UNITED STATES


SECURITIES AND EXCHANGE
COMMISSION


Washington, D.C.
20549




FORM 20-F




(Mark
One)




o
                    
                    REGISTRATION
      STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE
      ACT OF 1934OR ̈
                    
                    ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
      1934


OR


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


OR


 ̈
            
            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 transition period from January 1, 2009 to
October 31,
2009





Commission
file number: 000-53826





GSME
ACQUISITION PARTNERS I


(Exact
name of Registrant as specified in its charter)


N/A


(Translation
of Registrant’s name into English)


Cayman
Islands


(Jurisdiction
of incorporation or organization)


762
West Beijing Road, Shanghai, China 200041


(Address
of principal executive offices)





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





Title of Each Class
              Name of Each Exchange on Which
      RegisteredUnits
      consisting of one Ordinary Share, parvalue US$.001 per share, and one
      Warrant
              OTCBBOrdinary
      Shares, US$.001 par value per share
              OTCBBWarrants
      to purchase Ordinary Shares
              OTCBB




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




Indicate
the number of outstanding shares of each of the Issuer’s classes of capital or
ordinary shares as of the close of the period covered by the annual report:
1,380,000 ordinary shares, par
value $0.001 per share, as of October 31, 2009.





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





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





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





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





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
(Check one):





Large
accelerated filer  ̈   Accelerated
filer  ̈   Non-accelerated
filer þ





Indicate
by check mark which basis of accounting the registrant has used to prepare the
financial statements included in this filing:





US
      GAAP þ
              International
      Financial Reporting Standards asissued by the International
      AccountingStandards Board    ̈
              
              Other    ̈


If
“Other” has been checked in response to the previous question indicate by check
mark which financial statement item the registrant has elected to
follow.


Item 17  ̈     Item 18  ̈





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





TABLE
OF CONTENTS





INTRODUCTION
                    2PART
      I
                    4ITEM
      1.
                    IDENTITY
      OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
                    4ITEM
      2.
                    OFFER
      STATISTICS AND EXPECTED TIMETABLE
                    4ITEM
      3.
                    KEY
      INFORMATION
                    4ITEM
      4.
                    INFORMATION
      ON THE COMPANY
                    26ITEM
      4A.
                    UNRESOLVED
      STAFF COMMENTS
                    42ITEM
      5.
                    OPERATING
      AND FINANCIAL REVIEW AND PROSPECTS
                    42ITEM
      6.
                    DIRECTORS,
      SENIOR MANAGEMENT AND EMPLOYEES
                    43ITEM
      7.
                    MAJOR
      SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
                    46ITEM
      8.
                    FINANCIAL
      INFORMATION
                    49ITEM
      9.
                    THE
      OFFER AND LISTING
                    49ITEM
      10.
                    ADDITIONAL
      INFORMATION
                    50ITEM
      11.
                    QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
                    59ITEM
      12.
                    DESCRIPTION
      OF SECURITIES OTHER THAN EQUITY SECURITIES
                    60PART
      II
                    61ITEM
      13.
                    DEFAULTS,
      DIVIDEND ARREARAGES AND DELINQUENCIES
                    61ITEM
      14.
                    MATERIAL
      MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
      PROCEEDS
                    61ITEM
      15T.
                    CONTROLS
      AND PROCEDURES
                    61ITEM
      16A.
                    AUDIT
      COMMITTEE FINANCIAL EXPERT
                    62ITEM
      16B.
                    CODE
      OF ETHICS
                    62ITEM
      16C.
                    PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
                    62ITEM
      16D.
                    EXEMPTIONS
      FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
                    62ITEM
      16E.
                    PURCHASE
      OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
    PURCHASERS
                    62ITEM
      16F.
                    CHANGE
      IN REGISTRANT’S CERTIFYING ACCOUNTANT
                    62ITEM
      16G.
                    CORPORATE
      GOVERNANCE
                    62PART
      III
                    63ITEM
      17.
                    FINANCIAL
      STATEMENTS
                    63ITEM
      18.
                    FINANCIAL
      STATEMENTS
                    63ITEM
      19.
                    EXHIBITS
                    64SIGNATURES
                    65


i




INTRODUCTION




General




Unless
otherwise indicated and except where the context otherwise requires, references
in this annual report on Form 20-F to:




•
            “we,”
      “us” or “our company” refer to GSME Acquisition Partners
  I;




•
            “initial
      shareholders” refers to all of our shareholders prior to our initial
      public offering, including all of our officers and
    directors;




•
            “initial
      shares” refers to the 1,200,000 ordinary shares held by our initial
      shareholders;




•
            “insider
      warrants” refers to the 3,600,000 warrants purchased by MCK Capital Co.,
      Limited, Eli D. Scher and Larry Wizel simultaneously with the consummation
      of our initial public offering;




•
            “China”
      or the “PRC” refer to the People’s Republic of China as well as the Hong
      Kong Special Administrative Region, the Macau Special Administrative
      Region and Taiwan;




•
            “$”
      refer to the legal currency of the United
  States;




•
            “RMB”
      refer to Renminbi, the legal currency of the PRC;
  and




•
            “Companies
      Law” refers to the Companies Law (Revised) of the Cayman
      Islands.




We are a
Cayman Islands blank check company organized on March 27, 2008 as an exempted
company with limited liability.  We were organized for the purpose of
acquiring, through a merger, share exchange, asset acquisition, plan of
arrangement, recapitalization, reorganization or similar business combination,
an operating business, or control of such operating business through contractual
arrangements, that has its principal operations located in the PRC. Our efforts
to identify a prospective target business will not be limited to a particular
industry.




On
November 25, 2009, we closed our initial public offering (“IPO”) of 3,600,000
units with each unit consisting of one ordinary share and one warrant, each to
purchase one ordinary share at an exercise price of $11.50 per
share.  The units were sold at an offering price of $10.00 per unit,
generating gross proceeds of $36,000,000.  The ordinary shares issued
in our IPO are referred to as “public shares” and the holders thereof as “public
shareholders.”




Simultaneously
with the consummation of the IPO, we consummated the private sale of 3,600,000
insider warrants at a price of $0.50 per warrant, generating total proceeds of
$1,800,000.  The insider warrants were purchased by Eli D. Scher, our
Chief Executive Officer, Lawrence Wizel, and MCK Capital Co., Limited, an entity
controlled by Jing Dong Gao, the Chairman of the Board.




An
aggregate of $36,000,000 of the proceeds of the IPO and the private sale of the
insider warrants was placed in a trust account at Morgan Stanley Smith Barney,
maintained by Continental Stock Transfer & Trust Company, acting as
trustee.




We are
not presently engaged in, and we will not engage in, any substantive commercial
business until we consummate a business combination.  We intend to
utilize our cash, including the funds held in the trust fund, capital stock,
debt or a combination of the foregoing in effecting a business
combination.




We will
have until November 25, 2010 to consummate a business combination. In addition,
if we have executed a letter of intent, memorandum of understanding or
definitive agreement for a business combination prior to November 25, 2010, we
will have an additional six months to consummate a business combination.
Pursuant to our amended and restated memorandum and articles of association
(“Articles”), if we fail to consummate a business combination by (y) November
25, 2010 or (z) May 25, 2011 if the period to consummate our business
combination has been extended, our corporate existence will automatically cease
and we will liquidate and distribute the proceeds held in the trust account to
our public shareholders.




2




For
further information, see the Part I, Item 4, “Information on the
Company.”




Forward-Looking
Statements




This
annual report on Form 20-F contains forward-looking statements that involve
risks and uncertainties. All statements other than statements of historical
facts are forward-looking statements.  These statements involve known
and unknown risks, uncertainties and other factors that may cause our actual
results, performance or achievements to be materially different from those
expressed or implied by the forward-looking statements.




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.




This
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.




3




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 year ended October 31, 2009, the period from March
27, 2008 (inception) to October 31, 2008 and the period from March 27, 2008
(inception) to October 31, 2009 and as of October 31, 2009 and 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 Part I, Item 4,
“Information on the Company” and Part I, Item 5, “Operating and Financial Review
and Prospects.”




Selected
Financial Data


(Expressed
in United States Dollars)





Year
                    Ended
                  
                  
                  Period from
                    March 27,
                    2008
                    (inception)
                  
                  
                  Period from
                    March 27,
                    2008
                    (inception)October
      31,
                  
                  
                  to
      October 31,
                  
                  
                  to
      October 31,2009
                  
                  
                  2008
                  
                  
                  2008Consolidated
      Statement of Operations Data:Formation
      costs and operating expenses
                  
                  $
                  17,979
                  
                  
                  $
                  8,967
                  
                  
                  $
                  26,946Net
      loss applicable to common shareholders
                  
                  $
                  17,979
                  
                  
                  $
                  8,967
                  
                  
                  $
                  26,946Net
      loss per common share:Basic
      and diluted
                  
                  $
                  (0.01
                  )
                  
                  $
                  (0.01
                  )
                  
                  $
                  (0.02
                  )Weighted
      average common shares outstandingBasic
      and diluted
                  
                  
                  1,380,000
                  
                  
                  
                  1,380,000
                  
                  
                  
                  1,380,000





As at October 31,2009
                                        
                                        
                                        2008Consolidated
      Balance Sheet  Data:Total
      assets
                                        
                                        
                                        492,027
                                        
                                        
                                        
                                        161,033Total
      liabilities
                                        
                                        
                                        493,973
                                        
                                        
                                        
                                        145,000Total
      shareholders’ equity
                                        
                                        
                                        (1,946
                                        )
                                        
                                        
                                        16,033




B.
Capitalization and Indebtedness




Not
applicable.




C.
Reasons for the Offer and Use of Proceeds




Not
applicable.




4




D.
Risk Factors




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 Form 20-F before making a decision to invest
in our units.




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
recently incorporated development stage company with no operating results to
date. Therefore, our ability to commence operations is dependent upon obtaining
financing through the public offering of our securities. Since we do not have an
operating history, you will have no basis upon which to evaluate our ability to
achieve our business objective, which is to acquire an operating business. We
have not conducted any discussions and we have no plans, arrangements or
understandings with any prospective acquisition candidates. We will not generate
any revenues until, at the earliest, after the consummation of a business
combination.




If
we are forced to liquidate before a business combination and distribute the
trust account, our public shareholders may receive less than $10.00 or $10.30
per share (as the case may be), and our warrants will expire
worthless.




If we are
unable to complete a business combination within twelve months (or eighteen
months if the period to consummate our business combination has been extended)
from the consummation of the IPO and are forced to liquidate our assets, the
per-share liquidation distribution (including any amounts subject to
distribution pursuant to the letter of credit that was established in connection
with the IPO) may be less than $10.00 or $10.30 (as the case may be), because of
claims that may be made against the trust account. Furthermore, there will be no
distribution with respect to our outstanding warrants which will expire
worthless if we liquidate before the completion of a business
combination.




If
we are unable to consummate a business combination, our public shareholders may
be forced to wait more than twelve months (or eighteen months if we sign a
letter of intent, memorandum of understanding or definitive agreement within
such twelve month period) before receiving liquidation
distributions.




We will
have until November 25, 2010 to consummate a business combination. In addition,
if we have executed a letter of intent, memorandum of understanding or
definitive agreement for a business combination prior to November 25, 2010, we
will have an additional six months to consummate a business combination. We have
no obligation to return funds to investors prior to such dates unless we
consummate a business combination prior thereto and only then in cases where
investors have sought conversion of their shares. Only after the expiration of
the full time period will public shareholders be entitled to liquidation
distributions if we are unable to complete a business combination. Accordingly,
investors’ funds may be unavailable to them until such date.




Because
we are incorporated under the laws of the Cayman Islands, you may face
difficulties in protecting your interests, and your ability to protect your
rights through the U.S. federal courts may be limited.




We are a
company incorporated under the laws of the Cayman 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, including the PRC, 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. Moreover, we have been advised
that the PRC does not have treaties providing for the reciprocal recognition and
enforcement of judgments of courts with the United States. Further, it is
unclear if extraction treaties now in effect between the United States and the
PRC would permit effective enforcement of criminal penalties of the United
States federal securities laws.




5




Our
corporate affairs will be governed by our Articles, the Companies Law and the
common law of the Cayman 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 Cayman Islands law are to a large
extent governed by the common law of the Cayman Islands. The common law of the
Cayman Islands is derived in part from comparatively limited judicial precedent
in the Cayman 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 Cayman
Islands. The rights of our shareholders and the fiduciary responsibilities of
our directors under Cayman 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 Cayman 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, Cayman Islands companies may not have standing to
initiate a shareholder derivative action in a federal court of the United
States.




The
Cayman 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 Cayman
      Islands, based on certain civil liability provisions of U.S. securities
      laws that are penal in nature.





We
may issue shares of our capital stock or debt securities to complete a business
combination, which would reduce the equity interest of our shareholders and
likely cause a change in control of our ownership.





Our
Articles authorizes the issuance of up to 50,000,000 ordinary shares, par value
$.001 per share, and 1,000,000 shares of preferred stock, par value $.001 per
share. We have 38,000,000 authorized but unissued ordinary shares available for
issuance (after appropriate reservation for the issuance of the shares upon full
exercise of our outstanding warrants). Although we have no commitment as of the
date of this report, we may issue a substantial number of additional ordinary
shares or preferred shares, or a combination of ordinary and preferred shares,
to complete a business combination. The issuance of additional ordinary or
preferred shares:





•
            may
      significantly reduce the equity interest of
  investors;





•
            may
      subordinate the rights of holders of ordinary shares if we issue preferred
      shares with rights senior to those afforded to our ordinary
      shares;





•
            may
      cause a change in control if a substantial number of ordinary shares are
      issued, which may affect, among other things, our ability to use our net
      operating loss carry forwards, if any, and could result in the resignation
      or removal of our present officers and directors;
  and





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





Similarly,
if we issue debt securities, it could result in:





•
            default
      and foreclosure on our assets if our operating revenues after a business
      combination are insufficient to repay our debt
  obligations;





•
            acceleration
      of our obligations to repay the indebtedness even if we make all principal
      and interest payments when due if we breach certain covenants that require
      the maintenance of certain financial ratios or reserves without a waiver
      or renegotiation of that covenant;




6


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





•
            our
      inability to obtain necessary additional financing if the debt security
      contains covenants restricting our ability to obtain such financing while
      the debt security is outstanding.




If
the net proceeds of the IPO not being held in trust are insufficient to allow us
to operate for at least the next 18 months, we may be unable to complete a
business combination.




We
believe that the funds available to us outside of the trust account, plus the
interest earned on the funds held in the trust account that may be available to
us, will be sufficient to allow us to operate for at least the next 18 months,
assuming that a business combination is not consummated during that time.
However, we cannot assure you that our estimates will be accurate. We could use
a portion of the funds available to us to pay fees to consultants to assist us
with our search for a target business. We could also use a portion of the funds
as a down payment or to fund a “no-shop” provision (a provision in letters of
intent designed to keep target businesses from “shopping” around for
transactions with other companies on terms more favorable to such target
businesses) with respect to a particular proposed business combination, although
we do not have any current intention to do so. If we entered into a letter of
intent where we paid for the right to receive exclusivity from a target business
and were subsequently required to forfeit such funds (whether as a result of our
breach or otherwise), we might not have sufficient funds to continue searching
for, or conduct due diligence with respect to, a target business.




A
decline in interest rates could limit the amount available to fund our search
for a target business or businesses and complete a business combination since we
will depend on interest earned on the trust account to fund our search, to pay
our tax obligations and to complete our initial business
combination.




We will
depend on sufficient interest being earned on the proceeds held in the trust
account to provide us with additional working capital we will need to identify
one or more target businesses and to complete our initial business combination,
as well as to pay any tax obligations that we may owe. Interest rates on
permissible investments for us have been less than 1% over the last several
months. While we are entitled to have released to us for such purposes certain
interest earned on the funds in the trust account, a substantial decline in
interest rates may result in our having insufficient funds available with which
to structure, negotiate or close an initial business combination. In such event,
we would need to borrow funds from our initial shareholders to operate or may be
forced to liquidate. Our initial shareholders are under no obligation to advance
funds in such circumstances.




If
third parties bring claims against us, the proceeds held in trust could be
reduced and the per-share liquidation price received by shareholders may be less
than $10.00 or $10.30 per share (as the case may be).




Our
placing of funds in trust may not protect those funds from third party claims
against us. Although we will seek to have all vendors and service providers we
engage and prospective target businesses we negotiate with 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,
they may not execute such agreements. Furthermore, even if such entities execute
such agreements with us, they may seek recourse against the trust account. A
court may not uphold the validity of such agreements. Accordingly, the proceeds
held in trust could be subject to claims which could take priority over those of
our public shareholders. If we liquidate before the completion of a business
combination and distribute the proceeds held in trust to our public
shareholders, Jing Dong Gao and Eli D. Scher have agreed that they will be
personally liable to ensure that the proceeds in the trust account are not
reduced below $10.00 per share by the claims of target businesses or claims of
vendors or other entities that are owed money by us for services rendered or
contracted for or products sold to us. However, we cannot assure you that they
may not be able to meet such obligation. Therefore, the per-share distribution
from the trust account combined with any amounts subject to distribution
pursuant to the letter of credit, if we liquidate, may be less than $10.00 or
$10.30 (as the case may be), plus interest, due to such claims.




7




Additionally,
if we are forced to file a bankruptcy case or an involuntary bankruptcy case is
filed against us which is not dismissed, the proceeds held in the trust account
could be subject to applicable bankruptcy law, and may be included in our
bankruptcy estate and subject to the claims of third parties with priority over
the claims of our shareholders. To the extent any bankruptcy claims deplete the
trust account, we may not be able to return to our public shareholders at least
$10.00 or, upon any distribution of the per share amount pursuant to the letter
of credit, $10.30 per share (as the case may be).




Our
shareholders may be held liable for claims by third parties against us to the
extent of distributions received by them.




Our
Articles provide that we will continue in existence only until twelve months
from the consummation of the IPO, or eighteen months if the period to complete
our business combination has been extended. If we have not completed a business
combination by such date, our corporate existence will cease except for the
purposes of winding up our affairs and dissolving. As a result, this has the
same effect as if we had formally went through a voluntary liquidation procedure
under the Companies Law. In such a situation under the Companies Law, a
liquidator would give at least 21 days’ notice to creditors of his intention to
make a distribution by notifying known creditors (if any) who have not submitted
claims and by placing a public advertisement in the Cayman Islands Official
Gazette, although in practice this notice requirement need not necessarily delay
the distribution of assets as the liquidator may be satisfied that no creditors
would be adversely affected as a consequence of a distribution before this time
period has expired. As soon as the affairs of the company are fully wound-up,
the liquidator must lay his final report and accounts before a final general
meeting which must be called by a public notice at least one month before it
takes place. After the final meeting, the liquidator must make a return to the
Registrar confirming the date on which the meeting was held and three months
after the date of such filing the company is dissolved. In the case of a full
voluntary liquidation procedure, any liability of shareholders with respect to a
liquidating distribution would be barred if creditors miss the deadline for
submitting claims. However, it is our intention to liquidate the trust account
to our public shareholders as soon as reasonably possible and our directors and
officers have agreed to take any such action necessary to dissolve our company
and liquidate the trust account as soon as reasonably practicable if we do not
complete a business combination within the required time periods. Pursuant to
our Articles, failure to consummate a business combination within twelve months
from the date of the IPO, or eighteen months if the period to complete our
business combination has been extended, will trigger an automatic winding up of
the company. As such, our shareholders could potentially be liable for any
claims to the extent of distributions received by them pursuant to such process
and any liability of our shareholders may extend beyond the date of such
dissolution. Accordingly, we cannot assure you that third parties will not seek
to recover from our shareholders amounts owed to them by us.




If we are
unable to consummate a transaction within the required time periods, our purpose
and powers will be limited to dissolving and winding up. Upon notice from us,
the trustee of the trust account will distribute the amount in our trust account
to our public shareholders as part of our plan of dissolution and distribution.
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, Messrs. Gao and Scher have agreed
that they will be liable to ensure that the proceeds in the trust account are
not reduced below $10.00 per share by the claims of target businesses or claims
of vendors or other entities that are owed money by us for services rendered or
contracted for or products sold to us.




8




If we are
forced to file a bankruptcy case or an involuntary bankruptcy case is filed
against us which is not dismissed, any distributions received by shareholders
could be viewed under applicable debtor/creditor and/or bankruptcy laws as
either a “preferential transfer” or a “fraudulent conveyance.” As a result, a
bankruptcy court could seek to recover all amounts received by our shareholders.
Furthermore, because we intend to distribute the proceeds held in the trust
account to our public shareholders promptly after our termination, this may be
viewed or interpreted as giving preference to our public shareholders over any
potential creditors with respect to access to or distributions from our assets.
Furthermore, our board may be viewed as having breached their fiduciary duties
to our creditors and/or may have acted in bad faith, and thereby exposing itself
and our company to claims of punitive damages, by paying public shareholders
from the trust account prior to addressing the claims of creditors. We cannot
assure you that claims will not be brought against us for these
reasons.




Our
obligation to have any amounts we draw on the letter of credit that was provided
to us by Cohen & Company Securities, LLC in connection with the IPO
evidenced by a demand promissory note secured by all of the assets of the target
business with which we complete a business combination may make it more
difficult for us to complete such a business combination.




Upon
closing of the IPO, Cohen & Company Securities, LLC caused a letter of
credit from an internationally recognized bank to be issued to us in an amount
equal to $0.30 per share sold in the IPO. After we draw on this letter of
credit, it shall be cancelled and, in the event we have completed a business
combination, we will issue to Cohen & Company Securities, LLC a demand
secured first priority promissory note in an amount equal to the amount we draw
on the letter of credit bearing annual interest at the rate of 8%, payable
quarterly, with a default interest rate of 13%. Such promissory note must be
secured by all of the assets of the target business with which we complete a
business combination (subject to any existing security interests the target
business has in place). Since Cohen & Company Securities, LLC can demand
payment at any time and since the note will be secured by all of the target
businesses assets, this obligation may make us a less attractive candidate to
complete a business combination with. Accordingly, it may be more difficult for
us to complete a business combination than if the note was not required to be
secured by all of the assets of the target business.




An
effective registration statement may not be in place when an investor desires to
exercise warrants, thus precluding such investor from being able to exercise
his, her or its warrants and causing such warrants to be practically
worthless.




No
warrant held by public shareholders will be exercisable and we will not be
obligated to issue ordinary shares unless at the time such holder seeks to
exercise such warrant, a prospectus relating to the ordinary shares issuable
upon exercise of the warrant is current and the ordinary shares have been
registered or qualified or deemed to be exempt under the securities laws of the
state of residence of the holder of the warrants. Under the terms of the warrant
agreement, we have agreed to use our best efforts to meet these conditions and
to maintain a current prospectus relating to the ordinary shares issuable upon
exercise of the warrants until the expiration of the warrants. However, we
cannot assure you that we will be able to do so, and if we do not maintain a
current prospectus related to the ordinary shares issuable upon exercise of the
warrants, holders will be unable to exercise their warrants and we will not be
required to settle any such warrant exercise. If the prospectus relating to the
ordinary shares issuable upon the exercise of the warrants is not current or if
the ordinary shares are not qualified or exempt from qualification in the
jurisdictions in which the holders of the warrants reside, the warrants held by
public shareholders may have no value, the market for such warrants may be
limited and such warrants may expire worthless. Notwithstanding the foregoing,
the insider warrants may be exercisable for unregistered shares of common stock
even if the prospectus relating to the common stock issuable upon exercise of
the warrants is not current.




An
investor will only be able to exercise a warrant if the issuance of ordinary
shares upon such exercise has been registered or qualified or is deemed exempt
under the securities laws of the state of residence of the holder of the
warrants.




No
warrants will be exercisable and we will not be obligated to issue ordinary
shares unless the ordinary shares issuable upon such exercise has been
registered or qualified or deemed to be exempt under the securities laws of the
state of residence of the holder of the warrants. Because the exemptions from
qualification in certain states for resales of warrants and for issuances of
ordinary shares by the issuer upon exercise of a warrant may be different, a
warrant may be held by a holder in a state where an exemption is not available
for issuance of ordinary shares upon an exercise and the holder will be
precluded from exercise of the warrant. As a result, the warrants may be
deprived of any value, the market for the warrants may be limited and the
holders of warrants may not be able to exercise their warrants if the ordinary
shares issuable upon such exercise is not qualified or exempt from qualification
in the jurisdictions in which the holders of the warrants reside.




9




We
may amend the terms of the warrants that may be adverse to holders with the
approval by the holders of a majority of the then outstanding
warrants.




Our
warrants were issued in registered form under a warrant agreement between
Continental Stock Transfer & Trust Company, as warrant agent, and us. The
warrant agreement provides that the terms of the warrants may be amended without
the consent of any holder to cure any ambiguity or correct any defective
provision, but requires the approval by the holders of a majority of the then
outstanding warrants in order to make any change that adversely affects the
interests of the registered holders. Accordingly, we may amend the terms of the
warrants in an adverse way to a holder if a majority of the holders approve of
such amendment.




Since
we have not yet selected a particular industry or target business with which to
complete a business combination, we are unable to currently ascertain the merits
or risks of the industry or business in which we may ultimately
operate.




We may
consummate a business combination with a company in any industry we choose and
are not limited to any particular industry or type of business. Accordingly,
there is no current basis for you to evaluate the possible merits or risks of
the particular industry in which we may ultimately operate or the target
business which we may ultimately acquire. To the extent we complete a business
combination with a financially unstable company or an entity in its development
stage, we may be affected by numerous risks inherent in the business operations
of those entities. If we complete a business combination with an entity in an
industry characterized by a high level of risk, we may be affected by the
currently unascertainable risks of that industry. Although our management will
endeavor to evaluate the risks inherent in a particular industry or target
business, we cannot assure you that we will properly ascertain or assess all of
the significant risk factors. We also cannot assure you that an investment in
our securities will not ultimately prove to be less favorable to investors than
a direct investment, if an opportunity were available, in a target
business.




Our
ability to successfully effect a business combination and to be successful
thereafter will be totally dependent upon the efforts of our key personnel, some
of whom may join us following a business combination. 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.




Our
ability to successfully effect a business combination is dependent upon the
efforts of our key personnel. The role of our key personnel in the target
business, however, cannot presently be ascertained. Although some of our key
personnel may remain with the target business in senior management or advisory
positions following a business combination, it is likely that some or all of the
management of the target business will remain in place. 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 regulatory issues which may adversely
affect our operations.




Our
officers and directors may not have significant experience or knowledge
regarding the jurisdiction or industry of the target business we may seek to
acquire.




We may
consummate a business combination with a target business in any geographic
location or industry we choose so long as the target business has its principal
operations located in the PRC. If we decide to complete a business combination
with a target business that also has operations outside of the PRC or that
operates in a field outside of the expertise of our officers and directors, we
cannot assure you that our officers and directors will have enough experience or
have sufficient knowledge relating to the jurisdiction of the target or its
industry to make an informed decision regarding a business
combination.




10




Our
key personnel may negotiate employment or consulting agreements with a target
business in connection with a particular business combination. These agreements
may provide for them to receive compensation following a business combination
and as a result, may cause them to have conflicts of interest in determining
whether a particular business combination is the most advantageous.




Our key
personnel will be able to remain with the company after the consummation of a
business combination only if they are able to negotiate employment or consulting
agreements or other appropriate arrangements in connection with 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. The personal and financial interests of such individuals may
influence their motivation in identifying and selecting a target
business.




Our
officers and directors will allocate their time to other businesses thereby
causing 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. All of
our executive officers are engaged in several other business endeavors and are
not obligated to devote any specific number of hours to our affairs. If our
officers’ and directors’ other business affairs require them to devote more
substantial amounts of time to such 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.




Our
officers, directors and their affiliates may in the future become affiliated
with entities 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.




None of
our directors, officers or their affiliates has been or currently is a principal
of, or affiliated or associated with, a blank check company. However, our
officers and directors 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 us. Additionally, our officers and
directors may become aware of business opportunities which may be appropriate
for presentation to us and the other entities to which they owe fiduciary
duties. Accordingly, they may have conflicts of interest in determining to which
entity a particular business opportunity should be presented. As a result, a
potential target business may be presented to another entity prior to its
presentation to us and we may not be afforded the opportunity to engage in a
transaction with such target business. Furthermore, the officer or director who
determines to present the target to another entity may not be held liable to us
under Cayman Islands law.




Our
officers and directors or their affiliates own the initial shares and insider
warrants. These shares and warrants will not participate in liquidation
distributions and, therefore, our officers and directors may have a conflict of
interest in determining whether a particular target business is appropriate for
a business combination.




Our
officers and directors or their affiliates own the initial shares and insider
warrants. Such individuals have waived their right to convert their initial
shares or any other shares purchased in the IPO or thereafter, or to receive
distributions with respect to their initial shares upon our liquidation if we
are unable to consummate a business combination. Accordingly, the initial
shares, as well as the insider warrants and any warrants purchased by our
officers or directors in the aftermarket, will be worthless if we do not
consummate a business combination. The personal and financial interests of our
directors and officers may influence their motivation in timely identifying and
selecting a target business and completing a business combination. Consequently,
our directors’ and officers’ 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.




11




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 at any
time we have net tangible assets of $5,000,000 or less and our ordinary shares
have a market price per share of less than $5.00, transactions in our ordinary
shares may be subject to the “penny stock” rules promulgated under the
Securities Exchange Act of 1934. Under these rules, broker-dealers who recommend
such securities to persons other than institutional accredited investors
must:




•
            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
ordinary shares become subject to these rules, broker-dealers may find it
difficult to effectuate customer transactions and trading activity in our
securities may be adversely affected. As a result, the market price of our
securities may be depressed, and you may find it more difficult to sell our
securities.




We
may only be able to complete one business combination, which will cause us to be
solely dependent on a single business which may have a limited number of
products or services.




Our
business combination must be with a business with a fair market enterprise value
of at least 80% of the gross offering proceeds at the time of such acquisition,
although this may entail the simultaneous acquisitions of several operating
businesses at the same time whose collective value equals or exceeds 80% of the
gross offering proceeds. By consummating a business combination with only a
single entity, our lack of diversification may subject us to numerous economic,
competitive and regulatory developments. Further, we would 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. Accordingly, the prospects for our success 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.




This 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.




Alternatively,
if we determine to simultaneously acquire several businesses and such businesses
are owned by different sellers, we will need for each of such sellers to agree
that our purchase of its business is contingent on the simultaneous closings of
the other business combinations, which may make it more difficult for us, and
delay our ability, to complete the business combination. With multiple business
combinations, 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 operations and services or
products of the acquired companies in a single operating business. If we are
unable to adequately address these risks, it could negatively impact our
profitability and results of operations.




12




The
ability of our shareholders to exercise their conversion rights may not allow us
to effectuate the most desirable business combination or optimize our capital
structure.




When we
seek shareholder approval of any business combination, we will offer each public
shareholder (but not our initial shareholders) who votes against the proposed
business combination the right to have his, her or its ordinary shares converted
to cash for $10.00 per share. In addition, any public shareholder will have the
right to vote for the proposed business combination and demand that such
shareholder’s shares be converted into a pro rata share of the trust account
(which amount, when aggregated with the right to receive an additional $0.30 per
eligible share, is initially anticipated to be approximately $10.30 per share).
Accordingly, if our business combination requires us to use substantially all of
our cash to pay the purchase price, because we will not know how many
shareholders may exercise such conversion rights, we may either need to reserve
part of the trust account for possible payment upon such conversion, or we may
need to arrange third party financing to help fund our business combination in
case a larger percentage of shareholders exercise their conversion rights than
we expect. Since we have no specific business combination under consideration,
we have not taken any steps to secure third party financing. Therefore, we may
not be able to consummate a business combination that requires us to use all of
the funds held in the trust account as part of the purchase price, or we may end
up having a leverage ratio that is not optimal for our business combination.
This may limit our ability to effectuate the most attractive business
combination available to us.




We
will offer each public shareholder the option to vote in favor of a proposed
business combination and still seek conversion of his, her or its
shares.




When we
seek shareholder approval of any business combination, we will offer each public
shareholder (but not our initial shareholders) the right to have his, her or its
ordinary shares converted to cash for a pro rata share of the trust account and
to further receive an additional $0.30 per eligible share pursuant to the letter
of credit (initially anticipated to be an aggregate distribution of
approximately $10.30 per share) so long as such public shareholder votes each
such share in favor of our proposed business combination. We may proceed with a
business combination as long as public shareholders owning less than 81% of the
total number of public shares exercise their conversion rights, regardless of
whether they are voting for or against the proposed business combination.
Accordingly, public shareholders owning approximately 80.99% of the public
shares may exercise their conversion rights and we could still consummate a
proposed business combination. This is different than other similarly structured
blank check companies where shareholders are offered the right to convert their
shares only when they vote against a proposed business combination. Furthermore,
our conversion threshold at 81% is significantly higher than the more typical
threshold of between 20% and 40% and further allows holders of our ordinary
shares the right to vote in favor of our business combination and elect to
convert their shares. This higher threshold and the ability to seek conversion
while voting in favor of our proposed business combination may make it more
likely that we will consummate a business combination.




Public
shareholders, together with any affiliates of theirs or any other person with
whom they are acting in concert or as a “group” with, will be restricted from
seeking conversion rights with respect to more than 10% of the public
shares.




When we
seek shareholder approval of any business combination, we will offer each public
shareholder (but not our existing shareholders) the right to have his, her, or
its ordinary shares converted into cash. Notwithstanding the foregoing, a public
shareholder, together with any affiliate of his or any other person with whom he
is acting in concert or as a “group” will be restricted from seeking conversion
rights with respect to more than 10% of the public shares. Accordingly, if you
own more than 10% of the public shares and a proposed business combination is
approved, you will not be able to seek conversion rights with respect to the
full amount of your shares and may be forced to hold such additional ordinary
shares or sell them in the open market. We cannot assure you that the value of
such additional shares will appreciate over time following a business
combination or that the market price of our ordinary shares will exceed the
per-share conversion price.




13




We
may require shareholders who wish to convert their shares in connection with a
proposed business combination to comply with specific requirements for
conversion that may make it more difficult for them to exercise their conversion
rights prior to the deadline for exercising their rights.




We may
require public shareholders who wish to convert their shares in connection with
a proposed business combination to either tender their certificates to our
transfer agent at any time prior to the vote taken at the shareholder meeting
relating to such business combination or to deliver their shares to the transfer
agent electronically using the Depository Trust Company’s DWAC
(Deposit/Withdrawal At Custodian) System. In order to obtain a physical stock
certificate, a shareholder’s broker and/or clearing broker, DTC and our transfer
agent will need to act to facilitate this request. It is our understanding that
shareholders should generally allot at least two weeks to obtain physical
certificates from the transfer agent. However, because we do not have any
control over this process or over the brokers or DTC, it may take significantly
longer than two weeks to obtain a physical stock certificate. While we have been
advised that it takes a short time to deliver shares through the DWAC System, we
cannot assure you of this fact. Accordingly, if it takes longer than we
anticipate for shareholders to deliver their shares, shareholders who wish to
convert may be unable to meet the deadline for exercising their conversion
rights and thus may be unable to convert their shares.




If
we require public shareholders who wish to convert their shares in connection
with a proposed business combination to comply with specific requirements for
conversion, such converting shareholders may be unable to sell their securities
when they wish to in the event that the proposed business combination is not
approved.




If we
require public shareholders who wish to convert their shares in connection with
the proposed business combination to comply with specific requirements for
conversion and such proposed business combination is not consummated, we will
promptly return such certificates to the tendering public shareholders.
Accordingly, investors who attempted to convert their shares in such a
circumstance will be unable to sell their securities after the failed
acquisition until we have returned their securities to them. The market price
for our ordinary shares may decline during this time and you may not be able to
sell your securities when you wish to, even while other shareholders that did
not seek conversion may be able to sell their securities.




We
may use funds in our trust account to purchase, directly or indirectly, shares
from holders thereof who have indicated an intention to vote against such
proposed business combination and convert their shares.




If
holders of public shares indicate an intention to vote against a proposed
business combination and/or seek conversion of their shares into cash, we may
privately negotiate arrangements to provide for the purchase of such shares at
the closing of the business combination using funds held in the trust account.
The purpose of such arrangements would be to increase the likelihood of
satisfaction of the requirements that the holders of a majority of our ordinary
shares outstanding vote in favor of a proposed business combination and that
holders of fewer than 81% of the total number of public shares demand conversion
of their shares into cash where it appears that such requirements would
otherwise not be met. This may result in the approval of a business combination
that may not otherwise have been possible. Additionally, as a consequence of
such purchases,




•
            the
      funds in our trust account that are so used will not be available to us
      after the merger; and





•
            the
      public “float” of our ordinary shares may be reduced and the number of
      beneficial holders of our securities may be reduced, which may make it
      difficult to obtain the quotation, listing or trading of our securities on
      a national securities exchange.


14




Because
of our limited resources and structure, we may not be able to consummate an
attractive business combination.




We expect
to encounter intense competition from entities other than blank check companies
having a business objective similar to ours, including venture capital funds,
leveraged buyout funds and operating businesses competing for acquisitions. Many
of these entities are well established and have extensive experience in
identifying and effecting business combinations directly or through affiliates.
Many of these competitors possess greater technical, human and other resources
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 potential target businesses that we could acquire, our ability to
compete in acquiring certain sizable target businesses will be limited by our
available financial resources. This inherent competitive limitation gives others
an advantage in pursuing the acquisition of certain target businesses.
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 businesses. Any of these obligations
may place us at a competitive disadvantage in successfully negotiating a
business combination. If we are unable to consummate a business combination with
a target business within the prescribed time periods, we will be forced to
liquidate.




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 or abandon a particular business
combination.




Although
we believe that the proceeds available to us will be sufficient to allow us to
consummate a business combination, because we have not yet identified any
prospective target business, we cannot ascertain the capital requirements for
any particular transaction. If the proceeds available to us are insufficient,
either because of the size of the business combination, the depletion of the
available net proceeds in search of a target business, or the obligation to
convert into cash a significant number of shares from dissenting shareholders,
we will be required to seek additional financing. Such financing may not be
available 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 business candidate. In addition, if we consummate a business
combination, we may require additional financing to fund the operations or
growth of the target business. The failure to secure additional financing could
have a material adverse effect on the continued development or growth of the
target business. None of our officers, directors or shareholders is required to
provide any financing to us in connection with or after a business
combination.




Our
initial shareholders, including our officers and directors, control a
substantial interest in us and thus may influence certain actions requiring a
shareholder vote.




Our
initial shareholders (including all of our officers and directors) collectively
own 20% of our issued and outstanding ordinary shares. None of our officers,
directors, initial shareholders or their affiliates has indicated any intention
to purchase units or ordinary shares from persons in the open market or in
private transactions. However, if a significant number of shareholders vote, or
indicate an intention to vote, against a proposed business combination, our
officers, directors, initial shareholders or their affiliates could make such
purchases in the open market or in private transactions in order to influence
the vote.




We have
two directors with each director being elected for a term of two years and only
one director being elected in each year. It is unlikely that there will be an
annual meeting of shareholders to elect new directors prior to the consummation
of a business combination, in which case all of the current directors will
continue in office until at least the consummation of the business combination.
Accordingly, you may not be able to exercise your voting rights under corporate
law for up to 30 months. If there is an annual meeting, as a consequence of our
“staggered” board of directors, only a minority of the board of directors will
be considered for election and our initial shareholders, because of their
ownership position, will have considerable influence regarding the outcome.
Accordingly, our initial shareholders will continue to exert control at least
until the consummation of a business combination.




15




Our
outstanding warrants and option may have an adverse effect on the market price
of our common stock and make it more difficult to effect a business
combination.




We issued
warrants to purchase 3,600,000 ordinary shares as part of the units sold in the
IPO and the insider warrants to purchase 3,600,000 ordinary shares. We also
issued an option to purchase 360,000 units to the representative of the
underwriters in the IPO which, if exercised, will result in the issuance of an
additional 360,000 warrants. To the extent we issue ordinary shares to effect a
business combination, the potential for the issuance of a substantial number of
additional shares upon exercise of these warrants and option could make us a
less attractive acquisition vehicle in the eyes of a target business. Such
securities, when exercised, will increase the number of issued and outstanding
ordinary shares and reduce the value of the shares issued to complete the
business combination. Accordingly, our warrants and option may make it more
difficult to effectuate a business combination or increase the cost of acquiring
the target business. Additionally, the sale, or even the possibility of sale, of
the shares underlying the warrants and option 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 and option are exercised, you may
experience dilution to your holdings.




We
may redeem the warrants at a time that is not beneficial to public
investors.




We may
call the public warrants for redemption at any time after the redemption
criteria for our warrants have been satisfied. If we call the public warrants
for redemption, public shareholders may be forced to accept a nominal redemption
price or sell or exercise the warrants when they may not wish to do
so.




Our
management’s ability to require holders of our warrants to exercise such
warrants on a cashless basis will cause holders to receive fewer ordinary shares
upon their exercise of the warrants than they would have received had they been
able to exercise their warrants for cash.




If we
call our warrants for redemption, our management will have the option to require
any holder that wishes to exercise his warrant (including the insider warrants)
to do so on a “cashless basis.” If our management chooses to require holders to
exercise their warrants on a cashless basis, the number of ordinary shares
received by a holder upon exercise will be fewer than it would have been had
such holder exercised his warrant for cash. This will have the effect of
reducing the potential “upside” of the holder’s investment in our
company.




If
our initial shareholders exercise their registration rights with respect to
their securities, it may have an adverse effect on the market price of our
ordinary shares and the existence of these rights may make it more difficult to
effect a business combination.




Our
initial shareholders are entitled to make a demand that we register the resale
of their initial shares at any time commencing three months prior to the date on
which their shares may be released from escrow. Additionally, the holders of the
insider warrants are entitled to demand that we register the resale of their
insider warrants and underlying ordinary shares at any time after we consummate
a business combination. If such individuals exercise their registration rights
with respect to all of their securities, then there will be an additional
1,200,000 ordinary shares and 3,600,000 warrants (as well as 3,600,000 ordinary
shares underlying the warrants) eligible for trading in the public market. The
presence of these additional ordinary shares trading in the public market may
have an adverse effect on the market price of our securities. In addition, the
existence of these rights may make it more difficult to effectuate a business
combination or increase the cost of acquiring 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
because of the potential effect the exercise of such rights may have on the
trading market for our ordinary shares.




16




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.




A company
that, among other things, is or holds itself out as being engaged primarily, or
proposes to engage primarily, in the business of investing, reinvesting, owning,
trading or holding certain types of securities would be deemed an investment
company under the Investment Company Act of 1940. Since we will invest the
proceeds held in the trust account, it is possible that we could be deemed an
investment company. Notwithstanding the foregoing, we do not believe that our
anticipated principal activities will subject us to the Investment Company Act
of 1940. To this end, the proceeds held in trust may be invested by the trustee
only in United States “government securities” within the meaning of Section
2(a)(16) of the Investment Company Act of 1940 having 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 meet the
requirements for the exemption provided in Rule 3a-1 promulgated under the
Investment Company Act of 1940.




If we are
nevertheless 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.




Compliance
with these additional regulatory burdens would require additional expense for
which we have not allotted.




We
are not required to file our proxy statement for our initial business
combination with the SEC pursuant to the proxy rules under the Securities
Exchange Act of 1934.




Assuming
we remain a foreign private issuer, we will be exempt from the rules under the
Exchange Act relating to the furnishing and content of proxy statements. We have
agreed with the representative of the underwriters in our IPO that, until the
earlier of our consummation of an initial business combination or our
liquidation, in connection with any proposed business combination, we will
deliver to our shareholders proxy solicitation materials containing the
information we believe would have been required to be provided to shareholders
had we not been a foreign private issuer but still had a class of equity
securities registered under Section 12 of the Exchange Act and we will file with
the SEC a Report of Foreign Private Issuer on Form 6-K the proxy solicitation
material. Assuming we remain a foreign private issuer, however, we would not
required and do not intend to file our proxy solicitation materials with the SEC
for review or comment.




17




We
may become a passive foreign investment company (or “PFIC”), which could result
in adverse U.S. federal income tax consequences to U.S. investors.




In
general, we will be classified as a passive foreign investment company, or PFIC,
for any taxable year in which either (1) at least 75% of our gross income is
passive income or (2) at least 50% of the average value of our assets is
attributable to assets that produce, or are held for the production of, passive
income. Passive income generally includes, without limitation, dividends,
interest, rents, royalties, and gains from the disposition of passive assets. If
we are determined to be a PFIC for any taxable year during which a U.S. holder
held our ordinary shares or warrants, the U.S. holder may be subject to
increased U.S. federal income tax liability and may be subject to additional
reporting requirements. We cannot assure you that we will not be a PFIC in the
current or any future year. We urge U.S. investors to consult their own tax
advisors regarding the possible application of the PFIC rules




If
we deviate in our actions from the disclosure contained in the prospectus for
our IPO, investors may not ultimately receive the same benefits from the IPO
that they originally anticipated receiving.




Following
completion of their initial public offerings, some similarly structured blank
check companies have deviated from the disclosure contained in their initial
public offering prospectuses in order to consummate their initial business
combinations, such as by modifying their charters and governing instruments.
While we do not anticipate deviating from the disclosure contained in the
prospectus for our IPO, we may do so. Consequently, investors may not receive
the same benefits from the IPO that they originally anticipated receiving. In
such a situation, it is possible that each investor who purchased units in the
IPO and still held such units upon learning of our deviation from the disclosure
contained in the prospectus could seek rescission of the purchase of the units
he acquired in the offering (under which a successful claimant has the right to
receive the total amount paid for his or her securities pursuant to an allegedly
deficient prospectus, plus interest and less any income earned on the
securities, in exchange for surrender of the securities) or bring an action for
damages (compensation for loss on an investment caused by alleged material
misrepresentations or omissions in the sale of a security).




Risks
Related to Operations in China




Business
combinations with companies with operations in China entail special
considerations and risks. If we are successful in completing a business
combination with a target business with operations in China, we will be subject
to, and possibly adversely affected by, the following risks:




After
a business combination, substantially all of our assets will likely be located
in China and substantially all of our revenue will 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
policies, developments and conditions in China.




The PRC’s
economic, political and social conditions, as well as government policies, could
affect our business. The PRC economy differs from the economies of most
developed countries in many respects. China’s GDP has grown consistently since
1978 (National Bureau of Statistics of China). However, such growth may not be
sustained in the future. If in the future China’s economy experiences a downturn
or grows at a slower rate than expected, there may be less demand for spending
in certain industries. A decrease in demand for spending in certain industries
could materially and adversely affect our ability to find an attractive target
business with which to consummate a business combination and if we effect a
business combination, the ability of that target business to become
profitable.




The PRC’s
economic growth has been uneven, both geographically and among various sectors
of the economy. The PRC government has implemented various measures to encourage
economic growth and guide the allocation of resources. Some of these measures
benefit the overall PRC economy, but may 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 PRC
government control over capital investments or changes in tax regulations that
are applicable to a potential target business and a business
combination.




The PRC
economy has been transitioning from a planned economy to a more market-oriented
economy. Although in recent years the PRC 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 the PRC government. In addition, the PRC government
continues to play a significant role in regulating industry development by
imposing industrial policies. It also exercises significant control over PRC
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.




18




If
relations between the United States and the PRC deteriorate, potential target
businesses or their goods or services could become less attractive.




The
relationship between the United States and the PRC is subject to sudden
fluctuation and periodic tension. For instance, the United States recently
announced its intention to impose new short-term quotas on Chinese clothing
imports, which may be extended for several years. Such import quotas may
adversely affect political relations between the two countries and result in
retaliatory countermeasures by the PRC in industries that may affect our
ultimate target business. Relations may also be compromised if the U.S. becomes
a more vocal advocate of Taiwan or proceeds to sell certain military weapons and
technology to Taiwan. Changes in political conditions in the PRC and changes in
the state of Sino-U.S. 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.




As
a result of merger and acquisition regulations implemented on September 8, 2006
relating to acquisitions of assets and equity interests of Chinese companies by
foreign persons, it is expected that acquisitions will take longer and be
subject to economic scrutiny by the PRC government authorities such that we may
not be able to complete a transaction.




On
September 8, 2006, the Ministry of Commerce, together with several other
government agencies, promulgated a comprehensive set of regulations governing
the approval process by which a Chinese company may participate in an
acquisition of its assets or its equity interests and by which a Chinese company
may obtain public trading of its securities on a securities exchange outside the
PRC. Such regulations became effective on September 8, 2006. Although there was
a complex series of regulations in place prior to September 8, 2006 for approval
of Chinese enterprises that were administered by a combination of provincial and
centralized agencies, the new regulations have largely centralized and expanded
the approval process to the Ministry of Commerce (MOFCOM), the State
Administration of Industry and Commerce (SAIC), the State Administration of
Foreign Exchange (SAFE) or its branch offices, the State Asset Supervision and
Administration Commission (SASAC), and the China Securities Regulatory
Commission (CSRC). Depending on the structure of the transaction as determined
once a definitive agreement is executed, these regulations will require the
Chinese parties to make a series of applications and supplemental applications
to the aforementioned agencies, some of which must be made within strict time
limits and depending on approvals from one or the other of the aforementioned
agencies. The application process has been supplemented to require the
presentation of economic data concerning a transaction, including appraisals of
the business to be acquired and evaluations of the acquirer which will permit
the government to assess the economics of a transaction in addition to the
compliance with legal requirements. If obtained, approvals will have expiration
dates by which a transaction must be completed. Also, completed transactions
must be reported to MOFCOM and some of the other agencies within a short period
after closing or be subject to an unwinding of the transaction. It is expected
that compliance with the regulations will be more time consuming than in the
past, will be more costly for the Chinese parties and will permit the government
much more extensive evaluation and control over the terms of the transaction.
Therefore, a business combination we propose may not be able to be completed
because the terms of the transaction may not satisfy aspects of the approval
process and may not be completed, even if approved, if they are not consummated
within the time permitted by the approvals granted. Because the September 8,
2006, PRC merger and acquisition regulations permit the government agencies to
have scrutiny over the economics of an acquisition transaction and require
consideration in a transaction to be paid within stated time limits, we may not
be able to negotiate a transaction that is acceptable to our shareholders or
sufficiently protect their interests in a transaction.




19




The
regulations have introduced aspects of economic and substantive analysis of the
target business and the acquirer and the terms of the transaction by MOFCOM and
the other governing agencies through submissions of an appraisal report, an
evaluation report and the acquisition agreement, all of which form part of the
application for approval, depending on the structure of the transaction as
determined once a definitive agreement is executed. The regulations also
prohibit a transaction at an acquisition price obviously lower than the
appraised value of the Chinese business or assets. The regulations require that
in certain transaction structures, the consideration must be paid within strict
time periods, generally not in excess of a year. In asset transactions there
must be no harm to third parties or the public interest in the allocation of
assets and liabilities being assumed or acquired. These aspects of the
regulations will limit our ability to negotiate various terms of the
acquisition, including aspects of the initial consideration, contingent
consideration, holdback provisions, indemnification provisions and provisions
relating to the assumption and allocation of assets and liabilities. Therefore,
we may not be able to negotiate a transaction with terms that will satisfy our
investors and protect our shareholders interests in an acquisition of a Chinese
business or assets.




The
PRC merger and acquisition regulations of September 8, 2006, have introduced
industry protection and antitrust aspects to the acquisition of Chinese
companies and assets which may limit our ability to effect an
acquisition.




Under the
PRC merger and acquisition regulations, acquisitions of Chinese domestic
companies relating to “important industries” that may affect the national
economic security or result in the transfer of “actual control” of companies
having “famous Chinese brand names” or “well established Chinese brand names”
must be reported and approved by the Ministry of Commerce. The merger and
acquisition regulations also provide for antitrust review requirements for
certain large transactions or transactions involving large companies and roll-up
transactions with the same effect in the relevant Chinese market. In addition,
certain mergers and acquisitions among foreign companies occurring outside of
the PRC could also be subject to antitrust review in China which is similar to
United States anti-trust law concepts. The regulations use various economic
tests to determine if the transaction has to be reported to MOFCOM which include
(i) if any of the parties to the transaction has a turnover in the Chinese
market of more than RMB 1,500,000,000, (ii) if in a transaction outside of the
PRC, any party thereto has assets in the PRC of more than RMB 3,000,000,000,
(iii) if any of the parties to the transaction, before its consummation, has
control not less than 20% of the Chinese market, (iv) if any of the parties as a
result of the transaction will control 25% of the Chinese market, (v) the
foreign investor has acquired 10 or more enterprises in related industries in
the PRC during the last year, or (vi) if in a transaction outside of the PRC
results in the foreign entities acquiring 15 or more FIEs in related industries
within the PRC. Exemptions may be sought from the MOFCOM and SAIC on the basis
that: (i) the transaction will improve market competition, (ii) the transaction
will restructure unprofitable entities and ensures employment, (iii) the
transaction will introduce high technologies and increase international
competitiveness, and (iv) the transaction will improve the environment.
Notwithstanding the September 8, 2006, regulations, the Anti-Monopoly Law of the
PRC took effect as of August 1, 2008, which replace or supplement the above
provisions. Any transaction that we contemplate will have to comply with these
regulations and may require additional approval or abandonment if we are not
able to satisfy the requirements of the governmental authorities. When we
evaluate a potential transaction, we will consider the need to comply with these
regulations which may result in our modifying or not pursuing a particular
transaction.




Ambiguities
in the regulations of September 8, 2006 may make it difficult for us to properly
comply with all applicable rules and may affect our ability to consummate a
business combination.




Although
the merger and acquisition regulations provide specific requirements and
procedures, there are many ambiguities which give the regulators great latitude
in the approval process which will cause uncertainty in our ability to complete
a transaction on a timely basis.




20




The
merger and acquisition regulations set forth many requirements that have to be
followed, but there are still many ambiguities in the meaning of many
provisions. Although further regulations are anticipated in the future, until
there has been clarification either by pronouncements, regulation or practice,
there is some uncertainty in the scope of the regulations. Moreover, the
ambiguities give the regulators wide latitude in the enforcement of the
regulations and approval of transactions. Therefore, we cannot predict the
extent to which the regulations will apply to a transaction, and therefore,
there may be uncertainty in whether or not a transaction will be completed until
the approval process is under way or until the preliminary approvals are
obtained. This may negatively impact our ability to consummate a business
combination.




If
the PRC imposes restrictions to reduce inflation, future economic growth in the
PRC could be severely curtailed which could materially and adversely impact our
profitability following a business combination.




While the
economy of the PRC 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. In order to control inflation in the past, the PRC has imposed
controls on bank credits, limits on loans for fixed assets and restrictions on
state bank lending. Imposition of similar restrictions may lead to a slowing of
economic growth and decrease the interest in the services or products we may
ultimately offer leading to a material and adverse impact on our
profitability.




Any
devaluation of currencies used in the PRC could negatively impact our target
business’ results of operations and any appreciation thereof could cause the
cost of a target business as measured in United States dollars to
increase.




Because
our objective is to complete a business combination with a target business
having its primary operating facilities located in the PRC, and because
substantially all revenues and income following a business combination would be
received in a foreign currency such as Renminbi, the main currency used in the
PRC, the dollar equivalent of our net assets and distributions, if any, would be
adversely affected by reductions in the value of the Renminbi. The value of the
Renminbi fluctuates and is affected by, among other things, changes in the PRC’s
political and economic conditions. The conversion of Renminbi into foreign
currencies such as the United States dollar has been generally based on rates
set by the People’s Bank of China, which are set daily based on the previous
day’s interbank foreign exchange market rates and current exchange rates on the
world financial markets. 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 other countries, the PRC recently reformed its economic
policies to establish a floating value for its currency. However, China recently
adopted a floating rate with respect to the Renminbi, with a 0.3% fluctuation.
This floating exchange rate, and any appreciation of the Renminbi that may
result from such rate, could cause the cost of a target business as measured in
dollars to increase. Further, 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.




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




Following
a business combination, our payroll and other costs of non-United States
operations will be payable in foreign currencies, primarily Renminbi. 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 effect 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.




21


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. The Chinese government recently announced that it is pegging the
exchange rate of the Renminbi against a number of currencies, rather than just
the United States dollar. Fluctuations in the Renminbi exchange rate could
adversely affect our ability to find an attractive target business with which to
consummate a business combination and to operate our business after a business
combination.
  Exchange
controls that exist in the PRC may limit our ability to utilize our cash flow
effectively following a business combination.
  Following
a business combination, we will be subject to the PRC’s rules and regulations on
currency conversion. In the PRC, the State Administration for Foreign Exchange
(SAFE) regulates the conversion of the 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, 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.” Conversion of currency in the “capital account,”
including capital items such as infused registered capital and foreign currency
loans require approval of the SAFE. We cannot assure you that the PRC regulatory
authorities will not impose further restrictions on the convertibility of the
Renminbi. 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 the PRC.
  If
the PRC enacts regulations in our target business’ proposed 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 limit
the 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
regulations relating to offshore investment activities by PRC residents may
increase the administrative burden we face and create regulatory uncertainties
that may limit or adversely affect our ability to acquire PRC
companies.
  Notice on
Issues Relating to Administration of Foreign Exchange in Fund-raising and
Round-trip Investment Activities of Domestic Residents Conducted via Offshore
Special Purpose Companies, or Notice 75, was issued on October 21, 2005 by the
SAFE (that replaced two previously issued regulations on January 24, 2005 and
April 8, 2005, respectively) that will require approvals from, and registrations
with, PRC government authorities in connection with direct or indirect offshore
investment activities by PRC residents and PRC corporate entities. The SAFE
regulations retroactively require approval and registration of direct or
indirect investments previously made by PRC residents in offshore companies. In
the event that a PRC shareholder with a direct or indirect stake in an offshore
parent company fails to obtain the required SAFE approval and make the required
registration, the PRC subsidiaries of such offshore parent company may be
prohibited from making distributions of profit to the offshore parent and from
paying the offshore parent proceeds from any reduction in capital, share
transfer or liquidation in respect of the PRC subsidiaries. Further, failure to
comply with the various SAFE approval and registration requirements described
above, as currently drafted, could result in liability under PRC law for foreign
exchange evasion.
  22
  Although
the SAFE issued an implementation Notice No. 106, or Notice 106, on May 29, 2007
to its local branches or agencies (but not openly disclosed to the public), the
uncertainty as to when and how the new procedure and requirements will take
effect or be enforced, and uncertainty concerning the reconciliation of the new
regulations with other approval requirements, it remains unclear how these
existing regulations, and any future legislation concerning offshore or
cross-border transactions, will be interpreted, amended and implemented by the
relevant government authorities. We are committed to complying with the relevant
rules. As a result of the foregoing, we cannot assure you that we or the owners
of the target business we intend to acquire, as the case may be, will be able to
complete the necessary approval, filings and registrations for a proposed
business combination. This may restrict our ability to implement our business
combination strategy and adversely affect our operations.
  Because
Chinese law will govern almost all of any target business’ material agreements,
we may not be able to enforce our rights within the PRC or elsewhere, which
could result in a significant loss of business, business opportunities or
capital.
  Chinese
law will govern almost all of our target business’ material agreements, many of
which may be with Chinese governmental agencies. 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 PRC. The system of laws and the
enforcement of existing laws and contracts in the PRC 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. Furthermore, to the extent our target business’ material agreements
are with Chinese governmental agencies, we may not be able to enforce our rights
as the Chinese agencies would be immune from the jurisdiction of another
country’s courts under the doctrine of sovereign immunity. However, Chinese
agencies are not protected from suit within China. 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.
  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.
  The
government of the PRC has restricted or limited foreign ownership of certain
kinds of assets and companies operating in certain industries. The industry
groups that are restricted are wide ranging, including certain aspects of
telecommunications, advertising, food production, and heavy equipment
manufacturers, for example. 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 which may not be subject to the merger and
acquisition regulations mentioned above since these types of arrangements
typically do not involve a change of equity ownership in a PRC operating
company, injure a third party or affect the social public interest. 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 be our nominees and, therefore, may exempt the transaction
from the merger and acquisition regulations, including the application process
required thereunder. However, since there has been limited implementation
guidance provided with respect to the merger and acquisition regulations, there
can be no assurance that the relevant government agency would not apply them to
a business combination effected through contractual arrangements. If such an
agency determines that such an application should have been made consequences
may include levying fines, revoking business and other licenses, requiring
restructure of ownership or operations and requiring discontinuation of any
portion of all of the acquired business. These agreements likely also would
provide for increased ownership or full ownership and control by us when and if
permitted under PRC law and regulation. 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.
  23
  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. 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.
  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.
  The
business we acquire may distribute products that, due to their country of
origin, are at a higher risk for containing design or manufacturing defects,
which could cause us to incur significant expenses, harm our customer
relationships and industry reputation, and reduce our revenues and profitability
following the business combination.
  Recent
events have indicated that there may be a higher incidence of defective and
dangerous products among those produced in the PRC than among those produced in
the United States. As a result of such manufacturing or design defects, we may
be required to repair or replace a substantial number of products, incurring
significant expenses in the process. In addition, any manufacturing or design
defect could cause injury to a customer or a third party, cause us to lose
customers or revenues or damage our customer relationships and industry
reputation. The occurrence of any or all of the foregoing events may adversely
affect our results from operations following a business
combination.
  If
our management following a business combination is unfamiliar with United States
securities laws, they may have to expend time and resources becoming familiar
with such laws which could lead to various regulatory issues.
  Following
a business combination, our management will likely resign from their positions
as officers of the company and the management of the target business at the time
of the business combination will remain in place. We cannot assure you that
management of the target business will be familiar with United States securities
laws. If new management is unfamiliar with our laws, they may have to expend
time and resources becoming familiar with such laws. This could be expensive and
time-consuming and could lead to various regulatory issues which may adversely
affect our operations.
  24
  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, 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 and audited in accordance with U.S. generally accepted
auditing standards. 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. generally accepted accounting principles and audited in accordance with
U.S. generally accepted auditing standards, 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 generally accepted accounting
principles, it could make it more difficult for our management to analyze such
target business and determine whether it has a fair market enterprise value in
excess of 80% of the gross offering proceeds. It could also delay our
preparation of our proxy statement that 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.
  There
are significant uncertainties under the new corporate income tax law of the PRC,
or the New CIT Law, which became effective on January 1, 2008, regarding our PRC
enterprise income tax liabilities after we consummate a business combination,
such as tax on dividends paid to us by a subsidiary. The New CIT Law also
contains uncertainties regarding possible PRC withholding tax on dividends we
pay to our overseas shareholders and gains realized from the transfer of our
shares by our overseas shareholders.
  We are a
Cayman Islands company. After we consummate a business combination, we will
likely be a Cayman Islands holding company which operates through the target
business in the PRC that we acquire. The New CIT Law and its implementation
rules, both of which became effective on January 1, 2008, provide that
China-sourced income of foreign enterprises, such as dividends paid by a PRC
subsidiary to its overseas parent, will normally be subject to PRC withholding
tax at a rate of 10%, unless there are applicable treaties that reduce such
rate.
  Under the
New CIT Law, enterprises established under the laws of jurisdictions outside
China with their “de facto management bodies” located within China may be
considered to be PRC tax resident enterprises for tax purposes. A substantial
majority of the members of our management team following a business combination
likely will be located in China. If we are considered as a PRC tax resident
enterprise under the above definition, then our global income will be subject to
PRC enterprise income tax at the rate of 25%.
  Furthermore,
the implementation rules of the New CIT Law provide that, (i) if the enterprise
that distributes dividends is domiciled in the PRC, or (ii) if gains are
realized from transferring equity interests of enterprises domiciled in the PRC,
then such dividends or capital gains are treated as China-sourced income. It is
not clear how “domicile” may be interpreted under the New CIT Law, and it may be
interpreted as the jurisdiction where the enterprise is a tax resident.
Therefore, if we are considered as a PRC tax resident enterprise for tax
purposes, any dividends we pay to our overseas shareholders as well as gains
realized by such shareholders from the transfer of our shares may be regarded as
China-sourced income and as a result be subject to PRC withholding tax at the
rate up to 10%. We intend to take the position that any dividends we pay to our
overseas shareholders will not be subject to a withholding tax in the
PRC.
  25
  As the
New CIT Law and the implementation rules have only recently taken effect, it is
uncertain as to how they will be implemented by the relevant PRC tax
authorities. If dividend payments from any subsidiary to us are subject to PRC
withholding tax, or our global income becomes subject to PRC corporate income
tax, our financial condition, results of operations and the amount of dividends
available to pay our shareholders following our business combination may be
adversely affected. If dividends we pay to our overseas shareholders or gains
realized by such shareholders from the transfer of our shares are subject to PRC
withholding tax, it may materially and adversely affect your investment return
and the value of your investment in us.
  After
we consummate a business combination, our operating company in China will be
subject to restrictions on dividend payments.
  After we
consummate a business combination, we will rely on dividends and other
distributions from our operating company to provide us with cash flow and to
meet our other obligations. Current regulations in China would permit our
operating company in China to pay dividends to us only out of its accumulated
distributable profits, if any, determined in accordance with Chinese accounting
standards and regulations. In addition, our operating company in China will be
required to set aside at least 10% (up to an aggregate amount equal to half of
its registered capital) of its accumulated profits each year. Such reserve
account may not be distributed as cash dividends. In addition, if our operating
company in China incurs debt on its own behalf in the future, the instruments
governing the debt may restrict its ability to pay dividends or make other
payments to us.
  ITEM
4.           INFORMATION
ON THE COMPANY.
  Overview
  We are a
Cayman Islands blank check company organized on March 27, 2008 as an exempted
company with limited liability.
  Pursuant
to our Articles, we were formed with the purpose of acquiring, through a merger,
share exchange, asset acquisition, plan of arrangement, recapitalization,
reorganization or similar business combination, an operating business, or
control of such operating business through contractual arrangements that has its
principal operations located in the PRC. Our efforts to identify a prospective
target business will not be limited to a particular industry.
  We have
until November 25, 2010 to consummate a business combination. In addition, if we
have executed a letter of intent, memorandum of understanding or definitive
agreement for a business combination prior to November 25, 2010, we will have an
additional six months to consummate a business combination. Pursuant to our
Articles, if we fail to consummate a business combination by (i) November 25,
2010 or (ii) May 25, 2011 if the period to consummate our business combination
has been extended, our corporate existence will automatically cease and we will
liquidate and distribute the proceeds held in the trust account to our public
shareholders.
  On
November 25, 2009, we closed our IPO of 3,600,000 units with each unit
consisting of one ordinary share and one warrant, each to purchase one ordinary
share at an exercise price of $11.50 per share. The units were sold at an
offering price of $10.00 per unit, generating gross proceeds of
$36,000,000.
  Cohen
& Company Securities, LLC acted as the managing underwriter for the IPO. The
securities sold in the IPO were registered under the Securities Act of 1933
pursuant to a registration statement on Form F-1 (No. 333-162547). The
Securities and Exchange Commission, or the SEC, declared the registration
statement effective on November 19, 2009. Our units began trading on the OTCBB
on November 20, 2009.
  Simultaneously
with the consummation of the IPO, we consummated the private sale of 3,600,000
insider warrants at a price of $0.50 per warrant, generating total proceeds of
$1,800,000. The insider warrants were purchased by Eli D. Scher, our Chief
Executive Officer, Lawrence Wizel, and MCK Capital Co., Limited, an entity
controlled by Jing Dong Gao, the Chairman of the Board. The holders of the
insider warrants agreed that, subject to certain exceptions, the insider
warrants will not be sold or transferred by them until 60 days after the
completion of a business combination. The insider warrants are identical to the
warrants underlying the units sold in the IPO except that the insider warrants
(i) are exercisable for cash or on a cashless basis and (ii) will be
non-redeemable so long as they are held by the original purchasers of the
insider warrants and their permitted transferees.
  26
  $36,000,000,
or approximately $10.00 per unit of the proceeds of the IPO and the private
placement of the insider warrants was placed in the trust account at Morgan
Stanley Smith Barney maintained by Continental Stock Transfer & Trust
Company as trustee, acting as trustee. These proceeds include $1.44 million in
deferred underwriting discounts and commissions.
  Holders
of the Company’s units have been able to separately trade the ordinary shares
and warrants included in such units since on or about December 14, 2009. The
ordinary shares and warrants are quoted on the OTCBB under the symbols GSMXF and
GSMWF, respectively.
  Our
principal executive offices are located at 762 West Beijing Road, Shanghai, PRC
200041 and the phone number is (86) 21-6271-6777. Our registered office in the
Cayman Islands is located at Maples Corporate Services Limited, PO Box 309,
Ugland House, Grand Cayman, KY1-1104, Cayman Islands. Our agent for service of
process in the United States is Graubard Miller located at 405 Lexington Avenue,
New York, New York 10174.
  Opportunities
in China
  Opportunities
for market expansion have emerged for businesses with operations in China due to
certain changes in the PRC’s political, economic and social policies as well as
certain fundamental changes affecting the PRC and its neighboring countries. We
believe that China represents both a favorable environment for making
acquisitions and an attractive operating environment for a target business for
several reasons, including:
  •
              prolonged
      economic expansion within China, including gross domestic product growth
      of approximately 9% on average over the last 25 years, including 10.1% in
      2004, 9.9% in 2005, 11.1% in 2006, 11.4% in 2007, with a projected rate of
      9.8% for 2008 (National Bureau of Statistics of
  China);
  •
              increased
      government focus within China on privatizing assets, improving foreign
      trade and encouraging business and economic
  activity;
  •
              favorable
      labor rates and efficient, low-cost manufacturing
      capabilities;
  •
              the
      recent entry of China into the World Trade Organization, the sole global
      international organization dealing with the rules of trade between
      nations, which may lead to a reduction on tariffs for industrial products,
      a reduction in trade restrictions and an increase in trading with the
      United States; and
  •
              the
      fact that China’s public equity markets are not as well developed and
      active as the equity markets within the United States and are
      characterized by companies with relatively small market capitalizations
      and low trading volumes, thereby causing Chinese companies to attempt to
      be listed on the United States equity
markets.
  We
believe that these factors and others should enable us to acquire a target
business with growth potential on favorable terms.
  Notwithstanding
the foregoing, business combinations with companies having operations in the PRC
entail special considerations and risks, including the need to obtain financial
statements audited or reconciled in accordance with U.S. GAAP or prepared or
reconciled in accordance with the International Financial Reporting Standards of
potential targets that have previously kept their accounts in accordance with
GAAP of the PRC, the possible need for restructuring and reorganizing corporate
entities and assets and the requirements of complex Chinese regulatory filings
and approvals. These may make it more difficult for us to consummate a business
combination.
  27
  Government
Regulations
  Government
Regulations Relating to Foreign Exchange Controls
  The
principal regulation governing foreign exchange in China is the Foreign Currency
Administration Rules, as amended. Under these rules, the Renminbi, China’s
currency, is freely convertible for trade and service related foreign exchange
transactions (such as normal purchases and sales of goods and services from
providers in foreign countries), but not for direct investment, loan or
investment in securities outside of China unless the prior approval of the SAFE
of China is obtained. FIEs are required to apply to the SAFE for “Foreign
Exchange Registration Certificates for FIEs.” Following a business combination,
involving a change of equity ownership of a PRC operating entity or through
contractual arrangements with a PRC operating entity, our subsidiary 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.”
Conversion of currency in the “capital account,” including capital items such as
infused registered capital and foreign currency loans require approval of the
SAFE. This prior approval may delay or impair our ability to operate following a
business combination. On November 21, 2005, the SAFE issued Notice No. 75 on
“Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’
Corporate Financing and Roundtrip Investment through Offshore Special Purpose
Vehicles.” Notice 75 confirms that the use of offshore special purpose vehicles
as holding companies for PRC investments is permitted as long as proper foreign
exchange registrations are made with the SAFE and if applicable, approvals are
received from the Ministry of Commerce. On May 29, 2007, the SAFE issued the
implementation Notice 106 to further clarify SAFE’s Notice 75.
  Government
Regulations Relating to Taxation
  According
to the PRC Corporate Income Tax Law (the “New CIT Law”) and its Implementation
Rules, both of which became effective on January 1, 2008, the standard Corporate
Income Tax (“CIT”) rate is 25%, and China-sourced income of foreign enterprises,
such as dividends paid by a PRC subsidiary to its overseas parent, will normally
be subject to PRC withholding tax at a rate of 10%, unless there are applicable
treaties that reduce such rate. Certain special tax treatments are available to
companies that are conducting business in certain geographic areas such as the
west part of the mainland China, or in sectors that are considered “encouraged”
by the government such as clean energy, high-tech business, etc.
  Under the
New CIT Law, enterprises established under the laws of jurisdictions outside
China with their “de facto management bodies” located within China may be
considered to be PRC tax resident enterprises for tax purposes. A substantial
majority of the members of our management team following a business combination
likely will be located in China. If we are considered as a PRC tax resident
enterprise under the above definition, then our global income will be subject to
PRC corporate income tax at the rate of 25%.
  As the
New CIT Law and the implementation rules have only recently taken effect, it is
uncertain as to how they will be implemented by the relevant PRC tax
authorities. If dividend payments from any subsidiary to us are subject to PRC
withholding tax, or our global income becomes subject to PRC corporate income
tax, our financial condition, results of operations and the amount of dividends
available to pay our shareholders following our business combination may be
adversely affected. If dividends we pay to our overseas shareholders or gains
realized by such shareholders from the transfer of our shares are subject to PRC
withholding tax, it may materially and adversely affect your investment return
and the value of your investment in us. See “Risk Factors — There are
significant uncertainties under the new corporate income tax law of the PRC, or
the New CIT Law, which became effective on January 1, 2008, regarding our PRC
enterprise income tax liabilities after we consummate a business combination ,
such as tax on dividends paid to us by a subsidiary. The New CIT Law also
contains uncertainties regarding possible PRC withholding tax on dividends we
pay to our overseas shareholders and gains realized from the transfer of our
shares by our overseas shareholders.”
  28
  Regulation
of Foreign Currency Exchange and Dividend Distribution
  Foreign currency exchange.
Foreign currency exchange in China is governed by a series of regulations,
including the Foreign Currency Administrative Rules (1996), as amended, and the
Administrative Regulations Regarding Settlement, Sale and Payment of Foreign
Exchange (1996), as amended. Under these regulations, the Renminbi is freely
convertible for trade and service-related foreign exchange transactions, but not
for direct investment, loans or investments in securities outside China without
the prior approval of the SAFE. Pursuant to the Administrative Regulations
Regarding Settlement, Sale and Payment of Foreign Exchange, foreign-invested
enterprises in China may purchase foreign exchange without the approval of the
SAFE for trade and service-related foreign exchange transactions by providing
commercial documents evidencing these transactions. They may also retain foreign
exchange, subject to a cap approved by the SAFE, to satisfy foreign exchange
liabilities or to pay dividends. However, the relevant Chinese government
authorities may limit or eliminate the ability of foreign-invested enterprises
to purchase and retain foreign currencies in the future. In addition, foreign
exchange transactions for direct investment, loan and investment in securities
outside China are still subject to limitations and require approvals from the
SAFE.
  Regulation of Foreign Exchange in
Certain Onshore and Offshore Transactions. Pursuant to recent regulations
issued by the SAFE, PRC residents are required to register with and receive
approvals from the SAFE in connection with offshore investment activities. The
SAFE has stated that the purpose of these regulations is to ensure the proper
balance of foreign exchange and the standardization of the cross-border flow of
funds.
  On
January 24, 2005, the SAFE issued a regulation stating that SAFE approval is
required for any sale or transfer by the PRC residents of a PRC company’s assets
or equity interests to foreign entities in exchange for the equity interests or
assets of the foreign entities. The regulation also states that, when
registering with the foreign exchange authorities, a PRC company acquired by an
offshore company must clarify whether the offshore company is controlled or
owned by PRC residents and whether there is any share or asset link between or
among the parties to the acquisition transaction.
  On April
8, 2005, the SAFE issued another regulation further explaining and expanding
upon the January regulation. The April regulation clarified that, where a PRC
company is acquired by an offshore company in which PRC residents directly or
indirectly hold shares, such PRC residents must (i) register with the local SAFE
regarding their respective ownership interests in the offshore company, even if
the transaction occurred prior to the January regulation, and (ii) file
amendments to such registration concerning any material events of the offshore
company, such as changes in share capital and share transfers. The April
regulation also expanded the statutory definition of the term “foreign
acquisition”, making the regulations applicable to any transaction that results
in PRC residents directly or indirectly holding shares in the offshore company
that has an ownership interest in a PRC company. The April regulation also
provides that failure to comply with the registration procedures set forth
therein may result in the imposition of restrictions on the PRC company’s
foreign exchange activities and its ability to distribute profits to its
offshore parent company.
  On
October 21, 2005, the SAFE issued the Notice on Issues Relating to the
Administration of Foreign Exchange in Fund-raising and Round-trip Investment
Activities of Domestic Residents Conducted via Offshore Special Purpose
Companies, or Notice 75, which became effective as of November 1, 2005. Notice
75 replaced the two rules issued by the SAFE in January and April 2005 mentioned
above.
  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;
  29
  •
              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 merger or division, (4) a long term equity or debt investment, or (5)
      the creation of any security interests over the relevant assets located in
      China.
  Moreover,
Notice 75 applies retroactively. As a result, PRC residents who have established
or acquired control of offshore companies that have made onshore investments in
the PRC in the past are required to complete the relevant overseas investment
foreign exchange registration procedures by March 31, 2006. 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 refusal of registration as a SPV,
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.
  On May
29, 2007, the SAFE issued Notice 106 to further clarify relevant issues
concerning the implementation and application of Notice 75. Notice 106 sets
length of qualitative financial and operational requirements (normally financial
disclosure for 3 years subject to certain exceptions depending on the type of
investment) for candidate offshore companies. Failure to comply will result in
(i) refusal of registration as a SPV, (ii) refusal of remittance of dividends
and other distributions and (iii) potential punishment for illegal remittance of
foreign exchange.
  As a
Cayman Islands 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 the SAFE in connection with
their investment in us.
  As a
result of the lack of implementing rules, other uncertainties concerning how the
existing SAFE regulations will be interpreted or implemented, and uncertainty as
to when the new regulations will take effect, we cannot predict how they will
affect our business operations following a business combination. For example,
our ability to conduct foreign exchange activities following a business
combination, such as remittance of dividends and foreign-currency-denominated
borrowings, may be subject to compliance with the SAFE registration requirements
by such PRC residents, over whom we have no control. In addition, we cannot
assure you that such PRC residents will be able to complete the necessary
approval and registration procedures required by the SAFE regulations. We will
require all our shareholders, following a business combination, who are PRC
residents to comply with any SAFE registration requirements, although we have no
control over either our shareholders or the outcome of such registration
procedures. Such uncertainties may restrict our ability to implement our
acquisition strategy and adversely affect our business and prospects following a
business combination.
  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;
  30
  •
              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;
  •
              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.
  Regulation
of Foreign Investors’ Merging Chinese Enterprises and Overseas Listing of
Chinese Companies
  On August
8, 2006, the Ministry of Commerce, the State Assets Supervision and
Administration Commission, State Administration of Taxation, State
Administration of Industry and Commerce, China Securities Regulatory Commission
and State Administration of Foreign Exchange jointly promulgated the Regulations
on Merger with and Acquisition of Domestic Enterprises by Foreign Investors,
which took effect on September 8, 2006.
  Such new
merger regulations, among other things, include provisions that purport to
require that an offshore special purpose vehicle formed for purposes of overseas
listing of equity interests in PRC companies and controlled directly or
indirectly by PRC companies or individuals obtain the approval of the MOFCOM and
CSRC prior to the listing and trading of such special purpose vehicle’s
securities on an overseas stock exchange.
  On
September 21, 2006, the China Securities Regulatory Commission, or CSRC,
published on its official website procedures regarding its approval of overseas
listings by special purpose vehicles. The CSRC approval procedures require the
filing of a number of documents with the CSRC and it would take several months
to complete the approval process. The application of this new PRC regulation
remains unclear, with no consensus currently existing among leading PRC law
firms regarding the scope of the applicability of the CSRC approval requirement.
On December 1, 2007, National Development and Reform Commission and MOFCOM
issued the Catalogue for Guidance of Foreign Investment Industries, or 2007
Catalogue, as the 4th
amendment to its original 1995 Catalogue. The 2007 Catalogue may affect the
acquisitions involving foreign investors and parties in various restricted
categories of industries.
  We cannot
predict how those regulations will affect our future completion of a business
combination. However, we are confident our strong and in-depth understanding of
Chinese market would help us minimize the negative impacts.
  Use
of Contractual Arrangements
  The
government of the PRC has restricted or limited foreign ownership of certain
kinds of assets and companies operating in certain industries. The industry
groups that are restricted are wide ranging, including certain aspects of
telecommunications, advertising, food production, and heavy equipment
manufacturers, for example. 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 be our nominees.
These agreements likely also would provide for increased ownership or full
ownership and control by us when and if permitted under PRC law and regulation.
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.
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.
  31
  Effecting
a Business Combination
  General
  We are
not presently engaged in, and we will not engage in, any substantive commercial
business until consummation of a business combination. We intend to utilize cash
derived from the proceeds of the IPO, our capital stock, debt or a combination
of these in effecting a business combination. A business combination may involve
the acquisition of, or merger with, a company which does not need substantial
additional capital but which 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 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 simultaneous
business combinations with more than one target business, we will probably have
the ability, as a result of our limited resources, to effect only a single
business combination.
  We
Have Not Identified a Target Business
  To date,
we have not selected any target business on which to concentrate our search for
a business combination. As a result, we cannot assure you that we will be able
to locate a target business or that we will be able to engage in a business
combination with a target business on favorable terms or at all.
  Subject
to the limitations that a target business have its principal operations in the
People’s Republic of China and have a fair market enterprise value of at least
80% of the gross offering proceeds from our IPO at the time of the execution of
a definitive agreement for our initial business combination as described below
in more detail, we will have virtually unrestricted flexibility in identifying
and selecting a prospective acquisition candidate. We have not established any
other specific attributes or criteria (financial or otherwise) for prospective
target businesses. Accordingly, there is no basis for investors in to evaluate
the possible merits or risks of the target business with which we may ultimately
complete a business combination. To the extent we effect a business combination
with a financially unstable company or an entity in its early stage of
development or growth, including entities without established records of sales
or earnings, we may be affected by numerous risks inherent in the business and
operations of financially unstable and early stage or potential emerging growth
companies. Although our management will endeavor to evaluate the risks inherent
in a particular target business, we cannot assure you that we will properly
ascertain or assess all significant risk factors.
  32
  Sources
of Target Businesses
  While we
have not yet identified any acquisition candidates, we believe based on our
management’s business knowledge and past experience that there are numerous
acquisition candidates. We anticipate that target business candidates will be
brought to our attention from various unaffiliated sources, including investment
bankers, venture capital funds, private equity funds, leveraged buyout funds,
management buyout funds and other members of the financial community. Target
businesses may be brought to our attention by such unaffiliated sources as a
result of being solicited by us through calls or mailings. These sources may
also introduce us to target businesses they think we may be interested in on an
unsolicited basis, since many of these sources will have read our IPO prospectus
and know that we are searching for target businesses having principal operations
in China. Our officers and directors, as well as their affiliates and network of
entrepreneurs, may also bring to our attention target business candidates that
they become aware of through their business contacts as a result of formal or
informal inquiries or discussions they may have, as well as attending trade
shows or conventions. While we do not presently anticipate engaging the services
of professional firms or other individuals that specialize in business
acquisitions on any formal basis, we may engage these firms or other individuals
in the future, in which event we may pay a finder’s fee, consulting fee or other
compensation to be determined in an arm’s length negotiation based on the terms
of the transaction. Our management has experience in evaluating transactions,
but will retain advisors as they deem necessary to assist them in their due
diligence efforts. If we become aware of a potential business combination
outside of the industries which our officers and directors have their most
extensive experience, it is more likely that they would retain consultants and
advisors with experience in such industries to assist in the evaluation of such
business combination and in our determination of whether or not to proceed with
such a business combination, although we are not required to do so and may
determine that our management is able to make its own determinations based on
its collective business experience. In no event, however, will any of our
existing officers, directors or shareholders, or any entity with which they are
affiliated, be paid any finder’s fee, consulting fee or other compensation by us
or a target business prior to, or for any services they render in order to
effectuate, the consummation of a business combination (regardless of the type
of transaction that it is). If we determine to enter into a business combination
with a target business that is affiliated with our officers, directors, special
advisors or shareholders, we would do so only if we obtained an opinion from an
independent investment banking firm reasonably acceptable to Cohen & Company
Securities, LLC that the business combination is fair to our unaffiliated
shareholders from a financial point of view.
  We will
not acquire an entity with which any of our officers or directors, through their
other business activities, is currently having acquisition or investment
discussions. Additionally, we do not anticipate (i) acquiring an entity with
which our officers or directors, through their other business activities, had
acquisition or investment discussions in the past, (ii) acquiring an entity that
is either a portfolio company of, or has otherwise received a material financial
investment from, any private equity fund or investment company (or an affiliate
thereof) that is affiliated with any of our officers or directors or (iii)
entering into a business combination where we acquire less than 100% of a target
business and any of our officers, directors, initial shareholders or their
affiliates acquire the remaining portion of such target business. However, if we
determine to enter into such a transaction, we are required to obtain an opinion
from an independent investment banking firm reasonably acceptable to Cohen &
Company Securities, LLC that the business combination is fair to our
unaffiliated shareholders from a financial point of view.
  Selection
of a Target Business and Structuring of a Business Combination
  Subject
to the requirement that our initial business combination must be with a target
business having its principal operations in China and a fair market enterprise
value that is at least 80% of the gross offering proceeds from our IPO at the
time of the execution of a definitive agreement for such business combination
(both of which are required by our Articles), our management will have virtually
unrestricted flexibility in identifying and selecting a prospective target
business. We have not established any other specific attributes or criteria
(financial or otherwise) for prospective target businesses. In evaluating a
prospective target business, our management may consider a variety of factors,
including one or more of the following:
  •
              financial
      condition and results of operation;
  •
              growth
      potential;
  33
  •
              experience
      and skill of management and availability of additional
      personnel;
  •
              capital
      requirements;
  •
              competitive
      position;
  •
              barriers
      to entry;
  •
              stage
      of development of the products, processes or
  services;
  •
              degree
      of current or potential market acceptance of the products, processes or
      services;
  •
              proprietary
      features and degree of intellectual property or other protection of the
      products, processes 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 business, we will conduct
an extensive due diligence review which will encompass, among other things,
meetings with incumbent management and inspection of facilities, as well as
review of 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 are also required to have all 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. If any
prospective target business refused to execute such agreement, we would cease
negotiations with such target business.
  The time
and costs required to select and evaluate a target business 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 business 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.
  Fair
Market Enterprise Value of Target Business
  The
target business or businesses that we acquire must collectively have a fair
market enterprise value equal to at least 80% of the gross offering proceeds
from our IPO at the time of the execution of a definitive agreement for our
initial business combination, although we may acquire a target business whose
fair market enterprise value significantly exceeds 80% of such gross offering
proceeds. Accordingly, we could consummate a business combination in which we
acquire two separate target businesses where neither has a fair market
enterprise value that exceeds 80% of the gross offering proceeds at the time of
the execution of a definitive agreement for our initial business combination but
do so on a collective basis. In looking at the target’s balance sheet for
purposes of determining whether this threshold is met, we will not include the
amount of cash from the trust fund that we contribute to the target’s business.
We anticipate structuring a business combination to acquire 100% of the equity
interests or assets of the target business or businesses. We may, however,
structure a business combination to acquire less than100% of such interests or
assets of the target business or businesses but will not acquire less than a
controlling interest (meaning more than 50% of the voting securities of each
target business or all or substantially all of the assets of each target
business). If we acquire only a controlling interest in a target business or
businesses, only the portion of such business or businesses that we acquire will
be counted towards the 80% threshold test. The market value of all of the
businesses (or portion of such businesses) that we acquire must be equal to at
least 80% of the gross offering proceeds at the time of the execution of a
definitive agreement for our initial business combination. In order to
consummate an acquisition, we may issue a significant amount of our debt or
equity securities to the sellers of such businesses and/or seek to raise
additional funds through a private offering of debt or equity securities. Since
we have no specific business combination under consideration, we have not
entered into any such fund raising arrangement and have no current intention of
doing so. The fair market enterprise value of the target will be determined by
our board of directors based upon one or more standards generally accepted by
the financial community (such as actual and potential sales, earnings and cash
flow and/or book value). If our board is not able to independently determine
that the target business has a sufficient fair market enterprise value, we will
obtain an opinion from an unaffiliated, independent investment banking firm with
respect to the satisfaction of such criteria. We will not be required to obtain
an opinion from an investment banking firm as to the fair market enterprise
value if our board of directors independently determines that the target
business complies with the 80% threshold.
  34
  Lack
of Business Diversification
  Our
business combination must be with a target business or businesses that
collectively satisfy the minimum valuation standard at the time of the execution
of a definitive agreement for such business combination, as discussed above,
although this process may entail the simultaneous acquisitions of several
operating businesses at the same time. Therefore, at least initially, the
prospects for our success may be entirely dependent upon the future performance
of a single business. Unlike other entities which may have the resources to
complete several business combinations of entities 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, 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 performance of a single operating business or
      the development or market acceptance of a single or limited number of
      products, processes or services.
  If we
determine to simultaneously acquire several businesses and such businesses are
owned by different sellers, we will need for each of such sellers to agree that
our purchase of its business 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 operations and services or products of the
acquired companies in a single operating business.
  Limited
Ability to Evaluate the Target Business’ Management
  Although
we intend to scrutinize the management of a prospective target business when
evaluating the desirability of effecting a business combination, we cannot
assure you that our assessment of the target business’ management will prove to
be correct. In addition, we cannot assure you that the future management 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 it is possible that some of our key personnel will
remain associated in senior management or advisory positions with us following a
business combination, it is unlikely that they will devote their full time
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 the business combination. Such negotiations would
take place simultaneously with the negotiation of the business combination and
could provide for them 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 our key personnel may influence their motivation in identifying and
selecting a target business, their ability 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.
  35
  Following
a business combination, we may seek to recruit additional managers to supplement
the incumbent management of the target business. We cannot assure you that we
will have the ability to recruit additional managers, or that any such
additional managers we do recruit will have the requisite skills, knowledge or
experience necessary to enhance the incumbent management.
  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 applicable state
law.
  As a
foreign private issuer, we are exempt from the rules under the Securities
Exchange Act of 1934, as amended, regarding proxy statements. However, we have
agreed with the representative of the underwriters in our IPO that until the
earlier of our consummation of an initial business combination or our
liquidation, in connection with any proposed business combination, we will
deliver to our shareholders a proxy statement containing the information we
believe is required by the rules under the Securities Exchange Act of 1934. This
proxy statement will include a description of the operations of the target
business and audited historical financial statements of the
business.
  We will
proceed with the business combination only if (i) a majority of the ordinary
shares voted by the public shareholders are voted in favor of the business
combination and (ii) public shareholders owning less than 81% of the total
number of public shares properly exercise their conversion rights, regardless of
whether they are voting for or against the proposed business combination. If
holders of public shares indicate an intention to vote against a proposed
business combination and/or seek conversion of their shares into cash, we may
negotiate arrangements to provide for the purchase of such shares at the closing
of the business combination using funds held in the trust account. The purpose
of such arrangements would be to increase the likelihood of satisfaction of the
requirements that the holders of a majority of our ordinary shares outstanding
vote in favor of a proposed business combination and that holders of fewer than
81% of the public shares demand conversion of their shares into cash where it
appears that such requirements would otherwise not be met. All shares purchased
by us or our affiliates pursuant to such arrangements would be voted in favor of
the proposed business combination. No such arrangements currently
exist.
  Conversion
Rights
  At the
time we seek shareholder approval of any business combination, we will offer
each public shareholder the right to have such shareholder’s ordinary shares
converted to cash. Public shareholders who vote against a proposed business
combination will be entitled to convert their stock for $10.00 per share if the
business combination is approved and consummated. In addition, any public
shareholder will have the right to vote for the proposed business combination
and demand that such shareholder’s shares be converted into a pro rata share of
the trust account (which amount, when aggregated with the right to receive an
additional $0.30 per eligible share pursuant to the letter of credit, is
initially anticipated to be approximately $10.30 per share) if the business
combination is approved and consummated. Our initial business combination will
not be completed if public shareholders owning 81% or more of the total number
of public shares seek conversion of their ordinary shares, regardless of whether
they are voting for or against the proposed business combination.
Notwithstanding the foregoing, a public shareholder, together with any affiliate
of his or any other person with whom he is acting in concert or as a “group” (as
defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended)
will be restricted from seeking conversion rights with respect to 10% or more of
the public shares. Such a public shareholder would still be entitled to vote
against a proposed business combination with respect to all ordinary shares
owned by him or his affiliates. We believe this restriction will prevent
shareholders from accumulating large blocks of shares before the vote held to
approve a proposed business combination and attempt to use the conversion right
as a means to force us or our management to purchase their shares at a
significant premium to the then current market price. By limiting a
shareholder’s ability to convert no more than 10% of the public shares, we
believe we have limited the ability of a small group of shareholders to
unreasonably attempt to block a transaction which is favored by our other public
shareholders.
  36
  In the
event the business combination is not approved by a majority of our public
shareholders or 81% or more public shareholders demand conversion of their
shares, regardless of whether they are voting for or against the proposed
business combination, and the trust account is liquidated, the public
shareholders that voted against that proposed business combination shall be
entitled to receive only $10 per ordinary share, and those public shareholders
who voted for that proposed business combination shall be entitled to receive a
pro rata share of the trust account (which amount, when aggregated with the
right to receive an additional $0.30 per eligible share pursuant to the letter
of credit, is initially anticipated to be approximately $10.30 per
share).
  Our
initial shareholders will not have conversion rights with respect to any
ordinary shares owned by them, directly or indirectly.
  An
eligible shareholder may request conversion at any time after the mailing to our
shareholders of the proxy statement and prior to the vote taken with respect to
the proposed business combination at a meeting held for that purpose.
Additionally, we may require public shareholders, whether they are a record
holder or hold their shares in “street name,” to either tender their
certificates to our transfer agent at any time through the vote on the business
combination or to deliver their shares to the transfer agent electronically
using Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System,
at the holder’s option. The proxy solicitation materials that we will furnish to
shareholders in connection with the vote for any proposed business combination
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 to tender his
shares if he wishes to seek to exercise his conversion rights. This time period
varies 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 shares are held in “street name,” in a matter of hours by
simply contacting the transfer agent or his broker and requesting delivery of
his 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. Accordingly, we
will only require shareholders to deliver their certificates prior to the vote
if we give shareholders at least two weeks between the mailing of the proxy
solicitation materials and the meeting date.
  The
requirement for physical or electronic delivery prior to the meeting would be
imposed to ensure that a converting holder’s election to convert is irrevocable
once the business combination is approved. Traditionally, in order to perfect
conversion 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 convert.
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 could monitor the price of the stock
in the market. If the price rose above the conversion price, he could sell his
shares in the open market before actually delivering his shares to the company
for cancellation. Thus, the conversion right, to which shareholders were aware
they needed to commit before the shareholder meeting, would become a continuing
right surviving past the consummation of the business combination until the
converting holder delivered his certificate for conversion at the conversion
price.
  37
  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 $45 and it would be
the broker’s decision whether or not to pass this cost on to the converting
holder. However, this fee would be incurred regardless of whether or not we
require holders seeking to exercise conversion rights to tender their shares
prior to the meeting — the need to deliver shares is a requirement of
conversion regardless of the timing of when such delivery must be effectuated.
However, if the proposed business combination is ultimately rejected and we are
unable to complete another business combination, such fee would have been
incurred unnecessarily.
  Any
request for conversion, once made, may be withdrawn at any time up to the vote
taken with respect to the proposed business combination. Furthermore, if a
shareholder delivered his certificate for conversion and subsequently decided
prior to the meeting not to elect conversion, he 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 convert
their shares who elect conversion will be distributed promptly after completion
of a business combination. Public shareholders who convert their stock 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 until the
expiration of the applicable time period. If the initial business combination is
not approved or completed for any reason, then public shareholders who elected
to exercise their conversion rights would not be entitled to convert their
ordinary shares. 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.
  Automatic
Dissolution and Subsequent Liquidation if No Business Combination
  Our
Articles provide that we will continue in existence only until November 25, 2010
or May 25, 2011 if the period to complete our business combination has been
extended. If we have not completed a business combination by such date, it will
trigger our automatic dissolution. This has the same effect as if our board of
directors and shareholders had formally voted to approve our winding up and
dissolution and formally began a voluntary winding up procedure under the
Companies Law. As a result, no vote would be required from our shareholders to
commence such a voluntary winding up and dissolution. We view this provision
terminating our corporate life by November 25, 2010 or May 25, 2011 if the
period to complete our business combination has been extended as an obligation
to our shareholders and will not take any action to amend or waive this
provision to allow us to survive for a longer period of time. As mentioned
above, under the Companies Law, in the case of a full voluntary liquidation
procedure, a liquidator would give at least 21 days’ notice to creditors of his
intention to make a distribution. We anticipate notifying the trustee of the
trust account to begin liquidating the trust account promptly after the
expiration of such 21-day period and anticipate it will take no more than 10
business days to effectuate the distribution of the assets thereof 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, plus any remaining net assets (subject to our obligations under Cayman
Islands law to provide for claims of creditors). Our initial shareholders have
waived their rights to participate in any liquidation distribution with respect
to their initial shares. There will be no distribution from the trust account
with respect to our warrants which will expire worthless.
  We will
pay the costs of liquidation from our remaining assets outside of the trust
fund. If such funds are insufficient, Jing Dong Gao and Eli D. Scher have
contractually agreed to advance us the funds necessary to complete such
liquidation (currently anticipated to be no more than $15,000) and have
contractually agreed not to seek repayment of such expenses.
  If we
were to expend all of the net proceeds of the IPO, 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-share liquidation price would
be as follows:
  38
  •
              If
      we have not presented to public shareholders a proposed business
      combination by such time period, public shareholders shall be entitled to
      receive a pro rata share of the trust account (which amount, when
      aggregated with the right to receive an additional $0.30 per eligible
      share pursuant to the letter of credit, is initially anticipated to be
      approximately $10.30 per share).
  •
              If,
      prior to liquidation, we have presented to public shareholders a proposed
      business combination that ultimately was not approved, the public
      shareholders that voted against the last proposed business combination
      before liquidation or did not vote on such business combination shall be
      entitled to receive only $10.00 per ordinary share, and those public
      shareholders who voted for the proposed business combination and continued
      to hold their shares until liquidation shall be entitled to receive a pro
      rata share of the trust account (which amount, when aggregated with the
      right to receive an additional $0.30 per eligible share pursuant to the
      letter of credit, is initially anticipated to be approximately $10.30 per
      share).
  The
proceeds deposited in the trust account could, however, become subject to the
claims of our creditors (which could include vendors and service providers we
have engaged to assist us in any way in connection with our search for a target
business and that are owed money by us, as well as target businesses themselves)
which could have higher priority than the claims of our public shareholders.
Jing Dong Gao and Eli D. Scher have contractually agreed that if we liquidate
prior to the consummation of a business combination they will be personally
liable to ensure that the proceeds in the trust account are not reduced below
$10.00 per share by the claims of target businesses or claims of vendors or
other entities that are owed money by us for services rendered or contracted for
or products sold to us.
  Accordingly,
if a claim brought by a target business or vendor did not exceed the amount of
funds available to us outside of the trust account or available to be released
to us from interest earned on the trust account balance, Messrs. Gao and Scher
would not have any personal obligation to indemnify such claims as they would be
paid from such available funds. However, if a claim exceeded such amounts, the
only exceptions to the obligations of Messrs. Gao and Scher to pay such claim
would be if the party executed a valid and binding waiver agreement enforceable
under law. We have questioned such individuals on their financial net worth and
reviewed their financial information and believe they will be able to satisfy
any indemnification obligations that may arise. We cannot assure you, however,
that they would be able to satisfy those obligations. Furthermore, if they
refused to satisfy their obligations, we would be required to bring a claim
against him to enforce our indemnification rights. Furthermore, as our board
cannot waive these indemnification obligations because it would be a breach of
their fiduciary obligations, if they refused to satisfy their obligations, we
would be required to bring a claim against them to enforce our indemnification
rights. Accordingly, although such agreements are legally binding obligations on
the part of Messrs. Gao and Scher, as such individuals are residents of
jurisdictions other than the Cayman Islands, we may have difficulty enforcing
our rights under such agreements. Therefore, the actual per-share liquidation
price could be less than $10.00 or upon any distribution of the per-share amount
pursuant to the letter of credit, $10.30 (as the case may be) plus interest, due
to claims of creditors.
  Our
public shareholders will be entitled to receive funds from the trust account
only in the event of the expiration of our existence and our automatic
dissolution and subsequent liquidation or if they properly convert their
respective shares into cash upon consummation of a business combination. In no
other circumstances will a shareholder have any right or interest of any kind to
or in the trust account.
  Additionally,
in any liquidation proceedings of the company under Cayman 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. Furthermore, a liquidator of the company might seek to hold a
shareholder liable to contribute to our estate to the extent of distributions
received by them pursuant to the dissolution of the trust account beyond the
date of dissolution of the trust account. Additionally, we cannot assure you
that third parties will not seek to recover from our shareholders amounts owed
to them by us. Furthermore, our board may be viewed as having breached their
fiduciary duties to our creditors and/or may have acted in bad faith, and
thereby exposing itself and our company to claims for having paid public
shareholders from the trust account prior to addressing the claims of creditors.
We cannot assure you that claims will not be brought against us for these
reasons.
  39
  If we are
unable to consummate a transaction by November 25, 2010 or May 25, 2011 if the
period to complete our business combination has been extended, our purpose and
powers will be limited to dissolving, liquidating and winding up. Upon notice
from us, 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 plan of
distribution and dissolution. 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,
Jing Dong Gao and Eli D. Scher have contractually agreed that if we liquidate
prior to the consummation of a business combination they will be personally
liable to ensure that the proceeds in the trust account are not reduced below
$10.00 per share by the claims of target businesses or claims of vendors or
other entities that are owed money by us for services rendered or contracted for
or products sold to us. 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.) and potential target businesses. As described above,
pursuant to the obligation contained in our underwriting agreement, we will seek
to have all vendors, service providers and prospective target businesses execute
agreements with us waiving any right, title, interest or claim of any kind they
may have in or to any monies held in the trust account. As a result, we believe
the claims that could be made against us will be limited, thereby lessening the
likelihood that any claim would result in any liability extending to the trust.
We therefore believe that any necessary provision for creditors will be reduced
and should not have a significant impact on our ability to distribute the funds
in the trust account to our public shareholders. Nevertheless, we cannot assure
you of this fact as there is no guarantee that vendors, service providers and
prospective target businesses will execute such agreements. Nor is there any
guarantee that, even if they execute such agreements with us, they will not seek
recourse against the trust fund. A court could also conclude that such
agreements are not legally enforceable. As a result, if we liquidate, the
per-share distribution from the trust fund could be less than $10.00 or upon any
distribution of the per-share amount pursuant to the letter of credit, $10.30
(as the case may be) due to claims or potential claims of
creditors.
  Competition
for Target Business
  In
identifying, evaluating and selecting a target business, we may encounter
intense competition from other entities having a business objective similar to
ours. Additionally, we may be subject to competition from entities other than
blank check companies having a business objective similar to ours, including
venture capital firms, leverage buyout firms and operating businesses looking to
expand their operations through the acquisition of a target business. Many of
these entities are well established and have extensive experience identifying
and effecting business combinations directly or through affiliates. Many of
these competitors possess greater technical, human and other resources than us
and our financial resources will be relatively limited when contrasted with
those of many of these competitors. While we believe there may be numerous
potential target businesses that we could acquire, our ability to compete in
acquiring certain sizable target businesses may be limited by our available
financial resources. We will only have access to approximately $36 million in
our trust account to consummate a business combination. Accordingly, if we
locate a target business that is valued at substantially more than $36 million
and the sellers of that target business wish to be paid in cash, we will be
forced to obtain third party financing to complete such a transaction. There is
no assurance that such financing will be available to us on terms acceptable to
us or at all. Other blank check companies whose trust accounts are significantly
larger than ours would not have the same problem in financing such a
transaction. Accordingly, this inherent competitive limitation may give others
an advantage in pursuing the acquisition of a target business. However, our
ability to issue our securities in connection with any business combination
would allow us to complete a business combination with a much larger target
business. This is consistent with other similarly structured blank check
companies that have issued securities in connection with their business
combination with Chinese targets. We therefore believe that this competitive
disadvantage may be reduced in our situation although we cannot assure you of
this fact. The following also may not be viewed favorably by certain target
businesses:
  40
  •
              our
      obligation to seek shareholder approval of a business combination may
      delay the completion of a
transaction;
  •
              our
      obligation to convert into cash ordinary shares held by our public
      shareholders to such holders that exercise their conversion rights may
      reduce the resources available to us for a business combination;
      and
  •
              our
      outstanding warrants and option, and the potential future dilution they
      represent.
  Any of
these factors may place us at a competitive disadvantage in successfully
negotiating a business combination. Our management believes, however, that our
status as a public entity and potential access to the United States public
equity markets may give us a competitive advantage over privately-held entities
having a similar business objective as ours in acquiring a target business with
significant growth potential on favorable terms.
  If we
succeed in effecting a business combination, there will be, in all likelihood,
intense competition from competitors of the target business. We cannot assure
you that, subsequent to a business combination, we will have the resources or
ability to compete effectively.
  Facilities
  We
maintain our principal executive offices at 762 West Beijing Road, Shanghai, PRC
200041. GSME Capital Partners Inc. is providing this space to us at no cost. We
consider our current office space, combined with the other office space
otherwise available to our executive officers, adequate for our current
operations.
  Periodic
Reporting and Audited Financial Statements
  Assuming
we remain a foreign private issuer, we will be exempt from the rules under the
Exchange Act regarding proxy statements. In addition, we will not be required
under the Exchange Act to file current reports with the SEC as frequently or as
promptly as United States companies whose securities are registered under the
Exchange Act. However, we have agreed with the representative of the
underwriters in the IPO that, for until the earlier of our consummation of an
initial business combination or our liquidation, in connection with any proposed
business combination, we will deliver to our shareholders proxy solicitation
materials containing the information we believe would have been required to be
provided to shareholders had we not been a foreign private issuer but still had
a class of equity securities registered under Section 12 of the Exchange Act and
we will file with the SEC a Report of Foreign Private Issuer on Form 6-K the
proxy solicitation material. We have also agreed with the representative of the
underwriters that until the earlier of the consummation of an initial business
combination or our liquidation, we will comply with the rules and regulations
under the Exchange Act prescribing the requirements and filing deadlines for
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and will file
Reports of Foreign Private Issuer on Form 6-K complying with those rules and
regulations; however, we cannot assure you that the SEC will review any Form
6-Ks we file. We have also agreed to comply with the rules and regulations
prescribing the requirements and filing deadlines for Section 16 filings,
including Forms 3, 4 and 5, during this time period.
  41




We will
provide shareholders with audited financial statements of the prospective target
business as part of the proxy solicitation materials sent to shareholders to
assist them in assessing the target business. These financial statements will
need to be prepared in accordance with or reconciled to United States GAAP or
prepared or reconciled in accordance with the International Financial Reporting
Standards for potential targets that have previously kept their accounts in
accordance with GAAP of the PRC. We cannot assure you that any particular target
business identified by us as a potential acquisition candidate will have the
necessary financial statements. To the extent that this requirement cannot be
met, we may not be able to acquire the proposed target business.
  Legal
Proceedings
  There is
no material litigation currently pending against us or any members of our
management team in their capacity as such.
  ITEM
      4A.
              UNRESOLVED
      STAFF COMMENTS.
  None.
  ITEM 5.
              OPERATING
      AND FINANCIAL REVIEW AND PROSPECTS.
  We were formed on March 27, 2008 as a blank check company whose
objective is to acquire an operating business, or control of such operating
business through contractual arrangements, that has its principal operations
located in the People’s Republic of China. We intend to utilize cash derived
from the proceeds of our IPO, which was completed in November 2009, our capital
stock, debt or a combination of cash, capital stock and debt, in effecting a
business combination.
  For the
year ended October 31, 2009, we had a net loss of $17,979 comprised entirely of
operating expenses.
  For the
period from March 27, 2008 (inception) to October 31, 2008, we had a net loss of
$8,967 attributable to formation costs and operating expenses.
  On
November 25, 2009, we consummated our IPO and raised net proceeds of
$34,367,806. On consummation of our IPO, $36,000,000of the net proceeds
(including $1,800,000 we received from the sale of insider warrants) was
deposited in trust, with the remaining net proceeds ($200,000) becoming
available to pay for business, legal and accounting due diligence on prospective
acquisitions and continuing general and administrative expenses. We intend to
utilize our cash, including the funds held in the trust fund, capital stock,
debt or a combination of the foregoing to effect a business combination. To the
extent that our capital stock or debt securities are used in whole or in part as
consideration to effect a business combination, the proceeds held in the trust
fund as well as any other available cash will be used to finance the operations
of the target business.
  We
believe that the funds available to us outside of the trust account and amounts
available from interest income earned on the trust account will be sufficient to
allow us to operate until November 25, 2010, assuming that a business
combination is not consummated during that time. Over this time period, we will
be using these funds for identifying and evaluating prospective acquisition
candidates, performing business due diligence on prospective target businesses,
traveling to and from the offices, plants or similar locations of prospective
target businesses, reviewing corporate documents and material agreements of
prospective target businesses, selecting the target business to acquire and
structuring, negotiating and consummating the business combination. We
anticipate that we will incur approximately $100,000 of expenses for legal,
accounting and other third-party expenses attendant to the due diligence
investigations, structuring and negotiating of a business combination, $50,000
of expenses for the due diligence and investigation of a target business by our
officers, directors and initial shareholders, $35,000 of expenses in legal and
accounting fees relating to our SEC reporting obligations and $65,000 for
general working capital that will be used for miscellaneous expenses, taxes and
reserves, including director and officer liability insurance premiums. We do not
believe we will need to raise additional funds following the IPO in order to
meet the expenditures required for operating our business. However, we may need
to raise additional funds through a private offering of debt or equity
securities if such funds are required to consummate a business combination that
is presented to us, although we have not entered into any such arrangement and
have no current intention of doing so.
  42
  Prior to
the date of our IPO, Eli Scher advanced an aggregate of $125,000 to us for
payment of offering expenses on our behalf. This loan was repaid following our
IPO from the proceeds of the offering.
  ITEM 6.
              DIRECTORS,
      SENIOR MANAGEMENT AND EMPLOYEES.
  Directors
and Executive Officers
  Name
                    
                    Age
                    
                    PositionJing
      Dong Gao
                    
                    42
                    
                    Chairman
      of the BoardEli
      D. Scher
                    
                    29
                    
                    Chief
      Executive Officer and DirectorZhong
      Wen Lin
                    
                    40
                    
                    Vice
      President,
Finance
  Jing Dong
Gao has served as our chairman of the board since our inception. Mr. Gao
has invested in and built businesses in China in a variety of industries,
gaining experience in evaluating companies and investments in China. Mr. Gao is
the co-founder and chairman of GSME Capital Partners, a principal investment
business headquartered in Shanghai founded in July 2007. GSME Capital Partners
makes early stage investments in Chinese businesses with a focus on service
industries. Additionally, Mr. Gao serves as chairman and chief executive officer
of Fundamental Films, a film distribution and production company he co-founded
in April 2008, and invested in by the principals of GSME Capital Partners.
Further, Mr. Gao is the chairman of Media Communication Group (MCG), a
light-emitting diode (LED) high-technology media business he founded in 2006 and
invested in by the principals of GSME Capital Partners. MCG is the exclusive
operator of LED advertising screens in the Shanghai and Beijing subways, and
owns proprietary media networking management software and has advanced LED
screen optimization techniques. Prior to GSME, in 1997, he founded MCHEM Pharma
Group, a generic pharmaceuticals manufacturer that manufactured drugs focusing
on HIV/AIDS intermediates, APIs and FDFs which was sold to Matrix Labs of India.
He served as the company’s chairman and chief executive officer from 1997 to
2007. Mr. Gao also invested in Xiamen Prosolar, a Shanghai stock exchange listed
real estate development company (SSE: 600193), and sat on its board of directors
until May 2008. Mr. Gao received a B.S. from Nanjing University.
  Eli D.
Scher has served as our chief executive officer and a member of our board
of directors since our inception. Since July 2007, Mr. Scher has served as chief
executive officer of GSME Capital Partners Inc. From July 2007 to February 2008,
Mr. Scher served as chief development officer and a director of MCG. Since
February 2008, he has served as chief financial officer of MCG. Additionally,
Mr. Scher is a co-founder, and serves as president and chief financial officer,
of Fundamental Films. From September 2003 to February 2007, Mr. Scher served as
a principal at Daroth Capital Advisors LLC, which is involved in investing and
advising clients on financings, mergers and acquisitions and restructurings,
where he led the firm’s Asian business development efforts. From July 2002 to
September 2003, he served as a vice president of Cohen Bros. & Co., a
private investment bank. From June 2001 to September 2001, he was a financial
intern with China International Capital Corporation, a Sino-American joint
venture investment bank where Morgan Stanley and the China Construction Bank
acted as the principal partners and investors. Mr. Scher received an A.B. from
Princeton University. Mr. Scher is fluent in Mandarin Chinese.
  43
  Zhong Wen
Lin has served as our vice president, finance since our inception. Since
February 2007, Mr. Lin has served as finance director of MCG. From July 2006 to
February 2007, Mr. Lin served as general manager assistant at JCDecaux China
Shanghai Zhongle Vehicle Paint-Spraying Co., LTD, an outdoor transportation
media business. From January 2006 to July 2006, he served as finance director of
JCDecaux China, Metro Media System Department, a traditional media subway
advertising business. From April 1997 to January 2006, Mr. Lin held various
roles within Media Partners International, a company acquired by JC Decaux,
including: Shanghai Media Partners International Advertising Co., LTD, Public
transit system department — Finance Director; Group (Shanghai) — Finance
Director; Nanjing Media Partners International Public Transport Advertising Co.,
LTD — Finance Director; and Shanghai Media Partners International Advertising
Co., LTD — Finance Manager. Mr. Lin received a bachelor’s degree in Financial
Accounting from Shanghai University.
  Special
Advisor
  We may
seek guidance and advice from the following special advisor. We have no formal
arrangement or agreement with this individual to provide services to us and
accordingly, he has no contractual or fiduciary obligations to present business
opportunities to us. This individual will simply provide advice, introductions
to potential targets, and assistance to us, at our request, only if he is able
to do so. Our special advisor does not speak Chinese. Nevertheless, we believe
with his business background and extensive contacts, he will be helpful to our
search for a target business and our consummation of an initial business
combination.
  Lawrence S.
Wizelhas served
on the board of directors of American Oriental Bioengineering, Inc., a
plant-based Chinese pharmaceutical company, since 2006. He also serves on the
board of directors of several other companies. From 1965 to June 2006, Mr. Wizel
served with Deloitte & Touche in Deloitte’s New York office as a partner
from 1980 to June 2006. He most recently held the position of deputy
professional practice director. Mr. Wizel was responsible for serving a diverse
client base of publicly held and private companies in a variety of capacities
including SEC filings, initial public offerings, mergers and acquisition
transactions and periodic reporting. He received a B.S. from Michigan State
University and is a Certified Public Accountant.
  Executive Officer and Director
Compensation
  No
executive officer has received any cash compensation for services rendered to
us. No compensation of any kind, including finders, consulting or other similar
fees, will be paid to any of our initial shareholders, including our directors,
or any of their respective affiliates, prior to, or for any services they render
in order to effectuate, the consummation of a business combination. However,
such individuals will be reimbursed for any out-of-pocket expenses incurred in
connection with activities on our behalf such as identifying potential target
businesses and performing due diligence on suitable business combinations. There
is no limit on the amount of these out-of-pocket expenses and there will be no
review of the reasonableness of the expenses by anyone other than our board of
directors, which includes persons who may seek reimbursement, or a court of
competent jurisdiction if such reimbursement is challenged. Because of the
foregoing, we will generally not have the benefit of independent directors
examining the propriety of expenses incurred on our behalf and subject to
reimbursement.
  Compensation
Discussion and Analysis
  Overall,
following our initial business combination, we will seek to provide total
compensation packages that are competitive in terms of potential value to our
executives, and which are tailored to the unique characteristics and needs of
our company within our industry in order to create an executive compensation
program that will adequately reward our executives for their roles in creating
value for our shareholders. We intend to be competitive with other similarly
situated companies in our industry following completion of our initial business
combination. The compensation decisions regarding our executives will be based
on our need to attract individuals with the skills necessary for us to achieve
our business plan, to reward those individuals fairly over time, and to retain
those individuals who continue to perform at or above our
expectations.
  44
  It is
likely that our executives’ compensation will have three primary components –
salary, cash incentive bonus and stock-based awards. We will view the three
components of executive compensation as related but distinct. We do not believe
that significant compensation derived from one component of compensation should
negate or reduce compensation from other components. We anticipate determining
the appropriate level for each compensation component based in part, but not
exclusively, on our view of internal equity and consistency, individual
performance and other information deemed relevant and timely. We have not
adopted any formal or informal policies or guidelines for allocating
compensation between long-term and currently paid out compensation, between cash
and non-cash compensation, or among different forms of
compensation.
  We may
utilize the services of third parties from time to time in connection with the
hiring and compensation awarded to executive employees. This could include
subscriptions to executive compensation surveys and other
databases.
  Benchmarking
of Cash and Equity Compensation
  We
believe it is important when making compensation-related decisions to be
informed as to current practices of similarly situated publicly held companies.
We expect to stay apprised of the cash and equity compensation practices of
publicly held companies in the industry we operate in following our initial
business combination through the review of such companies’ public reports and
through other resources. It is expected that any companies chosen for inclusion
in any benchmarking group would have business characteristics comparable to our
company, including revenues, financial growth metrics, stage of development,
employee headcount and market capitalization. While benchmarking may not always
be appropriate as a stand-alone tool for setting compensation due to the aspects
of our post-acquisition business and objectives that may be unique to us, we
generally believe that gathering this information will be an important part of
our compensation-related decision-making process.
  Compensation
Components
  Base Salary. Generally, we
anticipate setting executive base salaries at levels comparable with those of
executives in similar positions and with similar responsibilities at comparable
companies. We will seek to maintain base salary amounts at or near the industry
norms while avoiding paying amounts in excess of what we believe is necessary to
motivate executives to meet corporate goals. It is anticipated base salaries
will generally be reviewed annually, subject to terms of employment agreements,
and that we will seek to adjust base salary amounts to realign such salaries
with industry norms after taking into account individual responsibilities,
performance and experience.
  Annual Bonuses. We may design
and utilize cash incentive bonuses for executives to focus them on achieving key
operational and financial objectives within a yearly time horizon. We will
structure cash incentive bonus compensation so that it is taxable to our
employees at the time it becomes available to them. At this time, it is not
anticipated that any executive officer’s annual cash compensation will exceed $1
million, and we have accordingly not made any plans to qualify for any
compensation deductions under Section 162(m) of the Internal Revenue
Code.
  Equity Awards.We may also
use stock options and other stock-based awards to reward long-term performance.
We believe that providing a meaningful portion of our executives’ total
compensation package in stock options and other stock-based awards will align
the incentives of our executives with the interests of our shareholders and with
our long-term success.
  Board
Practices
  We have
two directors with each director serving a two-year term. The term of office of
Jing Dong Gao will expire at our first annual meeting of shareholders. The term
of office of Eli D. Scher will expire at the second annual meeting. Pursuant to
our Articles, the number of directors that shall constitute our board has been
fixed at two. This provision in our Articles may not be amended by shareholders
prior to the consummation of our initial business combination except upon
approval by the holders of at least 85% of the outstanding ordinary
shares.
  45
  Employees
  We have
three executive officers. These individuals are not 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 a target business has been selected
for the business combination and the stage of the business combination process
the company is in. Accordingly, once management locates a suitable target
business to acquire, they will spend more time investigating such target
business and negotiating and processing the business combination (and
consequently spend more time to our affairs) than they would prior to locating a
suitable target business. We presently expect each of our executive officers to
devote an average of approximately 10 hours per week to our business. We do not
intend to have any full time employees prior to the consummation of a business
combination.
  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 May 21, 2010:
  ·
              each
      person known by us to be the beneficial owner of more than 5% of our
      outstanding ordinary shares;
  ·
              each
      of our officers and directors; and
  ·
              all
      our officers and directors as a
group.
  Unless
otherwise indicated, we believe that all persons named in the table have sole
voting and investment power with respect to all ordinary shares beneficially
owned by them.
  Name and Address of Beneficial Owner (1)
                            
                            Amount and Nature of
                              Beneficial Ownership
                            
                            
                            Percent
                              ofClassHartz
      Capital, Inc. (2)
                            
                            
                            755,000
                            (3)
                            
                            
                            15.7
                            %Bulldog
      Investors General Partnership(4)
                            
                            
                            529,641
                            
                            
                            
                            11.0
                            %Polar
      Securities Inc. (5)
                            
                            
                            250,000
                            (6)
                            
                            
                            5.2
                            %Barry
      Rubenstein(7)
                            
                            
                            250,000
                            (8)
                            
                            
                            5.2
                            %Jing
      Dong Gao
                            
                            
                            1,044,000
                            (9)
                            
                            
                            21.8
                            %Eli
      D. Scher
                            
                            
                            120,000
                            
                            
                            
                            2.5
                            %Zhong
      Wen Lin
                            
                            
                            0
                            
                            
                            
                            0
                            %All directors and
      executive officers as a group (three individuals)
                            
                            
                            1,164,000
                            (10)
                            
                            
                            24.3
                            %
  *
              Less
      than one percent.
  (1)
              Unless
      otherwise indicated, the business address of each of the individuals is
      762 West Beijing Road, Shanghai, China
2000041.
  (2)
              The
      business address of Hartz Capital, Inc. is 400 Plaza Drive, Secaucus, NJ
      07094.
  (3)
              Represents
      755,000 shares held by Hartz Capital Investments, LLC.  Hartz
      Capital, Inc. is the manager of Hartz Capital Investments, LLC and
      therefore exercises voting and dispositive power over such shares. The
      foregoing information is derived from a Schedule 13G filed with the
      Securities and Exchange Commission on February 5,
  2010.
  (4)
              The
      business address of Bulldog is Park 80 West, Plaza Two, Saddle Brook, NJ
      07663. Phillip Goldstein exercises voting and dispositive power over such
      shares. The foregoing information is derived from a Schedule 13G/A filed
      with the Securities and Exchange Commission on February 8,
      2010.
  (5)
              The
      business address of Polar Securities Inc. is 372 Bay Street, 21st floor,
      Toronto, Ontario M5H 2W9,
Canada.
  46
  (6)
              Represents
      shares held by North Pole Capital Master Fund of which Polar Securities
      controls. The foregoing information is derived from a Schedule 13G filed
      with the Securities and Exchange Commission on March 4,
    2010.
  (7)
              The
      business address of Barry Rubenstein is 68 Wheatley Road, Brookville, NY
      11545.
  (8)
              Represents
      150,000 shares held by Woodland Partners, of which Mr. Rubenstein is
      general partner, and 100,000 shares held in a joint account by Mr.
      Rubenstein and his wife. Does not include 250,000 shares issuable upon
      exercise of warrants that are not currently exercisable and will not
      become exercisable within 60 days. The foregoing information is derived
      from a Schedule 13G filed with the Securities and Exchange Commission on
      December 10, 2009.
  (9)
              Represents
      shares held by MCK Capital Co., Limited, an entity controlled by Mr.
      Gao.
  (10)
              Does
      not include 3,600,000 shares issuable upon exercise of insider warrants
      that are not currently exercisable and will not become exercisable within
      60 days.
  All of
the initial shares have been placed in escrow with Continental Stock Transfer
& Trust Company, as escrow agent, until (i) with respect to 20% of such
shares, upon consummation of our initial business combination, (ii) with respect
to 20% of such shares, when the closing price of our ordinary shares exceeds
$12.00 for any 20 trading days within a 30-trading day period following the
consummation of our initial business combination, (iii) with respect to 20% of
such shares, when the closing price of our ordinary shares exceeds $14.00 for
any 20 trading days within a 30-trading day period following the consummation of
our initial business combination, (iv) with respect to 20% of such shares, when
the closing price of our ordinary shares exceeds $16.00 for any 20 trading days
within a 30-trading day period following the consummation of our initial
business combination and (v) with respect to 20% of such shares, when the
closing price of our ordinary shares exceeds $20.00 for any 20 trading days
within a 30-trading day period following the consummation of our initial
business combination. All of the initial shares may be released from escrow
earlier than as described above if within that time period, we consummate a
subsequent liquidation, merger, stock 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.
  During
the escrow period, the holders of these shares will not be able to sell or
transfer their securities except (i) for transfers to an entity’s members upon
its liquidation, (ii) to relatives and trusts for estate planning purposes,
(iii) by virtue of the laws of descent and distribution upon death, (iv)
pursuant to a qualified domestic relations order, (v) by certain pledges to
secure obligations incurred in connection with purchases of our securities or
(vi) by private sales made at or prior to the consummation of a business
combination at prices no greater than the price at which the shares were
originally purchased, in each case where the transferee agrees to the terms of
the escrow agreement, but will retain all other rights as our shareholders,
including, without limitation, the right to vote their ordinary shares and the
right to receive cash dividends, if declared. 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, none of our initial
shareholders will receive any portion of the liquidation proceeds with respect
to their initial shares
  B.
Related Party Transactions
  In March
2008, we issued 1,293,750 ordinary shares to the individuals set forth below for
$25,000 in cash, at a purchase price of approximately $0.02 share, as
follows:
  Name
                          
                          Number of Shares
                          
                          Relationship to UsJing
      Dong Gao
                          
                          1,125,563
                          
                          Chairman
      of the BoardEli
      D. Scher
                          
                          129,375
                          
                          Chief
      Executive OfficerLawrence
      S. Wizel
                          
                          38,812
                          
                          Consultant
  47
  In July
2009, Mr. Gao transferred all his shares to MCK Capital Co., Limited, an entity
he controls. In September 2009, our board of directors authorized a share
dividend of approximately 0.067 shares for each outstanding ordinary
share.
  In
connection with the IPO, the underwriters determined not to exercise any of
their over-allotment option. As a result, our founders forfeited to us an
aggregate of 180,000 shares. Upon receipt, such forfeited shares were
immediately cancelled.
  The
holders of the majority of the initial shares are entitled to make up to two
demands that we register these shares. The holders of the majority of these
shares may elect to exercise these registration rights at any time commencing
three months prior to the date on which these ordinary shares 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 ordinary shares are released from escrow. We will bear the expenses
incurred in connection with the filing of any such registration
statements.
  MCK
Capital Co., Limited, Eli D. Scher and Larry Wizel purchased 3,600,000 insider
warrants (for a total purchase price of $1,800,000) from us simultaneously with
the consummation of the IPO. The insider warrants are identical to the warrants
underlying the units sold in the IPO except that the insider warrants will be
exercisable for cash or on a cashless basis, at the holder’s option, and will
not be redeemable by us, in each case so long as such warrants are held by the
purchasers or their affiliates. The purchasers have agreed that the insider
warrants will not be sold or transferred by them until 60 days after we have
completed a business combination. The holders of the majority of these insider
warrants (or underlying shares) will be entitled to demand that we register
these securities. The holders of the majority of these securities may elect to
exercise these registration rights with respect to such securities at any time
after we consummate a business combination. In addition, these holders have
certain “piggy-back” registration rights with respect to registration statements
filed subsequent to such date. We will bear the expenses incurred in connection
with the filing of any such registration statements.
  In order
to meet our working capital, certain of our officers and directors may, but are
not obligated to, loan us funds, from time to time or at any time, in whatever
amount such officer or director deems reasonable in their sole discretion. Each
loan would be evidenced by a note and, upon consummation of our business
combination, either payable without interest or, at such officer or director’s
discretion, convertible into warrants of the post business combination entity at
a price of $0.50 per warrant. The warrants would be identical to the insider
warrants. The holders of a majority of such warrants (or underlying shares) will
be entitled to demand that we register these securities pursuant to an agreement
to be entered into at the time of the loan. The holders of a majority of these
securities would have certain “piggy-back” registration rights with respect to
registration statements filed subsequent to such date. We will bear the expenses
incurred in connection with the filing of any such registration
statements.
  In
connection with the IPO, Eli D. Scher advanced to us $125,000 to cover expenses
related to the offering. The loan was payable without interest on the
consummation of the IPO. This loan was repaid from the proceeds of the IPO not
placed in trust.
  We will
reimburse our management team 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 businesses and business
combinations. There is no limit on the amount of out-of-pocket expenses that
could be incurred; provided, however, that to the extent such out-of-pocket
expenses exceed the funds available to us, such out-of-pocket expenses would not
be reimbursed by us unless we consummate our initial business
combination.
  Other
than the reimbursable out-of-pocket expenses payable to our management team, no
compensation or fees of any kind, including finder’s fees, consulting fees or
other similar compensation, will be paid to any of our founders, officers or
directors or to any of their respective affiliates, prior to or with respect to
the business combination.
  48
  All
ongoing and future transactions between us and any member of our management team
or their respective affiliates, including loans by members of our management
team, will be on terms believed by us at that time, based upon other similar
arrangements known to 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 in each instance by our audit
committee who had access, at our expense, to our attorneys or independent legal
counsel. It is our intention to obtain estimates from unaffiliated third parties
for similar goods or services to ascertain whether such transactions with
affiliates are on terms that are no less favorable to us than are otherwise
available from such unaffiliated third parties.
  Our Code
of Ethics requires us to avoid, wherever possible, all related party
transactions that could result in actual or potential conflicts of interest,
except under guidelines approved by the Board of Directors (or the audit
committee, if one exists). Related-party transactions are defined as
transactions in which (1) the aggregate amount involved will or may be expected
to exceed $120,000 in any calendar year, (2) we or any of our subsidiaries is a
participant, and (3) any (a) executive officer, director or nominee for election
as a director, (b) greater than 5 percent beneficial owner of our ordinary
shares, or (c) immediate family member, of the persons referred to in clauses
(a) and (b), has or will have a direct or indirect material interest (other than
solely as a result of being a director or a less than 10 percent beneficial
owner of another entity). A conflict of interest situation can arise when a
person takes actions or has interests that may make it difficult to perform his
or her work objectively and effectively. Conflicts of interest may also arise if
a person, or a member of his or her family, receives improper personal benefits
as a result of his or her position.
  We will
not acquire an entity with which any of our officers or directors, through their
other business activities, is currently having acquisition or investment
discussions. To further minimize potential conflicts of interest, we have agreed
not to (i) acquire an entity with which our officers or directors, through their
other business activities, had acquisition or investment discussions in the
past, (ii) consummate an initial business combination with an entity which is,
or has been within the past five years, affiliated with any of our officers,
directors, initial shareholders or their affiliates, including an entity that is
either a portfolio company of, or has otherwise received a material financial
investment from, any private equity fund or investment company (or an affiliate
thereof) that is affiliated with such individuals; or (iii) enter into a
business combination where we acquire less than 100% of a target business and
any of our officers, directors, initial shareholders or their affiliates acquire
the remaining portion of such target business, unless, in any case, we obtain an
opinion from an independent investment banking firm reasonably acceptable to
Cohen & Company Securities, LLC that the business combination is fair to our
unaffiliated shareholders from a financial point of view.
  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
  Our
securities did not commence trading on the OTC Bulletin Board until after
October 31, 2009.
  49
  B.
Plan of Distribution
  Not
applicable.
  C.
Markets
  Our
units, ordinary shares and warrants are traded under the symbols “GSMEF,”
“GSMXF” and “GSMWF,” respectively, on the OTC Bulletin Board.
  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 Association
  The
following represents a summary of certain key provisions of our Articles. The
summary does not purport to be a summary of all of the provisions of our
Articles or of all relevant provisions of Cayman Islands law governing the
management and regulation of Cayman Islands exempted companies.
  Incorporation
  We were
incorporated in the Cayman Islands as an exempted company on March 27, 2008
under the Companies Law with company registration number 207509. Our authorized
share capital is $51,000.00 divided into 50,000,000 ordinary shares of a par
value of US$0.001 each and 1,000,000 preferred shares of a par value of US$0.001
each.
  Objects
and Purposes
  Our
Articles grants us full power and authority to carry out any object not
prohibited by the Companies Law or as the same may be revised from time to time,
or any other law of the Cayman Islands.
  Directors
  We have
two directors and each director will generally serve for a term of two years
with only one director being elected in each year. There is no cumulative voting
with respect to the election of directors, with the result that the holders of
more than 50% of the shares eligible to vote for the election of directors can
elect all of the directors.
  Subject
to their fiduciary duties and our Articles, directors may engage in transactions
with us and vote on such transactions, provided the nature of the interest is
disclosed in accordance with the procedures under our Articles. Directors also
may exercise all the powers to borrow money and to mortgage or charge our
undertaking, property and uncalled capital or any part thereof and to issue
debentures, debenture stock, mortgages, bonds and other such securities whether
outright or as security for any debt, liability or obligation of us or of any
third party.
  50
  Rights
and Obligations of Shareholders
  Dividends
  Subject
to the Companies Law, directors may declare dividends and distributions on our
ordinary shares in issue and authorize payment on the dividends or distributions
out of lawfully available funds. No dividend or distribution may be paid except
out of our realized or unrealized profits, or out of the share premium account
or as otherwise permitted by the Companies Law.
  Voting
Rights
  Subject
to any rights or restrictions attached to any shares, on a show of hands every
member who (being an individual) is present in person or by proxy or, if a
corporation or other non-natural person is present by its duly authorized
representative or proxy, has one vote and on a poll every member has one vote
for every share of which he is the holder.
  In the
case of joint holders of record the vote of the senior holder who tenders a
vote, whether in person or by proxy, is accepted to the exclusion of the votes
of the other joint holders, and seniority is determined by the order in which
the names of the holders stand in the Register of Members.
  A member
of unsound mind, or in respect of whom an order has been made by any court,
having jurisdiction in lunacy, may vote, whether on a show of hands or on a
poll, by his committee, receiver, curator bonis, or other person on such
member's behalf appointed by that court, and any such committee, receiver,
curator bonis or other person may vote by proxy.
  No person
is entitled to vote at any general meeting or at any separate meeting of the
holders of a class of shares unless he is registered as a member on the record
date for such meeting nor unless all calls or other monies then payable by him
in respect of such shares have been paid.
  On a poll
or on a show of hands votes may be cast either personally or by proxy. A member
may appoint more than one proxy to attend and vote at a general
meeting.
  On a
poll, a member holding more than one share need not cast the votes in respect of
his shares in the same way on any resolution and therefore may vote a share or
some or all such shares either for or against a resolution and/or abstain from
voting a share or some or all of the shares and, subject to the terms of the
instrument appointing him, on a poll, a proxy appointed under one or more
instruments may vote a share or some or all of the shares in respect of which he
is appointed either for or against a resolution and/or abstain from
voting.
  Any
person in consequence of the death or bankruptcy or winding-up of a member (or
in any other way than by transfer) who becomes the holder of a share may vote at
any general meeting in respect thereof in the same manner as if he were the
registered holder of such shares, provided that forty-eight hours at least
before the time of the holding of the meeting or adjourned meeting, as the case
may be, at which he proposes to vote, he satisfies the directors of his
entitlement to such shares, or the directors have previously admitted his right
to vote at such meeting in respect thereof.
  Change
to Rights of Shareholders
  Shareholders
may change the rights of their class of shares by passing a special resolution
at a general meeting of the shareholders of that class.
  There are
no general limitations on the rights to own shares specified by the
Articles.
  General
Meetings
  A general
meeting may be convened:
  ·
              by
      three directors at any time; or
  ·
              our
      chairman of the board.
  Notice
of a general meeting is given to all shareholders. All business shall be deemed
special that is transacted at an extraordinary general meeting, and also all
business that is transacted at an annual general meeting, with the exception
of:
  (a)
              the
      declaration and sanctioning of
dividends;
  51
  (b)
              consideration
      and adoption of the accounts and balance sheet and the reports of the
      directors and auditors and other documents required to be annexed to the
      balance sheet;
  (c)
              the
      election of directors;
  (d)
              appointment
      of auditors (where special notice of the intention for such appointment is
      not required by the Companies Law) and other
  officers;
  (e)
              the
      fixing of the remuneration of the
auditors,
  (f)
              the
      voting of remuneration or extra remuneration to the directors; the
      granting of any mandate or authority to the directors to offer, allot,
      grant options over or otherwise dispose of the unissued shares in the
      capital of the Company representing not more than 20% in nominal value of
      its existing issued share capital;
and
  (g)
              the
      granting of any mandate or authority to the directors to repurchase our
      securities.
  A quorum
of shareholders is required to be present at any general meeting in order to
carry out business. A quorum consists of the holder or holders present in person
or by proxy entitled to exercise not less than 33.33% of the voting rights of
the shares of each class or series of shares entitled to vote as a class or
series thereon.
  The
directors are permitted to designate any general meeting of shareholders as an
annual general meeting provided that only one annual general meeting may be held
each year.
  Changes
in Capital
  We may
increase our share capital by ordinary resolution. The new shares will be
subject to all of the provisions to which the original shares are subject. We
may also by ordinary resolution:
  ·
              consolidate
      and divide all or any of our share capital into shares of a larger
      amount;
  ·
              sub-divide
      existing shares into shares of a smaller amount;
  and
  ·
              cancel
      any shares which, at the date of the resolution, are not held or agreed to
      be held by any person.
  We may
reduce our share capital and any capital redemption reserve by special
resolution in accordance with relevant provisions of the Companies
Law.
  Indemnity
  Pursuant
to our amended and restated Memorandum and Articles of association, every
director, agent or officer shall be indemnified out of our assets 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 us 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.
  C.
Material Contracts
  As of May
21, 2010, the Company has not entered into any material contracts.
  D.
Exchange Controls and Other Limitations Affecting Security Holders
  Under
Cayman Islands 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.
  52
  E.
Taxation
  The
following summary of the material Cayman 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 Form 20-F,
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 U.S. state, local and other tax laws.
  Cayman
Islands Taxation
  The
Government of the Cayman 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 Cayman Islands
are not party to a double tax treaty with any country that is applicable to any
payment made to or by us.
  We have
received an undertaking from the Governor-in-Cabinet of the Cayman Islands that,
in accordance with section 6 of the Tax Concessions Law (1999 Revision) of the
Cayman Islands, for a period of 20 years from the date of the undertaking, no
law which is enacted in the Cayman Islands imposing any tax to be levied on
profits, income, gains or appreciations shall apply to us or our operations and,
in addition, that no tax to be levied on profits, income, gains or appreciations
or which is in the nature of estate duty or inheritance tax shall be payable (i)
on the shares, debentures or other obligations of the company or (ii) by way of
the withholding in whole or in part of a payment of dividend or other
distribution of income or capital by the company to its members or a payment of
principal or interest or other sums due under a debenture or other obligation of
the company.
  United
States Federal Income Taxation
  This
section describes the material United States federal income tax consequences of
the acquisition, ownership and disposition of our ordinary shares and warrants.
This section does not address any aspect of United States federal gift or estate
tax, or the state, local or foreign tax consequences of an investment in our
ordinary shares and warrants. This section only applies to you if you hold your
ordinary shares and warrants as capital assets for tax purposes. This discussion
does not discuss all the tax consequences that may be relevant to particular
investors in light of their circumstances or to investors that are subject to
special rules, including:
  ·
              a
      bank;
  ·
              a
      dealer in securities or currencies;
  ·
              a
      trader in securities that elects to use a mark-to-market method of
      accounting for your securities
holdings;
  ·
              a
      tax-exempt organization;
  ·
              an
      insurance company;
  ·
              a
      person liable for alternative minimum
tax;
  ·
              a
      person that actually or constructively owns 10% or more of the vote or
      value of our shares;
  ·
              a
      person that holds ordinary shares that are a hedge or that are hedged
      against currency risks or as part of a straddle or a conversion
      transaction;
  ·
              a
      U.S. holder (as defined below) whose functional currency is not the U.S.
      dollar;
  ·
              a
      person who acquired shares pursuant to the exercise of a compensatory
      stock option; or
  ·
              a
      person who owns shares through a partnership or other pass-through
      entity.
  This
section is based on the Internal Revenue Code of 1986, as amended, its
legislative history, existing and proposed regulations promulgated thereunder,
and judicial and administrative interpretations thereof, all as in effect as of
the date hereof and all of which are subject to changes, possibly retroactively.
There is currently no comprehensive tax treaty between the United States and the
Cayman Islands.
  53
  For
purposes of the United States federal income tax discussion below, you are a
U.S. holder if you are a beneficial owner of ordinary shares or warrants and you
are:
  ·
              a
      citizen or resident of the United
States;
  ·
              a
      domestic corporation;
  ·
              an
      estate whose income is subject to United States federal income tax
      regardless of its source;
  ·
              or
      a trust if (A) a United States court can exercise primary supervision over
      the trust’s administration and one or more United States persons are
      authorized to control all substantial decisions of the trust, or (B) the
      trust was in existence on August 20, 1996, and validly elected to continue
      to be treated as a United States domestic
trust.
  In
general, the tax consequences for shares owned by a partnership depends on the
tax status of the parties.
  A
non-U.S. holder is a beneficial owner of ordinary shares or warrants that is not
a United States Holder for United States federal income tax
purposes.
  You
should consult your own tax advisor regarding the United States federal, state
and local tax consequences of owning and disposing of the ordinary shares or
warrants in your particular circumstances.
  This
discussion addresses only United States federal income taxation.
  Allocation
of Purchase Price Between Shares and Warrants
  There is
no authority addressing the treatment, for U.S. federal income tax purposes, of
securities with terms substantially the same as the units, and, therefore, that
treatment is not entirely clear. Each unit should be treated for U.S. federal
income tax purposes as an investment unit consisting of one ordinary share and a
warrant to acquire one ordinary share. For U.S. federal income tax purposes,
each holder of a unit must allocate the purchase price paid by such holder for a
unit between the ordinary share and the warrant included in that unit based on
their respective relative fair market values at the time of issuance. A holder’s
initial tax basis in the ordinary share and the warrant included in each unit
should equal the portion of the purchase price of the unit allocated thereto.
While uncertain, it is possible that 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 warrant that
comprise the unit is different than our allocation.
  Any
purchase price allocation by a holder of a unit or by us is not binding on the
IRS or the courts. For that reason, and because of the absence of authority
addressing the federal income tax treatment of the units, each holder is urged
to consult its own tax advisor regarding the U.S. federal income tax
consequences of an investment in a unit (including alternative characterizations
of a unit) and regarding the risks associated with an allocation of the purchase
price between the ordinary share and the warrant that comprise a unit that is
inconsistent with our allocation or the holder’s allocation of the purchase
price. Unless otherwise stated, the following discussion is based on the
assumption that the characterization of the units described above is accepted
for U.S. federal income tax purposes.
  54
  Taxation
of Dividends
  U.S. Holders. Under the
United States federal income tax laws, and subject to the personal foreign
investment company rules discussed below, if you are a U.S. holder, the gross
amount of any dividend we pay out of our current or accumulated earnings and
profits (as determined for United States federal income tax purposes) is subject
to United States federal income taxation. If you are a non-corporate U.S.
holder, dividends paid to you in taxable years beginning before January 1, 2011
that constitute qualified dividend income will be taxable to you at a maximum
tax rate of 15% provided that you hold our ordinary shares for more than 60 days
during the 120-day period beginning 60 days before the ex-dividend date and meet
other holding period requirements. Dividends we pay with respect to our ordinary
shares generally will be qualified dividend income provided that, in the year in
which the dividend is paid, our ordinary shares are readily tradable on an
established securities market in the United States.
  The
dividend will not be eligible for the dividends-received deduction generally
allowed to United States corporations in respect of dividends received from
other United States corporations. Distributions in excess of current and
accumulated earnings and profits, as determined for United States federal income
tax purposes, will be treated as a non-taxable return of capital to the extent
of your basis in our ordinary shares and thereafter as capital gain. If the
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 foreign currency/U.S. dollar rate on the date the dividend distribution
is includible in your income, regardless of whether the payment is in fact
converted into U.S. dollars. Therefore, since the value of the foreign currency
may decrease before you actually convert the currency into U.S. dollars, you may
actually be taxed on a larger amount in U.S. dollars than the U.S. dollar amount
that you will ultimately receive. Generally, any gain or loss resulting from
currency exchange fluctuations during the period from the date you include the
dividend payment in income to the date you convert the payment into U.S. dollars
will be treated as ordinary income or loss and will not be eligible for the
special tax rate applicable to qualified dividend income. The gain or loss
generally will be income or loss from sources within the United States for
foreign tax credit limitation purposes.
  Dividends
will be income from sources outside the United States, but generally will be
passive income or financial services income, which is treated separately from
other types of income for purposes of computing the foreign tax credit allowable
to you.
  Non-U.S. Holders. If you are
a non-U.S. holder, dividends paid to you in respect of our ordinary shares will
not be subject to United States federal income tax unless the dividends are
effectively connected with your conduct of a trade or business within the United
States, and the dividends are attributable to a permanent establishment that you
maintain in the United States if that is required by an applicable income tax
treaty as a condition for subjecting you to United States taxation on a net
income basis. In such cases you will be taxed in the same manner as a U.S.
holder. If you are a corporate non-U.S. holder, effectively connected dividends
may, under certain circumstances, be subject to an additional branch profits tax
at a 30% rate or at a lower rate if you are eligible for the benefits of an
income tax treaty that provides for a lower rate.
  Taxation
of Capital Gains
  U.S. Holders. Subject to the
PFIC rules discussed below, if you are a U.S. holder and you sell or otherwise
dispose of your ordinary shares or warrants, you will recognize capital gain or
loss for United States federal income tax purposes equal to the difference
between the U.S. dollar value of the amount that you realize and your tax basis,
determined in U.S. dollars, in your ordinary shares or warrants. Capital gain of
a noncorporate U.S. holder that is recognized before January 1, 2011 is
generally taxed at a maximum rate of 15% where the holder has a holding period
greater than one year. The gain or loss will generally be income or loss from
sources within the United States for foreign tax credit limitation purposes.
Your ability to deduct capital losses is subject to limitations.
  Non-U.S. Holders. If you are
a non-U.S. holder, you will not be subject to United States federal income tax
on gain recognized on the sale or other disposition of your ordinary shares or
warrants unless:
  55
  ·
              the
      gain is effectively connected with your conduct of a trade or business in
      the United States and the dividends are attributable to a permanent
      establishment that you maintain in the United States if that is required
      by an applicable income tax treaty as a condition for subjecting you to
      United States taxation on a net income basis;
or
  ·
              you
      are an individual, you are present in the United States for 183 or more
      days in the taxable year of the sale and certain other conditions
      exist
  If you
are a corporate non-U.S. holder, effectively connected gains that you recognize,
under certain circumstances, may also be subject to an additional branch profits
tax at a 30% rate or at a lower rate if you are eligible for the benefits of an
income tax treaty that provides for a lower rate.
  Exercise,
Disposition or Lapse of Warrants
  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. Shares acquired pursuant
to the exercise of a warrant will have a tax basis equal to the U.S. holder’s
tax basis in the warrant (that is, an amount equal to the portion of the
purchase price of each Unit allocated to the warrant as described above in
“Allocation of Purchase Price Between Shares and Warrants”), increased by the
amount paid to exercise the warrant. The holding period of such share would
begin on the day following the date of exercise of the warrant and will not
include the period during which the U.S. holder held the warrant.
  Subject
to the discussion of the PFIC rules below, upon the sale or other disposition of
a warrant (other than by exercise), a U.S. holder will recognize capital gain or
loss in an amount equal to the difference between the amount realized and the
U.S. holder’s tax basis in the warrant (that is, as discussed above, the portion
of the purchase price of a unit allocated to such warrant). Such gain or loss
will be long-term capital gain or loss if the U.S. holder has held the warrant
for more than one year. Under certain circumstances, we have the right to redeem
the warrants. A redemption of warrants will be treated as a sale or exchange of
the warrants.
  The terms
of the warrant provide for certain adjustments to the number of 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 as a dividend to the U.S. holder of the
warrants. Conversely, the absence of an appropriate adjustment may result in a
constructive distribution that could be taxable as a dividend to a U.S. holder
of the shares. See “Taxation of Dividends.”
  If a
warrant is allowed to lapse unexercised, a U.S. holder will recognize a capital
loss in an amount equal to such holder’s tax basis in the warrant. Such loss
will be long-term if the warrant has been held for more than one year. The
ability to deduct any such loss may be subject to certain limitations, and
holders should consult their own tax advisors as to the potential applicability
to them of such limitations.
  As
discussed above in “Allocation of Purchase Price Between Shares and Warrants”,
the allocation of price of a unit between the share and the warrants comprising
such unit is not binding on the IRS. If the IRS were successfully to challenge
your allocation, the amount of gain recognized upon disposition of a share or
warrant could be increased, and the amount of loss recognized upon disposition
of a share or warrant or upon lapse of a warrant could be reduced.
  Passive
Foreign Investment Company Rules
  Special
United States tax rules apply to a company that is considered a passive foreign
investment company, or PFIC. Under these rules, we will be classified as a PFIC
for United States federal income tax purposes in any taxable year in which
either:
  ·
              at
      least 75% of our gross income for the taxable year is passive income;
      or
  ·
              at
      least 50% of the gross value, determined on the basis of a quarterly
      average, of our assets is attributable to assets that produce or are held
      for the production of passive
income.
  56
  Passive
income generally includes dividends, interest, royalties, rents (not including
certain rents and royalties derived in the active conduct of a trade or
business), annuities and gains from assets that produce passive income. If a
foreign corporation owns directly or indirectly at least 25% by value of the
stock of another corporation, the foreign corporation is treated for purposes of
the PFIC tests as owning its proportionate share of the assets of the other
corporation, and as receiving directly its proportionate share of the other
corporation’s income.
  If we are
treated as a PFIC, and you are a U.S. holder that does not make a mark-to-market
election, as described below, you will be subject to special rules with respect
to:
  ·
              any
      gain you realize on the sale or other disposition of your ordinary shares
      or warrants; and
  ·
              any
      excess distribution that we make to you (generally, any distributions to
      you during a single taxable year that are greater than 125% of the average
      annual distributions received by you in respect of the ordinary shares
      during the three preceding taxable years or, if shorter, your holding
      period for the ordinary shares or ordinary
  shares).
  Under
these rules:
  ·
              the
      gain or excess distribution will be allocated ratably over your holding
      period for the ordinary shares;
  ·
              the
      amount allocated to the taxable year in which you realized 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
  ·
              the
      interest charge generally applicable to underpayments of tax will be
      imposed in respect of the tax attributable to each such
    year.
  Special
rules apply for calculating the amount of the foreign tax credit with respect to
excess distributions by a PFIC.
  If you
own ordinary shares in a PFIC that are treated as marketable shares, you may
make a mark-to-market election. If you make this election, you will not be
subject to the PFIC rules described above. Instead, in general, you will include
as ordinary income each year the excess, if any, of the fair market value of
your ordinary shares or warrants at the end of the taxable year over your
adjusted basis in your ordinary shares or warrants. These amounts of ordinary
income will not be eligible for the favorable tax rates applicable to qualified
dividend income or long-term capital gains. You will also be allowed to take an
ordinary loss in respect of the excess, if any, of the adjusted basis of your
ordinary shares over their fair market value at the end of the taxable year (but
only to the extent of the net amount of previously included income as a result
of the mark-to-market election). Your basis in the ordinary shares or warrants
will be adjusted to reflect any such income or loss amounts. Your gain, if any,
recognized upon the sale of your ordinary shares or warrants will be taxed as
ordinary income.
  In
addition, notwithstanding any election you make with regard to the ordinary
shares, dividends that you receive from us will not constitute qualified
dividend income to you if we are a PFIC either in the taxable year of the
distribution or the preceding taxable year. Dividends that you receive that do
not constitute qualified dividend income are not eligible for taxation at the
15% maximum rate applicable to qualified dividend income. Instead, you must
include the gross amount of any such dividend paid by us out of our accumulated
earnings and profits (as determined for United States federal income tax
purposes) in your gross income, and it will be subject to tax at rates
applicable to ordinary income.
  If you
own ordinary shares during any year that we are a PFIC, you must file Internal
Revenue Service Form 8621.
  57
  You
should consult your own tax advisor regarding the application of the PFIC rules
to our ordinary shares or warrants in your particular circumstances, including
the availability of making an election to avoid adverse United States federal
income tax consequences under the PFIC rules in the case we are determined to be
a PFIC in any given year.
  Backup
Withholding and Information Reporting
  If you
are a noncorporate U.S. holder, information reporting requirements, on Internal
Revenue Service Form 1099, generally will apply to:
  ·
              dividend
      payments or other taxable distributions made to you within the United
      States, and
  ·
              the
      payment of proceeds to you from the sale of ordinary shares effected at a
      United States office of a broker.
  Additionally,
backup withholding may apply to such payments if you are a noncorporate U.S.
holder that:
  ·
              fails
      to provide an accurate taxpayer identification
  number,
  ·
              is
      notified by the Internal Revenue Service that you have failed to report
      all interest and dividends required to be shown on your federal income tax
      returns, or
  ·
              in
      certain circumstances, fails to comply with applicable certification
      requirements.
  If you
are a non-U.S. holder, you are generally exempt from backup withholding and
information reporting requirements with respect to:
  ·
              dividend
      payments made to you outside the United States by us or another non-United
      States payor and
  ·
              other
      dividend payments and the payment of the proceeds from the sale of
      ordinary shares and warrants effected at a United States office of a
      broker, as long as the income associated with such payments is otherwise
      exempt from United States federal income tax, and the payor or broker does
      not have actual knowledge or reason to know that you are a United States
      person and you have furnished the payor or
  broker:
  ·
              dividend
      payments if you have provided us with an Internal Revenue Service Form
      W-8BEN or an acceptable substitute form upon which you certify, under
      penalties of perjury, that you are a non-United States person,
      or
  ·
              other
      documentation upon which it may rely to treat the payments as made to a
      non-United States person in accordance with U.S. Treasury regulations,
      or
  ·
              you
      otherwise establish an exemption.
  Payment
of the proceeds from the sale of ordinary shares or warrants effected at a
foreign office of a broker generally will not be subject to information
reporting or backup withholding. However, a sale of ordinary shares or warrants
that is effected at a foreign office of a broker will be subject to information
reporting and backup withholding if:
  ·
              the
      proceeds are transferred to an account maintained by you in the United
      States,
  ·
              the
      payment of proceeds or the confirmation of the sale is mailed to you at a
      United States address, or
  ·
              the
      sale has some other specified connection with the United States as
      provided in U.S. Treasury
regulations,
  unless
the broker does not have actual knowledge or reason to know that you are a
United States person and the documentation requirements described above are met
or you otherwise establish an exemption.
  58
  In
addition, a sale of ordinary shares or warrants effected at a foreign office of
a broker will be subject to information reporting if the broker is:
  ·
              a
      United States person,
  ·
              a
      controlled foreign corporation for United States tax
    purposes,
  ·
              a
      foreign person 50% or more of whose gross income is effectively connected
      with the conduct of a United States trade or business for a specified
      three-year period, or
  ·
              a
      foreign partnership, if at any time during its tax
  year:
  ·
              one
      or more of its partners are “U.S. persons”, as defined in U.S. Treasury
      regulations, who in the aggregate hold more than 50% of the income or
      capital interest in the partnership,
or
  ·
              such
      foreign partnership is engaged in the conduct of a United States trade or
      business,
  unless
the broker does not have actual knowledge or reason to know that you are a
United States person and the documentation requirements described above are met
or you otherwise establish an exemption. Backup withholding will apply if the
sale is subject to information reporting and the broker has actual knowledge
that you are a United States person.
  You
generally may obtain a refund of any amounts withheld under the backup
withholding rules that exceed your income tax liability by filing a refund claim
with the United States Internal Revenue Service.
  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 450 Fifth Street, N.W., 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 Eli D. Scher, Chief Executive Officer, GSME Acquisition
Partners I, 762 West Beijing Road, Shanghai, PRC 200041.
  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. $36,000,000 of the proceeds from our IPO and private sale
of insider warrants have been placed into a trust account at Morgan Stanley
Smith Barney, maintained by Continental Stock Transfer & Trust Company,
acting as trustee. The proceeds held in trust will only be invested in United
States “government securities,” defined as any Treasury Bill issued by the
United States having 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.. 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-United States currencies, 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.
  59
  ITEM
      12.
              DESCRIPTION
      OF SECURITIES OTHER THAN EQUITY
SECURITIES.
  Not
applicable.
  60
  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
      15T.
              CONTROLS
      AND PROCEDURES.
  (a)
Disclosure Controls and Procedures.
  Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in company reports filed or
submitted under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission’s rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in company reports filed or submitted under the
Exchange Act is accumulated and communicated to management, including our chief
executive officer and chief financial officer, as appropriate to allow timely
decisions regarding required disclosure.
  As
required by Rules 13a-15 and 15d-15 under the Exchange Act, our chief executive
officer and chief financial officer carried out an evaluation of the
effectiveness of the design and operation of our disclosure controls and
procedures as of October 31, 2009. Based upon their evaluation, they concluded
that our disclosure controls and procedures were effective.
  (b)
Management’s Annual Report on Internal Control over Financial
Reporting.
  This
annual report does not include a report of management’s assessment regarding
internal control over financial reporting or an attestation report of the
company’s registered public accounting firm due to a transition period
established by rules of the Securities and Exchange Commission for newly public
companies.
  (c)
Attestation Report of the Registered Public Accounting Firm.
  See
above.
  (d)
Changes in Internal Control over Financial Reporting.
  During
the most recently completed fiscal quarter, there has been no change in our
internal control over financial reporting that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.
  61




ITEM
      16A.
            AUDIT
      COMMITTEE FINANCIAL EXPERT.




We do not
have a standing audit committee.  Accordingly, we do not have an audit
committee financial expert serving on an audit committee.




ITEM
      16B.
            CODE
      OF ETHICS.




In
November 2009, our board of directors adopted a code of ethics that applies to
our directors, officers and employees as well as those of our
subsidiaries.  We will provide a copy of this code of ethics to any person
that request it, free of charge.  Requests for copies of our code of ethics
should be sent in writing to Eli D. Scher, Chief Executive Officer, GSME
Acquisition Partners I, 762 West Beijing Road, Shanghai, PRC
200041.




ITEM
      16C.
            PRINCIPAL
      ACCOUNTANT FEES AND SERVICES.




The
aggregate fees billed for professional services rendered by our auditors for
fiscal years ended October 31 are as follows:




2009
                  
                  
                  2008Audit
      Fees
                  
                  $
                  17,978
                  
                  
                  $
                  4,500Audit
      Related Fees
                  
                  $
                  18,107
                  
                  
                  $
                  5,500




Audit
fees represent fees for professional services related to the audit of our
financial statements for the period from March 27, 2008 (inception) to December
31, 2008 and for the fiscal year ended October 31, 2009. Audit related fees
represent fees for professional services related to the filing of our
registration statement with the SEC.




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.




ITEM
      16F.
            CHANGE
      IN REGISTRANT’S CERTIFYING
ACCOUNTANT.




Not
applicable.




ITEM
      16G.
            CORPORATE
      GOVERNANCE.




Not
applicable.


62




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 Changes in Shareholders’ Equity
                  F-4Statements
      of Cash Flows
                  F-5Notes
      to Financial Statements
                  F-6


63


Report of Independent Registered
Public Accounting Firm





GSME
Acquisition Partners I


Shanghai,
China





We have
audited the accompanying balance sheets of GSME Acquisition Partners I (a
development stage company) as of October 31, 2009 and 2008, and the related
statements of operations, changes in shareholders' equity, and cash flows for
the year ended October 31, 2009 and the periods from March 27, 2008 (inception)
to October 31, 2008 and March 27, 2008 (inception) to October 31, 2009. 
 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.  The Company is not required
to have, nor were we engaged to perform, an audit of its internal control over
financial reporting.  Our audit included consideration of internal control
over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting.  Accordingly, we express no such opinion.  An audit
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
audits provide 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 GSME Acquisition Partners I as of
October 31, 2009 and 2008, and the results of its operations and its cash flows
for the year ended October 31, 2009 and the periods from March 27, 2008
(inception) to October 31, 2008 and March 27, 2008 (inception) to October 31,
2009, in conformity with U.S. generally accepted accounting
principles.





/s/ Crowe
Horwath LLP





New York,
New York


May 24,
2010




F-1




GSME ACQUISITION PARTNERS I


(A
Development Stage Company)





BALANCE
SHEETS





October31,2009
                      
                      
                      October31,2008ASSETSCash
      and cash equivalent
                      
                      $
                      2,036
                      
                      
                      $
                      15,516Deferred
      offering costs
                      
                      
                      489,991
                      
                      
                      
                      145,517Total
      assets
                      
                      $
                      492,027
                      
                      
                      $
                      161,033LIABILITIES
      and SHAREHOLDERS' EQUITYLiabilities:Accounts
      payable and accrued liabilities
                      
                      $
                      368,973
                      
                      
                      $
                      20,000Due
      to related party
                      
                      
                      125,000
                      
                      
                      
                      125,000Total
      Liabilities
                      
                      
                      493,973
                      
                      
                      
                      145,000Shareholders'
      equity:Ordinary
      shares, $.001 par valueAuthorized
      50,000,000 shares:1,380,000
      shares issued  and outstanding
                      
                      
                      1,380
                      
                      
                      
                      1,380Additional
      Paid-in capital
                      
                      
                      23,620
                      
                      
                      
                      23,620Deficit
      accumulated during the development stage
                      
                      
                      (26,946
                      )
                      
                      
                      (8,967
                      )Total
      shareholders' equity
                      
                      
                      (1,946
                      )
                      
                      
                      16,033Total
      liabilities and shareholders' equity
                      
                      $
                      492,027
                      
                      
                      $
                      161,033





The
accompanying notes are an integral part of these financial
statements


F-2





GSME ACQUISITION PARTNERS I


(A
Development Stage Company)





STATEMENTS
OF OPERATIONS





YearendedOctober31,
                            2009
                          
                          
                          Fortheperiodfrom
                            March27,2008
                            (inception)to
                            October31,2008
                          
                          
                          Fortheperiodfrom
                            March27,2008
                            (inception)to
                            October31,2009Formation
      and operating costs
                          
                          $
                          17,979
                          
                          
                          $
                          8,967
                          
                          
                          $
                          26,946Net
      loss
                          
                          $
                          (17,979
                          )
                          
                          $
                          (8,967
                          )
                          
                          $
                          (26,946
                          )Weighted
      average shares outstanding
                          
                          
                          1,380,000
                          
                          
                          
                          1,380,000Basic
      and diluted net loss per share
                          
                          $
                          (0.01
                          )
                          
                          $
                          (0.01
                          )





The
accompanying notes are an integral part of these financial
statements


F-3





GSME ACQUISITION PARTNERS I


(A
Development Stage Company)





STATEMENT
OF CHANGES IN SHAREHOLDERS' EQUITY


For
the Period from March 27, 2008 (Inception) to October 31, 2009





OrdinaryShares
                            
                            
                            Additional
                              Paid-in
                              Capital
                            
                            
                            Deficit
                              Accumulated
                              Duringthe
                              Development
                              Stage
                            
                            
                            Shareholders'
                              EquityShares
                            
                            
                            AmountOrdinary
      shares issued at inception at $0.02 per share
                            
                            
                            1,380,000
                            
                            
                            $
                            1,380
                            
                            
                            $
                            23,620
                            
                            
                            $
                            -
                            
                            
                            $
                            25,000Net
      loss for the period from March 27, 2008 (inception) to December 31,
      2008
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (8,967
                            )
                            
                            
                            (8,967
                            )Balance
      at October 31, 2008
                            
                            
                            1,380,000
                            
                            
                            
                            1,380
                            
                            
                            
                            23,620
                            
                            
                            
                            (8,967
                            )
                            
                            
                            16,033Net
      loss for the year ended October 31, 2009
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (17,979
                            )
                            
                            
                            (17,979
                            )Balance
      at October 31, 2009
                            
                            
                            1,380,000
                            
                            
                            $
                            1,380
                            
                            
                            $
                            23,620
                            
                            
                            $
                            (26,946
                            )
                            
                            $
                            (1,946
                            )





The
accompanying notes are an integral part of these financial
statements


F-4





GSME ACQUISITION PARTNERS I


(A
Development Stage Company)





STATEMENTS
OF CASH FLOWS





YearendedOctober31,
                      2009
                    
                    
                    Fortheperiodfrom
                      March27,2008
                      (inception)toOctober
                      31,2008
                    
                    
                    Fortheperiod
                      fromMarch27,
                      2008(inception)to
                      October31,2009Cash
      flows from operating activitiesNet
      loss
                    
                    $
                    (17,979
                    )
                    
                    $
                    (8,967
                    )
                    
                    $
                    (26,946
                    )Changes
      in operating assets and liabilitiesDeferred
      offering costs
                    
                    
                    (344,474
                    )
                    
                    
                    (145,517
                    )
                    
                    
                    (489,991
                    )Accounts
      payable and accrued liabilities
                    
                    
                    348,973
                    
                    
                    
                    20,000
                    
                    
                    
                    368,973Net
      cash used in operating activities
                    
                    
                    (13,480
                    )
                    
                    
                    (134,484
                    )
                    
                    
                    (147,964
                    )Cash
      flows from financing activitiesProceeds
      from sale of ordinary shares to founding Shareholders
                    
                    
                    -
                    
                    
                    
                    25,000
                    
                    
                    
                    25,000Proceeds
      from due to related party
                    
                    
                    -
                    
                    
                    
                    125,000
                    
                    
                    
                    125,000Net
      cash provided by financing activities
                    
                    
                    -
                    
                    
                    
                    150,000
                    
                    
                    
                    150,000Net
      (decrease) increase in cash
                    
                    
                    (13,480
                    )
                    
                    
                    15,516
                    
                    
                    
                    2,036Cash
      at beginning of period
                    
                    
                    15,516
                    
                    
                    
                    -
                    
                    
                    
                    -Cash
      at end of period
                    
                    $
                    2,036
                    
                    
                    $
                    15,516
                    
                    
                    $
                    2,036





The
accompanying notes are an integral part of these financial
statements


F-5


GSME
ACQUISITION PARTNERS I


(A
Development Stage Company)





NOTES
TO FINANCIAL STATEMENTS




Note
1 — Organization and Plan of Business Operations




GSME
Acquisition Partners I (the “Company”) was incorporated in the Cayman Islands on
March 27, 2008 as a blank check company whose objective is to acquire an
operating business, or control of such operating business through contractual
arrangements, that has its principal operations located in the People’s Republic
of China.




At
October 31, 2009, the Company had not yet commenced any operations. All
activity from March 27, 2008 (inception) to October 31, 2009 relates to the
Company’s formation and the public offering described below. On November 25,
2009, the Company changed its fiscal year end from December 31 to October
31.




The
registration statement for the Company’s initial public offering (the
“Offering”) was declared effective on November 19, 2009. The Company
consummated the Offering on November 25, 2009 and received net proceeds
of $34,367,806 and $1,800,000 from the private placement sale of insider
warrants (Note 3). Substantially, all of the net proceeds of the Offering
are intended to be generally applied toward consummating a business combination
(“Business Combination”). The Company’s management has complete discretion
in identifying and electing the target business. There is no assurance
that the Company will be able to successfully effect a Business
Combination. Management agreed that at least $10 per unit sold in the Offering
(or $36,000,000) would be held in a trust account (“Trust Account”) and invested
in United States “government securities” within the meaning of Section
2(a)(16) of the Investment Company Act of 1940 having 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 until the earlier of (i)
the consummation of its first Business Combination and (ii) liquidation of
the Company. The placing of funds in the Trust Account may not protect those
funds from third party claims against the Company. Although the Company will
seek to have all vendors, prospective target businesses and other entities it
engages execute agreements with the Company waiving any right, title, interest
or claim of any kind in or to any monies held in the Trust Account, there is no
guarantee that they will execute such agreements. Two of the Company’s officers
have agreed that they will be liable under certain circumstances to ensure that
the proceeds in the Trust Account are not reduced below $10.00 per share by the
claims of target businesses or by vendors or other entities that are owed money
by the Company for services rendered contracted for or products sold to the
Company. However, there can be no assurance that they will be able to satisfy
those obligations. The remaining net proceeds (not held in the Trust Account)
may be used to pay for business, legal and accounting due diligence on
prospective acquisitions and continuing general and administrative expenses.
Additionally, any interest earned on the Trust Account may be released to the
Company to fund working capital and to pay the Company’s tax
obligations.


F-6


GSME
ACQUISITION PARTNERS I


(A
Development Stage Company)





NOTES
TO FINANCIAL STATEMENTS




Note
1 — Organization and Plan of Business Operations
(continued)





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 more than 80.99% of the total number of
shares sold in the Offering exercise their conversion rights, regardless of
whether they vote for or against the Business Combination, the Business
Combination will not be consummated. All of the Company’s shareholders prior to
the Offering, including all of the officers and directors of the Company
(“Initial Shareholders”), have agreed to vote their founding ordinary shares in
accordance with the vote of the majority in interest of all other shareholders
of the Company (“Public Shareholders”) with respect to any Business Combination
and have agreed to vote any ordinary shares acquired in the Offering or in the
aftermarket in favor of any Business Combination. After consummation of a
Business Combination, these voting safeguards will no longer be
applicable.





With
respect to a Business Combination which is approved and consummated, any Public
Shareholder may demand that the Company convert his or her shares. If a Public
Shareholder votes against a proposed Business Combination, the per share
conversion price will equal $10.00 per share. Any Public Shareholder will have
the right to vote for the proposed Business Combination and demand that such
shareholder’s shares be converted into a pro rata share of the Trust Account
(which amount, when aggregated with the right to receive an additional $0.30 per
eligible share pursuant to the letter of credit, is initially anticipated
to be approximately $10.30 per share).




The
Company’s Memorandum and Articles of Association provides that the Company will
continue in existence only until November 25, 2010 or until May 25, 2011 if
the Company has signed a letter of intent, memorandum of understanding or
definitive agreement by November 25, 2010. If the Company has not completed a
Business Combination by such date, its corporate existence will cease and it
will dissolve and liquidate for the purposes of winding up its
affairs.





Note
2 — Significant Accounting Policies




Basis
of Presentation




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





Use
of Estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
expenses during the reporting period. Actual results could differ from those
estimates.





Geographical
Risk





The
Company’s operations, if a Business Combination is consummated outside the
United States, will be subject to local government regulations and to the
uncertainties of the economic and political conditions of those
areas.


F-7





GSME
ACQUISITION PARTNERS I


(A
Development Stage Company)





NOTES
TO FINANCIAL STATEMENTS




Note
2 — Significant Accounting Policies (continued)





Income Taxes




The
Company was incorporated as a Cayman Island exempted company and management does
not foresee the imposition of any income tax.




Redeemable
common stock:




The
Company accounts for redeemable common stock in accordance with Emerging Issue
Task Force D-98 “Classification and Measurement of
Redeemable Securities”  which provides that securities that are
redeemable for cash or other assets are classified outside of permanent equity
if they are redeemable at the option of the holder. In addition, if the
redemption causes a liquidation event, the redeemable securities should not be
classified outside of permanent equity. As discussed in Note 1, the Business
Combination will only be consummated if 80.99% (2,915,999) or less of ordinary
shares sold in the Offering exercise their conversion rights. As further
discussed in Note 1, if a Business Combination is not consummated by
November 25, 2010, or May 25, 2011 if certain extension criteria have
been satisfied, the Company will liquidate. Accordingly, 2,915,999 shares of
common stock sold in the offering will be classified outside of permanent equity
at redemption value. The Company recognizes changes in the redemption value
immediately as they occur and adjusts the carrying value of the redeemable
common stock to equal its redemption value at the end of each reporting
period.




Earnings
per Share




The
Company computes basic earnings per common share by dividing the net income
available to common shareholders by the weighted-average number of shares
outstanding. Diluted earnings per common share is computed by dividing the
net income available to common shareholders by the weighted average number
of common shares and dilutive common share equivalents then
outstanding.





The
1,380,000 ordinary shares issued to the Company’s Initial Shareholders were
issued for $0.02 per share, which is considerably less than the Proposed
Offering per share price. Under the provisions of Staff Accounting Bulletin
Topic 4:D such shares have been assumed to be retroactively outstanding for the
period since inception.





There are
no potentially dilutive securities as of October 31, 2009 and 2008
respectively.





Recent
Accounting Pronouncements




Management
does not believe that any of the recently issued, but not yet effective,
accounting pronouncements, if currently adopted, would have a material effect on
the Company’s financial statements.


F-8


GSME
ACQUISITION PARTNERS I


(A
Development Stage Company)





NOTES
TO FINANCIAL STATEMENTS




Note 3—Initial PublicOffering




On
November 25, 2009, the Company sold 3,600,000 Units at an offering price of
$10.00 per Unit. Each Unit consists of one ordinary share, $.001 par value, of
the Company and one Redeemable Purchase Warrant (“Warrants”). Each Warrant
entitles the holder to purchase from the Company one ordinary share at an
exercise price of $11.50 commencing upon the completion of a Business
Combination and expiring November 18, 2014. The Company may redeem the Warrants,
at a price of $.01 per Warrant upon 30 days notice while the Warrants are
exercisable, only in the event that the last sale price of the ordinary shares
is at least $17.50 per share for any 20 trading days within a 30 trading day
period ending on the third day prior to the date on which notice
of redemption is given. If the Company redeems the Warrants as described
above, management will have the option to require any holder that wishes to
exercise his Warrant to do so on a “cashless basis.’' In such event, the holder
would pay the exercise price by surrendering his Warrants for that number of
ordinary shares equal to the quotient obtained by dividing (X) the product of
the number of ordinary shares underlying the Warrants, multiplied by the
difference between the exercise price of the Warrants and the “fair market
value” (defined below) by (Y) the fair market value. The “fair market value”
shall mean the average reported last sale price of the ordinary shares for the
10 trading days ending on the third trading day prior to the date on which the
notice of redemption is sent to holders of Warrants. In accordance with the
warrant agreement relating to the Warrants sold and issued in the Offering, the
Company is only required to use its best efforts to maintain the effectiveness
of the registration statement covering the Warrants. The Company will not be
obligated to deliver securities, and there are no contractual penalties for
failure to deliver securities, if a registration statement is not effective at
the time of exercise. Additionally, in the event that a
registration is not effective at the time of exercise, the holder of such
Warrant shall not be entitled to exercise such Warrant and in no event (whether
in the case of a registration statement not being effective or otherwise) will
the Company be required to net cash settle the warrant exercise. Consequently,
the Warrants may expire unexercised and unredeemed.




F-9





GSME
ACQUISITION PARTNERS I


(A
Development Stage Company)





NOTES
TO FINANCIAL STATEMENTS





Note
3 — Initial Public Offering (continued)





The
Company paid the underwriters in the Offering an underwriting discount of 7.0%
of the gross proceeds of the Offering. However, the underwriters have agreed
that 4.0% of the underwriting discounts will not be payable unless and until the
Company completes a Business Combination and have waived their right to receive
such payment upon the Company's liquidation if it is unable to complete a
Business Combination. The Company also issued a unit purchase option, for $100,
to Cohen & Company Securities, LLC (“Cohen Securities”), the representative
of the underwriters in the Offering, and its designees to purchase 360,000 Units
(10% of the total number of units sold in the Offering) at an exercise price of
$15.00 per Unit (150% of the public offering price). The Units issuable upon
exercise of this option are identical to the Units in the Offering. This option
is exercisable commencing on the later of the consummation of a Business
Combination and November 19, 2010 and expiring November 18, 2014. The Company
accounted for the fair value of the unit purchase option, net of the receipt of
the $100 cash payment, as an expense of the Offering resulting in a charge
directly to shareholders' equity. The Company estimates the fair value of this
unit purchase option is approximately $2.14 per unit using a Black-Scholes
option-pricing model.





The fair
value of the unit purchase option granted to the underwriter was estimated as of
the date of grant using the following assumptions: (1) expected volatility of
35%, (2) risk-free interest rate of 2.59% and (3) expected life of 5 years. The
unit purchase option may be exercised for cash or on a “cashless” basis, at the
holder’s option (except in the case of a forced cashless exercise upon the
Company’s redemption of the Warrants, as described above), such that the holder
may use the appreciated value of the unit purchase option (the difference
between the exercise prices of the unit purchase option and the underlying
Warrants and the market price of the Units and underlying ordinary shares)
to exercise the unit purchase option without the payment of cash.




The
Company will have no obligation to net cash settle the exercise of the unit
purchase option or the Warrants underlying the unit purchase option. The holder
of the unit purchase option will not be entitled to exercise the unit purchase
option or the Warrants underlying the unit purchase option unless a registration
statement covering the securities underlying the unit purchase option is
effective or an exemption from registration is available. If the holder is
unable to exercise the unit purchase option or underlying Warrants, the unit
purchase option or Warrants, as applicable, will expire
worthless.


F-10


GSME
ACQUISITION PARTNERS I


(A
Development Stage Company)





NOTES
TO FINANCIAL STATEMENTS




Note
4 — Deferred Offering Costs




Deferred
offering costs consist principally of legal, underwriting and other professional
fees incurred through the balance sheet date that are directly related to the
Offering and were charged to shareholders' equity on November 25, 2009 upon the
receipt of the capital raised.




Note 5—Related Party
Transactions




The
Company issued an unsecured promissory note to an officer of the Company in
an aggregate principal amount of $125,000. The note does not bear interest. The
note was repaid upon consummation of the Offering from the proceeds of the
Offering. Due to the short-term nature of the note, the fair value of the note
approximates its carrying amount.




Note
6 — Shareholder's Equity




Preferred
Stock




The
Company is authorized to issue up to 1,000,000 shares of preferred stock, par
value $0.001 per share. As of October 31, 2009 and 2008, no shares were issued
or outstanding.




Common
Stock




The
Company is authorized to issue up to 50,000,000 ordinary shares, par value
$0.001 per share. The holders of the ordinary shares are entitled to one vote
for each ordinary share. In addition, the holders of the ordinary shares are
entitled to receive dividends when, as and if declared by the board of
directors. In September 2009, the Company’s board of directors authorized a
share dividend of approximately 0.067 shares for each outstanding ordinary share
for a total of 86,250 additional shares. All references to share and per share
amounts have been restated to retroactively reflect this
transaction.




As of
October 31, 2009 and 2008, 1,380,000 ordinary shares were issued and
outstanding, of which 180,000 ordinary shares were subject to forfeiture to the
extent that the underwriters' over-allotment option was not exercised in
full.




Note
7 — Insider Warrants




The
Initial Shareholders executed letter agreements with the Company waiving their
rights to receive distributions with respect to their founding ordinary shares
upon the Company's liquidation. The Initial Shareholders and/or their designees
purchased 3,600,000 Warrants (“Insider Warrants”) at $0.50 per Warrant (for an
aggregate purchase price of $1,800,000) privately from the Company
simultaneously with the consummation of the Offering. All of the proceeds
received from this purchase were placed in the Trust Account. The Insider
Warrants purchased are identical to the Warrants sold in the Offering
except that the Insider Warrants may be exercisable for cash or on a cashless
basis, at the holder’s option, and will not be redeemable by the Company, in
each case so long as such securities are held by the Initial Shareholders or
their affiliates. Furthermore, the purchasers of the Insider Warrants have
agreed that the Insider Warrants and underlying securities will not be sold or
transferred until 60 days after the Company has completed a Business
Combination.


F-11


GSME
ACQUISITION PARTNERS I


(A
Development Stage Company)





NOTES
TO FINANCIAL STATEMENTS




Note
7 — Insider Warrants (continued)




The
Initial Shareholders and the holders of the Insider Warrants will be entitled to
registration rights with respect to their founding shares pursuant to an
agreement to be signed prior to or on the effective date of the Offering. The
holders of the majority of the founding shares are entitled to make up to two
demands that the Company register such shares. The holders of the majority of
the founding shares and the holders of the majority of the Insider Warrants can
elect to exercise these registration rights at any time commencing three months
prior to the date on which these ordinary shares are to be released from escrow.
The holders of the Insider Warrants (or underlying securities) are entitled to
demand that the Company register these securities at any time after the Company
consummates a Business Combination. In addition, the Initial Shareholders have
certain “piggy-back” registration rights on registration statements filed after
the Company's consummation of a Business Combination.




Note
8 – Letter of Credit




Upon
closing of the Offering, Cohen & Company Securities, LLC issued a letter of
credit from an internationally recognized bank to the Company in an amount equal
to $0.30 per share sold in the Offering. The proceeds of the letter of credit
shall not be held in trust or comprise any portion of any pro-rata distribution
of the Company’s Trust Account. The Company shall draw on the letter of credit
in order to distribute $0.30 per qualified share to certain of its Public
Shareholders, which amount shall be in addition to any pro-rata distribution
from the Trust Account. The $0.30 per share amount provided by the letter of
credit shall be distributed upon (i) the consummation of a Business Combination
to each of the Public Shareholders for each ordinary share voted in favor of the
Business Combination and properly converted, (ii) the Company’s liquidation, in
the event that a Business Combination was presented to the Company’s Public
Shareholders for approval but not consummated, to each of the Public
Shareholders for each ordinary share voted in favor of such proposed
Business Combination, or (iii) the Company’s liquidation, in the event that no
Business Combination is presented to the Public Shareholders for a vote, to each
of the Public Shareholders. The Company may draw on the letter of credit
solely to the extent necessary to pay each eligible holder an additional $0.30
per eligible share upon the earlier to occur of a Business Combination or
liquidation. After the Company draws on the letter of credit, it shall
be cancelled and, in the event the Company has completed a Business
Combination, the Company will issue to Cohen & Company Securities, LLC a
demand secured first priority promissory note in an amount equal to the amount
the Company draws on the letter of credit bearing annual interest at the rate of
8%, payable quarterly, with a default interest rate of 13%.


F-12


ITEM
      19.
            EXHIBITS.




Exhibit No.
              
              Description1.1
              
              Form
      of Underwriting Agreement.*3.1
              
              Amended
      and Restated Memorandum and Articles of Association.*4.1
              
              Specimen
      Unit Certificate.*4.2
              
              Specimen
      Ordinary Share Certificate.*4.3
              
              Specimen
      Warrant Certificate.*4.4
              
              Form
      of Warrant Agreement between Continental Stock Transfer & Trust
      Company and the Registrant.*4.5
              
              Form
      of Representative’s Unit Purchase Option.*10.1
              
              Letter
      Agreement among the Registrant, EarlyBirdCapital, Inc. and Jing Dong
      Gao.*10.2
              
              Letter
      Agreement among the Registrant, EarlyBirdCapital, Inc. and Eli D.
      Scher.*10.3
              
              Letter
      Agreement among the Registrant, EarlyBirdCapital, Inc. and Lawrence S.
      Wizel.*10.4
              
              Letter
      Agreement among the Registrant, EarlyBirdCapital, Inc. and Zhong Wen
      Lin.*10.5
              
              Form
      of Investment Management Trust Agreement between Continental Stock
      Transfer & Trust Company and the Registrant.*10.6
              
              Form
      of Stock Escrow Agreement between the Registrant, Continental Stock
      Transfer & Trust Company and the Initial
  Shareholders.*10.7
              
              Form
      of Registration Rights Agreement among the Registrant and the Initial
      Shareholders.*10.8
              
              Form
      of Subscription Agreement among the Registrant, EarlyBirdCapital, Inc.,
      Graubard Miller and each of MCHEM Pharm Group Limited (Hong Kong), Eli D.
      Scher and Lawrence S. Wizel.*10.9
              
              Form
      of Letter of Credit.*12.1
              
              Form
      of Certification of the Chief Executive Officer Pursuant to Rule 13a-14
      and 15d-14 under the Securities Exchange Act of 1934, as
      Amended12.2
              
              Form
      of Certification of the Chief Financial Officer Pursuant to Rule 13a-14
      and 15d-14 under the Securities Exchange Act of 1934, as
      Amended13
              
              Certification
      of the Chief Executive Officer and Chief Financial Officer Pursuant to 18
      U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002


*
Incorporated by reference to the Registrant's Form F-1 (Commission File No.
333-162547)


64


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.




Dated:
May 24, 2010


GSME
      ACQUISITION PARTNERS IBy:
              /s/ Eli D. ScherEli
      D. ScherChief
      Executive Officer


65