by us or upon the extended period being approved and
the shareholder voted against the extended period. In no other circumstances
will a shareholder have any right or interest of any kind to or in the trust
account. Voting against the business combination or the extended period, as the
case may be, alone will not result in redemption of a shareholder’s ordinary
shares into $7.89 per ordinary share from the trust account. Such shareholder
must have also exercised its redemption rights described above.


47


If we are
forced to enter insolvent liquidation or a petition to wind up the company is
filed against us which is not dismissed, any distributions received by
shareholders could in certain circumstances be viewed by applicable laws
(including insolvency laws and certain equitable and/or restitution principles)
as either fraudulent transfers or mistaken or otherwise wrongful payments. In
those circumstances, a BVI court could order that amounts received by our
shareholders be repaid to us.





Competition





We expect
to encounter intense competition from other entities having a business objective
similar to ours, including other blank check companies and other entities,
domestic and international, competing for the type of businesses that we may
intend to acquire. Many of these individuals and entities are well established
and have extensive experience in identifying and effecting, directly or
indirectly, acquisitions of companies operating in China. Many of these
competitors possess greater technical, human and other resources, or more local
knowledge, than we do and our financial resources will be relatively limited
when contrasted with those of many of these competitors. Our ability to compete
with respect to large acquisitions will be limited by our available financial
resources, giving a competitive advantage to other acquirers with greater
resources.





Our
competitors may adopt transaction structures similar to ours, which would
decrease our competitive advantage in offering flexible transaction terms. In
addition, the number of entities and the amount of funds competing for suitable
investment properties, assets and entities may increase, resulting in increased
demand and increased prices paid for such investments. If we pay higher prices
for a target business, our profitability may decrease and we may experience a
lower return on our investments. Increased competition may also preclude us from
acquiring those properties, assets and entities that would generate the most
attractive returns to us.




Further,
the following may not be viewed favorably by certain target
acquisitions:





·
            our
      obligation to file a Form 6-K and include audited historical financial
      statements of a target business
therein;





·
            our
      potential obligation to seek shareholder approval of a business
      combination or obtain the necessary financial information to be included
      in the proxy statement to be sent to shareholders in connection with such
      business combination may delay or prevent the completion of a
      transaction;





·
            our
      obligation to redeem for cash ordinary shares held by our public
      shareholders in certain instances may reduce the resources available to us
      for a business combination;





·
            the
      requirement to acquire assets or an operating business that has a fair
      market value equal to at least the 80% net asset threshold could require
      us to acquire several assets or closely related operating businesses at
      the same time, all of which sales would be contingent on the closings of
      the other sales, which could make it more difficult to consummate the
      business combination; and





·
            our
      outstanding warrants and unit purchase option, and the potential future
      dilution they represent, may not be viewed favorably by certain target
      businesses.





If we
succeed in effecting a business combination, there will be, in all likelihood,
intense competition from competitors of the target acquisition. We cannot assure
you that, subsequent to a business combination, we will have the resources or
ability to compete effectively.





Facilities


48


We
maintain our principal executive offices at 18E, Tower A Oriental Kenzo Plaza 48
Dongzhimenwai Street Beijing, 100027, China. We have also agreed to pay a
monthly fee of $7,500 to Chardan Capital, LLC, an affiliate of Li Zhang,
chairman of our board of directors, for office space and for general and
administrative services, including but not limited to receptionist, secretarial
and general office services. This agreement commences on the date of our initial
public offering and shall continue until the earliest to occur of: (i) the
consummation of a business combination, (ii) February 11, 2011 and (iii) the
date on which we cease our corporate existence in accordance with our memorandum
and articles of association. We consider our current office space to be adequate
for our current operations.




Employees





We have
three executive officers each of whom are members of our board of directors. We
anticipate that we will have access to the services of other personnel on an
as-needed basis, although there can be no assurances that any such personnel
will be able to devote sufficient time, effort or attention to us when we need
it. None of our officers nor any of these other personnel, all of whom we will
be dependent upon prior to effecting a business combination, have entered into
employment agreements with us and none are obligated to devote any specific
number of hours to our matters and intend to devote only as much time as they
deem necessary to our affairs. The amount of time they will devote in any time
period will vary based on whether we are in the process of: (i) seeking a
potential target acquisition, or (ii) performing due diligence on one or
more target acquisitions or (iii) completing the business combination for a
selected target acquisition. Our officers may spend more time than others, or no
time at all, on the various phases of the acquisition process depending on their
competing time requirements apart from our business and their particular areas
of expertise. We do not intend to have any full-time employees prior to the
consummation of a business combination.





Periodic
Reporting and Audited Financial Statements





We have
registered our units, ordinary shares and warrants under the Securities Exchange
Act of 1934, as amended, and have reporting obligations, including the
requirement that we file annual reports with the SEC. In accordance with the
requirements of the Securities Exchange Act of 1934, our annual reports will
contain financial statements audited and reported on by our independent
registered public accountants.





Our
management will provide shareholders with audited financial statements of the
properties to be acquired as part of our Form 6-K filing obligation and in the
event of a shareholder vote in the proxy solicitation materials sent to
shareholders, in order to assist them in assessing each specific target
acquisition we seek to acquire. While the requirement of having available
financial information for the target acquisition may limit the pool of potential
acquisition candidates, given the broad range of target acquisitions we may
consummate a business combination with, we do not believe that the narrowing of
the pool will be material.





Legal
Proceedings





There is
no litigation currently pending or, to our knowledge, contemplated against us or
any of our officers or directors in their capacity as such.




Government
Regulations




Government regulations relating to
foreign exchange controls




The
principal regulation governing foreign exchange in China include, among others,
the Foreign Currency Administration Rules (IPPS) and the Administrative
Regulations Regarding Settlement, Sale and Payment of Foreign Exhange. Under
these rules and regulations, the Renminbi, China’s currency, is freely
convertible for trade and service related foreign exchange transactions, but not
for direct investment, loan or investment in securities outside of China unless
the prior approval of SAFE is obtained. FIEs are required to apply to the SAFE
for “Foreign Exchange Registration Certificates for FIEs.” Following a business
combination, we will likely be an FIE as a result of our ownership structure.
With such registration certificates, which need to be renewed annually, FIEs are
allowed to open foreign currency accounts including a “basic account” and
“capital account.” Currency translation within the scope of the “basic account,”
such as remittance of foreign currencies for payment of dividends, can be
effected without requiring the approval of the SAFE. However, conversion of
currency in the “capital account,” including capital items such as direct
investment, loans and securities, still require approval of the SAFE. This prior
approval may delay or impair our ability to operate following a business
combination.


49


Government regulations relating to
income taxation




On
March 16, 2007, the PRC Enterprise Income Tax Law, or the EIT Law, was enacted
and became effective on January 1, 2008. On December 6, 2007, the PRC State
Council issued the implementation rules of the EIT Law, which also became
effective on January 1, 2008. The EIT Law adopted a uniform tax rate of 25% for
all enterprises (including FIEs). On December 26, 2007, the PRC government
issued detailed implementation rules regarding the applicable tax rates during
the transition period, which became effective upon promulgation. In accordance
with the new PRC tax law and regulations, enterprises that were established and
enjoyed preferential tax treatments before March 16, 2007 will continue to enjoy
such preferential tax treatments, and (1) in the case of preferential tax rates,
the enterprise income tax rate of such enterprises will gradually transition to
the uniform 25% enterprise income tax rate by January 1, 2013, or (2) in the
case of preferential tax exemption or reduction for a specified term, until the
expiration of such term.




Under
the EIT Law, “high and new technology enterprises” would be entitled to a
preferential tax rate of 15%. The Ministry of Science and Technology, the
Ministry of Finance and the State Administration of Taxation jointly issued the
Administrative Regulations on the Recognition of High and New Technology
Enterprises on April 14, 2008, or the Hi-tech Enterprises Recognition
Regulations. The EIT Law and its implementation rules provide that an income tax
rate of 10% will normally be applicable to dividends payable to investors that
are “non-resident enterprises”, to the extent such dividends have their source
within the PRC. Further, under the EIT Law, enterprises established under the
laws of foreign countries or regions whose “de facto management bodies” are
located within the PRC territory are considered resident enterprises and will
normally be subject to the enterprise income tax at the rate of 25% on its
global income. After our initial business combination, substantially all of our
management may be located in the PRC, and therefore we may be considered a
resident enterprise and subject to the enterprise income tax at the rate of 25%
on our global income.




Regulation of Mergers and
Acquisitions




The
2006 Acquisition Provisions deprive companies incorporated or controlled
overseas that are established by Chinese domestic companies, enterprises or
natural persons and are merging with or acquiring Chinese domestic affiliated
companies of the tax preferential treatments granted to FIEs, unless the
overseas companies will bring a certain amount of additional capital to the
Chinese company. The 2006 Acquisition Provisions also create new layers of
Chinese regulatory approvals affecting offshore “special purpose companies” set
up by Chinese domestic companies, enterprises or natural persons, and the
in-bound investment made by such “special purpose companies”. The 2006
Acquisition Provisions require that the parties to a merger or acquisition shall
disclose to the PRC approval authority and elaborate on whether the parties are
affiliates; if there are two parties who belong to the same actual controlling
party, the parties concerned must disclose the actual controlling party to the
PRC approval authority and explain the purpose of the merger or acquisition and
whether the price agreed conforms to fair market value.




The
2006 Acquisition Provisions define a “special purpose company” as “a foreign
company directly or indirectly controlled by Chinese domestic companies or
natural persons for the purpose of listing in an overseas market the equity
interests in a Chinese domestic company actually held by them.” A Chinese
domestic company that is to set up a special purpose company overseas must
obtain approval from MOFCOM and disclose to MOFCOM certain information including
the business plan with regard to the listing of the special purpose company in
the overseas market and the appraisal report issued by a consultant with regard
to the stock offering price for any future listing of the special purpose
company on an overseas market. The overseas listing of the special purpose
company is subject to the approval of CSRC. Additionally, the financing of the
special purpose company from its overseas listing must be repatriated to China
according to the repatriation plan filed with SAFE. The profits, dividends and
foreign exchange income obtained as a result of capital variation, which are
received by the Chinese domestic companies or natural persons from their special
purpose companies, must be repatriated to China within six months from the day
on which they are received.


50




With
regard to the tax treatments granted to FIEs established by Chinese domestic
companies, enterprises or natural persons by way of merger with or acquisition
of Chinese domestic affiliated companies in the name of their companies duly
incorporated or controlled overseas, the 2006 Acquisition Provisions explicitly
state that such FIEs are not eligible for the preferential treatments granted by
the PRC government to FIEs, unless such overseas companies subscribe to the
capital increase of the target Chinese domestic companies or contribute
additional capital to the post-acquisition Chinese domestic company and the
amount of the capital subscribed or contributed accounts for 25% or more of the
post-acquisition registered capital of the Chinese company.




The
2006 Acquisition Provisions require that if the merger or acquisition of a
Chinese domestic company by foreign investors and their obtaining controlling
rights (i) involves key industries, (ii) has any factor that impacts or may
impact the economic security of China, or (iii) leads to a shift of controlling
rights over a Chinese domestic company that possesses “famous brands” or
“traditional Chinese trade names”, then the parties concerned shall file an
application in respect of such issues with MOFCOM. The 2006 Acquisition
Provisions emphasize that mergers with or acquisitions of Chinese domestic
companies by foreign investors must not result in a loss on the sale of
state-owned assets and if the merger or acquisition involves such matters as the
transfer of state-owned property rights in companies or management of
state-owned equity rights in listed companies the relevant provisions regarding
the administration of State-owned assets must be complied with (see
below).




Regulation on State-owned Property
Rights




The
acquisition of a PRC state-owned company is subject to stringent governmental
regulation. The governing legislation is, among others the Provisional Regulations on Using
Foreign Investment to Reorganize State-owned Enterprisespromulgated by
SAIC and SAFE on November 8, 2002, effective from January 1, 2003 and the Provisional Measures on the
Administration of the Transfer of State-Owned Property Rights in Enterprisespromulgated by the SASAC and the MOF on December 31, 2003, effective from
February 1, 2004.




As
a matter of principle, the transfer of state-owned property rights in
enterprises must take place through a government approved “state-owned asset
exchange”, and the value of the transferred property rights must be evaluated by
those Chinese appraisal firms qualified to do “state-owned assets evaluation”.
The final price must not be less than 90% of the appraisal price. Additionally,
bidding/auction procedures are essential in the event that there is more than
one potential transferee.




In
the case of an acquisition by foreign investors of state-owned enterprises, the
acquirer and the seller must make a resettlement plan to properly resettle the
employees, and the resettlement plan must be approved by the Employees’
Representative Congress. The seller must pay all unpaid wages and social welfare
payments from the existing assets of the target company to the
employees.




Regulation of Foreign Exchange in
Certain Onshore and Offshore Transactions




According
to Notice 75:




•
              prior
      to establishing or assuming control of an offshore company for the purpose
      of financing that offshore company with assets or equity interests in an
      onshore enterprise in the PRC, each PRC resident, whether a natural or
      legal person, must complete the overseas investment foreign exchange
      registration procedures with the relevant local SAFE
    branch;•
              an
      amendment to the registration with the local SAFE branch is required to be
      filed by any PRC resident that directly or indirectly holds interests in
      that offshore company upon either (1) the injection of equity interests or
      assets of an onshore enterprise to the offshore company, or (2) the
      completion of any overseas fund raising by such offshore company;
      and•
              an
      amendment to the registration with the local SAFE branch is also required
      to be filed by such PRC resident when there is any material change
      involving a change in the capital of the offshore company, such as (1) an
      increase or decrease in its capital, (2) a transfer or swap of shares, (3)
      a division, (4) a long term equity or debt investment, or (5) the creation
      of any security interests over the relevant assets located in
      China.


51


Under
the relevant rules, failure to comply with the registration procedures set forth
in Notice 75 may result in restrictions being imposed on the foreign exchange
activities of the relevant onshore company, including the payment of dividends
and other distributions to its offshore parent or affiliate and the capital
inflow from the offshore entity, and may also subject relevant PRC residents to
penalties under PRC foreign exchange administration regulations.




As
a BVI company, and therefore a foreign entity, if we purchase the assets or
equity interest of a PRC company owned by PRC residents, such PRC residents will
be subject to the registration procedures described in the regulations as
currently drafted. Moreover, PRC residents who are beneficial holders of our
shares are required to register with SAFE in connection with their investment in
us.




To
further clarify the implementation of Circular 75, the SAFE issued Circular No.
106 on May 29, 2007. Under Circular No. 106, PRC subsidiaries of an offshore
special purpose company are required to coordinate and supervise the filing of
SAFE registrations by the offshore holding company’s shareholders who are PRC
residents in a timely manner. If these shareholders fail to comply, the PRC
subsidiaries are required to report to the local SAFE authorities. If the PRC
subsidiaries of the offshore parent company do not report to the local SAFE
authorities, they may be prohibited from distributing their profits and proceeds
from any reduction in capital, share transfer or liquidation to their offshore
parent company and the offshore parent company may be restricted in its ability
to contribute additional capital into its PRC subsidiaries. Moreover, failure to
comply with the above SAFE registration requirements could result in liabilities
under PRC laws for evasion of foreign exchange restrictions.




Regulation of wholly foreign-owned
enterprises (WFOE)




Generally
speaking, under the current Chinese legal regime regulating foreign direct
investment in China, the following forms of FIEs are available to foreign
investors:




•
            Sino-foreign
      equity joint ventures (“EJV”);•
            Sino-foreign
      co-operative joint ventures (“CJV”); and•
            Wholly
      foreign-owned enterprises (“WFOE”).




A
WFOE is a company with limited liability and legal person status. There are only
foreign investors and no Chinese partners. Unlike an EJV or CJV, articles of
association are sufficient to establish a WFOE, and there is no need to draw up
a joint venture contract even if there are two or more foreign investors in the
WFOE. Like an EJV or CJV, the articles of association must be approved by the
Chinese government.




Foreign
investors may prefer WFOEs to EJVs/CJVs because in the case of a WFOE (1) there
is a straightforward management structure which is not dependent on the
interests of a local partner; (2) it is easy to terminate compared to an EJV or
CJV; and (3) intellectual property is usually better protected. Without a local
partner, the foreign investor lacks local support and proper access to resources
(such as connections with governmental authorities) and access to the markets of
China’s unique economy.




While
it is an issue under Chinese law whether WFOEs are allowed in certain Chinese
industries, foreign investors are allowed to incorporate WFOEs in certain
industries.




Dividend
distribution.




The
principal laws and regulations in China governing distribution of dividends by
foreign-invested companies include:




•
            The
      Sino-foreign Equity Joint Venture Law (1979), as
  amended;•
            The
      Regulations for the Implementation of the Sino-foreign Equity Joint
      Venture Law (1983), as amended;•
            The
      Sino-foreign Cooperative Enterprise Law (1988), as
  amended;        52
 •
            The
      Detailed Rules for the Implementation of the Sino-foreign Cooperative
      Enterprise Law (1995), as amended;•
            The
      Foreign Investment Enterprise Law (1986), as amended;
  and•
            The
      Regulations of Implementation of the Foreign Investment Enterprise Law
      (1990), as amended.














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




ITEM 5. OPERATING AND FINANCIAL REVIEW AND
PROSPECTS




We
were formed on February 19, 2008 for the purpose of acquiring, engaging in a
merger, share exchange with, purchasing all or substantially all of the assets
of, or engaging in a contractual control arrangement or any other similar
business combination of an unidentified operating business. We intend to focus
on identifying a prospective target business having its primary operations in
the People’s Republic of China. Our efforts in identifying a prospective target
business will be limited geographically to China (although we may acquire an
entity that is not incorporated in China but has its principal business and/or
material operations in China) but not to any particular industry sector. We
intend to utilize cash derived from the proceeds of our initial public offering
and the founding director warrants, our share capital, debt or a combination of
cash, share capital and debt, in effecting a business combination.




For
the year ended December 31, 2008, we had no significant operations. On August
11, 2008, we consummated our initial public offering. The net proceeds from (i)
the sale of the units, and (ii) the sale of founding director warrants in a
private placement transaction prior to the closing of our initial public
offering, was approximately $54,293,000. As a result, $54,293,000 is currently
held in trust. We will use substantially all of the net proceeds of our initial
public offering to acquire a target business, including identifying and
evaluating prospective acquisition candidates, selecting the target business,
and structuring, negotiating and consummating the business combination, as
described above. To the extent that our share capital is used in whole or in
part as consideration to effect a business combination, the balance of proceeds
held in the trust account as well as any other net proceeds not expended will be
used to finance the operations of the operating business acquired in the
business combination.




We
believe that, upon consummation of this offering and the private placement, the
funds not held in trust ($45,413) plus all of the trust interest earned on the
trust account, which we will be permitted to draw at our discretion, will be
sufficient to allow us to operate for until February 11, 2011 (30 months from
our initial public offering), assuming that a business combination is not
consummated during that time. In order to fund our working capital (including
expenses in seeking business combinations and, potentially, the costs of our
liquidation and dissolution), we are permitted to draw all of the cumulative
interest earned on the funds held in the trust account, after taxes, from time
to time at our discretion. Over this time period, we will be using these funds
for identifying and evaluating prospective acquisition candidates, performing
business due diligence on prospective target acquisitions, traveling to and from
the property and asset locations that represent prospective target acquisitions,
reviewing corporate, title, environmental, and financial documents and material
agreements regarding prospective target acquisitions, selecting the target
acquisition to acquire and structuring, negotiating and consummating the
business combination. On the basis of our management’s prior experience in
operating and/or advising blank check companies, we anticipate that we will
incur approximately $600,000 of expenses for the due diligence and investigation
of a target acquisition, $550,000 of expenses for legal, accounting and other
expenses attendant to the due diligence investigations, structuring and
negotiating of a business combination, $225,000 under an administrative services
agreement with Chardan Capital, LLC, an affiliate of Li Zhang, chairman of our
board of directors, $150,000 of expenses in legal and accounting fees relating
to our SEC reporting obligations, $425,000 for general working capital that will
be used for miscellaneous expenses and reserves including the cost of
liquidation, which we currently estimate to be up to $15,000 if our corporate
existence terminates on February 11, 2011 30 months from the date of the
prospectus, and approximately $150,000 for director and officer liability
insurance premiums. These expense amounts are estimates only. Our actual
expenditures for some or all of these items may differ from the estimates set
forth herein. For example, we may incur greater legal and accounting expenses
than our current estimates in connection with negotiating and structuring a
business combination due to the level of complexity associated with that
business combination. We do not anticipate any change in our intended use of
proceeds, other than fluctuations among the amounts allocated to current
categories of allocated expenses, which fluctuations, to the extent they exceed
current estimates for any specific category of expenses, would be deducted from
our excess working capital. Any such funds not used for our working capital
requirements or to repay advances from our officers or directors and their
respective affiliates or for due diligence or legal, accounting and non-due
diligence expenses will be usable by us to pay other expenses that may exceed
our current estimates. If our estimate of the costs of undertaking in-depth due
diligence and negotiating a business combination is less than the actual amount
necessary to do so, we may be required to raise additional capital, the amount,
availability and cost of which cannot be currently ascertained. In that event,
we could seek such additional capital through loans or additional investments
from our officers or directors and their respective affiliates. None of such
officers or directors or their respective affiliates is under any obligation to
advance funds to, or invest in, us. Any such interest income not used to fund
our working capital requirements or repay advances from our officers or
directors and their respective affiliates or for due diligence or legal,
accounting and non-due diligence expenses will be usable by us to pay other
expenses that may exceed our current estimates. In connection with our initial
public offering we sold to the underwriters, for $100, an option to purchase up
to a total of 137,500 units. The sale of the option was accounted for as a cost
attributable to the offering. Accordingly, there will be no net impact on our
financial position or results of operations, except for the recording of the
$100 proceeds from the sale. We estimated, based upon a Black-Scholes model,
that the fair value of the option on the date of sale was approximately
$268,616, using an expected life of four years after the first anniversary of
our initial public offering, volatility of 30.87%, and a risk-free rate of 2.5%.
However, because our units did not have a trading history at the time it was
valued, the volatility assumption was based on information available to
management at such time. We believe the volatility estimate is a reasonable
benchmark to use in estimating the expected volatility of our units. Although an
expected life of four years was used in the calculation, if we do not consummate
a business combination within the prescribed time period and we liquidate, the
option will become worthless.


53




ITEM 6. DIRECTORS,
SENIOR MANAGEMENT AND EMPLOYEES




A. Directors and Senior
Management





Directors
and Executive Officers





Our
current directors and executive officers are as follows:




Name
            
            Age
            
            PositionKerry
      S. Propper
            
            32
            
            Chief
      Executive Officer and DirectorLi
      Zhang
            
            55
            
            Chairman
      of the Board of DirectorsXiaosong
      Zhong
            
            50
            
            Chief
      Financial Officer and DirectorLi
      Gong
            
            46
            
            Secretary
      and DirectorDr.
      Jianjun Shi
            
            50
            
            Director




Kerry S.
Propper has been our chief executive officer and a member of our board of
directors since inception. From March 2005 through September 2007, Mr. Propper
served as the chief financial officer, secretary and a member of the board of
directors of Chardan North China Acquisition Corp. which acquired HLS Systems
International Ltd. in September 2007. Since September 2007, Mr. Propper has
served as a director of HLS Systems International Ltd. (OTCBB Symbol: HLSYF).
From March 2005 through January 2008, Mr. Propper served as the chief executive
officer and a member of the board of directors of Chardan South China
Acquisition Corp. (which through a merger became A-Power Energy Generation
Systems - Nasdaq Symbol: APWR). Mr. Propper has been the owner and chief
executive officer of Chardan Capital Markets LLC (formerly known as Gramercy
Group), a New York based broker-dealer and FINRA member firm, since July 2003.
He has also been a managing member of SUJG, Inc., an investment company, since
April 2005. From its inception in December 2003 until November 2005, Mr. Propper
served as the executive vice president and a member of the board of directors of
Chardan China Acquisition Corp., an OTC Bulletin Board listed blank check
company that was seeking to acquire an operating business in the People’s
Republic of China. In November 2005, Chardan China Acquisition Corp. completed
its business combination with State Harvest Holdings Ltd. and changed its name
to Origin Agritech Limited (Nasdaq Symbol: SEED). Mr. Propper has continued to
serve as a member of the board of directors of Origin Agritech since its merger.
Since November 2006, Mr. Propper has served as the executive vice president of
mergers and acquisitions of Shine Media Acquisition Corp., a blank-check company
listed on the OTC Bulletin Board. On May 8, 2008, Shine Media entered into a
stock purchase agreement pursuant to which it will acquire all of the ordinary
shares of China Greenscape Co., Ltd., a British Virgin Islands company, which
owns 100% of Jiangsu Sunshine Zoology and Forestry Development Co., Ltd., a PRC
company. Jiangsu Sunshine is an urban green resources company that develops,
cultivates, and distributes trees, plants and flowers to expanding PRC
municipalities. Since December, 2005, Mr. Propper has served as a special
advisor to Jaguar Acquisition Corp., a blank-check company listed on the OTC
Bulletin Board. On April 9, 2008, Jaguar merged with and into a British Virgin
Islands company named China Cablecom Holdings, and concurrently entered into an
agreement and plan of merger with China Cablecom Ltd., pursuant to which Jaguar
acquired China Cablecom Ltd. China Cablecom is a consolidator of cable TV
operating companies in the PRC. Mr. Propper also sits on the board of directors
of Source Atlantic Inc., a health care consulting firm based in Massachusetts.
Mr. Propper was a founder, and from February 1999 to July 2003 owner and
managing director of Windsor Capital Advisors, a full service brokerage firm
also based in New York. Mr. Propper also founded The Private Capital Group LLC,
a small private investment firm specializing in hard money loans and convertible
preferred debt and equity offerings for small public companies, in May 2000 and
was affiliated with it until December 2003. From July 1997 until February 1999,
Mr. Propper worked at Aegis Capital Corp., a broker-dealer and member firm of
the FINRA. Mr. Propper is on the advisory board of Netsol Technologies, a
software company with operations in Pakistan. Mr. Propper received his B.A. in
Economics and International Studies from Colby College.


54


Li Zhang
has been the chairman of our board of directors since our inception. From March
2005 through January 2008, Mr. Zhang served as executive vice president and a
member of the board of directors of Chardan South China Acquisition Corporation
(which through a merger became A-Power Energy Generation Systems -Nasdaq Symbol:
APWR) since March 2005, and served as the chief executive officer and a member
of the board of directors of Chardan North China Acquisition Corporation (which
through a merger became HLS Systems International, Ltd. - OTCBB Symbol: HLSYF)
from March 2005 through September 2007. He also served as chief financial
officer and a member of the board of directors of Chardan China Acquisition
Corp. (which through a merger became Origin Agritech Limited - Nasdaq Symbol:
SEED) since its inception in December 2003 through consummation of its merger
with Origin Agritech Limited in November 2005. Mr. Zhang has also served as a
member and manager of Chardan Capital, LLC since its inception in August 2003.
From September 2001 through 2003, Mr. Zhang was a principal and president of
Pacific Asia Ventures, LLC, a company that provided strategic consulting
services for Chinese-U.S. business relationships. From January 1994 until
September 2001, Mr. Zhang served as chairman of Sino-American Investment, Inc.,
an investment consulting firm. From September 1996 until September 1998, Mr.
Zhang also served as a consultant to the China Retail Fund, a venture capital
fund that invests in retail ventures with backing from American International
Group. Mr. Zhang has two decades of experience in establishing commercial and
financial relationships between Chinese companies, government agencies and
Western investors. Among his other affiliations during that time, he was
chairman of Sino-American Power, Ltd., an organization formed for the purpose of
building electric power generating plants in China, from 1994 through 1996. Mr.
Zhang received a B.A. from the Shenyang Teacher’s University in the
PRC.





Xiaosong
Zhonghas been our chief financial officer and a member of our board
of directors since our inception. Mr. Zhong has been the chairman of Beijing
United Power Invested Co. Ltd, an investment firm which he founded, since its
inception in June 2006. He has been the general manager of Beijing C&D
International Co. Ltd., a company which he founded, since its inception in March
2001. Mr. Zhong has also been the chairman of TCT Science and Technology Co.
Ltd., a developer and distributor of women’s health equipment and company which
he founded, since its inception in July 1999. From June 1991 to August 1998, Mr.
Zhong was the manager of Beijing Yige Computer Control Engineering Company, a
contract electrical engineering firm which Mr. Zhong founded and sold in May
1998. From February 1988 to April 1991, Mr. Zhong was the manager of Beijing
Haidian Contraction Co., Ltd., a construction company in Beijing, China. Mr.
Zhong attended the Beijing Construction Institute in 1983, and from 1983 to 1987
received training as a technical cadre in China’s Ministry of
Construction.





Li Gong
has been our secretary and a member of our board of directors since our
inception. Ms. Gong also currently serves as the president of Beijing Sinokosen
Investment Ltd., which primarily engages in assisting Chinese enterprises with
financings and listings on various exchanges, a position she has held since
April 2005. From February 2004 to the present, Ms. Gong served as a consultant
of the Production Material Center of the Ministry of Science and Technology of
the People’s Republic of China (the “Ministry of Science and Technology”) and as
the advisor of the LED Office of the Ministry of Science and Technology. From
February 2002 to February 2005, Ms. Gong served as vice president of Beijing
LianHe YunTong Investment Ltd. Ms. Gong received a bachelor’s degree in physics
from Haerbing Educational Institute and a master’s degree from the Management
Engineering Institute of Haerbing Industrial University. Ms. Gong also
participated in EMBA training with the University GuanHua Management
Institute.


55


Dr. Jianjun
Shi has been a member of our board of directors since inception. Dr. Shi
currently serves as the general manager of ShangHai NengHuan Technology
Development Ltd., a position which he has held since August 2000. From August
1981 to August 2000 he served as Chief Medico at AnHui Province Electric Power
Construction Ltd. Dr. Shi received a bachelor’s degree in Chinese herbal
medicine from AnHui Herbalist Institute, a master’s of business administration
from Kiev University and a doctorate of economics and management from Shanghai
Tongi University.





Our board
of directors is divided into two classes, with only one class of directors being
elected in each year and each class serving a two-year term. Our amended and
restated memorandum and articles of association provide that the number of
directors which may constitute the board of directors shall be two or greater.
Our board of directors consists of five members. The term of office of the first
class of directors, consisting of Li Gong, Xiaosong Zhong and Dr. Jianjun Shi,
will expire at our first annual meeting of shareholders following the completion
of our initial public offering. The term of office of the second class of
directors, consisting of Kerry Propper and Li Zhang, will expire at the second
annual meeting following the completion of our initial public
offering.




B.
Compensation




No
executive officer has received any cash compensation for services rendered to
us. No compensation of any kind, including, without limitation, finders,
consulting fees or other similar compensation, will be paid to any of our
existing shareholders, officers or directors or any of their respective
affiliates, prior to or in connection with a business combination. However, such
individuals and entities will be reimbursed for any out-of-pocket expenses
incurred in connection with activities on our behalf such as identifying
potential target acquisitions and performing due diligence on suitable business
combinations.





After our
initial business combination, our executive officers and directors who remain
with us may be paid consulting, management or other fees from the combined
company with any and all amounts being fully disclosed to shareholders, to the
extent then known, in the proxy solicitation materials furnished to our
shareholders. It is unlikely, however, that the amount of such compensation will
be known at the time of a shareholder meeting held to consider an initial
business combination, as it will be up to the directors of the post-combination
business to determine executive and director compensation. Any compensation to
be paid to our chief executive officer and other officers will be determined, or
recommended to the board of directors for determination, either by a
compensation committee constituted solely by independent directors or by a
majority of the independent directors on our board of directors, in accordance
with the rules of the Nasdaq Capital Market.




C.
Board Practices




Director
Independence





At
present, our board of directors has determined that each of Li Zhang and Dr.
Jianjun Shi qualify as “independent directors” within the meaning of Rule 10A-3
promulgated under the Securities Exchange Act of 1934, as amended, and the
Sarbanes-Oxley Act of 2002, and Rule 4350 of the Nasdaq Marketplace
Rules.


56


Pursuant
to Rule 4350 of the Nasdaq Marketplace Rules, because we are a foreign based
entity, we need only comply with British Virgin Islands law, to the extent not
contrary to federal securities law, with respect to the composition of our board
of directors. British Virgin Islands law does not require independent directors
or an independent audit committee, however, pursuant to Section 10A(m) of the
Securities Exchange Act of 1934, as amended, and Section 3 of the Sarbanes-Oxley
Act of 2002, we are required to have an independent audit committee. Prior to
completion of a business combination, we intend to be in full compliance with
the standards imposed by the Securities Exchange Act of 1934 and Sarbanes-Oxley
Act of 2002.




Board
      Committees





Audit
Committee





Our audit
committee consists of Kerry S. Propper, Li Zhang and Dr. Jianjun Shi. As
required by the rules of the Nasdaq Capital Market, each of the members of our
audit committee is financially literate, and we consider Mr. Li to qualify as an
“audit committee financial expert” and “financially sophisticated” as defined
under SEC and Nasdaq Capital Market rules, respectively. We will have an audit
committee composed of three independent directors within one year of the date of
this prospectus. The responsibilities of our audit committee
include:





·
            meeting
      with our management periodically to consider the adequacy of our internal
      control over financial reporting and the objectivity of our financial
      reporting;





·
              appointing
      the independent registered public accounting firm, determining the
      compensation of the independent registered public accounting firm and
      pre-approving the engagement of the independent registered public
      accounting firm for audit and non-audit services;·
              overseeing
      the independent registered public accounting firm, including reviewing
      independence and quality control procedures and experience and
      qualifications of audit personnel that are providing us audit
      services;





·
            meeting
      with the independent registered public accounting firm and reviewing the
      scope and significant findings of the audits performed by them, and
      meeting with management and internal financial personnel regarding these
      matters;





·
            reviewing
      our financing plans, the adequacy and sufficiency of our financial and
      accounting controls, practices and procedures, the activities and
      recommendations of the auditors and our reporting policies and practices,
      and reporting recommendations to our full board of directors for
      approval;





·
            establishing
      procedures for the receipt, retention and treatment of complaints
      regarding internal accounting controls or auditing matters and the
      confidential, anonymous submissions by employees of concerns regarding
      questionable accounting or auditing
matters;





·
            preparing
      the report required by the rules of the SEC to be included in our annual
      proxy statement;





·
            monitoring
      compliance on a quarterly basis with the terms of our initial public
      offering and, if any noncompliance is identified, immediately taking all
      action necessary to rectify such noncompliance or otherwise causing
      compliance with the terms of our initial public offering;
    and





·
            reviewing
      and approving all payments made to our officers, directors and affiliates.
      Any payments made to members of our audit committee will be reviewed and
      approved by our board of directors, with the interested director or
      directors abstaining from such review and
  approval.





Governance
and Nominating Committee





Our
governance and nominating committee consist of Kerry S. Propper, Li Zhang and
Dr. Jianjun Shi. The functions of our governance and nominating committee
include:


57


·
              recommending
      qualified candidates for election to our board of
    directors;





·
              evaluating
      and reviewing the performance of existing
  directors;





·
              making
      recommendations to our board of directors regarding governance matters,
      including our amended and restated memorandum and articles of association
      and charters of our committees;
and





·
              developing
      and recommending to our board of directors governance and nominating
      guidelines and principles applicable to
us.   ·
                None
      of our officers and directors is required to commit their full time to our
      affairs and, accordingly, they may have conflicts of interest in
      allocating their time among various business
  activities.





·
            In
      the course of their other business activities, our officers and directors
      may become aware of investment and business opportunities that may be
      appropriate for presentation to us as well as the other entities with
      which they are affiliated. They may have conflicting fiduciary duties in
      determining to which entity a particular business opportunity should be
      presented. For a complete description of our management’s other
      affiliations, see the discussion below as well as the previous section
      entitled “Management—Directors and Executive Officers” and “Risk
      Factors—Risks Related to Our Business.” Such officers and directors may
      become subject to conflicts of interest regarding us and other business
      ventures in which they may be involved, which conflicts may have an
      adverse effect on our ability to consummate a business combination or may
      result in our entering into a less desirable business combination that we
      might otherwise not have pursued.





·
            Our
      officers and directors are now and may in the future become affiliated
      with entities, including other blank check companies, engaged in business
      activities similar to those intended to be conducted by our
      company.





·
            Since
      the existing shareholders own ordinary shares which will be released from
      escrow if a business combination is completed, and since the existing
      shareholders own securities which will become worthless if a business
      combination is not consummated, our board, all of whom are existing
      shareholders, may have a conflict of interest in determining whether a
      particular target acquisition is appropriate to effect a business
      combination. Additionally, members of our executive management may enter
      into consulting, asset management or employment agreements with us as part
      of a business combination, pursuant to which they may be entitled to
      compensation for their services. The personal and financial interests of
      our directors and officers may influence their motivation in identifying
      and selecting a target acquisition, timely completing a business
      combination and securing the release of their ordinary
    shares.





·
            Other
      than with respect to the initial business combination, we have not adopted
      a policy that expressly prohibits our directors, officers, shareholders or
      affiliates from having a direct or indirect pecuniary interest in any
      investment to be acquired or disposed of by us or in any transaction to
      which we are a party or have an interest. Nor do we have a policy that
      expressly prohibits any such persons from engaging for their own account
      in business activities of the types conducted by us. Accordingly, such
      parties may have an interest in certain transactions in which we are
      involved, and may also compete with
us.





·
            Our
      directors and officers may purchase ordinary shares in the open market.
      Our directors and officers have agreed to vote any ordinary shares
      acquired by them after our initial public offering in favor of a business
      combination.





·
            If
      we were to make a deposit, down payment or fund a “no shop” provision in
      connection with a potential business combination, we may have insufficient
      funds available outside of the trust account to pay for due diligence,
      legal, accounting and other expenses attendant to completing a business
      combination. In such event, our officers or directors or other parties may
      have to incur such expenses in order to proceed with the proposed business
      combination. As part of any such combination, our officers and directors
      or other parties may negotiate the repayment of some or all of any such
      expenses, without interest or other compensation, which if not agreed to
      by the target business’s management, could cause our management to view
      such potential business combination unfavorably, thereby resulting in a
      conflict of interest.


58





·
            If
      our management negotiates to be retained post business combination as a
      condition to any potential business combination, their financial
      interests, including compensation arrangements, could influence their
      motivation in selecting, negotiating and structuring a transaction with a
      target business, and such negotiations may result in a conflict of
      interest. For example, management may look unfavorably upon or reject a
      business combination with a potential target business whose owners refuse
      to retain members of our management post-business
    combination.




Code
of Ethics and Committee Charters





We have
adopted a code of ethics that applies to our officers, directors and employees.
We have filed copies of our code of ethics and our board committee charters as
exhibits to the registration statement in connection with our initial public
offering. You may review these documents by accessing our public filings at the
SEC’s web site at www.sec.gov. In addition, we will provide a copy of our code
of ethics upon request, without charge. We intend to disclose any amendments to
or waivers of certain provisions of our code of ethics in a Form
6-K.





Conflicts
of Interest





Potential
investors should be aware of the following potential conflicts of
interest:





Under
British Virgin Islands law, our directors have a statutory duty of loyalty to
act honestly, in good faith and with a view to our best interests. Our directors
also have a duty to exercise the care, diligence and skills that a reasonably
prudent person would exercise in comparable circumstances. In fulfilling their
duty of care to us, our directors must ensure compliance with our amended and
restated memorandum and articles of association and the Act. In certain limited
circumstances, a shareholder has the right to seek damages if a duty owed by our
directors is breached.





In
connection with the requirement that we present our initial business combination
to our shareholders for their approval, the existing shareholders have agreed to
vote the ordinary shares owned by them prior to our initial public offering, in
the same manner as a majority of the public shareholders who vote at the general
or annual meeting called for the purpose of approving a business combination.
The existing shareholders have also agreed that if they acquire ordinary shares
in or following our initial public offering, they will vote such acquired
ordinary shares in favor of a business combination. Accordingly, any ordinary
shares acquired by the existing shareholders in the open market will not have
the same right to vote as public shareholders with respect to a potential
business combination (since they are required to vote in favor of a business
combination). Additionally, the existing shareholders will not have redemption
rights with respect to ordinary shares acquired during or subsequent to our
initial public offering (since they may not vote against a business
combination), except upon our liquidation. In addition, with respect to ordinary
shares owned by them prior to our initial public offering, including the
ordinary shares underlying the private placement warrants, they have agreed to
waive their respective rights to participate in any liquidation including the
liquidation of our trust account to our public shareholders, occurring upon our
failure to consummate a business combination but only with respect to those
ordinary shares acquired by them prior to our initial public offering and not
with respect to any ordinary shares acquired in the open market.





While we
do not intend to pursue a business combination with any company that is
affiliated with our existing shareholders, officers or directors, we are not
prohibited from pursuing such a transaction. In the event we seek to complete a
business combination with such a company, we would obtain an opinion from an
independent investment banking firm which is a member of FINRA, that such a
business combination is fair to our shareholders from a financial point of view.
Such opinion would be included in our proxy statement relating to the business
combination. Although our management has not consulted with any investment
banker in connection with such an opinion, it is possible that such opinion may
only be able to be relied upon by our board of directors and not by our
shareholders. While we will consider whether such an opinion may be relied on by
our shareholders, it will not be dispositive as to which investment bank we seek
a fairness opinion from.  Other factors contributing to such a
determination are expected to include, among other factors, the reputation of
the independent investment bank, specifically their knowledge of China, timing
and cost. In considering such costs, we will need to consider the cost of
procuring a fairness opinion on which our shareholders may rely, and we expect
to seek such an opinion unless the cost is substantially in excess of what it
would be otherwise. In the event that we obtain an opinion that cannot be relied
on by our shareholders, we will include appropriate explanatory disclosure in
the proxy statement explaining why shareholders may not rely on the opinion.
While our shareholders might not have legal recourse against the investment
banking firm in such case, the fact that an independent expert has evaluated,
and passed upon, the fairness of the transaction is a factor our shareholders
may consider in determining whether or not to vote in favor of the potential
business combination.


59


Specific
Potential Conflicts





Each of
our directors has, or may come to have, fiduciary obligations to other entities
or organizations. Each of our directors may have fiduciary obligations to those
companies on whose board of directors they currently sit or may sit in the
future. To the extent that they identify business opportunities that may be
suitable for any of these other companies, they may have competing fiduciary
obligations. Accordingly, they may not present opportunities to us that
otherwise may be attractive to us, unless these other companies and any
successors to such entities have declined to accept such
opportunities.





Under
British Virgin Islands law, our directors have a statutory duty of loyalty to
act honestly, in good faith and with a view to our best interests. Our directors
also have a duty to exercise the care, diligence and skills that a reasonably
prudent person would exercise in comparable circumstances. In fulfilling their
duty of care to us, our directors must ensure compliance with our amended and
restated memorandum and articles of association and the Act. In certain limited
circumstances, a shareholder has the right to seek damages if a duty owed by our
directors is breached.





In
connection with the requirement that we present our initial business combination
to our shareholders for their approval, the existing shareholders have agreed to
vote the ordinary shares owned by them prior to our initial public offering, in
the same manner as a majority of the public shareholders who vote at the general
or annual meeting called for the purpose of approving a business combination.
The existing shareholders have also agreed that if they acquire ordinary shares
in or following our initial public offering, they will vote such acquired
ordinary shares in favor of a business combination. Accordingly, any ordinary
shares acquired by the existing shareholders in the open market will not have
the same right to vote as public shareholders with respect to a potential
business combination (since they are required to vote in favor of a business
combination). Additionally, the existing shareholders will not have redemption
rights with respect to ordinary shares acquired during or subsequent to our
initial public offering (since they may not vote against a business
combination), except upon our liquidation. In addition, with respect to ordinary
shares owned by them prior to our initial public offering, including the
ordinary shares underlying the private placement warrants, they have agreed to
waive their respective rights to participate in any liquidation including the
liquidation of our trust account to our public shareholders, occurring upon our
failure to consummate a business combination but only with respect to those
ordinary shares acquired by them prior to our initial public offering and not
with respect to any ordinary shares acquired in the open market.





While we
do not intend to pursue a business combination with any company that is
affiliated with our existing shareholders, officers or directors, we are not
prohibited from pursuing such a transaction. In the event we seek to complete a
business combination with such a company, we would obtain an opinion from an
independent investment banking firm which is a member of FINRA, that such a
business combination is fair to our shareholders from a financial point of view.
Such opinion would be included in our proxy statement relating to the business
combination. Although our management has not consulted with any investment
banker in connection with such an opinion, it is possible that such opinion may
only be able to be relied upon by our board of directors and not by our
shareholders. While we will consider whether such an opinion may be relied on by
our shareholders, it will not be dispositive as to which investment bank we seek
a fairness opinion from.  Other factors contributing to such a
determination are expected to include, among other factors, the reputation of
the independent investment bank, specifically their knowledge of China, timing
and cost. In considering such costs, we will need to consider the cost of
procuring a fairness opinion on which our shareholders may rely, and we expect
to seek such an opinion unless the cost is substantially in excess of what it
would be otherwise. In the event that we obtain an opinion that cannot be relied
on by our shareholders, we will include appropriate explanatory disclosure in
the proxy statement explaining why shareholders may not rely on the opinion.
While our shareholders might not have legal recourse against the investment
banking firm in such case, the fact that an independent expert has evaluated,
and passed upon, the fairness of the transaction is a factor our shareholders
may consider in determining whether or not to vote in favor of the potential
business combination.


60


Specific
Potential Conflicts





Each of
our directors has, or may come to have, fiduciary obligations to other entities
or organizations. Each of our directors may have fiduciary obligations to those
companies on whose board of directors they currently sit or may sit in the
future. To the extent that they identify business opportunities that may be
suitable for any of these other companies, they may have competing fiduciary
obligations. Accordingly, they may not present opportunities to us that
otherwise may be attractive to us, unless these other companies and any
successors to such entities have declined to accept such
opportunities.





A
description of the specific potential conflicts for our officers and directors
is as follows:





Kerry
Propper, our chief executive officer and director, is the executive vice
president of mergers and acquisitions of Shine Media Acquisition Corp. On May 8,
2008, Shine Media entered into a stock purchase agreement pursuant to which it
will acquire all of the ordinary shares of China Greenscape Co., Ltd., a British
Virgin Islands company, which owns 100% of Jiangsu Sunshine Zoology and Forestry
Development Co., Ltd., a PRC company. Jiangsu Sunshine is an urban green
resources company that develops, cultivates, and distributes trees, plants and
flowers to expanding PRC municipalities. In the event that we seek to acquire an
operating business in the media and advertising business in the PRC, a conflict
may arise because Mr. Propper has a pre-existing relationship with Shine Media,
it is likely that such a conflict would be resolved in favor of Shine
Media.





Kerry
Propper is a director of HLS Systems International Ltd., or HLS. HLS is an
automation and control systems company with its business operations located in
the PRC. In the event that we seek to acquire an operating business in the
automation and control systems industry in the PRC, a conflict may arise because
of Mr. Propper has a pre-existing relationship with HLS, it is likely that such
a conflict would be resolved in favor of HLS.





Kerry
Propper is a director of Origin Agritech Limited, or Origin, which is engaged in
the development, production and distribution of hybrid crop seeds in the PRC. In
the event that we seek to acquire an operating business in the hybrid crop seed
industry in the PRC, a conflict may arise as a result of his pre-existing
relationship with Origin, and it is likely that such a conflict would be
resolved in favor of Origin.





Li Zhang
is affiliated with Chardan China Investments, LLC, or CCI. CCI is a private
investment fund that invests in companies that have operations in China,
typically have fair market values in excess of the amount being held in our
trust account, and which anticipate becoming publicly traded companies in the
U.S. in a year or less following the date of such investments. It is possible
that, as a result of the financial interests of Li Zhang in CCI, that he would
choose to provide the capital needed by a Chinese company through CCI, rather
than through a business combination with us. However, under the terms of the
operating agreement of CCI, Li Zhang is permitted to organize one blank check
company prior to CCI’s being fully invested, and to present all appropriate
opportunities to that blank check company prior to offering that opportunity to
CCI. As he will have a significant role in deciding whether an opportunity for a
business combination is suitable for us or for CCI, the conflict of interest
posed by Li Zhang’s relationship with CCI may affect his judgment in that
regard.





Below is
a table summarizing the disclosures immediately above as they relate to the
companies which our officers and directors owe fiduciary obligations to that
could conflict with their fiduciary obligations to us, all of which would have
to: (i) be presented appropriate potential target businesses by our officers and
directors, and (ii) reject the opportunity to acquire such potential target
business, prior to their presentation of such target business to
us:





Individual
            
            Entity
            
            AffiliationKerry
      Propper
            
            Shine
      Media Acquisition Corp.
            
            Executive
      Vice President of Mergers and AcquisitionsHLS
      Systems International Ltd
            
            DirectorOrigin
      Agritech Limited
            
            DirectorLi
      Zhang
            
            Chardan
      China Investments, LLC
            
            Member
      of the Managing Member


61


In order
to minimize potential conflicts of interest which may arise from multiple
corporate affiliations, each of our officers and directors has agreed, until the
earlier of our initial business combination, our liquidation or such time as he
ceases to be an officer or director, to present to us for our consideration,
prior to presentation to any other entity, any business opportunity which may
reasonably be required to be presented to us under British Virgin Islands law,
taking into consideration any pre-existing fiduciary obligation they might
have.





Also,
each of Chardan Capital Markets, LLC, SUJG, Inc., Source Atlantic, Inc., Chardan
Capital, LLC, Chardan China Investments, LLC, L&P Consulting, Beijing United
Power Invested Co., Ltd., Beijing C&D International Co., Ltd., TCT Science
and Technology Co., Ltd., Beijing Sinokosen Investment Ltd., and Shang Hai
NengHuan Technology Development Ltd., which represent all of the privately-held
companies owned and/or controlled by our officers and directors, have entered
into a Right of First Refusal and Corporate Opportunities Agreement with us
which provides that, commencing on the date of this prospectus and extending
until the earlier of our initial business combination, our liquidation or such
time as the corresponding officer or director ceases to be an officer or
director of our company, we will have the first opportunity to consider any
business opportunity within any industry in China provided that the fair market
value of any such business opportunity meets or exceeds the 80% net asset
threshold we must meet. Accordingly, the Right of First Refusal and Corporate
Opportunity Agreements supersede the pre-existing fiduciary obligations that the
corresponding officers and directors have to the above-listed entities. Each of
the members of our board of directors has a fiduciary duty to enforce our rights
under each of the Right of First Refusal and Corporate Opportunities Agreements.
As such they have no basis upon which to waive any of our company’s rights under
such agreements. In addition, any decision by our company to release any entity
to pursue any corporate opportunity would require the unanimous vote of our
company’s disinterested directors. As provided in such agreements, none of such
agreements can be amended to accelerate or waive its termination without the
approval of holders of a majority of our outstanding ordinary
shares.





Although
it may be beneficial to us that the members of our management team know each
other and work together, these previous and/or existing relationships may
influence the roles taken by our officers and directors with respect to us. For
example, one of our directors or officers may be less likely to object to a
course of action with respect our activities because it may jeopardize their
relationships in another enterprise. Therefore, such persons may not protect our
interests as strenuously as would persons who had no pervious relationship with
each other.




Neither
we nor the members of our management team or board of directors have established
any procedures or criteria to evaluate contacts or discussions related to
potential target businesses if such potential target businesses created a
conflict of interest situation.





Although
no salary or other compensation will be paid to our officers and directors for
services rendered prior to or in connection with a business combination, they
will receive reimbursement for out-of-pocket expenses incurred by them in
connection with activities on our behalf, such as identifying potential target
businesses and performing due diligence on suitable business combinations. There
is no specified limit on the amount of these out-of-pocket expenses. Our board
of directors has designated Mr. Kerry Propper, to pass upon the reasonableness
of any reimbursable expenses incurred by members of our management that exceed
$1,000. To the extent that Mr.  Kerry Propper seeks reimbursement of
expenses he has incurred in excess of $1,000, such reimbursement will be
reviewed by our board of directors, with Mr. Kerry Propper abstaining. Other
than through this review process, or the review of a court of competent
jurisdiction if such reimbursement is challenged, there will be no other review
of the reasonableness of these expenses. Although we believe that all actions
taken by our directors on our behalf will be in our best interests, we cannot
assure you that this will be the case.


62


Limitation
of Director and Officer Liability




Pursuant
to our amended and restated memorandum and articles of association, every
director, agent or officer of the Company shall be indemnified out of the assets
of the Company against any liability incurred by him as a result of any act or
failure to act in carrying out his functions other than such liability (if any)
that he may incur by his own fraud or willful default. No such director, agent
or officer shall be liable to the Company for any loss or damage in carrying out
his functions unless that liability arises through the fraud or willful default
of such director, agent or officer.




ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS




A. Major
Shareholders




The
following table sets forth information regarding the beneficial ownership of our
ordinary shares as of the date hereof, based on 9,166,666 Ordinary Shares
outstanding, by:





·
            each
      person known by us to be the beneficial owner of 5% or more of our
      outstanding ordinary shares;





·
            each
      of our officers and directors; and





·
            all
      our officers and directors as a
group.




Name and Address of Beneficial Owners (1)
            
            Amount
      and Nature of
              Beneficial
      Ownership (2)
            
            Percent
      of ClassKerry
      Propper
            
            
            302,907
            3.30%Xiaosong
      Zhong
            
            
            25,000
            *Li
      Zhang
            
            
            130,713
            1.43%Li
      Gong
            
            
            25,000
            *Dr.
      Jianjun Shi
            
            
            25,000
            *Steve
      Urbach
            
            
            136,713
            1.49%Jiangnan
      Huang
            
            
            261,427
            2.85%Royale
      Holdings (3)
            
            
            661,693
            7.22%Dr.
      Richard Propper (4)
            
            
            186,528
            2.03%Paula
      Beharry (5)
            
            
            130,713
            1.43%Daniel
      Beharry (6)
            
            
            130,713
            1.43%Andrew
      M. Weiss PhD(7)
            
            
            768,328
            8.4%Weiss
      Asset Management LLC(7)
            
            
            110,635
            1.2%Weiss
      Capital LLC(7)
            
            
            657,693
            7.2%SPAC
      GP LLC(7)
            
            
            610,278
            6.7%Platinum
      Partners Value Arbitrage Fund LP(8)
            
            
            590,000
            6.43%All
      Directors and Officers as a group (five persons)
            
            
            508,620
            5.55%




*Less than
    1%.


63


(1)
            Unless
      otherwise indicated, the business address of the shareholder is c/o
      Chardan 2008 China Acquisition Corp., 18E, Tower A Oriental Kenzo Plaza 48
      Dongzhimenwai Street Beijing, 100027,
China.





(2)
            Unless
      otherwise indicated, all ownership is direct beneficial ownership. Does
      not include any ordinary shares issuable upon the exercise of insider
      warrants or private placement
warrants.




(3)
            Michael
      Walas and Mark Brewer share voting and investment control over the
      ordinary shares owned by Royale Holdings. Royale Holdings address is c/o
      Chardan Capital, LLC, 402 W. Broadway, Suite 2600, San Diego,
      CA.





(4)
              Dr.
      Richard Propper’s address is c/o Chardan Capital, LLC, 402 W. Broadway,
      Suite 2600, San Diego, CA.(5)
              Includes
      130,713 ordinary shares beneficially owned by Mrs. Beharry’s husband,
      Daniel Beharry. Mrs. Beharry’s address is 474 Three Mile Road,
      Glastonbury, CT.





(6)
                Includes
      130,713 ordinary shares beneficially owned by Mr. Beharry’s wife, Paula
      Beharry. Mr. Beharry’s address is 474 Three Mile Road, Glastonbury,
      CT.(7)
                The
      information relating to Weiss Asset Management LLC, Weiss Capital LLC,
      SPAC GP LLC and Andrew M. Weiss, PhD is derived from a Schedule 13G/A
      dated February 13, 2009 filed by such entities with the Securities
      and Exchange Commission. The address of the principal business office of
      Weiss Asset Management LLC beneficially owns 110,635 ordinary shares,
      Weiss Capital LLC beneficially owns 657,693 ordinary shares, SPAC GP LLC
      beneficially owns 610,278 ordinary shares and Andrew M. Weiss, Ph.
      beneficially owns 768,328 ordinary shares. Shares  reported for
      Dr. Weiss include shares beneficially owned by a
      private  investment  partnership  of
      which  Weiss Asset  Management  is the sole
      general  partner and which may be deemed to be
      controlled  by Dr. Weiss,  who is the Managing Member
      of Weiss Asset Management,  and also include shares held by a
      private  investment  corporation and private
      investment partnership, both of which may be deemed to
      be  controlled by Dr. Weiss, who is the managing member of Weiss
      Capital, the  Investment Manager of such private investment
      corporation and private investment partnership. Dr. Weiss disclaims
      beneficial ownership of the shares reported herein as beneficially owned
      by him except to the extent of his pecuniary interest
      therein.  The address for Mr. Weiss is 29 Commonwealth Avenue,
      10th Floor, Boston, MA 02116.(8)
                The
      information relating to Platinum Partners Value Arbitrage Fund LP is
      derived from a Schedule 13G/A dated February 12, 2009, filed by such
      entities with the Securities and Exchange Commission. The business address
      of Platinum Partners Value Arbitrage Fund LP is 152 West 57th
      Street, 4th
      floor, New York, New York
10019.





In
connection with our initial public offering, our existing shareholders placed
the ordinary shares, insider warrants and private placement warrants owned by
them before our initial public offering or acquired in the private placement
into an escrow account maintained by Continental Stock Transfer & Trust
Company, acting as escrow agent. Subject to certain limited exceptions (such as
transfers to relatives and trusts for estate planning purposes, while remaining
in escrow), the ordinary shares and insider warrants will not be transferable
until the earlier of: (i) one year after the consummation of a business
combination, (ii) thirty months from the date of our initial public offering (or
thirty-six months if the extended period is approved), or (iii) the consummation
of a liquidation, merger, share exchange or other similar transaction which
results in all of our shareholders having the right to exchange their ordinary
shares for cash, securities or other property subsequent to our consummating a
business combination with a target acquisition, at which time such ordinary
shares and insider warrants will be released from escrow, unless we were to
engage in a transaction after the consummation of the initial business
combination that results in all of the shareholders of the combined entity
having the right to exchange their ordinary shares for cash, securities or other
property. The private placement warrants will not be transferable, except in
limited circumstances (such as transfers to relatives and trusts for estate
planning purposes, while remaining in escrow), until the earlier of: (i) the
consummation of a business combination, or (ii) the consummation of a
liquidation, merger, share exchange or other similar transaction which results
in all of our shareholders having the right to exchange their ordinary shares
for cash, securities or other property subsequent to our consummating a business
combination with a target acquisition, at which time such private placement
warrants will be released from escrow, unless we were to engage in a transaction
after the consummation of the initial business combination that results in all
of the shareholders of the combined entity having the right to exchange their
ordinary shares for cash, securities or other property.


64


During
the escrow period, the holders of these ordinary shares will not be able to sell
or transfer their securities except in certain limited circumstances (such as
transfers to relatives and trusts for estate planning purposes, while remaining
in escrow), but will retain all other rights as our shareholders, including,
without limitation, the right to vote their ordinary shares. If dividends are
declared and payable in ordinary shares, such dividends will also be placed in
escrow. If we are unable to effect a business combination and liquidate, the
existing shareholders will not receive any portion of the liquidation proceeds
with respect to ordinary shares owned by them prior to our initial public
offering.




B. Certain Relationships and Related
Party Transactions




On March
12, 2008, we agreed to issue 2,291,666 insider units, each insider unit
consisting of one ordinary share and one warrant, to our officers, directors and
existing shareholders for an aggregate amount of $25,000 in cash, at a purchase
price of approximately $0.01091 per insider unit. On July 30, 2008, the
securities comprising the insider units were issued to our officers, directors
and existing shareholders.








Certain
of our officers and directors, and their affiliates, purchased in a private
placement transaction an aggregate of 2,000,000 warrants from us at a price of
$0.50 per warrant. These private placement warrants have terms and provisions
that are identical to the warrants being sold in our initial public offering,
respectively, except that: (i) the private placement warrants will not have
a claim to the funds held in the trust account, (ii) the private placement
warrants are being purchased pursuant to an exemption from the registration
requirements of the Securities Act and will become freely tradable only after
they are registered pursuant to a registration rights agreement to be signed on
or before the date of this prospectus, (iii) the private placement warrants will
be non-redeemable so long as they are held by the initial holders or their
permitted assigns and (iv) the private placement warrants are exercisable on a
“cashless” basis at any time, if held by the initial holders or their permitted
assigns. The transfer restriction does not apply to transfers made pursuant to
registration or an exemption that are occasioned by operation of law or for
estate planning purposes, while remaining in escrow. The entire purchase price
of the private placement warrants was added to the proceeds from our initial
public offering to be held in the trust account pending our completion of one or
more business combinations. If we do not complete one or more business
combinations that meet the criteria described herein, then the entire purchase
price of the private placement warrants will become part of the liquidation
amount distributed to our public shareholders from our trust account and the
private placement warrants will become worthless.





The
holders of a majority of all of: (i) the ordinary shares and insider
warrants owned or held by the existing shareholders; and (ii) the ordinary
shares issuable upon exercise of the private placement warrants will be entitled
to make up to two demands that we register these securities pursuant to an
agreement to be signed prior to or on the effective date of the registration
statement. Such holders may elect to exercise these registration rights at any
time commencing on or after the date on which these securities are released from
escrow. In addition, these shareholders have certain “piggy-back” registration
rights with respect to registration statements filed subsequent to the date on
which these securities are released from escrow. We will bear the expenses
incurred in connection with the filing of any such registration
statements.





Because
the private placement warrants sold in the private placement were originally
issued pursuant to an exemption from registration requirements under the federal
securities laws, the holders of the private placement warrants purchased in the
private placement will be able to exercise their warrants even if, at the time
of exercise, a prospectus relating to the ordinary shares issuable upon exercise
of such warrants is not current. Our private placement warrants and the
underlying ordinary shares will become freely tradable only after they are
registered pursuant to a registration rights agreement to be signed on or before
the date of this prospectus.





In order
to protect the amounts held in the trust account, our officers and directors
have agreed to indemnify us for claims of creditors, vendors, service providers
and target businesses that have not executed a valid and enforceable waiver of
their right to seek payment of amounts due to them out of the trust account. As
a result, we cannot assure you that the per-ordinary share distribution from the
trust account, if we liquidate, will not be less than $7.89, plus interest then
held in the trust account.


65


Kerry
Propper, our chief executive officer and a director, and Chardan China, LLC, an
affiliate of Li Zhang, chairman of our board of directors, advanced an aggregate
of $32,434 to us as of the effective date of the registration statement in
connection with our initial public offering to cover expenses related to the
offering, such as SEC registration fees, Nasdaq Capital Market listing fees,
FINRA registration fees and legal and accounting fees and expenses. All such
loans have been repaid without interest from proceeds of the offering not placed
in the trust account.





We have
agreed to pay a monthly fee of $7,500 to Chardan Capital, LLC, an affiliate of
Li Zhang, chairman of our board of directors, for general and administrative
services, including but not limited to office space, receptionist, secretarial
and general office services. This agreement commences on the date of this
prospectus and shall continue until the earliest to occur of: (i) the
consummation of a business combination, (ii) February 11, 2011 and (iii) the
date on which we cease our corporate existence in accordance with our amended
and restated memorandum and articles of association. This arrangement is being
agreed to by Chardan Capital, LLC for our benefit and is not intended to provide
Chardan Capital, LLC compensation in lieu of a management fee or other
remuneration because it is anticipated that the expenses to be paid by Chardan
Capital, LLC will approximate the monthly reimbursement. We believe that such
fees are at least as favorable as we could have obtained from an unaffiliated
entity. Upon consummation of a business combination or our liquidation, we will
cease paying these monthly fees.





We will
reimburse our officers and directors, subject to board approval, for any
reasonable out-of-pocket business expenses incurred by them in connection with
certain activities on our behalf such as identifying and investigating possible
target acquisitions and business combinations. There is no limit on the amount
of out-of-pocket expenses reimbursable by us, which will be reviewed only by our
board or a court of competent jurisdiction if such reimbursement is challenged.
Accountable out-of-pocket expenses incurred by our officers and directors will
not be repaid out of proceeds held in the trust account until these proceeds are
released to us upon the completion of a business combination, provided there are
sufficient funds available for reimbursement after such
consummation.





In order
to fund our working capital (including expenses in seeking business combinations
and, potentially, the costs of our liquidation and dissolution),we will initially have
$100,000 outside of the trust account for our use and we will be permitted to
draw, as earned, up to $2,900,000 of the cumulative interest earned on the funds
held in the trust account, after taxes, at our discretion at anytime following
the consummation of our initial public offering. Other than these amounts and as
provided for in our administrative services agreement and for the reimbursable
out-of-pocket expenses payable to our existing shareholders, officers and
directors, no compensation or fees of any kind, including finders, consulting
fees or other similar compensation, will be paid to our existing shareholders,
officers or directors who owned our ordinary shares prior to our initial public
offering, or to any of their respective affiliates prior to or with respect to a
business combination.





Our
existing shareholders, officers and directors will not receive reimbursement for
any out-of-pocket expenses incurred by them to the extent that such expenses
exceed the amount held outside of the trust account unless the business
combination is consummated and there are sufficient funds available for
reimbursement after such consummation. The financial interest of such persons
could influence their motivation in selecting a target business and thus, there
may be a conflict of interest when determining whether a particular business
combination is in the shareholders’ best interest.





After the
consummation of a business combination, if any, to the extent our management
remains as officers of the resulting business, some of our officers and
directors may enter into employment agreements, the terms of which shall be
negotiated and which we expect to be comparable to employment agreements with
other similarly-situated companies. Further, after the consummation of a
business combination, if any, to the extent our directors remain as directors of
the resulting business, we anticipate that they will receive compensation
comparable to directors at other similarly situated companies.





All
ongoing and future transactions between us and any of our officers and directors
or their respective affiliates, including loans by our officers and directors or
their respective affiliates, will be on terms believed by us to be no less
favorable than are available from unaffiliated third parties. Such transactions
or loans, including any forgiveness of loans, will require prior approval by a
majority of our disinterested “independent” directors or the members of our
board who do not have an interest in the transaction, in either case who had
access, at our expense, to our attorneys or independent legal counsel. We will
not enter into any such transaction unless our disinterested “independent”
directors determine that the terms of such transaction are no less favorable to
us than those that would be available to us with respect to such a transaction
from unaffiliated third parties.


66


C. Interest of Experts and
Counsel




Not
applicable.




ITEM 8. FINANCIAL INFORMATION




A. Consolidated Statements and Other
Financial Information




Please
see “Item 18. Financial Statements” for a list of the financial statements filed
as part of this annual report.




B. Significant
Changes




Not
applicable.




ITEM 9. THE OFFER AND LISTING




A. Offer and Listing
Details




Not
applicable




B. Plan of
Distribution




Not
applicable.




C. Markets




Our
units, our ordinary shares and our warrants are listed on the Nasdaq Capital
Market under the symbols CACAU, CACA and CACAW, respectively, since August 15,
2008.




D. Selling
Shareholders




Not
applicable.




E. Dilution




Not
applicable.




F. Expenses of the
Issue




Not
applicable.




ITEM 10. ADDITIONAL INFORMATION




A. Share Capital




Not
applicable.




B. Memorandum and Articles of
Incorporation




Our
Memorandum and Articles of Association were filed with the Securities and
Exchange Commission on August 4, 2008 as Exhibit 3.1 to Amendment No. 2 to our
Registration Statement on Form F-1 (File No. 333-145163).


67


C. Material
Contracts




Other
than the material contracts filed as exhibits to our Form F-1 registration
statement in connection with our initial public offering, we have not entered
into any material contracts.




D. Exchange Controls and Other
Limitations Affecting Security Holders




Under
BVI law, there are currently no restrictions on the export or import of capital,
including foreign exchange controls or restrictions that affect the remittance
of dividends, interest or other payments to nonresident holders of our
shares.




E. Taxation




The following summary of the
material British Virgin Islands and United States federal income tax
consequences of an investment in ordinary shares is based upon laws and relevant
interpretations thereof in effect as of the date of this prospectus, all of
which are subject to change. This summary does not deal with all possible tax
consequences relating to an investment in our ordinary shares, such as the tax
consequences under state, local and other tax laws.





British
Virgin Islands Taxation





The
Government of the British Virgin Islands, will not, under existing legislation,
impose any income, corporate or capital gains tax, estate duty, inheritance tax,
gift tax or withholding tax upon the company or its shareholders. The British
Virgin Islands are not party to any double taxation treaties.





The
company and all distributions, interest and other amounts paid by the company to
persons who are not persons resident in the British Virgin Islands are exempt
from the provisions of the Income Tax Act in the British Virgin Islands and any
capital gains realized with respect to any shares, debt obligations or other
securities of the company by persons who are not resident in the British Virgin
Islands are exempt from all forms of taxation in the British Virgin Islands. As
of January 1, 2007, the Payroll Taxes Act, 2004 came into force. It will not
apply to the company except to the extent the company has employees (and deemed
employees) rendering services to the company wholly or mainly in the British
Virgin Islands. The company at present has no employees in the British Virgin
Islands and has no intention of having any employees in the British Virgin
Islands.





No
estate, inheritance, succession or gift tax, rate, duty, levy or other charge is
payable by persons who are not persons resident in the British Virgin Islands
with respect to any shares, debt obligations or other securities of the
company.





All
instruments relating to transactions in respect of the shares, debt obligations
or other securities of the company and all instruments relating to other
transactions relating to the business of the company are exempt from the payment
of stamp duty in the British Virgin Islands.





There
are currently no withholding taxes or exchange control regulations in the
British Virgin Islands applicable to the company or its
shareholders.





United
States Federal Income Taxation





General


68


The
following is a summary of the material U.S. federal income tax consequences of
the acquisition, ownership, and disposition of our ordinary shares and warrants
issued pursuant to our initial public offering. The discussion below of the U.S.
federal income tax consequences to “U.S. Holders” will apply if you are a
beneficial owner of ordinary shares or warrants and you are for U.S. federal
income tax purposes:





•
            an
      individual who is a citizen or resident of the United
    States;





•
            a
      corporation (or other entity treated as a corporation for U.S. federal
      income tax purposes) that is created or organized (or treated as created
      or organized) in or under the laws of the United States, any state thereof
      or the District of Columbia;





•
            an
      estate whose income is includible in gross income for U.S. federal income
      tax purposes regardless of its source;
or





•
            a
      trust if: (i) a U.S. court can exercise primary supervision over the
      trust’s administration and one or more U.S. persons are authorized to
      control all substantial decisions of the trust, or (ii) it has a valid
      election in effect under applicable U.S. Treasury regulations to be
      treated as a U.S. person.




If you
are not described as a U.S. Holder and are not an entity treated as a
partnership or other pass-through entity for U.S. federal income tax purposes,
you will be considered a “Non-U.S. Holder” for purposes of this discussion. The
U.S. federal income tax consequences applicable to Non-U.S. Holders is described
below under the heading “Non-U.S. Holders.”





This
summary is based on the Internal Revenue Code of 1986, as amended (the “Code”),
its legislative history, existing and proposed Treasury regulations promulgated
thereunder, published rulings and court decisions, all as currently in effect.
These authorities are subject to change or differing interpretations, possibly
on a retroactive basis.





This
summary does not purport to be a comprehensive description of all of the tax
considerations that may be relevant to a person’s decision to purchase our
units, ordinary shares and warrants. This discussion does not address all
aspects of U.S. federal income taxation that may be relevant to any particular
holder based on such holder’s individual circumstances, and this discussion
addresses only persons that acquire our units, ordinary shares and warrants as
part of units upon their original issuance pursuant to our initial public
offering and assumes that each of our ordinary shares and warrants trade
separately. In particular, this discussion considers only holders that will own
our units, ordinary shares and warrants as capital assets within the meaning of
Section 1221 of the Code and does not address the potential application of the
alternative minimum tax or the U.S. federal income tax consequences to holders
that are subject to special rules, including:





•
            financial
      institutions or “financial services
entities”;





•
            broker-dealers;





•
            taxpayers
      who have elected mark-to-market
accounting;





•
            tax-exempt
      entities;





•
            insurance
      companies;





•
            regulated
      investment companies;





•
            certain
      expatriates or former long-term residents of the United
      States;





•
            persons
      that actually or constructively own 10% or more of our ordinary
      shares;





•
            persons
      that hold our units, ordinary shares or warrants as part of a straddle,
      constructive sale, hedging, conversion or other integrated transaction;
      or




69








•
            persons
      whose functional currency is not the U.S.
  dollar.





This
discussion does not address any aspect of U.S. federal non-income tax laws, such
as gift or estate tax laws, or state, local or non-U.S. tax laws. Additionally,
this discussion does not consider the tax treatment of partnerships or other
pass-through entities or persons who hold our units, ordinary shares and
warrants through such entities. If a partnership (or other entity classified as
a partnership for U.S. federal income tax purposes) is the beneficial owner of
our units, ordinary shares and warrants, the U.S. federal income tax treatment
of a partner in the partnership will generally depend on the status of the
partner and the activities of the partnership.





We have
not sought, and will not seek, a ruling from the Internal Revenue Service
(“IRS”) as to any U.S. federal income tax consequence described below. The IRS
may disagree with the description herein, and its determination may be upheld by
a court.





BECAUSE
OF THE COMPLEXITY OF THE TAX LAWS AND BECAUSE THE TAX CONSEQUENCES TO ANY
PARTICULAR INVESTOR MAY BE AFFECTED BY MATTERS NOT DISCUSSED HEREIN, EACH
PROSPECTIVE INVESTOR IS URGED TO CONSULT WITH ITS TAX ADVISOR WITH RESPECT TO
THE SPECIFIC TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF
OUR UNITS, ORDINARY SHARES AND WARRANTS, INCLUDING THE APPLICABILITY AND EFFECT
OF STATE, LOCAL AND NON-U.S. TAX LAWS, AS WELL AS U.S. FEDERAL TAX
LAWS.





Allocation
of Purchase Price Between Ordinary Shares and Warrants





For U.S.
federal income tax purposes, each holder of a unit generally must allocate the
purchase price of a unit between the ordinary share and the warrant that
comprise the unit based on their respective relative fair market values at the
time of the issuance. Of the purchase price for a unit offered hereunder, we
intend to allocate U.S. $7.50 to the ordinary share and U.S. $0.50 to the
warrant comprising part of such unit. The price allocated to the ordinary share
and the warrant generally will be the holder’s initial tax basis in such
ordinary share or warrant, as the case may be. While uncertain, the IRS, by
analogy to the rules relating to the allocation of the purchase price to
components of a unit consisting of debt and equity, may take the position that
our allocation of the purchase price will be binding on a holder of a unit,
unless the holder explicitly discloses in a statement attached to its timely
filed U.S. federal income tax return for the taxable year that includes the
acquisition date of the unit that the holder’s allocation of the purchase price
between the ordinary share and the warrant that comprise the unit is different
than our allocation. Our allocation is not, however, binding on the
IRS.





Each
holder is advised to consult such holder’s own tax advisor with respect to the
risks associated with an allocation of the purchase price between each ordinary
share and the warrant that comprise a unit that is inconsistent with our
allocation of the purchase price.





U.S.
Holders





Tax
Reporting





Certain
U.S. Holders will be required to file an IRS Form 926 (Return by a U.S.
Transferor of Property to a Foreign Corporation) to report a transfer of cash or
other property to us. Substantial penalties may be imposed on a U.S. Holder that
fails to comply with this reporting requirement. Each U.S. Holder is urged to
consult with its own tax advisor regarding this reporting
obligation.





Taxation
of Distributions Paid on Ordinary Shares





Subject
to the passive foreign investment company (“PFIC”) rules discussed below, a U.S.
Holder will be required to include in gross income as ordinary income the amount
of any dividend paid on our ordinary shares. A distribution on our ordinary
shares will be treated as a dividend for U.S. federal income tax purposes to the
extent the distribution is paid out of our current or accumulated earnings and
profits (as determined for U.S. federal income tax purposes). Such dividend will
not be eligible for the dividends-received deduction generally allowed to U.S.
corporations in respect of dividends received from other U.S. corporations.
Distributions in excess of such earnings and profits will be applied against and
reduce the U.S. Holder’s basis in its ordinary shares and, to the extent in
excess of such basis, will be treated as gain from the sale or exchange of such
ordinary shares.


70


With
respect to non-corporate U.S. Holders for taxable years beginning before January
1, 2011, dividends may be taxed at the lower applicable long-term capital gains
rate (see “ — Taxation on the Disposition of Ordinary Shares and
Warrants” below) provided that: (1) our ordinary shares are readily tradable on
an established securities market in the United States, (2) we are not a PFIC, as
discussed below, for either the taxable year in which the dividend was paid or
the preceding taxable year, and (3) certain holding period requirements are met.
It is not entirely clear, however, whether a U.S. Holder’s holding period for
our ordinary shares would be suspended for purposes of clause (3) above for the
period that such holder had a right to have such ordinary shares redeemed by us.
In addition, under recently published IRS authority, ordinary shares are
considered for purposes of clause (1) above to be readily tradable on an
established securities market in the United States only if they are listed on
certain exchanges. U.S. Holders are advised to consult their own tax advisors
regarding the availability of the lower rate for any dividends paid with respect
to our ordinary shares.




Taxation
on the Disposition of Ordinary Shares and Warrants





Upon a
sale or other taxable disposition of our ordinary shares or warrants (which, in
general, would include a redemption of ordinary shares or warrants), and subject
to the PFIC rules discussed below, a U.S. Holder generally will recognize
capital gain or loss in an amount equal to the difference between the amount
realized and the U.S. Holder’s adjusted tax basis in the applicable securities.
See “ — Exercise or Lapse of a Warrant” below for a discussion
regarding a U.S. Holder’s basis in the ordinary shares acquired pursuant to the
exercise of a warrant.




Capital
gains recognized by U.S. Holders generally are subject to U.S. federal income
tax at the same rate as ordinary income, except that long-term capital gains
recognized by non-corporate U.S. Holders are generally subject to U.S. federal
income tax at a maximum rate of 15% for taxable years beginning before January
1, 2011 (and 20% thereafter). Capital gain or loss will constitute long-term
capital gain or loss if the U.S. Holder’s holding period for the ordinary shares
or warrants exceeds one year. The deductibility of capital losses is subject to
various limitations.




Exercise
or Lapse of a Warrant





Subject
to the discussion of the PFIC rules below, a U.S. Holder generally will not
recognize gain or loss upon the exercise of a warrant. Ordinary shares acquired
pursuant to the exercise of a warrant for cash generally will have a tax basis
equal to the U.S. Holder’s tax basis in the warrant, increased by the amount
paid to exercise the warrant. The holding period of such ordinary shares
generally would begin on the day after the date of exercise of the warrant. If
the terms of a warrant provide for any adjustment to the number of ordinary
shares for which the warrant may be exercised or to the exercise price of the
warrants, such adjustment may, under certain circumstances, result in
constructive distributions that could be taxable to the U.S. Holder of the
warrants. Conversely, the absence of an appropriate adjustment similarly may
result in a constructive distribution that could be taxable to the U.S. Holders
of the ordinary shares. See “ — Taxation of Distributions Paid on
Ordinary Shares,” above. If a warrant is allowed to lapse unexercised, a U.S.
Holder generally will recognize a capital loss equal to such holder’s tax basis
in the warrant.





Passive
Foreign Investment Company Rules





A foreign
corporation such as ours will be a passive foreign investment company, or PFIC,
if at least 75% of its gross income in a taxable year, including its pro rata
share of the gross income of any company in which it is considered to own at
least 25% of the shares by value, is passive income. Alternatively, a foreign
corporation will be a PFIC if at least 50% of its assets in a taxable year,
ordinarily determined based on fair market value and averaged quarterly over the
year, including its pro rata share of the assets of any company in which it is
considered to own at least 25% of the shares by value, are held for the
production of, or produce, passive income. Passive income generally includes
dividends, interest, rents, royalties, and gains from the disposition of passive
assets.


71


Because
we are a blank check company, with no current active business, we believe that
it is likely that we will meet the PFIC asset or income test for the current
taxable year. However, pursuant to a start-up exception, a corporation will not
be a PFIC for the first taxable year the corporation has gross income, if: (1)
no predecessor of the corporation was a PFIC; (2) the corporation satisfies the
IRS that it will not be a PFIC for either of the first two taxable years
following the start-up year; and (3) the corporation is not in fact a PFIC for
either of those years. The applicability of the start-up exception to us is
uncertain. After acquisition of a company or assets in a business combination,
we may still meet one of the PFIC tests depending on the timing of the
acquisition and the amount of our passive income and assets and the passive
income and assets of the acquired business. If the company that we acquire in a
business combination is a PFIC, then we will likely not qualify for the start-up
exception and will be a PFIC for the current taxable year. Our actual PFIC
status for any taxable year will not be determinable until after the end of the
taxable year, and accordingly there can be no assurance that we will not be
considered a PFIC for the current taxable year or any future taxable
year.





If we are
a PFIC for any taxable year during which a U.S. Holder held our ordinary shares
or warrants, and the U.S. Holder did not make a timely qualified electing fund
(“QEF”) election for the first taxable year of its holding period for our
ordinary shares or a mark-to-market election, as described below, such holder
will be subject to special rules with respect to:




•
            any
      gain recognized by the U.S. Holder on the sale or other taxable
      disposition of its ordinary shares or warrants;
  and





•
            any
      excess distribution made to the U.S. Holder (generally, any distributions
      to such U.S. Holder during a taxable year that are greater than 125% of
      the average annual distributions received by such U.S. Holder in respect
      of the applicable securities during the three preceding taxable years or,
      if shorter, such U.S. Holder’s holding period for the applicable
      securities).




Under
these rules,




•
            the
      U.S. Holder’s gain or excess distribution will be allocated ratably over
      the U.S. Holder’s holding period for the ordinary shares or
      warrants;•
            the
      amount allocated to the taxable year in which the U.S. Holder recognized
      the gain or excess distribution will be taxed as ordinary
      income;





•
            the
      amount allocated to each prior year, with certain exceptions, will be
      taxed at the highest tax rate in effect for that year and applicable to
      the U.S. Holder; and





•
            the
      interest charge generally applicable to underpayments of tax will be
      imposed in respect of the tax attributable to each such
    year.




In
addition, if we are a PFIC, a U.S. Holder who acquires our ordinary shares or
warrants from a deceased U.S. Holder who dies before January 1, 2010 generally
will be denied the step-up of U.S. federal income tax basis in such ordinary
shares or warrants to their fair market value at the date of the deceased
holder’s death. Instead, such U.S. Holder would have a tax basis in such
securities equal to the deceased holder’s tax basis, if lower.





In
general, a U.S. Holder may avoid the PFIC tax consequences described above in
respect of our ordinary shares acquired as part of a unit in our initial public
offering by making a timely QEF election to include in income its pro rata share
of our net capital gains (as long-term capital gain) and other earnings and
profits (as ordinary income), on a current basis, in each case whether or not
distributed. A U.S. Holder may make a separate election to defer the payment of
taxes on undistributed income inclusions under the QEF rules, but if deferred,
any such taxes will be subject to an interest charge.





A U.S.
Holder may not make a QEF election with respect to its warrants. As a result, if
a U.S. Holder sells or otherwise disposes of a warrant (other than upon exercise
of a warrant), any gain recognized generally will be subject to the special tax
and interest charge rules treating the gain as an excess distribution, as
described above, if we were a PFIC at any time during the period the U.S. Holder
held the warrants. If a U.S. Holder that exercises such warrants properly makes
a QEF election with respect to the newly acquired ordinary shares (or has
previously made a QEF election with respect to our ordinary shares), the QEF
election will apply to the newly acquired ordinary shares, but the adverse tax
consequences relating to PFIC shares will continue to apply with respect to such
ordinary shares (which generally will be deemed to have a holding period for the
purposes of the PFIC rules that includes the period the U.S. Holder held the
warrants), unless the U.S. Holder makes a purging election. The purging election
creates a deemed sale of such ordinary shares at their fair market value. The
gain recognized by reason of the purging election will be subject to the special
tax and interest charge rules treating the gain as an excess distribution, as
described above. As a result of the purging election, the U.S. Holder will have
a new basis and holding period in the ordinary shares acquired upon the exercise
of the warrants for purposes of the PFIC rules.


72


The QEF
election is made on a shareholder-by-shareholder basis and, once made, can be
revoked only with the consent of the IRS. A U.S. Holder generally makes a QEF
election by attaching an appropriately completed IRS Form 8621 (Return by a
Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund),
including the information provided in a PFIC annual information statement, to a
timely filed U.S. federal income tax return for the tax year to which the
election relates. Retroactive QEF elections generally may be made only by filing
a protective statement with such return and if certain other conditions are met
or with the consent of the IRS.





In order
to comply with the requirements of a QEF election, a U.S. Holder must receive
certain information from us. Upon request from a U.S. Holder, we will endeavor
to provide to the U.S. Holder no later than 90 days after the request such
information as the IRS may require, including a PFIC annual information
statement, in order to enable the U.S. Holder to make and maintain a QEF
election. However, there is no assurance that we will have timely knowledge of
our status as a PFIC in the future or of the required information to be
provided.




If a U.S.
Holder has elected the application of the QEF rules to our ordinary shares, and
the special tax and interest charge rules do not apply to such ordinary shares
(because of a timely QEF election for the first tax year of the U.S. Holder’s
holding period for our ordinary shares or a purge of the PFIC taint pursuant to
a purging election), any gain recognized on the appreciation of our ordinary
shares generally will be taxable as capital gain and no interest charge will be
imposed. As discussed above, U.S. Holders of a QEF are currently taxed on their
pro rata shares of its earnings and profits, whether or not distributed. In such
case, a subsequent distribution of such earnings and profits that were
previously included in income generally will not be taxable as a dividend. The
tax basis of a U.S. Holder’s shares in a QEF will be increased by amounts that
are included in income, and decreased by amounts distributed but not taxed as
dividends, under the above rules. Similar basis adjustments apply to property if
by reason of holding such property the U.S. Holder is treated under the
applicable attribution rules as owning shares in a QEF.





Although
a determination as to our PFIC status will be made annually, an initial
determination that we are a PFIC will generally apply for subsequent years to a
U.S. Holder who held ordinary shares while we were a PFIC, whether or not we
meet the test for PFIC status in those years. A U.S. Holder who makes the QEF
election discussed above for our first tax year in which the U.S. Holder holds
(or is deemed to hold) our ordinary shares and for which we are determined to be
a PFIC, however, will not be subject to the PFIC tax and interest charge rules
(or the denial of basis step-up at death) discussed above in respect to such
ordinary shares. In addition, such U.S. Holder will not be subject to the QEF
inclusion regime with respect to such ordinary shares for the tax years in which
we are not a PFIC. On the other hand, if the QEF election is not effective for
each of our tax years in which we are a PFIC and the U.S. Holder holds (or is
deemed to hold) our ordinary shares, the PFIC rules discussed above will
continue to apply to such ordinary shares unless the holder makes a purging
election and pays the tax and interest charge with respect to the gain inherent
in such ordinary shares attributable to the pre-QEF election
period.





Alternatively,
if a U.S. Holder owns ordinary shares in a PFIC that is treated as marketable
stock, the U.S. Holder may make a mark-to-market election. If the U.S. Holder
makes a valid mark-to-market election, such holder generally will not be subject
to the PFIC rules described above in respect to its ordinary shares. Instead, in
general, the U.S. Holder will include as ordinary income each year the excess,
if any, of the fair market value of its ordinary shares at the end of its
taxable year over the adjusted basis in its ordinary shares. The U.S. Holder
also will be allowed to take an ordinary loss in respect of the excess, if any,
of the adjusted basis of its ordinary shares over the fair market value of its
ordinary shares at the end of its taxable year (but only to the extent of the
net amount of previously included income as a result of the mark-to-market
election). The U.S. Holder’s basis in its ordinary shares will be adjusted to
reflect any such income or loss amounts, and any further gain recognized on a
sale or other taxable disposition of the ordinary shares will be treated as
ordinary income. Currently, a mark-to-market election may not be made with
respect to warrants.


73


The
mark-to-market election is available only for stock that is regularly traded on
a national securities exchange that is registered with the Securities and
Exchange Commission or on Nasdaq, or on a foreign exchange or market that the
IRS determines has rules sufficient to ensure that the market price represents a
legitimate and sound fair market value. Since we expect that our ordinary shares
will be listed and traded on the Nasdaq Capital Market, our ordinary shares may
qualify as marketable stock for purposes of this election. U.S. Holders are
advised to consult their own tax advisors regarding the availability and tax
consequences of a mark-to-market election in respect to our ordinary shares
under their particular circumstances.





If we are
a PFIC and, at any time, have a non-U.S. subsidiary that is classified as a
PFIC, U.S. Holders generally would be deemed to own a portion of the shares of
such lower-tier PFIC, and generally could incur liability for the deferred tax
and interest charge described above if we receive a distribution from, or
dispose of all or part of our interest in, the lower-tier PFIC. Upon request, we
will endeavor to cause any lower-tier PFIC to provide to a U.S. Holder no later
than 90 days after the request the information that may be required to make or
maintain a QEF election with respect to the lower-tier PFIC. U.S. Holders are
urged to consult their own tax advisors regarding the tax issues raised by
lower-tier PFICs.




If a U.S.
Holder owns (or is deemed to own) shares during any year in a PFIC, such holder
may have to file an IRS Form 8621 (whether or not a QEF or mark-to-market
election is made).




The rules
dealing with PFICs and with the QEF and mark-to-market elections are very
complex and are affected by various factors in addition to those described
above. Accordingly, U.S. Holders of our ordinary shares and warrants are advised
to consult their own tax advisors concerning the application of the PFIC rules
to their acquisition, ownership and disposition of our ordinary shares and
warrants under their particular circumstances.





Non-U.S.
Holders





Dividends
paid to a Non-U.S. Holder in respect to its ordinary shares generally will not
be subject to U.S. federal income tax, unless the dividends are effectively
connected with the Non-U.S. Holder’s conduct of a trade or business within the
United States (and, if required by an applicable income tax treaty, are
attributable to a permanent establishment or fixed base that such holder
maintains in the United States).





In
addition, a Non-U.S. Holder generally will not be subject to U.S. federal income
tax on any gain attributable to a sale or other disposition of our ordinary
shares or warrants unless such gain is effectively connected with its conduct of
a trade or business in the United States (and, if required by an applicable
income tax treaty, is attributable to a permanent establishment or fixed base
that such holder maintains in the United States) or the Non-U.S. Holder is an
individual who is present in the United States for 183 days or more in the
taxable year of sale or other disposition and certain other conditions are met
(in which case, such gain from United States sources generally is subject to tax
at a 30% rate or a lower applicable tax treaty rate).





Dividends
and gains that are effectively connected with the Non-U.S. Holder’s conduct of a
trade or business in the United States (and, if required by an applicable income
tax treaty, are attributable to a permanent establishment or fixed base in the
United States) generally will be subject to tax in the same manner as for a U.S.
Holder and, in the case of a Non-U.S. Holder that is a corporation for U.S.
federal income tax purposes, may also be subject to an additional branch profits
tax at a 30% rate or a lower applicable tax treaty rate.





Backup
Withholding and Information Reporting





In
general, information reporting for U.S. federal income tax purposes will apply
to distributions made on our ordinary shares within the United States to a
non-corporate U.S. Holder and to the proceeds from sales and other dispositions
of our ordinary shares or warrants to or through a U.S. office of a broker by a
non-corporate U.S. Holder. Payments made (and sales and other dispositions
effected at an office) outside the United States will be subject to information
reporting in limited circumstances.





In
addition, backup withholding of United States federal income tax, currently at a
rate of 28%, generally will apply to dividends paid on our ordinary shares to a
non-corporate U.S. Holder and the proceeds from sales and other dispositions of
ordinary shares or warrants by a non-corporate U.S. Holder, in each case
who:


74


•
            fails
      to provide an accurate taxpayer identification
  number;





•
            is
      notified by the IRS that backup withholding is required;
  or





•
            in
      certain circumstances, fails to comply with applicable certification
      requirements.





A
Non-U.S. Holder generally may eliminate the requirement for information
reporting and backup withholding by providing certification of its foreign
status, under penalties of perjury, on a duly executed applicable IRS Form W-8
or by otherwise establishing an exemption.





Backup
withholding is not an additional tax. Rather, the amount of any backup
withholding will be allowed as a credit against a U.S. Holder’s or a Non-U.S.
Holder’s U.S. federal income tax liability and may entitle such holder to a
refund, provided that certain required information is timely furnished to the
IRS.




F.
Dividends and Paying Agents




Not
applicable.




G.
Statement by Experts




Not
applicable.




H.
Documents on Display




We
file annual reports and other information with the SEC. You may read and copy
any report or document we file, including the exhibits, at the SEC’s public
reference room located at 100 F Street, N.E., Washington, D.C. 20549. Please
call the SEC at 1-800-SEC-0330 for further information on the public reference
room. Such materials can also be obtained on the SEC’s site on the internet at
http://www.sec.gov.




We
will also provide without charge to each person, including any beneficial owner,
upon written or oral request of that person, a copy of any and all of the
information that has been incorporated by reference in this annual report.
Please direct such requests to Xiaosong Zhong, Chief Financial Officer, Chardan
2008 China Acquisition Corp., Xiaosong Zhong,c/o Chardan Capital, LLC,
Suite 18E, Tower A, Oriental Kenzo Plaza, 48 Dongzhimenwai Street, Beijing,
100027, China




I.
Subsidiary Information




Not
applicable.




ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK




Market
risk is a broad term for the risk of economic loss due to adverse changes in the
fair value of a financial instrument. These changes may be the result of various
factors, including interest rates, foreign exchange rates, commodity prices
and/or equity prices. $54,300,000 of the net offering proceeds has been placed
into a trust account at JP Morgan Chase London Branch maintained by Continental
Stock Transfer & Trust Company, acting as trustee. The proceeds held in
trust will only be invested in U.S. “government securities,” defined as any
Treasury Bill issued by the United States having a maturity of 180 days or less.
Thus, we are subject to market risk primarily through the effect of changes in
interest rates on government securities. In addition, following a business
combination, it is possible that some or all of our revenues and expenses may be
denominated in non-U.S. currencies, primarily Renminbi, which could subject us
to increased risks relating to foreign exchange rate fluctuations that could
have a material adverse effect on our business, financial condition and
operating results.


75




ITEM 12. DESCRIPTION
OF SECURITIES OTHER THAN EQUITY SECURITIES




Not
applicable.




PART II




ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND
DELINQUENCIES




There
has been no default of any indebtedness nor is there any arrearage in the
payment of dividends.




ITEM
14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS




There
have been no changes to the instruments defining the rights of the holders of
any class of registered securities, and the rights of holders of the registered
securities have not been altered by the issuance or modification of any other
class of securities. There are no restrictions on working capital and no removal
or substitution of assets securing any class of our registered
securities.




ITEM 15. CONTROLS AND PROCEDURES




(a)
Disclosure Controls
and Procedures. Under the supervision and with the participation of our
management, including our principal executive officer and principal financial
officer, we conducted an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures, as defined in Rules
13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), within the 90-day period preceding the filing
date of this report. Based on this evaluation, our principal executive officer
and principal financial officer concluded that our disclosure controls and
procedures were effective as of December 31, 2008 at a reasonable assurance
level and, accordingly, provide reasonable assurance that the information
required to be disclosed by us in reports filed under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the SEC’s rules and forms.




(b)
Management’s Annual
Report on Internal Control over Financial Reporting.




The
management of the company is responsible for establishing and maintaining
adequate internal control over financial reporting. Internal control over
financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under
the Securities Exchange Act of 1934 as a process designed by, or under the
supervision of, the company’s principal executive and principal financial
officers and effected by the company’s board of directors, management and other
personnel, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles and
includes those policies and procedures that:




-
Pertain to the maintenance of records that in reasonable detail accurately and
fairly reflect the transaction and dispositions of the assets of the
company;




-
Provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and




-
Provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use of disposition of the company’s assets that could
have a material effect on the financial statements.


76


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




Management
assessed the effectiveness of our internal control over financial reporting as
of December 31, 2008. In making this assessment, the company’s management used
the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control-Integrated
Framework.




Based
on our assessment, management believes that, as of December 31, 2008, the
company’s internal control over financial reporting is effective based on those
criteria.




(c)
Attestation Report of
the Registered Public Accounting Firm.




This
annual report does not include an attestation report of the company’s registered
public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the company’s registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the company to provide only management’s report
in this annual report.




(d)
Changes in Internal
Control over Financial Reporting.




There
have been no changes in the Company’s internal control over financial reporting
(as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as
amended) during the quarter ended December 31, 2008 that have materially
affected, or are reasonably likely to materially affect, the Company’s internal
control over financial reporting.




ITEM 16A AUDIT COMMITTEE FINANCIAL EXPERT




Our
board of directors established an audit committee and adopted the Audit
Committee Charter on August 1, 2008.. Each of the members of our audit committee
is financially literate, and we consider Mr. Li to qualify as an “audit
committee financial expert” and “financially sophisticated” as defined under SEC
and Nasdaq Capital Market rules.




ITEM 16B. CODE OF ETHICS




Our
board of directors adopted a code of ethics on August 1, 2008, which is
applicable to all of our officers, directors and employees.




ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES




The
aggregate fees billed for the last two fiscal years for professional services
rendered by our auditor are as follows:




For
      the Year Ended December 31,2008Audit
      Fees
                
                
                $15,000Audit-related
      fees
                
                
                $17,500




Audit
fees represent fees for professional services related to the audit of our
financial statements for the year ended December 31, 2008 including the review
of certain reports on Form 20-F. Audit-related fees represent fees for
professional services related to the filing of our registration statement with
the SEC.


77


Our
board of directors pre-approves all audit, audit-related and non-audit services
not prohibited by law to be performed by our independent auditors and associated
fees prior to the engagement of the independent auditor with respect to such
services.




ITEM 16D. EXEMPTIONS FROM THE LISTING
STANDARDS FOR AUDIT COMMITTEES




Not
applicable.




ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS




Not
applicable.


78


PART III




ITEM 17. FINANCIAL STATEMENTS




We have
elected to provide financial statements pursuant to Item 18.




ITEM 18. FINANCIAL STATEMENTS




The
following financial statements are filed as part of this annual
report.




Page
                      NumberReport
      of Independent Registered Public Accounting Firm
                    
                    F-1Balance
      Sheets
                    
                    F-2Statements
      of Operations
                    
                    F-3Statement
      of Shareholders’ Equity
                    
                    F-4Statements
      of Cash Flows
                    
                    F-5Notes
      to Financial Statements
                    
                    F-6





ITEM 19. EXHIBITS




Exhibit
      No.
                        
                        Description1.1
                        
                        Form
      of Underwriting Agreement (incorporated herein by reference to Exhibit 1.1
      to Amendment No. 1 to the Registrant’s Registration Statement on Form F-1 (File
      No. 333-152623), as filed with the Securities and Exchange Commission on
      August 4, 2008).3.1
                        
                        Memorandum
      and Articles of Association (incorporated herein by reference to Exhibit
      3.1 to Amendment No. 1 to the Registrant’s Registration Statement on Form F-1 (File
      No. 333-152623), as filed with the Securities and Exchange Commission on
      August 4, 2008).3.2
                        
                        Amended
      and Restated Memorandum and Articles of Association (incorporated herein
      by reference to Exhibit 3.2 to Amendment No. 1 to the Registrant’s
      Registration Statement on Form F-1 (File
      No. 333-152623), as filed with the Securities and Exchange Commission on
      August 4, 2008).4.1
                        
                        Specimen
      Unit Certificate (incorporated herein by reference to Exhibit 4.1 to
      Amendment No. 1 to the Registrant’s Registration Statement on Form F-1 (File
      No. 333-152623), as filed with the Securities and Exchange Commission on
      August 4, 2008).4.2
                        
                        Specimen
      Ordinary Shares Certificate (incorporated herein by reference to Exhibit
      4.2 to Amendment No. 1 to the Registrant’s Registration Statement on Form F-1 (File
      No. 333-152623), as filed with the Securities and Exchange Commission on
      August 4, 2008).4.3
                        
                        Specimen
      Warrant Certificate (incorporated herein by reference to Exhibit 4.3 to
      Amendment No. 1 to the Registrant’s Registration Statement on Form F-1 (File
      No. 333-152623), as filed with the Securities and Exchange Commission on
      August 4,
2008).
  79
   4.4
                                      
                                      Form
      of Unit Purchase Option to be granted to the underwriters (incorporated
      herein by reference to Exhibit 4.4 to Amendment No. 1 to the Registrant’s
      Registration Statement on Form F-1 (File
      No. 333-152623), as filed with the Securities and Exchange Commission on
      August 4, 2008).4.5
                                      
                                      Form
      of Warrant Agreement between Continental Stock Transfer & Trust
      Company and the Registrant (incorporated herein by reference to Exhibit
      4.5 to Amendment No. 1 to the Registrant’s Registration Statement on Form F-1 (File
      No. 333-152623), as filed with the Securities and Exchange Commission on
      August 4, 2008).5.1
                                      
                                      Opinion
      of Maples & Calder (incorporated herein by reference to Exhibit 5.1 to
      Amendment No. 1 to the Registrant’s Registration Statement on Form F-1 (File
      No. 333-152623), as filed with the Securities and Exchange Commission on
      August 4, 2008).10.1
                                      
                                      Form
      of Investment Management Trust Account Agreement between Continental Stock
      Transfer & Trust Company and the Registrant (incorporated herein by
      reference to Exhibit 10.1 to Amendment No. 1 to the Registrant’s
      Registration Statement on Form F-1 (File
      No. 333-152623), as filed with the Securities and Exchange Commission on
      August 4, 2008).10.2
                                      
                                      Form
      of Securities Escrow Agreement among the Registrant, Continental Stock
      Transfer & Trust Company and the Existing Shareholders (incorporated
      herein by reference to Exhibit 10.2 to Amendment No. 1 to the Registrant’s
      Registration Statement on Form F-1 (File
      No. 333-152623), as filed with the Securities and Exchange Commission on
      August 4, 2008).10.3
                                      
                                      Form
      of Private Placement Warrant Escrow Agreement among the Registrant,
      Continental Stock Transfer & Trust Company and the purchasers of the
      private placement warrants (incorporated herein by reference to Exhibit
      10.3 to Amendment No. 1 to the Registrant’s Registration Statement on Form F-1 (File
      No. 333-152623), as filed with the Securities and Exchange Commission on
      August 4, 2008).10.4
                                      
                                      Form
      of Warrant Purchase Agreement between the Registrant and the purchasers of
      the private placement warrants (incorporated herein by reference to
      Exhibit 10.4 to Amendment No. 1 to the Registrant’s Registration Statement
      on Form F-1
      (File No. 333-152623), as filed with the Securities and Exchange
      Commission on August 4, 2008).10.5
                                      
                                      Form
      of Registration Rights Agreement among the Registrant and the Existing
      Shareholders (incorporated herein by reference to Exhibit 10.5 to
      Amendment No. 1 to the Registrant’s Registration Statement on Form F-1 (File
      No. 333-152623), as filed with the Securities and Exchange Commission on
      August 4, 2008).10.6
                                      
                                      Form
      of Letter Agreement by and between the Registrant, Kerry Propper and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.6 to Amendment No. 1 to the Registrant’s Registration Statement
      on Form F-1
      (File No. 333-152623), as filed with the Securities and Exchange
      Commission on August 4, 2008).10.7
                                      
                                      Form
      of Letter Agreement by and between the Registrant, Xiaosong Zhong and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.7 to Amendment No. 1 to the Registrant’s Registration Statement
      on Form F-1
      (File No. 333-152623), as filed with the Securities and Exchange
      Commission on August 4, 2008).10.8
                                      
                                      Form
      of Letter Agreement by and between the Registrant, Li Gong and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.8 to Amendment No. 1 to the Registrant’s Registration Statement
      on Form F-1
      (File No. 333-152623), as filed with the Securities and Exchange
      Commission on August 4, 2008).10.9
                                      
                                      Form
      of Letter Agreement by and between the Registrant, Li Zhang and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.9 to Amendment No. 1 to the Registrant’s Registration Statement
      on Form F-1
      (File No. 333-152623), as filed with the Securities and Exchange
      Commission on August 4, 2008).10.10
                                      
                                      Form
      of Letter Agreement by and between the Registrant, Dr. Jianjun Shi and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.10 to Amendment No. 1 to the Registrant’s Registration
      Statement on
      Form F-1 (File No. 333-152623), as filed with the Securities and Exchange
      Commission on August 4,
2008).
  10.11.1
              
              Form
      of Letter Agreement by and between the Registrant, Steve Urbach and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.1 to Amendment No. 1 to the Registrant’s Registration
      Statement on
      Form F-1 (File No. 333-152623), as filed with the Securities and Exchange
      Commission on August 4, 2008).    80
  10.11.2
                                  
                                  Form
      of Letter Agreement by and between the Registrant, Jonas Grossman and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.2 to Amendment No. 1 to the Registrant’s Registration
      Statement on
      Form F-1 (File No. 333-152623), as filed with the Securities and Exchange
      Commission on August 4, 2008).10.11.3
                                  
                                  Form
      of Letter Agreement by and between the Registrant, George Kaufman and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.3 to Amendment No. 1 to the Registrant’s Registration
      Statement on
      Form F-1 (File No. 333-152623), as filed with the Securities and Exchange
      Commission on August 4, 2008).10.11.4
                                  
                                  Form
      of Letter Agreement by and between the Registrant, Todd Gold and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.4 to Amendment No. 1 to the Registrant’s Registration
      Statement on
      Form F-1 (File No. 333-152623), as filed with the Securities and Exchange
      Commission on August 4, 2008).10.11.5
                                  
                                  Form
      of Letter Agreement by and between the Registrant, Jiangnan Huang and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.5 to Amendment No. 1 to the Registrant’s Registration
      Statement on
      Form F-1 (File No. 333-152623), as filed with the Securities and Exchange
      Commission on August 4, 2008).10.11.6
                                  
                                  Form
      of Letter Agreement by and between the Registrant, Royale Holdings and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.6 to Amendment No. 1 to the Registrant’s Registration
      Statement on
      Form F-1 (File No. 333-152623), as filed with the Securities and Exchange
      Commission on August 4, 2008).10.11.7
                                  
                                  Form
      of Letter Agreement by and between the Registrant, Dr. Richard D. Propper
      and the representatives of the underwriters (incorporated herein by
      reference to Exhibit 10.11.7 to Amendment No. 1 to the Registrant’s
      Registration Statement on Form F-1 (File
      No. 333-152623), as filed with the Securities and Exchange Commission on
      August 4, 2008).10.11.8
                                  
                                  Form
      of Letter Agreement by and between the Registrant, Paula Beharry and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.8 to Amendment No. 1 to the Registrant’s Registration
      Statement on
      Form F-1 (File No. 333-152623), as filed with the Securities and Exchange
      Commission on August 4, 2008).10.11.9
                                  
                                  Form
      of Letter Agreement by and between the Registrant, Daniel Beharry and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.9 to Amendment No. 1 to the Registrant’s Registration
      Statement on
      Form F-1 (File No. 333-152623), as filed with the Securities and Exchange
      Commission on August 4, 2008).10.11.10
                                  
                                  Form
      of Letter Agreement by and between the Registrant, Li Ping He, as
      custodian for Tiffany He under the California Uniform Transfer to Minors
      Act and the representatives of the underwriters (incorporated herein by
      reference to Exhibit 10.11.10 to Amendment No. 1 to the Registrant’s
      Registration Statement on Form F-1 (File No. 333-152623), as filed with
      the Securities and Exchange Commission on August 4,
  2008).10.11.11
                                  
                                  Form
      of Letter Agreement by and between the Registrant, Carman Ramirez and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.11 to Amendment No. 1 to the Registrant’s Registration
      Statement on Form F-1 (File No. 333-152623), as filed with the Securities
      and Exchange Commission on August 4,
2008).


81


Exhibit
      No.
                                      
                                      Description10.11.12
                                      
                                      Form
      of Letter Agreement by and between the Registrant, Edward Carter and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.12 to Amendment No. 1 to the Registrant’s Registration
      Statement on Form F-1 (File No. 333-152623), as filed with the Securities
      and Exchange Commission on August 4, 2008).10.11.13
                                      
                                      Form
      of Letter Agreement by and between the Registrant, Ida Carter and the
      representatives of the underwriters (incorporated herein by reference to
      Exhibit 10.11.13 to Amendment No. 1 to the Registrant’s Registration
      Statement on Form F-1 (File No. 333-152623), as filed with the Securities
      and Exchange Commission on August 4, 2008).10.12.1
                                      
                                      Form
      of Right of First Refusal and Corporate Opportunities Agreement by and
      between the Registrant and Chardan Capital Markets, LLC (incorporated
      herein by reference to Exhibit 10.12.1 to Amendment No. 1 to the
      Registrant’s Registration Statement on Form F-1 (File No. 333-152623), as
      filed with the Securities and Exchange Commission on August 4,
      2008).10.12.2
                                      
                                      Form
      of Right of First Refusal and Corporate Opportunities Agreement by and
      between the Registrant and SUJG, Inc (incorporated herein by reference to
      Exhibit 10.12.2 to Amendment No. 1 to the Registrant’s Registration
      Statement on Form F-1 (File No. 333-152623), as filed with the Securities
      and Exchange Commission on August 4, 2008).10.12.3
                                      
                                      Form
      of Right of First Refusal and Corporate Opportunities Agreement by and
      between the Registrant and Source Atlantic, Inc (incorporated herein by
      reference to Exhibit 10.12.3 to Amendment No. 1 to the Registrant’s
      Registration Statement on Form F-1 (File No. 333-152623), as filed with
      the Securities and Exchange Commission on August 4,
  2008).10.12.4
                                      
                                      Form
      of Right of First Refusal and Corporate Opportunities Agreement by and
      between the Registrant and Chardan Capital, LLC (incorporated herein by
      reference to Exhibit 10.12.4 to Amendment No. 1 to the Registrant’s
      Registration Statement on Form F-1 (File No. 333-152623), as filed with
      the Securities and Exchange Commission on August 4,
  2008).10.12.5
                                      
                                      Form
      of Right of First Refusal and Corporate Opportunities Agreement by and
      between the Registrant and Chardan China Investments, LLC (incorporated
      herein by reference to Exhibit 10.12.5 to Amendment No. 1 to the
      Registrant’s Registration Statement on Form F-1 (File No. 333-152623), as
      filed with the Securities and Exchange Commission on August 4,
      2008).10.12.6
                                      
                                      Form
      of Right of First Refusal and Corporate Opportunities Agreement by and
      between the Registrant and L&P Consulting (incorporated herein by
      reference to Exhibit 10.12.6 to Amendment No. 1 to the Registrant’s
      Registration Statement on Form F-1 (File No. 333-152623), as filed with
      the Securities and Exchange Commission on August 4,
  2008).10.12.7
                                      
                                      Form
      of Right of First Refusal and Corporate Opportunities Agreement by and
      between the Registrant and Beijing United Power Investment Ltd
      (incorporated herein by reference to Exhibit 10.12.7 to Amendment No. 1 to
      the Registrant’s Registration Statement on Form F-1 (File No. 333-152623),
      as filed with the Securities and Exchange Commission on August 4,
      2008).10.12.8
                                      
                                      Form
      of Right of First Refusal and Corporate Opportunities Agreement by and
      between the Registrant and Beijing C&D International Co., Ltd
      (incorporated herein by reference to Exhibit 10.12.8 to Amendment No. 1 to
      the Registrant’s Registration Statement on Form F-1 (File No. 333-152623),
      as filed with the Securities and Exchange Commission on August 4,
      2008).
 82
  10.12.9
                                                  
                                                  Form
      of Right of First Refusal and Corporate Opportunities Agreement by and
      between the Registrant and TCT Science and Technology Co. Ltd
      (incorporated herein by reference to Exhibit 10.12.9 to Amendment No. 1 to
      the Registrant’s Registration Statement on Form F-1 (File No. 333-152623),
      as filed with the Securities and Exchange Commission on August 4,
      2008).10.12.10
                                                  
                                                  Form
      of Right of First Refusal and Corporate Opportunities Agreement by and
      between the Registrant and Beijing Sinokosen Investment, Ltd (incorporated
      herein by reference to Exhibit 10.12.10 to Amendment No. 1 to the
      Registrant’s Registration Statement on Form F-1 (File No. 333-152623), as
      filed with the Securities and Exchange Commission on August 4,
      2008).10.12.11
                                                  
                                                  Form
      of Right of First Refusal and Corporate Opportunities Agreement by and
      between the Registrant and Shang Hai NengHuan Technology Development Ltd
      (incorporated herein by reference to Exhibit 10.12.11 to Amendment No. 1
      to the Registrant’s Registration Statement on Form F-1 (File No.
      333-152623), as filed with the Securities and Exchange Commission on
      August 4, 2008).10.13
                                                  
                                                  Form
      of Administrative Services Agreement between the Registrant and Chardan
      Capital, LLC (incorporated herein by reference to Exhibit 10.13 to
      Amendment No. 1 to the Registrant’s Registration Statement on Form F-1
      (File No. 333-152623), as filed with the Securities and Exchange
      Commission on August 4, 2008).10.14
                                                  
                                                  Promissory
      Note, dated May 28, 2008, issued by the Registrant to Chardan Capital, LLC
      in the amount of $19,934 (incorporated herein by reference to Exhibit
      10.14 to Amendment No. 1 to the Registrant’s Registration Statement on
      Form F-1 (File No. 333-152623), as filed with the Securities and Exchange
      Commission on August 4, 2008).10.15
                                                  
                                                  Promissory
      Note, dated May 28, 2008, issued by the Registrant to Kerry Propper in the
      amount of $12,500 (incorporated herein by reference to Exhibit 10.13 to
      Amendment No. 1 to the Registrant’s Registration Statement on Form F-1
      (File No. 333-152623), as filed with the Securities and Exchange
      Commission on August 4, 2008).12.1
                                                  
                                                  CEO
      Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.*12.2
                                                  
                                                  CFO
      Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.*13.1
                                                  
                                                  CEO
      Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.*13.2
                                                  
                                                  CFO
      Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.*14
                                                  
                                                  Code
      of Business Conduct and Ethics (incorporated herein by reference to
      Exhibit 14 to Amendment No. 1 to the Registrant’s Registration Statement
      on Form F-1 (File No. 333-152623), as filed with the Securities and
      Exchange Commission on August 4, 2008).23.1
                                                  
                                                  Consent
      of Jewett, Schwartz, Wolfe & Associates.*23.2
                                                  
                                                  Consent
      of Maples & Calder (included in Exhibit 5.1).24
                                                  
                                                  Power
      of Attorney (incorporated herein by reference to Exhibit 24 to Amendment
      No. 1 to the Registrant’s Registration Statement on Form F-1 (File No.
      333-152623), as filed with the Securities and Exchange Commission on
      August 4, 2008).99.1
                                                  
                                                  Audit
      Committee Charter (incorporated herein by reference to Exhibit 99.1 to
      Amendment No. 1 to the Registrant’s Registration Statement on Form F-1
      (File No. 333-152623), as filed with the Securities and Exchange
      Commission on August 4, 2008).99.2
                                                  
                                                  Governance
      and Nominating Committee Charter (incorporated herein by reference to
      Exhibit 99.2 to Amendment No. 1 to the Registrant’s Registration Statement
      on Form F-1 (File No. 333-152623), as filed with the Securities and
      Exchange Commission on August 4,
2008).




*
            Filed
      herewith.


83


SIGNATURES




The
registrant hereby certifies that it meets all of the requirements for filing on
Form 20-F and has duly caused and authorized the undersigned to sign this annual
report on its behalf.




CHARDAN
      2008 CHINA ACQUISITION CORPORATIONBy:
      /s/ Kerry PropperName:  Kerry
      PropperTitle:
      Chief Executive OfficerBy:/s/
      Xiaosong ZhongName:
      Xiaosong ZhongTitle:
      Chief Financial Officer




Dated:
March 31, 2009


84


CHARDAN 2008 CHINA ACQUISITION
CORP.
 (A Development Stage
Company)
 
  INDEX
TO AUDITED FINANCIAL STATEMENTS


Report
      of Independent Registered Public Accounting Firm
              
              F-1Financial
      statementsBalance
      Sheet as of December 31, 2008
              
              F-2Statement
      of Operations for the period from February 18, 2008 (date of inception)
      through December 31, 2008
              
              F-3Statement
      of Shareholders’ Equity for the period from February 18, 2008 (date of
      inception) through December 31, 2008
              
              F-4Statement
      of Cash Flows for the period from February 18, 2008 (date of inception)
      through December 31, 2008
              
              F-5Notes
      to Financial Statements
              
              F-6
      – F-15










CHARDAN 2008 CHINA ACQUISITION
CORP.
 (A Development Stage
Company)
 
 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the
Board of Directors and Shareholders of


Chardan
2008 China Acquisitions





We have
audited the accompanying balance sheet of Chardan 2008 China Acquisitions as of
December 31, 2008 and the related statements of operations, changes in
shareholders' equity, and cash flows from February 18, 2008 (inception) through
December 31, 2008.  These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.





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





In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Chardan 2008 China Acquisitions as
of December 31, 2008 and the results of its operations and its cash flows from
February 18, 2008 (inception) through December 31, 2008 in conformity with
accounting principles generally accepted in the United States of
America.








/s/
JEWETT, SCHWARTZ, WOLFE & ASSOCIATES





Hollywood,
Florida


March 31,
2009




F-1




CHARDAN 2008 CHINA ACQUISITION
CORP.
 (A Development Stage
Company)
 
 BALANCE SHEETS


ASSETSDecember
      31,2008Current
      assets:Cash
                              
                              $
                              45,413Total
      current assets
                              
                              
                              45,413Restricted
      cash equivalents held in trust account
                              
                              
                              54,564,894Total
      assets
                              
                              $
                              54,610,307LIABILITIES AND STOCKHOLDERS’
      EQUITYCurrent
      liabilities:Loans
      from related parties
                              
                              $
                              9,854Total
      current liabilities
                              
                              
                              9,854Long
      term liabilities:Deferred
      underwriting discounts, net of $770,000 subject toforfeiture
      in the event of possible conversion
                              
                              
                              1,430,000Total
      liabilities
                              
                              
                              1,439,854Commitments
      and contingenciesOrdinary
      shares, subject to conversion (2,406,249 shares atconversion
      value of $7.89 per share)
                              
                              
                              18,985,305Stockholders'
      equity:Preferred  stock,
      $0.0001 par value, 5,000,000 shares
      authorized,  noneissued
      and outstanding
                              
                              
                              -Common
      stock, $0.0001 par value, 60,000,000 shares authorized,9,166,666  shares
      issued and outstanding, respectively
                              
                              
                              917Additional
      paid in capital
                              
                              
                              34,244,020Accumulated
      deficit during development stage
                              
                              
                              (59,789
                              )Total
      stockholders’ equity
                              
                              
                              34,185,148TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                              
                              $
                              54,610,307




See Accompanying Notes to Financial Statements.




F-2




CHARDAN 2008 CHINA ACQUISITION
CORP.
 (A Development Stage
Company)
 
 STATEMENTS OF
OPERATIONS




For
      the Period FromFebruary
      18, 2008(inception)
      toDecember
      31,2008REVENUE
                        
                        $
                        -COST
      OF SALES
                        
                        
                        -GROSS
      PROFIT
                        
                        
                        -OPERATING
      EXPENSES:Selling,
      general, and administrative
                        
                        
                        544,683Total
      operating expenses
                        
                        
                        544,683OTHER
      INCOME (EXPENSE):Interest
      income
                        
                        
                        484,894Net
      other income
                        
                        
                        484,894LOSS
      BEFORE INCOME TAXES
                        
                        
                        (59,789
                        )PROVISION
      FOR INCOME TAXES
                        
                        
                        -NET
      LOSS
                        
                        $
                        (59,789
                        )NET
      LOSS PER SHARE:Basic
      and Diluted
                        
                        $
                        (0.01
                        )WEIGHTED-AVERAGE
      SHARESBasic
      and Diluted
                        
                        
                        9,166,666




See
Accompanying Notes to Financial Statements.




F-3




CHARDAN 2008 CHINA ACQUISITION
CORP.
 (A Development Stage
Company)
 
 STATEMENT OF SHAREHOLDERS’
EQUITY


Common Stock $.0001
      par
                                                                                
                                                                                
                                                                                Additional
                                                                                
                                                                                
                                                                                Accumulated
                                                                                
                                                                                
                                                                                Shareholders'Shares
                                                                                
                                                                                
                                                                                Par Value
                                                                                
                                                                                
                                                                                Paid in
    Capital
                                                                                
                                                                                
                                                                                Deficit
                                                                                
                                                                                
                                                                                EquityBeginning Balance at February 18,
      2008
                                                                                
                                                                                
                                                                                -
                                                                                
                                                                                
                                                                                
                                                                                -
                                                                                
                                                                                
                                                                                
                                                                                -
                                                                                
                                                                                
                                                                                
                                                                                -
                                                                                
                                                                                
                                                                                
                                                                                -Initial Offering
                                                                                
                                                                                
                                                                                2,291,666
                                                                                
                                                                                
                                                                                
                                                                                229
                                                                                
                                                                                
                                                                                
                                                                                24,771
                                                                                
                                                                                
                                                                                
                                                                                -
                                                                                
                                                                                
                                                                                
                                                                                25,000Sale of common
    stock
                                                                                
                                                                                
                                                                                6,875,000
                                                                                
                                                                                
                                                                                
                                                                                688
                                                                                
                                                                                
                                                                                
                                                                                33,219,249
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                
                                                                                33,219,937Purchase of
    warrants
                                                                                
                                                                                
                                                                                -
                                                                                
                                                                                
                                                                                
                                                                                -
                                                                                
                                                                                
                                                                                
                                                                                1,000,000
                                                                                
                                                                                
                                                                                
                                                                                -
                                                                                
                                                                                
                                                                                
                                                                                1,000,000Net loss
                                                                                
                                                                                
                                                                                -
                                                                                
                                                                                
                                                                                
                                                                                -
                                                                                
                                                                                
                                                                                
                                                                                -
                                                                                
                                                                                
                                                                                
                                                                                (59,789
                                                                                )
                                                                                
                                                                                
                                                                                (59,789
                                                                                )Ending Balance at December 31,
      2008
                                                                                
                                                                                
                                                                                9,166,666
                                                                                
                                                                                
                                                                                $
                                                                                917
                                                                                
                                                                                
                                                                                $
                                                                                34,244,020
                                                                                
                                                                                
                                                                                $
                                                                                (59,789
                                                                                )
                                                                                
                                                                                $
                                                                                34,185,148




See
Accompanying Notes to Financial Statements.




F-4




CHARDAN 2008 CHINA ACQUISITION
CORP.
 (A Development Stage
Company)
 
 STATEMENT OF CASH
FLOWS




For
      the Period FromFebruary
      18, 2008(inception)
      toDecember
      31,2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
                              
                              $
                              (59,789
                              )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Net
      cash used in operating activities
                              
                              
                              (59,789
                              )CASH
      FLOWS FROM INVESTING ACTIVITIES:Proceeds
      from T Bills
                              
                              
                              (54,564,894
                              )Net
      cash used in investing activities
                              
                              
                              (54,564,894
                              )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from issuance of stock
                              
                              
                              53,230,242.21Proceeds
      from deferred financing costs
                              
                              
                              1,430,000Net
      loans from related parties
                              
                              
                              9,854Net
      cash provided by financing activities
                              
                              
                              54,670,096NET
      INCREASE IN CASH AND CASH EQUIVALENTS
                              
                              
                              45,413BEGINNING
      OF PERIOD
                              
                              
                              -END
      OF PERIOD
                              
                              $
                              45,413Supplementary
      disclosure of cash flow information:Cash
      paid for interest
                              
                              $
                              -Cash
      paid for taxes
                              
                              $
                              -




See
Accompanying Notes to Financial Statements.




F-5




CHARDAN 2008 CHINA ACQUISITION
CORP.
 (A Development Stage
Company)
 
 NOTES TO AUDITED FINANCIAL
STATEMENTS





NOTE
1—ORGANIZATION AND BUSINESS OPERATIONS





Chardan
2008 China Acquisition Corp. (the Company) is a newly organized British Virgin
Islands exempted company.  The Company has selected December 31st as its
year end.  The Company is a blank check company formed for the purpose
of acquiring, engaging in a merger, share capital exchange or contractual
control arrangement with, purchasing all or substantially all of the assets of,
or engaging in any other similar business combination of an unidentified
operating business.  The Company intends to focus on identifying a
prospective target business having its primary operations in the People’s
Republic of China.  Efforts in identifying a prospective target
business will not be limited to a particular industry within China.





As of
December 31, 2008, the Company has begun searching for prospective businesses;
however, for the most part, activities were restricted to filing and
establishing the fund. The fund currently holds, in Treasury Bills, a principal
sum of $54,564,894.





The
registration statement for the Company’s initial public offering (the
“Offering”) described in Note 3 was declared effective on August 11,
2008.  The Company consummated the Offering on August 15, 2008 and
immediately prior to such Offering, sold an aggregate of 2,000,000 warrants at
$.50 per warrant to certain officers and affiliates of the Company in a private
placement (the “Private Placement”) described in Note 4.  The net
proceeds of the Offering and the Private Placement are intended to be generally
applied toward consummating a business combination with one or more operating
business having their primary operations in the People’s Republic of China
(“Business Combination”).  Net proceeds of $53,300,000 from the
Offering and the Private Placement are held in a trust account (“Trust Account”)
and will only be released to the Company upon the earlier of: (i) the
consummation of a business combination; or (ii) the Company’s liquidation,
except to satisfy shareholder conversion rights. The Trust Account includes the
deferred underwriting discount from the Offering of up to $2,200,000 which will
be paid to the underwriters and upon consummation of a business combination, as
described in Note 5.  Additionally, up to an aggregate of $2,900,000,
of interest earned on the Trust Account balance (net of taxes paid or payable)
may be released to the Company to fund operating activities.





The
Company, after signing a definitive agreement for the acquisition of a target
business, is required to submit such transaction for shareholder approval. In
the event that shareholders owning 35% or more of the shares sold in the
Offering vote against the business combination and exercise their conversion
rights described below, the business combination will not be consummated. All of
the Company’s shareholders prior to the Offering, have agreed to vote their
pre-initial public offering ordinary shares in accordance with the vote of the
majority of the shares voted by all shareholders of the Company who purchased
their shares in the Offering or the aftermarket (“Public Shareholders”) with
respect to any business combination. After consummation of a business
combination, these voting safeguards will no longer be applicable.





If the
Company does not execute a letter of intent, agreement in principle or
definitive agreement for a business combination prior to 18 months from the date
of the closing of the Offering, the Company’s board will convene, adopt and
recommend to its shareholders a plan of dissolution and distribution and file a
proxy statement with the SEC seeking shareholder approval for such plan. If,
however, a letter of intent, agreement in principle or definitive agreement for
a business combination has been executed prior to 18 months from the date of the
closing of the Offering, the Company will seek the consummation of that business
combination. However, if the Company has entered into a letter of intent,
agreement in principle or definitive agreement within 18 months following the
closing of the Offering and management anticipates that the Company may not be
able to consummate a business combination within the 30 months from the date of
the closing of the Offering, the Company may seek to extend the time period
within which it may complete its business combination to 36 months, by calling a
special (or annual) meeting of shareholders for the purpose of soliciting their
approval for such extension (the “Extended Period”). If the Company receives
Public Shareholder approval for the Extended Period and holders of 35% or more
of the shares held by Public Shareholders do not vote against the Extended
Period and elect to convert their ordinary shares in connection with the vote
for the extended period, the Company will then have an additional 6 months in
which to complete the initial business combination. If the Extended Period is
approved, the Company will still be required to seek Public Shareholder approval
before completing a business combination. In the event there is no business
combination within the 30-month deadline (assuming the Extended Period is not
approved) described above, the Company will dissolve and distribute to its
Public Shareholders, in proportion to their respective equity interests, the
amount held in the Trust Account, and any remaining net assets, after the
distribution of the Trust Account. The Company’s corporate existence will
automatically cease at the end of the 36-month period if the Company has not
received shareholder approval for an initial business combination. In the event
of liquidation, the per share value of the residual assets remaining available
for distribution (including Trust Account assets) may be less than the initial
public offering price per share in the Offering.


F-6
  CHARDAN 2008 CHINA ACQUISITION
CORP.
 (A Development Stage
Company)
 
 NOTES TO AUDITED FINANCIAL
STATEMENTS


A Public
Shareholder’s election to convert ordinary shares in connection with the vote on
the Extended Period will only be honored if the Extended Period is approved.
Public Shareholders who vote the shares that have been converted against the
Extended Period and exercise their conversion rights will not be able to vote
these shares with respect to the initial business combination. All other Public
Shareholders will be able to vote on the initial business
combination.





With
respect to a business combination which is approved and consummated or a vote on
the Extended Period which is approved, any Public Shareholders who voted against
the business combination or Extended Period may contemporaneously with or prior
to such vote exercise their conversion right and their ordinary shares would be
cancelled and returned to the status of authorized but unissued shares. The per
share conversion price will equal the amount in the Trust Account (including
interest therein), calculated as of two business days prior to the consummation
of the proposed business combination or vote on Extended Period, divided by the
number of shares of common stock held by Public Shareholders at the closing of
the Offering.





Note
2 — Summary of Significant Accounting Policies





Basis
of presentation:





The
accompanying balance sheet is presented in U.S. dollars and have been
prepared in accordance with accounting principles generally accepted in the
United States of America (U.S. GAAP) and pursuant to the accounting rules and
disclosure regulations of the Securities and Exchange Commission
(SEC).





Use
of estimates:





The
preparation of financial statements in conformity with U.S GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.





Fair
value of financial instruments:





The fair
values of the Company’s assets and liabilities that qualify as financial
instruments under Statement of Financial Accounting Standards (SFAS) No. 107,
“Disclosure About Fair Value of Financial Instruments,” approximate the carrying
amounts represented in the accompanying balance sheet.





Cash
and cash equivalents:





The
Company considers all highly-liquid investments with original maturities of
three months or less when acquired to be cash equivalents.  Cash and cash
equivalents at December 31, 2008 principally consist of cash held in a bank
account.





Restricted
cash equivalents held in the trust account:





The
amounts held in the Trust Account represent substantially all of the proceeds of
the Offering and are classified as restricted assets since such amounts can only
be used by the Company in connection with the consummation of a Business
Combination. The funds held in the Trust Account are invested in a money market
fund that invests in securities of the United States Government. As of December
31, 2008, Chardan has approximately $54,565,000 held in U.S.
Treasuries.


F-7
  CHARDAN 2008 CHINA ACQUISITION
CORP.
 (A Development Stage
Company)
 
 NOTES TO AUDITED FINANCIAL
STATEMENTS





Concentration
of credit risk:





Financial
instruments that potentially subject the Company to concentrations of credit
risk consist of cash accounts in a financial institution, which at times, may
exceed the Federal depository insurance coverage of $100,000. The Company has
not experienced losses on these accounts and management believes the Company is
not exposed to significant risks on such accounts.





Income
taxes:





Under
current British Virgin Islands (BVI) laws, the Company is not subject to income
taxes, or capital gains, and no Cayman Islands withholding tax is imposed upon
payments of dividends by the Company to its shareholders. In the future, the
Company’s tax rate will be impacted by acquisitions of non-BVI subsidiaries
governed by the respective local income tax laws. Accordingly, no provision for
income taxes has been made in the accompanying balance sheet.





Ordinary
shares subject to conversion:





As
discussed in more detail in Note 1, the Company will only proceed with a
Business Combination if (1) it is approved by a majority of the votes cast by
the Company’s public shareholders and (2) public shareholders holding less than
35% (2,406,249) of the shares of ordinary shares sold in the Offering
exercise their conversion rights, which allows the public shareholders to
receive their per share interest in the Trust Account.  Accordingly,
the Company has classified 2,406,249 shares of its ordinary shares outside of
permanent equity as “Ordinary shares subject to conversion,” at an initial
conversion price of $7.89 on December 31, 2008 for a total of
$18,985,305.  The Company will recognize changes in the conversion
value as they occur and will adjust the carrying value of the ordinary shares
subject to conversion to be equal to its conversion value at the end of each
reporting period.





Accounting for Convertible Debt Instruments That May Be Settled
in Cash upon Conversion (Including Partial Cash Settlement)





In
May 2008, the FASB issued FSP Accounting Principles Board (“APB”) Opinion
No. 14-1, “Accounting for Convertible Debt Instruments That May Be
Settled in Cash upon Conversion (Including Partial Cash Settlement).” The FSP
clarifies the accounting for convertible debt instruments that may be settled in
cash (including partial cash settlement) upon conversion.  The FSP
requires issuers to account separately for the liability and equity components
of certain convertible debt instruments in a manner that reflects the issuer's
nonconvertible debt (unsecured debt) borrowing rate when interest cost is
recognized.  The FSP requires bifurcation of a component of the debt,
classification of that component in equity and the accretion of the resulting
discount on the debt to be recognized as part of interest expense in our
consolidated statement of operations.  The FSP requires retrospective
application to the terms of instruments as they existed for all periods
presented.  The FSP is effective for fiscal years beginning after
December 15, 2008 and early adoption is not permitted.  The Company is
currently evaluating the potential impact of FSP APB 14-1 upon its financial
statements.





The
Hierarchy of Generally Accepted Accounting Principles





In May
2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles.”  SFAS No. 162 identifies the sources of
accounting principles and the framework for selecting the principles used in the
preparation of financial statements.  SFAS No. 162 is effective 60
days following the SEC's approval of the Public Company Accounting Oversight
Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity
with Generally Accepted Accounting Principles".  The implementation of
this standard will not have a material impact on the Company's financial
position and results of operations.





Delay
in Effective Date


F-8
  CHARDAN 2008 CHINA ACQUISITION
CORP.
 (A Development Stage
Company)
 
 NOTES TO AUDITED FINANCIAL
STATEMENTS


In
February 2008, the FASB issued FSP FAS No. 157-2, “Effective Date of FASB
Statement No. 157”. This FSP delays the effective date of SFAS No. 157 for
all nonfinancial assets and nonfinancial liabilities, except those that are
recognized or disclosed at fair value on a recurring basis (at least annually)
to fiscal years beginning after November 15, 2008, and interim periods
within those fiscal years. The impact of adoption was not material to the
Company’s financial condition or results of operations.





Fair
Value Option for Financial Assets and Financial Liabilities


In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities – Including an amendment of SFAS No.
115,” which becomes effective for the Company on February 1, 2008, permits
companies to choose to measure many financial instruments and certain other
items at fair value and report unrealized gains and losses in earnings. Such
accounting is optional and is generally to be applied instrument by instrument.
The election of this fair-value option did not have a material effect on its
financial condition, results of operations, cash flows or
disclosures.





Fair
Value Measurements


In
September 2006, the FASB issued SFAS No. 157, "Fair Value
Measurements.”  SFAS No. 157 provides guidance for using fair value to
measure assets and liabilities.  SFAS No. 157 addresses the requests
from investors for expanded disclosure about the extent to which companies’
measure assets and liabilities at fair value, the information used to measure
fair value and the effect of fair value measurements on earnings. SFAS No. 157
applies whenever other standards require (or permit) assets or liabilities to be
measured at fair value, and does not expand the use of fair value in any new
circumstances. SFAS No. 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007 and was adopted by the Company in
the first quarter of fiscal year 2008. There was no material impact on the
Company’s results of operations and financial condition due to the adoption of
SFAS No. 157.





NOTE
3 - UNITED STATES TREASURIES





Funds
held in the Continental Trust account, as per the Trust agreement, were used to
purchase    Six month Treasury bonds, on September 4, 2008,
at an aggregate price of $54,293,941.  The bonds matured on February
26, 2009 with a face value of $54,810,000, representing an implied yield of
1.9927%. Due to the nature of the Treasury bonds, there are no coupon
payments.





Subsequent
to the initial purchase of the Treasury bonds, Chardan sold the principal sum of
Treasury Bills on the open market for total proceeds of $54,784,894. Chardan
then reinvested the proceeds, less amounts representing working capital, in the
principal sum of $54,564,894 to mature on January 2, 2009.




NOTE
4 - PUBLIC OFFERING





On August
15, 2008, the Company sold 6,875,000 units, in the Offering at a price of $8.00
per unit. Each unit consists of one share of the Company’s ordinary shares,
$0.0001 par value, and one warrant.  Each warrant will entitle the
holder to purchase from the Company one share of the Company’s ordinary shares
at an exercise price of $5.00 per share commencing on later of: (i) the
consummation of the business combination, or (ii) August 11,
2009.  The warrants will be exercisable only if the Company continues
to provide for an effective registration statement covering the shares
of ordinary share issuable upon exercise of the warrants.  In no
event will the holder of a warrant be entitled to receive a net cash settlement
or other consideration in lieu of physical settlement in shares of the Company’s
ordinary shares.





The
warrants expire on August 11, 2012, unless earlier redeemed.  The
warrants included in the units sold in the Offering are redeemable, at the
Company’s option, in whole and not in part at a price of $0.01 per warrant upon
a minimum of 30 days’ notice after the warrants become exercisable, only in the
event that the last sale price of the ordinary shares exceeds $10.00 per share
for any 20 trading days within a 30-trading day period ending three business
days prior to the notice of redemption being sent out.


F-9
  CHARDAN 2008 CHINA ACQUISITION
CORP.
 (A Development Stage
Company)
 
 NOTES TO AUDITED FINANCIAL
STATEMENTS


The
warrants are classified within shareholders’ equity since, under the terms of
the warrants, the Company cannot be required to settle or redeem them for
cash.




NOTE
5 - RELATED PARTY TRANSACTIONS





The
Company has agreed to pay Chardan Capital, LLC, a company owned and managed by
the Company’s Chairman of the Board, $7,500 per month for office space and
general and administrative services including secretarial support commencing on
the date of the prospectus and continuing until (i) the consummation by the
Company of a business combination (as described in Note 1), (ii) February 11,
2011, (iii) the date on which the Company ceases its corporate existence in
accordance with its amended and restated memorandum and articles of
incorporation.





Certain
officers and directors, and their affiliates, purchased an aggregate of
2,000,000 warrants at a price of $0.50 per warrant ($1,000,000 in the aggregate)
in a private placement immediately prior to the initial public offering
(“private placement warrants”). The proceeds from the sale of the private
placement warrants were added to the proceeds from the Offering held in the
Trust Account pending the Company’s consummation of a Business Combination. If
the Company does not complete a Business Combination that meets the criteria
described in the Offering, then the $1,000,000 purchase price of the private
placement warrants will become part of any liquidating distribution to the
Company’s public shareholders following the Company’s liquidation and
dissolution and the private placement warrants will expire
worthless.




The
private placement warrants have terms and provisions that are identical to the
warrants sold in the Offering with the following exceptions:  (i) The
private placement warrants do not have a claim to the funds held in the trust
account, (ii) the private placement warrants were purchased pursuant to an
exemption from the registration requirements of the Securities Act and will
become freely tradable only after they are registered pursuant to a registration
rights agreement to be signed on or before the date of this prospectus, (iii)
the private placement warrants will be non-redeemable so long as they are held
by the initial holders or their permitted assigns and (iv) the private placement
warrants are exercisable on a “cashless” basis at any time after the later to
occur of a business combination or one year from the date of the
Prospectus.





The sale
of private placement warrants did not result in the recognition of stock based
compensation expense because the private placement warrants were sold at or
above fair market value.





One of
the Company’s founders had provided to the Company advances totaling $32,434 to
pay expenses of the Offering for the SEC registration fee, FINRA registration
fee, and accounting and legal fees and expenses. The loan does not bear interest
and has been partially repaid as of December 31, 2008, with a remaining balance
of $9,854.





NOTE
6 - COMMITMENTS AND UNDERWRITERS’ COMPENSATION





The
Company paid to the underwriters a $1,100,000 underwriting discount,
representing 2.0% of the public Unit offering price, at the closing of the
Offering.  The Company is committed to pay up to an additional
$1,100,000 toward the remaining deferred underwriting discount and $1,100,000 in
non-accountable expenses currently held in the Trust Account, representing an
additional 4.0% fee, payable upon the Company’s consummation of a Business
Combination.    This deferred underwriting discount is shown
as a long term liability on the balance sheet and is net of $770,000, which
represents amounts that would be forfeited by the underwriter in the event of a
possible conversion of the Ordinary Shares as indicated in Note 2.





The
Company also issued and sold to the underwriters on the closing date an option,
as an additional compensation to purchase up to an aggregate of 137,500
units for an aggregate purchase price of $100. These Options shall be
exercisable, in whole or in part, commencing on the later of the consummation of
a Business Combination or one year from the effective date of the registration
(August 11, 2008) and expiring on August 11, 2013 at an initial exercise price
per Unit of $8.80.





The
Company has determined based upon a Black-Scholes option pricing formula, that
the estimated fair value of the option on the date of sale would be
approximately $1.95 per unit or an aggregate of approximately $268,616, assuming
an expected of five years, volatility of 30.87% and a risk-free interest rate of
2.5%. Given the parameters used in the computation of the value of the option
change over time, the actual fair value of the option on the date of sale is
expected to be different from the estimated fair value computed
above.


F-10
  CHARDAN 2008 CHINA ACQUISITION
CORP.
 (A Development Stage
Company)
 
 NOTES TO AUDITED FINANCIAL
STATEMENTS


The
volatility calculation of 30.87% is based on the review of trading prices of the
public warrants of 24 blank check companies that are comparable to the Company
(i) each having completed an initial public offering of $100 million or less
(ii) each currently seeking an acquisition and (iii) collectively with a median
average closing price for their public warrants of approximately $.50 over a six
month period.  Because Company does not have a trading history, the
Company estimated the potential volatility of its common stock price, which will
depend on a number of factors which cannot be ascertained at this time. The
Company used the annualized volatility of the historical volatilities for a
period of time equal in length to the term of the option because the Company
believes that the volatility of these companies is a reasonable benchmark to use
in estimating the expected volatility for the Company’s common stock
post-Business Combination. Although an expected life of five years was taken
into account for purposes of assigning value to this option, if the Company does
not consummate a Business Combination within the prescribed time period and
liquidates, this option would become worthless.





Pursuant
to Rule 2710(g) (1) of FINRA Conduct Rule, the option to purchase 137,500 units
is deemed to be underwriting compensation and therefore upon exercise, the
underlying shares and warrants are subject to a 180-day lock-up. Additionally,
the option may not be sold, transferred, assigned, pledged or hypothecated for a
one-year period (including the foregoing 180-day period) following the date of
the Proposed Offering.




F-11


CHARDAN 2008 CHINA ACQUISITION
CORP.
 (A Development Stage
Company)
 
 NOTES TO AUDITED FINANCIAL
STATEMENTS





MANAGEMENT’S
DISCUSSION AND ANALYSIS


OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS





This
interim report on Form 6-K contains forward-looking statements. All statements
other than statements of historical fact are, or may be deemed to be, forward
looking statements. Such forward-looking statements include statements
regarding, among others, our: (a) expectations about possible business
combinations, (b) growth strategies, (c) future financing plans, and (d)
anticipated needs for working capital. Forward-looking statements, which involve
assumptions and describe our future plans, strategies, and expectations, are
generally identifiable by use of the words “may,” “will,” “should,” “expect,”
“anticipate,” “approximate,” “estimate,” “believe,” “intend,” “plan,” “budget,”
“could,” “forecast,” “might,” “predict,” “shall” or “project,” or the negative
of these words or other variations on these words or comparable terminology.
This information may involve known and unknown risks, uncertainties, and other
factors that may cause our actual results, performance, or achievements to be
materially different from the future results, performance, or achievements
expressed or implied by any forward-looking statements. These statements may be
found in this interim report. Actual events or results may differ materially
from those discussed in forward-looking statements as a result of various
factors, including, without limitation, the risks outlined under the section
entitled “Risk Factors” herein. In light of these risks and uncertainties, the
events anticipated in the forward-looking statements may or may not
occur.





Forward-looking
statements are based on our current expectations and assumptions regarding our
business, potential target businesses, the economy and other future conditions.
Because forward-looking statements relate to the future, by their nature, they
are subject to inherent uncertainties, risks and changes in circumstances that
are difficult to predict. Our actual results may differ materially from those
contemplated by the forward-looking statements. We caution you therefore that
you should not rely on any of these forward-looking statements as statements of
historical fact or as guarantees or assurances of future performance. Important
factors that could cause actual results to differ materially from those in the
forward-looking statements include changes in local, regional, national or
global political, economic, business, competitive, market (supply and demand)
and regulatory conditions and the following:





·
            our status as a development
      stage company;





·
            our liquidation prior to a
      business combination;





·
            the reduction of the proceeds
      held in the trust account due to third party
  claims;





·
            our selection of a prospective
      target business or asset;





·
            our issuance of our share
      capital or incurrence of debt to complete a business
      combination;





·
            delisting of our securities
      from the Nasdaq Capital Market or the ability to have our securities
      listed on the Nasdaq Capital Market following our initial business
      combination;





·
            our ability to consummate an
      attractive business combination due to our limited resources and the
      significant competition for business combination
      opportunities;





·
            conflicts of interest of our
      officers and directors;





·
            potential current or future
      affiliations of our officers and directors with competing
      businesses;





·
            our ability to obtain
      additional financing if
necessary;





·
            the control by our existing
      shareholders of a substantial interest in
  us;





·
            the adverse effect the
      outstanding warrants and options may have on the market price of our
      ordinary shares;


F-12
  CHARDAN 2008 CHINA ACQUISITION
CORP.
 (A Development Stage
Company)
 
 NOTES TO AUDITED FINANCIAL
STATEMENTS


·
            the existence of registration
      rights with respect to the securities owned by our existing
      shareholders;





·
            the lack of a market for our
      securities;





·
            our being deemed an investment
      company;





·
            our dependence on our key
      personnel;





·
            our dependence on a single
      company after our business
combination;





·
            business and market
      outlook;





·
            our growth as a
      whole;





·
            our and our customers’
      business strategies;





·
            environmental, permitting and
      other regulatory risks;





·
            foreign currency fluctuations
      and overall political risk in foreign
  jurisdictions;





·
            our operating and capital
      expenditures;





·
            our competitive
      position;





·
            outcomes of legal
      proceedings;





·
            expected results of operations
      and/or financial position;





·
            future effective tax rates;
      and





·
            compliance with applicable
      laws and regulations in the U.S., China, the British Virgin Islands and
      elsewhere as applicable.





Any
forward-looking statement made by us in this interim report speaks only as of
the date on which we make it, and is expressly qualified in its entirety by the
foregoing cautionary statements. Factors or events that could cause our actual
results to differ may emerge from time to time, and it is not possible for us to
predict all of them. We undertake no obligation to publicly update any
forward-looking statement, whether as a result of new information, future
developments or otherwise.





Overview





Chardan
2008 China Acquisition Corp. is a newly incorporated British Virgin Islands
business company with limited liability. We are a blank check company formed for
the purpose of acquiring, engaging in a merger, share exchange or contractual
control arrangement with, purchasing all or substantially all of the assets of,
or engaging in any other similar business combination with an unidentified
operating business (a “Business
Combination”).





We have a
period of 18 months from the consummation of our initial public offering (the
“IPO”) to effect our
Business Combination, with an additional twelve-month period (for a total of 30
months) if a letter of intent, agreement in principle or definitive agreement
has been executed within such 18 month period but as to which the combination is
not yet complete. Further, if we have entered into a letter of intent, agreement
in principle or definitive agreement within such 18 month period, we may, prior
to the expiration of the 30 month period, call a meeting of our shareholders for
the purpose of soliciting their approval to extend the date before which we must
complete our Business Combination by an additional 6 months to avoid being
required to liquidate (the “Extended Period”). If the
Extended Period is approved by our shareholders we would have a total of 36
months from the consummation of the IPO to complete a Business
Combination.


F-13
  CHARDAN 2008 CHINA ACQUISITION
CORP.
 (A Development Stage
Company)
 
 NOTES TO AUDITED FINANCIAL
STATEMENTS


We intend
to focus on identifying a target business having its primary operations in the
People’s Republic of China, but our efforts will not be limited to a particular
industry. To date, our efforts have been limited to organizational activities,
completion of our IPO and the evaluation of possible Business Combinations, none
of which is yet probable to occur.





Financing
History





We
consummated an IPO of 6,875,000 units (the “Units”) on August 15, 2008.
Each Unit consists of one ordinary share, $0.0001 par value per share (the
“Public Ordinary
Shares”) and one warrant (the “Public Warrants”) entitling
the holder to purchase one Public Ordinary Share at a price of $5.00. The Units
were sold at an offering price of $8.00 per unit, generating gross proceeds of
$55,000,000. The Public Warrants will become exercisable on the later of: (i)
the completion of a Business Combination; or (ii) August 11, 2009, and will
expire on August 11, 2012, or earlier upon redemption or our
liquidation.





Prior to
the consummation of the IPO, we had issued 2,291,666 insider units (the “Insider Units”), each
consisting of one ordinary share (the “Insider Ordinary Shares”) and
one warrant (the “Insider
Warrants”) to certain of our officers, directors and existing
shareholders at a price of $0.01091 per Insider Unit, generating gross proceeds
of $25,000.  The holders of the Insider Ordinary Shares have agreed to
vote such shares in the same manner as the majority of the Public Ordinary
Shares included in the Units sold in the IPO. The terms of the Insider Warrants
are identical to those of the Public Warrants.





Additionally,
prior to the consummation of the IPO, certain of our officers, directors and
existing shareholders purchased 2,000,000 warrants from us at a price of $0.50
per warrant (the “Private
Placement Warrants”) in a private placement (the “Private Placement”),
generating gross proceeds of $1,000,000. The Private Placement Warrants are
identical to the Public Warrants included in the Units sold in the IPO, except
that the Private Placement Warrants are non-redeemable and may be exercised on a
“cashless” basis on the later of: (i) the completion of a Business Combination;
or (ii) August 11, 2009, and they will expire on August 11, 2012, or earlier
upon our liquidation.





The sale
of the Insider Ordinary Shares, the Units in the IPO and the Private Placement
Warrants generated gross proceeds to the Company in the aggregate amount of
$56,025,000. We intend to use the proceeds from those issuances, less offering
expenses (both paid and deferred) and the expenses of operations, an aggregate
of $52,200,000 (the “Net
Proceeds”), to engage in a Business Combination with a business that has
its principal operations in the People’s Republic of China.  Our
efforts will not be limited to a particular industry in China.





The Net
Proceeds (together with deferred offering expenses) have been deposited into a
trust account (the “Trust
Account”) at JPMorgan Chase, London branch, maintained by Continental
Stock Transfer & Trust Company acting as trustee. The holders of the Insider
Ordinary Shares have waived their right to receive any share of the Trust
Account upon distribution of the funds in the event we fail to consummate a
Business Combination.  The holders of the Public Warrants, Insider
Warrants and Private Placement Warrants have no right to receive any share of
the Trust Account upon distribution of the funds in the event we fail to
consummate a Business Combination, in which event the Public Warrants, Insider
Warrants and Private Placement Warrants will expire worthless.





Result
of Operations





For the
period from February 19, 2008 (inception) to December 31, 2008, we had net
income/(loss) of ($59,789), which consisted of interest income of $484,894
earned on the Trust Account investment of $54,564,894, offset by filing fees of
$87,471, $65,000 for D&O insurance, $172,616 for travel-related expenses,
and other miscellaneous administrative fees.





Liquidity
and Capital Resources





The funds
held in the Trust Account are available for use only to: (i) engage in a
Business Combination; (ii) redeem up to one ordinary share less than 35% of the
Public Ordinary Shares that are voted against the Extended Period if the
Extended Period is approved; (iii) redeem up to one ordinary share less than 35%
of the Public Ordinary Shares that are voted against a Business Combination if
the Business Combination is approved and completed; or (iv) distribute to the
holders of the Public Ordinary Shares in the event we fail to complete a
Business Combination and liquidate and dissolve, subject to the following
exceptions:


F-14
  CHARDAN 2008 CHINA ACQUISITION
CORP.
 (A Development Stage
Company)
 
 NOTES TO AUDITED FINANCIAL
STATEMENTS


-
            Payment
      of taxes due;


-
            Distribution
      of interest earned on the Net Proceeds in the Trust Account for our use as
      working capital in identifying and evaluating a target business and in
      negotiating and consummating a Business Combination with such target
      business; and


-
            Payment
      of deferred offering expenses to the underwriters of the
    IPO.





At
December 31, 2008, we had cash outside of the Trust Account of approximately
$45,413. We anticipate using these funds to cover expenses incurred in
identifying, evaluating and performing due diligence with respect to a
prospective target business or businesses, as well as legal, accounting and
other expenses associated with structuring, negotiating and documenting a
Business Combination. We will also incur regular expenses to meet our
obligations under applicable securities laws, to maintain directors’ and
officers’ insurance coverage and to pay a monthly $7,500 administrative expense
to Chardan Capital, LLC, an affiliate of Li Zhang, chairman of our board of
directors.





Although
interest rates may fluctuate, which could affect the amount of working capital
available to us, we believe that we will have sufficient working capital
available to operate for the twelve months that began January 1,
2009.  If the funds that we are entitled to withdraw from the Trust
Account are insufficient to cover our expenses, we may be required to raise
additional capital, the amount, availability and cost of which cannot be
ascertained at present.  In such an event, we could seek additional
capital through loans or additional investments from our directors and officers,
but none of which is under any obligation to advance funds to, or invest in, us.
Any interest income not used to fund working capital requirements will be remain
the property of the Company and will be available as additional consideration
payable in connection with a Business Combination.





Critical
Accounting Policies





The
preparation of financial statements and related disclosures in conformity with
generally accepted accounting principles in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements, and income and expenses during the periods
reported. Actual results could materially differ from those estimates. We have
identified the following as our critical accounting policies:





Cash and cash equivalents. We
consider all highly liquid investments, including short-term money market
instruments with original maturities of three months or less when purchased, to
be cash equivalents.





F-15