UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549







FORM
20-F








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





OR





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





For
the fiscal year ended ______________




OR




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





OR




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





Date
of event requiring this shell company report: July 7, 2010




Commission
file number: 000-53914




Ossen
Innovation Co. Ltd.


(formerly
Ultra Glory International Ltd.)


(Exact
name of Registrant as Specified in its Charter)




British
Virgin Islands


(Jurisdiction
of Incorporation or Organization)




518
Shangcheng Road, Floor 17, Shanghai, 200120, Peoples Republic of
China


(Address
of Principal Executive Offices)




Tel:+86 (21) 6888-8886 Fax: +86 (21) 6888-8666


(Name,
Telephone, E-mail and/or Facsimile Number and Address of Company Contact
Person)





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




Title of Each Class
                
                Name of Each Exchange On Which
      RegisteredNone
                
                None




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




Ordinary Shares, par value$0.01per
share


(Title of
Class)




Securities
for which there is a reporting obligation pursuant to Section 15(d) of the
Act:




None


(Title of
Class)




The
number of outstanding shares of each of the issuer’s classes of capital or
common stock as of July 7, 2010 was: 15,000,000 ordinary shares, par value
$0.01 per share.




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




Yes o
No x




If this
report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934.




Yes o
No o




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 o
No o




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).




Yes o
No o




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 o      
Accelerated filer o    
Non-accelerated filer x




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




x U.S. GAAP o
International Financial Reporting Standards as issued by the International
Accounting


Standards
Board o  Other
o




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




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









OSSEN
INNOVATION CO. LTD.


(formerly
Ultra Glory International Ltd.)


FORM
20-F SHELL COMPANY REPORT


TABLE
OF CONTENTS




PagePART
      IItem
      1.
                              
                              Identity
      of Directors, Senior Management and Advisors
                              
                              2Item
      2.
                              
                              Offer
      Statistics and Expected Timetable
                              
                              2Item
      3.
                              
                              Key
      Information
                              
                              3Item
      4.
                              
                              Information
      on the Company
                              
                              18Item
      4A.
                              
                              Unresolved
      Staff Comments
                              
                              35Item
      5.
                              
                              Operating
      and Financial Review and Prospects
                              
                              35Item
      6.
                              
                              Directors,
      Senior Management, and Employees
                              
                              48Item
      7.
                              
                              Major
      Shareholders and Related Party Transactions
                              
                              52Item
      8.
                              
                              Financial
      Information
                              
                              53Item
      9.
                              
                              The
      Offer and Listing
                              
                              53Item
      10.
                              
                              Additional
      Information
                              
                              54Item
      11.
                              
                              Quantitative
      and Qualitative Disclosures About Market Risk
                              
                              61Item
      12.
                              
                              Description
      of Securities Other Than Equity Securities
                              
                              62PART
      IIItem
      13.
                              
                              Defaults,
      Dividend Arrearages and Delinquencies
                              
                              62Item
      14.
                              
                              Material
      Modifications to the Rights of Security Holders and Use of
      Proceeds
                              
                              62Item
      15.
                              
                              Controls
      and Procedures
                              
                              62Item
      16.
                              
                              Reserved
                              
                              62Item
      16A.
                              
                              Audit
      Committee Financial Expert
                              
                              62Item
      16B.
                              
                              Code
      of Ethics
                              
                              62Item
      16C.
                              
                              Principal
      Accountiing Fees and Services
                              
                              62Item
      16D.
                              
                              Exemptions
      from the Listing Standards for Audit Committees
                              
                              62Item
      16E.
                              
                              Purchases
      of Equity Securities by the Issuer and Affiliated
    Purchasers
                              
                              62Item
      16F.
                              
                              Change
      inRegistrant'sCertifying
      Accountant
                              
                              63Item
      16G.
                              
                              Corporate
      Governance
                              
                              63PART
      IIIItem
      17.
                              
                              Financial
      Statements
                              
                              64Item
      18.
                              
                              Financial
      Statements
                              
                              64Item
      19.
                              
                              Exhibits
                              
                              64









CERTAIN
INFORMATION




In this
shell company report on Form 20-F, unless otherwise indicated, “we,” “us,”
“our,” the “Company” and “Ossen” refer to Ossen Innovation Co., Ltd., formerly
known as Ultra Glory International Ltd., or Ultra Glory, a company organized in
the British Virgin Islands, and its subsidiaries, subsequent to the business
combination referred to below. Unless the context indicates otherwise, all
references to “Ossen Materials” in this shell company report refer to Ossen
Innovation Materials Co., Ltd., a subsidiary of Ossen and one of the entities
through which the operating business is held, all references to “Ossen Jiujiang”
in this shell company report refer to Ossen (Jiujiang) Steel Wire & Cable
Co., Ltd., a subsidiary of Ossen Materials and one of the entities through which
our operating business is held, and all references to “Ossen Materials Group”
refer to Ossen Innovation Materials Group, Co., Ltd., our wholly-owned
subsidiary, which is a holding company that indirectly owns Ossen Materials and
Ossen Jiujiang. The “business combination” refers to the share exchange between
Ultra Glory, the sole shareholder of Ultra Glory, Ossen and the shareholders of
Ossen, resulting in the acquisition of all of the outstanding securities of
Ossen by Ultra Glory, which was consummated on July 7, 2010.




Unless
the context indicates otherwise, all references to “China” refer to the People’s
Republic of China.  All references to “Renminbi” or “RMB” are to the
legal currency of the People’s Republic of China and all references to “U.S.
dollars,” “dollars” and “$” are to the legal currency of the United States. This
shell company report contains translations of Renminbi amounts into U.S. dollars
at specified rates solely for the convenience of the reader. We make no
representation that the Renminbi or U.S. dollar amounts referred to in this
report could have been or could be converted into U.S. dollars or Renminbi, as
the case may be, at any particular rate or at all. On June 28, 2010, the cash
buying rate announced by the People’s Bank of China was RMB 6.789 to
$1.00.




FORWARD-LOOKING
STATEMENTS




This
report contains “forward-looking statements” that represent our beliefs,
projections and predictions about future events. All statements other than
statements of historical fact are “forward-looking statements,” including any
projections of earnings, revenue or other financial items, any statements of the
plans, strategies and objectives of management for future operations, any
statements concerning proposed new projects or other developments, any
statements regarding future economic conditions or performance, any statements
of management’s beliefs, goals, strategies, intentions and objectives, and any
statements of assumptions underlying any of the foregoing. Words such as “may”,
“will”, “should”, “could”, “would”, “predicts”, “potential”, “continue”,
“expects”, “anticipates”, “future”, “intends”, “plans”, “believes”, “estimates”
and similar expressions, as well as statements in the future tense, identify
forward-looking statements.




These
statements are necessarily subjective and involve known and unknown risks,
uncertainties and other important factors that could cause our actual results,
performance or achievements, or industry results, to differ materially from any
future results, performance or achievements described in or implied by such
statements. Actual results may differ materially from expected results described
in our forward-looking statements, including with respect to correct measurement
and identification of factors affecting our business or the extent of their
likely impact, and the accuracy and completeness of the publicly available
information with respect to the factors upon which our business strategy is
based or the success of our business.




Forward-looking
statements should not be read as a guarantee of future performance or results,
and will not necessarily be accurate indications of whether, or the times by
which, our performance or results may be achieved. Forward-looking statements
are based on information available at the time those statements are made and
management’s belief as of that time with respect to future events, and are
subject to risks and uncertainties that could cause actual performance or
results to differ materially from those expressed in or suggested by the
forward-looking statements. Important factors that could cause such differences
include, but are not limited to, those factors discussed under the headings
“Risk Factors”, “Operating and Financial Review and Prospects,” and elsewhere in
this report.




1




PART
I




ITEM
      1.
            IDENTITY
      OF DIRECTORS, SENIOR MANAGEMENT AND
ADVISORS




1.A.  Directors
and Senior Management




The following table lists the members
of the Company’s board of directors:




Name
                        
                        Age
                        
                        Position(s)Liang
      Tang
                        
                        42
                        
                        Chairman
      of the BoardZhiping
      Gu
                        
                        50
                        
                        DirectorWei
      Hua
                        
                        47
                        
                        Director




The
business address of each of the directors is: c/o Ossen Innovation Materials Co.
Ltd., 518 Shangcheng Road, Floor 17, Shanghai, 200120, People’s Republic of
China.




The
following table lists the senior management of the Company:




Name
                        
                        Age
                        
                        Position(s)Wei
      Hua
                        
                        47
                        
                        Chief
      Executive OfficerZhiping
      Gu
                        
                        47
                        
                        Chief
      Financial
Officer





The
business address for each of the members of senior management is: c/o Ossen
Innovation Materials Co. Ltd., 518 Shangcheng Road, Floor 17, Shanghai, 200120,
Peoples Republic of China.





See Item 6.A. – Directors and Senior
Managementbelow for more information
aboutour directors and executive
officers .




1.B.  Advisors




The
Company’s legal advisors in the People’s Republic of China are: Grandall Legal
Group, 31/F, Nanzheng Building, 580 Nanjing Road West, Shanghai 200041, People’s
Republic of China.




The
Company’s legal advisors in the U.S. are: Kramer Levin Naftalis & Frankel
LLP, 1177 Avenue of the Americas, New York, NY 10036.





T he
Company’s legal advisors in the British
Virgin Islands are: Withers BVI, 3rd Floor,
Little Denmark, Main Street, Road Town, Tortola,
BVI .




1.C.  Auditors




T he
Company’s auditors are: Sherb & Co. LLP, 805 Third Avenue, New York, NY
10022.  See Item 16.F Change in Registrant’s Certifying
Accountantbelow for information about the
change in our auditor following the business
comination .




Sherb
& Co. LLP has confirmed that it is independent with respect to the
Company under the guidelines of the SEC and the Independence Standards
Board.




ITEM
      2.
            OFFER
      STATISTICS AND EXPECTED TIMETABLE




Not
Applicable.




2




ITEM
      3.
            KEY
      INFORMATION




3.A.  Selected
Financial Data




T he
following selected financial information should be read in connection with, and
is qualified by reference to, our consolidated financial statements and their
related notes and the section entitled “Operating and Financial Review and
Prospectus,” each of which is included elsewhere in this report.  The
consolidated statements of operations and
comprehensive income data for the fiscal years ended December 31, 2008
and 2009 and the balance sheets data as of December 31, 2008 and 2009 are
derived from the audited consolidated financial statements included elsewhere in
this report.  The consolidated statements of operations and comprehensive income
data for the fiscal years ended December 31, 2005, 2006 and 2007 and the balance
sheets data as of December 31, 2005, 2006 and 2007 have been derived from
unaudited financial statements that are not included in this
prospectus.  Our historical results for any of these periods are not
necessarily indicative of results to be expected in any future
period .





Year Ended December 31,2009
                                              (Audited)
                                            
                                            
                                            2008
                                              (Audited)
                                            
                                            
                                            2007
                                              (Unaudited)
                                            
                                            
                                            2006
                                              (Unaudited)
                                            
                                            
                                            2005
                                              (Unaudited)Revenues
                                            
                                            $
                                            101,087,796
                                            
                                            
                                            $
                                            82,742,310
                                            
                                            
                                            $
                                            71,909,873
                                            
                                            
                                            $
                                            59,547,454
                                            
                                            
                                            $
                                            17,195,347Cost
      of goods sold
                                            
                                            
                                            87,659,925
                                            
                                            
                                            
                                            70,532,733
                                            
                                            
                                            
                                            63,340,890
                                            
                                            
                                            
                                            56,853,946
                                            
                                            
                                            
                                            15,216,951Gross
      profit
                                            
                                            
                                            13,427,871
                                            
                                            
                                            
                                            12,209,577
                                            
                                            
                                            
                                            8,568,983
                                            
                                            
                                            
                                            2,693,508
                                            
                                            
                                            
                                            1,978,395Selling
      and distribution expenses
                                            
                                            
                                            503,724
                                            
                                            
                                            
                                            4,326,491
                                            
                                            
                                            
                                            3,662,373
                                            
                                            
                                            
                                            1,024,209
                                            
                                            
                                            
                                            219,650General
      and administrative expenses
                                            
                                            
                                            1,143,672
                                            
                                            
                                            
                                            1,316,606
                                            
                                            
                                            
                                            571,498
                                            
                                            
                                            
                                            340,847
                                            
                                            
                                            
                                            255,270Total
      Operating Expenses
                                            
                                            
                                            1,647,396
                                            
                                            
                                            
                                            5,643,097
                                            
                                            
                                            
                                            4,288,796
                                            
                                            
                                            
                                            1,410,056
                                            
                                            
                                            
                                            501,920Income
      from operations
                                            
                                            
                                            11,780,475
                                            
                                            
                                            
                                            6,566,480
                                            
                                            
                                            
                                            4,280,187
                                            
                                            
                                            
                                            1,283,451
                                            
                                            
                                            
                                            1,476,475Interest
      expenses, net
                                            
                                            
                                            (1,496,712
                                            )
                                            
                                            
                                            (1,891,671
                                            )
                                            
                                            
                                            (1,189,027
                                            )
                                            
                                            
                                            (359,130
                                            )
                                            
                                            
                                            (22,920
                                            )Other
      income, net
                                            
                                            
                                            183,495
                                            
                                            
                                            
                                            380,766
                                            
                                            
                                            
                                            278,924
                                            
                                            
                                            
                                            211,875
                                            
                                            
                                            
                                            56,362Income
      before income taxes
                                            
                                            
                                            10,467,258
                                            
                                            
                                            
                                            5,055,575
                                            
                                            
                                            
                                            3,370,084
                                            
                                            
                                            
                                            1,136,196
                                            
                                            
                                            
                                            1,509,917Income
      taxes
                                            
                                            
                                            (740,053
                                            )
                                            
                                            
                                            (291,520
                                            )
                                            
                                            
                                            (233,674
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Net
      income
                                            
                                            
                                            9,727,205
                                            
                                            
                                            
                                            4,764,055
                                            
                                            
                                            
                                            3,136,410
                                            
                                            
                                            
                                            1,136,196
                                            
                                            
                                            
                                            1,509,917Less:
      Net IncomeAttributable
      to non-controlling
      interest
                                            
                                            
                                            1,714,670
                                            
                                            
                                            
                                            809,437
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Net
      income attributable to controlling interest
                                            
                                            
                                            8,012,535
                                            
                                            
                                            
                                            3,954,618
                                            
                                            
                                            
                                            3,136,410
                                            
                                            
                                            
                                            1,136,196
                                            
                                            
                                            
                                            1,509,917Other
      comprehensive incomeForeign
      currency translation gain, net of tax
                                            
                                            
                                            31,146
                                            
                                            
                                            
                                            420,883
                                            
                                            
                                            
                                            66,913
                                            
                                            
                                            
                                            360,384
                                            
                                            
                                            
                                            37,135Total
      Other comprehensive income, net of tax
                                            
                                            
                                            31,146
                                            
                                            
                                            
                                            420,883
                                            
                                            
                                            
                                            66,913
                                            
                                            
                                            
                                            360,384
                                            
                                            
                                            
                                            37,135Comprehensive
      Income
                                            
                                            $
                                            8,043,681
                                            
                                            
                                            $
                                            4,375,501
                                            
                                            
                                            
                                            3,203,323
                                            
                                            
                                            
                                            1,496,580
                                            
                                            
                                            
                                            1,547,052




3




Balance
      Sheet Data (at end of period)
                                    
                                    December 31,(in U.S. Dollars)
                                    
                                    2009
                                    
                                    
                                    2008
                                    
                                    
                                    2007
                                    
                                    
                                    2006
                                    
                                    
                                    2005Audited
                                    
                                    
                                    Audited
                                    
                                    
                                    Unaudited
                                    
                                    
                                    Unaudited
                                    
                                    
                                    UnauditedCash
      and cash equivalents
                                    
                                    $
                                    8,409,467
                                    
                                    
                                    $
                                    3,761,315
                                    
                                    
                                    $
                                    6,735,616
                                    
                                    
                                    $
                                    7,828,750
                                    
                                    
                                    $
                                    3,120,317Total
      current assets
                                    
                                    
                                    68,374,508
                                    
                                    
                                    
                                    47,316,208
                                    
                                    
                                    
                                    35,162,129
                                    
                                    
                                    
                                    18,712,764
                                    
                                    
                                    
                                    9,901,704Total
      assets
                                    
                                    
                                    85,717,587
                                    
                                    
                                    
                                    65,896,382
                                    
                                    
                                    
                                    52,626,708
                                    
                                    
                                    
                                    31,436,385
                                    
                                    
                                    
                                    19,799,869Total
      liabilities
                                    
                                    
                                    65,538,241
                                    
                                    
                                    
                                    55,475,387
                                    
                                    
                                    
                                    47,390,651
                                    
                                    
                                    
                                    18,297,807
                                    
                                    
                                    
                                    8,317,707Total
      shareholders’ equity
                                    
                                    
                                    20,179,346
                                    
                                    
                                    
                                    10,420,995
                                    
                                    
                                    
                                    5,236,057
                                    
                                    
                                    
                                    13,138,578
                                    
                                    
                                    
                                    11,482,162Total
      liabilities and shareholders’ equity
                                    
                                    
                                    85,717,587
                                    
                                    
                                    
                                    65,896,382
                                    
                                    
                                    
                                    52,626,708
                                    
                                    
                                    
                                    31,436,385
                                    
                                    
                                    
                                    19,799,869




4




3.A.3.  Exchange
Rates




Not
Applicable.





3.B.  Capitalization
and Indebtedness




The
following table sets forth our capitalization and indebtedness as of December
31, 2009 on an actual basis. This information should be read in conjunction with
our consolidated financial statements and the notes relating to such statements
appearing elsewhere in this report.




As
      of December 31, 2009Cash:Cash
      and cash equivalents
                                    
                                    $
                                    8,409,467Restricted
      cash (1)
                                    
                                    
                                    11,824,214Debt:Notes
      payable - bank acceptance notes (1)
                                    
                                    
                                    19,744,925Short-term
      bank loans (2)
                                    
                                    
                                    27,350,377Shareholders’
      equity:Common shares, no par
      value
                                    
                                    
                                    500Accumulated
      other comprehensive income
                                    
                                    
                                    543,036Statutory
      Reserve
                                    
                                    
                                    1,093,331Retained
      earnings
                                    
                                    
                                    13,069,401Non-controlling
      interest
                                    
                                    
                                    5,473,078Total
      shareholders’ equity
                                    
                                    $
                                    20,179,346




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




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




3.C.  Reasons
For The Offer And Use Of Proceeds




Not
Applicable.




3.D.  Risk
Factors




You
should carefully consider the risks described below in evaluating our business
before investing in our ordinary shares. If any of the following risks were to
occur, our business, results of operations and financial condition could be
harmed. In that case, the trading price of our ordinary shares could decline and
you might lose all or part of your investment in our ordinary shares. You should
also refer to the other information set forth in this shell company report,
including our consolidated financial statements and the related notes and the
section captioned “Operating and Financial Review and Prospects” before deciding
whether to invest in our ordinary shares.




5




Risks
Related to Our Business and Our Industry




Our
revenues are highly dependent on a limited number of customers and the loss of
any one of our major customers could materially and adversely affect our growth
and our revenues.




During
the years ended December 31, 2008 and 2009, our six largest
customers contributed 80.8% and 86.6% of
our total sales, respectively.  As a result of our reliance on a
limited number of customers, we may face pricing and other competitive
pressures, which may have a material
adverse effect on our profits and our revenues. The volume of products sold
for specific customers varies from year to year, especially since we are not the
exclusive provider for any customers.  In addition, there are a number
of factors, other than our performance, that could cause the loss of a customer
or a substantial reduction in the products that we provide to any customer and
that may not be predictable. For example, our customers may decide to reduce
spending on our products or a customer may no longer need our products following
the completion of a project. The loss of any one of our major customers, a
decrease in the volume of sales to these customers or a decrease in the price at
which we sell our products to them could materially adversely affect our profitsand our revenues.


In
addition, this customer concentration may subject us to perceived or actual
leverage that our customers may have in negotiations with us, given their
relative size and importance to us. If our customers seek to negotiate their
agreements on terms less favorable to us and we accept such unfavorable terms,
such unfavorable terms may have a material adverse effect on our business,
financial condition and results of operations. Accordingly, unless and until we
diversify and expand our customer base, our future success will significantly
depend upon the timing and volume of business from our largest customers and the
financial and operational success of these customers.




Anti-dumping
duties imposed by foreign governments on our products have caused us to cease
doing business with some of our international customers.




In 2008,
we sold approximately 32% of our products to customers in the United States and
Europe.  The Crispin Corporation, a US company, and Ibercordones
Pretensados S.L., a Spanish Company, were two of our top three customers in
2008.




However,
in May 2009, the Council of the European Union imposed an anti-dumping duty on
imports of certain prestressed wires and wire strands originating in
China.  Dumping occurs when a foreign company sells a product at a
price that is considered less than fair value in the country into which the
product is imported.  Following an anti-dumping investigation
initiated in February 2008, the Council concluded that imports of these products
originating in China caused material injury to the European industry. The rate
of the anti-dumping duty applicable to us has been set at 31.1% and the duty
applicable to our competitors generally has been set at 46.2%.




On May
17, 2010, the U.S. Department of Commerce announced an affirmative final
decision, imposing an anti-dumping rate of 193.55% for imports of certain
prestressed concrete steel wire strands, including the plain surface materials
we had been selling to our U.S. customers, exported from China to the
U.S.  The U.S. Customs and Border Protection has been instructed to
collect a cash deposit or bond based on this rate.




In
anticipation of these rulings, we discontinued sales to these regions at the end
of 2008.  If these anti-dumping measures remain in place and we are
unable to continue increasing our sales to customers in China or other regions
in which we sell our products, these measures could have a negative impact on
our business and results of operations.




Because we decreasedsales to international customers and increased sales to
domestic PRC customersin 2009as a result of the global economic crisis, we have
experienced,and will continue to experience,increased needs
to finance our working capital requirements, which may
materially and adversely affect our financial position and resultsof operations.
  Historically, we sold a significant portion of our
productsto international customers, who generally pay by letter
of credit, enabling us to convert our accountsreceivable into
cash more quickly, prepay our suppliers and reduce the amount of funds that we
needed to finance our working capital requirements. However,at the end of 2008,as a result of the global economic crisis and in
anticipation of the anti-dumping measures ultimately imposed by the U.S. and the
European Union,we had to exit some of these international
marketsentirely and turn to the domestic PRC customers, which
generally pay approximately 40 days after receiving the materials at the
construction site.  These longer payment terms have negatively
impacted our short-term liquidity. Although we have been able to maintain
adequate working capital primarily through short-term borrowing, any failure by
our customers to settle outstanding accountsreceivable in
the future could materially and adversely affect our cash flow, financial
condition and resultsof operations.


Some
of the terms of the agreements between Ossen Materials and its affiliates may be
less favorable to us than similar agreements negotiated between unaffiliated
third parties.




We
purchase a significant amount of our raw materials from Shanghai Z.F.X. Steel
Co., Ltd., or Shanghai ZFX, an affiliate of ours.  Specifically, Ossen
Materials acquired 26.4% and 15.0%, and Ossen Jiujiang acquired 25.8% and 4.3%,
of their raw materials from Shanghai ZFX in 2008 and 2009,
respectively.  While we believe we benefit from these agreements, such
agreements were negotiated between two affiliated companies, and therefore may
not reflect the terms that would have been reached by two unaffiliated parties
negotiating at arm’s length.  The transactions may be less favorable
to us than would be the case if they were negotiated with unaffiliated third
parties.




6




As
we expand our operations, we may need to establish a more diverse supplier
network for our raw materials.  The failure to secure a more diverse
and reliable supplier network could have an adverse effect on our financial
condition.




We
currently purchase almost all of our raw materials from a small number of
suppliers.  Purchases from our five largest suppliers amounted to
86.5% and 89.5% of our total cost of supplies in 2008 and 2009,
respectively.  As we increase the scale of our production, we may need
to establish a more diverse supplier network, while attempting to continue to
leverage our purchasing power to obtain favorable pricing and delivery
terms.  However, in the event that we need to diversify our supplier
network, we may not be able to procure a sufficient supply of raw materials at a
competitive price, which could have an adverse effect on our results of
operations, financial condition and cash flows.




Furthermore,
despite our efforts to control our supply of raw materials and maintain good
relationships with our existing suppliers, we could lose one or more of our
existing suppliers at any time.  The loss of one or more key suppliers
could increase our reliance on higher cost or lower quality supplies, which
could negatively affect our profitability.  Any interruptions to, or
decline in, the amount or quality of our raw materials supply could materially
disrupt our production and adversely affect our business and financial condition
and financial prospects.




Volatile
steel prices can cause significant fluctuations in our operating results. Our
sales and operating income could decrease if steel prices decline or if we are
unable to pass price increases on to our customers.




Our
principal raw material is high carbon steel wire rods that we typically purchase
from multiple primary steel producers. The steel industry as a whole is cyclical
and, at times, pricing and availability of steel can be volatile due to numerous
factors beyond our control, including general domestic and international
economic conditions, labor costs, sales levels, competition, levels of inventory
held by us and other steel service centers, consolidation of steel producers,
higher raw material costs for steel producers, import duties and tariffs and
currency exchange rates. This volatility can significantly affect the
availability and cost of raw materials for us.




We, like
many other steel manufacturers, maintain
substantial inventories of steel to accommodate the short lead times and
just-in-time delivery requirements of our customers. Accordingly, we purchase
steel in an effort to maintain our inventory at levels that we believe to be
appropriate to satisfy the anticipated needs of our customers based upon
historic buying practices, supply agreements with customers and market
conditions. Our commitments to purchase steel are generally at prevailing market
prices in effect at the time we place our orders. We have no long-term,
fixed-price steel purchase contracts. When steel prices increase, as they did in
2008, competitive conditions will influence how much of the price increase we
can pass on to our customers. To the extent we are unable to pass on future
price increases in our raw materials to our customers, the net sales and
profitability of our business could be adversely affected.




When
steel prices decline, as they did in the fourth quarter of 2008 and through the
first half of 2009, customer demands for lower prices and our competitors'
responses to those demands could result in lower sale prices, lower marginsand inventory valued at the lower of cost or market
adjustmentsas we use existing steel inventory. Significant
or rapid declines in steel prices or reductions in sales volumes could result in
us incurring inventory or goodwill impairment charges. Changing steel prices
therefore could significantly impact our net sales, gross margins, operating
income and net income.




7




We
are subject to various risks and uncertainties that might affect our ability to
procure quality raw materials.




Our
performance depends on our ability to procure low cost, high quality raw
materials on a timely basis from our suppliers.  Our supplies are
subject to certain risks, including availability of raw materials, labor
disputes, inclement weather, natural disasters, and general economic and
political conditions, which might limit the ability of our suppliers to provide
us with low cost, high quality merchandise on a timely
basis.  Furthermore, for these or other reasons, one or more of our
suppliers might not adhere to our quality control standards, and we might not
identify the deficiency.  Our suppliers’ failure to supply quality
materials at a reasonable cost on a timely basis could reduce our net sales,
damage our reputation and have an adverse effect on our financial
condition.




Our
operations are cash intensive, and our business could be adversely affected if
we fail to maintain sufficient levels of liquidity and working
capital.




Historically,
we have spent a significant amount of cash on our operational activities,
principally to procure raw materials for our products.  We financed
our operations mainly through cash flows from our operations, short-term bank
loans and proceeds from bank acceptance notes.  If we fail to continue
to generate sufficient cash flow from these sources, we may not have sufficient
liquidity to fund our operating costs and our business could be adversely
affected.




Our
short-term loans are from Chinese banks and are generally secured by our fixed
assets, receivables and/or guarantees by third parties.  The term of
almost all such loans is one year or less.  Historically, we have
rolled over such loans on an annual basis.  However, we may not have
sufficient funds available to pay all of our borrowings upon maturity in the
future.  Failure to roll over our short-term borrowings at maturity or
to service our debt could result in the imposition of penalties, including
increases in interest rates, legal actions against us by our creditors, or even
insolvency.




If
available liquidity is not sufficient to meet our operating and loan obligations
as they come due, our plans include considering pursuing alternative financing
arrangements, reducing expenditures as necessary, or limiting our plans for
expansion to meet our cash requirements.  However, there is no
assurance that, if required, we will be able to raise additional capital, reduce
discretionary spending or efficiently limit our expansion to provide the
required liquidity.  Currently, the capital markets for small
capitalization companies are extremely difficult and banking institutions have
become stringent in their lending requirements.  Accordingly, we
cannot be sure of the availability or terms of any third party
financing.  If we are unable to raise additional financing, we may be
unable to implement our long-term business plan, develop or enhance our
products, take advantage of future opportunities or respond to competitive
pressures on a timely basis.  In the alternative, if we raise capital
by issuing equity or convertible debt securities, such issuances could result in
substantial dilution to our shareholders.




Our
inability to manage our growth may have a material adverse effect on our
business, results of operations and financial condition.




We have
experienced significant growth since we began operations in 2004.  Our
revenues have grown from approximately $17.2 million in 2005 to approximately
$101.1 million in 2009.




8




We expect our growth to continue to place significant
demands on both our management and our resources. This requires us to
continuously evolve and improve our operational, financial and internal controls
across our organization. In particular, continued expansion increases the
challenges we face in:




·
            recruiting,
      training and retaining sufficient skilled sales and management
      personnel;


·
            adhering
      to our high quality and process execution
  standards;


·
            maintaining
      high levels of customer
satisfaction;


·
            creating
      and managing economies of scale;


·
            maintaining
      and managing costs to correspond with timeliness of revenue recognition;
      and


·
            developing
      and improving our internal administrative infrastructure, including our
      financial, operational and communication systems, processes and
      controls.




Any
inability to manage our growth may have a material adverse effect on our
business, results of operations and financial condition.




We
face intense competition, and if we are unable to compete effectively we may not
be able to maintain profitability.




We
compete with many other companies located in the PRC and internationally that
manufacture materials similar to ours.  Many of our competitors are
larger companies with greater financial resources than us.  In
addition, we expect that as demand in the PRC and in other foreign countries for
high quality, prestressed materials continues to grow, new competitors will
enter the market.  Increased competition may adversely affect our
future financial performance or reputation.  Moreover, increased
competition may result in potential or actual litigation between us and our
competitors relating to such activities as competitive sales practices,
relationships with key suppliers and customers or other matters.




We
may lose our competitive advantage, and our operations may suffer, if we fail to
prevent the loss or misappropriation of, or disputes over, our intellectual
property.




We rely
on a combination of patents, trademarks, trade secrets and confidentiality
agreements to protect our intellectual property rights. While we are not
currently aware of any infringement on our intellectual property rights, our
ability to compete successfully and to achieve future revenue growth will
depend, in significant part, on our ability to protect our proprietary
technology.  Despite many laws and regulations promulgated, and other
efforts made, by China over the past several years in an attempt to protect
intellectual property rights, intellectual property rights are not as certain in
China as they would in many Western countries, including the United
States.  Furthermore, enforcement of such laws and regulations in
China has not been fully developed.  Neither the administrative
agencies nor the court systems in China are equipped as their counterparts in
developed countries to deal with violations or handle the nuances and
complexities between compliant technological innovation and non-compliant
infringement.




Our
competitors may independently develop proprietary methodologies similar to ours
or duplicate our products or services. Unauthorized parties may infringe upon or
misappropriate our services or proprietary information, which could have a
material adverse effect on our business, results of operations and financial
condition. The misappropriation or duplication of our intellectual property
could disrupt our ongoing business, distract our management and employees,
reduce our revenues and increase our expenses. We may need to litigate to
enforce our intellectual property rights. Any such litigation could be time
consuming and costly and the outcome of any such litigation cannot be
guaranteed.




Our revenues, expenses and profits are difficult to
predict and can vary significantly from quarter to quarter. This could cause the
trading price of our ordinary shares to decline.




Our
operating results may vary significantly from quarter to quarter. Therefore, we
believe that period-to-period comparisons of our results of operations are not
necessarily meaningful and should not be relied upon as an indication of our
future performance. It is possible that in the future some of our quarterly
results of operations may be below the expectations of market analysts and our
investors, which could lead to a significant decline in the trading price of our
ordinary shares.




9




Factors
which affect the fluctuation of our revenues, expenses and profits
include:




·
            changes
      in prices of our raw materials, with higher prices leading to reduced
      operating income;


·
            variations,
      expected or unexpected, in the duration, size, timing and scope of
      purchase orders;


·
            changes
      in our pricing policies or those of our
  competitors;


·
            changes
      in compensation, which may reduce our gross profit for the quarter in
      which they are effected;


·
            our
      inability to manage costs, including those related to our raw materials,
      personnel, infrastructure and
facilities;


·
            exchange
      rate fluctuations; and


·
            general
      economic conditions.





A portion
of our expenses, particularly those related to personnel and facilities, are
generally fixed in advance of any particular quarter. As a result, unanticipated
variations in the number and timing of our purchase orders or prices of our raw
materials may cause significant variations in our operating results in any
particular quarter.




We
may undertake strategic acquisitions, joint ventures and alliances, which may
prove to be difficult to integrate and manage or may not be successful, and may
result in increased expenses or write-offs.




We may
over time pursue strategic acquisitions, joint ventures and alliances to enhance
our capabilities and expand our industry expertise and geographic coverage. It
is possible that we may not identify suitable acquisition candidates, alliances
or joint venture partners, or if we do identify suitable candidates or partners,
we may not complete those transactions on terms commercially acceptable to us or
at all. The inability to identify suitable acquisition targets, joint ventures
or alliances, or our inability to complete such transactions on terms
commercially acceptable to us or at all, may adversely affect our ability to
compete and grow.




These
types of transactions involve numerous risks, including:




·
            difficulties
      in integrating operations, systems, technologies, accounting methods and
      personnel;


·
            difficulties
      in supporting and transitioning clients of our acquired companies or
      strategic partners;


·
            disruption
      of our ongoing business;


·
            diversion
      of financial and management resources from existing
      operations;


·
            risks
      of entering new markets;


·
            potential
      loss of key employees; and


·
            inability
      to generate sufficient revenue to offset transaction costs and
      expenses.





Furthermore,
any such transaction that we attempt, whether or not completed, or any media
reports or rumors with respect to any such transactions, may materially and
adversely affect the value of our ordinary shares.




We may
finance future transactions through debt financing or the issuance of our equity
securities or a combination of the foregoing. Acquisitions financed with the
issuance of our equity securities could be dilutive, which could affect the
market price of our ordinary shares. Acquisitions financed with debt could
require us to dedicate a substantial portion of our cash flow to principal and
interest payments and could subject us to restrictive covenants. Acquisitions
also frequently result in the recording of goodwill and other intangible assets
that are subject to potential impairments in the future that could harm our
financial results.  Moreover, if we fail to properly evaluate
acquisitions, alliances or investments, we may not achieve the anticipated
benefits of those transactions, and we may incur costs in excess of what we had
anticipated.




10




Our
success depends in large part upon our senior management and key personnel. Our
inability to attract and retain these individuals could materially and adversely
affect our business, results of operations and financial condition.




We are
highly dependent on our senior management and other key employees, including our
Chairman, Dr. Tang, Mr. Hua and Mr. Gu.  Our future performance
will be dependent upon the continued service of members of our senior management
and key employees. We do not maintain key man life insurance for any of the
members of our management team or other key personnel. Competition for senior
management in our industry is intense, and we may not be able to retain our
senior management and key personnel or attract and retain new senior management
and key personnel in the future, which could materially and adversely affect our
business, results of operations and financial condition.




We have limited insurance
coverage and may incur losses resulting from product liability claims, business
interruption or natural disasters.




We are
exposed to risks associated with product liability claims in the event that the
use of our products results in property damage or personal injury. Since our
products are ultimately incorporated into bridges, buildings, railways and other
large structures, it is possible that users of these structures or people
installing our products could be injured or killed by such structures, whether
as a result of defects, improper installation or other causes. Because we
continue to expand our customer base, we are unable to predict whether product
liability claims will be brought against us in the future or to predict the
impact of any resulting adverse publicity on our business. The successful
assertion of product liability claims against us could result in potentially
significant monetary damages and require us to make significant payments. We do
not carry product liability insurance and may not have adequate resources to
satisfy a judgment in the event of a successful claim against us. As the
insurance industry in China is still in its early stages of development, even
the insurance that we currently carry offers limited coverage compared with that
offered in many other countries. Any business interruption or natural disaster
could result in substantial losses and diversion of our resources and materially
and adversely affect our business, financial condition and results of
operations.




One
shareholder owns a large percentage of our outstanding stock and could
significantly influence the outcome of our corporate matters.




Currently,
Dr. Tang, our chairman, beneficially owns approximately 79% of our outstanding
ordinary shares.  As our majority shareholder, Dr. Tang is able to
exercise significant influence over all matters that require shareholder
approval, including the election of directors to our board and approval of
significant corporate transactions that we may consider, such as a merger or
other sale of our company or its assets.  This concentration of
ownership in our shares by Dr. Tang will limit your ability to influence
corporate matters and may have the effect of delaying or preventing a third
party from acquiring control over us.




If
we are unable to maintain appropriate internal financial reporting controls and
procedures, it could cause us to fail to meet our reporting obligations, result
in the restatement of our financial statements, harm our operating results,
subject us to regulatory scrutiny and sanction, and cause investors to lose
confidence in our reported financial information.




Effective
internal controls are necessary for us to provide reliable financial reports and
effectively prevent fraud.




As a
public company, we have significant requirements for enhanced financial
reporting and internal controls. We will be required to document and test our
internal control procedures in order to satisfy the requirements of Section 404
of the Sarbanes-Oxley Act of 2002, which requires annual management assessments
of the effectiveness of our internal controls over financial reporting and, for
many companies, a report by the independent registered public accounting firm
addressing these assessments. The process of designing and implementing
effective internal controls is a continuous effort that requires us to
anticipate and react to changes in our business and the economic and regulatory
environments and to expend significant resources to maintain a system of
internal controls that is adequate to satisfy our reporting obligations as a
public company.




11




We cannot
assure you that we will not in the future identify areas requiring improvement
in our internal control over financial reporting. We cannot assure you that the
measures we will take to remediate any areas in need of improvement will be
successful or that we will implement and maintain adequate controls over our
financial processes and reporting in the future as we continue our growth. If we
are unable to establish appropriate internal financial reporting controls and
procedures, it could cause us to fail to comply with Sarbanes-Oxley and meet our
reporting obligations, result in the restatement of our financial statements,
harm our operating results, subject us to regulatory scrutiny and sanction, and
cause investors to lose confidence in our reported financial
information.




We
will incur increased costs as a result of being a public company.




As a
public company, we will incur significant legal, accounting and other expenses
that we did not incur as a private company. We expect the rules and regulations
to which public companies are subject, including the Sarbanes-Oxley Act of 2002,
to increase our legal, accounting and financial compliance costs and to make
certain corporate activities more time-consuming and costly. In addition, we
will incur additional costs associated with our public company reporting
requirements.




Risks
Related to Doing Business in China




Changes
in China’s political or economic situation could harm us and our operating
results.




Economic
reforms adopted by the Chinese government have had a positive effect on the
economic development of the country, but the government could change these
economic reforms or any of the legal systems at any time. This could either
benefit or damage our operations and profitability. Some of the things that
could have this effect are:




·
            Level
      of government involvement in the
economy;




·
            Control
      of foreign exchange;




·
            Methods
      of allocating resources;




·
            Balance
      of payments position;




·
            International
      trade restrictions; and




·
            International
      conflict.




The
Chinese economy differs from the economies of most countries belonging to the
Organization for Economic Cooperation and Development, or OECD, in many ways.
For example, state-owned enterprises still constitute a large portion of the
Chinese economy, and weak corporate governance and the lack of a flexible
currency exchange policy still prevail in China. As a result of these
differences, we may not develop in the same way or at the same rate as might be
expected if the Chinese economy was similar to those of the OECD member
countries.




The PRC government exerts substantial influence over the manner in
which we must conduct our business activities.




The PRC
government has exercised, and continues to exercise, substantial control over
virtually every sector of the Chinese economy through regulation and state
ownership. Our ability to operate in China may be harmed by changes in its laws
and regulations, including those relating to taxation, import and export
tariffs, environmental regulations, land use rights, property, and other
matters. We believe that our operations in China are in material compliance with
all applicable legal and regulatory requirements. However, the central or local
governments of the jurisdictions in which we operate may impose new, stricter
regulations or interpretations of existing regulations that would require
additional expenditures and efforts on our part to ensure our compliance with
such regulations or interpretations.  Accordingly, government actions
in the future, including any decision not to continue to support recent economic
reforms and to return to a more centrally planned economy or regional or local
variations in the implementation of economic policies, could have a significant
effect on economic conditions in China or particular regions
thereof.




12




Future
inflation in China may inhibit our ability to conduct business in
China.




In recent
years, the Chinese economy has experienced periods of rapid expansion and highly
fluctuating rates of inflation. During the past ten years, the rate of inflation
in China has been as high as 5.9% and as low as (0.8)%. These factors have led
to the adoption by the Chinese government, from time to time, of various
corrective measures designed to restrict the availability of credit or regulate
growth and contain inflation. High inflation may in the future cause the Chinese
government to impose controls on credit and/or prices, or to take other action,
which could inhibit economic activity in China, and thereby harm the market for
our products and our company.




You
may have difficulty enforcing judgments against us.




Our
assets are located, and our operations are conducted, in the PRC. In addition,
all of our directors and officers are nationals and residents of the PRC and a
substantial portion of their assets is located outside the United States. As a
result, it may be difficult for you to effect service of process within the
United States upon these persons. In addition, there is uncertainty as to
whether the courts of the PRC would recognize or enforce judgments of U.S.
courts because China does not have any treaties or other arrangements that
provide for the reciprocal recognition and enforcement of foreign judgments with
the United States. In addition, according to the PRC Civil Procedures Law,
courts in the PRC will not enforce a foreign judgment against us or our
directors and officers if they decide that the judgment violates basic
principles of PRC law or national sovereignty, security, or the public
interest.




Most
of our revenues are denominated in Renminbi, which is not freely convertible for
capital account transactions and may be subject to exchange rate
volatility.




We are
exposed to the risks associated with foreign exchange controls and restrictions
in China, as our revenues are primarily denominated in Renminbi, which is
currently not freely exchangeable. The PRC government imposes control over the
convertibility between Renminbi and foreign currencies. Under the PRC foreign
exchange regulations, payments for “current account” transactions, including
remittance of foreign currencies for payment of dividends, profit distributions,
interest and operation-related expenditures, may be made without prior approval
but are subject to procedural requirements. Strict foreign exchange control
continues to apply to “capital account” transactions, such as direct foreign
investment and foreign currency loans. These capital account transactions must
be approved by, or registered with, the PRC State Administration of Foreign
Exchange, or SAFE. Further, capital contribution by an offshore shareholder to
its PRC subsidiaries may require approval
by the Ministry of Commerce in China or its local counterparts. We cannot assure
you that we are able to meet all of our foreign currency obligations to remit
profits out of China or to fund operations in China.


On August
29, 2008, SAFE promulgated the Circular on the Relevant Operating Issues
concerning the Improvement of the Administration of Payment and Settlement of
Foreign Currency Capital of Foreign-Invested Enterprises, or Circular 142, to
regulate the conversion by foreign invested enterprises, or FIEs, of foreign
currency into Renminbi by restricting how the converted Renminbi may be used.
Circular 142 requires that Renminbi converted from the foreign
currency-dominated capital of a FIE may be used only for purposes within the
business scope approved by the applicable government authority and may not be
used for equity investments within the PRC unless specifically provided. In
addition, SAFE strengthened its oversight over the flow and use of Renminbi
funds converted from the foreign currency-dominated capital of a FIE. The use of
such Renminbi may not be changed without approval from SAFE, and may not be used
to repay Renminbi loans if the proceeds of such loans have not yet been used.
Compliance with Circular 142 may delay or inhibit our ability to complete such
transactions, which could affect our ability to expand our
business.




Fluctuation
in the value of the Renminbi and of the U.S. dollar may have a material adverse
effect on investments in our ordinary shares.




Any
significant revaluation of the Renminbi may have a material adverse effect on
the U.S. dollar equivalent amount of our revenues and financial condition as
well as on the value of, and any dividends payable on, our ordinary shares in
foreign currency terms. For instance, a decrease in the value of Renminbi
against the U.S. dollar could reduce the U.S. dollar equivalent amounts of our
financial results, the value of your investment in our ordinary shares and the
dividends we may pay in the future, if any, all of which may have a material
adverse effect on the prices of our common shares. A significant portion of our
revenues are denominated in Renminbi. Any further appreciation of Renminbi
against U.S. dollars may result in significant exchange losses.




13




Prior to
1994, the Renminbi experienced a significant net devaluation against most major
currencies, and there was significant volatility in the exchange rate during
certain periods. Upon the execution of the unitary managed floating rate system
in 1994, the Renminbi was devalued by 50% against the U.S. dollar. Since 1994,
the Renminbi to U.S. dollar exchange rate has largely stabilized. On July 21,
2005, the People’s Bank of China announced that the exchange rate of U.S. dollar
to Renminbi would be adjusted from $1 to RMB8.27 to $1 to RMB8.11, and it ceased
to peg the Renminbi to the U.S. dollar. Instead, the Renminbi would be pegged to
a basket of currencies, whose components would be adjusted based on changes in
market supply and demand under a set of systematic principles. On September 23,
2005, the PRC government widened the daily trading band for Renminbi against
non-U.S. dollar currencies from 1.5% to 3.0% to improve the flexibility of the
new foreign exchange system. Since the adoption of these measures, the value of
Renminbi against the U.S. dollar has fluctuated on a daily basis within narrow
ranges, but overall has further strengthened against the U.S. dollar. There
remains significant international pressure on the PRC government to further
liberalize its currency policy, which could result in a further and more
significant appreciation in the value of the Renminbi against the U.S. dollar.
The Renminbi may be revalued further against the U.S. dollar or other
currencies, or may be permitted to enter into a full or limited free float,
which may result in an appreciation or depreciation in the value of the Renminbi
against the U.S. dollar or other currencies.




China’s
legal system is different from those in some other countries.




China is
a civil law jurisdiction. Under the civil law system, prior court decisions may
be cited as persuasive authority but do not have binding precedential effect.
Although progress has been made in the promulgation of laws and regulations
dealing with economic matters, such as corporate organization and governance,
foreign investment, commerce, taxation and trade, China’s legal system remains
less developed than the legal systems in many other countries. Furthermore,
because many laws, regulations and legal requirements have been recently
adopted, their interpretation and enforcement by the courts and administrative
agencies may involve uncertainties. Sometimes, different government departments
may have different interpretations. Licenses and permits issued or granted by
one government authority may be revoked by a higher government authority at a
later time. Government authorities may decline to take action against unlicensed
operators which may work to the disadvantage of licensed operators, including
us. The PRC legal system is based in part on government policies and internal
rules that may have a retroactive effect. We may not be aware of our violation
of these policies and rules until some time after the violation. Changes in
China’s legal and regulatory framework, the promulgation of new laws and
possible conflicts between national and provincial regulations could adversely
affect our financial condition and results of operations. In addition, any
litigation in China may result in substantial costs and diversion of resources
and management attention.




Our business and financial performance may be
materially adversely affected if the PRC regulatory authorities determine that
our acquisition of Ossen Materials constitutes a round-trip investment without
MOFCOM approval.




On August
8, 2006, six PRC regulatory agencies promulgated the Regulation on Mergers and
Acquisitions of Domestic Companies by Foreign Investors, or the 2006 M&A
Rule, which became effective on September 8, 2006. According to the 2006 M&A
Rule, a “round-trip investment” is defined as having taken place when a PRC
business that is owned by PRC individuals is sold to a non-PRC entity that is
established or controlled, directly or indirectly, by those same PRC
individuals. Under the 2006 M&A Rules, any round-trip investment must be
approved by MOFCOM, and any indirect arrangement or series of arrangements which
achieves the same end result without the approval of MOFCOM is a violation of
PRC law.




The
direct shareholders of Ossen Materials, Ossen Asia and Topchina, are British
Virgin Islands limited liability companies that were owned by Ossen Materials
Group, a British Virgin Islands limited liability company that was controlled by
Dr. Tang prior to our business combination.  Topchina also holds
shares in Ossen Jiujiang.  We have been advised that we are not
required to obtain MOFCOM approval because the relevant transactions occurred
prior to the effectiveness of the 2006 M&A Rule.




14




However,
the PRC regulatory authorities may take the view that the acquisition of shares
in our PRC operating subsidiaries by Ossen Asia and Topchina, and the share
exchange between Ultra Glory and Ossen Materials Group, are part of an overall
series of arrangements which constitute a round-trip investment. If the PRC
regulatory authorities take this view, we cannot assure you we may be able to
obtain the approval required from MOFCOM. It is also possible that the PRC
regulatory authorities could invalidate our acquisition and ownership of our
Chinese subsidiaries, and that these transactions require the prior approval of
the China Securities Regulatory Commission, or CSRC, before MOFCOM approval is
obtained.




If these
regulatory actions occur, we cannot assure you that we will be able to
re-establish control of our Chinese subsidiaries’ business operations, that any
such contractual arrangements will be protected by PRC law, or that we would
receive as complete or effective an economic benefit and control of our Chinese
subsidiaries’ business as if we had direct ownership of our Chinese
subsidiaries.




Under
the New Enterprise Income Tax Law, we may be classified as a “resident
enterprise” of China. Such classification will likely result in unfavorable tax
consequences to us and our non-PRC shareholders.




China
passed a New Enterprise Income Tax Law, or the New EIT Law, which became
effective on January 1, 2008. Under the New EIT Law, an enterprise established
outside of China with de facto management bodies within China is considered a
resident enterprise, meaning that it can be treated in a manner similar to a
Chinese enterprise for enterprise income tax purposes. The implementing rules of
the New EIT Law define de facto management as “substantial and overall
management and control over the production and operations, personnel,
accounting, and properties” of the enterprise. In addition, a circular issued by
the State Administration of Taxation on April 22, 2009 clarified that dividends
and other income paid by such resident enterprises will be considered to be PRC
source income, subject to PRC withholding tax, currently at a rate of 10%, when
recognized by non-PRC enterprise shareholders. This recent circular also
subjects such resident enterprises to various reporting requirements with the
PRC tax authorities.




Although substantially all of our management is currently located
in the PRC, it remains unclear whether the PRC tax authorities would require or
permit our overseas registered entities to be treated as PRC resident
enterprises. We do not currently consider our company to be a PRC resident
enterprise. However, if the PRC tax authorities determine that we are a resident
enterprise for PRC enterprise income tax purposes, a number of unfavorable PRC
tax consequences could follow. First, we may be subject to the enterprise income
tax at a rate of 25% on our worldwide taxable income as well as PRC enterprise
income tax reporting obligations. In our case, this would mean that income such
as interest on offering proceeds and non-China source income would be subject to
PRC enterprise income tax at a rate of 25%. Second, although under the New EIT
Law and its implementing rules dividends paid to us from our PRC subsidiaries
would qualify as tax-exempt income, we cannot guarantee that such dividends will
not be subject to a 10% withholding tax, as the PRC foreign exchange control
authorities, which enforce the withholding tax, have not yet issued guidance
with respect to the processing of outbound remittances to entities that are
treated as resident enterprises for PRC enterprise income tax purposes. Finally,
it is possible that future guidance issued with respect to the new resident
enterprise classification could result in a situation in which a 10% withholding
tax is imposed on dividends we pay to our non-PRC shareholders and with respect
to gains derived by our non-PRC shareholders from transferring our
shares.




Restrictions
under PRC law on our PRC subsidiaries' ability to pay dividends and make other
distributions could materially and adversely affect our ability to grow, make
investments or acquisitions that could benefit our business, pay dividends to
you, and otherwise fund and conduct our business.




Our
revenues are generated by our PRC subsidiaries. However, PRC regulations
restrict the ability of our PRC subsidiaries to pay dividends and make other
payments to their offshore parent company. PRC legal restrictions permit
payments of dividends by our PRC subsidiaries only out of their accumulated
after-tax profits, if any, determined in accordance with PRC accounting
standards and regulations. Our PRC subsidiaries are also required under PRC laws
and regulations to allocate at least 10% of their annual after-tax profits
determined in accordance with PRC GAAP to a statutory general reserve fund until
the amounts in said fund reaches 50% of their registered capital. Allocations to
these statutory reserve funds can be used only for specific purposes and are not
transferable to us in the form of loans, advances, or cash dividends. Any
limitations on the ability of our PRC subsidiaries to transfer funds to us could
materially and adversely limit our ability to grow, make investments or
acquisitions that could be beneficial to our business, pay dividends and
otherwise fund and conduct our business.




15




Any
failure to comply with PRC environmental laws may require us to incur
significant costs.




We carry
on our business in an industry that is subject to PRC environmental protection
laws and regulations.  These laws and regulations require enterprises
engaged in manufacturing and construction that may cause environmental waste to
adopt effective measures to control such waste.  In addition, such
enterprises are required to pay fines, or to cease operations entirely under
extreme circumstances, should they discharge waste substances.  The
Chinese government may also change the existing laws or regulations or impose
additional or stricter laws or regulations, compliance with which may cause us
to incur significant capital expenditures, which we may be unable to pass on to
our customers through higher prices for our products.




We
must comply with the Foreign Corrupt Practices Act.




We are
required to comply with the United States Foreign Corrupt Practices Act, which
prohibits U.S. companies from making prohibited payments to foreign officials
for the purpose of obtaining or retaining business.  Corruption,
extortion, bribery, pay-offs, theft and other fraudulent practices occur from
time to time in mainland China.  If any of our non-U.S. listed
competitors that are not subject to the Foreign Corrupt Practices Act engage in
these practices, they may receive preferential treatment and secure business
from government officials in a way that is unavailable to
us.  Furthermore, although we inform our personnel that such practices
are illegal, we cannot assure you that our employees or other agents will not
engage in illegal conduct for which we might be held responsible under U.S.
law.  If our employees or other agents are found to have engaged in
such practices, we could suffer severe penalties.




Because
our funds are held in banks that do not provide insurance, the failure of any
bank in which we deposit our funds could affect our ability to continue our
business operations.




Banks and
other financial institutions in the PRC do not provide insurance for funds held
on deposit. As a result, in the event of a bank failure, we may not have access
to funds on deposit. Depending upon the amount of money we maintain in a bank
that fails, our inability to have access to our cash could impair our
operations, and, if we are not able to access funds to pay our suppliers,
employees and other creditors, we may be unable to continue our business
operations.




If
relations between the United States and China worsen, investors may be unwilling
to hold or buy our ordinary shares and our share price may
decrease.




At
various times during recent years, the United States and China have had
significant disagreements over political and economic issues. Controversies may
arise in the future between these two countries. Any political or trade
controversies between the United States and China, whether or not directly
related to our business, could reduce the price of our ordinary
shares.




Risks
Related to Our Ordinary Shares




The
market price for our ordinary shares may be volatile.




The
market price for our ordinary shares is likely to be highly volatile and subject
to wide fluctuations in response to various factors, including the
following:




·
            actual
      or anticipated fluctuations in our quarterly operating results and
      revisions to our expected results;




·
            changes
      in financial estimates by securities research
  analysts;




·
            conditions
      in the markets for our products;




16




·
            changes
      in the economic performance or market valuations of companies specializing
      in our industry or our customers or their
  industries;




·
            announcements
      by us or our competitors of new products, acquisitions, strategic
      relationships, joint ventures or capital
  commitments;




·
            addition
      or departure of our senior management and key
  personnel;




·
            fluctuations
      of exchange rates between the Renminbi and the U.S.
  dollar;




·
            litigation
      related to our intellectual
property;




·
            release
      or expiry of lock-up or other transfer restrictions on our outstanding
      ordinary shares; and




·
            sales
      or perceived potential sales of our ordinary
  shares.




In
addition, the securities market has from time to time, and to an even greater
degree since the last quarter of 2007, experienced significant price and volume
fluctuations that are not related to the operating performance of particular
companies. These market fluctuations may also have a material adverse effect on
the market price of our ordinary shares.  Furthermore, in the past,
following periods of volatility in the market price of a public company’s
securities, shareholders have frequently instituted securities class action
litigation against that company. Litigation of this kind could result in
substantial costs and a diversion of our management’s attention and
resources.




We
may not be able to pay any dividends on our ordinary shares.




Under
British Virgin Islands law, we may pay dividends if the directors declare that
the company is able to satisfy the provisions of Section 57 of the BVI Companies
Act, 2004.  Pursuant to this provision, the company, immediately after
the distribution must satisfy the solvency test, in so far as its assets exceeds
its liabilities, and the company must be able to pay its debts as they become
due. Our ability to pay dividends will therefore depend on our ability to
generate sufficient profits. We cannot give any assurance that we will declare
dividends of any amounts, at any rate or at all in the future. We have not paid
any dividends in the past. Future dividends, if any, will be at the discretion
of our board of directors, subject to the approval of our shareholders, and will
depend upon our results of operations, our cash flows, our financial condition,
the payment of our subsidiaries of cash dividends to us, our capital needs,
future prospects and other factors that our directors may deem
appropriate.




There
is no public market for our ordinary shares, and you may not be able to resell
our ordinary shares at or above the price you paid, or at all.




There is
no public market for our ordinary shares. If an active trading market for our
ordinary shares does not develop, the market price and liquidity of our ordinary
shares will be materially and adversely affected and you may not be able to
resell our ordinary shares at or above the price you paid, or at all. An active
trading market for our ordinary shares may not develop in a timely manner or at
all.




If
equity research analysts do not publish research reports about our company or if
they issue unfavorable commentary or downgrade our ordinary shares, the price of
our ordinary shares could decline.




The
trading market for our ordinary shares will rely in part on the research reports
that equity research analysts publish about us and our company. We do not
control these analysts. The price of our ordinary shares could decline if one or
more equity analysts downgrade our ordinary shares or if they issue other
unfavorable commentary, or cease publishing reports, about us or our
company.




17






ITEM
      4.
            INFORMATION
      ON THE COMPANY




4A.  History
and Development of the Company




We are a
British Virgin Islands limited liability company organized on January 21, 2010
under the BVI Business Companies Act, 2004 under the name Ultra Glory
International Ltd., or Ultra Glory, as a blank check company for the purpose of
acquiring, through a share exchange, asset acquisition or other similar business
combination, an operating business.




Business
Combination




O n July 7,
2010, Ultra Glory and its sole shareholder entered into a share exchange
agreement with Ossen Innovation Group, a British Virgin Islands limited
liability company organized on April 30, 2010 under the British Virgin Islands
Companies Act (2004) and the shareholders of Ossen Innovation Group. Pursuant to
the share exchange agreement, Ultra Glory acquired from the shareholders of
Ossen Innovation Group all of the issued and outstanding shares of Ossen
Innovation Group, in exchange for an aggregate of 10,000,000 newly issued
ordinary shares issued by Ultra Glory to the shareholders of Ossen Innovation
Group.  In addition, the sole shareholder of Ultra Glory sold all of
the 5,000,000 ordinary shares of Ultra Glory that were issued and outstanding
prior to the business combination, to the shareholders of Ossen Innovation Group
for cash, at a price of $0.03 per share.  As a result, the individuals
and entities that owned shares of Ossen Innovation Group prior to the business
combination acquired 100% of the equity of Ultra Glory, and Ultra Glory acquired
100% of the equity of Ossen Innovation Group.  Ossen Innovation Group
is now a wholly owned subsidiary of Ultra Glory.  In conjunction with
the business combination, Ultra Glory filed an amended charter, pursuant to
which Ultra Glory changed its name to Ossen Innovation Co., Ltd., changed its
fiscal year end to December 31, changed the par
value of its ordinary shares to $0.01 per share and increased its
authorized shares to 100,000,000.  Upon the consummation of the
business combination, we ceased to be a shell company .




Our
Shareholders




Dr. Tang,
our chairman, owns 100% of the shares of Effectual Strength Enterprises Ltd., a
British Virgin Islands company, which owned 79% of the shares of Ossen
Innovation Group prior to the business combination, and owns 79% of our shares
since the business combination.  The holders of the remaining 21% of
our shares are investors that are residents of the PRC and are unaffiliated with
Ossen.




Our
Subsidiaries




British
Virgin Islands Companies




Ossen
Innovation Group, our wholly owned subsidiary, is the sole shareholder of two
holding companies organized in the British Virgin Islands: Ossen Group (Asia)
Co., Ltd., or Ossen Asia, and Topchina Development Group Ltd., or
Topchina.  All of the equity of Ossen Asia and Topchina had been held
by Dr. Tang since inception.  In May 2010, Dr. Tang transferred these
shares to Ossen Innovation Group in anticipation of the public listing of our
company’s shares in the United States.




Ossen
Asia is a British Virgin Islands limited liability company organized on February
7, 2002.  Ossen Asia has one direct operating subsidiary in China,
Ossen Innovation Materials Co. Ltd., or Ossen Materials.  Ossen Asia
owns 81% of the equity of Ossen Materials.




Topchina
is a British Virgin Islands limited liability company organized on November 3,
2004.  Ossen Materials and Topchina directly own an operating
subsidiary in China, Ossen (Jiujiang) Steel Wire & Cable Co., Ltd., or Ossen
Jiujiang.  Ossen Materials owns 75% of the equity of Ossen Jiujiang
and Topchina owns 25%.




Ossen
Materials




Ossen
Materials was formed in China on October 27, 2004 as a Sino-foreign joint
venture limited liability company under the name Ossen (Ma’anshan) Steel Wire
and Cable Co., Ltd.  On May 8, 2008, Ossen Materials was restructured
from a Sino-foreign joint venture limited liability company to a
corporation.  The name of the entity was changed at that time to Ossen
Innovation Materials Co., Ltd.


18




Ossen
Asia owns 81% of the equity of Ossen Materials.  The remaining 19% is
held in the aggregate by four Chinese entities, two of which are controlled by
Chinese governmental entities, one of which is controlled by Zhonglu Co. Ltd., a
company whose shares are listed on the Shanghai Stock Exchange, and one of which
is controlled by Chinese citizens.




Through
Ossen Materials, we have manufactured and sold plain surface prestressed
concrete (“PC”) strands, galvanized PC steel wires and PC wires in our
Maanshan City, PRC, facility since 2004.  The primary products
manufactured in this facility are our plain surface PC strands.  The
primary markets for the products manufactured at our Maanshan facility are Anhui
Province, Jiangsu Province, Zhejiang Province and Shanghai City, each in the
PRC.




Ossen
Jiujiang




On April
6, 2005, Ossen Shanghai Investment Co., Ltd., or Ossen Shanghai, acquired a
portion of the bankruptcy assets of Jiujiang Tianlong Galvanized Prestressing
Steel Strand LLC, including equipment, land use rights and inventory for
approximately $3.9 million.  Ossen Jiujiang was formed by Ossen
Shanghai in the PRC as a Sino-foreign joint venture limited liability company on
April 13, 2005.  Ossen Shanghai then transferred the newly acquired
assets to Ossen Jiujiang. At its inception, Ossen Jiujiang was owned by two
entities: 33.3% of its equity was held by Ossen Asia and 66.7% by Ossen
Shanghai.  Ossen Shanghai is a Chinese company owned by five Chinese
individuals, one of whom is a director of our subsidiary, Ossen Materials. In
June 2005, Ossen Shanghai transferred its entire interest in Ossen Jiujiang to
Topchina in exchange for approximately $2.9 million. In October 2007, Topchina
transferred 41.7% of the equity in Ossen Jiujiang to Ossen Asia for no
consideration. On December 17, 2007, Ossen Asia transferred all of its shares in
Ossen Jiujiang to Ossen Materials for no consideration.  Since that
date 75% of the equity of Ossen Jiujiang has been held by Ossen Materials and
25% by Topchina.




Through
Ossen Jiujiang, we manufacture galvanized PC wires, plain surface PC strands,
galvanized PC strands, unbonded PC strands, helical rib PC wires, sleeper PC
wires and indented PC wires.  The primary products manufactured in
this facility are our galvanized PC wires.  The primary markets for
the PC strands manufactured in our Jiujiang facility are Jiangxi Province, Wuhan
Province, Hunan Province, Fujian Province and Sichuan Province, each in the
PRC.




Organizational
Structure Chart




T he
following chart reflects our organizational structure since the date of the
business combination between Ultra Glory andthe
shareholders of Ossen Innovation Group :


19









Capital
Expenditures




Our
capital expenditures consist primarily of expenditures on property, plant and
equipment. Capital expenditures on property, plant and equipment were $2.9
million in 2007, $2.3 million in 2008 and $0.2 million in 2009. We financed our
capital expenditure requirements from the cash flows generated by our operating
activities and from short-term bank loans.  We have no current
commitments for capital expenditures.




Registered
office




The
address of our registered office in the British Virgin Islands is: Akara
Building, 24 De Castro Street, Wickhams Cay 1, Road Town, Tortola, British
Virgin Islands. The telephone number of the registered office is (284)
494-4840.


20




4B.  Business
Overview





General




Ossen is
one of the largest producers of prestressed steel materials in
China.  Our facilities are located in Maanshan City, Anhui Province
and in Jiujiang City, Jiangxi Province, in the People’s Republic of China. We
manufacture and sell an array of plain surface and rare earth galvanized
prestressed steel materials, which we believe is the most comprehensive amongst
our competitors in China.  According to the PRC PC Strand Industry
Investment and Market Operation Research Report, in 2008, our rare earth coated
PC strand products were ranked third in sales in the PRC and first in export
sales by Chinese prestressed steel manufacturers.




Ossen is
one of the leading enterprises in the PRC in the design, engineering,
manufacture and sale of customized prestressed steel materials used in the
construction of railways, highways, bridges and buildings in China and is a
member of the China Prestressed Association.  Since 2007, we have also
been one of the leading Chinese exporters of customized prestressed steel
materials to other countries, including the United States, Canada, Spain, Italy
and South Asian countries.  Currently, our best-selling products are
our plain surface PC wires and rare earth galvanized PC strands.  The
primary characteristics that make our prestressed steel products suitable for
this wide range of projects are their high strength and low relaxation
rate.  Prestressed materials of high strength and low relaxation,
which comprised approximately 80% of our revenues in 2009, are currently in high
demand in major construction projects in China.




Ossen’s
product offerings incorporate proprietary designs and are known for their high
level of reliability and performance. Our products are marketed under the
“Ossen” brand name both domestically and internationally. Our management’s core
strategy is to leverage our expertise in research and development of customized
products by providing solutions to our customers’ unique needs, as evidenced by
our continuous introduction of new product lines since our inception. We handle
all aspects of market research, product design, engineering, manufacturing,
sales and marketing.  We conduct our manufacturing operations in our
ISO 9001 manufacturing facilities in Maanshan City and Jiujiang City, in the
PRC.




Ossen
Materials, our operating subsidiary, was founded in 2004 by Ossen Shanghai and
Ossen Asia.  In 2005, we expanded our manufacturing capabilities by
acquiring a new facility in Jiujiang City in the PRC and forming Ossen
Jiujiang.  The founders of Ossen were among the first in China to
introduce and promote the use of prestressed steel materials in construction
projects. The founders of Ossen have been involved in producing prestressed
materials since 1994 and have accumulated more than 15 years of experience in
the prestressed materials industry.




We are
affiliated with the Ossen Group, which is a Chinese conglomerate controlled by
our Chairman, Dr. Tang, whose core businesses include steel manufacturing and
real estate, among others.  The annual revenue of the Ossen Group in
2009 was approximately $1.5 billion.




Our
Growth Strategy




We intend
to expand our industry position while maximizing shareholder value and pursuing
a growth strategy that includes increasing our production capacity and
strengthening our relationships with key customers, diversifying our customer
base and pursuing strategic relationships and acquisition
opportunities.




Increasing
our production capacity and developing new higher margin products.




We
believe that we will be able to increase our production capacity from 140,000
tons to 200,000 tons in the next five years.  We believe that the
expansion of our production capacity will enable us to benefit from the
continued growth in overall demand for prestressed steel materials in
China.  A significant portion of our growth would be devoted to
galvanized materials, which have higher profit margins and which we could sell
to customers in the United States because the anti-dumping measures recently
imposed by the U.S. on Chinese steel exporters do not cover these galvanized
materials.


21




Strengthening
our relationships with key customers and diversifying our customer
base.




We intend
to strengthen our relationships with key customers while further expanding our
customer base. We plan to continue providing high-quality and cost-competitive
products to our existing customers and to use our existing customer network and
strong industry reputation to expand into new regions within the PRC, beyond the
local regions in which we currently sell our products, and
internationally.  We intend to continue to use customer feedback to
improve the quality of our products and technical after-sales services and to
strengthen our long-term base of domestic and international
customers.




Pursuing
strategic relationships and acquisition opportunities




We intend
to evaluate and pursue acquisition opportunities and strategic partner
relationships which could enhance our product offerings, customer base or
geographic reach, or which could allow us to achieve economies of scale and
operating efficiencies.  We currently have no plans, agreements or
commitments with respect to any material acquisitions or strategic
relationships.




Competitive
Advantages




Our
management believes that the following competitive strengths differentiate us
from other domestic and international competitors and are the key factors to our
success:




We
are Taking Advantage of Industry Trends




Due to
the demand for new prestressed materials in infrastructure construction and the
domestic market, we believe that our industry will grow significantly for at
least the next five years. Specifically, we expectthe market for premium rare earth products, including rare earth
galvanized prestressed steel strands and wires, to grow.
  Many
reports indicate that our industry will
experience significant growthin the coming
years. For example, based on the 11th five-year plan for highway and
waterway transportation by the Ministry of Transportation of the PRC, the
government plans to invest $730 billion in the national highway network from
2009 to 2013, which drives huge demand for prestressed
materials.  Similarly, the Railway Network Plan issued by the Ministry
of Railways of the PRC has indicated that $290 billion will be invested in
railway construction from 2009 to 2013, which further drives the demands for
prestressed materials. From now until 2020, we believe that 200 new bridges will
be built on dozens of rivers in the PRC, including the Yangtze River, Yellow
River, Songhua River, Jiangxi River, Xiangjiang River, Han River, Minjiang River
and Pearl River. The bridge projects will require approximately 6 million
tons of rare earth galvanized prestressed materials in the
aggregate.
  In
addition, over the next decade, China is expected to build four cross-sea
bridges and tunnels, such as the Bohai Bay Cross-Sea Bridge, the Hong
Kong-Zhuhai-Macao Cross-Sea Bridge, the Qiongzhou Strait Bridge and the Taiwan
Strait Tunnel. These projects are expected to require approximately 8 million
tons of rare earth galvanized prestressed materials.
  The China
National Nuclear Industry Group has estimated that the PRC government will
invest approximately $60 billion by 2020 for nuclear power construction, which
would require approximately two million tons of prestressed materials. Further,
the ongoing building of a large number of rural roads, highwaysand
buildings should continue to generate significant demands for prestressed
materials.
  Leading
Provider of Customized Prestressed Steel Materials
  Ossen is
one of the leading providers in the design, engineering, manufacture and sale of
customized prestressed steel materials used in the construction of railways,
highways, bridgesand buildings in China
and exported from China. Based on our estimates, we believe that in 2008, Ossen held a market share of approximately
30% in China forcertain of its coated
prestressed steel products and 58.9% in export sales of these materials from
China. China is investing heavily in transportation infrastructure, including
railways, highways, and urban metro transit systems. Our management anticipates
a growing demand for these materials.
 22




Strong
In-House Design Capabilities




O ur design
and engineering team consists of members educated in top universities in China,
and our management team has fifteen years of industry experience on average. We
have built a recognized brand name in the industry by introducing innovative
solutions to the prestressed steel industry
in China and internationally. Our engineering team works closely with our
customers in order to understand their requirements. We have been able to
introduce new equipment to enhance cost saving and time reduction in the
construction of bridges, highways, railways and buildings, as well as numerous
other projects .




Efficient
Proprietary Production Technology




We
continually pursue technological improvements to our manufacturing processes via
our strong in-house development teams. We have been granted ten patents by the
State Intellectual Property Office of the PRC, including one invention patent
and nine utility patents. In addition, we have applied for an additional
thirteen invention patents and seven utility model patents, which are currently
pending. These patents and patent applications are intended to protect our
technologies, including production processes of various wire ropes, pickling
methods for steel wire materials and devices designed for the production of
steel wire. Our research and development efforts have generated technological
improvements that have been instrumental in controlling our production costs and
increasing our operational efficiency.




Strong
Recognition from Domestic and International Customers for Building
Projects




The solid
reputation that our management team has developed over the past 15 years in the
prestressed material industry in China and in other countries such as Canada,
the United States, South Korea, Italy and Spain, including an established track
record for consistently providing quality products at competitive prices, has
enabled us to develop a strong customer base and to be involved in major
building projects.  Some of our recent projects are listed below under
the heading “Recent Projects”.




Rigorous
Quality Control Standards




C onsistent
with our continuing commitment to quality, we impose rigorous quality control
standards at various stages of our production process.  We strictly
comply with various national and international quality standards with respect to
the manufacture of prestressed materials. Our certifications and accreditations
include the United Kingdom Accreditation Service (UKAS), the British Standards Institution (BSI)
certification, the Korean Standards
Association (KS) certification from South Korea, theMarket Access certification from the Spanish
Ministry of Industry andan ISO 9001
certification.  We believe that these certifications, together with
the numerous national awards that we have been awarded demonstrate our
commitment to producing high-quality products as well as providing us with a
competitive advantage over some of our competitors in certain international
markets and in China .




Experienced
Management and Operational Teams with Domestic PRC Market Knowledge




Our
senior management team and key operating personnel have extensive management
skills, relevant operating experience and industry knowledge.  In
particular, Dr. Tang, our Chairman, is a Doctor of Economics, Senior Engineer
and Professor of Finance and Statistics at the School of East China Normal
University, and has extensive experience managing and operating companies in the
prestressed steel industry.  We believe our management team’s
experience and in depth knowledge of the market in China will enable us to
continue to successfully execute our expansion strategies. In addition, we
believe our management team’s strong track record will enable us to continue to
take advantage of market opportunities that may arise.


23




Our
Products




Our
prestressed steel materials are categorized as plain surface products and rare
earth coated products.




Plain
Surface Products




Our plain
surface products are characterized as follows:




·
            Plain
      surface prestressed concrete, or PC, strands.  These products
      consist of PC wires that are twisted into a bundle and used as precast
      concrete plates on the riding surface of bridges.  These
      products are categorized based on size, strength and
      structure.  Sizes range from 9.3mm to
      17.8mm.  Strength level ranges from 1570MPa to
      2000MPa.  Structures vary between 1x3 and
  1x7.




·
            Unbonded
      plain surface PC strands.  These products consist of plain
      surface PC strands that are coated with grease and extruded with
      high-density polyethylene. These products are used primarily in the
      construction of bridges and
buildings.




·
            PC wires.  These
      products are further divided among the following three
      categories:




§
            Plain
      surface PC wires.  This product consists of an individual round
      wire used in the construction of
buildings.




§
            Indented
      PC wires.  This product consists of an individual round wire
      that contains an indentation used in the construction of
      buildings.




§
            Helical
      (spiral) rib PC wires.  This product consists of an individual
      round wire whose surface is pulled out into a helical rib pattern used in
      the construction of railway ties, or sleepers, and
    buildings.




P C wires
are categorized based on size, strength and structure.  Sizes range
from 4.0mm to 9.0mm.  Strength level ranges from 1570MPa(megapascal) to 2000MPa.  Structures
vary between 1x3 and 1x7 .




Rare
Earth Coated Prestressed Products




Our rare
earth coated prestressed products are characterized as follows:




·
            Rare
      earth coated PC wires.  These products are further divided as
      follows:




§
            Ф5.0
      Series, used for suspension
bridges.


§
            Ф7.0 Series,
      used for cable-stayed bridges.




·
            Rare
      earth coated PC strands, used for bridges and
  buildings.




Rare
earth coated products are plain surface materials that are galvanized, or
coated, with a rare earth zinc-plating protective layer so as to produce
materials that are more corrosion-resistant and long-lasting. The purpose of
galvanizing is to generate a surface layer to protect the materials from
erosion, abrasion and oxidization, without changing the elements of the basic
materials or weakening the basic material’s strength or other functionality
through any techniques that utilize physical chemistry or
electrochemistry.  The coating process can cause loss of strength in
regular steel materials, but the loss of strength in galvanized prestressed
products is minimal.




Customers
that purchase our prestressed materials also purchase other supporting products,
such as anchorage devices and ripple tubes, to complement our materials. These
supplementary products are produced by anchorage manufacturing factories that
are unaffiliated with us.


24


Competition


China is
one of the world’s largest producers and markets for prestressed steel
materials. In 2009, our sales were predominantly to customers located in the
PRC, and as a result, our primary competitors were PRC domestic companies. To a lesser degree,
we faced competition from international
companies.  However, as our sales to international markets increase
from 2009 levels, we expect to face increasing competition from international
companies in those markets.


We
believe that being located in China provides us with a number of competitive
factors within our industry, including the following:




·
            Pricing.  Flexibility
      to control pricing of products and the ability to use economies of scale
      to secure competitive pricing
advantages;




·
            Technology.  Ability
      to manufacture products efficiently, utilize low-cost raw materials, and
      to achieve better production quality;
and




·
            Barriers to
      entry.  Technical knowledge, access to capital, local
      market knowledge and established relationships with suppliers and
      customers to support the development of commercially viable production
      facilities and products.




Competition
among manufacturers of plain surface steel products in China can be
characterized as fragmented, with many large and small companies competing with
each other.  Our primary competitors for these products are Jiangyin
Foster, Jiangxi Xinhua, Baosteel Group Shanghai Ergang Co. Ltd. and Jiangyin
Wabin Steel Cable Co. Ltd.




Competition
among manufacturers of coated steel products in China is limited to a small
group of companies.  Our main competitors for these products are
Baosteel Group Shanghai Ergang Co. Ltd. and Jiangyin Wabin Steel Cable Co.
Ltd.  We believe that we differentiate ourselves by being an early
mover in the industry and by offering superior product quality, timely delivery
and high value. We believe that we have the following advantages over many of
our competitors:




·
            the
      performance and cost effectiveness of our
  products;




·
            our
      ability to manufacture and deliver products in required volumes, on a
      timely basis, and at competitive
prices;




·
            superior
      quality and reliability of our
products;




·
            our
      after-sale support capabilities, from both an engineering and an
      operational perspective;




·
            effectiveness
      of customer service and our ability to send experienced operators and
      engineers as well as a seasoned sales force to assist our customers;
      and




·
            overall
      management capability.





Seasonality




Demand
for our products remains fairly consistent throughout the year.




Our
Raw Materials and Supply




Raw
Materials




High
carbon steel wire rods are the primary raw material required to manufacture
prestressed steel materials. The quality and cost of the rods we purchase
differs between our plain surface products and our coated products. Coated products require higher-priced rods that
are higher in purity and durability.  The price for certain rods
needed for coated products is approximately
$150 per ton higher than rods needed for plain surface products.  B87
MnQL, a type of high carbon steel wire rod, is the most expensive material that
we purchase from Chinese suppliers, costing as much as approximately $1,000 per
ton.  DLP, a type of high carbon steel wire rod that we import from
Japan, is the most expensive material that we purchase overall, costing as much
as approximately $1,500 per ton.
 25




Our
Supply Sources




We select
our suppliers by assessing criteria such as the quality of materials supplied,
the duration of the supplier’s business relationship with us, pricing, delivery
reliability and response time to orders placed by us.  To minimize
purchasing costs, we use a limited number of suppliers.  Because we
purchase substantial quantities from these suppliers, we are often able to
procure these products at competitive prices.  We usually enter into a
one-year purchase agreement with each supplier and then order on a spot basis
for each delivery.  We negotiate pricing with our suppliers on an
arm’s length basis prior to the delivery of these supplies to us, based upon the
prevailing market prices at such time.  As we increase the scale of
our production, we may need to establish a more diverse supplier network while
attempting to continue to leverage our purchasing power to obtain favorable
pricing and delivery and payment terms.




Historically,
we have purchased a significant percentage of our raw materials from an
affiliated entity, Shanghai Z.F.X. Steel Co., Ltd., or Shanghai ZFX, a supplier
of steel wire rods, which is controlled by our chairman, Dr. Tang.  In
2008 and 2009, we purchased approximately 26.2% and 12.8% of our raw materials
from Shanghai ZFX, respectively.  We expect that we will continue to
purchase the bulk of our supplies from unaffiliated suppliers in the future, as
we did in 2009.




The three
suppliers that are unaffiliated with us that supplied us with a significant
percentage of our raw materials in 2008 or 2009 were Zhangjiagang Free Trade
Zone JinDe Trading Co., Ltd., Jiangsu Shagang and LiaoNing TongDa Building
Material Industrial, all based in China.




In 2008,
purchases from our four largest suppliers, in the aggregate, accounted for
approximately 77.7% of our total cost of supplies.  In 2009, purchases
from our four largest suppliers, in the aggregate, accounted for approximately
84.9% of our total cost of supplies.




We are
not dependent on any one of our suppliers, as we are able to source raw
materials from alternative vendors should the need arise.  We have not
experienced significant production disruptions due to a supply shortage from our
suppliers, nor have we had any major dispute with a material
supplier.




Volatility
of Price of Raw Materials




We have
no long-term, fixed-price steel purchase contracts.  When steel prices
increase, as they did in 2008, competitive conditions will influence how much of
the price increase we can pass on to our customers.  When steel prices
decline, as they did in the fourth quarter of 2008 and through the first half of
2009, customer demands for lower prices and our competitors' responses to those
demands could result in lower sale prices, lower margins and inventoryvalued at lower of cost or market adjustments as
we use existing steel inventory.


Manufacturing
Process




Equipment




Our
production facilities use innovative equipment and machinery imported from
France and Italy and is of the highest quality in metal wire drawing, wire
stranding, zinc plating and finishing. Our production lines produce prestressed
steel materials that meet quality standards mandated by numerous countries,
including Spain, the United Kingdom and South Korea.


26


We own
cutting edge technologies in over 20 high-tech fields, including oil-immersion
preservation technology, new coating production technology, skin pass coating
technology, coating stabilization technology, rare earth alloy plating
technology, new high-temperature phosphorization heating technology, new
material traction technology, rare earth alloy technology, new fixed scoring
technology, new high-temperature low-speed thread stripping technology, and
double coating stabilization, among others.  We believe that we are
the leading company in our industry with respect to the implementation of
innovative technologies in the manufacture of prestressed steel
materials.




Production
Process




The
production of our products involves various steps, including inspection,
pickling, washing, rinsing, phosphatizing, boronizing, surface treatment,
plating, baking, coating, cooling, polishing, inspection and
packaging.  The technology and procedures used in the above processes
vary among the different products that we manufacture and depend upon the
product specifications prescribed by a particular customer.




Generally,
the manufacturing process involves the following:




·
            Cleaning
      steel wire rods or other similar raw materials by chemical pickling,
      mechanical de-scaling or a similar process.  The materials are
      then cold drawn and reduced until the desired diameter and resistance
      characteristics are achieved. This process is what provides the material
      with its strength.




·
            In
      the production of strands, the individual wires (either 3 or 7 wires) are
      braided together to form a strand.




·
            The
      final step is to subject the steel material to a thermo-chemical process
      which endows the material with mechanical properties, such as low
      relaxation, which enable the material to last over
  time.




Production
Lines




We
currently have 18 production lines, consisting of the following:




·
            Two
      surface treatment production lines, one located in our Maanshan facility
      and one in our Jiujiang facility, each composed of an acid pickling bath,
      rinsing bath, high pressure water rinsing bath, phosphating bath,
      saponification (boronizing) bath and cleaning
  bath.




·
            Seven
      wire drawing production lines, four located in our Maanshan facility and
      three in our Jiujiang facility, each composed of a pay-off machine, drawn
      can and take-up machine. Each of our half-finished products is processed
      on a wire drawing production line.




·
            Three
      PC strand stabilization treatment production lines, two located in our
      Maanshan facility and one in our Jiujiang facility, each composed of
      stranding machines, straightening wheels, jockey wheels, medium frequency
      furnace, cooling tank, take-up and pay-off machines, a wire arraying
      machine and a layer winding machine.  The PC strand
      stabilization product lines in our Jiujiang facility produce plain surface
      PC strands and galvanized PC strands of various
      specifications.




·
            One
      zinc galvanization production line, located in our Jiujiang facility,
      composed of a pay-off machine, degreasing furnace, acid rinsing pickling
      tank, assistant plating tank, drying furnace, galvanizing furnace, drawing
      tower and take-up machine. Half-finished products needed for different
      series of rare earth galvanized PC wires and strands are produced on this
      line.




·
            Two
      surface finishing production lines, both located in our Jiujiang facility,
      each composed of a pay-off machine, a finishing machine and a take-up
      machine. These production lines are used to produce half-finished products
      of rare earth galvanized PC wires and
strands.




27


·
            Two
      PC wire stabilization treatment production lines, both located in our
      Jiujiang facility, each composed of a pay-off machine, jockey wheel,
      straightening machine, indent marking machine, medium frequency furnace,
      cooling tank, towing machine, shearing machine and take-up machine. Zinc
      galvanized PC wires, round PC wires, indented PC wires and helical rib PC
      wires are produced on these production
lines.




·
            One
      unbonded PC strand production line, located in our Jiujiang facility,
      composed of a pay-off machine, oiling machine, high-density polyethylene
      plastic injection machine, water tank, towing machine and take-up machine.
      This production line is used to produce different series of unbonded plain
      surface PC strands and unbonded galvanized PC
  strands.




Quality
Control




Consistent
with our continuing commitment to quality, we impose rigorous quality control
standards at various stages in the production process.  In addition,
our facilities are equipped with first-class testing equipment, such as a
tensile strength tester and a relaxation tester, which guarantee the high
quality and safety of our products.




We
strictly comply with various national and international quality standards with
respect to the manufacture of pre-stressed materials. Our certifications and
accreditations include the United Kingdom Accreditation Service (UKAS), the British Standards Institution (BSI)
certification, the Korean Standards
Association (KS) certification from South Korea, Market Access certification
from the Spanish Ministry of Industry andan ISO 9001 certification.


Our
procedure when discovering any product quality problem in the production process
includes immediate shut down for inspection. Once the problem is solved, we
continue with production.  If a problem occurs with a product, the
product inspector stamps a nonconformity seal and hangs a nonconformity label on
the problematical product. The nonconforming product is moved to a separate area
and is not transferred to the next procedure. We do not deliver nonconforming
products to users.




Sales,
Marketing and Distribution


Sales
and Marketing




We have
been successful to date in maintaining long-term relationships with numerous
customers by satisfying their commercial needs. In addition, our marketing team
monitors the market and responds accordingly in order to increase our customer
base. We have a dedicated marketing and sales team of 11 employees that
proactively follows up on new sales leads.




Our
marketing team develops strategies for the short-term and long-term by obtaining
first-hand information about our products’ market positioning, monitoring
national macro-economic policies, inquiring about current and future markets
needs, following the progress of existing projects and the satisfaction of
existing customers.  In addition, our technicians and marketing
specialists regularly visit governmental departments, construction development
companies, design institutes, supervision institutions, national construction
quality inspection institutions and builders to promote new
products.  We have also joined the PRC national bridge exhibition for
marketing purposes.




Distribution




Both of
our manufacturing plants are equipped with facilities for cargo lifting,
shipment and distribution. Products for domestic customers are distributed to
the destination designated by our customers. Products for international
customers are delivered either to carriers at various ports of exit in China or
delivered to a designated destination overseas.


28




Technical
After-Sales Services




Our team
of experienced engineers and technicians provides after-sales services to our
customers.  After the delivery of our materials, our engineers train our
customers to install and identify and address safety and maintenance
concerns.  After a sale of our product, we introduce and advertise the
company brand position, distribute a guide application method process, issue
regulation manuals, and explain and solve general and difficult
problems.




Our
Customers


We sell
the majority of our products domestically in China.  Since our
inception, we have also exported our products to foreign countries, including
the United States, Spain, South Korea and Saudi Arabia, among
others.  Our customers are diverse in nature, as we sell our products
directly to end users, to other manufacturers and to distributors, in each case
depending on the nature of the product and the utilization of the
product.




The six
customers whose purchases comprised a significant percentage of our sales in
2008 or 2009 were Shanghai Zhaoyang New Metal Material (China), the Crispin
Corporation (United States), Ibercordones Pretensados (Spain), National Metal
Manufacturing and Casting Co. (Saudi Arabia), Zhangjiagang Ruifeng Iron and
Steel Co. (China) and Hada Railway Passenger Dedicated Lines
(China).  In anticipation of the imposition of anti-dumping rates by
the U.S. and the European Union, which were ultimately implemented in 2009, we
discontinued sales of our plain surface materials to Crispin, Ibercordones and
our other customers in those regions at the end of 2008.




In 2008
and 2009, sales to our six largest customers, in the aggregate, accounted for
approximately 80.8% and 86.6% of our total sales, respectively.




The
following table describes the breakdown of our sales in 2008 and 2009 between
our domestic and international customers.




Year ended December 31,2009
                  
                  
                  2008Domestic
      Sales
                  
                  $
                  97,361,596
                  
                  
                  $
                  51,611,646International
      Sales
                  
                  
                  3,726,200
                  
                  
                  
                  31,130,664Total
      Sales
                  
                  $
                  101,087,796
                  
                  
                  $
                  82,742,310





Recent
Projects


The
following list is a sample of some of the recent projects in which our
prestressed steel materials were used in both the domestic and the international
markets:




Nanchang
      New Bayi Bridge, PRC
              
              Jiujiang-Lushan
      Railway Project, PRC
              
              Hefei-Bangbu
      Passenger Dedicated Line, PRC
              
              Beijing-Shanghai
      Express Rail, PRCShenzhan
      Bay Bridge, PRC
              
              Boyang
      Lake Railway Bridge, PRC
              
              Wenfu
      Railway, PRC
              
              Wuhan-Guangzhou
      Railway, PRCPantian
      Highway, PRC
              
              Shanghai
      No. 6 Subway, PRC
              
              Nanjing-Hangzhou
      Passenger Dedicated Line, PRC
              
              Yunnan
      Shi-Suo Expressway, PRCAlameda
      Corridor  Turnpike, Alameda, California, U.S.A.
              
              MGM
      Grand Parking, Las Vegas, Nevada, U.S.A.
              
              Dallas
      Center of Performing Arts, Dallas, Texas, U.S.A.
              
              Trois
      Rivieres Grand Anchors, CanadaNam
      Chang Bridge, South Korea
              
              Parking
      Apron in the Cadiz Airport, Spain
              
              Grand
      Hyatt San Antonio, Texas, U.S.A.
              
              Trump
      Tower, Las Vegas, Nevada,
U.S.A.


29


Intellectual
Property


We rely
on a combination of patents, trademarks, domain names and confidentiality
agreements to protect our intellectual property. Our manufacturing processes are
based on technology developed primarily in-house by our research and development
and engineering personnel.




With
respect to proprietary know-how that is not patentable and processes for which
patents are difficult to enforce, we rely on, among other things, trade secret
protection and confidentiality agreements to safeguard our interests. All of our
research and development personnel have entered into confidentiality and
proprietary information agreements with us. These agreements address
intellectual property protection issues and require our associates to assign to
us all of the inventions, designs and technologies they develop during the
course of employment with us.  We are not aware of any material
infringement of our intellectual property rights.




Patents




We have
been granted ten patents by the State Intellectual Property Office of the PRC,
including one invention patent and nine utility patents. In addition, we have
applied for an additional thirteen invention patents and seven utility model
patents, which are currently pending. Actual examination times for patent
applications in China vary, but examinations of similar patent applications have
taken approximately one year. These patents and patent applications are intended
to protect the production processes of various wire ropes, pickling methods of
materials of steel wire and devices designed for the steel wire production. The
term of all of the utility model patents is ten years from the filing of
the application and the term of all of the invention patents is twenty years
from the filing of the application.  We currently do not have any
patents registered or pending in any jurisdiction outside of the
PRC.
  The
following table provides the name, application number or patent number, the
applicant or patent holder and the status
of each of our invention patents and invention patent applications and the
expiration date of our registered invention patent:


Name
                                                        
                                                        ApplicationNo.
                                                          /Patent No.
                                                        
                                                        Applicant
                                                          /Patent
                                                          Holder
                                                        
                                                        Status
                                                        
                                                        Expiration
                                                          DateStabilizing
      Process of Indented Wire
                                                        
                                                        2007101571490
                                                        
                                                        Ossen
      Jiujiang
                                                        
                                                        Registered
                                                        
                                                        11/23/2027Method
      to Change the Length of Waste of Stranded Wire Joint
                                                        
                                                        200910144241.2
                                                        
                                                        Ossen
      Materials
                                                        
                                                        Pending
                                                        
                                                        -Stirring
      & Pickling Process of Raw Materials of Stranded Wire
                                                        
                                                        200910144242.7
                                                        
                                                        Ossen
      Materials
                                                        
                                                        Pending
                                                        
                                                        -Multi-Bath
      Pickling Process of Materials of Stranded Wire
                                                        
                                                        200910144243.1
                                                        
                                                        Ossen
      Materials
                                                        
                                                        Pending
                                                        
                                                        -Production
      Process of Galvanized Steel Wire
                                                        
                                                        2010101051799
                                                        
                                                        Ossen
      Jiujiang
                                                        
                                                        Pending
                                                        
                                                        -Production
      Process of Helical Rib Steel Wire
                                                        
                                                        2010101051534
                                                        
                                                        Ossen
      Jiujiang
                                                        
                                                        Pending
                                                        
                                                        -Production
      Process of Pre-stressed Galvanized Stranded Wire
                                                        
                                                        2010101052062
                                                        
                                                        Ossen
      Jiujiang
                                                        
                                                        Pending
                                                        
                                                        -




30




Name
                                        
                                        ApplicationNo.
                                          /Patent No.
                                        
                                        Applicant
                                          /Patent
                                          Holder
                                        
                                        Status
                                        
                                        Expiration
                                          DateStabilizing
      Production Process of High Strength Pre-stressed Rare Earth Coated Steel
      Wire
                                        
                                        2010101051784
                                        
                                        Ossen
      Jiujiang
                                        
                                        Pending
                                        
                                        -Precision
      Measurement Instrument for measuring Indented Depth of Pre-stressed
      Indented Steel Wire
                                        
                                        2010201102461
                                        
                                        Ossen
      Jiujiang
                                        
                                        Pending
                                        
                                        -Double-Pump
      Spray Device of Galvanized Steel Wire’s Coating- Assistant
      Tank
                                        
                                        2010201102599
                                        
                                        Ossen
      Jiujiang
                                        
                                        Pending
                                        
                                        -Device
      Designed to Remove Dust of High Strength Pre-stressed Rare Earth Coated
      Steel Wire
                                        
                                        2010201102654
                                        
                                        Ossen
      Jiujiang
                                        
                                        Pending
                                        
                                        -A
      New Dual-Conical-Surfaces Self-locking Power Lock
                                        
                                        2010201102809
                                        
                                        Ossen
      Jiujiang
                                        
                                        Pending
                                        
                                        -A
      New Stranding Pulley Designed for Production of High Strength Pre-stressed
      Rare Earth Coated Steel Wire
                                        
                                        201020117245x
                                        
                                        Ossen
      Jiujiang
                                        
                                        Pending
                                        
                                        -Stabilizing
      Temperature Alarm Control Device for High Strength Pre-stressed Rare Earth
      Coated Steel Wire
                                        
                                        2010201172407
                                        
                                        Ossen
      Jiujiang
                                        
                                        Pending
                                        
                                        -




The
following table provides the name, application number or patent number, the
applicant or patent holder and the status of each of our utility model patents
and utility model patent applications and the expiration date of our registered
utility model patents:




Name
                                                            
                                                            ApplicationNo.
                                                              /Patent No.
                                                            
                                                            Applicant
                                                              /Patent
                                                              Holder
                                                            
                                                            Status
                                                            
                                                            Expiration
                                                              DateLoose
      Tensile Test Device for Pre-stressed Steel Wire
                                                            
                                                            ZL200720192927.0
                                                            
                                                            Ossen
      Materials
                                                            
                                                            Registered
                                                            
                                                            12/03/2017Hanging
      Box Used in Phosphate Bath of Stranded Wire
                                                            
                                                            ZL200820185077.0
                                                            
                                                            Ossen
      Materials
                                                            
                                                            Registered
                                                            
                                                            08/22/2018Oiling
      Device for Pre-stressed Stranded Wire
                                                            
                                                            ZL200820185079.x
                                                            
                                                            Ossen
      Materials
                                                            
                                                            Registered
                                                            
                                                            08/22/2018Water
      Cut-off Device to Test Infrared Temperature of Stranding
      Machine
                                                            
                                                            ZL200820185080.2
                                                            
                                                            Ossen
      Materials
                                                            
                                                            Registered
                                                            
                                                            08/22/2018Infrared
      Safety Control Device for Lift Truck
                                                            
                                                            ZL200820185081.7
                                                            
                                                            Ossen
      Materials
                                                            
                                                            Registered
                                                            
                                                            08/22/2018Device
      Designed to Control Smoke by Temperature
                                                            
                                                            ZL200820185082.1
                                                            
                                                            Ossen
      Materials
                                                            
                                                            Registered
                                                            
                                                            08/22/2018Device
      Designed to Control Water Temperature When Phosphatizing the Pre-stressed
      Stranded Wire
                                                            
                                                            200920233724.5
                                                            
                                                            Ossen
      Materials
                                                            
                                                            Pending
                                                            
                                                            -Device
      for Testing Center Steel Wire Broken for Stranded Wire
                                                            
                                                            200920233725.x
                                                            
                                                            Ossen
      Materials
                                                            
                                                            Pending
                                                            
                                                            -




31




Name
                                              
                                              ApplicationNo.
                                                /Patent No.
                                              
                                              Applicant
                                                /Patent
                                                Holder
                                              
                                              Status
                                              
                                              Expiration
                                                DateDevice
      Designed to Test Temperature of Steel Wire When Drawing the Stranded
      Wire
                                              
                                              200920233726.4
                                              
                                              Ossen
      Materials
                                              
                                              Pending
                                              
                                              -Steel
      Wire Joint Machine with Pressure Detecting Function
                                              
                                              200920233728.3
                                              
                                              Ossen
      Materials
                                              
                                              Pending
                                              
                                              -Automatic
      Paper Rolling Device of Asphalt Paper
                                              
                                              200920233729.8
                                              
                                              Ossen
      Materials
                                              
                                              Pending
                                              
                                              -Aerial
      Overhaul Platform for Forklift
                                              
                                              200920233730.0
                                              
                                              Ossen
      Materials
                                              
                                              Pending
                                              
                                              -Skid
      Used When Packing Pre-stressed Stranded Wire
                                              
                                              200920233731.5
                                              
                                              Ossen
      Materials
                                              
                                              Pending
                                              
                                              -Cooling
      Device Designed for the Cutter Bit for Indentation Used for Production of
      Pre-stressed Indented Wire
                                              
                                              ZL200720192974.x
                                              
                                              Ossen
      Jiujiang
                                              
                                              Registered
                                              
                                              12/03/2017Adjustable
      Ingress Pipe of Steel Wire-rewinding Machine
                                              
                                              ZL200720192973.5
                                              
                                              Ossen
      Jiujiang
                                              
                                              Registered
                                              
                                              12/03/2017A
      Control Device for Alarming the Coating Leakage on the Galvanized
      Production Line
                                              
                                              ZL200720192533.x
                                              
                                              Ossen
      Jiujiang
                                              
                                              Registered
                                              
                                              11/23/2017




Trademarks


We have
been granted a total of five trademarks, three of which are registered
trademarks in the PRC and two of which are registered with the World
Intellectual Property Organization (WIPO) in accordance with Madrid Agreement.
The five trademarks were transferred by Ossen Shanghai to Ossen Materials in
2008 and 2009.




Name of Trademark
                          
                          Application
      No.
                            /Trademark No.
                          
                          Applicant
                            /Trademark
                            Holder
                          
                          StatusA
      Figurative Trademark(Registered under Madrid Agreement)
                          
                          0973552
                          
                          Ossen
      Materials
                          
                          Registered“OSSEN”(
      Registered under Madrid Agreement)
                          
                          0945308
                          
                          Ossen
      Materials
                          
                          RegisteredA
      Figurative Trademark (PRC Domestic Registered)
                          
                          4396898
                          
                          Ossen
      Materials
                          
                          Registered“OSSEN”
      (PRC Domestic Registered)
                          
                          4396895
                          
                          Ossen
      Materials
                          
                          Registered“” (Domestic Registered)
                          
                          4396896
                          
                          Ossen
      Materials
                          
                          Registered





32




Environmental
Matters




The
Environmental Protection Law, promulgated by the National People’s Congress on
December 26, 1989, is the primary law for environmental protection in
China.  The law establishes basic principles for coordinated
advancement of economic growth, social progress and environmental protection,
and defines the rights and duties of governments at all levels.  Local
environmental protection bureaus may set stricter local standards than the
national standards and enterprises are required to comply with the stricter of
the two sets of standards.  Due to the nature of our business, we
produce certain amounts of waste water, gas and solid waste materials during the
course of our production.  We believe that we are in compliance in all
material respects with applicable PRC laws and regulations, as we do not produce
any hazardous materials.  All of our products meet the relevant
environmental requirements under PRC laws and we have not been subject to any
fines or legal action involving non-compliance with any relevant environmental
regulation, nor are we aware of any threatened or pending action, including by
any environmental regulatory authority.




Governmental
Regulations




Business
license




Any
company that conducts business in the PRC must have a business license that
covers a particular type of work. Our business license covers our present
business of manufacturing, processing, procuring and selling metallic materials,
metallic products, new alloy materials, rare earth application products,
building materials, general machinery and related products. Prior to expanding
our business beyond that of our business license, we are required to apply and
receive approval from the PRC government.




Employment
laws




We are
subject to laws and regulations governing our relationship with our employees,
including: wage and hour requirements, working and safety conditions,
citizenship requirements, work permits and travel restrictions. These include
local labor laws and regulations, which may require substantial resources for
compliance. China’s National Labor Law, which became effective on January 1,
1995, and China’s National Labor Contract Law, which became effective on January
1, 2008, permit workers in both state and private enterprises in China to
bargain collectively. The National Labor Law and the National Labor Contract Law
provide for collective contracts to be developed through collaboration between
the labor union (or worker representatives in the absence of a union) and
management that specify such matters as working conditions, wage scales, and
hours of work. The laws also permit workers and employers in all types of
enterprises to sign individual contracts, which are to be drawn up in accordance
with the collective contract.




Patent
protection in China




The PRC
has domestic laws for the protection of copyrights, patents, trademarks and
trade secrets.  The PRC is also signatory to some of the world’s major
intellectual property conventions, including:




·
            Convention
      establishing the World Intellectual Property Organization (WIPO
      Convention) (June 4, 1980);




·
            Paris
      Convention for the Protection of Industrial Property (March 19,
      1985);




·
            Patent
      Cooperation Treaty (January 1, 1994);
and




·
            The
      Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs)
      (November 11, 2001).


33




Patents
in the PRC are governed by the China Patent Law and its Implementing
Regulations, each of which went into effect in 1985.  Amended versions
of the China Patent Law and its Implementing Regulations came into effect in
2001 and 2003, respectively.




The PRC
is signatory to the Paris Convention for the Protection of Industrial Property,
in accordance with which any person who has duly filed an application for a
patent in one signatory country shall enjoy, for the purposes of filing in the
other countries, a right of priority during the period fixed in the convention
(12 months for inventions and utility models, and 6 months for industrial
designs).




The
Patent Law covers three kinds of patents - patents for inventions, utility
models and designs. The Chinese patent system adopts the principle of first to
file, which means that a patent may be granted only to the person who first
files an application. Consistent with international practice, the PRC allows the
patenting of inventions or utility models that possess the characteristics of
novelty, inventiveness and practical applicability only. For a design to be
patentable it cannot be identical with, or similar to, any design which, before
the date of filing, has been publicly disclosed in publications in the country
or abroad or has been publicly used in the country, and should not be in
conflict with any prior right of another.




Value
added tax




Pursuant
to the Provisional Regulation of China on Value Added Tax and their implementing
rules, all entities and individuals that are engaged in the sale of goods, the
provision of repairs and replacement services and the importation of goods in
China are generally required to pay VAT at a rate of 17.0% of the gross sales
proceeds received, less any deductible VAT already paid or borne by the
taxpayer. Furthermore, when exporting goods, the exporter is entitled to a
portion, or in some instances all, of the VAT refund that the exporter
previously paid.




Foreign
currency exchange




Under the
PRC foreign currency exchange regulations applicable to us, the Renminbi is
convertible for current account items, including the distribution of dividends,
interest payments, and trade and service-related foreign exchange transactions.
Conversion of Renminbi for capital account items, such as direct investment,
loan, security investment and repatriation of investment, however, is still
subject to the approval of the PRC State Administration of Foreign Exchange, or
SAFE. Foreign-invested enterprises may buy, sell and/or remit foreign currencies
only at those banks authorized to conduct foreign exchange business, after
providing valid commercial documents and, in the case of capital account item
transactions, obtaining approval from SAFE. Capital investments by
foreign-invested enterprises outside of China are also subject to limitations,
which include approvals by the Ministry of Commerce, SAFE and the State Reform
and Development Commission.




Mandatory
statutory reserve and dividend distributions




Under
applicable PRC regulations, foreign-invested enterprises in China may pay
dividends out of their accumulated profits only, if any, as determined in
accordance with PRC accounting standards and regulations. In addition, a
foreign-invested enterprise in China is required to set aside at least 10% of
its after-tax profit based on PRC accounting standards each year for its general
reserve until the cumulative amount of such reserve reaches 50% of its
registered capital. These reserves are not distributable as cash dividends. The
board of directors of a foreign-invested enterprise has the discretion to
allocate a portion of its after-tax profits to staff welfare and bonus funds,
which may not be distributed to equity owners except in the event of
liquidation.




Capital
Expenditures




Our
capital requirements are dependent on many factors, including working capital
requirements to finance the growth of our company, the allocation of resources
to our research and development efforts, and our marketing and sales activities.
We anticipate continuing to engage in capital spending consistent with
anticipated growth in our operations.


34




4C.  Organizational
Structure




See
“—History and Development of the Company” above in subsection A of Item 4 for a
description of our organizational structure.




4D.  Property,
Plants and Equipment




Under PRC
law, land is owned by the state.  “Land use rights” are granted to an
individual or entity after payment of a land use right fee is made to the
applicable state or rural collective economic organization. Land use rights
allow the holder the right to use the land for a specified long-term
period.




We have
land-use rights for facilities at two locations in the PRC, one in Maanshan
City, Anhui Province and one in Jiujiang City, Jiangxi Province, which are
utilized for production, research and development and employee living
quarters.  We have paid all amounts relating to these properties. The
land-use rights for our Maanshan facility expires in 2058 and the rights for our
Jiujiang facilities expire at different intervals ranging from 2055 to
2057.  Our facilities cover an aggregate of approximately 106,136
square meters.




As of
December 31, 2009, our production facility in Maanshan City had a total gross
floor area of approximately 47,356 square meters and we employed 63 production
personnel at that facility. Our Maanshan facility contained seven production
lines with an annual production capacity of approximately 80,392 tons in
2009.  As of December 31, 2009, our production facility in Jiujiang
City had a total gross floor area of approximately 58,780 square meters and we
employed 65 production personnel at that facility. Our Jiujiang facility
contained eleven production lines with an annual production capacity of
approximately 46,495 tons in 2009. Historically, we have not experienced any
form of disruption in our production facilities.




Our
primary products are plain surface PC strands and galvanized PC
wires.




Due to
the nature of our business, we produce certain amounts of waste water, gas and
solid waste materials during the course of our production.




We
believe that our current property rights are sufficient for our current
operations. However, to continue growth, we expect to expand our production
capacity in the future.




ITEM
      4A.
            UNRESOLVED
      STAFF COMMENTS




Not
applicable




ITEM
      5.
            OPERATING
      AND FINANCIAL REVIEW AND PROSPECTS




The
following discussion and analysis should be read in conjunction with our
consolidated financial statements, the notes to those financial statements and
other financial data that appear elsewhere in this report. In addition to
historical information, the following discussion contains forward-looking
statements based on current expectations that involve risks and uncertainties.
Actual results and the timing of certain events may differ significantly from
those projected in such forward-looking statements due to a number of factors,
including those set forth in “Risk Factors” and elsewhere in this report. Our
consolidated financial statements are prepared in conformity with U.S.
GAAP.


35




5A.  Operating
Results




Overview




General




Ossen is
one of the largest producers of prestressed steel materials in
China.  Our facilities are located in Maanshan City, Anhui Province
and in Jiujiang City, Jiangxi Province, in the People’s Republic of China. We
manufacture and sell an array of plain surface and rare earth galvanized
prestressed steel materials, which we believe is the most comprehensive amongst
our competitors in China.  According to the PRC PC Strand Industry
Investment and Market Operation Research Report, in 2008, our high strength, low relaxation products were
ranked third in sales in the PRC and ranked first in export sales by Chinese
prestressed steel manufacturers.


On
July 7, 2010, Ultra Glory and its sole shareholder entered into a share
exchange agreement with Ossen Innovation Materials Group Co., Ltd., or Ossen
Innovation Group, a British Virgin Islands limited liability company organized
on April 30, 2010 under the BVI Companies Act, 2004 and the shareholders of
Ossen Innovation Group. Pursuant to the share exchange agreement, Ultra Glory
acquired from the shareholders of Ossen Innovation Group all of the issued and
outstanding shares of Ossen Innovation Group, in exchange for an aggregate of
10,000,000 newly issued ordinary shares issued by Ultra Glory to the
shareholders of Ossen Innovation Group.  In addition, the sole
shareholder of Ultra Glory sold all of the 5,000,000 ordinary shares of Ultra
Glory that were issued and outstanding prior to the business combination, to the
shareholders of Ossen Innovation Group for cash, at a price of $0.03 per
share.  As a result, the individuals and entities that owned shares of
Ossen Innovation Group prior to the business combination acquired 100% of the
equity of Ultra Glory, and Ultra Glory acquired 100% of the equity of Ossen
Innovation Group.  Ossen Innovation Group is now a wholly owned
subsidiary of Ultra Glory.  In conjunction with the business
combination, Ultra Glory filed an amended charter, pursuant to which Ultra Glory
changed its name to Ossen Innovation Co., Ltd, changed its fiscal year end to
December 31 and increased its authorized shares to 100,000,000.  Upon
the consummation of the business combination, we ceased to be a shell
company.




Important
Factors Affecting our Results of Operations and Existing Trends




International
sales and product mix




Our
results of operations depend in part on the proportion of international sales to
domestic sales that we attain during a particular financial reporting
period.  Sales to international customers generally generate higher
profit margins for us.  In addition, our international customers
generally pay by letter of credit, which enables us to convert accounts
receivable into cash more quickly.  Our domestic customers generally
pay approximately 40 days after receiving the materials at the construction
site.  In 2008, we sold 49.4% of our products to international
customers.  However, in 2009, we sold only 4.3% of our products to
international customers, as a result of the global economic and financial crisis
and the imposition of anti-dumping duties by the U.S. and the European
Union.




Our
results of operations also depend on the product mix that we attain during a
particular financial reporting period.  We produce and sell products
according to customer orders.  The prices of our rare earth coated products are higher than the prices of our
plain surface products because of their antiseptic property and the long service
life of the finished products constructed with these materials, such as
buildings and bridges. Since the increase in our
expenses in developing and selling coated materials is less than the increased
sales prices, these products generate higher revenues than our plain
surface materials.




To
counter the adverse impacts brought by the global financial and economic crisis
in 2009, we adjusted our strategy by increasing sales to PRC customers in an
attempt to take advantage of the RMB 4 trillion stimulus package announced by
Chinese government to stimulate the domestic PRC economy.  In 2009, we
sold many of our products for use in numerous infrastructure construction
projects in the PRC, including bridges, inter-city high speed railways and
expressways.  These projects generally required our rare earth coated materials.  As a percentage of
overall sales, sales of our rare earth coated products increased from 4.8% in 2008 to
25.4% in 2009, as discussed under “—Results of Operations” below.  Our
plan is to continue to increase sales of our rare earth coated products, both in the PRC and
internationally, in order to increase our revenues and profits.  We
intend to sell these products in the U.S. in future periods as well, since rare
earth galvanized products are not subject to the anti-dumping measures imposed
by the U.S.




Favorable
price and terms for supply of principal raw materials




Our
principal raw material is high carbon steel wire rods that we typically purchase
from multiple primary steel producers. The steel industry as a whole is cyclical
and, at times, pricing and availability of steel can be volatile due to numerous
factors beyond our control, including general domestic and international
economic conditions, labor costs, sales levels, competition, levels of inventory
held by us and other steel service centers, consolidation of steel producers,
higher raw material costs for steel producers, import duties and tariffs and
currency exchange rates. This volatility can significantly affect the
availability and cost of raw materials for us.


36




We, like
many other steel service centers, maintain substantial inventories of steel to
accommodate the short lead times and just-in-time delivery requirements of our
customers. Accordingly, we purchase steel in an effort to maintain our inventory
at levels that we believe to be appropriate to satisfy the anticipated needs of
our customers based upon historic buying practices, supply agreements with
customers and market conditions. Our commitments to purchase steel are generally
at prevailing market prices in effect at the time we place our orders. We have
no long-term, fixed-price steel purchase contracts. When steel prices increase,
as they did in 2008, competitive conditions will influence how much of the price
increase we can pass on to our customers. To the extent we are unable to pass on
future price increases in our raw materials to our customers, the net sales and
profitability of our business could be adversely affected.




When
steel prices decline, as they did in the fourth quarter of 2008 and through the
first half of 2009, customer demands for lower prices and our competitors'
responses to those demands could result in lower sale prices and, consequently,
lower margins. Significant or rapid declines in steel prices or reductions in
sales volumes could result in us incurring inventory or goodwill impairment
charges. Changing steel prices therefore could significantly impact our net
sales, gross margins, operating income and net income.




We
currently purchase almost all of our new materials from a very small number of
suppliers.  Purchases from our four largest suppliers amounted to 77.0% and 84.9% of our total cost of supplies in 2008 and
2009, respectively.  To date we have been able to obtain favorable
pricing and delivery terms from these suppliers.  However, as we
continue to increase the scale of our production, we may need to further
diversify our supplier network and, as a result, may not be able to obtain
favorable pricing and delivery terms from new suppliers.
  Production
capacity




In order
to capture additional market share for our products, we have expanded over the
past several years, and plan to continue to expand, our production
capacity.  We are currently producing at nearly full
capacity.  Increased capacity has had, and could continue to have, a
significant effect on our results of operations, by allowing us to produce and
sell more products to generate higher revenues and profits.




Growth
of the Chinese economy




We
operate our manufacturing facilities in China and derive the majority of our
revenues from sales to customers in China. As such, economic conditions in China
affect virtually all aspects of our operations, including the demand for our
products, the availability and prices of our raw materials and our other
expenses. According to the National Bureau of Statistics of China, China has
experienced significant economic growth, achieving a CAGR, of 12.1% in gross
domestic product from 1997 through 2007. Domestic demand for, and consumption
of, prestressed steel products has increased substantially as a result of this
growth. We anticipate that the demand for our materials in China will continue
to increase as the Chinese government carries out its stimulus plan and other
plans to further develop the transportation infrastructure in the PRC. However,
any adverse changes in economic conditions or regulatory environment in China
may have a material adverse effect on our future performances.




Level
of income tax and preferential tax treatment




Our net
income is affected by the income tax that we pay and any preferential tax
treatment that we are able to receive.  Our operating subsidiaries are
subject to the PRC enterprise income tax, or EIT.  According to the
relevant laws and regulations in the PRC, foreign invested enterprises
established prior to January 1, 2008 are entitled to full exemption from income
tax for two years beginning with the first year in which such enterprise is
profitable and a 50% income tax reduction for the subsequent three
years.  Ossen Materials was entitled to an EIT exemption during the
two years ended December 31, 2008, was
subject to a50% income tax reduction
during the year ended from January 1, 2009, and will be subject to a 50% income tax reduction
during the two years ending December 31, 2011.  Ossen Jiujiang
was entitled to the EIT exemption in 2009, will be entitled to the EIT exemption in
2010, and will be subject to 50% income tax reduction during the period from
January 1, 2011 to December 31, 2013.  As our income tax obligations
increase over time, our net income will be affected.




Our net
income is affected by the income tax that we pay and any preferential tax
treatment that we are able to receive.  Our operating subsidiaries are
subject to the PRC enterprise income tax, or EIT.  According to the
relevant laws and regulations in the PRC, foreign invested enterprises
established prior to January 1, 2008 are entitled to full exemption from income
tax for two years beginning with the first year in which such enterprise is
profitable and a 50% income tax reduction for the subsequent three
years.  Ossen Materials was entitled to an EIT exemption during the
two years ended December 31, 2008, and is subject to 50% income tax reduction
during the period from January 1, 2009 to December 31, 2011.  Ossen
Jiujiang is entitled to the EIT exemption in 2009 and 2010, and will be subject
to 50% income tax reduction during the period from January 1, 2011 to December
31, 2013.  As our income tax obligations increase over time, our net
income will be affected.




37




Costs
of being a public company




Prior to
the business combination, Ossen did not operate as a public company. Ossen has
incurred significant accounting, legal and other expenses in connection with the
business combination since its year ended December 31, 2009, and it expects that
compliance with its obligations as a public company will require significant
management time and continued increases in general administrative expenses,
including insurance, legal and financial compliance costs.




Foreign
currency translation




Our
financial statements are expressed in U.S. dollars but the functional
currency of our operating subsidiaries is RMB. Our results of operations are
translated at average exchange rates during the relevant financial reporting
periods, assets and liabilities are translated at the unified exchange rate at
the end of these periods and equity is translated at historical exchange rates.
Adjustments resulting from the process of translating the local currency
financial statements into U.S. dollars are included in determining comprehensive
income.




Description
of Selected Income Statement Items




Net Sales.  We
generate revenue from sales of our prestressed steel products, including plain
surface products and rare earth coated products.




Cost of
sales.  Cost of sales consists of costs directly attributable
to production, including the cost of raw materials, salaries for staff engaged
in production activity, electricity, depreciation, packing materials, and
related expenses.




Selling and distribution
expenses.  Selling and distribution expenses consist of sales
commissions, payroll, traveling expenses,
transportationexpenses and advertising
expenses.  We pay our distribution customers a commission ranging from
0.6% to 1.4% of invoiced amounts (including VAT) actually paid to
us.




General and administrative
expenses.  General and administrative expenses consist
primarily of employee remuneration, payroll taxes and benefits, general office
expenses and depreciation.  We expect administrative expenses to
continue to increase as we incur additional expenses related to costs of
compliance with securities laws and other regulations, including increased audit
and legal fees and investor relations expenses.




Interest
expenses.  Interest expenses consist of interest expense on
bank loans.




Other Income.  Our
other income consisted of government grants and revenue from sales of scrap
materials in 2008 and 2009.




Income Taxes.  The
PRC Enterprise Income Tax Law imposed a unified income tax rate of 33% prior to
and including 2007 and of 25% beginning in 2008 for enterprises registered in
the PRC.  Both Ossen Materials and Ossen Jiujiang were designated by
the local tax authority as a foreign-invested enterprise engaged in
manufacturing activities.  As a result, Ossen Jiujiang was entitled to the EIT exemption in 2009, will
be entitled to the EIT exemption in 2010, and will be subject to 50%
income taxreduction during the period from January 1, 2011 to December 31,
2013.  As our income tax obligations increase over time, our net
income will be affected.




Results
of Operations





The
following table sets forth the key components of our results of operations for
the periods indicated, in dollars and as a percentage of
revenue.


38




(All
amounts in U.S. dollars, except for percentages)





For Year Ended December 31,2009
                    
                    
                    2008(Audited)
                    
                    
                    (Audited)USD
                    
                    
                    % of
                      Revenue
                    
                    
                    USD
                    
                    
                    % of
                      RevenueRevenues
                    
                    $
                    101,087,796
                    
                    
                    
                    100
                    %
                    
                    $
                    82,742,310
                    
                    
                    
                    100
                    %Cost
      of Goods Sold
                    
                    
                    87,659,925
                    
                    
                    
                    86.7
                    %
                    
                    
                    70,532,733
                    
                    
                    
                    85.2
                    %Gross
      profit
                    
                    
                    13,427,871
                    
                    
                    
                    13.2
                    %
                    
                    
                    12,209,577
                    
                    
                    
                    14.8
                    %Selling
      and distribution expenses
                    
                    
                    503,724
                    
                    
                    
                    0.5
                    %
                    
                    
                    4,326,491
                    
                    
                    
                    5.2
                    %General
      and administrative expenses
                    
                    
                    1,143,672
                    
                    
                    
                    
                    
                    
                    
                    1,316,606Total
      operating expenses
                    
                    
                    1,647,396
                    
                    
                    
                    1.6
                    %
                    
                    
                    5,643,097
                    
                    
                    
                    6.8
                    %Income
      from operation
                    
                    
                    11,780,475
                    
                    
                    
                    11.1
                    %
                    
                    
                    6,566,480
                    
                    
                    
                    7.9
                    %Interest
      expenses, net
                    
                    
                    (1,496,712
                    )
                    
                    
                    1.5
                    %
                    
                    
                    (1,891,671
                    )
                    
                    
                    2.3
                    %Other
      income, net
                    
                    
                    183,495
                    
                    
                    
                    0.2
                    %
                    
                    
                    380,766
                    
                    
                    
                    0.5
                    %Income
      before income taxes
                    
                    
                    10,467,258
                    
                    
                    
                    10.4
                    %
                    
                    
                    5,055,575
                    
                    
                    
                    6.1
                    %Income
      Taxes
                    
                    
                    (740,053
                    )
                    
                    
                    0.8
                    %
                    
                    
                    (291,520
                    )
                    
                    
                    0.4
                    %Net
      Income
                    
                    
                    9,727,205
                    
                    
                    
                    9.6
                    %
                    
                    
                    4,764,055
                    
                    
                    
                    5.7
                    %Less:
      net income attributable to non-controlling interest
                    
                    
                    1,714,670
                    
                    
                    
                    1.7
                    %
                    
                    
                    809,437
                    
                    
                    
                    1.0
                    %Net
      income attributable to controlling interest
                    
                    
                    8,012,535
                    
                    
                    
                    7.9
                    %
                    
                    
                    3,954,618
                    
                    
                    
                    4.7
                    %Other
      comprehensive income-Foreign currency translation gain, net of
      tax
                    
                    
                    31,146
                    
                    
                    
                    -
                    
                    
                    
                    420,883
                    
                    
                    
                    0.5
                    %Total
      other comprehensive income, net of tax
                    
                    
                    31,146
                    
                    
                    
                    -
                    
                    
                    
                    420,883
                    
                    
                    
                    0.5
                    %Comprehensive
      Income
                    
                    
                    8,043,681
                    
                    
                    
                    7.9
                    %
                    
                    
                    4,375,501
                    
                    
                    
                    5.3
                    %




Net Sales.  During the
year ended December 31, 2009, we had revenues of approximately $101.1 million as
compared to revenues of approximately $82.7 million during year ended December
31, 2008, an increase of approximately $18.3 million, or
22.2%.   The growth in our revenues during the year ended
December 31, 2009 was attributable to a significant increase of volume sold
during such period as compared to the year ended December 31, 2008.




The
following table provides a breakdown of the percentages of revenue generated
from each of our primary product types during the years ended December 31, 2009
and 2008:




Year ended December 31,
                                
                                
                                Change2008
                                
                                
                                2009
                                
                                
                                from 2008% of total revenue
                                
                                
                                % of total revenue
                                
                                
                                to 2009Products:Plain
      surface PC strands
                                
                                
                                60
                                %
                                
                                
                                32
                                %
                                
                                
                                (36.2
                                %)Rare
      earth galvanized PC wires and PC strands
                                
                                
                                4
                                %
                                
                                
                                2
                                %
                                
                                
                                (35.1
                                %)Stabilized
      PC wires
                                
                                
                                36
                                %
                                
                                
                                51
                                %
                                
                                
                                69.3
                                %Other
      rare earth coated PC wires and PC strands
                                
                                
                                -
                                
                                
                                
                                15
                                %
                                
                                
                                -




The
reasons for the change in our product mix from 2008 to 2009, with sales of plain
surface products decreasing significantly and sales of galvanized products,
including stabilized PC wires, increasing significantly, are
twofold.  One, as a result of an overall decrease in demand in
international markets for our products due to the global financial and economic
crisis and the anti-dumping duties imposed by the U.S. and the European Union,
we had to decrease our international sales, which were comprised primarily of
plain surface materials in 2008.  Two, we increased sales of our
higher margin rare earth galvanized products and other coated products,
including stabilized PC wires and other rare earth coated PC wires and PC
strands, primarily in the domestic PRC market in 2009 to take advantage of the
growth and stimulus measures existing in the PRC.


39




Cost of Sales.  Cost of
sales was approximately $87.7 million during the year ended December 31, 2009,
as compared to approximately $70.5 million during the year ended December 31,
2008, representing an increase of 24.3%, or approximately $17.2 million. As a
percentage of net sales, cost of sales increased from 85.2% to 86.7% during the
year ended December 31, 2009.  This increase resulted from the
increase in purchases of zinc in order to product greater quantities of our
galvanized materials, of which zinc is a crucial element.




Gross Profit and Gross
Margin.  Our gross profit is equal to the difference between
our revenues and our cost of goods sold.  Our gross profit increased
10.0% to approximately $13.4 million during the year ended December 31, 2009,
from approximately $12.2 million for the same period in 2008.  The
increase was primarily attributable to increased sales volume.




For the
years ended December 31, 2009 and 2008, our gross margin was 13.2% and 14.8%,
respectively. The reason for this decrease in gross margin is that we decreased
our international sales, which generally generate higher margins than domestic
sales, as a result of the global economic crisis and anti-dumping duties imposed
by the U.S. and the European Union.




General and Administrative Expenses.General
and administrative expenses totaled approximately $1.1 million for the year
ended December 31, 2009, as compared to approximately $1.3 million for the year
ended December 31, 2008, representing a decrease of 17.6%. This decrease was
primarily attributable to costs incurred in connection with a potential
financing transaction in 2008.




Selling and Distribution
Expenses.  Selling and distribution expenses totaled $0.5
million for the year ended December 31, 2009, as compared to $4.3 million for
the year ended December 31, 2008, a decrease of 88.4%.  This decrease
was attributable primarily to a significant decrease in our freight costs and
other costs related to international sales as a result of the significant
decrease in international sales in 2009.




Operating Income.As a result
of the foregoing, operating income for the year ended December 31, 2009 was
approximately $11.8 million, an increase of 78.8% as compared to approximately
$6.6 million for the same period in 2008.  As a percentage of net
sales, operating income increased from 7.9% to 11.1% during the year ended
December 31, 2009.




Other Income.Our other
income for the year ended December 31, 2009 totaled $0.2 million, compared to
other income of $0.4 million for the previous year, a decrease of
51.8%.  This decrease was attributable to the receipt of a government
subsidy in 2008 in recognition of our high level of exports, which grant was not
made in 2009.




Income Taxes. We
incurred income tax expenses of $740,053 and $291,520 in fiscal years ended
December 31, 2009 and 2008, respectively.




Net Income. As a result of
the foregoing, our net income totaled approximately $9.7 million for the year
ended December 31, 2009, as compared to approximately $4.8 million for the year
ended December 31, 2008, an increase of 106%.




Net Income Attributable to
Non-controlling Interest.  We own 81% of our operating subsidiaries.  Net income
attributable to non-controlling interest represents the net income attributable
to the holders of theremaining
19%.


Foreign Currency Translation.
Our financial statements are expressed in U.S. dollars but the functional
currency of our operating subsidiary is RMB. Our results of operations are
translated at average exchange rates during the relevant financial reporting
periods, assets and liabilities are translated at the unified exchange rate at
the end of these periods and equity is translated at historical exchange rates.
Adjustments resulting from the process of translating the local currency
financial statements into U.S. dollars are included in determining comprehensive
income.


40




Critical
Accounting Policies and Estimates


Management’s
discussion and analysis of its financial condition and results of operations are
based upon our consolidated financial statements, which have been prepared in
accordance with U.S. GAAP. Our financial statements reflect the selection and
application of accounting policies, which require management to make significant
estimates and judgments. See Note 1 to our consolidated financial statements,
“Summary of Significant Accounting Policies.” We believe that the following
paragraphs reflect the most critical accounting policies that currently affect
our financial condition and results of operations.




Revenue
Recognition





Revenues
represent the invoiced value of goods sold recognized upon the shipment of goods
to customers.  Revenues are recognized when all of the following
criteria are met:





·
            Persuasive
      evidence of an arrangement exists,





·
            Delivery
      has occurred or services have been
rendered,





·
            The
      seller’s price to the buyer is fixed or determinable,
  and





·
            Collectability
      is reasonable assured.




Income
Taxes




Deferred
tax assets and liabilities are recognized for the future tax consequence
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to be
applied to taxable income in the years in which those temporary differences are
expected to reverse. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in the statement of income in the period that
includes the enactment date. A valuation allowance is provided for deferred tax
assets if it is more likely than not these items will either expire before the
Company is able to realize their benefits, or that future deductibility is
uncertain.





Foreign
Currency Translation




The
accompanying consolidated financial statements are presented in United States
dollars (“US$). The functional currency of the Company is Renminbi (“RMB”). The
consolidated financial statements are translated into United States dollars from
RMB at year-end exchange rates as to assets and liabilities and average exchange
rates as to revenues and expenses. Capital accounts are translated at their
historical exchange rates when the capital transactions occurred. The resulting
transaction adjustments are recorded as a component of shareholders’ equity.
Gains and losses from foreign currency transactions are included in net
income.





2009
                
                
                2008Year
      ended RMB: US$ exchange rate
                
                
                6.8372
                
                
                
                6.8542Average
      yearly RMB: US$ exchange rate
                
                
                6.8409
                
                
                
                6.9623





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





Fair
Value of Financial Instruments




FASB ASC
820 (formerly SFAS No. 157 Fair Value Measurements) establishes a three-tier
fair value hierarchy, which prioritizes the inputs used in measuring fair value.
The hierarchy prioritizes the inputs into three levels based on the extent to
which inputs used in measuring fair value are observable in the
market


41





These
tiers include:





·
            Level
      1—defined as observable inputs such as quoted prices in active
      markets;





·
            Level
      2—defined as inputs other than quoted prices in active markets that are
      either directly or indirectly observable;
and





·
            Level
      3—defined as unobservable inputs in which little or no market data exists,
      therefore requiring an entity to develop its own
    assumptions.




The
assets measured at fair value on a recurring basis subject to the disclosure
requirements of ASC 820 as of December 31, 2009 are as follows:





Fair Value Measurements at Reporting Date UsingCarryingvalue
                            asof
                            December31,
                            2009
                          
                          
                          QuotedPricesin
                            ActiveMarkets
                            forIdentical
                            Assets
                            (Level1)
                          
                          
                          SignificantOther
                            Observable
                            Inputs
                            (Level2)
                          
                          
                          Significant
                            UnobservableInputs
                            (Level3)Cash
      and cash equivalents
                          
                          $
                          8,409,467
                          
                          
                          $
                          8,409,467
                          
                          
                          
                          -
                          
                          
                          
                          -Restricted
      cash
                          
                          $
                          11,824,214
                          
                          
                          $
                          11,824,214
                          
                          
                          
                          -
                          
                          
                          
                          -





Property,
Plant, and Equipment




Property,
plant and equipment are stated at cost less accumulated depreciation, and
include expenditure that substantially increases the useful lives of existing
assets.





Depreciation
is provided over their estimated useful lives, using the straight-line
method.  Estimated useful lives are as follows:





Buildings
      and improvements
                  
                  5 ~
      20 yearsMachinery
      and equipment
                  
                  5 ~
      20 yearsMotor
      vehicles
                  
                  5
      yearsOffice
      Equipment
                  
                  5 ~
      10 years





When
assets are sold or retired, their costs and accumulated depreciation are
eliminated from the consolidated financial statements and any gain or loss
resulting from their disposal is recognized in the period of disposition as an
element of other income.  The cost of maintenance and repairs is
charged to income as incurred, whereas significant renewals and betterments are
capitalized.


Recently
Issued Accounting Pronouncements


In June
2009, the Company adopted Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) 105-10 (formerly Statement of
Financial Accounting Standards (“SFAS”) No. 168, the FASB ASC and Hierarchy of
Generally Accepted Accounting Principles, a replacement of FASB Statement No.
162).  ASC 105-10 establishes the FASB ASC as the source of
authoritative accounting principles recognized by the FASB to be applied in
preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America.  The adoption
of this standard has no impact on the Company’s consolidated financial
statements.  However, reference to specific accounting standards have
been changed to refer to appropriate section of the ASC.  Subsequent
revisions to GAAP by the FASB will be incorporated into ASC through issuance of
Accounting Standards Updates (“ASU”).


42





Effective
January 1, 2009, the Company adopted ASC 805 (formerly SFAS No. 141 R, Business
Combinations).  ASC 805 requires an acquirer to measure the
identifiable assets acquired, the liabilities assumed, and any noncontrolling
interest in the acquiree at their fair values on the acquisition date, with
goodwill being the excess value over the net identifiable assets
acquired.  The adoption of ASC 805 did not have any effect on the
Company’s consolidated financial statements.





Effective
January 1, 2009, the Company adopted ASC 810-10 (formerly SFAS No. 160,
Noncontrolling Interests in Consolidated Financial Statements).  This
Statement establishes accounting and reporting standards that require the
ownership interests in subsidiaries’ non-parent owners be clearly presented in
the equity section of the balance sheet; requires the amount of consolidated net
income attributable to the parent and to the non-controlling interest be clearly
identified and presented on the face of the consolidated statement of income;
requires that changes in a parent’s ownership interest while the parent retains
its controlling financial interest in its subsidiary be accounted for
consistently; requires that when a subsidiary is deconsolidated, any retained
non-controlling equity investment in the former subsidiary be initially measured
at fair value and the gain or loss on the deconsolidation of the subsidiary be
measured using the fair value of any non-controlling equity; requires that
entities provide disclosures that clearly identify the interests of the parent
and the interests of the non-controlling owners.  The adoption of ASC
810-10 has not had a significant effect on the Company’s consolidated financial
statements.





On April
1, 2009, the FASB approved ASC 805 (formerly FSP FAS 141R-1, Accounting for
Assets Acquired and Liabilities Assumed in a Business Combination That Arise
from Contingencies), which amends Statement 141R and eliminates the distinction
between contractual and non-contractual contingencies.  Under ASC 805,
an acquirer is required to recognize at fair value an asset acquired or
liability assumed in a business combination that arises from a contingency if
the acquisition-date fair value of that asset or liability can be determined
during the measurement period. If the acquisition-date fair value cannot be
determined, the acquirer applies the recognition criteria in SFAS No. 5,
Accounting for Contingencies and Interpretation 14, “Reasonable Estimation of
the Amount of a Loss – and interpretation of FASB Statement No. 5,” to determine
whether the contingency should be recognized as of the acquisition date or after
it.  The adoption of ASC 805 has not had a material effect on the
Company’s consolidated financial statements.





ASC
320-10 (formerly FSP FAS 115-2 and FAS 124-2) amends the other-than-temporary
impairment guidance in U.S. GAAP for debt securities to make the guidance more
operational and to improve the presentation and disclosure of
other-than-temporary impairments on debt and equity securities in the financial
statements.  It did not amend existing recognition and measurement
guidance related to other-than-temporary impairments of equity securities. We
are required to adopt ASC 320-10 for our interim and annual reporting periods
ending after June 15, 2009.  ASC 320-10 does not require disclosures
for periods presented for comparative purposes at initial
adoption.  ASC 320-10 requires comparative disclosures only for
periods ending after initial adoption.  The adoption of ASC 320-10 has
not had a material effect on the Company’s consolidated financial
statements.





On April
9, 2009, the FASB also approved ASC 825-10 (formerly FSP FAS 107-1 and APB
28-1,Interim Disclosures
about Fair Value of Financial Instruments )to require disclosures
about fair value of financial instruments in interim period financial statements
of publicly traded companies and in summarized financial information required by
APB Opinion No. 28,Interim
Financial Reporting.  We are required to adopt ASC 825-10 for
our interim and annual reporting periods ending after June 15,
2009.  ASC 825-10 does not require disclosures for periods presented
for comparative purposes at initial adoption. ASC 825-10 requires comparative
disclosures only for periods ending after initial adoption.  The
adoption of ASC 825-10 has not had a material effect on the Company’s
consolidated financial statements.





In April
2009, the FASB issued FSP No. FAS 157-4, “Determining Fair Value When the Volume
and Level of Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly” as incorporated into FASB ASC
820, “Fair Value Measurements and Disclosures”. The guidance relates to
determining fair values when there is no active market or where the price inputs
being used represent distressed sales.  It reaffirms what FASB ASC 820
states is the objective of fair value measurement—to reflect how much an asset
would be sold for in an orderly transaction (as opposed to a distressed or
forced transaction) at the date of the financial statements under current market
conditions.  Specifically, it reaffirms the need to use judgment to
ascertain if a formerly active market has become inactive and in determining
fair values when markets have become inactive.  This guidance is
effective for interim and annual periods ended after June 15, 2009, but entities
may early adopt this guidance for the interim and annual periods ended after
March 15, 2009. The adoption of such standard has not had a material impact on
the Company’s consolidated financial statements.


43





In August
2009, the FASB issued FASB ASU 2009-05, “Measuring Liabilities at Fair Value”.
FASB ASU 2009-05 amends FASB ASC 820, “Fair Value
Measurements”.  Specifically, FASB ASU 2009-05 provides clarification
that in circumstances in which a quoted price in an active market for the
identical liability is not available, a reporting entity is required to measure
fair value using one or more of the following methods: 1) a valuation technique
that uses a) the quoted price of the identical liability when traded as an asset
or b) quoted prices for similar liabilities or similar liabilities when traded
as assets and/or 2) a valuation technique that is consistent with the principles
of FASB ASC 820 of the Accounting Standards Codification (e.g. an income
approach or market approach).  FASB ASU 2009-05 also clarifies that
when estimating the fair value of a liability, a reporting entity is not
required to adjust to include inputs relating to the existence of transfer
restrictions on that liability.  The adoption of such standard has not
had a material impact on the Company’s consolidated financial
statements.





In May
2009, the FASB issued SFAS No. 165, “Subsequent Events”, (FASB ASC 855-10”)
which establishes general standards of accounting for and disclosure of events
that occur after the balance sheet date but before financial
statements.  The statement is effective for interim and annual periods
ended after June 15, 2009.  The standard was subsequently amended by
FASB ASU 2010-09 which exempts an entity that is an SEC filer from the
requirement to disclose the date through which subsequent events have been
evaluated.





In
September 2009, the Emerging Issues Task Force reached final consensus on FASB
ASU 2009-13, “Revenue Arrangements with Multiple Deliverables”.  FASB
ASU 2009-13 addresses how to determine whether an arrangement involving multiple
deliverables contains more than one unit of accounting, and how the arrangement
consideration should be allocated among the separate units of
accounting.  This ASU will be effective prospectively for revenue
arrangements entered into or materially modified in fiscal years beginning on or
after June 15, 2010.  Early adoption is permitted. The adoption of
such standard has not had a material impact on the Company’s consolidated
financial statements.





In
December 2009, the FASB issued FASB ASU 2009-17, Consolidation (“FASB ASC 810):
Improvements to Financial Reporting by Enterprises involved with Variable
Interest Entities.  This ASU amends the FASB Accounting Standards
Codification for statement No.167.  In June 2009, the FASB issued SFAS
No.167, Amendments to FASB Interpretation No. 46(R), which requires an
enterprise to perform an analysis and ongoing reassessments to determine whether
the enterprises variable interest or interests give it a controlling financial
interest in a variable interest entity and amends certain guidance for
determining whether an entity is a variable interest entity. It also requires
enhanced disclosures that will provide users of financial statements with more
transparent information about an enterprises involvement in a variable interest
entity.  SFAS No.167 is effective as of the beginning of each
reporting entity’s first annual reporting period that begins after November 15,
2009 and for all interim reporting periods after that, with early application
prohibited.  The Company is currently evaluating the impact of the
adoption of SFAS No.167.





In
January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and
Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements,
which will require companies to make new disclosures about recurring or
nonrecurring fair value measurements including significant transfers into and
out of Level 1 and Level 2 fair value hierarchies and information on purchases,
sales, issuance and settlements on a gross basis in the reconciliation of Level
3 fair value measurements.  The ASU is effective prospectively for
financial statements issued for fiscal years and interim periods beginning after
December 15, 2009.  The new disclosures about purchases, sales,
issuance and settlements on a gross basis in the reconciliation of Level 3 fair
value measurements is effective for interim and annual reporting periods
beginning after December 15, 2010.  The Company expects that the
adoption of ASU 2010-06 will not have a material impact on its consolidated
financial statements.




Governmental
Regulations




See the
discussion under the heading “Governmental Regulations” in Item 4 above for a
discussion of governmental policies or factors that could materially affect our
business.


44




5B.
Liquidity and Capital Resources


The major
sources of our liquidity for fiscal year 2008 and 2009 were cash generated from
operations and short-term borrowings, including short-term loans from banks and
bank acceptance notes.  We expect to continue to finance our
operations and working capital needs in the near future from cash generated from
operations and short-term borrowings.  Our cash and cash equivalents
are denominated in RMB.




Our cash
and cash equivalentswhich are denominated
in RMB, were approximately $8.4 million at
December 31, 2009, as compared to $3.7 million at December 31, 2008, which
increase was due to undistributed profits and a prepayment of approximately $0.3
million by one of our customers in 2009.  We believe that our cash
reserves, together with expected cash flow from operations and short-term loans,
are sufficient to allow us to continue to operate for the next 12
months.  However, we may sell equity or obtain credit facilities to
enhance our liquidity position or to increase our cash reserves for future
expansion. The sale of additional equity would result in dilution to our
shareholders. The incurrence of indebtedness would result in increased fixed
obligations and could result in operating covenants that would restrict our
operations, or other restrictive covenants. We cannot assure you that financing
will be available in amounts or on terms acceptable to us, if at
all.


Accounts
Receivable




International
sales accounted for 37.6% of our revenues in 2008 but only 3.7% in 2009 as a
result of the global financial and economic crisis and the anti-dumping tariffs
imposed by the European Union and the U.S.  Our international
customers generally pay by letter of credit, which enables us to convert
accounts receivable into cash more quickly.  Our domestic customers
generally pay approximately 40 days after receiving the materials at their
construction site.  As a result, our accounts receivable increased
significantly in 2009 as compared to 2008.  We do not expect our
accounts receivable to decrease to 2008 levels until we are able to
significantly increase our international sales.  We intend to sell
our coated products in the U.S. in future
periods, since these products are not
subject to the anti-dumping measures imposed by the U.S.


Bank
Loans




At
December 31, 2009, we had approximately $27.4 million of short-term bank loans
and $19.7 million of bank acceptance notes outstanding, as compared to $19.4
million and $18.2 million at December 31, 2008, respectively.




Short-term
bank loans are obtained from local banks in China. All short-term bank loans are
repayable within one year and are secured by property, plant and equipment and
land use rights owned by us.




The
weighted average annual interest rate of our short-term bank loans was 5.5% and
6.42% as of December 31, 2009 and 2008, respectively.  Interest
expense was $1.4 and $1.9 million for the years ended December 31, 2009 and
2008, respectively.




We have
not experienced any difficulties in the acquisition and rollover of the
short-term bank loans that we use to fund our daily operations.  We
anticipate rollovers of all current facilities that are set to mature in the
2010 and do not foresee a reduction in the availability of bank credit to fund
our operations and meet our growth objectives.




Working
Capital




Our
working capital was approximately $2.8 million at December 31, 2009 as compared
to ($8.2 million) at December 31, 2008, which increase was due primarily to the
increase in cash and cash equivalents, a $10.4 million increase in accounts
receivable, a $1.8 million note receivable from a related party and a $0.9
million increase in inventories, offset by an increase in short-term bank loans
and bank acceptance notes and a $2.2 million increase in customer
deposits.


45


Cash
Flows




The
following table sets forth a summary of our net cash flow information for the
periods indicated:


(All
amounts in U.S. dollars)


Year Ended December 31,2009
                  
                  
                  2008(Audited)
                  
                  
                  (Audited)Net
      cash used in operating activities
                  
                  $
                  (2,769,330
                  )
                  
                  $
                  (2,234,087
                  )Net
      cash used in investing activities
                  
                  
                  (209,511
                  )
                  
                  
                  (2,666,665
                  )Net
      cash provided by financing activities
                  
                  
                  7,558,779
                  
                  
                  
                  345,059





Operating
Activities




Net cash
used in operating activities was approximately $2.8 million in 2009, as compared
to $2.2 million in 2008.  This increase in cash used in operating
activities was primarily attributable to a $10.4 million increase in accounts
receivable in 2009 as compared to a $1.0 million decrease in 2008 due to a shift
in sales, with sales to international customers decreasing significantly in
2009, and $1.8 million in notes receivable from a related party in
2009.  This increase in cash used was offset by an increase in our net
income for the reasons discussed above under “Results of Operations,” a smaller
increase in inventories in 2009 as compared to 2008 because we increased
inventories significantly in 2008 in anticipation of the increase in steel
prices at the end of 2008, and a smaller increase in prepayments in 2009 as
compared to 2008 as a result of required prepayments to a new customer in
2008.




Investing
Activities




Net cash
used in investing activities was approximately $0.2 million in 2009, as compared
to $2.7 million in 2008.  This decrease in cash used in investing
activities was attributable to a smaller increase in purchases of plant and
equipment in 2009.  Specifically, in 2008 we incurred approximately
$2.3 million of expenses in connection with the purchase of equipment for a new
production line.




Financing
Activities




Net cash
provided by financing activities for the year ended December 31, 2009 was
approximately $7.6 million, as compared to approximately $0.3 million in
2008.  The increase in cash provided by financing activities was
primarily due to increased proceeds from short-term bank loans, which were used
to purchase raw materials and other working capital requirements, a smaller
increase in restricted cash, representing amounts held by banks as security for
bank acceptance notes, a decrease in repayments of notes payable to a related
party and cash dividends in 2009, offset by an increase in repayments of
short-term bank loans and a decrease in proceeds from notes
payable.  In 2008, Ossen Materials and Ossen Jiujiang paid an
aggregate of $2.4 million in cash dividends to their shareholders, which
dividends were declared in 2007.




5.C.  Research
and Development, Patents and Licenses, etc.




Research
and Development


Our
research and development efforts are focused on three objectives:




·
            Superior
      product safety and quality;




·
            Reduction
      of operating costs; and




·
            Sustaining
      growth through the development of new
products.




46




We have a
research and development staff at each of our facilities.  In total,
nineteen employees are dedicated to research and development.  We
spent $1.1 million, $1.5 million and $1.7 million in 2009, 2008 and 2007,
respectively on our research and development activities.




We
regularly train the members of our research and development department in order
to consistently enhance our research and development capabilities in the field
of coating technology. We have developed a business model that involves a very
close interrelationship between our research and development department and our
product development and marketing departments. As a result, we focus our
research and development activities on projects that would enable us to branch
out our products into new desired markets.  In addition, we conduct
research and development activities that enable us to increase our market share
in existing markets in the PRC and internationally.  We also focus
certain of our research and development activities on higher margin products
that can be sold to customers in international markets.




Specifically,
we have entered into cooperation agreements with Jiujiang Institute pursuant to
which the institute assists us in our efforts to improve the comprehensive
function and manufacturing technique of our high strength, anti-erosion
galvanized prestressed strands.  These high strength products, which
have high endurance against erosion, are sold domestically and
internationally.  In addition, we are cooperating with other steel
manufacturers in research efforts regarding galvanized PC wires, which serve as
raw materials for our galvanized PC strands, indented PC wires and helical rib
PC wires with high performance and are designed for our international
customers.




We have
also entered into an agreement with the Shanghai Machinery Manufacturing
Technology Research Institute.  Pursuant to this agreement, the
institute designs high strength, indented PC wire and galvanized PC wire for us
according to our specifications.




We
believe that our research and development activities and production technology
for rare-earth galvanized materials have contributed significantly to our
growth.  By using rare earth zinc-plating technology, we are able to
lower the temperature for the stabilizing treatment during the production
process and thereby minimize the loss of strength during the stabilizing
process.  As a result, this technology reduces the level of strength
required of our raw materials under circumstances of unvaried finished product
strength requirement and enables us to produce materials with greater strength
under circumstances in which the strength of raw materials remains
firm.  We believe that we are the only enterprise which can produce
rare-earth galvanized pre-stressing materials of 1,860 megapascal and 15.20 mm
in the world, as a result of our rare earth zinc-plating
technology.




We plan
to continue our research and development efforts to strengthen our leading
position in our industry. For example, we plan to develop rare earth coated
prestressed materials that are larger (up to 15.24 mm and 1,860 mPa) and can
withstand greater levels of pressure as well as new greased prestressed
materials of 12.7 mm and 1,860 mPa. We also own or lease various technologies
that improve the quality of our products and reduce our operating costs,
including coating polished technology, stabilizing treatment technology for dual
tension gear galvanized prestressing material, warning technology for missing
plating of coating production line, stranded wire greasing technology, water
cut-off technology by strander infrared temperature detection and other core
technologies.




We will
continue to focus on developing fundamental coating technology and applications
for the following technologies in the future:




·
            Rare
      earth coating technology;




·
            Surface
      finishing/ polishing technology;




·
            Dual
      tension gear wire stabilizing treatment
process;




·
            Connector
      production technology without
shutdown;




·
            New
      technology on constant high temperature constant tension stabilizing
      treatment; and




47




·
            High
      speed stabilizing treatment
technology.




5.D.  Trend
Information




See
discussion in Parts A and B of this item.




5.E.  Off-Balance
Sheet Arrangements




We do not
have any off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to our
investors.




5.F.  Tabular
Disclosure of Contractual Obligations




Contractual
Obligations




Our
contractual obligations consist of short-term debt obligations.  The
following table sets forth a breakdown of our contractual obligations as of
December 31, 2009:


Paymentsduebyperiod(inthousandsofdollars)Contractual Obligations
                    
                    Total
                    
                    
                    Lessthan
                      1year
                    
                    
                    1-3years
                    
                    
                    3-5years
                    
                    
                    Morethan
                      5years($US in Thousands)Short-term debt obligations (1)
                    
                    
                    47,095,302
                    
                    
                    
                    47,095,302
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -





(1)
Attributable to short-term bank loans.





ITEM
      6.
            DIRECTORS,
      SENIOR MANAGEMENT, AND EMPLOYEES




6.A.  Directors
and Senior Management




Prior to
the date of our business combination, Wei Guo served as our sole director and
executive officer.  Mr. Guo’s service was terminated on the date of
our business combination.  Since the date of our business combination,
the following individuals have served as our directors and executive
officers:


48




Name
                
                Positions
                
                AgeLiang
      Tang
                
                Chairman
      of Board
                
                42Wei
      Hua
                
                Chief
      Executive Officer and Director
                
                47Zhiping
      Gu
                
                Chief
      Financial Officer and Director
                
                50





Mr. Liang Tang was appointed
as our Chairman following our business combination.  Dr. Tanghas been the Chairman
and President of Ossen Materials, our subsidiary, since 2008.  Dr.
Tang has also been President of Shanghai Ossen Investment Holding (Group) Co.,
Ltd. since 2001.  He has more than 20 years of experience in the steel
industry.  Prior to joining our Company in 2004, from 1994 until 1998,
Dr. Tang was the President of Zhongmin Group of PRC Ministry of Civil
Affairs.  From 1988 until 1994, Dr. Tang was Head of Enterprise
Administrative Division of the Shanghai Municipal Metallurgical Industry
Bureau.  Prior to that date, Dr. Tang was the Deputy Director of
Enterprise Management at Baosteel Group Shanghai Ergang Co., Ltd., a competitor
of ours.  Dr. Tang is involved in many charity affairs and social
organizations including China Committee of Corporate Citizenship and China
Chamber of Metallurgy Industry.  Dr. Tang has received the title of
Shanghai Leader by the Shanghai Municipal Government, Outstanding Innovation
Entrepreneur by the Symposium on Chinese Enterprise Innovation and the Royal
Knight Medal of Spain by the King of Spain. Dr. Tang received a bachelors degree
from Shanghai University, a Masters degree in International Finance from Peking
University and an MBA from Fordham University.  Dr. Tang also received
a doctoral degree in world economics from East China Normal
University.




Mr. Wei Hua was appointed as
a director of ours following our business combination.  Mr. Wei has
served as Chairman of the Board of Directors of Ossen Jiujiang since 2007. Since
2000, he has been the Assistant Chief Executive Officer for the Steel Department
of Ossen Group.  Before joining Ossen Group in 2000, from 1988 until
2000, Mr. Wei was a vice supervisor of the department of technology and quality
supervision at Baosteel Group Shanghai Ergang Co., Ltd.  From 1985
until 1988, Mr. Hua worked at Shanghai No. 5 steel factory.  He
graduated from Shanghai University with a degree in Business
Management.




Mr. Zhiping Guwas appointed
as a director of ours following our business combination.  Mr. Gu has
been the Vice President of Finance of Ossen Group since 2003.  Mr. Gu
received a bachelors degree from Shanghai Lixin University.




Messrs.
Tang, Hua and Gu, our directors since the date of our business combination, will
serve as directors until our next annual general meeting and until their
successors are duly elected and qualified.




There are
no family relationships between any of our directors or senior management. There
are no arrangements or understandings with major shareholders, customers,
suppliers or others, pursuant to which any person referred to above was selected
as a director or member of senior management.




6.B.  Compensation




Director
Compensation




Our
directors do not currently receive any cash compensation for their service as
members of the board of directors.




Executive
Compensation




Prior to
the business combination, Mr. Guo, our sole director and officer, did not
receive any cash compensation for services rendered to the
company.


49


The
following table shows information concerning the annual compensation to
executive officers of Ossen:




Name
                                              
                                              Year
                                              
                                              Salary
                                              
                                              
                                              Bonus
                                              
                                              
                                              All
                                                other
                                                compensation
                                              
                                              
                                              Total
                                                compensationLiang
      Tang
                                              
                                              2009
                                              
                                              $
                                              14,041
                                              
                                              
                                              $
                                              8,771
                                              
                                              
                                              
                                              -
                                              
                                              
                                              $
                                              22,8122008
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Wei
      Hua
                                              
                                              2009
                                              
                                              $
                                              9,302
                                              
                                              
                                              $
                                              4,388
                                              
                                              
                                              
                                              -
                                              
                                              
                                              $
                                              13,6902008
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Zhiping
      Gu
                                              
                                              2009
                                              
                                              $
                                              8,776
                                              
                                              
                                              $
                                              3,657
                                              
                                              
                                              
                                              -
                                              
                                              
                                              $
                                              12,4322008
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -




Ossen
currently has no options or long-term compensation plans.




Employment
Agreement




We have
entered into an employment agreement with Mr. Liang Tang.  Mr. Tang is
employed as Chairman of the Board of our Company.  The term of his
agreement is from October 7, 2008 until October 6, 2011.  We will
compensate Mr. Tang at an annual rate of $14,041.  We may terminate
the employment agreement for cause as specified in the agreement.  Mr.
Tang may terminate the employment agreement with thirty days written
notice.  The employment agreement may be renewed upon the mutual
agreement of the parties.




Each
executive officer has agreed to hold in confidence any confidential information
that he has obtained about the Company.




6.C.
Board Practices




Board
Composition and Terms of Directors and Officers




O ur board
of directors currently consists of three directors, Dr. Tang, Mr. Hua and Mr. Gu, none of whom qualifies as an independent
director .




Pursuant
to our memorandum and articles of association, the business of our company is
managed by our board of directors. Commencing with the first annual meeting of
the shareholders, directors are elected for a term of office to expire at the
next succeeding annual meeting of the shareholders after their
election.  Each director holds office until the expiration of his or
her term of office and until his or her successor has been elected and
qualified, or until his or her earlier death, resignation or removal by
resolution of shareholders or a resolution of directors in accordance with the
memorandum and articles of association.




The
directors may at any time by resolution of directors appoint any person to be a
director to fill a vacancy.  There is a vacancy if a director dies or
otherwise ceases to hold office as a director.  The directors may not
appoint a director to fill a vacancy for a term exceeding the term that remained
when the person ceasing to be a director ceased to hold office.




Our
officers are appointed by resolution of our directors and hold office until
removed from office by our directors, whether or not a successor is
appointed.




Committees
of the Board of Directors




We
currently do not have any committees under our board of directors.




Duties
of Directors




Under the
laws of the British Virgin Islands, a director in exercising their powers or
performing their duties shall act honestly and in good faith and in what the
director believes to be the best interests of the company. In fulfilling their
duty of care to us, our directors must ensure compliance with our Memorandum and
Articles of Association. We have the right to take legal action if a duty owed
by our directors is breached.


50




We have
not entered into a director service contract with any of our
directors.




6.D.  Employees




As of
March 31, 2010, we had 239 full-time employees. The following table shows the
breakdown in numbers and percentages of employees by department:




Functions
              
              Number of
                  employees
              
              
              % of totalManufacturing
              
              
              128
              
              
              
              54
              %Technology
              
              
              25
              
              
              
              11
              %Research
      & Development
              
              
              19
              
              
              
              8
              %Quality
      Control
              
              
              9
              
              
              
              4
              %General
      Administration, Purchasing, Sales and Marketing
              
              
              24
              
              
              
              10
              %Total
              
              
              239
              
              
              
              100
              %





We have
not experienced any significant labor disputes and consider our relationship
with our employees to be good. Our employees are not covered by any collective
bargaining agreement.




We have
established an employee welfare plan in accordance with the relevant PRC laws
and regulations. Our total expenses for this plan was approximately $26,286 and
$39,735 in 2008 and 2009, respectively.




As we
continue to expand our business, we believe it is critical to hire and retain
top talent, especially in the areas of marketing, metal surface treatment,
materials science, and technology engineering. We believe we have the ability to
attract and retain high quality engineering talent in China based on our
competitive salaries, annual performance-based bonus system, and equity
incentive program for senior employees and executives. In addition, we have a
training program for entry-level engineers that allows them to work closely with
an experienced mentor to gain valuable hands-on experience and provide other
professional development opportunities, including seminars where experienced
engineers give lectures on specific engineering topics and new methods that can
be applied to various projects.




6.E.  Share
Ownership




As of
July 7, 2010, 15,000,000 of our ordinary shares were outstanding. Holders
of our ordinary shares are entitled to vote together as a single class on all
matters submitted to shareholders for approval. No holder of ordinary shares has
different voting rights from other any other holders of ordinary shares. We are
not aware of any arrangement that may, at a subsequent date, result in a change
of control of our company. As of July 7, 2010, no ordinary shares were held
by record holders in the United States.




Beneficial
ownership is determined in accordance with the rules and regulations of the SEC.
The percentages of shares beneficially owned in the table below are based on
15,000,000 ordinary shares outstanding as of July 7, 2010.




The
following table sets forth information with respect to the beneficial ownership
of our common shares as of July 7, 2010 by:




·
            each
      of our directors and executive officers;
and




·
            each
      person known to us to beneficially own more than 5% of our outstanding
      ordinary shares.




Except as
otherwise noted, the business address of each person listed in the table is 518
Shangcheng Road, Floor 17, Shanghai, 200120, People’s Republic of
China.


51




Shares
                                      Beneficially OwnedNumber
                                    
                                    
                                    %Directors,
      Executive Officers and 5% Shareholders:Liang
      Tang
                                    
                                    
                                    11,850,000
                                    
                                    
                                    
                                    79
                                    %Wei
      Hua
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Zhiping
      Gu
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -




Stock
Options




We do not
currently have a stock option plan.




ITEM
      7.
            MAJOR
      SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS




7.A.  Major
Shareholders




See Item
6.E., “Share Ownership,” for a description of our major
shareholders.




7.B.  Related
Party Transactions




Transfers
of Shares Between Related Parties




Several of our subsidiaries and affiliates which are, or
at one time were, controlled by our chairman, transferred shares with other
entities controlled by Mr. Tang.  See the discussion under “History
and Development of the Company” in Item 4 above for a description of
these transactions.


Purchase
from a Related Party




Historically,
we have purchased a significant percentage of our raw materials from an
affiliated entity, Shanghai Z.F.X. Steel Co., Ltd., or Shanghai ZFX, a supplier
of steel wire rods, which is controlled by our chairman, Dr. Tang.  In
2008, we purchased $20.1 million, or approximately 26.2% of our raw materials
from Shanghai ZFX.  In 2009, we purchased $11.5 million, or
approximately 12.8% of our raw materials from Shanghai ZFX.




We have
entered into sales contracts with Shanghai ZFX,
each of which has a term of one year.  The contracts generally
specify the name of the products, specifications, price and
quantity.  Pursuant to the contracts, we must take delivery of the
materials within a specified number of days.  If we disagree with the
quality of the materials received, we must notify Shanghai ZFX. in writing within thirty days of receipt of
the materials.  The materials may be paid for by cash or bank
acceptance.  If we determine a change is necessary to the method of
taking delivery, product ordered, steel or product specifications or quantity,
we must notify Shanghai ZFX. in writing at
least thirty days in advance.  We, or Shanghai ZFX. may rescind the contract/purchase order,
which must be negotiated to the mutual agreement of both parties.


Management
believes the transactions referenced above were on terms at least as favorable
to us as we could have obtained from unaffiliated parties.




Guarantees




During
the years ended December 31, 2008 and 2009, Shanghai Ossen, an affiliate of
ours, provided guarantees for certain of our short-term bank loans. Shanghai
Ossen guaranteed loans in the amount of $5.4 million in each of 2008 and
2009.




The
purpose of these loans is to fund our working capital and construction and
expansion.  Local banks have required guaranties pursuant to their standard
regulations.  The term of each of the loans is one year.  The
loans that have come due were repaid in May and June 2010.  The
remaining loan is due in November 2010.


52




The terms
of the loan guarantees between the guarantor and the bank provide for the
following: if the borrower does not repay its loan, the bank may seek the
principal and interest of the loan from the guarantor; the guarantee period is
two years from the date the guaranteed loan is due; the bank may change the
terms of the loan with the borrower without receiving the consent of the
guarantor; the guarantor indemnifies the bank for actual damage or loss because
of any fraudulent misrepresentations made by the guarantor and if the guarantor
causes the contract to become invalid, the guarantor indemnifies the bank for
damages and losses.




7.C.  Interests
of Experts and Counsel




Not
applicable.




ITEM
      8.
            FINANCIAL
      INFORMATION




Consolidated
Statements and Other Financial Information




The
financial statements required by this item may be found at the end of this
report on 20-F.


Legal
Proceedings




From time
to time, we may be involved in various claims and legal proceedings arising in
the ordinary course of business. We are not currently a party to any such claims
or proceedings which, if decided adversely to us, would either, individually or
in the aggregate, have a material adverse effect on our business, financial
condition, results of operations or cash flows.




Dividends




We have
never declared or paid any dividend on our ordinary shares and we do not
anticipate paying any dividends on our ordinary shares in the
future.  We currently intend to retain all future earnings to finance
our operations and to expand our business.




No
Significant Changes




No
significant changes to our financial condition have occurred since the date of
the annual financial statements contained herein.




ITEM
      9.
            THE
      OFFER AND LISTING




9.A.  Offer
and Listing Details




Not
Applicable.




9.B.  Plan
of Distribution




Not
Applicable.




9.C.  Markets




Our
ordinary shares are not currently traded on any exchange.




9.D.
Selling Shareholders




Not
Applicable.


53


9.E.
Dilution




Not
Applicable.




9.F.
Expenses of the Issuer




Not
Applicable.




ITEM
      10.
            ADDITIONAL
      INFORMATION




10.A.  Share
Capital




Authorized/Issued
Capital and History of Share Capital




Since
July 7, 2010, on which date we amended our memorandum and articles of
association in connection with our business combination, we are authorized to
issue 100,000,000 ordinary shares, par value $0.01 per share.  Ultra
Glory issued 50,000 shares to its original shareholder.  These shares
were subsequently increased to 5,000,000 upon the change in the par value of our
shares from $1.00 to $0.01 on July 7, 2010.  These 5,000,000 shares
were transferred to the former shareholders of Ossen Materials Group pursuant to
the business combination.  In addition, we issued 10,000,000 new
ordinary shares on July 7, 2010 to the former shareholders of Ossen Materials
Group pursuant to the business combination.




Shares
Not Representing Capital




Not
Applicable.




Shares
Held By Company




Not
Applicable.




Resolutions/Authorizations/Approvals




Not
Applicable.




10.B.  Memorandum
and Articles of Association




Charter




Our
charter documents consist of our amended and restated memorandum of association
and our amended and restated articles of association, or the memorandum and
articles of association.  We may amend our memorandum and articles of
association generally by a resolution of our shareholders.




The
following description of certain provisions of our memorandum and articles of
association does not purpose to be complete and is qualified in its entirety by
our memorandum and articles of association included as Exhibit 1.1 to this report.


Corporate
Powers




Ultra
Glory was incorporated under the BVI Business Companies Act, 2004 on January 21,
2010.  Pursuant to our memorandum of association, the objects for
which we were established are unrestricted and we have full power and authority
to carry out any objects not prohibited by the BVI Business Companies Act,
2004,  as the same may be revised from time to time, or any other law
of the British Virgin Islands, except that we have no power to carry on banking
or trust business, business as an insurance or reinsurance company, insurance
agent or insurance broker, the business of company management, the business of
providing the registered office or the registered agent for companies
incorporated in the British Virgin Islands, or business as a mutual fund, mutual
fund management or mutual fund administrator, unless we obtain certain licenses
under the laws of the British Virgin Islands.


54




Board
Composition




Pursuant
to our memorandum and articles of association, the business of our company is
managed by our board of directors.  Commencing with the first annual
meeting of the shareholders, directors are elected for a term of office to
expire at the next succeeding annual meeting of the shareholders after their
election.  Each director will hold office until the expiration of his
or her term of office and until his or her successor has been elected and
qualified, or until his or her earlier death, resignation or removal by the
shareholders or a resolution passed by the majority of the remaining
directors.




In the
interim between annual meetings of shareholders, or special meetings of
shareholders called for the election of directors, any vacancy on the board of
directors may be filled by the vote of a majority of the remaining directors
then in office, although less than a quorum, or by the sole remaining director.
A director elected to fill a vacancy resulting from death, resignation or
removal of a director will serve for the remainder of the full term of the
director whose death, resignation or removal will have caused such vacancy and
until his successor will have been elected and qualified.




There is
no cumulative voting by shareholders for the election of
directors.  We do not have any age-based retirement requirement and we
do not require our directors to own any number of shares to qualify as a
director.




Board
Meetings




Board
meetings may be held at the discretion of the directors at such times and in
such manner as the directors may determine upon not less than three days notice
having been given to all directors. Decisions made by the directors at meetings
shall be made by a majority of the directors.  There must be at least
a majority of the directors (with a minimum of two) at each
meeting.




Directors
Interested in a Transaction




A
director must, immediately after becoming aware of the fact that he is
interested in a transaction entered into or to be entered into by us, disclose
such interest to the board of directors.  A director who is interested
in a transaction entered into, or to be entered into, by the company, may vote
on a matter related to the transaction, attend a meeting of directors at which a
matter relating to the transaction arises and be included among the directors
present at the meeting for the purposes of a quorum and sign a document on
behalf of the company, or do any other thin in his capacity as a director, that
relates to the transaction.  A director is not required to disclose
his interest in a transaction or a proposed transaction to our board of
directors if the transaction or proposed transaction is between the director and
us, or the transaction or proposed transaction is or is to be entered into the
ordinary course of our business and on usual terms and conditions.




The
directors may exercise all powers of our company to borrow money, mortgage or
charge our undertakings and property, issue debentures, debenture shares and
other securities whenever money is borrowed or as security for any debt,
liability or obligation of the company or of any third party.




Our
directors may, by resolution, fix the compensation of directors in respect of
services rendered or to be rendered in any capacity to us.




A
director may attend and speak at any meeting of the shareholders and at any
separate meeting of the holders of any class of our shares.




Rights
of Shares




We are
currently authorized to issue 100,000,000 ordinary shares.  The shares
are made up of one class and one series, namely ordinary shares with a par value
of $0.01 per share.  The ordinary shares have one vote each and have
the same rights with regard to dividends paid by the company and distributions
of the surplus assets of the company.


55




The
directors may, subject to the BVI Business Companies Act, 2004, by amending the
memorandum of association and/or the articles of association, without limiting
or affecting any right of holders of existing shares, determine the rights
related to any preferred shares that we may issue.  The directors may
redeem any of our outstanding shares at a premium.




Issuance
of Shares; Variation of Rights of Shares




Our
articles of association provide that directors may, without limiting or
affecting any right of holders of existing shares, offer, allot, grant options
over or otherwise dispose of our unissued shares to such persons at such times
and for such consideration and upon such terms and conditions as the directors
may determine.




Without
prejudice to any special rights previously conferred on the holders of any
existing shares or class of shares, we may issue shares, with such preferred,
deferred or other special rights or such restrictions, whether in regard to
dividend, voting or otherwise, as the directors from time to time may
determine.




If we
issue shares of more than one class, the rights attached to any class (unless
otherwise provided by the terms of issue of the shares of that class) may be
varied with the consent in writing of the holders of not less than three-fourths
of the issued shares of that class and the holders of not less than
three-fourths of the issued shares of any other class of shares which may be
affected by such variation.  The rights conferred upon the holders of
the shares of any class issued with preferred or other rights will not, unless
otherwise expressly provided by the terms of issue of the shares of that class,
be deemed to be varied by the creation or issue of further shares ranking pari
passu therewith.




Shareholders Meetings




Under our
memorandum and articles of association, we are required to hold an annual
meeting of shareholders each year at such date and time determined by our
directors.  Meetings of shareholders may be called pursuant to board
resolution or the written request of shareholders holding more than 30% of the
votes of our outstanding voting shares.  Written notice of meetings of
shareholders must be given to each shareholder entitled to vote at a meeting not
fewer than 10 days prior to the date of the meeting, with certain limited
exceptions.  The written notice will state the place, time and
business to be conducted at the meeting.  The shareholders listed in
our share register on the date prior to the date the notice is given shall be
entitled to vote at the meeting, unless the notice provides a different date for
determining the shareholders who are entitled to vote.




A meeting
of shareholders held without proper notice will be valid if shareholders holding
90% majority of the total number of shares entitled to vote on all matters to be
considered at the meeting, or 90% of the votes of each class or series of shares
where shareholders are entitled to vote thereon as a class or series, together
with an absolute majority of the remaining votes, have waived notice of the
meeting and, for this purpose, presence of a shareholder at the meeting is
deemed to constitute a waiver.  The inadvertent failure of the
directors to give notice of a meeting to a shareholder, or the fact that a
shareholder has not received notice, will not invalidate a meeting.




Shareholders
may vote in person or by proxy.  No business may be transacted at any
meeting unless a quorum of shareholders is present.  A quorum consists
of the presence in person or by proxy of holders entitled to exercise at least
50% of the voting rights of the shares of each class or series of shares
entitled to vote as a class or series thereon and the same proportion of the
votes of the remaining shares entitled to vote thereon.




Changes in the Maximum Number of Shares the
Company is Authorized to Issue




Subject
to the provisions of the BVI Business Companies Act, 2004, we may, by a
resolution of shareholders, amend our memorandum and articles of association to
increase or decrease the number of shares authorized to be
issued.  Our directors may, by resolution, authorize a distribution by
us at a time, of an amount, and to any shareholders they think fit if they are
satisfied, on reasonable grounds, that we will, immediately after the
distribution, satisfy the solvency test as set forth in the BVI Business
Companies Act, 2004, which requires that the value of a company’s assets exceeds
its liabilities, and the company is able to pay its debts as they fall
due.




56




Indemnification




Subject
to the provisions of the BVI Business Companies Act, 2004, we may indemnify any
person who (a) is or was a party or is threatened to be made a party to any
threatened, pending or completed proceedings, whether civil, criminal,
administrative or investigative, by reason of the fact that the person is or was
a director of our company; or (b) is or was, at our request, serving as a
director of, or in any other capacity is or was acting for, another company or a
partnership, joint venture, trust or other enterprise, against all expenses,
including legal fees, and against all judgments, fines and amounts paid in
settlement and reasonably incurred in connection with legal, administrative or
investigative proceedings.




10.C.  Material
Contracts




Loans
and Guarantees




We enter
in loan agreements from time to time with local banks.  These loans
are short-term and are used for capital during production and
operation.  The term of each loan is one year.  We must
obtain the consent of the bank to change the specified usage of the
loans.  The bank sets the interest rate at the time of the
distribution of the loan and it will not be adjusted during the
term.  The loans are expected to be repaid from operating
income.  We are obligated to provide the bank with financial
statements during the term and we may not prepay the loan without consent from
the bank.  If we engage in a contracted lease, restructuring, joint
operation, merger, acquisition, joint venture, decrease in capital contribution
or transfer of material assets, we must inform the bank.  We are
limited by the bank to the amount of dividends we may pay, and we are
prohibited, unless we receive the bank’s permission, from applying for other
credit, repaying other long term debt, amending existing credit agreements or
providing debt guarantees to third parties.  If we do not use the loan
as specified in the loan agreement, the bank may terminate the loan and require
payment in full.  If we pay the full principal of the loan before the
end of the term, the bank may charge the interest rate agreed for the full term
of the loan.




Our loans
are guaranteed by certain relatedentities.See Item 7.B.–Related Party Transactions
for a description of the loan guarantees.




Employment
Agreement




We have
entered into an employment agreement with Liang Tang, Chairman of the Board,
dated October 2008.  See Item 6.B-Compensation for
a description of the employment agreement.


Cooperation
Agreement




Ossen Jiujiang has entered into a
cooperation agreement with Shanghai Machinery Manufacturing Technology Research
Institute, Organization Department of Jiujiang Committee of CPC and Jiujiang
Bureau of Science and Technology, dated January 2008.  See Item5.C. - Research and Development,
Patentsand Licenses, etc. for a
description of the cooperation agreement.


10.D.  Exchange
Controls




British
Virgin Islands




There are
no exchange control regulations imposed on us or our shareholders under British
Virgin Islands law.




The
PRC




China
regulates foreign currency exchanges primarily through the following rules and
regulations:




·
            Foreign
      Currency Administration Rules of 1996, as amended;
  and


57


·
            Administrative
      Rules of the Settlement, Sale and Payment of Foreign Exchange of
      1996.




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




Pursuant
to the above-mentioned administrative rules, foreign-invested enterprises, such
as our PRC subsidiaries, Ossen Materials and Ossen Jiujiang, may buy, sell
and/or remit foreign currencies for current account transactions at banks in
China with authority to conduct foreign exchange business by complying with
certain procedural requirements, such as presentment of valid commercial
documents. For capital-account transactions involving foreign direct investment,
foreign debts and outbound investment in securities and derivatives, approval
from SAFE is a pre-condition. Capital investments by foreign-invested
enterprises outside China are subject to limitations and requirements in China,
such as prior approvals from the PRC Ministry of Commerce or SAFE.




10.E.  Taxation




The
following summary of the material tax consequences of an investment in our
ordinary shares relevant to our shareholders is based upon laws and relevant
interpretations thereof in effect as of the date of this prospectus, all of
which are subject to change, possibly with retroactive effect. The discussion is
not intended to be, nor should it be construed as, legal or tax advice to any
prospective purchaser and is not exhaustive of all possible tax considerations.
This summary does not deal with all possible tax consequences relating to an
investment in our shares, such as the tax consequences under U.S. federal, state
and local tax laws or non-PRC and non-BVI tax laws. You should consult your own
tax advisors with respect to the consequences of the acquisition, ownership and
disposition of our shares.




British
Virgin Islands Taxation




All
dividends, interests, rents, royalties, compensations and other amounts paid by
us to persons who are not resident in the British Virgin Islands are exempt from
all forms of taxation in the British Virgin Islands and any capital gains
realized with respect to any of our shares, debt obligations, or other
securities by persons who are not persons resident in the British Virgin Islands
are exempt from all forms of taxation in the British Virgin Islands. No estate,
inheritance, succession or gift tax, rate, duty, levy or other charge is payable
under BVI law by persons who are not persons resident in the British Virgin
Islands with respect to any of our shares, debt obligation or other securities.
There are currently no withholding taxes or exchange control regulations in the
British Virgin Islands applicable to us or our shareholders. Currently, there is
no income tax treaty, convention or reciprocal tax treaty regarding withholdings
currently in effect between the United States and the British Virgin
Islands.




People’s
Republic of China Taxation




Under the
former Income Tax Law for Enterprises with Foreign Investment and Foreign
Enterprises, any dividends payable by foreign-invested enterprises to non-PRC
investors were exempt from PRC withholding tax. In addition, any dividends
payable, or distributions made, by us to holders or beneficial owners of our
shares would not be subject to any PRC tax, provided that such holders or
beneficial owners, including individuals and enterprises, were not deemed to be
PRC residents under the PRC tax law and were not otherwise subject to PRC
tax.




On March
16, 2007, the PRC National People’s Congress approved and promulgated a new PRC
Enterprise Income Tax Law, which took effect as of January 1, 2008. Under the
new tax law, enterprises established under the laws of non-PRC jurisdictions but
whose “de facto management body” are located in China are considered “resident
enterprises” for PRC tax purposes. Under the implementation regulations issued
by the State Council relating to the new tax law, “de facto management body” is
defined as the body that has material and overall management control over the
business, personnel, accounts and properties of an enterprise. In April 2009,
the PRC State Administration of Taxation promulgated a circular to clarify the
definition of “de facto management body” for enterprises incorporated overseas
with controlling shareholders being PRC enterprises.  It remains
unclear how the tax authorities will treat an overseas enterprise invested or
controlled by another overseas enterprise and ultimately controlled by PRC
individual residents as is in our case. We are currently not treated as a PRC
resident enterprise by the relevant tax authorities. Since substantially all of
our management is currently based in China and may remain in China in the
future, we may be treated as a “resident enterprise” for the PRC tax purposes,
in which case, we will be subject to PRC income tax as to our worldwide income
at a uniform income tax rate of 25%. In addition, the new tax law provides that
dividend income between qualified “resident enterprises” is exempt from income
tax.


58


Moreover,
the new tax law provides that an income tax rate of 10% is normally applicable
to dividends payable for earnings derived since January 1, 2008 to non-PRC
investors who are “non-resident enterprises,” to the extent such dividends are
derived from sources within China. We are a British Virgin Islands holding
company and substantially all of our income is derived from dividends, if any,
we receive from our operating subsidiaries located in China. Thus, dividends
payable to us by our subsidiaries in China may be subject to the 10% withholding
tax if we are considered as a “non-resident enterprise” under the new tax
law.




Under the
currently available guidance of the new tax law, dividends payable by us to our
shareholders should not be deemed to be derived from sources within China and
therefore should not be subject to withholding tax at 10%, or a lower rate if
reduced by a tax treaty or agreement. However, what will constitute income
derived from sources within China is currently unclear. In addition, gains on
the disposition of our shares should not be subject to PRC withholding
tax.  However, these conclusions are not entirely free from doubt. In
addition, it is possible that these rules may change in the future, possibly
with retroactive effect.




59




10.F.  Dividends
and Paying Agents




The
Company has no current plans to pay dividends. The Company does not currently
have a paying agent.




10.G.  Statement
by Experts




The
consolidated financial statements of the Company as of December 31, 2009, and
2008 and for the fiscal years ended December 31, 2009, and 2008, included
herein, have been audited by Sherb & Co. LLP, independent registered public
accounting firm, as stated in their report appearing herein, and is included in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing and their consent and authorization.


60


10.H.  Documents
on Display




The
Company’s documents can be viewed at its headquarters, located at 518 Shangcheng
Road, Floor 17, Shanghai, 200120, China. The Company is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended,
and will file reports, registration statements and other information with the
SEC. The Company’s reports, registration statements and other information can be
inspected on the SEC’s website at www.sec.gov and such information can also be
inspected and copies ordered at the public reference facilities maintained by
the SEC at the following location: 100 F Street NE, Washington,
D.C.  20549.




10.I.
Subsidiary Information




Not
Applicable.




ITEM
      11.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK




Quantitative
and Qualitative Disclosures about Market Risk




Financial
instruments that expose us to concentrations of credit risk primarily consist of
cash and accounts receivables. The maximum amount of loss due to credit risk in
the event of other parties failing to perform their obligations is represented
by the carrying amount of each financial asset as stated in our consolidated
balance sheets.




As of
December 31, 2009 and 2008, substantially all of our cash included bank deposits
in accounts maintained within the PRC where there is currently no rule or
regulation in place for obligatory insurance to cover bank deposits in the event
of bank failure. However, we have not experienced any losses in such accounts
and we believe we are not exposed to any significant risks on our cash in bank
accounts.




We are
exposed to various types of market risks, including changes in foreign exchange
rates, commodity prices and inflation in the normal course of
business.




Interest
rate risk




We are
subject to risks resulting from fluctuations in interest rates on our bank
balances. A substantial portion of our cash is held in China in interest bearing
bank deposits and denominated in RMB. To the extent that we may need to raise
debt financing in the future, upward fluctuations in interest rates would
increase the cost of new debt. We do not currently use any derivative
instruments to manage our interest rate risk.




Commodity
price risk




Certain
raw materials used by us are subject to price volatility caused by supply
conditions, political and economic variables and other unpredictable factors.
The primary purpose of our commodity price management activities is to manage
the volatility associated with purchases of commodities in the normal course of
business. We do not speculate on commodity prices.




Foreign
exchange risk




The RMB
is not a freely convertible currency. The PRC government may take actions that
could cause future exchange rates to vary significantly from current or
historical exchange rates. Fluctuations in exchange rates may adversely affect
the value of any dividends we declare.




Very
limited hedging transactions are available in China to reduce our exposure to
exchange rate fluctuations.  To date, we have not entered into any
hedging transactions in an effort to reduce our exposure to foreign currency
exchange risk. While we may enter into hedging transactions in the future, the
availability and effectiveness of these transactions may be limited, and we may
not be able to successfully hedge our exposure at all. In addition, our foreign
currency exchange losses may be magnified by PRC exchange control regulations
that restrict our ability to convert RMB into foreign
currencies.


61


Inflation
risk




In recent
years, China has not experienced significant inflation or deflation and thus
inflation and deflation have not had a significant effect on our business during
the past three years. Inflationary factors such as increases in the cost of our
products and overhead costs may adversely affect our operating
results.  A high rate of inflation in the future may have an adverse
effect on our ability to maintain current levels of gross margin and selling,
general and administrative expenses as a percentage of net revenues if the
selling prices of our products do not increase proportionately with these
increased costs.




ITEM
      12.
            DESCRIPTION
      OF SECURITIES OTHER THAN EQUITY
SECURITIES




Not
Applicable.




PART
II




ITEM
      13.
            DEFAULTS,
      DIVIDEND ARREARAGES AND
DELINQUENCIES




Not
Applicable.




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




Not
Applicable.




ITEM
      15.
            CONTROLS
      AND PROCEDURES




Not
Applicable.




ITEM
      16.
            RESERVED




ITEM
      16A.
            AUDIT
      COMMITTEE FINANCIAL EXPERT




Not
Applicable.




ITEM
      16B.
            CODE
      OF ETHICS




Not
Applicable.




ITEM
      16C.
            PRINCIPAL
      ACCOUNTIING FEES AND SERVICES




Not
Applicable.




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




Not
Applicable.




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




Not
Applicable.


62


ITEM
      16F.
            CHANGE
      IN REGISTRANT’S CERTIFYING
ACCOUNTANT




On
July 7, 2010, our board of directors approved the engagement of Sherb &
Co., LLP as our independent registered public accounting firm for the year
ending December 31, 2009. The board determined not to renew the engagement of Li
& Company, PC as our independent registered public accounting
firm.




The Board
determined to engage Sherb & Co., LLP in order to realize economies and
efficiencies, since Sherb & Co., LLP acted as the independent
registered public accounting firm for Ossen prior to the business
combination.




The
report of Li & Company, PC on the financial statements of the Company as of
February 28, 2010 did not contain an adverse opinion or disclaimer of opinion
and was not qualified or modified as to uncertainty, audit scope or accounting
principles.




In
connection with the audit of our financial statements for the period ended
February 28, 2010, there were no disagreements with Li & Company, PC on any
matters of accounting principles or practices, financial statement disclosure,
or auditing scope and procedures which, if not resolved to the satisfaction of
Li & Company, PC, would have caused Li & Company, PC to make reference
to the matter of such disagreements in their reports.




We
engaged Sherb & Co., LLP as our new independent registered public
accounting firm as of July 7, 2010. During our two most recent fiscal years
neither our company nor anyone on its behalf has consulted with Sherb & Co.,
LLP regarding either (i) the application of accounting principles to a
specified transaction, either completed or proposed; or the type of audit
opinion that might be rendered on our financial statements, and neither a
written report was provided to us nor oral advice was provided by Sherb &
Co. that was an important factor considered by us in reaching a decision as to
any accounting, auditing or financial reporting issue; or (ii) any matter that
was the subject of a disagreement, as that term is defined by SEC regulations, or a reportable event, as
that term is defined by SEC
regulations.




ITEM
      16G.
            CORPORATE
      GOVERNANCE




Not
Applicable.


63


PART
III




ITEM
      17.
            FINANCIAL
      STATEMENTS




Not
applicable.




ITEM
      18.
            FINANCIAL
      STATEMENTS




The
consolidated financial statements and related notes required by this item are
contained on pages F-1 through F-24.




ITEM
      19.
            EXHIBITS




Exhibit
                    Number
                
                Description of Documents1.1
                
                Amended
      and Restated Memorandum and Articles of Association4.1
                
                Share
      Exchange Agreement between Ultra Glory International Ltd., the shareholder
      of Ultra Glory International Ltd., Ossen Innovation Materials Group Co.,
      Ltd. and the Shareholders of Ossen Innovation Materials Group Co., Ltd.,
      dated July 7, 20104.2
                
                Form
      of Sales Contract between Ossen Innovation Materials Co. Ltd. and Shanghai
      Zhaoyang New Metal Material Co., Ltd.4.3
                
                Form
      of Sales Contract between Ossen (Jiujiang) Steel Wire & Cable Co.,
      Ltd. and The Crispin Corporation4.4
                
                Form
      of Sales Contract between Ossen (Jiujiang) Steel Wire & Cable Co.,
      Ltd. and Ibercordones Pretensados S. L.4.5
                
                Form
      of Sales Contract between Ossen Innovation Materials Co., Ltd. and
      Zhangjiagang Ruifeng Iron and Steel Co., Ltd.4.6
                
                Form
      of Coating Processing Agreement between Ossen Innovation Materials Co.,
      Ltd. and Zhangjiagang Ruifeng Iron and Steel Co., Ltd.4.7
                
                Form
      of Purchase Contract between Ossen Innovation Materials Co., Ltd. and
      Zhangjiagang Free Trade Zone B.M. International Trading Co.,
      Ltd.4.8
                
                Form
      of Sales Contract between Shanghai Z.F.X. Steel Co., Ltd. and Ossen
      Innovation Materials Co. Ltd.4.9
                
                Form
      of Purchase Contract between Ossen Innovation Materials Co., Ltd. and
      Zhangjiagang Free Trade Zone JinDe Trading Co., Ltd.4.10
                
                Form
      of Purchase Contract between Ossen Innovation Materials Co., Ltd. and
      Jiangsu Shagang Group Co., Ltd.4.11
                
                Employment
      Contract by and between Ossen Innovation Materials Co., Ltd. and Liang
      Tang, dated October 7, 20084.12
                
                Form
      of Stabilization Processing Agreement between Shanghai Zhaoyang New Metal
      Material Co., Ltd. and Ossen Innovation Materials Co.,
  Ltd.


64





4.13
              
              Form
      of Loan Contract between Ossen Innovation Materials Co., Ltd. and
      Feicuiyuan Branch, Huishang Bank4.14
              
              Form
      of Loan Guarantee Contract between Shanghai Ossen Investment Co., Ltd. and
      Feicuiyuan Branch, Huishang Bank4.15
              
              Form
      of Loan Guarantee Contract between Shanghai Z.F.X. Steel Co., Ltd. and
      Feicuiyuan Branch, Huishang Bank4.16
              
              Cooperation
      Agreement between Ossen (Jiujiang) Steel Wire & Cable Co., Ltd.,
      Shanghai Machinery Manufacturing Technology Research Institute,
      Organization Department of Jiujiang Committee of CPC and Jiujiang Bureau
      of Science and Technology, dated January 20088.1
              
              Subsidiaries
      of the Registrant15.1
              
              Consent
      of Sherb & Co., LLP


65


SIGNATURES




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




OSSEN
      INNOVATION CO. LTD./s/  Wei HuaName:
      Wei HuaTitle:
      Chief Executive Officer




Date:
July 7, 2010


66




OSSEN
INNOVATION MATERIALS CO., LTD.AND
SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
 DECEMBER 31, 2009 AND
2008
  CONTENTS
  Report
      of Independent Registered Public Accounting Firm
              F-2Consolidated
      Financial Statements:Consolidated
      Balance Sheets
              F-3Consolidated
      Statements of Operations
              F-4Consolidated
      Statements of Shareholders’ Equity
              F-5Consolidated
      Statements of Cash Flows
              F-6Notes
      to Consolidated Financial Statements
              F-7
      to F-24
  F-1
  REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To the
Shareholders and Directors
 Ossen
Innovation Co., Ltd. and Subsidiaries
 
 We have
audited the accompanying consolidated balance sheets of Ossen Innovation Co.,
Ltd. and Subsidiaries as of December 31, 2009 and 2008 and the related
consolidated statements of operations, shareholders’ equity and cash flows for
the years ended December 31, 2009 and 2008. These consolidated financial
statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits 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 audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purposes 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 consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Ossen Innovation Co., Ltd.
as of December 31, 2009 and 2008 and the results of its operations and its cash
flows for the years ended December 31, 2009 and 2008 in conformity with
accounting principles generally accepted in the United States.
 
 /s/ Sherb
& Co., LLP
 Certified
Public Accountants
 New York,
New York
 July 7,
2010
  F-2




OSSEN
INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS


December 31,2009
                
                
                2008ASSETSCurrent
      AssetsCash
      and cash equivalents
                
                $
                8,409,467
                
                
                $
                3,761,315Restricted
      cash
                
                
                11,824,214
                
                
                
                9,977,092Note
      receivable-bank
      acceptance note
                
                
                150,208
                
                
                
                -Accounts
      receivable, net of allowance for doubtful accounts of $42,487 and $35,782
      at December 31, 2009 and 2008
                
                
                15,157,087
                
                
                
                4,713,488Inventories
                
                
                10,206,861
                
                
                
                9,300,261Prepayments
                
                
                19,833,561
                
                
                
                19,270,693Other
      current assets
                
                
                964,876
                
                
                
                293,359Notes
      receivable from related party-bank acceptance notes
                
                
                1,828,234
                
                
                
                -Total
      Current Assets
                
                
                68,374,508
                
                
                
                47,316,208Long-term
      AssetsProperty,
      plant and equipment, net
                
                
                13,088,809
                
                
                
                14,246,542Land
      use rights, net
                
                
                4,254,270
                
                
                
                4,333,632Total
      Long-term Assets
                
                
                17,343,079
                
                
                
                18,580,174TOTAL
      ASSETS
                
                $
                85,717,587
                
                
                $
                65,896,382LIABILITIES
      AND SHAREHOLDERS’ EQUITYCurrent
      LiabilitiesNotes
      payable – bank acceptance notes
                
                $
                19,744,925
                
                
                $
                18,236,993Short-term
      bank loans
                
                
                27,350,377
                
                
                
                19,404,161Accounts
      payable
                
                
                240,275
                
                
                
                428,441Customer
      deposits
                
                
                5,189,759
                
                
                
                2,936,267Taxes
      payable
                
                
                110,493
                
                
                
                6,465Other
      payables and accrued expenses
                
                
                32,473
                
                
                
                1,475,472Due
      to related parties
                
                
                12,869,939
                
                
                
                12,987,588Total
      Current Liabilities
                
                
                65,538,241
                
                
                
                55,475,387TOTAL
      LIABILITIES
                
                
                65,538,241
                
                
                
                55,475,387Shareholders'
      EquityCommon stock,
      no par value, 50,000 sharesauthorized,
      50,000 shares issued and outstanding
                
                
                500
                
                
                
                500Accumulated
      other comprehensive income
                
                
                543,036
                
                
                
                511,890Statutory
      reserve
                
                
                1,093,331
                
                
                
                661,597Retained
      earnings
                
                
                13,069,401
                
                
                
                5,488,600Non-controlling
      interest
                
                
                5,473,078
                
                
                
                3,758,408TOTAL
      SHAREHOLDERS’ EQUITY
                
                
                20,179,346
                
                
                
                10,420,995TOTAL
      LIABILITIES AND SHAREHOLDERS’ EQUITY
                
                $
                85,717,587
                
                
                $
                65,896,382





See
accompanying notes to the consolidated financial statements


F-3




OSSEN
INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME




Year Ended December 31,2009
                
                
                2008REVENUES
                
                $
                101,087,796
                
                
                $
                82,742,310COST
      OF GOODS SOLD
                
                
                87,659,925
                
                
                
                70,532,733GROSS
      PROFIT
                
                
                13,427,871
                
                
                
                12,209,577Selling
      and distribution expenses
                
                
                503,724
                
                
                
                4,326,491General
      and administrative expenses
                
                
                1,143,672
                
                
                
                1,316,606Total
      Operating Expenses
                
                
                1,647,396
                
                
                
                5,643,097INCOME
      FROM OPERATIONS
                
                
                11,780,475
                
                
                
                6,566,480Interest
      expenses, net
                
                
                (1,496,712
                )
                
                
                (1,891,671
                )Other
      income, net
                
                
                183,495
                
                
                
                380,766INCOME
      BEFORE INCOME TAXES
                
                
                10,467,258
                
                
                
                5,055,575INCOME
      TAXES
                
                
                (740,053
                )
                
                
                (291,520
                )NET
      INCOME
                
                
                9,727,205
                
                
                
                4,764,055LESS:
      NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST
                
                
                1,714,670
                
                
                
                809,437NET
      INCOME ATTRIBUTABLE TO CONTROLLING INTEREST
                
                
                8,012,535
                
                
                
                3,954,618OTHER
      COMPREHENSIVE INCOMEForeign
      currency translation gain, net of tax
                
                
                31,146
                
                
                
                420,883TOTAL
      OTHER COMPREHENSIVE INCOME, NET OF TAX
                
                
                31,146
                
                
                
                420,883COMPREHENSIVE
      INCOME
                
                $
                8,043,681
                
                
                $
                4,375,501





See
accompanying notes to the consolidated financial statements


F-4




OSSEN
INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


CommonStock
                                                
                                                
                                                Accumulated
                                                  Other
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                NonShares
                                                
                                                
                                                Amount
                                                
                                                
                                                Comprehensive
                                                  Income
                                                
                                                
                                                Statutory
                                                  Reserve
                                                
                                                
                                                Retained
                                                  Earnings
                                                
                                                
                                                Controlling
                                                  Interest
                                                
                                                
                                                TotalBalance,
      January 1, 2008
                                                
                                                
                                                50,000
                                                
                                                
                                                $
                                                500
                                                
                                                
                                                $
                                                91,007
                                                
                                                
                                                $
                                                238,676
                                                
                                                
                                                $
                                                1,956,903
                                                
                                                
                                                $
                                                2,948,971
                                                
                                                
                                                $
                                                5,236,057Net
      income
                                                
                                                
                                                -
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                3,954,618
                                                
                                                
                                                
                                                809,437
                                                
                                                
                                                
                                                4,764,055Transfer
      to statutory reserve
                                                
                                                
                                                -
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                422,921
                                                
                                                
                                                
                                                (422,921
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Foreign
      currency translation adjustment, net of tax
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                420,883
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                420,883Balance,
      December 31, 2008
                                                
                                                
                                                50,000
                                                
                                                
                                                
                                                500
                                                
                                                
                                                
                                                511,890
                                                
                                                
                                                
                                                661,597
                                                
                                                
                                                
                                                5,488,600
                                                
                                                
                                                
                                                3,758,408
                                                
                                                
                                                
                                                10,420,995Net
      income
                                                
                                                
                                                -
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                8,012,535
                                                
                                                
                                                
                                                1,714,670
                                                
                                                
                                                
                                                9,727,205Transfer
      to statutory reserve
                                                
                                                
                                                -
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                431,734
                                                
                                                
                                                
                                                (431,734
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Foreign
      currency translation adjustment, net of tax
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                31,146
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                31,146Balance,
      December 31, 2009
                                                
                                                
                                                50,000
                                                
                                                
                                                $
                                                500
                                                
                                                
                                                $
                                                543,036
                                                
                                                
                                                $
                                                1,093,331
                                                
                                                
                                                $
                                                13,069,401
                                                
                                                
                                                $
                                                5,473,078
                                                
                                                
                                                $
                                                20,179,346





See
accompanying notes to the consolidated financial statements


F-5




OSSEN
INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS




Year ended December 31,2009
                    
                    
                    2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income
                    
                    $
                    9,727,205
                    
                    
                    $
                    4,764,055Adjustments
      to reconcile net income to net cash used in operating
      activitiesDepreciation
      and amortization
                    
                    
                    1,457,784
                    
                    
                    
                    1,555,624Deferred
      taxes
                    
                    
                    (838
                    )
                    
                    
                    (1,176
                    )Changes
      in operating assets and liabilities:(Increase)
      Decrease In:Accounts
      receivable
                    
                    
                    (10,443,599
                    )
                    
                    
                    1,002,464Inventories
                    
                    
                    (906,600
                    )
                    
                    
                    (2,112,944
                    )Prepayments
                    
                    
                    (562,867
                    )
                    
                    
                    (12,408,746
                    )Due
      from related party
                    
                    
                    -
                    
                    
                    
                    3,846,600Note
      receivable-bank acceptance note from unrelated party
                    
                    
                    (150,208
                    )
                    
                    
                    -Notes
      receivable from related party
                    
                    
                    (1,828,234
                    )
                    
                    
                    -Other
      current assets
                    
                    
                    (670,679
                    )
                    
                    
                    10,680Accounts
      payable
                    
                    
                    (188,166
                    )
                    
                    
                    (35,011
                    )Customer
      deposits
                    
                    
                    2,253,492
                    
                    
                    
                    2,749,301Taxes
      payable
                    
                    
                    104,028
                    
                    
                    
                    (134,501
                    )Other
      payables and accrued expenses
                    
                    
                    (1,442,999
                    )
                    
                    
                    (1,616,329
                    )Due
      to related parties
                    
                    
                    (117,649
                    )
                    
                    
                    145,896Net
      cash used in operating activities
                    
                    
                    (2,769,330
                    )
                    
                    
                    (2,234,087
                    )CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchases
      of plant and equipment
                    
                    
                    (209,511
                    )
                    
                    
                    (2,287,268
                    )Purchases
      of land use rights
                    
                    
                    -
                    
                    
                    
                    (379,397
                    )Net
      cash used in investing activities
                    
                    
                    (209,511
                    )
                    
                    
                    (2,666,665
                    )CASH
      FLOWS FROM FINANCING ACTIVITIES:Increase
      in restricted cash
                    
                    
                    (1,847,122
                    )
                    
                    
                    (5,465,258
                    )Proceeds
      from short-term bank loans
                    
                    
                    35,687,123
                    
                    
                    
                    22,322,080Repayments
      of short-term bank loans
                    
                    
                    (27,789,153
                    )
                    
                    
                    (21,446,704
                    )Proceeds
      from notes payable to unrelated parties
                    
                    
                    1,507,931
                    
                    
                    
                    18,236,993Repayment
      of notes payable to related party
                    
                    
                    -
                    
                    
                    
                    (10,937,778
                    )Cash
      dividend paid to a shareholder
                    
                    
                    -
                    
                    
                    
                    (2,364,274
                    )Net
      cash provided by financing activities
                    
                    
                    7,558,779
                    
                    
                    
                    345,059INCREASE
      (DECREASE) IN CASH AND CASH EQUIVALENTS
                    
                    
                    4,579,938
                    
                    
                    
                    (4,555,693
                    )Effect
      of exchange rate changes on cash
                    
                    
                    68,214
                    
                    
                    
                    1,581,392Cash
      and cash equivalents at beginning of year
                    
                    
                    3,761,315
                    
                    
                    
                    6,735,616CASH
      AND CASH EQUIVALENTS AT END OF YEAR
                    
                    $
                    8,409,467
                    
                    
                    $
                    3,761,315SUPPLEMENTARY
      CASH FLOW INFORMATIONCash
      paid during the period for:Income
      taxes paid
                    
                    $
                    637,267
                    
                    
                    $
                    441,029Interest
      paid
                    
                    $
                    1,492,404
                    
                    
                    $
                    1,514,114





See
accompanying notes to the consolidated financial statements


F-6


OSSEN
INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008





NOTE
1 – ORGANIZATION AND PRINCIPAL ACTIVITIES





Ultra
Glory International, Ltd., or Ultra Glory is a British Virgin Islands limited
liability company organized on January 21, 2010 under the BVI Business Companies
Act, 2004. Ultra Glory was a blank check company formed for the purpose of
acquiring, through a share exchange, asset acquisition or other similar business
combination, an operating business.




Business
Combination




On
July 7, 2010, Ultra Glory and its sole shareholder entered into a share
exchange agreement with Ossen Innovation Group, a British Virgin Islands limited
liability company organized on April 30, 2010 under the British Virgin Islands
Companies Act (2004) and the shareholders of Ossen Innovation Group. Pursuant to
the share exchange agreement, Ultra Glory acquired from the shareholders of
Ossen Innovation Group all of the issued and outstanding shares of Ossen
Innovation Group, in exchange for an aggregate of 10,000,000 newly issued
ordinary shares issued by Ultra Glory to the shareholders of Ossen Innovation
Group.  In addition, the sole shareholder of Ultra Glory sold all of
the 5,000,000 ordinary shares of Ultra Glory that were issued and outstanding
prior to the business combination, to the shareholders of Ossen Innovation Group
for cash, at a price of $0.03 per share.  As a result, the individuals
and entities that owned shares of Ossen Innovation Group prior to the business
combination acquired 100% of the equity of Ultra Glory, and Ultra Glory acquired
100% of the equity of Ossen Innovation Group.  Ossen Innovation Group
is now a wholly owned subsidiary of Ultra Glory.  In conjunction with
the business combination, Ultra Glory filed an amended charter, pursuant to
which Ultra Glory changed its name to Ossen Innovation Co., Ltd., changed its
fiscal year end to December 31 and increased its authorized shares to
100,000,000.  Upon the consummation of the business combination, the
company ceased to be a shell company.




The
company’s Shareholders




Dr. Tang,
the company’s chairman, owns 100% of the shares of Effectual Strength
Enterprises Ltd., a British Virgin Islands company, which owned 79% of the
shares of Ossen Innovation Group prior to the business combination, and owns 79%
of the Company’s shares since the business combination.  The holders
of the remaining 21% of our shares are investors that are residents of the PRC
and are unaffiliated with Ossen.




Our
Subsidiaries




British
Virgin Islands Companies




Ossen
Innovation Group, the company’s wholly owned subsidiary, is the sole shareholder
of two holding companies organized in the British Virgin Islands: Ossen Group
(Asia) Co., Ltd., or Ossen Asia, and Topchina Development Group Ltd., or
Topchina. All of the equity of Ossen Asia and Topchina had been held by Dr. Tang
since inception.  In May 2010, Dr. Tang transferred these shares to
Ossen Innovation Group in anticipation of the public listing of our company’s
shares in the United States.




Ossen
Asia is a British Virgin Islands limited liability company organized on February
7, 2002.  Ossen Asia has one direct operating subsidiary in China,
Ossen Innovation Materials Co. Ltd., or Ossen Materials.  Ossen Asia
owns 81% of the equity of Ossen Materials.




Topchina
is a British Virgin Islands limited liability company organized on November 3,
2004.  Ossen Materials and Topchina directly own an operating
subsidiary in China, Ossen (Jiujiang) Steel Wire & Cable Co., Ltd., or Ossen
Jiujiang.  Ossen Materials owns 75% of the equity of Ossen Jiujiang
and Topchina owns 25%.




Ossen
Materials




Ossen
Materials was formed in China on October 27, 2004 as a Sino-foreign joint
venture limited liability company under the name Ossen (Ma’anshan) Steel Wire
and Cable Co., Ltd.  On May 8, 2008, Ossen Materials was restructured
from a Sino-foreign joint venture limited liability company to a
corporation.  The name of the entity was changed at that time to Ossen
Innovation Materials Co., Ltd.


F-7


OSSEN
INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008





Ossen
Asia owns 81% of the equity of Ossen Materials.  The remaining 19% is
held in the aggregate by four Chinese entities, two of which are controlled by
Chinese governmental entities, one of which is controlled by Zhonglu Co. Ltd., a
company whose shares are listed on the Shanghai Stock Exchange, and one of which
is controlled by Chinese citizens.




Through
Ossen Materials, the company has manufactured and sold plain surface PC strands,
galvanized PC steel wires and PC wires in the company’s Maanshan City, PRC,
facility since 2004.  The primary products manufactured in this
facility are the company’s plain surface PC strands.  The primary
markets for the products manufactured at the company’s Maanshan facility
are Anhui Province, Jiangsu Province, Zhejiang Province and Shanghai City, each
in the PRC.




Ossen
Jiujiang




On April
6, 2005, Ossen Shanghai Investment Co., Ltd., or Ossen Shanghai, acquired a
portion of the bankruptcy assets of Jiujiang Tianlong Galvanized Prestressing
Steel Strand LLC, including equipment, land use rights and inventory for
approximately $3.9 million.  Ossen Jiujiang was formed by Ossen
Shanghai in the PRC as a Sino-foreign joint venture limited liability company on
April 13, 2005.  Ossen Shanghai then transferred the newly acquired
assets to Ossen Jiujiang. At its inception, Ossen Jiujiang was owned by two
entities: 33.3% of its equity was held by Ossen Asia and 66.7% by Ossen
Shanghai.  Ossen Shanghai is a Chinese company owned by five Chinese
individuals, one of whom is a director of our subsidiary, Ossen Materials. In
June 2005, Ossen Shanghai transferred its entire interest in Ossen Jiujiang to
Topchina in exchange for approximately $2.9 million. In October 2007, Topchina
transferred 41.7% of the equity in Ossen Jiujiang to Ossen Asia for no
consideration. On December 17, 2007, Ossen Asia transferred all of its shares in
Ossen Jiujiang to Ossen Materials for no consideration.  Since that
date 75% of the equity of Ossen Jiujiang has been held by Ossen Materials and
25% by Topchina.




Through
Ossen Jiujiang, the company manufactures galvanized PC wires, plain surface PC
strands, galvanized PC strands, unbonded PC strands, helical rib PC wires,
sleeper PC wires and indented PC wires.  The primary products
manufactured in this facility are the company’s galvanized PC
wires.  The primary markets for the PC strands manufactured in the
company’s Jiujiang facility are Jiangxi Province, Wuhan Province, Hunan
Province, Fujian Province and Sichuan Province, each in the PRC.




At
December 31, 2009, the subsidiaries of Ossen Innovation Group were as
follows:





Name
                            
                            Domicile and Date
                              of Incorporation
                            
                            
                            Paid-in Capital
                            
                            
                            Percentage
                              of
                              Effective Ownership
                            
                            
                            Principal
                              ActivitiesOssen
      Group (Asia) Co., Ltd. ("Ossen Asia")
                            
                            BVI
                              February
      7, 2002
                            
                            
                            USD
                            -
                            
                            
                            
                            100
                            %
                            
                            Investments
      holdingsTopchina
      Development Group Ltd. ("Topchina")
                            
                            BVI
                              November
      3, 2004
                            
                            
                            USD
                            -
                            
                            
                            
                            100
                            %
                            
                            Investments
      holdingsOssen
      Innovation Materials Co., Ltd. ("Ossen Meterials")
                            
                            The
      PRC
                              October
      27, 2004
                            
                            
                            RMB
                            75,000,000
                            
                            
                            
                            81
                            %
                            
                            Design,
      engeneering, manufacture and saleof
      customized prestressed steel materialsOssen
      (Jiujiang) Steel Wire & Cable Co., Ltd. ("Ossen
    Jiujiang")
                            
                            The
      PRC
                              April
      13, 2005
                            
                            
                            RMB
                            50,000,000
                            
                            
                            
                            85.75
                            %
                            
                            Design,
      engeneering, manufacture and saleof customized
      prestressed steel
materials


F-8


OSSEN
INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008





NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Principles
of Consolidation





The
consolidated financial statements include the accounts of OSSEN Innovation
Materials Co., and its subsidiaries. Intercompany accounts and transactions have
been eliminated upon consolidation.





Use
of Estimates





The
preparation of the consolidated financial statements in conformity with
generally accepted accounting principles in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting periods.
Management makes these estimates using the best information available at the
time the estimates are made. Actual results could differ from those
estimates.





Revenue
Recognition





Revenues
represent the invoiced value of goods sold recognized upon the shipment of goods
to customers.  Revenues are recognized when all of the following
criteria are met:





l
            Persuasive
      evidence of an arrangement exists,


l
            Delivery
      has occurred or services have been
rendered,


l
            The
      seller’s price to the buyer is fixed or determinable,
  and


l
            Collectability
      is reasonable assured.





Retirement
Benefits





Retirement
benefits in the form of contributions under defined contribution retirement
plans to the relevant authorities are charged to operations as incurred.
Retirement benefits amounting to $65,710 and $30,131 were charged to operations
for the years ended December 31, 2009 and 2008.


F-9


OSSEN
INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008





NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Income
Taxes





Deferred
tax assets and liabilities are recognized for the future tax consequence
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to be
applied to taxable income in the years in which those temporary differences are
expected to reverse. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in the statement of income in the period that
includes the enactment date. A valuation allowance is provided for deferred tax
assets if it is more likely than not these items will either expire before the
Company is able to realize their benefits, or that future deductibility is
uncertain. See Note 10.





Foreign
Currency Translation





The
accompanying consolidated financial statements are presented in United States
dollars (“US$). The functional currency of the Company is Renminbi (“RMB”). The
consolidated financial statements are translated into United States dollars from
RMB at year-end exchange rates as to assets and liabilities and average exchange
rates as to revenues and expenses. Capital accounts are translated at their
historical exchange rates when the capital transactions occurred. The resulting
transaction adjustments are recorded as a component of shareholders’ equity.
Gains and losses from foreign currency transactions are included in net
income.





2008
                
                
                2009Year
      ended RMB: US$ exchange rate
                
                
                6.8372
                
                
                
                6.8542Average
      yearly RMB: US$ exchange rate
                
                
                6.8409
                
                
                
                6.9623





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





Comprehensive
Income





Comprehensive
income is defined as the change in equity during the year from transactions and
other events, excluding the changes resulting from investments by owners and
distributions to owners, and is not included in the computation of income tax
expense or benefit. Accumulated comprehensive income consists of changes in
unrealized gains and losses on foreign currency translation.


F-10


OSSEN
INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008





NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Cash
and Cash Equivalents





For
financial reporting purposes, the Company considers all highly liquid
investments purchased with original maturity of three months or less to be cash
equivalents. The Company maintains no bank account in the United States of
America. The Company maintains its bank accounts in China.  Balances
at financial institutions or state-owned banks within the PRC are not covered by
insurance.  However, the Company has not experienced any losses in
such accounts and believes it is not exposed to any significant risks on its
cash in bank accounts.





Restricted
Cash





Restricted
cash represents amounts held by a bank as security for bank acceptance notes and
therefore is not available for the Company’s use until such time as the bank
acceptance notes have been fulfilled or expired, normally within 12 month
period.





Accounts
Receivable





Accounts
receivable are carried at net realizable value.  An allowance for
doubtful accounts is recorded in the period when loss is probable based on an
assessment of specific evidence indicating troubled collection, historical
experience, accounts aging and other factors.  An account receivable
is written off after all collection effort has ceased.





Fair
Value of Financial Instruments





FASB ASC
820 (formerly SFAS No. 157 Fair Value Measurements) establishes a three-tier
fair value hierarchy, which prioritizes the inputs used in measuring fair value.
The hierarchy prioritizes the inputs into three levels based on the extent to
which inputs used in measuring fair value are observable in the
market





These
tiers include:





•
            Level
      1—defined as observable inputs such as quoted prices in active
      markets;




•
              Level
      2—defined as inputs other than quoted prices in active markets that are
      either directly or indirectly observable;
and




•
              Level
      3—defined as unobservable inputs in which little or no market data exists,
      therefore requiring an entity to develop its own
    assumptions.


F-11


OSSEN
INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008





NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





The
company’s financial instruments primarily consist of cash and cash equivalents,
accounts receivable, restricted assets, accounts payable, other payables and
accruals, short-term bank loans, other current liabilities.





Cash and
cash equivalents include money market securities and commercial paper that are
considered to be highly liquid and easily tradable. These securities are valued
using inputs observable in active markets for identical securities and are
therefore classified as Level 1 within the fair value hierarchy.





As of the
balance sheet dates, the estimated fair values of financial instruments were not
materially different from their carrying value as presented due to the short
maturities of these instruments and that the interest rates on the borrowing
approximate those that would have been available for loans of similar remaining
maturity and risk profile at respective year ends.





Inventories





Inventories
are stated at the lower of cost or market, which is based on estimated selling
prices less any further costs expected to be incurred for completion and
disposal. Cost of raw materials is calculated using the weighted average method.
Finished goods costs are determined using the weighted average method and
comprise direct materials, direct labor and an appropriate proportion of
overhead. At December 31, 2009 and 2008, the Company has no reserve for
inventories. See Note 5.





Prepayments





Prepayments
represent cash paid in advance to suppliers for purchases of raw
materials.  The balance of prepayments was $19,833,561 and $19,270,693
at December 31, 2009 and 2008, respectively.





Customer
Deposits





Customer
deposits consist of amounts paid to the Company in advance for the sale of
products in the PRC. The Company receives these amounts and recognizes them as a
current liability until the revenue can be recognized when the goods are
delivered. The balance of customer deposits was $5,189,759 and $2,936,267 at
December 31, 2009 and 2008, respectively.





Property,
Plant, and Equipment (“PPE”)





PPE are
stated at cost less accumulated depreciation, and include expenditure that
substantially increases the useful lives of existing assets.





Transportation
charges




Transportation
charges represent costs to deliver the Company’s inventory to point of sale.
Transportation costs are expensed and charged to cost of sales as incurred.
Transportation charges represent costs to deliver the Company’s inventory to
point of sale. Transportation costs are expensed and charged to selling expense
as incurred.


F-12


OSSEN
INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008





NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Depreciation
is provided over their estimated useful lives, using the straight-line
method.  Estimated useful lives are as follows:





Buildings
      and improvements
                5 ~
      20 yearsMachinery
      and equipment
                5 ~
      20 yearsMotor
      vehicles
                5
      yearsOffice
      Equipment
                5 ~
      10 years





When
assets are sold or retired, their costs and accumulated depreciation are
eliminated from the consolidated financial statements and any gain or loss
resulting from their disposal is recognized in the period of disposition as an
element of other income.  The cost of maintenance and repairs is
charged to income as incurred, whereas significant renewals and betterments are
capitalized.  See Note 7.





Land
Use Rights





According
to PRC laws, the government owns all the land in the PRC. Companies or
individuals are authorized to possess and use the land only through land use
rights granted by the Chinese government.  The land use rights granted
to the Company, located at Jiu Jiang and Ma’anshan, are being
amortized using the straight-line method over the lease term of fifty
years.  See Note 8.





Impairment
of Long-Lived Assets





Long-term
assets of the Company are reviewed annually as to whether their carrying value
has become impaired, pursuant to the guidelines established in FASB ASC 360
(formerly SFAS No. 144 Accounting for the Impairment or
Disposal of Long-Lived Assets).  The Company considers assets
to be impaired if the carrying value exceeds the future projected cash flows
from the related operations.  The Company also re-evaluates the
periods of amortization to determine whether subsequent events and circumstances
warrant revised estimates of useful lives.  There were no impairments
for the years ended December 31, 2009 and 2008.





Economic
and Political Risks





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





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





Exchange
risk




The
Company can not guarantee that the current exchange rate will remain steady,
therefore there is a possibility that the Company could post the same amount of
profit for two comparable periods and because of a fluctuating exchange rate
actually post higher or lower profit depending on exchange rate of PRC Renminbi
(RMB) converted to U.S. dollars on the date. The exchange rate could fluctuate
depending on changes in the political and economic environments without
notice.


F-13


OSSEN
INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008





NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Recently
Issued Accounting Pronouncements





On April
1, 2009, the FASB approved ASC 805 (formerly FSP FAS 141R-1, Accounting for
Assets Acquired and Liabilities Assumed in a Business Combination That Arise
from Contingencies), which amends Statement 141R and eliminates the distinction
between contractual and non-contractual contingencies.  Under ASC 805,
an acquirer is required to recognize at fair value an asset acquired or
liability assumed in a business combination that arises from a contingency if
the acquisition-date fair value of that asset or liability can be determined
during the measurement period. If the acquisition-date fair value cannot be
determined, the acquirer applies the recognition criteria in SFAS No. 5,
Accounting for Contingencies and Interpretation 14, “Reasonable Estimation of
the Amount of a Loss – and interpretation of FASB Statement No. 5,” to determine
whether the contingency should be recognized as of the acquisition date or after
it.  The adoption of ASC 805 has not had a material effect on the
Company’s consolidated financial statements.





ASC
320-10 (formerly FSP FAS 115-2 and FAS 124-2) amends the other-than-temporary
impairment guidance in U.S. GAAP for debt securities to make the guidance more
operational and to improve the presentation and disclosure of
other-than-temporary impairments on debt and equity securities in the financial
statements.  It did not amend existing recognition and measurement
guidance related to other-than-temporary impairments of equity securities. We
are required to adopt ASC 320-10 for our interim and annual reporting periods
ending after June 15, 2009.  ASC 320-10 does not require disclosures
for periods presented for comparative purposes at initial
adoption.  ASC 320-10 requires comparative disclosures only for
periods ending after initial adoption.  The adoption of ASC 320-10 has
not had a material effect on the Company’s consolidated financial
statements.





On April
9, 2009, the FASB also approved ASC 825-10 (formerly FSP FAS 107-1 and APB
28-1,Interim Disclosures
about Fair Value of Financial Instruments )to require disclosures
about fair value of financial instruments in interim period financial statements
of publicly traded companies and in summarized financial information required by
APB Opinion No. 28,Interim
Financial Reporting.  We are required to adopt ASC 825-10 for
our interim and annual reporting periods ending after June 15,
2009.  ASC 825-10 does not require disclosures for periods presented
for comparative purposes at initial adoption. ASC 825-10 requires comparative
disclosures only for periods ending after initial adoption.  The
adoption of ASC 825-10 has not had a material effect on the Company’s
consolidated financial statements.





In April
2009, the FASB issued FSP No. FAS 157-4, “Determining Fair Value When the Volume
and Level of Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly” as incorporated into FASB ASC
820, “Fair Value Measurements and Disclosures”. The guidance relates to
determining fair values when there is no active market or where the price inputs
being used represent distressed sales.  It reaffirms what FASB ASC 820
states is the objective of fair value measurement—to reflect how much an asset
would be sold for in an orderly transaction (as opposed to a distressed or
forced transaction) at the date of the financial statements under current market
conditions.  Specifically, it reaffirms the need to use judgment to
ascertain if a formerly active market has become inactive and in determining
fair values when markets have become inactive.  This guidance is
effective for interim and annual periods ended after June 15, 2009, but entities
may early adopt this guidance for the interim and annual periods ended after
March 15, 2009. The adoption of such standard has not had a material impact on
the Company’s consolidated financial statements.





In August
2009, the FASB issued FASB ASU 2009-05, “Measuring Liabilities at Fair Value”.
FASB ASU 2009-05 amends FASB ASC 820, “Fair Value
Measurements”.  Specifically, FASB ASU 2009-05 provides clarification
that in circumstances in which a quoted price in an active market for the
identical liability is not available, a reporting entity is required to measure
fair value using one or more of the following methods: 1) a valuation technique
that uses a) the quoted price of the identical liability when traded as an asset
or b) quoted prices for similar liabilities or similar liabilities when traded
as assets and/or 2) a valuation technique that is consistent with the principles
of FASB ASC 820 of the Accounting Standards Codification (e.g. an income
approach or market approach).  FASB ASU 2009-05 also clarifies that
when estimating the fair value of a liability, a reporting entity is not
required to adjust to include inputs relating to the existence of transfer
 restrictions on that liability.  The adoption of such standard
has not had a material impact on the Company’s consolidated financial
statements.


F-14


OSSEN
INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008





NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





In May
2009, the FASB issued SFAS No. 165, “Subsequent Events”, (FASB ASC 855-10”)
which establishes general standards of accounting for and disclosure of events
that occur after the balance sheet date but before financial
statements.  The statement is effective for interim and annual periods
ended after June 15, 2009.  The standard was subsequently amended by
FASB ASU 2010-09 which exempts an entity that is an SEC filer from the
requirement to disclose the date through which subsequent events have been
evaluated.





In
September 2009, the Emerging Issues Task Force reached final consensus on FASB
ASU 2009-13, “Revenue Arrangements with Multiple Deliverables”.  FASB
ASU 2009-13 addresses how to determine whether an arrangement involving multiple
deliverables contains more than one unit of accounting, and how the arrangement
consideration should be allocated among the separate units of
accounting.  This ASU will be effective prospectively for revenue
arrangements entered into or materially modified in fiscal years beginning on or
after June 15, 2010.  Early adoption is permitted. The adoption of
such standard has not had a material impact on the Company’s consolidated
financial statements.





In
December 2009, the FASB issued FASB ASU 2009-17, Consolidation (“FASB ASC 810):
Improvements to Financial Reporting by Enterprises involved with Variable
Interest Entities.  This ASU amends the FASB Accounting Standards
Codification for statement No.167.  In June 2009, the FASB issued SFAS
No.167, Amendments to FASB Interpretation No. 46(R), which requires an
enterprise to perform an analysis and ongoing reassessments to determine whether
the enterprises variable interest or interests give it a controlling financial
interest in a variable interest entity and amends certain guidance for
determining whether an entity is a variable interest entity. It also requires
enhanced disclosures that will provide users of financial statements with more
transparent information about an enterprises involvement in a variable interest
entity.  SFAS No.167 is effective as of the beginning of each
reporting entity’s first annual reporting period that begins after November 15,
2009 and for all interim reporting periods after that, with early application
prohibited.  The Company is currently evaluating the impact of the
adoption of SFAS No.167.





In
January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and
Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements,
which will require companies to make new disclosures about recurring or
nonrecurring fair value measurements including significant transfers into and
out of Level 1 and Level 2 fair value hierarchies and information on purchases,
sales, issuance and settlements on a gross basis in the reconciliation of Level
3 fair value measurements.  The ASU is effective prospectively for
financial statements issued for fiscal years and interim periods beginning after
December 15, 2009.  The new disclosures about purchases, sales,
issuance and settlements on a gross basis in the reconciliation of Level 3 fair
value measurements is effective for interim and annual reporting periods
beginning after December 15, 2010.  The Company expects that the
adoption of ASU 2010-06 will not have a material impact on its consolidated
financial statements.


F-15


OSSEN
INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008




NOTE
3 – CONCENTRATION RISK





Concentration
of Major Customers and Suppliers:





Year
      ended December 31,2009
                        
                        
                        2008Major
      customers with revenues of more than 10% of the Company’s
      salesSales
      to major customers
                        
                        $
                        72,040,540
                        
                        
                        $
                        58,216,143Percentage
      of sales
                        
                        
                        71
                        %
                        
                        
                        70
                        %Number
      of customers
                        
                        
                        2
                        
                        
                        
                        3Major
      suppliers with purchases of more than 10% of the Company’s
      purchasesPurchases
      from major suppliers
                        
                        $
                        74,621,428
                        
                        
                        $
                        54,738,995Percentage
      of purchases
                        
                        
                        89
                        %
                        
                        
                        72
                        %Number
      of suppliers
                        
                        
                        4
                        
                        
                        
                        3





Accounts
receivable related to the Company’s major customer comprised 36% and 28% of all
accounts receivable as of December 31, 2009 and 2008, respectively.





Accounts
payable related to the Company’s major suppliers comprised 38% and 33% of all
accounts payable as of December 31, 2009 and 2008, respectively.





NOTE
4 – ACCOUNTS RECEIVABLE





Accounts
receivable is net of allowance for doubtful accounts as follows:





December
      31,2009
                          
                          
                          2008Accounts
      receivable
                          
                          $
                          15,199,574
                          
                          
                          $
                          4,749,270Less:
      allowance for doubtful accounts
                          
                          
                          (42,487
                          )
                          
                          
                          (35,782
                          )Net
      Accounts receivable
                          
                          $
                          15,157,087
                          
                          
                          $
                          4,713,488




F-16


OSSEN
INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008





NOTE
5 – INVENTORIES





December
      31,2009
                            
                            
                            2008Raw
      materials
                            
                            $
                            5,584,313
                            
                            
                            $
                            5,200,622Work-in-progress
                            
                            
                            237,422
                            
                            
                            
                            292,997Finished
      goods
                            
                            
                            4,385,126
                            
                            
                            
                            3,806,64210,206,861
                            
                            
                            
                            9,300,261Less:
      Provision for slow-moving inventories
                            
                            
                            -
                            
                            
                            
                            -Inventories,
      net
                            
                            $
                            10,206,861
                            
                            
                            $
                            9,300,261





NOTE
6 – OTHER CURRENT ASSETS





Other
current assets consist of the following:





December
      31,2009
                          
                          
                          2008Security
      deposits
                          
                          $
                          410,255
                          
                          
                          $
                          51,064VAT
      receivable
                          
                          
                          535,824
                          
                          
                          
                          232,745Other
                          
                          
                          18,797
                          
                          
                          
                          9,550Total
      other current assets
                          
                          $
                          964,876
                          
                          
                          $
                          293,359


F-17


OSSEN
INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008





NOTE 7
– PROPERTY, PLANT AND EQUIPMENT





Property,
plant and equipment consist of the following:





December
      31,2009
                                
                                
                                2008At
      cost:Buildings
                                
                                $
                                3,899,669
                                
                                
                                $
                                3,878,091Machinery
      and equipment
                                
                                
                                13,801,699
                                
                                
                                
                                13,635,258Motor
      vehicles
                                
                                
                                247,926
                                
                                
                                
                                230,046Office
      equipment
                                
                                
                                97,266
                                
                                
                                
                                93,65418,046,560
                                
                                
                                
                                17,837,049Less:
      Accumulated depreciationBuildings
                                
                                
                                (684,755
                                )
                                
                                
                                (442,383
                                )Machinery
      and equipment
                                
                                
                                (4,036,209
                                )
                                
                                
                                (2,974,065
                                )Motor
      vehicles
                                
                                
                                (163,593
                                )
                                
                                
                                (118,814
                                )Office
      equipment
                                
                                
                                (73,194
                                )
                                
                                
                                (55,245
                                )(4,957,751
                                )
                                
                                
                                (3,590,507
                                )Property,
      plant and equipment, net
                                
                                $
                                13,088,809
                                
                                
                                $
                                14,246,542





Depreciation
expense for the years ended December 31, 2009 and 2008 was $1,367,244 and
$1,461,337, respectively.





The net
book value of property, plant and equipment pledged as collateral for bank loans
was $1,923,204 and $1,918,434 at December 31, 2009 and 2008. See Note
9.


F-18


OSSEN
INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008





NOTE 8
– LAND USE RIGHTS





Land use
rights consist of the following:





December
      31,2009
                          
                          
                          2008Cost
      of land use rights
                          
                          $
                          4,506,975
                          
                          
                          $
                          4,495,797Less:
      Accumulated amortization
                          
                          
                          (252,705
                          )
                          
                          
                          (162,165
                          )Land
      use rights, net
                          
                          $
                          4,254,270
                          
                          
                          $
                          4,333,632





The land
use rights, located at Jiu Jiang and Ma’anshan, are commenced through 2005
to 2007 with the lease term of fifty years





Amortization
expense for the years ended December 31, 2009 and 2008 was $79,361 and $89,733,
respectively.





Amortization
expense for the next five years and thereafter is as follows:





2010
                        
                        $
                        90,1402011
                        
                        
                        90,1402012
                        
                        
                        90,1402013
                        
                        
                        90,1402014
                        
                        
                        90,140Thereafter
                        
                        
                        3,803,570Total
                        
                        $
                        4,254,270


F-19


OSSEN
INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008





NOTE 9
– RELATED PARTY TRANSACTIONS





(a)
            Names
      and Relationship of Related
Parties:





Existing
      Relationship with the CompanyMr.
      Tang
                
                Director
      and controlling shareholder of the CompanyShanghai
      Zhengfangxing Steel Co., Ltd. (“SZS”)
                
                Under
      common control of Mr. TangShanghai
      Ossen Investment Co., Ltd. (“SOI”)
                
                Under
      common control of Mr.
Tang





(b)
            Summary
      of Balances with Related Party:





December
      31,2009
                          
                          
                          2008Due
      from related party:SZS
                          
                          $
                          -
                          
                          
                          $
                          -$
                          -
                          
                          
                          $
                          -





December
      31,2009
                          
                          
                          2008Due
      to related party:SZS
                          
                          $
                          -
                          
                          
                          $
                          145,896$
                          -
                          
                          
                          $
                          145,896





SZS is a
supplier of the Company.  For the years ended December 31, 2009 and
2008, the Company purchased $11,487,206 and $20,482,023 of raw materials from
SZS, respectively. The balance of due from related party represents bank
acceptance from SZS for the sales of the products to SZS.





December
      31,2009
                          
                          
                          2008Notes
      receivable from related party:SZS,
      due June 11, 2010
                          
                          $
                          804,423
                          
                          
                          $
                          -SZS,
      due March 25, 2010
                          
                          
                          1,023,811
                          
                          
                          
                          -$
                          1,828,234
                          
                          
                          $
                          -





December
      31,2009
                      
                      
                      2008Due
      to shareholder:Mr.
      Tang
                      
                      $
                      12,869,939
                      
                      
                      $
                      12,841,692


F-20


OSSEN
INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


FOR THE
YEARS ENDED DECEMBER 31, 2009 AND 2008





NOTE 9
– RELATED PARTY TRANSACTIONS (CONTINUED)





(c)
            Summary
      of Related Party Transactions:





December
      31,Note
                            
                            2009
                            
                            
                            2008SZS
                            
                            SZS
      provided guarantee for the short-term bank loans borrowed by the
      Company
                            
                            11
                            
                            $
                            8,775,521
                            
                            
                            $
                            6,857,110SZS
                            
                            SZS
      sold raw materials to the Company
                            
                            8
                            
                            $
                            11,487,206
                            
                            
                            $
                            20,482,023SOI
                            
                            SOI
      provided guarantee for the short-term bank loans borrowed by the
      Company
                            
                            11
                            
                            $
                            5,411,572
                            
                            
                            $
                            5,398,150





NOTE 10
– OTHER PAYABLES AND ACCRUED LIABILITIES





Other
payables and accrued liabilities consist of the following:





December
      31,2009
                          
                          
                          2008Deferred
      government grant
                          
                          $
                          -
                          
                          
                          $
                          1,327,653Others
                          
                          
                          32,473
                          
                          
                          
                          147,819Total
                          
                          $
                          32,473
                          
                          
                          $
                          1,475,472





The
deferred government grants represent the wide variety of subsidies from
local government of Ma’anshan and are all received by the
Company.


F-21


OSSEN
INNOVATION AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


FOR THE
YEARS ENDED DECEMBER 31, 2009 AND 2008





NOTE
11 – NOTES PAYABLE





Bank
      acceptance notes:
                          
                          December
      31,2009
                          
                          
                          2008Due
      June 10, 2009 (subsequently repaid on its due date)
                          
                          $
                          -
                          
                          
                          $
                          2,188,439Due
      March 7, 2009 (subsequently repaid on its due date)
                          
                          
                          -
                          
                          
                          
                          1,458,959Due
      April 7, 2009 (subsequently repaid on its due date)
                          
                          
                          -
                          
                          
                          
                          1,458,959Due
      May 28, 2009 (subsequently repaid on its due date)
                          
                          
                          -
                          
                          
                          
                          2,917,919Due
      April 24, 2009 (subsequently repaid on its due date)
                          
                          
                          -
                          
                          
                          
                          1,458,959Due
      May 26, 2009 (subsequently repaid on its due date)
                          
                          
                          -
                          
                          
                          
                          1,458,959Due
      May 12, 2009 (subsequently repaid on its due date)
                          
                          
                          -
                          
                          
                          
                          1,458,959Due
      March 12, 2009 (subsequently repaid on its due date)
                          
                          
                          -
                          
                          
                          
                          2,917,920Due
      March 26, 2009 (subsequently repaid on its due date)
                          
                          
                          -
                          
                          
                          
                          2,917,920Due
      March 15, 2010 (subsequently repaid on its due date)
                          
                          
                          1,462,587
                          
                          
                          
                          -Due
      March 26, 2010 (subsequently repaid on its due date)
                          
                          
                          1,462,587
                          
                          
                          
                          -Due
      March 23, 2010 (subsequently repaid on its due date)
                          
                          
                          1,462,587
                          
                          
                          
                          -Due
      March 10, 2010 (subsequently repaid on its due date)
                          
                          
                          2,925,173
                          
                          
                          
                          -Due
      March 15, 2010 (subsequently repaid on its due date)
                          
                          
                          2,925,173
                          
                          
                          
                          -Due
      April 29, 2010 (subsequently repaid on its due date)
                          
                          
                          1,462,587
                          
                          
                          
                          -Due
      May 5, 2010 (subsequently repaid on its due date)
                          
                          
                          1,170,070
                          
                          
                          
                          -Due
      May 18, 2010 (subsequently repaid on its due date)
                          
                          
                          1,170,070
                          
                          
                          
                          -Due
      May 27, 2010 (subsequently repaid on its due date)
                          
                          
                          1,170,070
                          
                          
                          
                          -Due
      June 10, 2010 (subsequently repaid on its due date)
                          
                          
                          1,170,070
                          
                          
                          
                          -Due
      June 8, 2010 (subsequently repaid on its due date)
                          
                          
                          1,170,070
                          
                          
                          
                          -Due
      June 15, 2010 (subsequently repaid on its due date)
                          
                          
                          2,193,881
                          
                          
                          
                          -Total
                          
                          $
                          19,744,925
                          
                          
                          $
                          18,236,993





The
interest-free notes payable are secured by $11,824,214 and $9,977,092
restricted cash as of December 31, 2009 and 2008.


F-22


OSSEN
INNOVATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008





NOTE
12 – SHORT TERM BANK LOANS





Short-term
loans are summarized as follows:


Interest rate
                                per annum
                              
                              
                              December
      31,2009
                              
                              
                              2008Due
      January 6, 2010, guaranteed by SZS, subsequently repaid on due
      date
                              
                              
                              5.31
                              %
                              
                              $
                              2,925,173
                              
                              
                              $
                              -Due
      January 14, 2010, subsequently repaid on due date
                              
                              
                              5.35
                              %
                              
                              
                              731,294
                              
                              
                              
                              -Due
      January 15, 2010, subsequently repaid on due date
                              
                              
                              5.35
                              %
                              
                              
                              1,462,587
                              
                              
                              
                              -Due
      February 20, 2010, subsequently repaid on due date
                              
                              
                              5.84
                              %
                              
                              
                              2,925,174
                              
                              
                              
                              -Due
      February 27, 2010, subsequently repaid on due date
                              
                              
                              5.31
                              %
                              
                              
                              731,294
                              
                              
                              
                              -Due
      March 4, 2010 , subsequently repaid on due date
                              
                              
                              5.31
                              %
                              
                              
                              2,340,139
                              
                              
                              
                              -Due
      March 8, 2010, subsequently repaid on due date
                              
                              
                              5.31
                              %
                              
                              
                              731,294
                              
                              
                              
                              -Due
      March 12, 2010, subsequently repaid on due date
                              
                              
                              5.84
                              %
                              
                              
                              1,462,587
                              
                              
                              
                              -Due
      March 27, 2010 subsequently repaid on due date
                              
                              
                              5.84
                              %
                              
                              
                              1,462,587
                              
                              
                              
                              -Due
      March 30, 2010 guaranteed by SZS
                              
                              
                              5.84
                              %
                              
                              
                              1,462,587
                              
                              
                              
                              -Due
      May 13, 2010 subsequently repaid on due date
                              
                              
                              5.31
                              %
                              
                              
                              1,316,328
                              
                              
                              
                              -Due
      May 30, 2010 , guaranteed by SOI, subsequently repaid on due
      date
                              
                              
                              5.31
                              %
                              
                              
                              1,462,587
                              
                              
                              
                              -Due
      June 2, 2010 , guaranteed by SOI, subsequently repaid on due
      date
                              
                              
                              5.31
                              %
                              
                              
                              1,462,587
                              
                              
                              
                              -Due
      September 8, 2010 guaranteed by SZS
                              
                              
                              5.31
                              %
                              
                              
                              3,948,985
                              
                              
                              
                              -Due
      September 9, 2010 guaranteed by SZS
                              
                              
                              5.31
                              %
                              
                              
                              438,776
                              
                              
                              
                              -Due
      November 6, 2010 guaranteed by SOI
                              
                              
                              5.84
                              %
                              
                              
                              1,316,328
                              
                              
                              
                              -Due
      November 9, 2010, guaranteed by SOI
                              
                              
                              5.84
                              %
                              
                              
                              1,170,070
                              
                              
                              
                              -Due
      January 8, 2009, guaranteed by SZS, subsequently repaid on due
      date
                              
                              
                              7.28
                              %
                              
                              
                              -
                              
                              
                              
                              2,917,919Due
      January 17, 2009 guaranteed by SOI, subsequently repaid on due
      date
                              
                              
                              5.58
                              %
                              
                              
                              -
                              
                              
                              
                              1,313,064Due
      January 30, 2009, subsequently repaid on due date
                              
                              
                              5.54
                              %
                              
                              
                              -
                              
                              
                              
                              1,458,959Due
      January 30, 2009, subsequently repaid on due date
                              
                              
                              5.54
                              %
                              
                              
                              -
                              
                              
                              
                              1,458,959Due
      March 3, 2009, subsequently repaid on due date
                              
                              
                              7.47
                              %
                              
                              
                              -
                              
                              
                              
                              729,480Due
      March 5, 2009, subsequently repaid on due date
                              
                              
                              7.47
                              %
                              
                              
                              -
                              
                              
                              
                              2,188,439Due
      April 1, 2009, guaranteed by SOI, subsequently repaid on due
      date
                              
                              
                              5.58
                              %
                              
                              
                              -
                              
                              
                              
                              1,167,168Due
      May 8, 2009, subsequently repaid on due date
                              
                              
                              7.47
                              %
                              
                              
                              -
                              
                              
                              
                              1,313,064Due
      July 17, 2009 , guaranteed by SOI, subsequently repaid on due
      date
                              
                              
                              5.58
                              %
                              
                              
                              -
                              
                              
                              
                              1,458,959Due
      July 17, 2009 , guaranteed by SOI, subsequently repaid on due
      date
                              
                              
                              5.58
                              %
                              
                              
                              -
                              
                              
                              
                              1,458,959Due
      September 18, 2009 guaranteed by SZS, subsequently repaid on due
      date
                              
                              
                              7.56
                              %
                              
                              
                              -
                              
                              
                              
                              3,939,191Totals
                              
                              
                              
                              
                              
                              $
                              27,350,377
                              
                              
                              $
                              19,404,161





Short-term
bank loans are obtained from local banks in China. All the short-term bank loans
are repayable within one year and are secured by property, plant and equipment
and land use rights owned by the Company.  See Notes 6.





The
weighted average annual interest rate of the short-term bank loans was 5.5% and
6.42% as of December 31, 2009 and 2008, respectively.  Interest
expense was $1,429,729 and $1,514,114 for the years ended December 31, 2009 and
2008, respectively.


F-23


OSSEN
INNOVATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008





NOTE
13 – TAXES





(a)
Corporation Income Tax (“CIT”)





On March
16, 2007, the National People’s Congress of China approved the new Corporate
Income Tax Law of the People’s Republic of China (the “New CIT Law”), which is
effective from January 1, 2008.





Prior to
January 1, 2008, the CIT rate applicable to our subsidiaries in the PRC is
33%.  After January 1, 2008, under the New CIT Law, the corporate
income tax rate applicable to our subsidiaries is 25%.  The New CIT
Law has an impact on the deferred tax assets and liabilities of the
Company.  The Company adjusted deferred tax balances as of December
31, 2009 based on their best estimate and will continue to assess the impact of
such new law in the future.  The effects arising from the enforcement
of the New CIT Law have been reflected in the accounts.





Both
Ossen Ma An Shan and Ossen Jiu Jiang received official designation by the local
tax authority as a foreign-invested enterprise engaged in manufacturing
activities, and they are exempted from corporate income tax for two years
commencing from the first profitable year in 2007 and 2009, respectively,
followed by a 50% reduction for the next three years.





In
accordance with the New CIT Law, enterprises established under the laws of
foreign countries or regions and whose “place of effective management” is
located within the PRC territory are considered PRC resident enterprises and
subject to the PRC income tax at the rate of 25% on worldwide
income.  The definition of “place of effective management" refers to
an establishment that exercises, in substance, overall management and control
over the production and business, personnel, accounting, properties, etc. of an
enterprise. As of December 31, 2009, no detailed interpretation or guidance has
been issued to define “place of effective management”. Furthermore, as of
December 31, 2009, the administrative practice associated with interpreting and
applying the concept of “place of effective management” is unclear. If the
Company’s non-PRC incorporated entities are deemed PRC tax residents, such
entities would be subject to PRC tax under the New CIT Law.  The
Company has analyzed the applicability of this law, as of December 31, 2009, and
the Company has not accrued for PRC tax on such basis.  The Company
will continue to monitor changes in the interpretation or guidance of this
law.





The New
CIT Law also imposes a 10% withholding income tax, subject to reduction based on
tax treaty where applicable, for dividends distributed by a foreign invested
enterprise to its immediate holding company outside China.  Such
dividends were exempted from PRC tax under the previous income tax law and
regulations.  The foreign invested enterprise is subject to the
withholding tax starting from January 1, 2008.  There were no
dividends distributed in the year ended December 31, 2009 or
2008.


F-24


OSSEN
INNOVATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008





NOTE
13 – TAXES (CONTINUED)





Income
tax expenses consist of the following:


Year
      Ended December 31,2009
                          
                          
                          2008Current
      tax expenses
                          
                          $
                          740,880
                          
                          
                          $
                          292,460Deferred
      taxes
                          
                          
                          (827
                          )
                          
                          
                          (940
                          )Income
      tax expenses
                          
                          $
                          740,053
                          
                          
                          $
                          291,520





Reconciliation
from the expected income tax expenses calculated with reference to the statutory
tax rate in the PRC of 25% for 2009 and 2008 is as follows:





Year
      Ended December 31,2009
                          
                          
                          2008Computed
      "expected" income tax expenses
                          
                          $
                          1,481,592
                          
                          
                          $
                          1,394,103Effect
      on tax incentive / holiday
                          
                          
                          (741,539
                          )
                          
                          
                          (1,102,583
                          )Income
      tax expenses
                          
                          $
                          740,053
                          
                          
                          $
                          291,520





Components
of net deferred tax assets are as follows:





December
      31,2009
                          
                          
                          2008Deferred
      tax assets:Current
      portion:Provision
      of doubtful accounts
                          
                          $
                          5,311
                          
                          
                          $
                          4,473





The
Company uses FASB ASC 740 (formerly FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (“FIN 48”)). – AN INTERPRETATION OF FASB STATEMENT NO. 109,
ACCOUNTING FOR INCOME TAXES.  The Interpretation addresses the
determination of whether tax benefits claimed or expected to be claimed on a tax
return should be recorded in the financial statements.  Under FIN 48,
we may recognize the tax benefit from an uncertain tax position only if it is
more likely than not that the tax position will be sustained on examination by
the taxing authorities, based on the technical merits of the
position.  The tax benefits recognized in the financial statements
from such a position should be measured based on the largest benefit that has a
greater than fifty percent likelihood of being realized upon ultimate
settlement.  FIN 48 also provides guidance on recognition,
classification, interest and penalties on income taxes, accounting in interim
periods and requires increased disclosures.  As of December 31, 2009,
the Company does not have a liability for unrecognized tax
benefits.


F-25


OSSEN
INNOVATION AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008





NOTE
13 – TAXES (CONTINUED)





(b) Value
Added tax (“VAT”)





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





On
January 1, 2002, the export policy of VAT "Exemption, Credit and Refund" began
to apply to all exports by manufacture-based enterprises. In accordance with
this policy, exported goods are exempted from output VAT and the input VAT
charged for purchases of the raw materials, components and power consumed for
the production of the exported goods may be refunded.  The refund
rates of strand products applicable to Ossen Ma An Shan and Ossen Jiujiang was
5%.





The VAT
refundable balance of $535,824 and $66,252 at December 31, 2009 and 2008,
respectively are included in Other Current Assets in the accompanying
consolidated balance sheets.





NOTE
13 – GEOGRAPHICAL SALES AND SEGMENTS





Information
for the Company’s sales by geographical area for the years ended December 31,
2009, 2008 and 2007 are as follows:




Year
      ended December 31,2009
                  
                  
                  2008Domestic
      Sales
                  
                  $
                  97,361,596
                  
                  
                  $
                  51,611,646International
      Sales
                  
                  
                  3,726,200
                  
                  
                  
                  31,130,664Total
      Sales
                  
                  $
                  101,087,796
                  
                  
                  $
                  82,742,310





The
Company operates in one business segment for the years ended December 31, 2009
and 2008.





NOTE
14 – SUBSEQUENT EVENTS





We have
evaluated all events or transactions that occurred after December 31, 2009 up
through the date we issued the consolidated financial statements. We did not
have any material subsequent events to disclose.


F-26