UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
  WASHINGTON,
D.C. 20549
  FORM
20-F
 (Mark One)
  o
              REGISTRATION STATEMENT PURSUANT
      TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 OR
 
 x
              ANNUAL REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 For the
fiscal year ended December 31, 2009
 
 OR
 
 o
              TRANSITION REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 OR
 
 o
              SHELL COMPANY REPORT PURSUANT
      TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 Date of
event requiring this shell company report _________________________
  For the
transition period from ___________ to ___________.
  Commission
file number: 001-34532
  CHINA
GERUI ADVANCED MATERIALS GROUP LIMITED
 
 (Exact
name of Registrant as specified in its charter)
  Not
Applicable
 (Translation
of Registrant’s name into English)
  British Virgin
Islands
 (Jurisdiction
of incorporation or organization)
  No.
69 Huaibei Street, Longhai Middle Road
 Zhengzhou,
China, 451191
 
 (Address
of principal executive offices)
 
 Mingwang
Lu
 69
Huaihai Street, Longhai Middle Road,Zhengzhou, China 451191
 Tel:
86-371-68970951, Fax: 86-371-68895448
 Email:
mingwang.lu@geruigroup.com
 
 (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 registeredOrdinary Shares,
      no par value
                
                NASDAQ
      Global MarketWarrants
      to Purchase Ordinary Shares
                
                NASDAQ
      Global MarketUnits,
      each consisting of one Ordinary Share and two Warrants
                
                NASDAQ
      Global Market
 
 Securities
registered or to be registered pursuant to Section 12(g) of the
Act.
 None
 (Title of
Class)
  Securities
for which there is a reporting obligation pursuant to Section 15(d) of the
Act.
 
 None
 (Title of
Class)
  Indicate
the number of outstanding shares of each of the issuer’s classes of capital or
common stock as of the close of the period covered by the annual report
(December 31, 2009): 40,692,323 ordinary shares.
 
 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 x
  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 x 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.
 
 Large
      Accelerated Filer  o
                        Accelerated
      Filer o
                        Non-Accelerated
      Filer  x
  Indicate
by check mark which basis of accounting the registrant has used to prepare the
financial statements included in this filing:
 
 U.S.
      GAAP  x
                        International
      Financial Reporting
                        Other  oStandards
      as issued by the InternationalAccounting
      Standards Board
  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.
 o Item
17  o
Item 18
 
 If this
is an annual report, indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange
Act).                                                                                                                            
    Yes o No x
  
 
  
 CHINA
GERUI ADVANCED MATERIALS GROUP LIMITED
 
 Annual
Report on FORM 20-F
 For the Fiscal
Year Ended December 31, 2009
 
  TABLE
OF CONTENTS
 
 PagePART
      I
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  2ITEM
      1.
                                                                                                  
                                                                                                  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND
      ADVISERS
                                                                                                  
                                                                                                  2ITEM 2.
                                                                                                  
                                                                                                  OFFER STATISTICS AND EXPECTED TIMETABLE
                                                                                                  
                                                                                                  2ITEM 3.
                                                                                                  
                                                                                                  KEY INFORMATION
                                                                                                  
                                                                                                  2ITEM 4.
                                                                                                  
                                                                                                  INFORMATION ON THE COMPANY
                                                                                                  
                                                                                                  18ITEM 4A.
                                                                                                  
                                                                                                  UNRESOLVED STAFF COMMENTS
                                                                                                  
                                                                                                  29ITEM 5.
                                                                                                  
                                                                                                  OPERATING AND FINANCIAL REVIEW AND
      PROSPECTS
                                                                                                  
                                                                                                  30ITEM 6.
                                                                                                  
                                                                                                  DIRECTORS,
      SENIOR MANAGEMENT AND EMPLOYEES
                                                                                                  
                                                                                                  40ITEM 7.
                                                                                                  
                                                                                                  MAJOR SHAREHOLDERS AND RELATED PARTY
      TRANSACTIONS
                                                                                                  
                                                                                                  45ITEM 8.
                                                                                                  
                                                                                                  FINANCIAL INFORMATION
                                                                                                  
                                                                                                  47ITEM 9.
                                                                                                  
                                                                                                  THE OFFER AND LISTING
                                                                                                  
                                                                                                  47ITEM 10.
                                                                                                  
                                                                                                  ADDITIONAL INFORMATION
                                                                                                  
                                                                                                  49ITEM 11.
                                                                                                  
                                                                                                  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
      MARKET RISK
                                                                                                  
                                                                                                  59ITEM 12.
                                                                                                  
                                                                                                  DESCRIPTION OF SECURITIES OTHER THAN EQUITY
      SECURITIES
                                                                                                  
                                                                                                  60PART II
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  60ITEM
      13.
                                                                                                  
                                                                                                  DEFAULTS, DIVIDEND ARREARAGES AND
      DELINQUENCIES
                                                                                                  
                                                                                                  60ITEM 14.
                                                                                                  
                                                                                                  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITIES HOLDERS AND USE OF
      PROCEEDS
                                                                                                  
                                                                                                  60ITEM 15.
                                                                                                  
                                                                                                  CONTROLS AND PROCEDURES
                                                                                                  
                                                                                                  61ITEM 16A.
                                                                                                  
                                                                                                  AUDIT COMMITTEE FINANCIAL EXPERT
                                                                                                  
                                                                                                  62ITEM 16B.
                                                                                                  
                                                                                                  CODE OF ETHICS
                                                                                                  
                                                                                                  62ITEM 16C.
                                                                                                  
                                                                                                  PRINCIPAL ACCOUNTANT FEES AND
      SERVICES
                                                                                                  
                                                                                                  62ITEM 16D.
                                                                                                  
                                                                                                  EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
      COMMITTEES
                                                                                                  
                                                                                                  62ITEM 16E.
                                                                                                  
                                                                                                  PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND
      AFFILIATED PURCHASERS
                                                                                                  
                                                                                                  63ITEM 16F.
                                                                                                  
                                                                                                  CHANGE IN REGISTRANT’S CERTIFYING
      ACCOUNTANT
                                                                                                  
                                                                                                  63ITEM 16G.
                                                                                                  
                                                                                                  CORPORATE GOVERNANCE
                                                                                                  
                                                                                                  63PART III
                                                                                                  
                                                                                                  
                                                                                                  
                                                                                                  63ITEM
      17.
                                                                                                  
                                                                                                  FINANCIAL STATEMENTS
                                                                                                  
                                                                                                  63ITEM 18.
                                                                                                  
                                                                                                  FINANCIAL STATEMENTS
                                                                                                  
                                                                                                  63ITEM 19.
                                                                                                  
                                                                                                  EXHIBITS
                                                                                                  
                                                                                                  63CONSOLIDATED FINANCIAL
      STATEMENTS FOR THE YEARS ENDED DECEMBER
      31, 2009 AND 2008
                                                                                                  
                                                                                                  F-1
   
  USE
OF CERTAIN DEFINED TERMS
 
 Except as
otherwise indicated by the context, references in this annual report
to:
 
 ·
              “China
      Gerui” “we,” “us,” or “our,” and the “Company,” are references to the
      combined business of China Gerui Advanced Materials Group Limited, a
      British Virgin Islands company, and its wholly-owned subsidiary, Wealth
      Rainbow Development Limited, or “Wealth Rainbow,” a Hong Kong company, and
      Wealth Rainbow’s wholly-owned PRC subsidiary, Henan Green Complex
      Materials Co., Ltd., or “Henan
Green.”
 
 ·
              “COAC,”
      are references to China Opportunity Acquisition Corp., a Delaware
      corporation that merged with and into China
  Gerui;
 
 ·
              “China”
      and “PRC,” are references to the People’s Republic of
    China;
 
 ·
              “BVI,”
      are references to the British Virgin
Islands;
 
 ·
              “Hong
      Kong,” are references to the Hong Kong Special Administrative Region of
      China;
 
 ·
              “RMB,”
      are references to Renminbi, the legal currency of
  China;
 
 ·
              “U.S.
      dollars,” “$” and “US$,” are references to the legal currency of the
      United States; and
 
 ·
              “Securities
      Act,” are references to the Securities Act of 1933, as amended, and
      references to “Exchange Act” are references to the Securities Exchange Act
      of 1934, as amended.
 
 FORWARD-LOOKING
INFORMATION
 
 This
annual report contains forward-looking statements and information relating to us
that are based on the current beliefs, expectations, assumptions, estimates and
projections of our management regarding our company and
industry.  When used in this annual report, the words “may”, “will”,
“anticipate”, “believe”, “estimate”, “expect”, “intend”, “plan” and similar
expressions, as they relate to us or our management, are intended to identify
forward-looking statements.  These statements reflect management’s
current view of us concerning future events and are subject to certain risks,
uncertainties and assumptions, including among many others: our potential
inability to achieve similar growth in future periods as we did historically, a
decrease in the availability of our raw materials, the emergence of additional
competing technologies, changes in domestic and foreign laws, regulations and
taxes, changes in economic conditions, uncertainties related to China’s legal
system and economic, political and social events in China, a general economic
downturn, a downturn in the securities markets, and other risks and
uncertainties which are generally set forth under Item 3, “Key information —
Risk Factors” and elsewhere in this annual report.  Should any of
these risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those described as
anticipated, estimated or expected in this annual report.
 
 All
forward-looking statements included herein attributable to us or other parties
or any person acting on our behalf are expressly qualified in their entirety by
the cautionary statements contained or referred to in this section. Except to
the extent required by applicable laws and regulations, we undertake no
obligations to update these forward-looking statements to reflect events or
circumstances after the date of this annual report or to reflect the occurrence
of unanticipated events.
  1
 
 PART I
  ITEM
1.       IDENTITY OF DIRECTORS, SENIOR
MANAGEMENT AND ADVISERS
 
 Not
applicable.
 
 ITEM
2.       OFFER STATISTICS AND EXPECTED
TIMETABLE
 
 Not
applicable.
 
 ITEM
3.       KEY INFORMATION
 
 Selected
Consolidated Financial Data
 
 The
following table presents selected financial data regarding our
business.  It should be read in conjunction with our consolidated
financial statements and related notes contained elsewhere in this annual report
and the information under Item 5, “Operating and Financial Review and
Prospects.”  The selected consolidated statement of income data for
the fiscal years ended December 31, 2008, and 2009, and the selected
consolidated balance sheet data as of December 31, 2008 and 2009 have been
derived from our audited consolidated financial statements that are included in
this annual report beginning on page F-1.  The selected balance sheet
data as of and for the year ended December 31, 2007 have been derived
from our audited consolidated financial statements that are not included in this
annual report.  The selected statement of income data for the fiscal
year ended December 31, 2006 and the balance sheet data as of December 31, 2006
have been derived from the audited financial statements of Henan Green that are
not included in this annual report.  The selected statement of income
data for the fiscal year ended December 31, 2005 and balance sheet data as of
December 31, 2005 have been derived from the unaudited financial statements of
Henan Green that are not included in this annual report.
 
 The
consolidated financial statements for the years ended December 31, 2008 and 2009
are prepared and presented in accordance with generally accepted accounting
principles in the United States, or U.S. GAAP.  The selected financial
data information is only a summary and should be read in conjunction with the
historical consolidated financial statements and related notes of China Gerui
contained elsewhere herein.  The financial statements of Henan
Green are not presented and fully represent our financial condition
and operations; however, they are not indicative of our future
performance.
 
 Fiscal Year Ended December 31,2005
                    (Henan
                    Green,
                    unaudited)
                  
                  
                  2006
                    (Henan
                    Green,
                    audited)
                  
                  
                  2007
                    (Consolidated,
                    audited)
                  
                  
                  2008
                    (Consolidated,
                    audited)
                  
                  
                  2009
                    (Consolidated,
                    audited)(In thousands of U.S. Dollars, except number of shares and per share data)Statement
      of Income Data:Revenue
                  
                  $
                  62,520
                  
                  
                  $
                  99,017
                  
                  
                  $
                  139,649
                  
                  
                  $
                  196,264
                  
                  
                  $
                  218,903Operating
      income
                  
                  
                  11,725
                  
                  
                  
                  23,893
                  
                  
                  
                  35,771
                  
                  
                  
                  49,594
                  
                  
                  
                  60,315Net
      income before income taxes and minority interest
                  
                  
                  11,568
                  
                  
                  
                  23,649
                  
                  
                  
                  35,072
                  
                  
                  
                  47,375
                  
                  
                  
                  58,200Net
      income before minority interest (1)
                  
                  
                  N/A
                  
                  
                  
                  N/A
                  
                  
                  
                  23,650
                  
                  
                  
                  35,506
                  
                  
                  
                  43,448Net
      income (1)(2)
                  
                  
                  7,788
                  
                  
                  
                  15,879
                  
                  
                  
                  13,012
                  
                  
                  
                  21,585
                  
                  
                  
                  43,448Weighted
      average ordinary common shares(3)(4)
                  
                  
                  N/A
                  
                  
                  
                  N/A
                  
                  
                  
                  30,000,000
                  
                  
                  
                  30,000,000
                  
                  
                  
                  33,751,844Weighted
      average number of diluted ordinary shares(3)(4)
                  
                  
                  N/A
                  
                  
                  
                  N/A
                  
                  
                  
                  30,000,000
                  
                  
                  
                  30,000,000
                  
                  
                  
                  37,675,479Basic
      earnings per share (1)(3)(4)
                  
                  $
                  N/A
                  
                  
                  $
                  N/A
                  
                  
                  $
                  0.43
                  
                  
                  $
                  0.72
                  
                  
                  $
                  1.29Diluted
      earnings per share(1)(3)(4)
                  
                  $
                  N/A
                  
                  
                  $
                  N/A
                  
                  
                  $
                  0.43
                  
                  
                  $
                  0.72
                  
                  
                  $
                  1.15Balance
      Sheet Data:Total
      current assets
                  
                  $
                  71,020
                  
                  
                  $
                  68,822
                  
                  
                  $
                  74,654
                  
                  
                  $
                  93,381
                  
                  
                  $
                  146,638Total
      assets
                  
                  
                  85,695
                  
                  
                  
                  85,782
                  
                  
                  
                  91,817
                  
                  
                  
                  115,376
                  
                  
                  
                  184,350Total
      current liabilities
                  
                  
                  71,533
                  
                  
                  
                  62,781
                  
                  
                  
                  60,119
                  
                  
                  
                  102,808
                  
                  
                  
                  97,307Total
      liabilities
                  
                  
                  72,051
                  
                  
                  
                  63,239
                  
                  
                  
                  60,273
                  
                  
                  
                  102,836
                  
                  
                  
                  97,307Minority
      Interest(1)
                  
                  
                  N/A
                  
                  
                  
                  N/A
                  
                  
                  
                  14,188
                  
                  
                  
                  0
                  
                  
                  
                  0Stockholders’
      equity
                  
                  
                  13,644
                  
                  
                  
                  22,543
                  
                  
                  
                  17,356
                  
                  
                  
                  12,540
                  
                  
                  
                  87,043
  2
  (1)Henan
Green was acquired by China Gerui on October 21, 2008 and for reporting purposes
a 44.98% interest of Henan Green has been accounted for as a minority interest
prior to the date of acquisition during the years ended December 31, 2007 and
2008.  Net income and per share data have been calculated after giving
effect to the minority interest in such periods.  Minority Interest
was not accounted for during the years ended December 31, 2005 and 2006 in
respect of Henan Green.
 
 (2)We have
no discontinued operations, therefore net income and net income per share has
been provided in lieu of income from continuing operations and income from
continuing operations per share.
 
 (3)In
anticipation of the merger transaction with China Acquisition Opportunity
Corporation, China Gerui effectuated a recapitalization on March 13, 2009
pursuant to which 29,999,900 newly issued ordinary shares were issued to China
Gerui’s then-current shareholders pro rata with their relative ownership
percentages.  Consequently, the foregoing table presents ordinary
shares outstanding (actual and diluted) and per share data (basic and diluted)
on a pro forma basis assuming that the recapitalization had already occurred at
all times during the periods presented.
  (4)Ordinary
shares outstanding (actual and diluted) and per share data (basis and diluted)
of Henan Green have been omitted for 2005 and 2006 because of differences in the
capital structures of China Gerui and Henan Green.  Presenting such data in
this report is not particularly helpful and could be misleading to
readers.
 
 Capitalization
and Indebtedness
 
 Not
applicable.
 
 Reasons
for the Offer and Use of Proceeds
 
 Not
applicable.
 
 Risk
Factors
  An
investment in our capital stock involves a high degree of risk. You should
carefully consider the risks described below, together with all of the other
information included in this annual report, before making an investment
decision. If any of the following risks actually occurs, our business, financial
condition or results of operations could suffer. In that case, the trading price
of our capital stock could decline, and you may lose all or part of your
investment.
 
 RISKS RELATED TO OUR BUSINESS
 
 Due
to our rapid growth in recent years, our past results may not be indicative of
our future performance so evaluating our business and prospects may be
difficult.
  Our
business has grown and evolved rapidly in recent years as demonstrated by our
growth in sales revenue from approximately $139.6 million in 2007 to $218.9
million in 2009.  Our net income has grown from approximately $13.0
million in 2007 to approximately $43.4 million in 2009.  We may not be
able to achieve similar growth in future periods.  Therefore, our
historical operating results may not provide a meaningful basis for evaluating
our business, financial performance and prospects in the
future.  Moreover, our ability to achieve satisfactory operating
results at higher production and sales volumes is unproven.  You
should not rely on our past results or our historical rate of growth as an
indication of our future performance.
 
 A
large percentage of our revenues are derived from sales to a limited number of
customers and our business will suffer if sales to these customers
decline.
 
 We
currently sell high precision steel products to more than 20 major customers in
the Chinese domestic market.  For the fiscal years ended December 31,
2009 and 2008, sales revenues generated from our top 10 customers amounted to
36.9% and 48.0% of total sales revenues, respectively, and sales to our largest
single customer for the same periods amounted to 8.4% and 10.0% of our total
sales revenues, respectively.  We do not enter into long-term
contracts with our customers and therefore cannot be certain that sales to these
customers will continue. The loss of any of our largest customers would likely
have a material negative impact on our sales revenues and business.
  3
  Our
customers operate in highly competitive markets, and they may be willing to
accept substitutes in lieu of our products.
 
 Our
customers and other users of cold-rolled steel products operate in highly
competitive markets, which are becoming increasingly
cost-conscious.  Cold-rolled precision steel competes with other
materials, such as aluminum, plastics, composite materials and glass, among
others, for industrial and commercial applications. Customers have demonstrated
a willingness to substitute other materials for cold-rolled steel.  If
our customers increasingly utilize substitutes for cold-rolled steel products in
their operations, sales of our products will decline and our business and
results of operations will suffer.
 
 We
may be unable to fund the substantial ongoing capital and maintenance
expenditures that our operations require.
 
 Our
operations are capital intensive and our business strategy is likely to require
additional substantial capital investment.  Our growth strategy
includes increasing our annual production capacity, which was 250,000
metric tons as of December 31, 2009, to 500,000 metric tons within the next 24
months and we are building an additional manufacturing facility with total
production capacity of 250,000 metric tons.  In the future, we may
require additional capital for building new production lines and acquiring
new equipment as well as for maintaining the condition of our existing equipment
and complying with environmental laws and regulation.  Sourcing
external capital funds for these purposes are key factors that have constrained
and may in the future constrain our growth, production capability and
profitability.  There can be no assurance that such capital will be
available in sufficient amounts or on terms acceptable to us or at
all.   If we need to raise capital by selling a substantial
number of additional ordinary shares or securities convertible into ordinary
shares, this will cause dilution to the holders of our ordinary shares and could
also cause the market price of our ordinary shares to decline.
 
 A
downturn or negative changes in the highly volatile steel industry will harm our
business and profitability.
 
 Steel
consumption is highly cyclical and generally follows general economic and
industrial conditions, both worldwide and in various smaller geographic areas.
Pricing can be volatile as a result of general economic conditions, labor costs,
competition, import duties, tariffs and currency exchange rates. The steel
industry has historically been characterized by excess world supply and
wide fluctuations in results of operations both in China and globally. This
has led to substantial price decreases during periods of economic weakness,
which have not been offset by commensurate price increases during periods of
economic strength.  Substitute materials are increasingly available
for many steel products, which may further reduce demand for
steel.  Additional overcapacity or the use of alternative products
could hurt our results of operations.
 
 Our
revenues will decrease if there is less demand for the end product in which our
products are installed.
 
 Our
finished steel products mainly serve as key components in food and packaging
materials, telecommunications cable and equipment, household decorations,
construction materials, and electrical appliance.  Therefore, we are
subject to the general changes in economic conditions affecting the food and
beverage, chemical, telecommunications, construction and household appliance
industry participants.  If our customers which operate in these
industries experience a downturn in their business or if they utilize
substitutes for our products in their manufacturing operations, demand for our
products and our business results will suffer.
 
 Environmental
compliance and remediation could result in substantially increased capital
requirements and operating costs.
 
 Steel
manufacturing and processing operations are subject to numerous Chinese
provincial and local laws and regulations relating to the protection of the
environment.  We are subject to regulations regarding emissions and
waste disposal and management.  These laws continue to evolve and are
becoming increasingly stringent. The ultimate impact of complying with such laws
and regulations is not always clearly known or determinable because regulations
under some of these laws have not yet been promulgated or are undergoing
revision. Our business and operating results could suffer if we were required to
increase our expenditures to comply with any new environmental regulations
affecting our operations.
  4
  Our
capital improvement and expansion plans require us to obtain significant capital
which may be unavailable to us on favorable terms or at all.
 
 We plan
to expand our annual production capacity from 250,000 metric tons as of the end
of 2009 to 500,000 metric tons within the next 24 months in order to meet
expected demand for our products.  Our expansion plans may require us
to acquire new property or land use rights, expand existing buildings or
construct new buildings and procure additional highly specialized manufacturing
equipment.  Each of these activities will require considerable capital
and we expect that we will need external sources of financing to complete these
capital expansion projects.  To the extent that we finance our capital
expansion projects with debt financing, we may become subject to financial
covenants or operating covenants that restrict our ability to freely operate our
business or take actions that are desired by shareholders, such as the payment
of dividends.  If we elect to finance our capital expansion plans
through equity financing, our shareholders may experience dilution or may have
their voting or economic rights as shareholders subordinated to a senior class
of stock.  In either event, we may be unable to find external sources
of financing on favorable terms or at all.  Our failure to obtain
external financing for our capital expansion projects can severely impede our
growth plans and strategy and impair our revenue, earnings and overall financial
performance.
 
 Our
level of indebtedness may make it more difficult for us to fulfill all of our
debt obligations and may reduce the amount of cash available for maintaining and
growing our operations, which could have an adverse effect on our
revenues.
 
 Our total
debt under existing bank loans to the Company as of December 31, 2009 was
approximately $75.0 million. This indebtedness and the incurrence of any new
indebtedness could (i) make it more difficult for us to satisfy and pay our
existing liabilities and obligations, which could in turn result in an event of
default, (ii) require us to dedicate a substantial portion of our cash flow from
operations to debt service payments, thereby reducing the availability of cash
for working capital, capital expenditures, acquisitions, general corporate
purposes or other purposes, (iii) impair our ability to obtain additional
financing in the future for working capital, capital expenditures, acquisitions,
general corporate purposes or other purposes, (iv) diminish our ability to
withstand a downturn in our business, the industry in which we operate or the
economy generally, (v) limit our flexibility in planning for, or reacting to,
changes in our business and the industry in which we operate, or (vi) place us
at a competitive disadvantage compared to competitors that have proportionately
less debt.  If we are unable to meet our debt service obligations, we
could be forced to restructure or refinance our indebtedness, seek additional
equity capital or sell assets. We may be unable to obtain financing or sell
assets on satisfactory terms, or at all, which could cause us to default on our
debt service obligations and be subject to foreclosure on such
loans.  Additionally, we could incur additional indebtedness in the
future and, if new debt is added to our current debt levels, the risks above
could intensify.
 
 We
face significant competition from competitors with greater resources, and we may
not have the resources necessary to successfully compete with them.
 
 The steel
manufacturing and processing business is highly fragmented and competitive. We
compete with a large number of other steel manufacturers and processors in
China, on a region-by-region basis, and with foreign steel manufacturers, such
as PASCO Steel, on a world wide basis.  Our competitors are of various
sizes, some of which have more established brand names and relationships in
certain markets than we do.  We are not in direct competition with
China’s local state-owned steel giants because those companies concentrate on
the production of hot-rolled steel.  As such, they are more often a
raw material supplier to us, rather than a competitor.  We are one of
a limited number of specialty precision cold-rolled steel producers in
China.  Differences in the type and nature of the specialty precision
steel products in China’s steel industry are relatively small and, coupled with
intense competition from international and local suppliers and customer price
sensitivity, competition can be fierce.  Our competitors may increase
their market share through pricing strategies that damage our
business.  Since our industry is capital-intensive, our competitors
may be able to successfully compete with us if their financial resources, staff
and facilities are substantially greater than ours, placing us at a competitive
disadvantage to these larger companies.
 
 Any
decrease in the availability, or increase in the cost, of raw materials could
materially reduce our earnings.
 
 Our
business operations depend heavily on the availability of various raw materials
and energy resources, primarily steel coil, but also chromium, tin, zinc, oil
paint, electricity and natural gas.  Steel coil has historically
accounted for approximately 90% of our total cost of sales.  The
availability of raw materials and energy resources may decrease and their prices
may fluctuate greatly.  We purchase a large portion of our raw
materials from Zhengzhou Zhongchu Materials Distribution Center and Henan
Baoyuxin Technology and Trading Co. Ltd., but we currently do not have long-term
supply contracts with any particular supplier to assure a continued supply of
raw materials.  While we maintain good relationships with these suppliers,
the supply of raw materials may nevertheless be interrupted on account of events
outside our control, which will negatively impact our operations.  If
these or any other important suppliers are unable or unwilling to provide us
with raw materials on terms favorable to us, we may be unable to produce certain
products.  This could result in a decrease in profit and damage
to our reputation in our industry.  So far we have been able to pass
raw material cost increases on to our customers.  However, if our raw
material and energy costs increase to such an extent that we cannot pass these
higher costs on to our customers in full or at all, our margins will
suffer.  Although we currently benefit from favorable pricing in some
of these supply contracts, if market prices for these raw materials decline, we
may not be able to take advantage of decreasing market prices, and our profit
margins may suffer.
  5
  We
produce a limited number of products and may not be able to respond quickly to
significant changes in the market or new market entrants.
 
 Cold-rolled
specialty precision steel manufacturing is a relatively new industry in
China.  Previously, our customers which manufacture durable goods have
relied solely on imports from Japan, Korea, the European Union and the United
States.  We believe the average quality and standards of products of
China’s high precision steel industry lags behind international
standards.  While we offer 5 series and over 20 types of
high-precision steel products and believe we have developed a nationally
recognizable brand, there are many other specialty precision steel products of
similar nature in the market.  As of December 31, 2009, we have not
yet penetrated the international market and have not developed an
internationally recognizable brand for specialty steel products.  If
there are significant changes in market demand and/or competitive forces, we may
not be able to change our product mix or adapt our production equipment quickly
enough to meet customers’ needs.  Under such circumstances, our narrow
band of precision steel products and/or new market entrants may negatively
impact our financial performance.
 
 Increased
imports of steel products into China could negatively affect domestic steel
demand and prices and reduce our profitability.
 
 While
China’s steel production has increased rapidly in recent years, we believe that
domestic production continues to be insufficient to meet demand for high-end
steel products.   As a result, China is expected to continue to
import a significant portion of its steel products. Foreign competitors may have
lower labor costs, and are often owned, controlled or subsidized by their
governments, which allows their production and pricing decisions to be
influenced by political and economic policy considerations as well as prevailing
market conditions.  Import levels may also be impacted by decisions of
government agencies, under trade laws.  Increases in future levels of
imported steel could negatively impact future market prices and demand levels
for our precision steel products.
 
 While
virtually all of our operations, customers and sales are in China, some limited
administrative matters are geographically dispersed so any deterioration of
general business conditions in China may make it difficult or prohibitive to
continue to operate or expand our business.
 
 Our
manufacturing operations are located in China, some of our administrative
offices are located in Hong Kong and a limited number of administrative matters
are handled in the BVI.  We have regulatory filing obligations in the
United States.  The geographical distances between our facilities create a
number of logistical and communications challenges, including time differences
and differences in the cultures in each location, which makes communication and
effective cooperation more difficult. In addition, because of the location of
the manufacturing facilities in China, our operations could be affected by,
among other things:
 
 ·
              economic
      and political instability in China, including problems related to labor
      unrest,
 ·
              lack
      of developed infrastructure,
 ·
              variances
      in payment cycles,
 ·
              currency
      fluctuations,
 ·
              overlapping
      taxes and multiple taxation issues,
 ·
              employment
      and severance taxes,
 ·
              compliance
      with local laws and regulatory
requirements,
 ·
              greater
      difficulty in collecting accounts receivable,
  and
 ·
              the
      burdens of cost and compliance with a variety of foreign
    laws.
 
 Moreover,
inadequate development or maintenance of infrastructure in China, including
adequate power and water supplies, transportation, raw materials availability or
the deterioration in the general political, economic or social environment could
make it difficult, more expensive and possibly prohibitive to continue to
operate or expand our facilities in China.
  6
  Our
rapid expansion could significantly strain our resources, management and
operational infrastructure which could impair our ability to meet increased
demand for our products and hurt our business results.
  To
accommodate our anticipated growth, we will need to expend capital resources and
dedicate personnel to implement and upgrade our accounting, operational and
internal management systems and enhance our record keeping and contract tracking
system. Such measures will require us to dedicate additional financial resources
and personnel to optimize our operational infrastructure and to recruit more
personnel to train and manage our growing employee base. If we cannot
successfully implement these measures efficiently and cost-effectively, we will
be unable to satisfy the demand for our products, which will impair our revenue
growth and hurt our overall financial performance.
 
 We
will be at a competitive disadvantage if we cannot successfully adapt to
changing technology and manufacturing techniques.
 
 The
successful implementation of our business strategy requires us to continuously
evolve our existing products and services and introduce new products and
services to meet customers’ needs.   We produce steel products
that are characterized by stringent performance and specification requirements
that mandate a high degree of manufacturing and engineering
expertise.  We believe that our customers rigorously evaluate our
services and products on the basis of a number of factors, including, but not
limited to:
 
 ·
              quality,
 ·
              price
      competitiveness,
 ·
              technical
      expertise and development
capability,
 ·
              innovation,
 ·
              reliability
      and timeliness of delivery,
 ·
              product
      design capability,
 ·
              operational
      flexibility,
 ·
              customer
      service, and
 ·
              overall
      management.
 
 Our
success depends on our ability to continue to meet our customers’ changing
requirements and specifications with respect to these and other criteria. There
can be no assurance that we will be able to address technological advances or
introduce new designs or products that may be necessary to remain competitive
within the precision steel industry.
 
 Our
production facilities are subject to risks of power shortages which may impair
our ability to meet our customers’ needs.
 
 Our
manufacturing processes are extremely specialized and depend on critical pieces
of equipment and a constant availability of energy to power
them.  Many cities and provinces in China have suffered serious power
shortages in recent times, largely as a result of the growth and
commercialization of formerly rural regions of China. Many of the regional
grids do not have sufficient power generating capacity to fully satisfy the
increased demand for electricity driven by continual economic growth and
persistent hot weather. Local governments have occasionally required local
factories to temporarily shut down their operations or reduce their daily
operational hours in order to reduce local power consumption levels. To date,
our operations have not been affected by those administrative
measures.  While we have not experienced any severe or lengthy power
outages in the past, we do not have any back up power generation
systems.  However, there is a risk that we may be affected by those
administrative measures or power outages in the future, thereby causing material
production disruption and delay in delivery schedule. In such event, our
business, results of operation and financial conditions could be
damaged.
 
 Unexpected
equipment failures may damage our business due to production curtailments or
shutdowns.
 
 Highly
specialized machinery is used in our manufacturing processes which cannot be
repaired or replaced without significant expense and time delay. On
occasion, our equipment may be out of service as a result of unanticipated
failures which may result in plant shutdowns or periods of materially reduced
production. Interruptions in production capabilities will inevitably increase
production costs and reduce our sales and earnings. In addition to
equipment failures, our facilities are also subject to the risk of catastrophic
loss due to unanticipated events such as fires, explosions or adverse weather
conditions. Furthermore, any interruption in production capability may require
us to make large capital expenditures to remedy the situation, which could have
a negative effect on our profitability and cash flows. We do not have
business interruption insurance to cover losses as a result of equipment
failures. In addition, longer-term business disruption could result in a loss of
customers. If this were to occur, our future sales levels, and therefore our
profitability, could decline.
  7
  We
might fail to adequately protect our intellectual property and third parties may
claim that our products infringe upon their intellectual property.
 
 As part
of our business strategy, we intend to accelerate our investment in new
technologies in an effort to strengthen and differentiate our product portfolio
and make our manufacturing processes more efficient.   Our
primary focus will be to develop new and better technologies to allow us to
manufacture higher valued-added products, such as chrome finished,
zinc-plated and galvanized products. As a result, we believe that the
protection of our intellectual property will become increasingly important to
our business. Currently, we have one patent application pending. We expect to
rely on a combination of patents, trade secrets, trademarks and copyrights to
provide protection in this regard, but this protection might be inadequate. For
example, our pending or future patent applications might not be approved or, if
allowed, they might not be of sufficient strength or scope. Conversely, third
parties might assert that our technologies infringe their proprietary rights. In
either case, litigation could result in substantial costs and diversion of our
resources, and whether or not we are ultimately successful, the litigation could
hurt our business and financial condition.
 
 We
face risks associated with future investments or acquisitions.
 
 A
component of our growth strategy is to invest in or acquire businesses
complementary to ours that will enable us, among other things, to expand the
products we offer to our existing target customer base, and that will provide
opportunities to expand into new markets. We may be unable to identify suitable
investment or acquisition candidates or to make these investments or
acquisitions on a commercially reasonable basis, if at all. If we complete an
investment or acquisition, we may not realize the anticipated benefits from the
transaction.  Integrating an acquired company or technology is
complex, distracting and time consuming, as well as a potentially expensive
process.  The successful integration of an acquisition would require
us to:
 
 ·
              integrate
      and retain key management, sales, research and development, and other
      personnel;
 ·
              incorporate
      the acquired products or capabilities into our offerings both from an
      engineering and sales and marketing
perspective;
 ·
              coordinate
      research and development efforts;
 ·
              integrate
      and support pre-existing supplier, distribution and customer
      relationships; and
 ·
              consolidate
      duplicate facilities and functions and combine back office accounting,
      order processing and support
functions.
 
 The
geographic distance between the companies, the complexity of the technologies
and operations being integrated and the disparate corporate cultures being
combined may increase the difficulties of combining an acquired company or
technology.  Acquired businesses are likely to have different
standards, controls, contracts, procedures and policies, making it more
difficult to implement and harmonize company-wide financial, accounting,
billing, information and other systems.  Management’s focus on
integrating operations may distract attention from our day-to-day business and
may disrupt key research and development, marketing or sales
efforts.
 
 Our
acquisition strategy also depends on our ability to obtain necessary government
approvals that may be required, as described under “Risks Related to Doing
Business in China”.  We may be unable to complete a business
combination transaction efficiently or on favorable terms due to complicated
merger and acquisition regulations implemented on September 8,
2006.
 
 We
do not carry any business interruption insurance, product liability or recall
insurance or third-party liability insurance.
 
 Operation
of our business and facilities involves many risks, including equipment
failures, natural disasters, industrial accidents, power outages, labor
disturbances, business interruptions, property damage, product liability,
personal injury and death.  We do not carry any business interruption
insurance or third-party liability insurance for our business to cover claims in
respect of product liability, personal injury or property or environmental
damage arising from accidents on our property or relating to our operations.
Therefore, our existing insurance coverage may not be sufficient to cover all
risks associated with our business. As a result, we may be required to pay for
financial and other losses, damages and liabilities, including those caused by
natural disasters and other events beyond our control, out of our own funds,
which could have a material adverse effect on our business, financial condition
and results of operations.
  8
  Our
business will suffer if it loses its land use rights.
 
 There is
no private ownership of land in China and all land ownership is held by the
government of China, its agencies, and collectives.  In the case of
land used for business purposes, land use rights can be obtained from the
government for a period up to 50 years, and are typically
renewable.  Land use rights can be transferred upon approval by the
land administrative authorities of China (State Land Administration Bureau) upon
payment of the required land transfer fee. We hold land use rights for some
of its occupied properties and leases the land and the building on which its
main facilities are located from third parties that it believes have proper land
use rights, but no assurance can be given that these land use rights will be
renewed or that our lessors will maintain their land use rights.  If
the land use right certificates needed for our operations are determined by the
government of China to be invalid or if they are not renewed, or if we are
unable to renew the lease for our facilities when it expires in 2027, we may
lose production facilities or employee accommodations that would be difficult or
impossible to replace.  Should we have to relocate, our workforce may
be unable or unwilling to work in the new location and its operations will be
disrupted during the relocation. The relocation or loss of facilities could
cause us to lose sales and/or increase its costs of production, which would
negatively impact financial results.
 
 If
we fail to maintain an effective system of internal control over financial
reporting, our ability to accurately and timely report our financial results or
prevent fraud may be adversely affected and investor confidence and the market
price of our ordinary shares may be adversely impacted.
 
 As
directed by Section 404 of the Sarbanes-Oxley Act of 2002, the Securities and
Exchange Commission, or the SEC, adopted rules requiring public companies to
include a report of management on the company’s internal controls over financial
reporting in their annual reports, including Form 20-F.  In addition,
the independent registered public accounting firm auditing a company’s financial
statements must also attest to and report on the effectiveness of the company’s
internal controls over financial reporting.  Under current SEC rules,
we were required to include a management report beginning with our annual report
for the fiscal year ending December 31, 2009 and will be required to include our
independent registered public accounting firm’s attestation
report beginning with our annual report for the fiscal year ending December
31, 2010.  Although our management concluded that our internal
controls over our financial reporting were effective as of December 31, 2009,
they may not do so in future annual reports.  Our independent
registered public accounting firm may issue a report that is qualified if it is
not satisfied with our controls or the level at which our controls are
documented, designed, operated or reviewed, or if it interprets the relevant
requirements differently from us.  Any of these possible outcomes
could result in an adverse reaction in the financial marketplace due to a loss
of investor confidence in the reliability of our reporting processes, which
could adversely impact the market price of our securities.
  Failure
to comply with the U.S. Foreign Corrupt Practices Act could subject us to
penalties and other adverse consequences.
 
 We are
subject to the U.S. Foreign Corrupt Practices Act, which generally prohibits
United States companies from engaging in bribery or other prohibited payments to
foreign officials for the purpose of obtaining or retaining business. In
addition, we are required to maintain records that accurately and fairly
represent our transactions and have an adequate system of internal accounting
controls. Foreign companies, including some that may compete with us, are not
subject to these prohibitions, and therefore may have a competitive advantage
over us. Corruption, extortion, bribery, pay-offs, theft and other fraudulent
practices occur from time-to-time in the PRC, and our executive officers and
employees have not been subject to the U.S. Foreign Corrupt Practices Act prior
to the completion of our merger in March of 2009. While we have implemented
measures to ensure compliance with the FCPA by all individuals involved with our
company, we can make no assurance that our employees or other agents will not
engage in such conduct for which we might be held responsible. If our employees
or other agents are found to have engaged in such practices, we could suffer
severe penalties and other consequences that may have a material adverse effect
on our business, financial condition and results of operations.
 
 We
rely heavily on our management team.
 
 Our
executive management team has a specialized knowledge of steel markets and works
closely with our customers to provide products to exact
specifications.  Our Chairman and founder, Mr. Lu, has twenty-four
years experience in the steel industry in China.  In addition, the
executive management team has an average of sixteen years of industry
experience. Their long tenure with the company and the industry has enabled the
management team to build close relationships with suppliers and customers. The
expertise of management and technical innovation of the company give it a strong
competitive advantage.  The loss of Mr. Lu’s services or any of our
other management poses a risk to our business.
  9
  RISKS
RELATED TO DOING BUSINESS IN CHINA
 
 Substantially all of our operating
assets are located in China and substantially all of our revenueisderived fromouroperations in China,so our business, results of
operations and prospects are subject to the economic, political
and legal policies, developments and conditions in China.
 
 The PRC’s
economic, political and social conditions, as well as government policies, could
impair our business.  The PRC economy differs from the economies of
most developed countries in many respects.  China’s GDP has grown
consistently since 1978 (National Bureau of Statistics of China). However,
we cannot assure you that such growth will be sustained in the future. If, in
the future, China’s economy experiences a downturn or grows at a slower rate
than expected, there may be less demand for spending in certain industries. A
decrease in demand for spending in certain industries could impair our ability
to remain profitable.  The PRC’s economic growth has been uneven, both
geographically and among various sectors of the economy. The PRC government has
implemented various measures to encourage economic growth and guide the
allocation of resources. Some of these measures benefit the overall PRC economy,
but may have a negative effect on us.  For example, our financial
condition and results of operations may be hindered by PRC government control
over capital investments or changes in tax regulations.
 
 The PRC
economy has been transitioning from a planned economy to a more market-oriented
economy. Although in recent years the PRC government has implemented measures
emphasizing the use of market forces for economic reform, the reduction of state
ownership of productive assets and the establishment of sound corporate
governance in business enterprises, a substantial portion of productive assets
in China is still owned by the PRC government. In addition, the PRC government
continues to play a significant role in regulating industry development by
imposing industrial policies. It also exercises significant control over PRC
economic growth through the allocation of resources, controlling payment of
foreign currency-denominated obligations, setting monetary policy and providing
preferential treatment to particular industries or companies.
 
 If
the China Securities Regulatory Commission, or CSRC, or another PRC regulatory
agency, determines that CSRC approval of our recent merger was required or if
other regulatory obligations are imposed upon us, we may incur sanctions,
penalties or additional costs which would damage our business
 
 On August
8, 2006, six PRC regulatory agencies, including the CSRC, promulgated the
Regulations on Mergers and Acquisitions of Domestic Companies by Foreign
Investors, which became effective on September 8, 2006. Under these regulations,
the prior approval of the CSRC is required for the overseas listing of offshore
special purpose vehicles that are directly or indirectly controlled by PRC
companies or individuals and used for the purpose of listing PRC onshore
interests on an overseas stock exchange.
 
 On March
17, 2009, we completed a merger transaction with China Opportunity Acquisition
Corp., or COAC, which resulted in our current ownership and corporate
structure.  We believe, based on the opinion of the PRC legal counsel,
Jingtian & Gongcheng, Attorneys at Law, that CSRC approval was not required
for our merger transaction or for the listing and trading of our securities on a
trading market because we are not an offshore special purpose vehicle that is
directly or indirectly controlled by PRC companies or individuals. Although
the merger and acquisition regulations provide specific requirements and
procedures, there are still many ambiguities in the meaning of many
provisions.  Further regulations are anticipated in the future, but
until there has been clarification either by pronouncements, regulation or
practice, there is some uncertainty in the scope of the regulations and the
regulators have wide latitude in the enforcement of the regulations and approval
of transactions.  If the CSRC or another PRC regulatory agency subsequently
determines that the CSRC’s approval was required, we may face sanctions by the
CSRC or another PRC regulatory agency.  If this happens, these regulatory
agencies may impose fines and penalties on our operations in China, limit our
operating privileges in China, restrict or prohibit payment or remittance of
dividends paid by Henan Green, or take other actions that could damage our
business, financial condition, results of operations, reputation and prospects,
as well as the trading price of our securities.
 
 If
the PRC imposes restrictions designed to reduce inflation, future economic
growth in the PRC could be severely curtailed which could hurt our business and
profitability.
 
 While the
economy of the PRC has experienced rapid growth, this growth has been uneven
among various sectors of the economy and in different geographical areas of the
country. Rapid economic growth often can lead to growth in the supply of
money and rising inflation. In order to control inflation in the past, the
PRC has imposed controls on bank credits, limits on loans for fixed assets and
restrictions on state bank lending. Imposition of similar restrictions may
lead to a slowing of economic growth, a decrease in demand for our steel
products and generally damage our business and profitability.
  10
  Fluctuations
in exchange rates could harm our business and the value of our
securities.
 
 The value
of our securities will be indirectly affected by the foreign exchange rate
between U.S. dollars and RMB and between those currencies and other currencies
in which our sales may be denominated. Because substantially all of our earnings
and cash assets are denominated in RMB and our financial results are reported in
U.S. dollars, fluctuations in the exchange rate between the U.S. dollar and the
RMB will affect our balance sheet and our earnings per share in U.S.
dollars.  In addition, appreciation or depreciation in the value of
the RMB relative to the U.S. dollar would affect our financial results reported
in U.S. dollar terms without giving effect to any underlying change in our
business or results of operations.  Fluctuations in the exchange rate
will also affect the relative value of any dividend we issue that will be
exchanged into U.S. dollars as well as earnings from, and the value of, any U.S.
dollar-denominated investments we make in the future.  Since July 2005, the RMB has no longer been pegged
to the U.S. dollar. Although the People’s Bank of China regularly intervenes in
the foreign exchange market to prevent significant short-term fluctuations in
the exchange rate, the RMB may appreciate or depreciate significantly in value
against the U.S. dollar in the medium to long term. Moreover, it is possible
that in the future PRC authorities may lift restrictions on fluctuations in the
RMB exchange rate and lessen intervention in the foreign exchange
market.
 
 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. 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.
 
 Exchange
controls that exist in the PRC may limit our ability to utilize our cash flow
effectively.
 
 We are
subject to the PRC’s rules and regulations on currency conversion. In the
PRC, the State Administration for Foreign Exchange, or SAFE, regulates the
conversion of the Renminbi into foreign currencies. Currently, foreign
investment enterprises, or FIEs, are required to apply to the SAFE for “Foreign
Exchange Registration Certificates for FIEs.”  We believe that we will
likely be an FIE as a result of our ownership of Henan Green. With such
registration certificates, which need to be renewed annually, FIEs are allowed
to open foreign currency accounts including a “basic account” and “capital
account.” Currency conversion within the scope of the “basic account,” such as
remittance of foreign currencies for payment of dividends, can be effected
without requiring the approval of the SAFE. However, conversion of currency in
the “capital account,” including capital items such as direct investment, loans
and securities, still require approval of the SAFE. We cannot assure you that
the PRC regulatory authorities will not impose further restrictions on the
convertibility of the Renminbi. Any future restrictions on currency exchanges
may limit our ability to use our cash flow for the distribution of dividends to
our shareholders or to fund operations it may have outside of the
PRC.
 
 Failure
to comply with PRC regulations relating to the establishment of offshore special
purpose companies by PRC residents may subject our PRC resident stockholders to
personal liability, limit our ability to acquire PRC companies or to inject
capital into our PRC subsidiaries, limit our PRC subsidiaries' ability to
distribute profits to us or otherwise materially adversely affect
us.
 
 In
October 2005, SAFE issued the Notice on Relevant Issues in the Foreign Exchange
Control over Financing and Return Investment Through Special Purpose Companies
by Residents Inside China, generally referred to as Circular 75, which required
PRC residents to register with the competent local SAFE branch before
establishing or acquiring control over an offshore special purpose company, or
SPV, for the purpose of engaging in an equity financing outside of China on the
strength of domestic PRC assets originally held by those residents. Internal
implementing guidelines issued by SAFE, which became public in June 2007 (known
as Notice 106), expanded the reach of Circular 75 by (1) purporting to cover the
establishment or acquisition of control by PRC residents of offshore entities
which merely acquire “control” over domestic companies or assets, even in the
absence of legal ownership; (2) adding requirements relating to the source of
the PRC resident’s funds used to establish or acquire the offshore entity; (3)
covering the use of existing offshore entities for offshore financings; (4)
purporting to cover situations in which an offshore SPV establishes a new
subsidiary in China or acquires an unrelated company or unrelated assets in
China; and (5) making the domestic affiliate of the SPV responsible for the
accuracy of certain documents which must be filed in connection with any such
registration, notably, the business plan which describes the overseas financing
and the use of proceeds. Amendments to registrations made under Circular 75 are
required in connection with any increase or decrease of capital, transfer of
shares, mergers and acquisitions, equity investment or creation of any security
interest in any assets located in China to guarantee offshore obligations, and
Notice 106 makes the offshore SPV jointly responsible for these filings. In the
case of an SPV which was established, and which acquired a related domestic
company or assets, before the implementation date of Circular 75, a retroactive
SAFE registration was required to have been completed before March 31, 2006;
this date was subsequently extended indefinitely by Notice 106, which also
required that the registrant establish that all foreign exchange transactions
undertaken by the SPV and its affiliates were in compliance with applicable laws
and regulations. Failure to comply with the requirements of Circular 75, as
applied by SAFE in accordance with Notice 106, may result in fines and other
penalties under PRC laws for evasion of applicable foreign exchange
restrictions. Any such failure could also result in the SPV’s affiliates being
impeded or prevented from distributing their profits and the proceeds from any
reduction in capital, share transfer or liquidation to the SPV, or from engaging
in other transfers of funds into or out of China.
  11
  We have
asked our stockholders, who are PRC residents as defined in Circular 75, to
register with the relevant branch of SAFE, as currently required, in connection
with their equity interests in us and our acquisitions of equity interests in
our PRC subsidiaries. However, we cannot provide any assurances that they can
obtain the above SAFE registrations required by Circular 75 and Notice 106.
Moreover, because of uncertainty over how Circular 75 will be interpreted and
implemented, and how or whether SAFE will apply it to us, we cannot predict how
it will affect our business operations or future strategies. For example, our
present and prospective PRC subsidiaries’ ability to conduct foreign exchange
activities, such as the remittance of dividends and foreign currency-denominated
borrowings, may be subject to compliance with Circular 75 and Notice 106 by our
PRC resident beneficial holders.
 
 In
addition, such PRC residents may not always be able to complete the necessary
registration procedures required by Circular 75 and Notice 106. We also have
little control over either our present or prospective direct or indirect
stockholders or the outcome of such registration procedures. A failure by our
PRC resident beneficial holders or future PRC resident stockholders to comply
with Circular 75 and Notice 106, if SAFE requires it, could subject these PRC
resident beneficial holders to fines or legal sanctions, restrict our overseas
or cross-border investment activities, limit our subsidiaries’ ability to make
distributions or pay dividends or affect our ownership structure, which could
adversely affect our business and prospects.
 
 Because
Chinese law governs many of our material agreements, we may not be able to
enforce our rights within the PRC or elsewhere, which could result in a
significant loss of business, business opportunities or capital.
 
 Chinese
law governs many of our material agreements, some of which may be with Chinese
governmental agencies. We cannot assure you that we will be able to enforce any
of our material agreements or that remedies will be available outside of the
PRC. The system of laws and the enforcement of existing laws and contracts
in the PRC may not be as certain in implementation and interpretation as in the
United States. The Chinese judiciary is relatively inexperienced in enforcing
corporate and commercial law, leading to a higher than usual degree of
uncertainty as to the outcome of any litigation. The inability to enforce or
obtain a remedy under any of our future agreements could result in a significant
loss of business, business opportunities or capital.
 
 Our
management is unfamiliar with United States securities laws and will have to
expend time and resources becoming familiar with such laws which could lead to
various regulatory issues.
 
 Many
members of our management team are not familiar with United States securities
laws and will have to expend time and resources becoming familiar with such
laws. This could be expensive and time-consuming and could lead to various
regulatory issues and a diversion of management attention, which may harm our
operations.
 
 The
ability of our Chinese operating subsidiary to pay certain foreign currency
obligations, including dividends, is subject to restrictions.
 
 Our
ability to pay dividends may be restricted due to the foreign exchange control
policies and availability of cash balances. Since substantially all of our
operations are conducted in China and a majority of our revenues are generated
in China, a significant portion of our revenue earned and currency received are
denominated in Renminbi.  The Chinese government imposes controls on
the convertibility of Renminbi into foreign currencies and, in certain cases,
the remittance of currency out of China. Renminbi is currently not a freely
convertible currency. Shortages in the availability of foreign currency may
restrict our ability to remit sufficient foreign currency to pay dividends, if
any, on our ordinary shares or otherwise satisfy foreign currency denominated
obligations. Under existing Chinese foreign exchange regulations, payments of
current account items, including profit distributions, interest payments and
expenditures from the transaction, can be made in foreign currencies without
prior approval from the State Administration of Foreign Exchange by complying
with certain procedural requirements. However, approval from appropriate
governmental authorities is required where Renminbi is to be converted into
foreign currency and remitted out of China to pay capital expenses such as the
repayment of bank loans denominated in foreign currencies.  The
Chinese government may also at its discretion restrict access in the future to
foreign currencies for current account transactions. If the foreign exchange
control system prevents us from obtaining sufficient foreign currency to satisfy
our currency demands, we may not be able to pay certain of our expenses as they
come due.  In addition, current regulations in China would permit
Henan Green to pay dividends to us only out of Henan Green’s accumulated
distributable profits, if any, determined in accordance with Chinese accounting
standards and regulations. In addition, Henan Green will be required to set
aside at least 10% (up to an aggregate amount equal to half of its registered
capital) of its accumulated profits each year. Such reserve account may not be
distributed as cash dividends.
  12
  If
any dividend is declared in the future and paid in a foreign currency, you may
be taxed on a larger amount in U.S. dollars than the U.S. dollar amount that you
will actually ultimately receive.
 
 If you
are a U.S. holder, you will be taxed on the U.S. dollar value of your dividends
at the time you receive them, even if you actually receive a smaller amount of
U.S. dollars when the payment is in fact converted into U.S. dollars.
Specifically, if a dividend is declared and paid in a foreign currency, the
amount of the dividend distribution that you must include in your income as a
U.S. holder will be the U.S. dollar value of the payments made in the foreign
currency, determined at the conversion rate of the foreign currency to the U.S.
dollar on the date the dividend distribution is includible in your income,
regardless of whether the payment is in fact converted into U.S. dollars. Thus,
if the value of the foreign currency decreases before you actually convert
the currency into U.S. dollars, you will be taxed on a larger amount in U.S.
dollars than the U.S. dollar amount that you will actually ultimately
receive.
 
 Our
business could be severely harmed if the Chinese government changes its
policies, laws, regulations, tax structure or its current interpretations of its
laws, rules and regulations relating to our operations in China.
 
 Our
manufacturing facility is located in Henan, China and virtually all of our
assets are located in China.  We generate our sales revenue only from
customers located in China. Our results of operations, financial state of
affairs and future growth are, to a significant degree, subject to China’s
economic, political and legal development and related uncertainties. Our
operations and results could be materially affected by a number of factors,
including, but not limited to
 
 ·
              Changes
      in policies by the Chinese government resulting in changes in laws or
      regulations or the interpretation of laws or
  regulations,
 ·
              changes
      in taxation,
 ·
              changes
      in employment restrictions,
 ·
              restrictions
      on imports and sources of supply,
 ·
              import
      duties, and
 ·
              currency
      revaluation.
 
 Over the
past several years, the Chinese government has pursued economic reform policies
including the encouragement of private economic activities and greater economic
decentralization. If the Chinese government does not continue to pursue its
present policies that encourage foreign investment and operations in China, or
if these policies are either not successful or are significantly altered, then
our business could be harmed. Following the Chinese government’s policy of
privatizing many state-owned enterprises, the Chinese government has attempted
to augment its revenues through increased tax collection. It also exercises
significant control over China’s economic growth through the allocation of
resources, controlling payment of foreign currency-denominated obligations,
setting monetary policy and providing preferential treatment to particular
industries or companies.  Continued efforts to increase tax revenues
could result in increased taxation expenses being incurred by us. Economic
development may be limited as well by the imposition of austerity measures
intended to reduce inflation, the inadequate development of infrastructure and
the potential unavailability of adequate power and water supplies,
transportation and communications. In addition, the Chinese government
continues to play a significant role in regulating industry by imposing
industrial policies.
 
 The
Chinese laws and regulations which govern our current business operations are
sometimes vague and uncertain and may be changed in a way that hurts our
business.
 
 China’s
legal system is a civil law system based on written statutes, in which system
decided legal cases have little value as precedents, unlike the common law
system prevalent in the United States. There are substantial uncertainties
regarding the interpretation and application of Chinese laws and regulations,
including but not limited to the laws and regulations governing our business, or
the enforcement and performance of our arrangements with customers in the event
of the imposition of statutory liens, death, bankruptcy and criminal
proceedings. The Chinese government has been developing a comprehensive
system of commercial laws, and considerable progress has been made in
introducing laws and regulations dealing with economic matters such as foreign
investment, corporate organization and governance, commerce, taxation and
trade. However, because these laws and regulations are relatively new, and
because of the limited volume of published cases and judicial interpretation and
their lack of force as precedents, interpretation and enforcement of these laws
and regulations involve significant uncertainties. New laws and regulations that
affect existing and proposed future businesses may also be applied
retroactively.   We are considered an FIE under Chinese laws, and
as a result, we must comply with Chinese laws and regulations.  We
cannot predict what effect the interpretation of existing or new Chinese laws or
regulations may have on our business. If the relevant authorities find us
to be in violation of Chinese laws or regulations, they would have broad
discretion in dealing with such a violation, including, without limitation:
levying fines; revoking our business and other licenses; requiring that we
restructure our ownership or operations; and requiring that we discontinue any
portion or all of our business.
  13
  A
slowdown or other adverse developments in the Chinese economy may materially and
adversely affect our customers’ demand for our services and our
business.
 
 All of
our operations are conducted in China and all of our revenues are generated from
sales to businesses operating in China.  Although the Chinese economy has
grown significantly in recent years, such growth may not continue. We do not
know how sensitive we are to a slowdown in economic growth or other adverse
changes in Chinese economy which may affect demand for precision steel products.
 A slowdown in overall economic growth, an economic downturn or recession
or other adverse economic developments in China may materially reduce the demand
for our products and in turn reduce Our results of operations.
 
 Controversies
affecting China’s trade with the United States could depress the price of our
securities.
 
 While
China has been granted permanent most favored nation trade status in the United
States through its entry into the World Trade Organization, controversies and
trade disagreements between the United States and China may arise that
depress our the price of our securities. Political or trade
friction between the United States and China, whether or not actually affecting
our business, could also materially and adversely affect the prevailing market
price of our securities.
 
 Imposition
of trade barriers and taxes may reduce our ability to do business
internationally, and the resulting loss of revenue could harm our
profitability.
 
 We may
experience barriers to conducting business and trade in our targeted emerging
markets in the form of delayed customs clearances, customs duties and tariffs.
In addition, we may be subject to repatriation taxes levied upon the exchange of
income from local currency into foreign currency, substantial taxes of profits,
revenues, assets and payroll, as well as value-added tax. The markets in which
we plan to operate may impose onerous and unpredictable duties, tariffs and
taxes on our business and products, and there can be no assurance that this will
not reduce the level of sales that we achieve in such markets, which would
reduce our revenues and profits.
 
 There
can be no guarantee that China will comply with the membership requirements of
the World Trade Organization, which could leave us subject to retaliatory
actions by other governments and reduce our ability to sell our products
internationally.
 
 China has
agreed that foreign companies will be allowed to import most products into any
part of China. In the sensitive area of intellectual property rights, China has
agreed to implement the trade-related intellectual property agreement of the
Uruguay Round. There can be no assurances that China will implement any or all
of the requirements of its membership in the World Trade Organization in a
timely manner, if at all. If China does not fulfill its obligations to the
World Trade Organization, we may be subject to retaliatory actions by the
governments of the countries into which it sell our products, which could render
its products less attractive, thus reducing revenues and profits.
 
 The
implementation of the new PRC employment contract law and increases in the labor
costs in China may hurt our business and profitability.
 
 A new
employment contract law became effective on January 1, 2008 in China. It
imposes more stringent requirements on employers in relation to entry into
fixed-term employment contracts, recruitment of temporary employees and
dismissal of employees. In addition, under the Regulations on Paid Annual Leave
for Employees, which also became effective on January 1, 2008, employees who
have worked continuously for more than one year are entitled to paid vacation
ranging from 5 to 15 days, depending on the length of the employee’s service.
Employees who waive such vacation entitlements at the request of the employer
will be compensated for three times their normal daily salaries for each
vacation day so waived. As a result of the new law and regulations, our labor
costs may increase. There is no assurance that disputes, work stoppages or
strikes will not arise in the future. Increases in the labor costs or future
disputes with our employees could damage our business, financial condition or
operating results.
  14
  The
Chinese government has been adopting increasingly stringent environmental,
health and safety protection requirements, which could hurt our
business.
 
 The
continuance of our operations depends upon compliance with the applicable
environmental, health and safety, fire prevention and other regulations.
 Any change in the scope or application of these laws and regulations may
limit our production capacity or increase our cost of operation and could
therefore have an adverse effect on our business operations, financial condition
and operating results.  Our failure to comply with these laws and
regulations could result in fines, penalties or legal proceedings. There can be
no assurance that the Chinese government will not impose additional or stricter
laws or regulations, compliance with which may cause us to incur significant
capital expenditures, which it may not be able to pass on to our
customers.
 
 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, and its implementing
rules, both of 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 recent circular issued by the State Administration of Taxation on
April 22, 2009 regarding the standards used to classify certain Chinese-invested
enterprises controlled by Chinese enterprises or Chinese group enterprises and
established outside of China as “resident enterprises” 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.
 
 In
addition, the recent circular mentioned above sets out criteria for determining
whether “de facto management bodies” are located in China for overseas
incorporated, domestically controlled enterprises. However, as this circular
only applies to enterprises established outside of China that are controlled by
PRC enterprises or groups of PRC enterprises, it remains unclear how the tax
authorities will determine the location of “de facto management bodies” for
overseas incorporated enterprises that are controlled by individual PRC
residents like us and some of our subsidiaries.
 
 Therefore,
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 stockholders and
with respect to gains derived by our non-PRC stockholders from transferring our
shares.
 
 In
addition, under the New EIT law, the Notice of the State Administration
of Taxation on Negotiated Reduction of Dividends and Interest Rates, or
Notice 112, which was issued on January 29, 2008, the Arrangement between the PRC and the
Hong Kong Special Administrative Region on the Avoidance of Double Taxation and
Prevention of Fiscal Evasion, or the Double Taxation Arrangement (Hong
Kong), which became effective on December 8, 2006,and the Notice of the State Administration
of Taxation Regarding Interpretation and Recognition of Beneficial Owners under
Tax Treaties, or Notice 601, which became effective on October 27, 2009,
dividends from our PRC operating subsidiary paid to us through our Hong Kong
subsidiary may be subject to a withholding tax at a rate of 10%, or at a rate of
5% if our Hong Kong subsidiary is considered a “beneficial owner” that is
generally engaged insubstantial business
activities and entitled to treaty benefits under the Double Taxation Arrangement
(Hong Kong).Furthermore, the
ultimate tax rate will be determined by treaty between the PRC and the tax
residence of the holderof the PRC subsidiary.
We are actively monitoring the proposed withholding tax and are evaluating
appropriateorganizational changes
to minimize the corresponding tax impact.
  15
  Dividends
declared and paid from pre-January 1, 2008 distributable profits are
grandfathered under the New EIT Law and are not subject to withholding
tax.
 
 RISKS
RELATED TO THE MARKET FOR OUR ORDINARY SHARES GENERALLY
 
 The
market price for our ordinary shares, warrants and units may be
volatile.
 
 The
market price for our ordinary shares, warrants and units may be highly volatile
and could be subject to wide fluctuations in response to a variety of factors,
some of which may be beyond our control. Factors affecting the trading price of
our ordinary shares, warrants and units include:
 
 ·
              our
      earnings releases, actual or anticipated changes in our earnings,
      fluctuations in our operating results or our failure to meet the
      expectations of financial market analysts and
  investors;
 ·
              changes
      in financial estimates by us or by any securities analysts who might cover
      our stock;
 ·
              speculation
      about our business in the press or the investment
    community;
 ·
              significant
      developments relating to our relationships with our customers or
      suppliers;
 ·
              stock
      market price and volume fluctuations of other publicly traded companies
      and, in particular, those that are in the steel
  industry;
 ·
              customer
      demand for our products;
 ·
              investor
      perceptions of the steel industry in general and our company in
      particular;
 ·
              the
      operating and stock performance of comparable
  companies;
 ·
              general
      economic conditions and trends;
 ·
              major
      catastrophic events;
 ·
              announcements
      by us or our competitors of new products, significant acquisitions,
      strategic partnerships or
divestitures;
 ·
              changes
      in accounting standards, policies, guidance, interpretation or
      principles;
 ·
              loss
      of external funding sources;
 ·
              sales
      of our stock, including sales by our directors, officers or significant
      shareholders; and
 ·
              additions
      or departures of key personnel.
 
 Securities
class action litigation is often instituted against companies following periods
of volatility in their stock price. This type of litigation could result in
substantial costs to us and divert our management’s attention and
resources.
 
 Moreover,
securities markets may from time to time experience significant price and volume
fluctuations for reasons unrelated to operating performance of particular
companies. For example, from October 2008 until June 2009, securities markets in
the United States, China and throughout the world experienced an historically
large decline in share price. These market fluctuations may adversely affect the
price of our ordinary shares and other interests in our company at a time when
you want to sell your interest in us.
 
 The
exercise of outstanding warrants may result in dilution.
 
 Dilution
of the per share value of our ordinary shares could result from the exercise of
outstanding warrants which we assumed in connection with our merger with
COAC.  As of April 30, 2010, there were outstanding warrants to
purchase 14,561,952 ordinary shares at an exercise price of $5.00 per share as
well as an Underwriter’s Unit Purchase Option to purchase 600,000 units at an
exercise price of $6.60 per unit (which consists of 1 ordinary share and 2
warrants to purchase our ordinary shares with the warrants exercisable at $5.00
per ordinary share).  The warrants will expire and cease to be
exercisable on March 19, 2011.  We have also issued to Maxim Group LLC
a warrant to purchase 144,000 ordinary shares, which was subsequently
assigned to Maxim Partners LLC.  The warrant has an exercise price of
$6.00.  The warrant is exercisable commencing nine (9) months
after the effective date of the registration statement related to the offering
in which it was issued, or August 9, 2010, and will be exercisable until
November 9, 2014.  When the exercise price of the warrants is less than the
trading price of our ordinary shares, exercise of the warrant would have a
dilutive effect on our shareholders.  The possibility of the issuance
of our ordinary shares upon exercise of the warrants could cause the trading
price of our ordinary shares to decline or limit
the appreciation in the value of our ordinary shares while the warrants remain
outstanding.  The impact of potentially issuing additional warrants
can have a dilutive effect on our shareholders.
  16
  Future
sales or perceived sales of our ordinary shares could depress our stock
price.
 
 A
substantial number of our ordinary shares held by our current shareholders are
freely tradable.  If the holders of these shares were to attempt to sell a
substantial amount of their holdings at once, the market price of our ordinary
shares could decline. Moreover, the perceived risk of this potential dilution
could cause shareholders to attempt to sell their shares and investors to short
the ordinary shares, a practice in which an investor sells shares that he or she
does not own at prevailing market prices, hoping to purchase shares later at a
lower price to cover the sale. As each of these events would cause the number of
our ordinary shares for sale to increase, our ordinary shares market price would
likely further decline.
 
 We
do not intend to pay dividends on our ordinary shares for the foreseeable
future.
 
 Prior to
our March 2009 merger with COAC, our operating subsidiary, Henan Green, declared
and paid dividends of $23.2 million and $8.9 million in 2008 and 2007,
respectively.  Notwithstanding Henan Green’s past history of making
dividend payments, we intend to retain any future earnings to fund the operation
and expansion of our business and, therefore, we do not anticipate paying cash
dividends on our ordinary shares in the foreseeable future.
 
 We
are a “foreign private issuer,” and have disclosure obligations that are
different than those of U.S. domestic reporting companies so you should not
expect to receive the same information about us at the same time as a U.S.
domestic reporting company may provide.
 
 We are a
foreign private issuer and, as a result, we are not subject to certain of the
requirements imposed upon U.S. domestic issuers by the SEC. For example, we
are not required by the SEC or the federal securities laws to issue quarterly
reports or proxy statements with the SEC.  Through the fiscal year
ending December 31, 2010, we are allowed six months to file our annual report
with the SEC and thereafter must file our annual report within four months of
our fiscal year end.  We are not required to disclose certain detailed
information regarding executive compensation that is required from U.S. domestic
issuers. Further, our directors and executive officers are not required to
report equity holdings under Section 16 of the Securities Act.  As a
foreign private issuer, we are also exempt from the requirements of Regulation
FD (Fair Disclosure) which, generally, are meant to ensure that select groups of
investors are not privy to specific information about an issuer before other
investors. We are, however, still subject to the anti-fraud and
anti-manipulation rules of the SEC, such as Rule 10b-5.  Since many of
the disclosure obligations required of us as a foreign private issuer are
different than those required by other U.S. domestic reporting companies,
our shareholders should not expect to receive information about us in the same
amount and at the same time as information is received from, or provided by,
other U.S. domestic reporting companies. We are liable for violations of the
rules and regulations of the SEC which do apply to us as a foreign private
issuer. Violations of these rules could affect our business, results of
operations and financial condition.
 
 You
may have difficulty enforcing judgments obtained against us.
 
 We are a
BVI company and substantially all of our assets are located outside of the
United States. Virtually all of our assets and a substantial portion of our
current business operations are conducted in the PRC. In addition, almost
all of our directors and officers are nationals and residents of countries other
than the United States. A substantial portion of the assets of these persons are
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. It
may also be difficult for you to enforce in U.S. courts judgments obtained
in U.S. courts based on the civil liability provisions of the
U.S. federal securities laws against us and our officers and directors,
many of whom are not residents in the United States and whose assets are located
in significant part outside of the United States. In addition, there is
uncertainty as to whether the courts of the British Virgin Islands or the PRC
would recognize or enforce judgments of U.S. courts against us or such
persons predicated upon the civil liability provisions of the securities laws of
the United States or any state.  In addition, it is uncertain whether such
British Virgin Islands or PRC courts would be competent to hear original actions
brought in the British Virgin Islands or the PRC against us or such persons
predicated upon the securities laws of the United States or any
state.
  17
  Because
we are incorporated under the laws of the BVI, it may be more difficult for our
shareholders to protect their rights than it would be for a shareholder of a
corporation incorporated in another jurisdiction.
 
 Our
corporate affairs are governed by our Memorandum and Articles of Association and
by the BVI Companies Act, 2004 (No. 16 of 2004) of the BVI. Principles of law
relating to such matters as the validity of corporate procedures, the fiduciary
duties of management and the rights of our shareholders differ from those that
would apply if we were incorporated in the United States or another
jurisdiction.  The rights of shareholders under BVI law are not as
clearly established as are the rights of shareholders in many other
jurisdictions.  Under the laws of most jurisdictions in the United
States, majority and controlling shareholders generally have certain fiduciary
responsibilities to the minority shareholders. Shareholder action must be taken
in good faith, and actions by controlling shareholders which are obviously
unreasonable may be declared null and void. BVI law protecting the interests of
minority shareholders may not be as protective in all circumstances as the law
protecting minority shareholders in US jurisdictions.  In addition,
the circumstances in which a shareholder of a BVI company may sue the company
derivatively, and the procedures and defenses that may be available to the
company, may result in the rights of shareholders of a BVI company being more
limited than those of shareholders of a company organized in the
US.  Furthermore, our directors have the power to take certain actions
without shareholder approval which would require shareholder approval under the
laws of most US jurisdictions.  The directors of a BVI corporation,
subject in certain cases to court approval but without shareholder approval, may
implement a reorganization, merger or consolidation, the sale of any assets,
property, part of the business, or securities of the corporation.  The
ability of our board of directors to create new classes or series of shares and
the rights attached by amending our Memorandum of Association and Articles of
Association without shareholder approval could have the effect of delaying,
deterring or preventing a change in our control without any further action by
the shareholders, including a tender offer to purchase our ordinary shares at a
premium over then current market prices. Thus, our shareholders may have more
difficulty protecting their interests in the face of actions by our board of
directors or our controlling shareholders than they would have as shareholders
of a corporation incorporated in another jurisdiction.
 
 ITEM
4.        INFORMATION ON THE
COMPANY
 
 History
and Development of the Company
 
 We are a BVI company that was incorporated on
March 11, 2008 under the BVI Business Companies Act, 2004.  We were
incorporated solely for the purpose of acquiring the issued share capital of
Wealth Rainbow.  Our registered office is Palm Grove House, PO Box
438, Road Town, Tortola, BVI and our registered agent is Equity Trust (BVI)
Limited of Palm Grove House, PO Box 438, Road Town, Tortola, BVI.  Our
business operations are conducted through our wholly-owned indirect subsidiary,
Henan Green.  Our principal executive offices are located at No. 69
Huaibei Street, Longhai Middle Road, Zhengzhou, Henan Province,
China.  Our telephone number is (86) 371-6897-0951.
 
 On March
17, 2009, we completed a business combination transaction with China Opportunity
Acquisition Corp., or COAC, which resulted in our current ownership and
corporate structure.  Effective December 14, 2009, we changed our name
from Golden Green Enterprises Limited to our current name, China Gerui Advanced
Materials Group Limited.
 
 COAC was
incorporated in Delaware on August 7, 2006 as a blank check company whose
objective was to acquire an operating business with its principal operations
located in China.  All business activity conducted by COAC from its
inception on August 7, 2006 until our merger with COAC on March 17, 2009 related
to its formation, initial public offering and search for a business combination
partner as a special purpose acquisition company.  On March 26, 2007,
COAC consummated its initial public offering in which it raised approximately
$41.4 million through the sale of its capital stock and, thereafter, its primary
objective was to complete a business combination transaction prior to March 20,
2009.
 
 On
November 12, 2008, COAC entered into an Agreement of Merger and Plan of
Reorganization, or the Merger Agreement, with China Gerui (then known as Golden
Green Enterprises Limited), Wealth Rainbow, Henan Green and the shareholders of
China Gerui pursuant to which COAC merged with and into China Gerui with China
Gerui being the surviving corporation thereby implementing our current corporate
structure.
 
 Upon
completion of the merger, the three shareholders of China Gerui owned 30,000,000
of our ordinary shares and the holders of ordinary shares of COAC received
2,245,723 of our ordinary shares.  In addition, the holders of the
existing COAC warrants and units received like securities that are exercisable
or exchangeable into our securities.  In addition, we were obligated
under the Merger Agreement to issue an aggregate of 1,000,000 of our ordinary
shares to certain of our shareholders, specifically, Oasis Green Investments
Limited, Plumpton Group Limited, and Honest Joy Group Limited for each of the
years ending on December 31, 2009, 2010 and 2011 in which Henan Green, has net
after tax income that equals or exceeds the target specified for such year in
the merger agreement ($45 million, $60 million and $80 million,
respectively).  At the time of our merger with COAC, we received less
cash than was originally expected which caused us to temporarily delay some of
our anticipated capital expansion and improvement
projects.  Consequently, it is possible that we may grow at a slower
rate than anticipated at the time of the merger.  Due to
this change, on September 15, 2009, we entered into an agreement with the
Original Shareholders to issue to them an aggregate of 2,850,000 ordinary shares
as full consideration for a release from related claims under the Merger
Agreement and other related claims in connection with the
merger.
  18
  Upon
completion of the merger transaction, we succeeded to foreign private issuer
status under applicable securities laws and the individuals who currently
comprise our Board of Directors were so appointed.
 
 Business
Overview
 
 General
 
 We are a
leading China-based, non state-owned contract manufacturer of cold-rolled high
precision narrow strip steel products. In particular, we are the largest
manufacturer in China of high precision cold-rolled narrow strip steel
based on sales revenue with a market share of approximately 12.5% of the Chinese
market in 2008, according to Freedonia Custom Research, or
Freedonia.
 
 We
convert steel manufactured by third parties into thin steel sheets and strips
according to our customers’ specifications.  We produce precision
ultra-thin, high strength cold-rolled steel products, with thicknesses ranging
from 0.09 mm to 1.3 mm, width up to 600 mm and the minimal precision
tolerance ranging from 0.0025 mm to 0.005 mm.  We sell our
products to domestic Chinese customers who primarily operate in the food and
packaging, construction materials, telecommunications cable and equipment and
electrical appliances industries.  The cold-rolled precision steel
industry is relatively new in China.  Manufacturers of products that
use specialty precision steel products, including our customers, traditionally
imported raw materials from Japan, South Korea, the European Union and the
United States.
 
 Our
revenue has increased from $139.6 million in 2007 to $196.3 million in 2008 and
to $218.9 million in 2009, representing a compounded annual growth rate, or
CAGR, of approximately 25.2% from 2007 to 2009.   Our net income
before minority interest increased from $23.7 million in 2007 to $35.5 million
in 2008 and to $43.4 million in 2009, representing a CAGR of 35.3% from 2007 to
2009.
 
 We
believe that our significant growth reflects our success in increasing market
penetration and expanding our production lines.  As a net importer of
high-end precision products, China currently still lacks the capability to
produce high-end precision steel products.  Our success in the past
mainly came from being able to expand into products which replace expensive
imported products and being able to manufacture these types of products at a
cost-efficient level compared to other domestic Chinese manufacturers. We
believe our technology and product development capability has been a key factor
in our success.
 
 Our
primary PRC manufacturing facility is located in Zhengzhou, Henan Province,
China.  We operate six sets of cold-rolled steel production lines with
a current annual steel processing capacity of approximately 250,000 metric tons
and a chromium coating production line with an annual capacity of approximately
50,000 metric tons.  As of April 30, 2010, we have used most of the
net proceeds of our November 2009 offering, together with self-generated cash
from operations, as prepayment for the land and machinery that will help double
our cold-rolled steel processing capacity to 500,000 metric tons by
2011.
 
 Prior to
2009, we produced and sold unplated steel sheets to manufacturers or
distributors which then further treated or outsourced our products for tin or
zinc coating to produce tinplate or zinc-plated steel, or for electrolytic
chromic acid treatments to produce chromium plated steel, according to
customers’ specifications.  We added the chromium coating facilities
in December 2008, and launched our mass production of chromium plated steel
products in February 2009.  In addition, we plan to add production
lines in tin and zinc coating to extend and increase our profit
margin.  Our newly-added capacity to produce these types of high-end
plated steel products will enable us to expand our business into
construction decoration materials, a high profit margin
business.
 
 Our
Industry
 
 Steel
Product Definition
 
 Steel is
an alloy consisting mostly of iron with the carbon content between 0.2% and
2.14% depending on grade.  With varying amounts and forms of carbon,
the quality of the resulting steel varies in terms of hardness, ductility
(ability to deform under tensile stress), and tensile strength.  High
carbon content steel is harder and stronger than iron.
  19
  Steel is
made by refining iron or scrap steel, removing excess carbon and impurities, and
adding alloying elements to create a molten mixture.  The molten steel
is then poured into molds and solidified into ingots, and reheated and rolled
into semi-finished shapes.  There are two major methods to form
semi-finished steel into finished shapes to make bars, wire, tubes, sheets, and
strips: hot-rolling consisting primarily of hammering and pressing, extrusion,
and rolling the steel under high heat; and cold-rolling, comprising rolling,
extrusion, and drawing.  Sheet steel is further produced into plated
steel products to be protected from corrosion, by electroplating into
chromium-plated sheet (or tin free), by galvanizing into zinc-plated sheet, or
galvanized sheet, or tinplating into tin plated sheet, or SPTE.
 
 The
following chart illustrates the product flow in the steel value
chain:
 
 
 
 Source:
Freedonia
  Cold-rolled steel
products
 
 Cold-rolled
steel products represent hot-rolled de-scaled (pickled) steel coils, which are
used as raw materials in the precision steel industry, are processed by cold
reduction through a cold-rolling mill to the desired thinness. The process does
not involve heating and the primary feature of cold reduction is to reduce the
thickness of the steel coils. However, because the cold reduction operation
induces very high strains, or work hardening, into the steel sheet, the
precision steel sheet not only becomes thinner, but also becomes much harder,
less ductile and very difficult to form. Thus, cold-reduced steel products are
annealed, or heated to high temperatures, to become soft and formable. Cold
rolled sheet products are used in a wide variety of end applications, such as
food and packaging, wire and cable, construction decoration, household
appliances (refrigerators, washers, dryers, and other small appliances),
automobiles (exposed as well as unexposed parts, electric motors) and many other
areas of manufacturing.
  20
  High precision cold-rolled
narrow strip
 
 High-precision
cold-rolled steel strip is defined, by Freedonia, to include those products with
width no more than 600 mm and thickness no more than 0.30
mm.   Narrow strips are produced by cutting the hot-rolled steel
first and then cold-rolling, while wide strips are produced by rolling first and
then cutting.  Narrow strips usually have a higher degree of precision
and lower margin of error in thicknesses, and thus are not produced by simply
cutting wide strips.
 
 Plated steel
products
 
 Tinplate.
Tinplate consists of steel sheets plated with a thin layer of tin.  It
is used primarily to manufacture food and beverage containers.  For
many food and beverage products, raw material costs account for two-thirds of
total production cost so savings are best achieved by reducing the thickness of
the sheets and thus the amount of materials used.  With the new
technologies available, tin cans can now be produced by using sheet grades as
thin as 0.12 mm.
 
 Zinc-plated
steel.  Zinc-plated steel is another coating that is primarily
used for industrial packaging as a preservative and protectant.  Even
though zinc is poisonous, it protects iron electrolytically by oxidizing and
turning to a white powder to preserve the iron, whereas tin will only protect
the iron if the tin-surface remains unbroken.
 
 Chromium-plated
steel. Chromium-plated steel is produced by applying electrolytic chromic
acid treatment over steel sheets.  Besides being widely used for
making beverage cans, it is also used as a protective material for optical fiber
cables.
 
 Global and Chinese Steel
Market
 
 The
following iron and steel price index chart illustrates its price change over
time:
 
 
  Source:
Bureau of Labor Statistics
 
 The steel
industry is cyclical and highly competitive, and is closely tied to the
economy.  Steel prices generally increase during periods of overall
economic growth and decrease during recessionary periods, driven by supply and
demand in steel products.  According to International Iron and Steel
Institute, world consumption of steel increased from 698.0 million metric
tons in 1997 to 1,197 million metric tons in 2008 (IISI 2009). China
accounted for approximately 78% of the growth in world steel consumption
during the aforesaid period and was the primary driver for the upward price
movement in the recent cycle.
 
 According
to the China Metallurgical Industry Planning and Research Institute,
approximately 65% of China’s steel production is low-end products and
approximately 35% are high-end high value products.  Currently, China
is a net exporter of crude steel and a net importer of high-end precision
products.  Low-end steel products include long products such as pipes,
tubes, wires and rods.  High-end high value products include flat
products such as hot-rolled steel or cold-rolled steel strips.  In
addition, China is a net exporter of crude steel and a net importer of high-end
precision products.
 
 Growth in
the global steel industry has been driven primarily by economic development in
China.  China replaced Japan to become the world’s largest
manufacturer of crude steel in 1996, and has experienced recent growth that
outpaces the global market.
  21
  According
to World Steel Association, from 2002 to 2008, world steel production grew at a
CAGR of 7%.  During this period, Chinese steel production grew at a
CAGR of 18% and the GDP growth per year in the country was 10%.  In
2008 China accounted for approximately 38% of the world’s steel production
volume, according to World Steel Association.  The following charts
illustrate the country’s fast growing and leading positions in the world during
this time period.
 
 
  Source:
World Steel Association
 
 The World
Steel Association estimates that worldwide consumption of steel will decline by
8.6% to 1,103.7 million tons in 2009 from 2008 and will grow by 9.2% to 1,205.6
million tons in 2010 from 2009, following a decline of 1.4% in 2008 from
2007.   China’s steel consumption is expected to grow by 18.8%
and 5.0% respectively in 2009 and 2010.
 
 Cold-rolled
Steel Market
 
 China has
a supply shortage on the production of cold-rolled steel
products.  Cold-rolled precision steel is a relatively new industry in
China and manufacturers generally import precision steel products from Japan,
Korea, the European Union and the United States.   According to
Freedonia, from 2005 to 2008, China’s production of cold-rolled products grew at
a CAGR of 29.1% to reach 40 million tons, replacing a large percentage of the
import products while closing the gap between its demand and
supply.  For the same period, the demand in this subsector grew at a
CAGR of 16.2% and from 2008 to 2011, it is projected that the demand in
this subsector will continue to grow at a CAGR 7.2% according to
Freedonia.
  22
  Plated
Steel Market
 
 China has
a limited supply of plated steel, and thus relies heavily on imported,
hot-rolled, cold-rolled, zinc-plated and color-plated steel
sheets.  These products are generally used in the production of
automobiles, machinery, household applications and household appliances, sectors
in China which have experienced significant growth in recent years.
 
 The
plated steel market is highly fragmented. There is no significant market
leader in the Chinese plated steel industry. Most manufacturers are small-scale
private companies operating with out-of-date equipment and technology. Large
state-owned enterprises are the main manufacturers; however, only a few of them
can produce high-end plated steel products.
 
 High-end
plated steel products are under-supplied, while low and medium-end plated steel
production capacities have over expanded with supply exceeding
demand.  China continues to rely, in a significant part, on
imports.  Since high-end plated steel products require advanced
technology and capital-intensive equipment, most Chinese manufactures are not
technically capable of producing high-end plated steel products.
 
 High
Precision Cold-rolled Strip Steel Market
  According
to Freedonia, consumption of high precision cold-rolled narrow strip
products with width below 600 mm and thickness below 0.3 mm, amounted to 1.4
million metric tons in 2008, growing at a CAGR of 19.1% from 2005 to 2008 and
projected to grow at 10.0% from 2008 to 2011 to reach 1.87 tons, and the
growth is expected to be fueled by further increases in the production
of food and beverage packaging, optical fiber cable, household appliances,
batteries, and electronic components. Rising construction and decoration
expenditures are also expected to support gains.   Imports
of narrow plates have declined while Chinese manufacturers have increased their
production over time.  The following charts illustrate the fast
growing high precision cold-rolled narrow strip steel market in China and
declining imports during this time period:
  
 
 
  Source:
Freedonia
  Packaging,
insulated wire and cable, construction decoration and home appliances are the
major application markets of high precision cold-rolled narrow strip steel
and our major customers operate in these industries. According to
Freedonia, from 2008 through 2011, the production of metal food and beverage
container, insulated wire and cable, optic fiber cable, and household appliances
in China is expected to grow at CAGRs of 10.9%, 11.5%, 17.8%, and 7.3%,
respectively.
  23
  Our
Competitive Strengths
 
 We
believe that the following competitive strengths contribute to our strong market
position and will enable us to continue to improve our profitability and cash
flow:
 
 ·
              Strong track record of
      growth.  As a result of our success in expanding our
      production lines and increasing our market penetration, our annual revenue
      increased from $139.6 million in 2007 to $196.3 in 2008 and to $218.9
      million in 2009, representing a CAGR of approximately 25.2%.  We
      intend to strategically grow our business in the near future by expanding
      our annual steel processing capacity to 500,000 metric tons by 2011,
      adding plated steel production capacity and introducing new products with
      higher profit margins.
 
 ·
              Reputation and experience as a
      leading China-based manufacturer of precision cold-rolled
      steel.We are a leading China-based contract
      manufacturer of highly engineered precision cold-rolled steel products
      with a demonstrated track record of providing tailored products with
      precise specifications to users in a range of industries. In
      particular, we are one of the largest manufacturers in China of
      high precision cold-rolled narrow strip steel based on sales revenue
      with a market share of approximately 12.5% of the Chinese market in 2008,
      according to Freedonia. Our extensive experience in manufacturing
      high precision steel enables us to provide customized solutions to our
      customers in a range of industries.  Because we work with
      customers and end users from the trial stage to commercial production, we
      are able to work collaboratively with them in the development and
      commercialization of new, high-performance products.  As a
      result, we believe we are often the supplier of choice when our existing
      customers develop new products, and we have developed a reputation as an
      experienced contract manufacturer that offers process development and
      manufacturing services tailored to meet the needs of our
      customers.
 
 ·
              Exposures to diversified end
      markets in growing industries with cost efficiency.We
      sell our products to customers on a contract manufacturing basis in a
      diverse range of industries in China, including the food and packaging,
      construction materials, telecommunications cable and equipment and
      electrical appliances industries.  We believe the broad range of
      end markets reflects the strength of our reputation as well as the large
      available markets for our product applications.  Demand for high
      precision steel in these end markets in China is projected to grow, and we
      believe we are well positioned to benefit from this growth as a result of
      our long-term and established relationships with numerous end users in
      these industries.  Further, our cost efficiency in
      manufacturing, distribution and logistics compares favorably versus
      international manufacturers.  We believe our established
      presence as a supplier of precision steel products to each of these
      industries will enable us to take advantage of the anticipated growth in
      demand in these end markets.
 
 ·
              Ability to manage the
      fluctuation of raw material and final product prices in a volatile steel
      market environment.Our principal raw materials,
      hot-rolled and cold-rolled steel, account for majority of our production
      costs.  The price of our raw materials is largely set and affected by
      steel price fluctuation.  As the direction of the steel price
      changes, we believe our ability to manage the price of raw materials,
      prices of our final products and our long-term relationships with our
      suppliers and customers are key to our
success.
 
 ·
              Our potential competitors face
      significant barriers to entry.  Our high-precision
      cold-rolled steel products are produced in capital intensive manufacturing
      operations using large and advanced pieces of equipment which require
      considerable initial investment, maintenance and repair expenses, thereby
      creating a significant barrier for new market
      entrants.  Companies which lack substantial resources or access
      to capital will face significant difficulties in entering or effectively
      competing in our market segment.
 
 ·
              Experienced and knowledgeable
      management team and loyal employees. We have an experienced
      management team led by Mr. Mingwang Lu, our chairman and chief executive
      officer.  Mr. Lu has been in the steel industry since 1985, with
      expertise in managing and marketing cold-rolled steel construction,
      technologies, production and marketing.  The other members of
      our senior management team have an average of 15 years of experience in
      the steel business and a strong track record of product development and
      sales and marketing in China.  We will continue to focus on hiring
      and retaining the best research scientists in our field so that we can
      continue to operate at internationally competitive
  levels.
  24
  Our
Growth Strategy
 
 We
believe that our strong competitive position and our ability to meet customer
demand will enable us to benefit from the resurgence and growth in China’s
manufacturing and construction industries.
 
 We are
committed to enhancing our sales, profitability and cash flows through the
following strategies:
 
 ·
              Increase production capacity.We intend to expand our steel processing capacity to 500,000
      metric tons by 2011 and expect that the addition of this new production
      capacity will help us meet demand and contribute to growing our
      revenue.
 
 ·
              Broaden our product portfolio
      and mix by expanding into plated steel production.  We
      are developing and introducing new, higher valued-added products, such as
      chrome and zinc plated products, that we expect will expand our margins
      and meet the increasing demands of new and existing
    customers.
 
 ·
              Increase market
      penetration. We intend to further enhance our leadership position
      in the high-end plated steel product segment by expanding our sales
      channels, increasing our product offerings and focusing on customer
      satisfaction and our other competitive strengths to gain additional market
      share.
 
 ·
              Strengthen our new technology
      and product development capabilities.  Our success mainly
      comes from being able to expand into products which replace expensive
      imported products and being able to manufacture these types of products at
      a cost efficient level compared to other domestic Chinese
      manufacturers.  We believe that our research and development
      capability is a key driving force behind our success.  We will
      continually try to meet the needs and requirements of new and existing
      customers with the continued emphasis on our technology and product
      development efforts. We plan to continue to invest in technology and
      product development efforts and expect that this investment will
      contribute to our ability to manufacture new high quality products to more
      extreme and precise specifications and
  tolerances.
 
 ·
              Improve operating efficiencies
      and strengthen cost control. We intend to develop our business
      while managing financial risks and to efficiently seize opportunities to
      expand our product mix and service platform.  In particular, we
      intend to continue to expand our technical expertise to improve our
      manufacturing processes, increase efficiency and to control costs of
      raw materials and production processes.  We generally do not
      enter into long-term contracts with customers or end users and price our
      products on a contract by contract basis utilizing the most current raw
      material prices and other costs, making our profit margin less susceptible
      to fluctuations from changes in market
prices.
 
 ·
              Pursue strategic relationships
      and acquisition opportunities.  We intend to evaluate and
      pursue acquisition opportunities which enhance our product offerings,
      customer base or geographic reach or which allow us to capitalize on our
      fragmented industry, develop a more efficient cost structure, and improve
      economies of scale.
 
 Our
Products
 
 We
manufacture precision ultra-thin, high precision cold-rolled narrow strip steel
products, with thicknesses ranging from 0.05mm to 0.25mm, width up to 600mm and
the precision at 0.003 mm for our customers at their specifications. Our
products are not standardized commodity products, but are tailored to
customers’ requirements and then incorporated into products they and the
end users make for various applications.
 
 We have 5
series and over 20 types of high precision strip steel products.  Our
products are manufactured from steel substrate of cold-rolled or hot-rolled
pickled coils.  We have the flexibility to adjust our production
specifications to meet changes in market demand.  The following table
sets forth the percentages of our products by industry applications during each
of the three years of 2009, 2008 and 2007:
 
 Year Ended December 31,Revenue by Industry Application
                            
                            Thickness
                            
                            Precision
                            
                            2009
                              % of Sales
                            
                            
                            2008
                              % of Sales
                            
                            
                            2007
                              % of SalesFood
      and industrial packaging
                            
                            0.1
      - 1.3 mm
                            
                            ±0.0025
      - 0.005
                            
                            
                            46.8
                            %
                            
                            
                            49.7
                            %
                            
                            
                            63.1
                            %Construction
      material
                            
                            0.2
      - 1.1 mm
                            
                            ±0.0025
      - 0.005
                            
                            
                            34.7
                            %
                            
                            
                            21.7
                            %
                            
                            
                            27.5
                            %Electrical
      appliances
                            
                            0.09-1.1
      mm
                            
                            ±0.002
      - 0.005
                            
                            
                            5.0
                            %
                            
                            
                            8.6
                            %
                            
                            
                            5.9
                            %Telecommunication
      equipment
                            
                            0.1-0.24
      mm
                            
                            ±0.0025
      - 0.005
                            
                            
                            13.6
                            %
                            
                            
                            20.0
                            %
                            
                            
                            3.5
                            %Total
                            
                            
                            
                            
                            
                            
                            100
                            %
                            
                            
                            100
                            %
                            
                            
                            100
                            %
  25
  Our
deliveries of products amounted to approximately 249,941 metric tons in 2009,
representing increase of 23.8% from previous year.
 
 Our
Pricing Strategy
 
 We price
our products after reflecting raw material and production costs, selling
expenses and our target profit margin.  Our product price is largely
affected by the steel price as well as the supply and demand dynamics of our
products in the marketplace.
 
 The price
of precision steel products varies depending on thickness, precision, and
hardness.  Product quality is also a pricing factor, reflecting the
technological leadership, engineering and operating efficiency of the
manufacturers.
 
 The
market for our principal raw material, hot and cold rolled steel, is price
sensitive.  We work with long-term suppliers, which are the large and
mid-scale steel mills in China, as well as our customers to ensure quick
reaction to the change of pricing directions in the market.  As steel
prices drop, we obtain price concessions from suppliers, and pass the
cost-savings to our customers.  As steel prices rise, we negotiate
with customers to pass on cost increases, and negotiate with suppliers to lock
in lower steel costs.  We believe our ability to manage the price
of raw materials and the price of final products, as well as our long-term
relationships with our suppliers and customers, are the key to our success in
this business.
 
 Raw
Materials and Suppliers
 
 The
principal raw material used in producing our products is hot rolled steel coil,
which account for approximately 90% of our total production cost.  Our
raw material procurement policy is to use only long-term suppliers who have
demonstrated quality control and reliability.  We maintain multiple
supply sources so that supply problems with any one supplier will not materially
disrupt our operations.  We also believe that we have sufficient
suppliers to meet our present and anticipated future needs.
 
 The
prices of steel rolls can fluctuate and can be quite
volatile.  To provide some protection from the pressure and volatility
of the market, we make bulk purchases only when all purchases are supported by
customers’ orders.  When executing sales orders with customers, we set
pricing based on the currently prevailing price of steel coil thereby allowing
us to pass incremental cost increases in raw materials to our
customers.  In a market environment when the steel price declines, it
is a general industry practice that steel mills will provide concession for
price protection and we generally will pass on the price concessions to our
customers.
  On the
other hand, our principal suppliers usually dedicate portions of their
inventories as reserves to meet our manufacturing requirements.  Suppliers
are generally provided a prepayment and are paid in full when the products are
delivered.
 
 For the
years ended December 31, 2009, 2008 and 2007, our five largest suppliers
accounted for over 86.8% of our total purchases.  For the fiscal years
ended December 31, 2009, 2008 and 2007, our single largest supplier accounted
for 28.4%, 46.4% and 19.2% of our total purchases,
respectively.
 
 Customers,
Sales and Marketing
 
 We
produce on a contract basis for our customers and develop, process and
manufacture our steel products which are tailored to customers’
specifications.  Our high precision steel products are sold directly
to the end users in various parts of China and our production is based on
confirmed sales orders.  Generally, an initial deposit (approximately 30%
of the aggregate contracted sales amount) is pre-paid when the contract is
signed.  Our major customers are located in Shanghai, Zhejiang, Jiangsu,
Shandong, Guangdong, Hebei, Tianjin, Guangxi, Fujian and Liaoning.
 
 During
the last three years, we have sold our products to more than 200
customers.  Our major customers for the year ended December 31, 2009
include:
  26
  Customer
      Name
                  
                  Quantity Sold
                    (Metric Tons)
                  
                  
                  % of Total Sales
                    (in
      Metric Tons)Luo
      Yang Lixin Commerce and Trading Co. Ltd
                  
                  
                  22,553
                  
                  
                  
                  9.0
                  %Jiangsu
      Surui Precision Composite Materials Co. Ltd.
                  
                  
                  14,989
                  
                  
                  
                  6.0
                  %Henan
      Jindan Emanel Products Co., Ltd
                  
                  
                  10,674
                  
                  
                  
                  4.3
                  %Wuxi
      Qiangli Thin Plates Co.
                  
                  
                  8,445
                  
                  
                  
                  3.4
                  %Xian
      Concord Emanel Products Co. Ltd
                  
                  
                  7,307
                  
                  
                  
                  2.9
                  %
 
 We
currently sell our products in China using our own sales staff and network which
cover many Chinese provinces and regions, especially in the eastern coastal
regions in China.  We have developed and strive to maintain a
diversified sales network that allows us to effectively market products and
services to our customers.
 
 Members
of our sales team generate sales leads by contacting customers and customer
prospects directly and by attending industry trade shows and exhibitions. Given
our established status as one of China’s leading suppliers of cold-rolled
precision steel products, our customers often contact us directly regarding new
projects. Although most of our business is developed by direct personal contact
and referrals from our customers, we have been marketing and promoting our
products through the following means:
 
 ·
              Hosting
      annual product promotion meeting with current and potential customers, in
      which we introduce our products and new improvements to the
      market;
 
 ·
              Attending
      various exhibitions to improve our name recognition;
  and
 
 ·
              Visiting
      our customers and collecting information regarding their
      needs.
 
 Sales to
customers in China account for virtually all of our revenue. We target our
sales efforts primarily in the coastal provinces of Guangdong, Fujian, Zhejiang,
Jiangsu and Shanghai areas, where the majority of our customers are located.
 We have a sales staff of approximately 30 employees. We maintain nine
sales offices in China, including three in Guangdong, three in Zhejiang, one in
Fujian, one in Shandong, and one in Anhui.  We participate in industry
expositions in which we showcase our products and services and from which we
obtain new customers.
 
 We sell
our products primarily in China either directly to manufacturers or through
distributors.  For 2007, 2008 and 2009, we did not have any single
customer which accounted for over 16% of our total revenue.
 
 For each
of the years ended December 31, 2009, 2008 and 2007, our five largest customers
accounted for 25.2%, 29.7%, and 38.4% of total sales in U.S.
dollars.  For the fiscal years ended December 31, 2009, 2008 and 2007,
the single largest customer accounted for 8.4%, 10.1% and 15.6% of our total
sales, respectively in U.S. dollars.  We generally collect prepayment
from customers, and ask for cash on delivery.  Management reviews its
accounts receivable on a regular basis to determine if the allowance for
doubtful accounts is adequate at each quarter-end.
 
 Competition
and Our Market Position
 
 Competition
within the steel industry, both in China and worldwide, is
intense.  There are many large state-owned enterprises and smaller
private steel companies in China.  In addition, Chinese steel makers
also face competition from international steel manufacturers.  For
high precision cold-rolled narrow strip steel products, we are one of the
leading manufacturers in China with a market share of approximately 12.5% of the
Chinese market in 2008, according to Freedonia.
 
 The top
five players, including us, accounted for approximately 36% of the total
sales revenue in 2008 according to Freedonia, and the four largest players next
to us were Hebei Iron and Steel Group, Hebei Dachang Jinming Accurate
Cold-Rolling Steel Plate Co., Ltd., Jiangsu Huaxi Group Corp., and Hangzhou
Metal Rolling.  The remaining 64% of the market is comprised of
over 200 manufactures which are mostly smaller private enterprises.
Compared to these players, we believe we have lower production
and distribution costs and can provide more competitive pricing. We
also believe being located in China provides us with a number of competitive
factors within our industry, such as:
  ·
              Cost and pricing.
      A producer’s flexibility to control cost and pricing of products and the
      ability to use economies of scale to secure advantages in procurement,
      production and distribution;
 
 ·
              Technology.  A
      producer’s ability to manufacture products efficiently, utilize low-cost
      raw materials, and to achieve better production quality;
    and
  27
  ·
              Barriers to
      entry.  A producer’s technical knowledge, access to
      capital, local market knowledge and established relationships with
      suppliers and customers to support the development of commercially viable
      production facilities.
 
 In
addition, we believe we differentiate ourselves by being an early mover in the
industry, and by offering high product quality, timely delivery and better
value. We believe we have the following advantages over our
competitors:
 
 ·
              performance
      and cost effectiveness of our
products;
 
 ·
              ability
      to manufacture and deliver products in required volumes, on a timely
      basis, and at competitive prices;
 
 ·
              high
      quality and reliability of our
products;
 
 ·
              after-sale
      support capabilities, from both an engineering and an operational
      perspective;
 
 ·
              excellence
      and flexibility in operations;
 
 ·
              effectiveness
      of customer service and our ability to send experienced operators and
      engineers as well as a seasoned sales force to assist customers;
      and
 
 ·
              overall
      management capability.
 
 Regulation
 
 We are
subject to numerous central, provincial and local laws and regulations, which
may be changed from time to time in response to economic or political conditions
and have a significant impact upon overall operations. Changes in these
regulations could require us to expend significant resources to comply with new
laws or regulations or changes to current requirements and could have a material
adverse effect on our company.
 
 Included
among these laws and regulations are numerous central, provincial and local laws
and regulations relating to the protection of the environment.  These
laws continue to evolve and are becoming increasingly stringent.  The
ultimate impact of complying with such laws and regulations is not always
clearly known or determinable because regulations under some of these laws have
not yet been promulgated or are undergoing revision. The State Environmental
Protection Administration Bureau is responsible for the supervision of
environmental protection in, implementation of national standards for
environmental quality and discharge of pollutants for and supervision of the
environmental management system of the PRC.  Environmental protection
bureaus at the county level or above are responsible for environmental
protection within their jurisdictions
 
 Seasonality
 
 Our
operating results and operating cash flows historically have not been subject to
seasonal variations. This pattern may change, however, as a result of new market
opportunities or new product introductions.
 
 Organizational
Structure
 
 The
following diagram illustrates our corporate structure as of the date of this
annual report.  We are a holding company with no operations of our
own.  We conduct our operations in China through our Chinese operating
company, Henan Green.
  28
  
 Property,
Plants and Equipment
 
 There is
no private ownership of land in China and all land ownership is held by the
government of China, its agencies, and collectives.  In the case of
land used for business purposes, land use rights can be obtained from the
government for a period up to 50 years, and are typically
renewable.  Land use rights can be transferred upon approval by the
land administrative authorities of China (State Land Administration Bureau) upon
payment of the required land transfer fee.
 
 Our
manufacturing facilities are located in Zhengzhou, Henan Province,
China.  The total land area is approximately 1,194,000 square feet,
which we lease from Zhengzhou No. 2 Iron and Steel Company
Limited.  Our facilities have a total area of approximately 264,000
square feet, of which 226,000 square feet is devoted to production facilities,
9,100 square feet is raw material warehouse space, 6,350 square feet is finished
product warehouse space and 22,700 square feet is an office
building.  The lease is for a 20-year term, which began on January 1,
2008 and terminates on December 31, 2027.  During the lease term, the
annual rent was $8,781 for both 2008 and 2009 and will increase by 10% annually
beginning in 2010.  The lessor has pledged the land and buildings
to guarantee our obligations under certain of our short term bank
loans.
 
 As of
December 31, 2009, our facilities had an annual cold rolling steel processing
capacity of approximately 250,000 metric tons and an annual chromium coating
capacity of approximately 50,000 metric tons.
 
 We also
have obtained land use rights and permission to construct facilities on
additional land of approximately 2,152,780 square feet, adjacent to our present
facilities, from the Zhengzhou local government.  We are presently
constructing additional facilities to produce chrome, zinc and tin plated
products and to expand our overall steel processing capacity.  We
expect that the construction of our additional facilities will be completed in
2011.  When completed, the new steel processing facility is expected
to add an additional annual capacity of 250,000 metric tons. We have pledged the
land use rights for this property to the lenders of certain of our short-term
bank loans to secure our obligations under these loans.
 
 Our
manufacturing facilities are subject to various pollution control regulations
with respect to noise and air pollution and the disposal of waste and hazardous
materials.  We are also subject to periodic inspections by local
environmental protection authorities.  Our operating subsidiaries have
received certifications from the relevant PRC government agencies indicating
that their business operations are in material compliance with the relevant PRC
environmental laws and regulations.  We are not currently subject to any
pending actions alleging any violations of applicable PRC environmental
laws.
 
 ITEM
4A.        UNRESOLVED STAFF
COMMENTS
 
 Not
Applicable
  29
  ITEM
5.           OPERATING
AND FINANCIAL REVIEW AND PROSPECTS
 
 You
should read the following discussion and analysis of our financial condition and
results of operations in conjunction with our consolidated financial statements
and the related notes and selected financial data included elsewhere in
this annual report on Form 20-F.  This discussion may contain
forward-looking statements based upon current expectations that involve risks
and uncertainties.  Our actual results may differ materially from
those anticipated in these forward-looking statements as a result of various
factors, including those set forth under “Item 3, Key Information — Risk
Factors” or in other parts of this annual report on Form 20-F.
 
 Operating
Results
 
 Overview
 
 We are
the largest China-based, non state-owned contract manufacturer of high precision
cold-rolled narrow strip steel products with a market share of approximately
12.5% of the Chinese market in 2008, according to Freedonia. We utilize a
variety of processes and methodologies to convert steel manufactured by third
parties into thin steel sheets and strips according to our customers’
specification. We produce precision ultra-thin, high strength cold-rolled steel
products, with thicknesses ranging from 0.09 mm to 1.3 mm, width up to 600 mm
and precision ranging from 0.0025 mm to 0.005 mm. We sell our products to
domestic Chinese customers who primarily operate in the food and packaging,
construction materials, telecommunications cable and equipment and electrical
appliances industries. We source the raw materials, which are comprised
primarily of steel coil, from a variety of suppliers in China.
 
 Our
revenue increased from $139.6 million in 2007 to $196.3 million in 2008 and to
$218.9 million in 2009, representing a CAGR of approximately 25.2% from
2007 to 2009.   Our net income before minority interest increased from
$23.7 million in 2007 to $35.5 million in 2008 and to $43.4 million in 2009,
representing a CAGR of 35.3% from 2007 to 2009.  We believe that the
growth which we have achieved reflects our success in addressing customer needs,
strategically expanding our production lines, increasing market penetration and
enhancing the quality of our products.
 
 Our cold
rolling steel processing production capacity as of December 31, 2009 was
approximately 250,000 metric tons per annum and our chromium coating capacity
was approximately 50,000 metric tons per annum. We plan to expand our
overall steel processing manufacturing capacity to 500,000 metric tons by 2011.
We also intend to add new production lines and higher value-added products, such
as chrome finished, zinc plated and galvanized products to improve our profit
margin.
 
 Important
Factors Affecting our Results of Operations
 
 The most
significant factors that affect our financial condition and results of
operations are:
 
 Factors Specific to Our
Business
 
 ·
              Expansion of our production
      capacity and product mix. We anticipate that our future results
      will be further supported by the expected sales of our new product lines,
      which include zinc plated steel sheets and chrome plated steel sheets. In
      August 2008, we accelerated our expansion plan by installing a new
      processing line producing chrome plated steel products, which are
      higher-end, value-added products with a higher selling price and higher
      profit margin. We completed pilot production of the chrome plated steel
      products, and commenced mass production during the first quarter of 2009.
      We also plan to introduce zinc and tin plated steel products in the near
      future, while gradually increasing our annual steel processing capacity to
      500,000 metric tons by 2011.
 
 ·
              Growth in the Chinese
      Economy. We operate our manufacturing facilities in China and
      derive almost all of our revenues from sales to customers in China.
      Economic conditions in China, therefore, affect virtually all aspects of
      our operations, including the demand for our products, the availability
      and prices of our raw materials and our other expenses. China is expected
      to experience continued growth in all areas of investment and consumption,
      even in the face of a global economic recession. However, China has been
      affected by the global economic slowdown and is experiencing a slowing of
      its growth rate.
 
 ·
              Supply and Demand for High-End
      Precision Cold-Rolled Steel. While the overall Chinese steel
      industry has recently experienced a period of excess supply, there is an
      increasing shortage of high-end thin steel sheets and galvanized steel
      products in China, which has been primarily driven by the limited number
      of producers of precision thin steel products in China. We expect that the
      shortage of supply in this steel market will continue. In addition, due to
      the continuing improvement of the standard of living in China and the
      growth of China’s middle class, the demand for telecommunications cable
      and equipment, electrical household appliances and construction materials
      in which our products serve as components has risen in recent years,
      thereby increasing the demand for the high-end steel products that we
      produce.
  30
  ·
              Recent Economic Events.
      Despite the recent global economic crisis and market turmoil, we
      experienced continued growth during 2009, albeit at a less rapid pace than
      in recent years. The recent decline in steel prices in China has not
      materially affected our gross margins as we have experienced a symmetrical
      drop in our raw materials costs, offsetting the sales price reductions. We
      also customarily carry a rolling order backlog of approximately two
      months. Although some uncertainty can be expected in demand for 2010 due
      to the general slowdown in China’s economy as compared to certain prior
      years, our customers have given no indication of a reduction in
      orders through the end of 2009. If we continue to produce innovative, high
      quality products that meet our customers’ demands, we believe that we will
      continue to experience strong demand over the next 12
    months.
 
 ·
              PRC Economic Stimulus Plans.The PRC government has issued a policy entitled “Central Government Policy On
      Stimulating Domestic Consumption To Counter The Damage Result From Export
      Business Of The Country.”  Under this policy, the PRC Central
      Government is dedicating approximately $580 billion to stimulate domestic
      consumption. Companies that are either directly or indirectly related to
      construction, building material, electrical household appliances and
      telecommunication are expected to benefit. An executive order has been
      announced that the PRC Central Government will improve the living standard
      in the country’s rural areas by subsidizing the purchase of any electric
      household appliance for every household in the rural area. In
      addition, the policy indicates a strong determination to improve
      telecommunication in all rural areas. We expect to benefit from order
      growth due to this economic stimulus
plan.
 
 Factors Specific to Our
Industry
 
 ·
              Cyclicality.The steel
      industry is highly cyclical and significantly affected by general economic
      conditions and other factors, such as worldwide production capacity,
      fluctuations in imports and exports, fluctuations in metal purchase prices
      and tariffs. Recently, the global steel markets have been experiencing
      larger and more pronounced cyclical fluctuations, primarily driven by
      slower global economic growth and the increase in Chinese production and
      consumption. This trend, combined with the upward pressure on costs of key
      inputs, comprising mainly metals, energy and transportation and logistics
      costs, presents increasing uncertainty and challenge for steel producers
      on a worldwide basis. However, processed steel demand and prices for the
      precision steel products, like those we manufacture, are driven by and
      sensitive to other factors, such as product differentiation, customer
      service and cost reductions through improved efficiencies and economies of
      scale. Therefore we are comparatively less affected by cyclicality than
      other companies within our
industry.
 
 ·
              Raw Materials Prices.
      The market for our principal raw material, hot-rolled steel, is price
      sensitive. During much of 2009, because of the general slowdown in
      economic activity experienced in China and the rest of the world, prices
      for this material have declined. Consequently, our cost of sales has also
      declined and we have passed the savings onto our customers. While we
      frequently prepay suppliers for our raw materials in order to ensure an
      ample supply of raw materials, pricing of our orders is
      not established until the order and physical delivery are confirmed,
      at which time the price is confirmed at the then-current market price. We
      account for inventory at cost and any adjustment required to value
      inventory at the lower of cost or market is made at the year-end and
      not at interim periods. Because of the relatively short periods during
      which inventory is kept on hand, we believe that differences between cost
      and market are not significant. Other than hot-rolled steel, no other raw
      materials are significantly used in our manufacturing
      processes.
 
 ·
              Steel prices. Demand
      for steel in China has played a major role in the movement of
      international steel prices. The price of steel rose on a global basis from
      2004 to June 2008, after which time the price of steel declined by
      approximately 30%. Any fluctuations in the cost of raw steel affect our
      operating costs and the prices that we charge our customers. We generally
      pass onto our customers any cost savings that result from reduced steel
      prices. For this reason, our revenue and cost of sales are directly
      related to the market price, demand and supply of
  steel.
 
 ·
              Product mix and effect on
      gross margin.Our gross margin is primarily affected by our
      product mix.For years ended
      December 31, 2009, 2008 and 2007, our gross margins were 30.1%, 27.4% and
      28.0%, respectively. Fluctuations in our gross margin were primarily
      driven by changes in our product mix.  Our production costs are
      generally higher in early phases of production introduction due to higher
      start-up costs and low production yield rate. Over time we typically
      improve our manufacturing efficiency.  Furthermore, while the gross
      profit in dollar value remains constant, a higher level of sales revenue
      and cost of sales will lead to a lower level of gross profit
      margin.
  31
  ·
              Inventory Revaluation.Inventory revaluation arises from a de-valuation of our inventory
      and results in (1) a write-down of the inventory as inventory is valued at
      lower of actual cost or market value; and (2) a charge to net income as a
      result of the write-down. Under our procurement policy, we do not carry
      material amounts of raw material inventory without confirmed purchase
      orders with a predetermined sales price and delivery schedule. Thus, we
      were not negatively affected by the inventory revaluation as a result of
      the steel price decline in 2008.
 
 ·
              Consolidation in the Steel
      Industry. There has been significant consolidation in the global
      steel industry and consolidation is also taking place in China. The
      government of China has publicly stated that it expects consolidation of
      the Chinese steel industry and the top several producers in China to
      account for the majority of national production. Cross border
      consolidation has also occurred with the aim of achieving greater
      efficiency and economies of scale, particularly in response to the
      effective consolidation undertaken by raw material suppliers and consumers
      of steel products. Notwithstanding the general trend towards consolidation
      in the industry, China’s specialty steel sector, the sector in which
      we operate, is dominated by privately-owned enterprises and is still
      highly fragmented. This fragmentation presents an opportunity for
      companies like ours to gain market share through acquisitions and internal
      expansion.
 
 Minority
Interest
 
 Henan
Green was acquired by China Gerui through Wealth Rainbow on October 21, 2008 and
the acquisition was accounted for as a reorganization under common control with
the purchase of a minority interest. For reporting purposes, a control
group comprised of our Chairman and CEO, Mr. Lu and his two direct relatives
(Mr. Lu’s son, Yi Lu and Mr. Lu’s brother, Baiwang Lu) held 55.02% of the shares
of Henan Green on the date of acquisition. Upon the acquisition, we were wholly
owned by Wealth Rainbow, whose sole shareholder was Ms. Yuying Lu, the daughter
of Mr. Lu. Wealth Rainbow was acquired by China Gerui on November 28, 2008, and
upon the acquisition, Henan Green was wholly owned by China Gerui, the majority
shareholder of which is Oasis Green Investments Limited, whose sole
shareholder is Ms. Yuying Lu, the daughter of Mr. Lu. Therefore, under U.S. GAAP
reporting rules the control group’s 55.02% interest of Henan Green that was
acquired constitutes an exchange of equity interests between entities under
common control, and the remaining 44.98% interest of Henan Green was accounted
for as a minority interest prior to the date of acquisition. As of March 17,
2009, the minority interest ceased to exist.
 
 Gross
Profit and Gross Margin
 
 For the years ended December 31, 2009, 2008 and
2007, our gross margin was 30.1%, 27.4% and 28.0%, respectively. Our direct
costs of manufacturing are generally high when we first introduce a new product
due to higher start-up costs and higher raw material consumption rate. As
production volumes increase, we typically improve our manufacturing efficiency
and are able to strengthen our purchasing power by buying raw materials in
greater quantities.
 
 Changes
in our gross margin are primarily driven by changes in our product mix and other
strategic operating decisions. Our high-end, value-added products generally tend
to have higher profit margins and we have moved to emphasize these products in
our mix. Further, general economic conditions and our response to them, cost of
raw materials as well as supply and demand of steel finishing fabrication
products within our markets influence sales prices.
 
 To gain
market penetration, we price our products at levels that we believe are
competitive compared to imported products. Through our continuous efforts to
improve manufacturing efficiency and reduce production costs, we believe that we
are able to offer products of comparable quality to our Chinese state-owned
competitors and international competitors at more competitive prices. Our sales
prices are influenced by general economic conditions, cost of raw materials as
well as supply and demand of steel finishing fabrication products within our
markets. Our high-end, value-added products generally tend to have higher profit
margin.
 
 Taxation
 
 BVI. China Gerui is
incorporated in the BVI. Under the current law of the BVI, China Gerui is not
subject to income or capital gains tax. In addition, dividend payments are not
subject to withholding tax in the BVI.
  32
  Hong Kong. We did not
have any assessable profits subject to the Hong Kong profits tax from 2007 to
2009. We do not anticipate having any income subject to income taxes in Hong
Kong in the foreseeable future.
 
 PRC. In 2007, the PRC
government promulgated the New EIT Law and the relevant implementation rules,
which became effective on January 1, 2008. Under the New EIT Law and its
implementation rules, all domestic and foreign investment companies will be
subject to a uniform enterprise income tax at the rate of 25%, effective January
1, 2008.  As a result, our PRC subsidiary, Henan Green, was subject to
an enterprise income tax at the rates of 33% in 2007 and 25% in 2008 and
2009.  Under the New EIT Law, dividends from PRC subsidiaries to their
non-PRC shareholders will be subject to a withholding tax at a rate of 20%,
which is further reduced to 10% by the implementation rules, if the non-PRC
shareholder is considered to be a non-PRC tax resident enterprise without any
establishment or place within China or if the dividends payable has no
connection with the non-PRC shareholder’s establishment or place within
China, unless any such non-PRC shareholder’s jurisdiction of incorporation has a
tax treaty with China that provides for a different withholding arrangement. In
addition, pursuant to the New EIT Law, enterprises established under the laws of
non-PRC jurisdictions, but whose “de facto management body” is located in the
PRC, should be treated as resident enterprises for PRC tax purposes. However, it
is currently uncertain whether we may be deemed a resident enterprise, or how to
interpret whether any income or gain is derived from sources within China. See
Item 3, “Key information — Risk Factors — 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.” If we, as a BVI company with substantially all of our
management located in China, were treated as a resident enterprise for PRC
tax purposes, we will be subject to PRC tax on our worldwide income at the 25%
uniform tax rate, which would have an impact on our effective tax
rate.
 
 Critical
Accounting Policies
 
 We
prepare financial statements in conformity with U.S. GAAP, which requires us to
make estimates and assumptions that affect the amounts reported in our combined
and consolidated financial statements and related notes.  We
periodically evaluate these estimates and assumptions based on the most recently
available information, our own historical experience and various other
assumptions that we believe are reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other
sources.  Since the use of estimates is an integral component of the
financial reporting process, actual results could differ from those
estimates.  Some of our accounting policies require higher degrees of
judgment than others in their application.  We believe the following
accounting policies involve the most significant judgments and estimates used in
the preparation of our financial statements.
 
 Revenue
Recognition
 
 We
primarily generate revenue from cold-rolled steel products or chrome-plated
steel products sales to our customers. We consider revenue from the sale of our
finished cold-rolled and chrome-plated steel products realized or realizable and
earned upon meeting all of the following criteria: persuasive evidence of a sale
arrangement exists, delivery has occurred, the price to the customer is fixed or
determinable, and collectibility of payment is reasonably assured. These
criteria are met at the time of shipment when the risk of loss passes to the
distributor.
 
 Revenue
represents the invoiced value of sold goods, net of VAT.  Our
products, all of which are sold in China, are subject to a Chinese VAT at a rate
of 17% of the gross sales price or at a rate approved by the Chinese local
government.  This VAT may be offset by VAT we paid on raw materials
and other materials included in the cost of producing the finished
product.  The VAT amounts paid and available for offset are maintained
in our current liabilities.
 
 Accounts
Receivables
 
 Most of
our sales were conducted on pre-payment or COD basis.  However, during
the normal course of business, we extend to some of our customers interest-free
unsecured credit for a term of 30 days depending on a customer’s credit history,
as well as local market practices.  We reviewed our accounts
receivables quarterly and determined the amount of allowances, if any, necessary
for doubtful accounts. Historically, we have not had any bad debt write-offs
and, as such, we do not provide an arbitrary reserve amount for possible bad
debts based upon a percentage of sales or accounts receivable balances. Rather,
we review our accounts receivable balances to determine whether specific
reserves are required due to such issues as disputed balances with distributors,
declines in distributors’ credit worthiness, or unpaid balances exceeding
agreed-upon terms. Based upon the results of these reviews, we determine whether
a specific provision should be made to provide a reserve for possible bad debt
write-offs. We have provided 2% allowances for doubtful accounts in 2006, 2007,
2008 and 2009.  As of December 31, 2009, we communicate with our
distributors each month to identify any potential issues and reassess our credit
limits and terms with some of them based on their prior payment history and
practice. We also plan to continue building upon our existing relationships and
history with each of our customers to assist us in the full and timely
collection of outstanding payments.
  33
  As of
December 31, 2009 and December 31, 2008, we had outstanding accounts receivable
totaling $4.8 million and $10.3 million, respectively.  We believe
that these outstanding amounts will be collected pursuant to the terms,
conditions, and within the time frames agreed upon with our
customers.  During the reported periods, we did not experience any
material problems relating to distributor payments and had no bad debt
write-offs. In terms of our liquidity, we reflect the extended interest-free
unsecured credit in our cash flows for the reported periods. Therefore, we
anticipate no changes from past cash flow patterns.
 
 Inventories
 
 We value
inventories, consisting of work in process and raw materials, at the lower of
cost or market.  Cost of material is determined on the weighted
average cost method. Cost of work in progress includes direct materials, direct
production cost and an allocated portion of production overhead. We evaluate
inventory periodically for possible obsolescence of our raw materials to
determine if a provision for obsolescence is necessary. Due to the durable
nature of our raw materials which primarily consist of hot-rolled steel sheet,
we had no reserve obsolescence at December 31, 2009. Our estimates for
determining the provision for obsolescence may be affected by technological
changes and developments to our product offerings and changes in governmental
regulations.
 
 As
of  December 31, 2009 and December 31, 2008, we had an inventory
balance of $6.0 million and $3.6 million, respectively.
 
 Recently
Issued Accounting Standards
 
 We
describe below recent pronouncements that have had or may have a significant
effect on our financial statements. We do not discuss recent pronouncements that
are not anticipated to have an impact on or are unrelated to our financial
condition, results of operations, or disclosures.
  In
December 2007, the FASB issued FASB ASC 810-10, “Noncontrolling Interest in
Consolidated Financial Statements” (“FASB ASC 810-10”). This Statement amends
ARB 51 to establish accounting and reporting standards for the noncontrolling
interest in a subsidiary and for the deconsolidation of a subsidiary. It
clarifies that a noncontrolling interest in a subsidiary is an ownership
interest in the consolidated entity that should be reported as equity in the
consolidated financial statements. Before this Statement was issued, limited
guidance existed for reporting noncontrolling interests. As a result,
considerable diversity in practice existed. So-called minority interests were
reported in the consolidated statement of financial position as liabilities or
in the mezzanine section between liabilities and equity. This Statement improves
comparability by eliminating that diversity. FASB ASC 810-10 is effective for
fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2008. Earlier adoption is prohibited. Effective January 1,
2009, the Group adopted the provisions of FASB ASC 810-10.
  In April
2009, the FASB issued guidance within ASC Topic 805, “Business
Combinations”  ASC Topic 805 amends the initial recognition and
measurement, subsequent measurement and accounting, and disclosure of assets and
liabilities arising from contingencies in a business
combination.  This guidance is effective for assets or liabilities
arising from contingencies in business combinations for which the acquisition
date is on or after the beginning of the first annual reporting period beginning
on or after December 15, 2008. The adoption of this guidance did not have a
material impact on our consolidated financial position, results of operations or
cash flows as of the date of adoption. ASC 805 will be applied to any future
business combinations.
  In June
2009, the FASB issued FASB ASC 105-10-05, 10, 15, 65, 70 (“FASB ASC 105-10-05,
10, 15, 65, 70”) (formerly FASB Statement No. 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles - a
replacement of FASB Statement No. 162). FASB ASC 105-10-05, 10, 15, 65, 70
establishes the FASB ASC as the source of authoritative GAAP for nongovernmental
entities. The ASC does not change GAAP, instead it takes individual
pronouncements that currently comprise GAAP and reorganizes them into Topics.
Contents in each Topic are further organized by Subtopic, then Section and
finally Paragraph. The Paragraph level is the only level that contains
substantive content. Citing particular content in the ASC involves specifying
the unique numeric path to the content through the Topic, Subtopic, Section and
Paragraph structure. FASB suggests that all citations begin with “FASB ASC.”
FASB ASC 105-10-05, 10, 15, 65, 70 was effective for interim and annual periods
ending after September 15, 2009 and does not have an impact on our financial
position.
  34
  Management
does not believe that any other recently issued, but not yet effective
accounting pronouncements, if adopted, would have a material effect on the
accompanying financial statements.
  Results
of Operations
 
 The
following tables set forth key components of our results of operations for the
periods indicated, in dollars and as a percentage of revenue.
 
 (All
amounts in thousands of U.S. dollars, except for the percentages)
 
 Years Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007USD
                  
                  
                  % of
                    Revenue
                  
                  
                  USD
                  
                  
                  % of
                    Revenue
                  
                  
                  USD
                  
                  
                  % of
                    RevenueRevenue
                  
                  
                  218,903
                  
                  
                  
                  100.0
                  
                  
                  $
                  196,265
                  
                  
                  
                  100.0
                  
                  
                  $
                  139,649
                  
                  
                  
                  100.0Raw
      material
                  
                  
                  (140,061
                  )
                  
                  
                  -64.0
                  
                  
                  
                  (131,805
                  )
                  
                  
                  -67.2
                  
                  
                  
                  (92,888
                  )
                  
                  
                  -66.5Labor
                  
                  
                  (2,585
                  )
                  
                  
                  -1.2
                  
                  
                  
                  (1,665
                  )
                  
                  
                  -0.8
                  
                  
                  
                  (1,407
                  )
                  
                  
                  -1.0Cost
      of production
                  
                  
                  (10,449
                  )
                  
                  
                  4.7
                  
                  
                  
                  (8,938
                  )
                  
                  
                  -4.6
                  
                  
                  
                  (6,282
                  )
                  
                  
                  -4.5Total
      cost of revenue
                  
                  
                  (153,095
                  )
                  
                  
                  -69.9
                  
                  
                  
                  (142,408
                  )
                  
                  
                  -72.6
                  
                  
                  
                  (100,577
                  )
                  
                  
                  -72.0Gross
      profit
                  
                  
                  65,807
                  
                  
                  
                  30.1
                  
                  
                  
                  53,857
                  
                  
                  
                  27.4
                  
                  
                  
                  39,072
                  
                  
                  
                  28.0General
      and administrative expenses
                  
                  
                  (4,574
                  )
                  
                  
                  -2.1
                  
                  
                  
                  (3,432
                  )
                  
                  
                  -1.7
                  
                  
                  
                  (2,767
                  )
                  
                  
                  -2.0Selling
      and marketing expenses
                  
                  
                  (919
                  )
                  
                  
                  -0.3
                  
                  
                  
                  (831
                  )
                  
                  
                  -0.4
                  
                  
                  
                  (534
                  )
                  
                  
                  -0.4Operating
      income
                  
                  
                  60,315
                  
                  
                  
                  27.6
                  
                  
                  
                  49,594
                  
                  
                  
                  25.3
                  
                  
                  
                  35,771
                  
                  
                  
                  25.6Other
      income and (expense)Interest
      income
                  
                  
                  829
                  
                  
                  
                  0.3
                  
                  
                  
                  1,395
                  
                  
                  
                  0.7
                  
                  
                  
                  1,432
                  
                  
                  
                  1.0Interest
      expenses
                  
                  
                  (3,238
                  )
                  
                  
                  -1.5
                  
                  
                  
                  (3,769
                  )
                  
                  
                  -1.9
                  
                  
                  
                  (2,147
                  )
                  
                  
                  -1.5Sundry
      income
                  
                  
                  294
                  
                  
                  
                  0.1
                  
                  
                  
                  156
                  
                  
                  
                  0.1
                  
                  
                  
                  16
                  
                  
                  
                  0.0Income
      before income taxes
                  
                  
                  58,200
                  
                  
                  
                  26.5
                  
                  
                  
                  47,375
                  
                  
                  
                  24.1
                  
                  
                  
                  35,072
                  
                  
                  
                  25.1Income
      tax expense
                  
                  
                  (14,752
                  )
                  
                  
                  -6.7
                  
                  
                  
                  (11,870
                  )
                  
                  
                  -6.0
                  
                  
                  
                  (11,422
                  )
                  
                  
                  -8.2Net
      income before Minority interests
                  
                  
                  43,448
                  
                  
                  
                  19.8
                  
                  
                  
                  35,506
                  
                  
                  
                  18.1
                  
                  
                  
                  23,650
                  
                  
                  
                  16.9Minority
      interests
                  
                  
                  0
                  
                  
                  
                  0
                  
                  
                  
                  (13,921
                  )
                  
                  
                  -7.2
                  
                  
                  
                  (10,638
                  )
                  
                  
                  -7.6Net
      Income
                  
                  
                  43,448
                  
                  
                  
                  19.8
                  
                  
                  
                  21,585
                  
                  
                  
                  11.0
                  
                  
                  
                  13,012
                  
                  
                  
                  9.3
 
 Comparison
of Fiscal Years Ended December 31, 2009 and 2008
 
 Revenue.  Our
revenue is mainly generated from sales of our cold-rolled steel products. Our
revenue increased $22.6 million, or 11.5%, to $218.9 million in 2009 from
$196.3 million in 2008.  During the year ended December 31, 2009, our
sales volume was up by 23.8% to 249.9 metric tons from 201.9 metric tons last
year.  However, our average selling price was down from $972.1 per
metric ton during 2008 to $875.8 per metric ton during 2009 as a result of
an industry wide reduction in the selling price of steel
products.
 
 Cost of
Revenue.  Our cost of revenue includes the direct costs of our
raw materials, primarily steel coil, as well as the cost of labor and overhead.
Our cost of revenue increased approximately $10.7 million, or 7.5%, to
approximately $153.1 million in 2009 from approximately $142.4 million in
2008.  The increases were primarily due to (i) costs associated with
the overall increase in the volume of products sold including raw materials,
labor, energy and other costs, which we believe were in line with our increased
sales and (ii) other factors such as additional depreciation resulting from
newly acquired equipment and direct labor input which contributed to the
increased level of manufacturing overhead.
 
 Gross Profit.  Our
gross profit is equal to the difference between our revenue and our cost of
revenue. Our gross profit increased approximately $11.9 million to
approximately $65.8 million in 2009 from approximately $53.9 million in
2008.  Gross profit as a percentage of revenue (gross margin) was
30.1% in 2009, as compared to 27.4% in 2008.  The increase was primarily
attributable to a larger decrease in raw material prices, on a
percentage basis, as compared to the decrease in our average selling price.
  35
  General and Administrative
Expenses.  General and administrative expenses consist
primarily of compensation and benefits to our general management, finance and
administrative staff, professional advisor fees, bad debts reserve and other
expenses incurred in connection with general operations. Our general and
administrative expenses increased by approximately $1.2 million to approximately
$4.6 million in 2009 from $3.4 million in 2008.  As a percentage of
revenue, general and administrative expenses were 2.1% of revenue in 2009 as
compared to 1.7% in 2008.  The increase was primarily attributable to
professional expenses incurred in connection with the merger between us and COAC
in March 2009 and subsequent expenses associated with becoming a US public
reporting company.
 
 Selling
Expenses.  Our selling expenses consist primarily of
compensation and benefits to our sales and marketing staff, sales commission,
cost of advertising, promotion, business travel, after-sale support,
transportation costs and other sales related costs. Our selling expenses
increased approximately $0.1 million, or 10.6%, to approximately $0.9 million in
2009 from $0.8 million in 2008. As a percentage of revenue, our selling expenses
were 0.4% in 2009, as compared to 0.4% in 2008.  The increase was
mostly attributable to increased advertising and promotion activities and other
costs relating to selling activities which we
believe were in line with our increased sales
revenue.
  Interest and Other Income.
Interest and other income is mainly interest income generated from the
restricted cash balance.  Our interest and other income decreased $0.6
million, or 40.6% to $0.8 million in 2009 from $1.4 million in
2008.  The decrease was attributable to relatively lower average bank
loan account balances and a decrease in interest rates paid by the banks
throughout 2009 as compared to 2008.
 
 Interest
Expense.  Interest expense is primarily interest expense on
notes payable and short term loans related to our daily business
operations.  Our interest expense decreased $0.6 million, or 14.1%, to
$3.2 in 2009 from $3.8 million in 2008. The decrease was attributable to the
lower weighted average interest rate from the lending institutions in 2009 as
compared to 2008.
 
 Provision for Income
Taxes.  We incurred income tax expense of $14.8 million and
$11.9 million in 2009 and 2008, respectively.  The effective EIT rates
were 25% and 25% respectively in the two aforesaid years.
 
 Net
Income.   Our net income, after accounting for minority
interests of $0 million and $13.9 million in 2009 and 2008, respectively,
increased approximately $21.8 million, or 100.9%, to $43.4 million in 2009 from
approximately $21.6 million in 2008, as a result of the factors described
above.
 
 Comparison
of Fiscal Years Ended December 31, 2008 and 2007
 
 Revenue. Our revenue
increased $56.7 million, or 40.6%, to $196.3 million in 2008 from $139.6 million
in 2007.  The increase was attributable to the growing demand for our
specialty steel products purchased primarily by customers in the
telecommunications sectors as these end markets have continued to generate
considerable demand.  In addition, we expanded our production
capacity with an addition of approximately 50,000 tons in the second
half of 2008, which allowed us to satisfy the increasing demand for our
products.
 
 Cost of Revenue. Our
cost of revenue increased approximately $41.8 million, or 41.6%, to
approximately $142.4 million in 2008 from approximately $100.6 million in
2007.  The increases were primarily due to (i) costs associated
with the overall increase in the volume of products sold including raw
materials, labor, energy and other costs, which we believe were in line with our
increased sales and (ii) other factors such as additional depreciation resulting
from newly acquired equipment and direct labor input which contributed to the
increased level of manufacturing overhead.
 
 Gross Profit.  Our gross profit
increased approximately $14.8 million to approximately $53.9 million in 2008
from approximately $39.1 million in 2007.  Gross profit as a percentage of
revenue (gross margin) was 27.4% in 2008, as compared to 28.0% in
2007.  The decrease in overall gross profit margin was primarily a
result of increased energy and other direct material costs during this
period.
 
 General and Administrative
Expenses.  Our general and administrative expenses increased by
approximately $0.6 million to approximately $3.4 million in 2008 from $2.8
million in 2007.  As a percentage of revenue, general and administrative
expenses were 1.7% of revenue in 2008 as compared to 2.0% in
2007.  The dollar increase was mainly attributable to the addition of
employees and related salary, benefits and other labor costs as our scale of
operations expanded and revenues increased.
  36
  Selling Expenses.  Our
selling expenses increased approximately $0.3 million, or 55.5%, to
approximately $0.8 million in 2008 from $0.5 million in 2007. As a percentage of
revenue, our selling expenses were consistent at 0.4% in 2008 and 2007,
respectively.  Such dollar increase reflected the increased salary,
benefits, travel, and other costs related to selling activities in 2008, which
corresponded with our growth in sales and operations.
 
 Interest Income and Interest
Expenses.  Our interest income decreased slightly by $36,898,
or 2.6%, from $1,432,019 in 2007 to $1,395,121 in 2008.  Our interest
expense increased approximately $1.6 million, or 75.5%, to $3.8 million in 2008
from $2.1 million in 2007.  The overall increase in net interest
expenses was attributable to our increased borrowing from local Chinese
banks.
 
 Provision for Income
Taxes.  We incurred income tax expense of $11.9 million and
$11.4 million in 2008 and 2007, respectively.  The effective EIT rates
were 25% and 33% respectively in the two aforesaid years.
 
 Net
Income.   Our net income, after accounting for minority
interests of $13.9 million and $10.6 million in 2008 and 2007,
respectively, increased approximately $8.6 million, or 65.9%, to $21.6 million
in 2008 from approximately $13.0 million in 2007, as a result of the factors
described above.
 
 Liquidity
and Capital Resources
 
 The
following table sets forth a summary of our net cash flow information for the
periods indicated:
 
 (All
amounts in thousands of U.S. dollars)
 
 Year Ended December 31,2009
                  
                  
                  2008
                  
                  
                  2007Net
      cash provided by (used in) operating activities
                  
                  $
                  33,788
                  
                  
                  $
                  51,105
                  
                  
                  $
                  21,506Net
      cash provided by (used in) investing activities
                  
                  
                  (31,350
                  )
                  
                  
                  12,431
                  
                  
                  
                  (1,145
                  )Net
      cash provided by (used in) financing activities
                  
                  
                  34,514
                  
                  
                  
                  (22,690
                  )
                  
                  
                  (22,300
                  )Net
      cash inflow (outflow)
                  
                  
                  36,952
                  
                  
                  
                  40,846
                  
                  
                  
                  (1,940
                  )
 
 Operating
Activities
 
 Net cash
provided by operating activities was approximately $33.8 million in 2009, as
compared to approximately $51.1 million net cash provided by operating
activities in 2008, a decrease of 33.9%.  The decrease primarily
resulted from increased inventory and prepayment to suppliers in
preparation for scheduled production to contracts in the subsequent quarter,
reduced customer deposits as a result of revenue recognition, and reduction of
accrued liabilities and other payables, which was partially offset by
a decrease in accounts receivable and an increase in accounts payable
balance.
 
 Net cash
provided by operating activities was approximately $51.1 million in 2008,
as compared to approximately $21.5 million in 2007, an increase
of 135%.  The increase was mainly due to (1) the increased
operating income as a result of the business expansion; (2) lower raw materials
and finished goods inventory level as of December 31, 2008 due to the better
management of inventory; (3) an increase in cash collection from customers,
partially offset by increased accounts payable; (4) increased overall cash
advance received from customers after deducting the prepayment made to suppliers
for raw material procurement; and (5) the increased income tax payment resulting
from the higher net income base for calculating the tax liability.
 
 We
strategically manage our cash resources as a means to optimize our available
cash flows in the following manner:
 
 ·
              We
      have not experienced any deterioration in the collection of our
      receivables and we are unaware of any trends that pose collections
      problems.  We intend to extend credit to certain customers
      prospectively as part of our growth strategy but will apply stringent and
      prudent criteria for determining qualification for such credit, including
      securing us with underlying assets and required cash
    minimums.
 
 ·
              We
      manage the year-end accounts payable and accrued liabilities to improve
      cash flow.
 
 ·
              Our
      operating cash flow can also be affected by timing of prepayments
      made to suppliers for raw materials procurement and the corresponding
      receipt of advances from customers.  There is no material effect
      on cash flow as a result of this practice over time but interim and
      annual period-end balances can be distributed unevenly.  On a
      rolling twelve-month basis, our prepayments and inventory growth are
      expected to be consistent with our backlog of customer orders and sales
      growth.
  37
  Investing
Activities
 
 Cash used
in investing activities mainly consists of capital expenditures, shareholders'
borrowings, and increases in restricted cash.
 
 Net cash
used in investing activities was approximately $31.4 million in 2009, as
compared to approximately $12.4 million net cash provided by investing
activities in 2008.  The change mainly resulted from (1) increased
capital expenditures, (2) increased restricted cash levels as a result of a
higher level of notes payable financing that the Company obtained in 2009 and
(3) zero proceeds from former owners since certain borrowings by our former
shareholders were fully repaid in 2008.
 
 Net cash
provided by investing activities was approximately $12.4 million in 2008, as
compared to approximately $1.1 million net cash used in investing activities in
2007.  The change resulted from increased cash collected from our
shareholders, offset by a larger amount in capital expenditure.
 
 We paid
$5.2 million in 2009, $6.6 million in 2008 and $2.3 million in 2007 to acquire
capital equipment.  Restricted cash had an increase of $12.8 million
in 2009, an increase of $5.5 million in 2008 and a decrease of $8.3 million in
2007. We received $25.1 million in 2008 when our former shareholders repaid
certain borrowings.
 
 Financing
Activities
 
 Cash used
in financing activities mainly consists of dividends paid, distributions to
shareholders, repayment of bank loans, withdrawal and repayment of borrowings
from related parties.
 
 We paid
dividends of $9.6 million in 2009, $42.3 million in 2008 and $16.1 million
in 2007.
 
 Net cash
provided by financing activities was approximately $34.5 million in 2009, as
compared to approximately $22.7 million net cash used in financing activities in
2008.  The increase in cash provided by financing activities was
primarily due to the proceeds from our November 2009 ordinary shares offering
and increased notes receivable financing.
 
 We repaid
short-term loans of $37.3 million in 2009, $26.7 million in 2008 and $5.9
million in 2007, while incurring new short-term borrowings of $40.6 million in
the 2009, $40.0 million in 2008 and $15.1 million in 2007.  We
increased our notes receivable financing by $14.1 million in 2009, $6.4 million
in 2008 and we reduced our notes receivable financing by $15.0 million in
2007.
 
 Capital
Expenditures
 
 We
believe that our future capital expenditures will be incurred primarily in
connection with (i) purchases of property, plant and equipment and construction
of our facilities, (ii) leasehold improvements, (iii) investment in equipment,
technology and operating systems, and (iv) capitalized interest.  Our
planned capital expenditures for 2010 and 2011 are for expansion of our
manufacturing capacity from 250,000 metric tons to 500,000 metric tons by
adding cold-rolled thin steel and a new zinc plated steel sheet production
line.  The expansion will take place in two phases, with the first
phase projected to cost approximately $42 million and the second phase costing
approximately $12 million.  We expect to finance the capital
expenditure by using cash on hand, internal cash flow to be generated,
short-term bank borrowings as well as fund-raising from capital
markets.
 
 Loan Facilities
 
 We
believe that we currently maintain a good business relationship with many banks.
 As of December 31, 2009, our outstanding bank loans were as
follows:
  38
  (All
Amounts in U.S. Dollars)
 
 Commercial
      Bank of Zhengzhou
                  
                  $
                  7,323,861Shanghai
      Pu Dong Development Bank
                  
                  
                  5,859,089China
      Merchants Bank
                  
                  
                  4,394,317China
      Citic Bank
                  
                  
                  3,661,930Guangdong
      Development Bank
                  
                  
                  2,929,544Minsheng
      Bank of China Branch in Zhengzhou
                  
                  
                  2,783,067Zhengzhou
      City Rural Credit Cooperative
                  
                  
                  1,171,818Bank
      of Luoyang Branch
                  
                  
                  4,394,317Bank
      of Communications
                  
                  
                  1,464,772Total
                  
                  $
                  33,982,715
 
 Most of
the foregoing bank loans have a term of twelve months or less, and in most
cases, not more than six months.  As security for repayment of these
loans, we maintain at the respective banks which have extended loans to us cash
in deposit accounts which is reflected as restricted cash on our balance
sheet.
  We
believe that our currently available working capital, including anticipated cash
flow from operations and available credit facilities referred to above are
adequate to finance our operations at current levels through at least the next
twelve months.  In this regard, we are not experiencing any
difficulties in the acquisition and rollover of our short term credit facilities
that fund our daily operations.  We anticipate rollovers of all
current facilities coming due in the 2010 operating year and do not foresee a
reduction on the availability of credit to fund our operations and meet our
growth objectives.
 
 Research
and Development, Patents and Licenses, Etc.
 
 Intellectual
Property
 
 We
protect our intellectual property primarily by maintaining strict control over
the use of production processes.  All our employees, including key
employees and engineers, have signed our standard form of labor contracts,
pursuant to which they are obligated to hold in confidence any of our trade
secrets, know-how or other confidential information and not to compete with us,
both during the employment term and within five years after the termination of
employment.  In addition, for each project, only the personnel
associated with the project have access to the related intellectual
property.  Access to proprietary data is limited to authorized
personnel to prevent unintended disclosure or otherwise using our intellectual
property without proper authorization.  We will continue to take steps
to protect our intellectual property rights.
  As of the
date of this annual report, we have one utility model patent application
pending (application number: 200920089897.4), which is related to our
production process technology, in particular, hydraulic pressured automatic
thickness control system for four-roll reversible cold mill.  The
application was made on April 28, 2009.
 
 We have
registered the trademark for the logo  with
the Trademark Office of the State Administration for Industry and Commerce of
China.  We use our trademark for the sales and marketing of our
products.  Our trademark expires on November 27, 2012 and may be
continually renewed thereafter.
 
 Trend
Information
 
 Other
than as disclosed in the foregoing disclosures and elsewhere in this annual
report, we are not aware of any trends, uncertainties, demands, commitments or
events for the period from January 1, 2010 to December 31, 2010 that are
reasonably likely to have a material adverse effect on our net revenues, income,
profitability, liquidity or capital resources, or that would cause our disclosed
financial information to be not necessarily indicative of future operating
results or financial conditions.
 
 Off-Balance
Sheet Arrangements
 
 We have
not entered into, nor do we expect to enter into, any off-balance sheet
arrangements.  We also have not entered into any financial guarantees
or other commitments to guarantee the payment obligations of third
parties.  In addition, we have not entered into any derivative
contracts that are indexed to our equity interests and classified as
shareholders’ equity.  Furthermore, we do not have any retained or
contingent interest in assets transferred to an unconsolidated entity that
serves as credit, liquidity or market risk support to such entity.  We
do not have any variable interest in any unconsolidated entity that provides
financing, liquidity, market risk or credit support to us or that engages in
leasing, hedging or research and development services with us.
  39
  Tabular
Disclosure of Contractual Obligations
 
 The
following table sets forth our contractual obligations in respect of operating
leases as of December 31, 2009.
 
 Payments Due By PeriodTotal
                  
                  
                  Less than 1
                    year
                  
                  
                  1-3 years
                  
                  
                  3-5 years
                  
                  
                  More than 5
                    yearsOperating
      Lease Obligations*
                  
                  $
                  579,273
                  
                  
                  $
                  24,461
                  
                  
                  $
                  51,963
                  
                  
                  $
                  56,722
                  
                  
                  $
                  446,127Commercial
      Bank Loans**
                  
                  
                  33,982,715
                  
                  
                  
                  33,982,715
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Total
                  
                  $
                  34,561,988
                  
                  
                  $
                  34,007,176
                  
                  
                  $
                  51,963
                  
                  
                  $
                  56,722
                  
                  
                  $
                  446,127
 
 * Our
operating lease obligations result from the land use rights associated with the
land, including a state-owned reservoir on the premises that the company
acquired for planned capacity expansion.
 
 ** Our
commercial bank loans are usually lines of credit with a term of less than one
year (usually six months) which are collateralized by cash in deposit accounts
which is reflected as restricted cash on our balance sheet.
 
 Safe
Harbor
 
 See the
section headed “Forward-Looking Information.”
 
 ITEM
6.          DIRECTORS, SENIOR
MANAGEMENT AND EMPLOYEES
 
 Directors
and Senior Management
 
 The following table sets forth certain information regarding our
directors and senior management as of the date of this annual report.
 
 NAME
                
                AGE
                
                POSITIONMingwang
      Lu
                
                57
                
                Chairman
      of the Board and Chief Executive OfficerEdward
      Meng
                
                42
                
                Chief
      Financial OfficerYi
      Lu
                
                34
                
                General
      Manager and DirectorHarry
      Edelson
                
                76
                
                DirectorJ.P.
      Huang
                
                49
                
                DirectorKwok
      Keung Wong
                
                60
                
                DirectorYunlong
      Wang
                
                47
                
                DirectorMaotong
      Xu
                
                70
                
                Director
 
 Mingwang Lubecame our chairman of the board and chief executive officer on March 17,
2009 and has served as Henan Green’s general manager since 2000.  He
was previously senior economist and engineer of Henan Green.  Mr. Lu has
been in the steel industry since 1985, with expertise in managing and marketing
cold-rolled steel construction, technologies, production and marketing.
 Mr. Lu was elected as a member of the 9th,
10th
and 11th
National People’s Congress in Henan Province.  He has been awarded numerous
honors including the “Wuyi Labor Medal,” “Excellent Director/Manager in Henan
Province,” “National Excellent Township Entrepreneur” and “Expert in Steel
Industry of Henan Province.”
  Edward Menghas been our Chief Financial Officer since October 19,
2009.  Prior to that Mr. Meng was our Director of Investor Relations
since April 2009.  From July 2007 to October 2008, Mr. Meng served as
the part-time and then full-time Chief Financial Officer of A-Power Energy
Generation Systems (Nasdaq GS: APWR), an alternative energy
company.  From 2007 to 2008, Mr. Meng served as an independent
director and chairman of the audit committee of China Housing and Land
Development Limited (Nasdaq CM: CHLN), a Chinese real estate development company
and Huiheng Medical Inc. (OTCBB: HHGM), a Chinese company which,
through its subsidiaries, designs, develops, and markets radiation therapy
systems used for the treatment of cancer in the PRC.  Mr. Meng also
previously served as Vice President of Finance/Chief Financial Officer of Terex
Corporation, Beijing Representative Office from 2007 to 2008, which is a
diversified global manufacturer of a broad range of equipment for use in various
industries, including the construction, infrastructure, quarrying, surface
mining, shipping, transportation, refining and utility.  In 2007, Mr.
Meng served briefly as the part-time Chief Financial Officer and a director of
Navstar Media Holdings, Inc., a public U.S. holding company with PRC operating
subsidiaries specializing in media content production and
distribution.  Mr. Meng was a Senior Financial Consultant to Shell
(China) Limited from 2006 to 2007 and was the Chief Financial Officer of Koch
Materials (China) Co., from 2003 to 2006. Prior to that, he served in
executive and senior managerial positions at Intelsat, Inc. from 1997 to 2003
and Schenker International AG (China) from 1992 to 1995. A Certified Public
Accountant, Mr. Meng is experienced in both PRC and U.S. GAAP accounting.
 Mr. Meng received his MBA from Georgetown University and a Bachelor’s
degree in English from Sichuan International Studies University in China.
 He is fluent in both Mandarin and English.
  40
  Yi Lubecame our director on March 17, 2009 and has served as the deputy
general manager of Henan Green since May 2008.  From July 2003 to May
2008, he served as general manager of Henan Green. While with Henan Green, Mr.
Lu helped develop 5 series as well as over 20 types of high precision strip
steel products.  Prior to joining Henan Green, Mr. Lu served as the
recording department director of Zhengzhou Television Station.  He has been
honored as one of the sixth top ten excellent youth of Xinzheng City in June
2005, and elected into the second Union of Youth Committee in April 2006.
 Mr. Lu graduated from Northwest College in business
administration.
 
 Harry Edelsonbecame our director on March 17, 2009 and served as COAC’s chairman of
the board and chief executive officer from its inception to its merger with us
in March 2009.  Since August 1984, he has been the managing partner of
Edelson Technology Partners, which manages a series of five venture capital
technology funds (the “Edelson Funds”) for ten multinational corporations
(AT&T, Viacom, Ford Motor, Cincinnati Bell, Colgate Palmolive, Reed
Elsevier, Imation, Asea Brown Boveri and UPS) and two large pension funds. Mr.
Edelson previously worked for Merrill Lynch, Drexel Burnham Lambert and CS First
Boston.  Mr. Edelson is a former president of the Analyst Club, the
oldest club on Wall Street, founded in 1925, and is President and a founding
member of the China Investment Group LLC, an organization formed to provide a
forum to update and exchange its members’ knowledge of China. He has been a
member of the Juilliard Council since 2001. The Julliard Council is one of the
world’s leading schools in the fields of music, dance and acting. Mr. Edelson
was honored in the Knesset by receiving the Israel 50th
Anniversary Award from the Prime Minister of Israel. Mr. Edelson is a member of
the Asia Society and the China Cultural Foundation. He is also an advisor to the
China Cultural Foundation. He has given numerous speeches in Hong Kong, China
and the United States on investing in China. Mr. Edelson received a B.S. from
Brooklyn College and an MBA from New York University Graduate School of
Business.
 
 Dr. J.P. Huangbecame our director on March 17, 2009 and has been Founder, Chairman
Emeritus and Chief Strategic Adviser of Jpigroup Inc. since
1988.  Under Dr. Huang’s advisory guidance, Jpigroup has been one of
China’s major private investment and development companies that has invested and
advised in the areas of manufacturing, human capital development, technologies
and financial services.  From 1985 and prior to founding Jpigroup, Dr.
Huang worked for the Government of China in the former Ministry of Foreign
Economic Relations and Trade and during that time, he was very active and
instrumental in helping formulating some of China’s first open door strategies
and reform plans, especially in the area of international investment and trade.
Dr. Huang holds a Ph.D. in economics from University of International Business
and Economics in Beijing, where he now concurrently holds a Professorship in
Finance. Dr. Huang acted as a consultant to COAC in connection with our merger
with COAC.
 
 Kwok Keung Wongbecame our director on March 17, 2009.  Mr. Wong has in-depth
and practical business working experience in dealing with Chinese companies and
the Chinese government and assisting foreign investors in doing investments in
China for more than twenty years. Since 2000, he has been the Senior Consultant
of Thundercap Investments Consultant Limited, a consulting company that advises
Chinese clients regarding the raising of funds through Sino-foreign joint
ventures, private investment and overseas initial public offerings. Since 1986,
Mr. Wong has been a private consultant providing services in the areas of
marketing, manufacturing, production, financing and management to more than
twenty Chinese enterprises. From 2000 to 2007, he provided consultation services
and successfully assisted three Chinese companies in completing initial public
offerings in Singapore.
 
 Yunlong
Wang became our director on March 17, 2009 and has been the Head and
Chief Engineer of Biotech Research Center of Henan Province in China since
2000.  Professor Wang specializes in human cell research and has
published over twenty theses in that and related fields.  He has been
admitted and recognized as a member Specialist in Bio-engineering by the State
Council of China.  He also served as a Professor at the Henan
Vocational Institute since 2005.
 
 Maotong Xubecame our director on March 17, 2009 and has been the secretary of the
board of directors of Henan Green since 2000.  Prior to joining Henan
Green, Mr. Xu had served with Henan Luoyang Steel Group from 1966 to 1997 as
technician, engineer, vice general engineer and vice factory director.  Mr.
Xu received a Bachelor’s degree from Beijing Steel College.
 
 In
connection with the business combination with COAC, the then shareholders of
China Gerui and Mr. Edelson entered into a voting agreement with China Gerui,
pursuant to which each of the shareholders of China Gerui and Mr. Edelson agreed
to vote their China Gerui ordinary shares in favor of the election of Mingwang
Lu, Yi Lu, Wong Kwok Keung, Maotong Xu, Yunlong Wang, Harry Edelson, and J.P.
Huang as directors of China Gerui in specified classes in all elections through
the annual meeting of China Gerui that will be held in 2011.
  41
  The
address of our directors and executive officers is c/o Henan Green Complex
Materials Co., Ltd., No. 69 Huaibei Street, Longhai Middle Road, Zhengzhou,
Henan Province, China, 451191.  No family relationship exists between
any of our directors and executive officers, except that Mr. Yi Lu is the son of
our Chairman and CEO, Mingwang Lu.
 
 Compensation
 
 Compensation
of Directors and Senior Management
 
 In 2009,
we paid an aggregate of $0.2 million in cash compensation to our directors and
senior management as a group.  None of our directors or senior
management received any equity awards, including options, restricted stock or
other equity incentives in 2009.  We do not set aside or accrue any
amounts for pension, retirement or other benefits for our directors and senior
management.  However, we reimburse our directors for out-of-pocket
expenses incurred in connection with their services in such
capacity.
 
 We plan
to enter into a contract with each of our independent directors, in which the
compensation to each independent director for his or her service as a director
will be determined.
 
 Employment
Agreements
 
 As
required by local Chinese labor law, our indirect subsidiary Henan Green has
entered into employment agreements with each member of our senior management,
which have substantially similar terms.   Under these agreements,
each of our executive officers is employed for a specified time period, but
Henan Green may terminate his or her employment for cause, at any time, without
notice or remuneration, for certain acts, including but not limited to, his or
her conviction of crimes, his or her breach of material corporate policy and his
or her failure to perform his or her duties to our material
detriment.  Furthermore, either we or an executive officer may
terminate his or her employment at any time without cause upon advance written
notice to the other party.  If we terminate an executive officer’s
employment without cause, we will pay the executive officer severance pay in
accordance with applicable law. We do not have other arrangements with any
executive officers for special termination benefits.
  Each
executive officer has agreed to hold, both during the employment term and after
employment terminates, in confidence any of our trade secrets, know-how or
financial, trading or other confidential information.  In addition,
each executive officer has agreed to be bound by non-competition restrictions
set forth in his or her employment agreement and is prohibited from providing
services to our competitors or operating businesses that compete against us for
a period of five years following termination or expiration of his or her
employment agreement.
 
 Board
Practices
 
 Terms
of Directors and Executive Officers
  Our board
consists of seven members, who were elected as our directors in connection with
the business combination with COAC on March 17, 2009.  Our board is a
classified board consisting of three classes of directors.  The Class
I directors shall be elected for a three year term of office, the Class II
directors shall be elected for a two year term of office and the Class III
directors shall be elected for a one year term of office.  The current
board members are classified as follows:
 
 ·
              in
      the class to stand for reelection in 2010: Maotong Xu and J.P.
      Huang;
 
 ·
              in
      the class to stand for reelection in 2011: Kwok Keung Wong and Harry
      Edelson; and
 
 ·
              in
      the class to stand for reelection in 2012: Mingwang Lu, Yi Lu and Yunlong
      Wang.
 
 At a
general meeting in each year, successors to the class of directors whose term
expires in that year shall be elected for a three year term.  A
majority of votes cast at the relevant meeting shall be sufficient to elect
directors.  The directors may appoint one or more directors to fill a
vacancy on the Board.
  42
  Our
executive officers are appointed by our board.  The executive officers
shall hold office until their successors are duly elected and qualified, but any
officer elected or appointed by the directors may be removed at any time, with
or without cause, by resolution of directors.  Any vacancy occurring
in any office may be filled by resolution of directors.
  Independence
of Directors
  We have
elected to follow the rules of NASDAQ to determine whether a director is
independent.  Our board will also consult with counsel to ensure that
our board’s determinations are consistent with those rules and all relevant
securities and other laws and regulations regarding the independence of
directors.  Rule 5605(a)(2) of Listing Rules of The Nasdaq Stock
Market, Inc., or the Nasdaq Listing Rules, defines an “independent director”
generally as a person, other than an officer of the Company, who does not have a
relationship with the Company that would interfere with the director’s exercise
of independent judgment.  Consistent with these considerations, our
board has affirmatively determined that, Yunlong Wang, Maotong Xu, Kwok Keung
Wong and J.P. Huang are our independent directors.
 
 Board Committees
  Audit
Committee
 
 Our audit
committee consists of Messrs. Maotong Xu, Kwok Keung Wong and J.P. Huang, with
Maotong Xu serving as chairman.  Our board has also determined that
J.P. Huang possesses the accounting or related financial management experience
that qualifies him as financially sophisticated within the meaning of Rule
5605(c)(2)(A) of the Nasdaq Listing Rules and that he is an “audit committee
financial expert” as defined by the rules and regulations of the
SEC.
 
 The audit
committee is mainly responsible for, among other things:
 
 ·
              selecting
      our independent auditors and pre-approving all auditing and non-auditing
      services permitted to be performed by our independent
      auditors;
 
 ·
              reviewing
      with our independent auditors any audit problems or difficulties and
      management’s response;
 
 ·
              reviewing
      and approving all proposed related party transactions, as defined in Item
      404 of Regulation S-K under the Securities
Act;
 
 ·
              discussing
      the annual audited financial statements with management and our
      independent auditors;
 
 ·
              monitoring
      the independence of the independent
auditor;
 
 ·
              verifying
      the rotation of the audit partners having primary responsibility for the
      audit and the audit partner responsible for reviewing the audit as
      required by law;
 
 ·
              inquiring
      and discussing with management the Company’s compliance with applicable
      laws and regulations;
 
 ·
              determining
      the compensation and oversight of the work of the independent auditor
      (including resolution of disagreements between management and the
      independent auditor regarding financial reporting) for the purpose of
      preparing or issuing an audit report or related work;
  and
 
 ·
              establishing
      procedures for the receipt, retention and treatment of complaints received
      by the Company regarding accounting internal accounting controls or
      reports which raise material issues regarding the Company’s financial
      statements or accounting policies.
  Compensation
Committee
 
 Our
compensation committee consists of Messrs. Maotong Xu, Kwok Keung Wong and J.P.
Huang, with Maotong Xu serving as chairman.  Our compensation
committee reviews and approves compensation paid to our officers and directors
and to administer our incentive compensation plans, should any such plans be
adopted in the future, including authority to make and modify awards under such
plans.
  43
  The
Compensation Committee is mainly responsible for, among other
things:
 
 ·
              approving
      and overseeing the compensation for our executive
  officers;
 
 ·
              reviewing
      and approving corporate goals and objectives relevant to the compensation
      of our chief executive officer, evaluating the performance of our chief
      executive officer in light of those goals and objectives, and setting the
      compensation level of our chief executive officer based on this
      evaluation; and
 
 ·
              reviewing
      periodically and making recommendations to the board regarding any
      long-term incentive compensation or equity plans, programs or similar
      arrangements, annual bonuses, employee pension and welfare benefit plans;
      and reviewing and making recommendations to the board regarding succession
      plans for the chief executive officer and other senior
      officers.
 
 Nominating
and Corporate Governance Committee
 
 Our
nominating and corporate governance committee consists of Messrs. Maotong
Xu, Kwok Keung Wong and J.P. Huang, with Maotong Xu serving as
chairman.  The corporate governance and nominating committee assists
the board of directors in identifying individuals qualified to become our
directors and in determining the composition of the board and its
committees.
 
 The
nominating and corporate governance committee is mainly responsible for, among
other things:
 
 ·
              selecting
      or recommending to the board the nominees for election as directors or for
      appointment to fill any vacancy;
 
 ·
              selecting
      or recommending to the board the directors to be appointed to each
      committee of the board;
 
 ·
              overseeing
      the board in the board’s annual review of its performance and making
      appropriate recommendations to improve performance;
  and
 
 ·
              performing
      any other duties or responsibilities expressly delegated to the committee
      by the board from time to time relating to the nomination of board and
      committee members.
 
 Employees
  We had
627, 588 and 560 full-time employees as of December 31, 2009, 2008 and 2007,
respectively. The following table sets forth the number of our employees for
each of our areas of operations as of December 31, 2009:
 
 Category
                  
                  Number of Employees
                  
                  
                  % of TotalManufacturing
                  
                  
                  518
                  
                  
                  
                  83
                  %Sales
      and Marketing
                  
                  
                  29
                  
                  
                  
                  5
                  %General
      Administration, Purchasing and Logistics
                  
                  
                  59
                  
                  
                  
                  9
                  %Technology
      and Research & Development
                  
                  
                  21
                  
                  
                  
                  3
                  %Total
                  
                  
                  627
                  
                  
                  
                  100
                  %
 
 From time
to time, we also employ third-party consultants for R&D of our
products.  We believe that we maintain a satisfactory working
relationship with our employees and we have not experienced any significant
labor disputes or any difficulty in recruiting staff for our
operations.
 
 As
required by applicable Chinese law, through Henan Green, we have entered into
employment contracts with all of our officers, managers and
employees.  It is required by Chinese law to make several mandatory
contributions for our employees, including social pension, medical insurance,
unemployment insurance, work-related injury insurance and maternity
insurance.  As of the date of this report, we are in compliance with
the applicable PRC employee law and regulations and have made the contributions
required by the applicable laws.
  44
  Share
Ownership
 
 The
following table sets forth information with respect to the beneficial ownership
of our ordinary shares as of April 30, 2010 by (i) each person who is known by
us to beneficially own more than 5% of our ordinary shares; (ii) by each of our
officers and directors; and (iii) by all of our officers and directors as a
group.  The address of each of the persons set forth below is in care
of the Company, No. 69 Huaibei Street, Longhai Middle Road, Zhengzhou, Henan
Province, China, 451191.
 
 Name
      and Address of BeneficialOwner
                                                                  
                                                                  Office,
      if any
                                                                  
                                                                  Title
      of Class
                                                                  
                                                                  Amount
      andNature ofBeneficialOwnership(1)
                                                                  
                                                                  
                                                                  %
      ofClass(2)Officers
      and DirectorsMingwang
      Lu
                                                                  
                                                                  Chairman
      and CEO
                                                                  
                                                                  Ordinary
      Shares
                                                                  
                                                                  
                                                                  0
                                                                  
                                                                  
                                                                  
                                                                  *Edward
      Meng
                                                                  
                                                                  Chief
      Financial Officer
                                                                  
                                                                  Ordinary
      Shares
                                                                  
                                                                  
                                                                  0
                                                                  
                                                                  
                                                                  
                                                                  *Yi
      Lu
                                                                  
                                                                  General
      Manager and Director
                                                                  
                                                                  Ordinary
      Shares
                                                                  
                                                                  
                                                                  0
                                                                  
                                                                  
                                                                  
                                                                  *Harry
      Edelson
                                                                  
                                                                  Director
                                                                  
                                                                  Ordinary
      Shares
                                                                  
                                                                  
                                                                  3,276,318
                                                                  (3)
                                                                  
                                                                  
                                                                  7.78
                                                                  %J.P.
      Huang
                                                                  
                                                                  Director
                                                                  
                                                                  Ordinary
      Shares
                                                                  
                                                                  
                                                                  0
                                                                  
                                                                  
                                                                  
                                                                  *Kwok
      Keung Wong
                                                                  
                                                                  Director
                                                                  
                                                                  Ordinary
      Shares
                                                                  
                                                                  
                                                                  985,500
                                                                  (4)
                                                                  
                                                                  
                                                                  2.34
                                                                  %Yunlong
      Wang
                                                                  
                                                                  Director
                                                                  
                                                                  Ordinary
      Shares
                                                                  
                                                                  
                                                                  0
                                                                  
                                                                  
                                                                  
                                                                  *Maotong
      Xu
                                                                  
                                                                  Director
                                                                  
                                                                  Ordinary
      Shares
                                                                  
                                                                  
                                                                  0
                                                                  
                                                                  
                                                                  
                                                                  *All
      officers and directors as a group (8 persons named above)
                                                                  
                                                                  
                                                                  
                                                                  Ordinary
      Shares
                                                                  
                                                                  
                                                                  4,261,818
                                                                  (3)(4)
                                                                  
                                                                  
                                                                  10.12
                                                                  %5%
      Security HoldersOasis Green
      Investments Group(5)
                                                                  
                                                                  
                                                                  
                                                                  Ordinary
      Shares
                                                                  
                                                                  
                                                                  30,222,000
                                                                  
                                                                  
                                                                  
                                                                  71.75
                                                                  %All
      persons named above as a group
                                                                  
                                                                  
                                                                  
                                                                  Ordinary
      Shares
                                                                  
                                                                  
                                                                  34,483,818
                                                                  (3)(4)
                                                                  
                                                                  
                                                                  81.87
                                                                  %
  * Less
than 1%.
 
 (1)
              Beneficial
      Ownership is determined in accordance with the rules of the Securities and
      Exchange Commission and generally includes voting or investment power with
      respect to securities.  Except as otherwise indicated, each of
      the beneficial owners listed above has direct ownership of and sole voting
      power and investment power with respect to our ordinary
      shares.
 
 (2)
              A
      total of 42,120,438 (including shares included in our units) of our
      ordinary shares as of April 30, 2010 are outstanding pursuant to SEC Rule
      13d-3(d)(1).  Ordinary shares that may be acquired by an
      individual or group within 60 days of April 30, 2010, pursuant to the
      exercise of warrants or options, are deemed to be outstanding for the
      purpose of computing the percentage ownership of such individual or group,
      but are not deemed to be outstanding for the purpose of computing the
      percentage ownership of any other person shown in the above
      table.
 
 (3)
              Includes
      1,666,667 shares underlying a warrant to purchase shares of our ordinary
      shares.
 
 (4)
              Includes
      985,500 of our ordinary shares owned by Honest Joy Group Limited, which is
      wholly-owned by Mr. Wong.  Mr. Wong may be deemed to be a
      beneficial owner of the shares held by Honest Joy Group
      Limited.
 
 (5)
              Oasis
      Green Investments Group, or Oasis Green, is wholly owned by Ms. Yuying Lu,
      an Australian citizen.  Ms. Lu is the daughter of our Chairman
      and CEO, Mingwang Lu, but does not live in the same
      household.  Ms. Lu may be deemed to be a beneficial owner of the
      shares held by Oasis Green.
 
 None of
our major shareholders have different voting rights from other
shareholders.  We are not aware of any arrangement that may, at a
subsequent date, result in a change of control of our company.
 
 ITEM
7.      MAJOR SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS
 
 Major
Shareholders
 
 Please
refer to Item 6, “Directors, Senior Management and Employees — Share
Ownership.”
  45
  Related
Party Transactions
 
 The
following includes a summary of transactions since the beginning of the 2009
fiscal year between us and certain related persons.  We believe the
terms obtained or consideration that we paid or received, as applicable, in
connection with the transactions described below were comparable to terms
available or the amounts that would be paid or received, as applicable, in
arm’s-length transactions.
 
 ·
              In
      connection with our merger with COAC, Oasis Green, our majority
      shareholder, agreed to deposit 3,000,000 of the ordinary shares it owns in
      escrow, pursuant to the Escrow Agreement among us, Oasis Green and
      Continental Stock Transfer & Trust Company, as escrow agent, to secure
      Oasis Green’s obligations under the Agreement of Merger and Plan of
      Reorganization, or the Merger Agreement, to indemnify the surviving entity
      of the merger for damages arising out of the merger until the later of (i)
      30 days after the date on which we have filed this annual report on Form
      20-F for our 2009 fiscal year or (ii) one year after the closing of the
      merger.
 
 ·
              Oasis
      Green, Plumpton Group Limited and Honest Joy Group Limited, or the
      Original Shareholders, were entitled under the Merger Agreement to be
      issued an aggregate of 1,000,000 of our ordinary shares for each of the
      years ending on December 31, 2009, 2010 and 2011 in which we have net
      after tax income that equals or exceeds the target specified for such year
      in the Merger Agreement ($45 million, $60 million and $80 million,
      respectively).  At the time of our merger with COAC, we received
      less cash than was originally expected which caused us to temporarily
      delay some of our anticipated capital expansion and improvement
      projects.  Consequently, it was expected that we would grow
      at a slower rate than anticipated at the time of the
      merger.  Due to this change, on September 15, 2009, we entered
      into an agreement with the Original Shareholders to issue to them an
      aggregate of 2,850,000 ordinary shares as full consideration for a release
      from the aforementioned obligations under the Merger
      Agreement.
 
 ·
              In
      connection with our merger with COAC, each of the Original Shareholders
      agreed not to sell its ordinary shares for 12 months (in the case of Oasis
      Green) and six months (in the case of the other two shareholders) after
      the closing of the merger, subject to limited exceptions (including
      transfer to family, transfer after death, transfer to entities control by
      the transferor).
 
 ·
              Other
      than reimbursable out-of-pocket expenses payable to the officers and
      directors of COAC in connection with our merger transaction, no
      compensation or fees of any kind, including finder’s fees, consulting fees
      or other similar compensation, has been or will be paid to any of our
      officers, directors or substantial shareholder, or to any of their
      respective affiliates, except for a $7,500 monthly fee paid to Edelson
      Technology Inc., an affiliate of Mr. Edelson, for office space and
      secretarial and administrative services, and a $10,000 monthly fee paid to
      Mr. Edelson described in the bullet-point item that immediately
      follows.  The arrangement with and payment of the fee to Edelson
      Technology Inc. terminated upon consummation of the merger. A total of
      $180,000 was paid to Edelson Technology Inc. pursuant to such arrangement
      through the date of the merger.
 
 ·
              Since
      January 2010, we have paid Mr. Edelson a monthly fee of $10,000 in return
      for his verbal agreement to perform certain services.  These
      services have included or may include the following: (a) helping to
      promote awareness of the Company within the investment community through
      introductions to investors, investment banks, and research analysts; (b)
      participation in future deal or non-deal road shows and financing
      activities of the Company upon request and at the discretion of the
      Company and the Board of Directors; (c) assistance in investor conference
      presentations, whether or not management of the Company is able to be
      present; (d) providing occasional office use and communication facilities
      where required by the Company; (e) monitoring and providing capital market
      feedback on the Company; and (f) such other activities as may be requested
      of him, from time to time, by the Board or executive management team of
      the Company.
 
 ·
              In
      connection with COAC’s initial public offering, Mr. Edelson entered into
      an agreement with EarlyBirdCapital, which is intended to comply with Rule
      10b5-1 under the Exchange Act, pursuant to which he placed limit orders
      for $3 million of our ordinary shares commencing November 26, 2008 which,
      pursuant to such agreement, was ten business days after COAC filed its
      Report on Form 6-K announcing our execution of the merger agreement. Mr.
      Edelson purchased an aggregate of 509,521 shares of COAC ordinary shares
      in accordance with such agreement at an average price of $5.89 per share.
      Mr. Edelson may vote these shares any way he chooses. Mr. Edelson has
      agreed that he will not sell or transfer any ordinary shares purchased by
      him pursuant to this agreement until one year after COAC has completed the
      merger. It is intended that these purchases will comply with Rule 10b-18
      under the Exchange Act. These purchases were made by EarlyBirdCapital in
      such amounts and at such times as EarlyBirdCapital determined, in its sole
      discretion. As a result of EarlyBirdCapital’s interest in our consummation
      of a business combination, it may not be deemed to be independent for
      purposes of this agreement.
  46
  ·
              Before
      2007, Zhengzhou No. 2 Iron and Steel Company Limited, or Zhengzhou, was
      one of the owners of Henan Green with 76.93% of the total
      ownership.  In December 2006, Zhengzhou sold all of its
      ownership to our Chairman and CEO, Mingwang Lu and others, whereby Mr. Lu
      became a major owner holding 40% of the total ownership.  In
      2008, the holders transferred their ownership interests in Henan Green to
      China Gerui.  Mingwang Lu was a common owner of Henan Green and
      Zhengzhou. Zhengzhou engaged in the same type of industry as Henan Green
      but ceased its processing and selling of steel operation in 2003 and its
      principal business activity after the cessation of its steel operations is
      receiving rental income from its investments.  In 2004, we
      entered into a rental agreement for land use rights with Zhengzhou with
      the term from January 1, 2005 to December 30, 2014.  In December
      2008, we entered into a new lease with the related party lessor, which
      replaces the 2004 rental agreement.  The new lease term
      commenced on January 1, 2008 and terminates on December 31,
      2027.  Rental paid to Zhengzhou for the fiscal year ended
      December 31, 2009 was $8,781.  Rent payable under the lease will
      increase by 10% annually beginning in 2010.  Zhengzhou also
      guarantees our obligations under short term bank loans.  We do
      not pay any consideration to this related guarantor for guaranteeing our
      obligations.
 
 Interests
of Experts and Counsel
 
 Not
applicable.
 
 ITEM
8.        FINANCIAL
INFORMATION
 
 Consolidated
Statements and Other Financial Information
  Financial
Statements
 
 We have
appended consolidated financial statements filed as part of this annual report.
See Item 18, “Financial Statements.”
 
 Legal
Proceedings
  We may be
subject to legal proceedings, investigations and claims incidental to the
conduct of our business from time to time.  We are currently not a
party to any litigation or other legal proceedings brought against
us.  We are also not aware of any legal proceeding, investigation or
claim, or other legal exposure that has a more than remote possibility of having
a material adverse effect on our business, financial condition or results of
operations.
 
 Dividend
Policy
 
 Our
operating subsidiary, Henan Green, paid dividends of $42.3 million and $16.1
million and in 2008 and 2007, respectively, prior to our 2009 merger with
COAC.  In 2009,
we issued a total of 2,850,000 ordinary shares to certain shareholders in
consideration for a release of claims relating to our March 2009
merger.  This issuance was accounted for as a dividend of $9.6 million
in connection with the accounting of our March 2009 merger as a
recapitalization.For the foreseeable future, we intend to retain
any future earnings to fund the operation and expansion of our business and do
not anticipate paying cash dividends on our ordinary shares.
 
 The
payment of any dividends in the future will be within the discretion of our
board of directors, subject to the relevant provision of BVI law.
 
 Significant
Changes
 
 No
significant change has occurred since the date of our consolidated financial
statements filed as part of this annual report.
  ITEM
9.        THE OFFER AND
LISTING
 
 Offer
and Listing Details
 
 The
common stock, warrants and units of COAC were quoted on the Over-the-Counter
Bulletin Board maintained by the Financial Industry Regulatory Authority, under
the symbols of CHNQ, CHNQW and CHNQU, respectively.  COAC units
commenced public trading on March 22, 2007 and common stock and warrants
commenced public trading on April 18, 2007.
  47
  On March
17, 2009, COAC merged with and into us.  As a result of the merger,
COAC’s outstanding shares of common stock, warrants and units have been
converted into like securities of us on a one-to-one basis.  Our
ordinary shares, warrants and units were quoted on the Over-the-Counter Bulletin
Board under the symbols of GGEEF, GGENF and GGETF, respectively, effective April
27, 2009.
 
 Effective
November 10, 2009, our ordinary shares, warrants and units began trading on
the Nasdaq Global Market under the symbols “CHOP”, “CHOPW”, and “CHOPU”,
respectively.
 
 The
following table provides the high and low closing bid prices for our ordinary
shares, units and warrants and the historical prices for COAC’s common stock,
warrants and units prior to the merger, for the periods indicated
below.  The over-the-counter market quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not necessarily
reflect actual transactions.
 
 Ordinary Shares/Common Stock*
                  
                  
                  Warrants
                  
                  
                  UnitsHigh
                  
                  
                  Low
                  
                  
                  High
                  
                  
                  Low
                  
                  
                  High
                  
                  
                  LowAnnual
      Market PricesYear
      2007 (from March 22, 2007)
                  
                  $
                  5.76
                  
                  
                  $
                  5.30
                  
                  
                  $
                  1.08
                  
                  
                  $
                  0.55
                  
                  
                  $
                  7.85
                  
                  
                  $
                  6.05Year
      2008
                  
                  
                  5.86
                  
                  
                  
                  5.30
                  
                  
                  
                  .99
                  
                  
                  
                  0.01
                  
                  
                  
                  7.75
                  
                  
                  
                  5.40Year
      2009
                  
                  
                  10.00
                  
                  
                  
                  3.01
                  
                  
                  
                  1.80
                  
                  
                  
                  0.10
                  
                  
                  
                  6.34
                  
                  
                  
                  5.95Year
      2010 (through April 30, 2010)
                  
                  
                  8.20
                  
                  
                  
                  5.55
                  
                  
                  
                  3.00
                  
                  
                  
                  1.21
                  
                  
                  
                  ***
                  
                  
                  
                  ***Quarterly
      Market PricesFirst
      Quarter 2008
                  
                  
                  5.62
                  
                  
                  
                  5.50
                  
                  
                  
                  0.99
                  
                  
                  
                  0.57
                  
                  
                  
                  7.75
                  
                  
                  
                  6.95Second
      Quarter 2008
                  
                  
                  5.75
                  
                  
                  
                  5.50
                  
                  
                  
                  0.62
                  
                  
                  
                  0.46
                  
                  
                  
                  6.85
                  
                  
                  
                  6.51Third
      Quarter 2008
                  
                  
                  5.86
                  
                  
                  
                  5.53
                  
                  
                  
                  0.50
                  
                  
                  
                  0.23
                  
                  
                  
                  6.50
                  
                  
                  
                  5.60Fourth
      Quarter 2008
                  
                  
                  5.85
                  
                  
                  
                  5.30
                  
                  
                  
                  0.30
                  
                  
                  
                  0.01
                  
                  
                  
                  6.00
                  
                  
                  
                  5.40First
      Quarter 2009
                  
                  
                  6.00
                  
                  
                  
                  3.01
                  
                  
                  
                  0.45
                  
                  
                  
                  0.10
                  
                  
                  
                  6.34
                  
                  
                  
                  5.95Second
      Quarter 2009**
                  
                  
                  10.00
                  
                  
                  
                  5.55
                  
                  
                  
                  0.75
                  
                  
                  
                  0.15
                  
                  
                  
                  ***
                  
                  
                  
                  ***Third
      Quarter 2009**
                  
                  
                  9.00
                  
                  
                  
                  6.00
                  
                  
                  
                  1.25
                  
                  
                  
                  0.35
                  
                  
                  
                  ***
                  
                  
                  
                  ***Fourth
      Quarter 2009**
                  
                  
                  9.75
                  
                  
                  
                  4.99
                  
                  
                  
                  1.80
                  
                  
                  
                  0.70
                  
                  
                  
                  ***
                  
                  
                  
                  ***Monthly
      Market PricesJanuary
      2010**
                  
                  
                  7.50
                  
                  
                  
                  5.55
                  
                  
                  
                  2.30
                  
                  
                  
                  1.21
                  
                  
                  
                  ***
                  
                  
                  
                  ***February
      2010**
                  
                  
                  6.84
                  
                  
                  
                  6.10
                  
                  
                  
                  1.95
                  
                  
                  
                  1.39
                  
                  
                  
                  ***
                  
                  
                  
                  ***March
      2010**
                  
                  
                  8.20
                  
                  
                  
                  6.28
                  
                  
                  
                  3.00
                  
                  
                  
                  1.75
                  
                  
                  
                  ***
                  
                  
                  
                  ***April
      2010**
                  
                  
                  7.92
                  
                  
                  
                  6.84
                  
                  
                  
                  2.77
                  
                  
                  
                  1.91
                  
                  
                  
                  ***
                  
                  
                  
                  ***
 
 *The
above table sets forth the range of high and low closing bid prices per share of
our ordinary shares as reported by www.quotemedia.com for the periods indicated.
 
 **Reflects
the price range of our ordinary shares after the completion of our business
combination transaction with COAC in March 2009.
 
 ***Market
data is unavailable.
 
 Plan
of Distribution
 
 Not
applicable.
 
 Markets
 
 See our
disclosures above under “Offer and Listing Details.”
 
 Selling
Shareholders
 
 Not
applicable.
  48
  Dilution
 
 Not
applicable.
 
 Expenses
of the Issue
 
 Not
applicable.
 
 ITEM
10.      ADDITIONAL INFORMATION
 
 Share
Capital
 
 Not
applicable.
 
 Memorandum
and Articles of Association
 
 The
following represents a summary of certain key provisions of the Company’s
amended and restated memorandum and articles of association.  The
summary does not purport to be a summary of all of the provisions of our
memorandum and articles of association and of all relevant provisions of BVI law
governing the management and regulation of BVI companies.
 
 Register
  We were
incorporated in the BVI on March 11, 2008 under the BVI Business Companies Act,
2004, or the Act.  We filed a Certificate of Change of Name to change
our name from Golden Green Enterprises Limited to China Gerui Advanced Materials
Group Limited on December 14, 2009.  Our amended and restated
memorandum of association authorizes the issuance of up to 100,000,000 shares
without par value.
 
 Objects
and Purposes
  Our
amended and restated memorandum of association grants us full power and capacity
to carry on or undertake any business or activity and do any act or enter into
any transaction not prohibited by the Act or any other BVI
legislation.
 
 Directors
  We have a
classified board of directors consisting of three classes of directors, Class I,
Class II and Class III.  At the first general meeting held after the
date of the adoption of our amended and restated articles of association, the
Class I directors shall be elected for a three year term of office, the Class II
directors shall be elected for a two year term of office and the Class III
directors shall be elected for a one year term of office.  At a
general meeting in each year, successors to the class of directors whose term
expires in that year shall be elected for a three year term.  A
majority of votes cast at the relevant meeting shall be sufficient to elect
directors.  The directors may appoint one or more directors to fill a
vacancy on the Board.  A director shall not require a share
qualification, and may be an individual or a company.
  Directors
have the powers necessary for managing, and for directing and supervising our
business and affairs.  Directors may engage in transactions with us
and vote on such transactions, provided the nature of the interest is disclosed
to the entire board of directors.  With the prior or subsequent
approval by an ordinary resolution of members (i.e., shareholders), the
directors may, by a resolution of directors, fix the emoluments of directors
with respect to services to be rendered in any capacity to us.  The
board of directors shall obtain our approval in a general meeting before making
any payment to any director or past director of us by way of compensation for
loss of office, or as consideration for or in connection with his retirement
from office.
 
 Rights
and Obligations of Shareholders
  Dividends
 
 Subject
to the Act, the directors may, by resolution of directors, authorize a
distribution (including a dividend) by us to members (i.e., shareholders) at such
time and of such an amount as they think fit if they are satisfied, on
reasonable grounds, that immediately after the distribution, the value of our
assets exceeds our liabilities and we are able to pay our debts as they fall
due.  Any distribution payable in respect of a share which has
remained unclaimed for three years from the date when it became due for payment
shall, if the board of the directors so resolves, be forfeited and cease to
remain owing by us.  The directors may, before authorizing any
distribution, set aside out of our profits such sum as they think proper as a
reserve fund, and may invest the sum so set apart as a reserve fund upon such
securities as they may select.
  49
  The
holder of each ordinary share has the right to an equal share in any
distribution paid by us.
 
 We do not
intend to pay any dividends to our shareholders in the foreseeable
future.
  Voting
Rights
  Each
ordinary share confers on the shareholder the right to one vote at a meeting of
the members or on any resolution of members on all matters before our
shareholders.
  Rights in the event of
winding up
  The
holder of each ordinary share is entitled to an equal share in the distribution
of the surplus assets of us on a winding up.
 
 Redemption
 
 We may
purchase, redeem or otherwise acquire and hold its own shares with the consent
of members whose shares are to be purchased, redeemed or otherwise acquired
unless we are permitted by the Act or any provision of the amended and restated
memorandum of association or the amended and restated articles of association to
purchase, redeem or otherwise acquire the shares without their consent. We
may only offer to acquire shares if at the relevant time the directors determine
by resolution of directors that immediately after the acquisition the value of
our assets exceeds our liabilities and we are able to pay our debts as they fall
due.
 
 The
directors may make an offer to purchase, redeem or otherwise acquire shares
issued by us if the offer is (i) an offer to all members that would, if
accepted, leave the relative voting and distribution rights of the members
unaffected and affords each member a reasonable opportunity to accept the offer;
or (ii) an offer to one or more members which either (1) all members have
consented to in writing or (2) the directors have passed a resolution of
directors stating that, in their opinion (a) the purchase, redemption or other
acquisition is to the benefit of the remaining members and (b) that the terms of
the offer and the consideration offered for the shares are fair and reasonable
to us and to the remaining members, and setting out the reasons for their
opinion.
 
 We may
purchase, redeem or otherwise acquire our shares at a price lower than the fair
value if permitted by, and then only in accordance with, the terms of the
amended and restated memorandum and articles of association or a written
agreement for the subscription for the shares to be purchased, redeemed or
otherwise acquired.
 
 Changes
in the rights of shareholders
 
 The
rights attached to any class or series of shares (unless otherwise provided by
the terms of issue of the shares of that class or series), whether or not
we are being wound-up, must be varied with the consent in writing of all
the holders of the issued shares of that class or series or with the sanction of
a resolution passed by a majority of the votes cast at a separate meeting of the
holders of the shares of the class or series.
 
 Meetings
 
 An annual
meeting of members must be held each year at such date and time as may be
determined by the directors.  The directors shall call a meeting of
the members if requested in writing to do so by members entitled to exercise at
least 30% of the voting rights in respect of the matter for which the meeting is
being held.  No less than ten days and not more than sixty days notice
of meetings is required to be given to members.
 
 A meeting
of members is properly constituted if at the commencement of the meeting there
are two (2) members present in person or by proxy or (in the case of a member
being a corporation) by its duly authorized representative representing not less
than one third of the votes of the shares or class or series of shares entitled
to vote on resolutions of members to be considered at the meeting.
  50
  A member
shall be deemed to be present at the meeting if he participates by telephone or
other electronic means and all members participating in the meeting are able to
hear each other.
 
 An
ordinary resolution of members is a resolution approved at a duly constituted
meeting of members by the affirmative vote of a simple majority of the votes
cast by such members entitled to vote and voting on the resolution.  A
special resolution of members is a resolution passed by a majority of not less
than two-thirds of votes cast by such members as, being entitled so to do, vote
in person or, in the case of such members as are corporations, by their
respective duly authorized representative or, where proxies are allowed, by
proxy at a general meeting of which not less than ten (10) clear days’ notice,
specifying the intention to propose the resolution as a special resolution, has
been duly given, provided that, except in the case of an annual general meeting,
if it is so agreed by a majority in number of the members having the right to
attend and vote at any such meeting, being a majority together holding not less
than ninety-five (95) per cent in nominal value of the shares giving that right
and in the case of an annual general meeting, if it is so agreed by all members
entitled to attend and vote thereat, a resolution may be proposed and passed as
a special resolution at a meeting of which less than ten (10) clear days’ notice
has been given.
 
 The
inadvertent failure of the directors to give notice of a meeting to a member, or
the fact that a member has not received notice, does not invalidate the
meeting.
 
 A member
may be represented at a meeting of members by a proxy (who need not be a member)
who may speak and vote on behalf of the member.  A written instrument
giving the proxy such authority must be produced at the place appointed for such
purpose not less than 48 hours before the time for holding the
meeting.
 
 Limitations
on Ownership of Securities
 
 There are
no limitations on the right of non-residents or foreign persons to own our
securities imposed by BVI law or by our amended and restated memorandum and
articles of association
 
 Change
in Control of Company
 
 A special
resolution of members is required for us to issue our shares or securities
convertible into our shares resulting in our change of
control.  Additionally, the board of directors is empowered to issue
preferred shares with such rights attaching to them as they decide and such
power could be used in a manner that would delay, defer or prevent a change of
control of our company
 
 Ownership
Threshold
 
 There are
no provisions governing the ownership threshold above which shareholder
ownership must be disclosed imposed by BVI law or by our amended and restated
memorandum and articles of association.
 
 Changes
in Capital
 
 Subject
to the provisions of the amended and restated memorandum and articles of
association, the Act and the rules of the Designated Stock Exchange, our
unissued shares shall be at the disposal of the directors who may, without
prejudice to any rights previously conferred on the holders of any existing
shares or class or series of shares, offer, allot, grant options over or
otherwise dispose of the shares to such persons, at such times and upon such
terms and conditions as we may by resolution of directors
determine.
 
 Subject
to the provisions of the memorandum of association relating to changes in the
rights of shareholders and the powers of directors in relation to preferred
shareholders, we may, by a special resolution of members, amend our memorandum
of association to increase or decrease the number of ordinary shares
authorized to be issued.
 
 Differences
in Corporate Law
 
 The
companies law of the BVI differs from laws applicable to U.S. corporations and
their shareholders.  Set forth below is a summary of the significant
differences between the provisions of the companies law applicable to us and the
laws applicable to companies incorporated in the United States and their
shareholders.
 
 51
  Protection for minority
shareholders
 
 Under the
laws of most U.S. jurisdictions, majority and controlling shareholders of a
company generally have certain “fiduciary” responsibilities to the minority
shareholders.  Corporate actions taken by majority and controlling
shareholders which are unreasonable and materially detrimental to the interests
of minority shareholders may be declared null and void.  Minority
shareholders may have less protection for their rights under BVI law than they
would have under U.S. law.
  Powers of
directors
  Unlike
most U.S. jurisdictions, the directors of a BVI company, subject in certain
cases to court approval but without shareholders’ approval, may implement the
sale, transfer, exchange or disposition of any Company asset, property, part of
the business, or securities, with the exception that shareholder approval is
required for the disposition of over 50% in the value of our total
assets.
  Conflict of
interests
  Similar
to the laws of most U.S. jurisdictions, when a director becomes aware of the
fact that he has an interest in a transaction which we are to enter into,
he must disclose it to our board.  However, with sufficient disclosure
of interest in relation to that transaction, the director who is interested in a
transaction entered into or to be entered into by us may (i) vote on a matter
relating to the transaction; (ii) attend a meeting of directors at which a
matter relating to the transaction arises and be included in the quorum; and
(iii) sign a document on behalf of us, or do any other thing in his
capacity as a director, that relates to the transaction.
 
 Written consent and
cumulative voting
  Similar
to the laws of most U.S. jurisdictions, under BVI law, shareholders are
permitted to approve matters by way of written resolution in place of a formal
meeting.  BVI law does not make a specific reference to cumulative
voting, and our current Memorandum and Articles of Association have no
provisions authorizing cumulative voting.
  Independent
directors
 
 There is
no requirement for a majority of our directors to be independent as a matter of
BVI law.
  Redemption
  Our
ordinary shares are not redeemable at a shareholder’s option.  We may
redeem our shares only with the consent of the shareholders whose shares are to
be redeemed, except that the consent from the shareholders whose shares are
being redeemed is not needed when (i) they are subject to compulsory redemption
by us following our receipt of a written request by a shareholder or
shareholders holding 90% of the votes of the outstanding ordinary shares
entitled to vote that such shares be redeemed or (ii) if the directors make an
offer to purchase, redeem or otherwise acquire shares that we have issued and
such offer is an offer to one or more members which either (1) all members have
consented to in writing or (2) the directors have passed a resolution of
directors stating that, in their opinion (a) the purchase, redemption or other
acquisition is to the benefit of the remaining members and (b) that the terms of
the offer and the consideration offered for the shares are fair and reasonable
to us and to the remaining members, and setting out the reasons for their
opinion..
  Takeover
provisions
  Some
provisions of our amended and restated memorandum and articles of association
may discourage, delay or prevent a change in control of our company or
management that shareholders may consider favorable.  For instance,
our directors are empowered to amend the relevant provisions of the memorandum
of association for the purposes of creating new classes or series of shares and
the rights attached thereto and may amend the articles of association to take
into account any ancillary changes required, provided that the directors do not,
however, have the power to amend the memorandum and articles of association to
(a) restrict the rights or powers of the members to amend the memorandum or
articles of association, (b) to change the percentage of members required to
pass a resolution to amend the memorandum and articles of association, or (c) in
circumstances where the memorandum or articles of association cannot be amended
by the members.
  52
  Shareholder’s access to
corporate records
  Pursuant
to the Act, a shareholder is entitled, on giving written notice to us, to
inspect our (i) memorandum and articles of association; (ii) register of
members; (iii) register of directors; and (iv) minutes of meetings and
resolutions of members and of those classes of members of which the shareholder
is a member.
  The
directors may, if they are satisfied that it would be contrary to our interests
to allow a member to inspect any document listed above (or any part thereof),
deny or limit the inspection of the document.
 
 Indemnification
  We shall
indemnify 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 any person who (i) 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, an officer or a
liquidator of us; or (ii) is or was, at our request, serving as a director,
officer or liquidator of, or in any other capacity is or was acting for, another
body corporate or a partnership, joint venture, trust or other
enterprise.  To be entitled to indemnification, these persons must
have acted honestly and in good faith and in what they believe to be our best
interest, and in the case of criminal proceedings, they must have had no
reasonable cause to believe their conduct was unlawful.
  Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling us under the foregoing
provisions, we have been advised that in the opinion of the SEC, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
 
 Mergers and similar
arrangements
 
 Under the
laws of the BVI, two or more companies may merge or consolidate in accordance
with Section 170 of the Act.  A merger means the merging of two or
more constituent companies into one of the constituent companies, and a
consolidation means the uniting of two or more constituent companies into a new
company.  In order to merge or consolidate, the directors of each
constituent company must approve a written plan of merger or consolidation which
must be authorized by a resolution of shareholders.
  While a
director may vote on the plan even if he has a financial interest in the plan of
merger of consolidation, in order for the resolution to be valid, the interest
must have been disclosed to our board forthwith upon him becoming aware of such
interest.
 
 Shareholders
not otherwise entitled to vote on the merger or consolidation may still acquire
the right to vote if the plan of merger or consolidation contains any provision
which, if proposed as an amendment to the memorandum or articles of association,
would entitle them to vote as a class or series on the proposed
amendment.  In any event, all shareholders must be given a copy of the
plan of merger or consolidation irrespective of whether they are entitled to
vote at the meeting or consent to the written resolution to approve the plan of
merger or consolidation.
  The
shareholders of the constituent companies are not required to receive shares of
the surviving or consolidated company, but may receive debt obligations or other
securities of the surviving or consolidated company, or other assets, or a
combination thereof.  Furthermore, some or all of the shares of a
class or series may be converted into a kind of asset while the other shares of
the same class or series may receive a different kind of
asset.  As such, not all the shares of a class or series must receive
the same kind of consideration.
 
 After the
plan of merger or consolidation has been approved by the directors and
authorized by a resolution of the shareholders, articles of merger or
consolidation are executed by each company and filed with the Registrar of
Corporate Affairs in the BVI.
  Dissenter
Rights
 
 A
shareholder may dissent from a mandatory redemption of his shares, an
arrangement (if permitted by the court), a merger (unless the shareholder was a
shareholder of the surviving company prior to the merger and continues to hold
the same or similar shares after the merger) and a consolidation.  A
shareholder properly exercising his dissent rights is entitled to payment of the
fair value of their shares.
  53
  A
shareholder dissenting from a merger or consolidation must object in writing to
the merger or consolidation before the vote by the shareholders on the merger or
consolidation, unless notice of the meeting was not given to the
shareholder.  If the merger or consolidation is approved by the
shareholders, we must within 20 days give notice of this fact to each
shareholder who gave written objection, and to each shareholder who did not
receive notice of the meeting.  Such shareholders then have
20 days to give us their written election in the form specified by the BVI
Business Companies Act to dissent from the merger or consolidation, provided
that in the case of a merger, the 20 days starts when the plan of merger is
delivered to the shareholder.
  Upon
giving notice of his election to dissent, a shareholder ceases to have any
rights of a shareholder except the right to be paid the fair value of his
shares.  As such, the merger or consolidation may proceed in the
ordinary course notwithstanding the dissent.
  Within
seven days of the later of the delivery of the notice of election to dissent and
the effective date of the merger or consolidation, we must make a written offer
to each dissenting shareholder to purchase his shares at a specified price that
the company determines to be their fair value.  We and the
shareholders then have 30 days to agree upon the price.  If we and a
shareholder fail to agree on the price within the 30 days, then we and the
shareholder shall each designate an appraiser and these two appraisers shall
designate a third appraiser.  These three appraisers shall fix the
fair value of the shares as of the close of business on the day before the
shareholders approved the transaction without taking into account any change in
value as a result of the transaction.
  Shareholders’
suits
  Similar
to the laws of most U.S. jurisdictions, BVI law permits derivative actions
against its directors.  However, the circumstances under which such
actions may be brought, and the procedures and defenses available may result in
the rights of shareholders of a BVI company being more limited than those of
shareholders of a company incorporated and/or existing in the United
States.
 
 The court
of the BVI may, on the application of a shareholder of a company, grant leave to
that shareholder to bring proceedings in the name and on behalf of that company,
or intervene in proceedings to which the company is a party for the purpose of
continuing, defending or discontinuing the proceedings on behalf of the
company.  In determining whether to grant leave, the High Court of the
BVI must take into account (i) whether the shareholder is acting in good
faith; (ii) whether the derivative action is in the interests of the company
taking account of the views of the company’s directors on commercial
matters; (iii) whether the proceedings are likely to succeed; (iv) the costs of
the proceedings in relation to the relief likely to be obtained; and (v) whether
an alternative remedy to the derivative claim is available.
  Leave to
bring or intervene in proceedings may be granted only if the High Court of the
BVI is satisfied that (i) we do not intend to bring, diligently continue or
defend, or discontinue the proceedings, as the case may be; or (ii) it is
in our interests that the conduct of the proceedings should not be left to the
directors or to the determination of the shareholders as a whole.
  Material
Contracts
 
 Except
for the following, we have not entered into any material contracts other than in
the ordinary course of business and other than those described in Item 4,
“Information on the Company,” Item 7, “Major Shareholders and Related Party
Transactions,” or Item 5, “Operating and Financial Review and Prospects –
Contractual Obligations,” or filed (or incorporated by reference) as exhibits to
this annual report or otherwise described or referenced in this annual
report.
 
 On March
17, 2009, we consummated our merger with COAC pursuant to the terms of the
Merger Agreement.  At the closing of the Merger, or the Closing, COAC
merged into us, with us being the surviving corporation.  In addition,
the holders of securities of COAC (in the aggregate, 931,186 units, each
consisting of one share of common stock and two warrants, 2,245,723 shares of
common stock (including shares included in the units), warrants to purchase
16,066,667 shares of COAC common stock (including warrants included in the
units) and one Representative’s unit purchase option to purchase 600,000 units
received our like securities, on a one-to-one basis, in exchange for their
existing COAC securities.
 
 Immediately
prior to the Closing, the Original Shareholders owned an aggregate 30,000,000
ordinary shares of the Company, which they continued to own upon the
Closing.  The Company’s Original Shareholders are also entitled under
our Merger Agreement to be issued an aggregate of 1,000,000 of our ordinary
shares for each of the years ending on December 31, 2009, 2010 and 2011 in which
we have net after tax income that equals or exceeds the target specified for
such year in the Merger Agreement ($45 million, $60 million and $80 million,
respectively). At the
time of our merger with COAC, we received less cash than was originally expected
which caused us to temporarily delay some of our anticipated capital expansion
and improvement projects.  Consequently, it was expected that we would
grow at a slower rate than anticipated at the time of the merger.  Due
to this change, on September 15, 2009, we entered into an agreement with the
aforementioned shareholders to issue to them an aggregate of 2,850,000 ordinary
shares as full consideration for a release from related claims under the
Merger Agreement and other related claims in connection with the
merger.
 54
  On
November 9, 2009, we entered into an underwriting agreement with Maxim Group
LLC, acting as the sole book-running manager and sole representative of the
underwriters in an underwritten offering of our ordinary
shares.  Under the underwriting agreement, the underwriters agreed to
purchase, and we agreed to sell, an aggregate 4,800,000 ordinary shares at the
public offering price of $5.00 per share, less an underwriter discount of $0.35
per share and a corporate finance fee of 1% of gross proceeds, or $0.05 per
share.  The Company received net proceeds of $22,080,000 before
expenses.  The underwriters also received an over-allotment option to
purchase up to an additional 720,000 ordinary shares for 45 days following the
date of the final prospectus relating to this offering.  The
underwriters exercised their over-allotment option in full.  The
Company received net proceeds of $3,312,000, before expenses, from the
over-allotment exercise.
 
 In
connection with the underwriting agreement, we also agreed to issue to Maxim
Group LLC a warrant to purchase 144,000 ordinary shares (equal to an
aggregate of three (3%) percent of the ordinary shares sold in the
offering).  The warrant has an exercise price equal to 120% of the
offering price of the ordinary shares sold in this offering, or
$6.00.  The warrant is exercisable commencing nine (9) months
after the effective date of the registration statement related to the offering,
and is exercisable for five (5) years after the effective date of the
registration statement.  The warrant is not redeemable by
us.  The warrant also provides for one demand registration payable by
us, one demand registration payable by Maxim Group LLC and unlimited
“piggyback” registration rights at our expense with respect to the underlying
ordinary shares during the five (5) year period commencing on the effective date
of the registration statement relating to the offering with respect to such
demand registrations and the five (5) year period commencing six (6) months
after the effective date of the registration statement relating to the offering
with respect to such “piggy back” registration rights.  Pursuant to
the rules of the Financial Industry Regulatory, Inc., or FINRA (formerly the
NASD), and in particular Rule 5110, the warrant (and underlying shares) issued
to Maxim Group LLC may not be sold, transferred, assigned, pledged, or
hypothecated, or be the subject of any hedging, short sale, derivative, put or
call transaction that would result in the effective disposition of the
securities by any person for a period of 180 days immediately following the date
of delivery and payment for the shares offered; provided, however, that the
warrant (and underlying shares) may be transferred to officers or partners
of Maxim Group LLC and members of the underwriting syndicate and
their officers or partners as long as the warrant (and underlying
shares) remain subject to the lockup.  Maxim Group LLC has assigned
the warrant and its rights thereunder to Maxim Partners LLC.
 
 In
addition, in connection with the underwriting agreement, we and each of our
directors, executive officers and certain of our principal
shareholders entered into lock-up agreements with the underwriters. Under
these agreements, subject to certain exceptions, those subject to lock-up
agreements may not, directly or indirectly, offer, sell, contract to sell,
pledge, grant any option for the sale of, or otherwise dispose of any ordinary
shares, securities convertible into or exchangeable for ordinary shares, options
or rights to acquire ordinary shares or publicly announce the intention to do
any of the foregoing, without the prior written consent of Maxim Group LLC, for
a period of 270 days from the date of the prospectus relating to the offering,
or the initial lock-up period.  In addition, if (1) during the last 17 days
of the initial lock-up period, we release earnings results or publicly announce
material news or a material event relating to us or (2) prior to the expiration
of the initial lock-up period, we announce that we will release earnings results
during the 16-day period beginning on the last day of the initial lock-up
period, then in each case the initial lock-up period will be extended until the
expiration of the 18-day period beginning on the date of release of the earnings
results or the occurrence of the material news or material event, as applicable,
unless Maxim Group LLC, on behalf of the underwriters, waives, in writing, such
extension.  The initial lock-up period, as so extended, is referred to as
the lock-up period.  Maxim Group LLC may agree at its discretion and
at any time or from time to time, without notice, to release all or any portion
of the shares subject to the lock-up agreements described above.
 
 In
connection with the above-mentioned offering, we advanced $75,000 to Maxim Group
LLC, which represented a reasonable estimate of the actual accountable expenses
Maxim Group LLC expected to incur in the offering. Maxim Group LLC was
entitled to receive an accountable expense reimbursement if the offering was
terminated.  If the offering had not been consummated, Maxim Group LLC
would not have been entitled to receive an expense reimbursement and agreed to
refund the advance to the Company at the closing of the offering.
  Since the
offering was completed, Maxim Group LLC was compensated as provided for in the
underwriting agreement as described herein and in the Registration Statement
which became effective on November 9, 2010.
  We also
have agreed that, upon successful completion of this offering, for a period of
fifteen (15) months from the closing of this offering, we will grant Maxim Group
LLC the right of participation to act as lead managing underwriter and book
runner or minimally as a co-lead manager and co-book runner and/or co-lead
placement agent with at least 50.0% of the economics; or, in the case of a
three-handed deal 33.0% of the economics, for any and all subsequent equity
offerings as well as any convertible debt offerings undertaken during this
period by us or any of our subsidiaries, excluding any financing transaction
(whether debt, equity or otherwise) that occurs on an exchange in China, Hong
Kong and/or Singapore.
  55
  The
underwriting agreement provides for indemnification by and among us and the
underwriters against specified liabilities, including liabilities under the
Securities Act, and for contribution by us and the underwriters to payments that
may be required to be made with respect to those liabilities.  We have
been advised that, in the opinion of the Securities and Exchange Commission,
indemnification of liabilities under the Securities Act is against public policy
as expressed in the Securities Act, and is therefore,
unenforceable.
 
 Exchange
Controls
 
 BVI
Exchange Controls
 
 There are
no material exchange controls restrictions on payment of dividends, interest or
other payments to the holders of our ordinary or preferred shares or on the
conduct of our operations in the BVI, where we were
incorporated.  There are no material BVI laws that impose any material
exchange controls on us or that affect the payment of dividends, interest or
other payments to nonresident holders of our ordinary or preferred
shares.  BVI law and our amended and restated memorandum and articles
of association do not impose any material limitations on the right of
non-residents or foreign owners to hold or vote our ordinary or preferred
shares.
  Exchange
Controls in China
 
 Under the
Foreign Currency Administration Rules promulgated in 1996 and revised in 1997,
and various regulations issued by State Administration of Foreign Exchange, or
SAFE, and other relevant PRC government authorities, RMB is convertible into
other currencies without prior approval from SAFE only to the extent of current
account items, such as trade related receipts and payments, interest and
dividends and after complying with certain procedural
requirements.  The conversion of RMB into other currencies and
remittance of the converted foreign currency outside PRC for the purpose of
capital account items, such as direct equity investments, loans and repatriation
of investment, requires the prior approval from SAFE or its local
office.  Payments for transactions that take place within China must
be made in RMB.  Unless otherwise approved, PRC companies must
repatriate foreign currency payments received from
abroad.  Foreign-invested enterprises may retain foreign exchange in
accounts with designated foreign exchange banks subject to a cap set by SAFE or
its local office.  Unless otherwise approved, domestic enterprises
must convert all of their foreign currency proceeds into RMB.
  On
October 21, 2005, SAFE issued the Notice on Issues Relating to the
Administration of Foreign Exchange in Fund-raising and Reverse Investment
Activities of Domestic Residents Conducted via Offshore Special Purpose
Companies, which became effective as of November 1, 2005.  According
to the notice, a special purpose company, or SPV, refers to an offshore company
established or indirectly controlled by PRC residents for the special purpose of
carrying out financing of their assets or equity interest in PRC domestic
enterprises.  Prior to establishing or assuming control of an SPV,
each PRC resident, whether a natural or legal person, must complete the overseas
investment foreign exchange registration procedures with the relevant local SAFE
branch.  The notice applies retroactively.  As a result, PRC
residents who have established or acquired control of these SPVs that previously
made onshore investments in China were required to complete the relevant
overseas investment foreign exchange registration procedures by March 31,
2006.  These PRC residents must also amend the registration with the
relevant SAFE branch in the following circumstances: (i) the PRC residents have
completed the injection of equity investment or assets of a domestic company
into the SPV; (ii) the overseas funding of the SPV has been completed; (iii)
there is a material change in the capital of the SPV.  Under the
rules, failure to comply with the foreign exchange registration procedures may
result in restrictions being imposed on the foreign exchange activities of the
violator, including restrictions on the payment of dividends and other
distributions to its offshore parent company, and may also subject the
violators to penalties under the PRC foreign exchange administration
regulations.
 
 Taxation
 
 The following is a general summary
of certain materialBVIand U.S. federal income tax
considerations.The discussion is not intended
to
be, nor should it
be construed as, legalor tax advice to any
particular prospective shareholder.The discussion is based on laws and
relevant interpretations thereof in effect as
of the date hereof, all of which are  subject to change or different
interpretations,
possibly with retroactive effect.
  56
  BVI
Taxation
 
 The BVI
does not impose a withholding tax on dividends paid by us to holders of our
ordinary shares, nor does the BVI levy any capital gains or income taxes on
us.  Further, a holder of our ordinary shares who is not a resident of
the BVI is exempt from the BVI income tax on dividends paid with respect to the
ordinary shares.  Holders of ordinary shares are not subject to the
BVI income tax on gains realized on the sale or disposition of the ordinary
shares.
 
 Our
ordinary shares are not subject to transfer taxes, stamp duties or similar
charges in the BVI.  However, as a business company, we are required
to pay the BVI government an annual license fee based on the number of shares we
are authorized to issue.
 
 There is
no income tax treaty or convention currently in effect between the United States
and the BVI.
 
 Taxation
in China
 
 In 2007,
the PRC government promulgated the New EIT Law and the relevant implementation
rules, which became effective on January 1, 2008. Under the New EIT Law and its
implementation rules, all domestic and foreign investment companies will be
subject to a uniform enterprise income tax at the rate of 25% and dividends from
PRC subsidiaries to their non-PRC shareholders will be subject to a withholding
tax at a rate of 20%, which is further reduced to 10% by the implementation
rules, if the non-PRC shareholder is considered to be a non-PRC tax resident
enterprise without any establishment or place within China or if the dividends
payable has no connection with the non-PRC shareholder’s establishment or place
within China, unless any such non-PRC shareholder’s jurisdiction of
incorporation has a tax treaty with China that provides for a different
withholding arrangement. In addition, pursuant to the New EIT Law, enterprises
established under the laws of non-PRC jurisdictions, but whose “de facto
management body” is located in the PRC, should be treated as resident
enterprises for PRC tax purposes. However, it is currently uncertain whether we
may be deemed a resident enterprise, or how to interpret whether any income or
gain is derived from sources within China.  See Item 3, “Key
information — Risk Factors — 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.”  If we, as a BVI company with substantially all of our
management located in China, were treated as a resident enterprise for PRC
tax purposes, we will be subject to PRC tax on our worldwide income at the 25%
uniform tax rate, which would have an impact on our effective tax
rate.
 
 U.S.
Federal Income Taxation
  The
following is a discussion of the material U.S. federal tax consequences of the
ownership of our ordinary shares by U.S. Holders (as described
below).  It does not purport to be a comprehensive description of all
of the tax considerations that may be relevant to a particular person’s
situation.  The discussion applies to investors in shares that hold
the shares as capital assets for U.S. federal income tax purposes and it does
not describe all of the tax consequences that may be relevant to holders subject
to special rules, such as:
 
 ·
              certain
      financial institutions;
 ·
              insurance
      companies;
 ·
              dealers
      and traders in securities or foreign
currencies;
 ·
              persons
      holding shares as part of a hedge, “straddle,” integrated transaction or
      similar transaction;
 ·
              persons
      whose functional currency for U.S. federal income tax purposes is not the
      U.S. dollar;
 ·
              partnerships
      or other entities classified as partnerships for U.S. federal income tax
      purposes;
 ·
              persons
      liable for the alternative minimum
tax;
 ·
              tax-exempt
      organizations;
 ·
              persons
      holding shares that own or are deemed to own 10% or more of our voting
      stock;
 ·
              persons
      who hold the shares in connection with a trade or business outside the
      United States; or
 ·
              persons
      who acquired our shares pursuant to the exercise of any employee stock
      option or otherwise as
compensation.
 
 PROSPECTIVE
PURCHASERS ARE URGED TO CONSULT THEIR TAX ADVISORS ABOUT THE APPLICATION OF THE
U.S. FEDERAL TAX RULES TO THEIR PARTICULAR CIRCUMSTANCES AS WELL AS THE STATE,
LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF ORDINARY SHARES.
  57
  This
discussion is based on the U.S. Internal Revenue Code of 1986, as amended, or
the Code, administrative pronouncements, judicial decisions and final, temporary
and proposed Treasury regulations, all as of the date hereof.  These
laws are subject to change, and can change on a retroactive
basis.  “U.S. Holder” means a beneficial owner of shares that, for
U.S. federal income tax purposes, is: a citizen or resident of the United
States; a corporation, or other entity taxable as a corporation, created or
organized in or under the laws of the United States or any political subdivision
thereof; or an estate or trust the income of which is subject to U.S. federal
income taxation, regardless of its source.  This discussion assumes
that we are not, and will not become, a passive foreign investment company, or a
PFIC, for U.S. federal income tax purposes, as described below.
 
 Taxation of
Dividends
 
 The gross
amount of any distributions paid with respect to shares, other than certain pro
rata distributions of shares, generally will be treated as foreign source
dividend income for U.S. federal income tax purposes.  U.S. Holders
will not be entitled to claim a dividends-received deduction with respect to
distributions paid by us.  Dividends will be included in a U.S.
Holder’s income on the date of such U.S. Holder’s receipt of the
dividend.
 
 If you
are a non-corporate U.S. Holder, subject to applicable limitations, you may be
eligible to be taxed at a maximum rate of 15% in respect of dividends received
in taxable years beginning before January 1, 2011.  Please consult
your tax advisors to determine whether you are subject to any special rules that
limit your ability to be taxed at this favorable rate.
 
 In the
event that we are deemed to be a Chinese “resident enterprise” under PRC tax
law, you may be subject to PRC withholding taxes on dividends paid to you with
respect to the ordinary shares.  In addition, subject to certain
conditions and limitations, PRC withholding taxes on dividends not in excess of
the rate allowed under the income tax treaty between the United States and the
PRC, or the Treaty, if applicable, may be treated as foreign taxes eligible for
credit against your U.S. federal income tax liability.  The rules
governing the foreign tax credit are complex.  You are urged to
consult your tax advisors regarding the availability of the foreign tax credit
in light of your particular circumstances.
  Taxation of Capital
Gains
 
 Upon sale
or other disposition of the ordinary shares, a U.S. Holder will generally
recognize capital gain or loss for U.S. federal income tax purposes in an amount
equal to the difference between such holder’s tax basis in the shares sold or
disposed of and the amount realized on the sale or other
disposition.  Such gain or loss will be long-term capital gain or loss
if the U.S. Holder has held the shares for more than one year and will generally
be U.S. source gain or loss for foreign tax credit purposes.  However,
if we are deemed to be a Chinese “resident enterprise” under PRC tax law, gains
on disposal may be subject to PRC tax.  In that event, a U.S. Holder
may be eligible for the benefits of the Treaty.  Under the Treaty, if
any PRC tax were to be imposed on any gain from the disposition of the shares,
the gain would be treated as PRC source income.  We urge you to
consult your tax advisors regarding the tax consequences if a foreign tax is
imposed on gain on a disposition of our shares, including the availability of
the foreign tax credit in light of your particular circumstances.
 
 Passive Foreign Investment
Company Rules (PFIC)
 
 We
believe that we were not a PFIC for United States federal income tax purposes
for our taxable year ended December 31, 2009.  However, since PFIC
status depends upon the composition of a company’s income and assets and the
market value of its assets (including goodwill) from time to time, there can be
no assurance that we will not be a PFIC for any taxable year.
 
 In
general, if we were a PFIC for any taxable year during which a U.S. Holder held
shares, gain recognized by such U.S. Holder on a sale or other disposition
(including certain pledges) of the shares would be allocated ratably over the
U.S. Holder’s holding period for the shares.  The amounts allocated to
the taxable year of the sale or other disposition and to any year before we
became a PFIC would be taxed as ordinary income.  The amount allocated
to each other taxable year would be subject to tax at the highest rate in effect
for individuals or corporations, as appropriate, for such taxable year, and an
interest charge would be imposed on the amount allocated to such taxable
year.  Similar rules would apply to any distribution in respect of
shares in excess of 125% of the average of the annual distributions on shares
received by a U.S. Holder during the preceding three years or such holder’s
holding period, whichever is shorter.  Certain elections may be
available that would result in alternative treatments (such as a mark-to-market
treatment) of the shares.  U.S. Holders should consult their tax
advisers to determine whether such elections are available and, if so, what the
consequences of the alternative treatments would be in those holders' particular
circumstances.
  58
  Information Reporting and
Backup Withholding
 
 Payment
of dividends and sales proceeds that are made within the United States or
through certain U.S.-related financial intermediaries generally are subject to
information reporting and to backup withholding unless (i) the U.S. Holder is a
corporation or other exempt recipient or (ii) in the case of backup withholding,
the U.S. Holder provides a correct taxpayer identification number and certifies
that backup withholding does not apply.
 
 The
amount of any backup withholding from a payment to a U.S. Holder will be allowed
as a credit against the U.S. Holder’s U.S. federal income tax liability and may
entitle the U.S. Holder to a refund, provided that the required information is
furnished to the Internal Revenue Service.
 
 Dividends
and Paying Agents
 
 Not
applicable.
 
 Statement
by Expert
 
 Not
applicable.
 
 Documents
on Display
 
 We have
filed this Annual Report on Form 20-F with the SEC under the Exchange
Act.  Statements made in this Annual Report as to the contents of any
document referred to are not necessarily complete.  With respect to
each such document filed as an exhibit to this Annual Report, reference is made
to the exhibit for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by such
reference.
 
 We are
subject to the informational requirements of the Exchange Act as a foreign
private issuer and file reports and other information with the
SEC.  Reports and other information filed by us with the SEC,
including this Annual Report on Form 20-F, may be inspected and copied at the
public reference room of the SEC at 100 F. Street, N.E., Washington D.C.
20549.  You can also obtain copies of this Annual Report on Form 20-F
by mail from the Public Reference Section of the SEC, 100 F. Street, N.E.,
Washington D.C. 20549, at prescribed rates.  Additionally, copies of
this material may be obtained from the SEC’s Internet site at http://www.sec.gov.  The
SEC’s telephone number is 1-800-SEC-0330.
 
 As a
foreign private issuer, we are exempt from the rules under the Exchange Act
prescribing the furnishing and content of quarterly reports and proxy
statements, and officers, directors and principal shareholders are exempt from
the reporting and short-swing profit recovery provisions contained in Section 16
of the Exchange Act.
 
 Subsidiary
Information
 
 Not
applicable.
 
 ITEM
11.      QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
 
 Interest
Rate Risk
 
 We are
exposed to interest rate risk primarily with respect to our short-term bank
loans.  Although the interest rates, which are based on the banks’
prime rates with respect to our short-term loans are fixed for the terms of the
loans, the terms are typically three to twelve months for short-term bank loans
and interest rates are subject to change upon renewal.  There were no
material changes in interest rates for short-term bank loans renewed during the
fiscal year ended December 31, 2009.
 
 A
hypothetical 1.0% increase in the annual interest rates for all of our credit
facilities under which we had outstanding borrowings as of December 31, 2009,
would decrease net income before provision for income taxes by approximately
$0.9 million for the fiscal year ended December 31, 2009.  Management
monitors the banks’ prime rates in conjunction with our cash requirements to
determine the appropriate level of debt balances relative to other sources of
funds.  We have not entered into any hedging transactions in an effort
to reduce our exposure to interest rate risk.
  59
  Foreign
Exchange Risk
 
 While our
reporting currency is the U.S. Dollar, substantially all of our consolidated
revenues and consolidated costs and expenses are denominated in
RMB.  All of our assets are denominated in RMB except for
cash.  As a result, we are exposed to foreign exchange risk as our
revenues and results of operations may be affected by fluctuations in the
exchange rate between U.S. Dollars and RMB.  If the RMB depreciates
against the U.S. Dollar, the value of our RMB revenues, earnings and assets
as expressed in our U.S. Dollar financial statements will
decline.  Assets and liabilities are translated at exchange rates at
the balance sheet dates and revenue and expenses are translated at the average
exchange rates and shareholders’ equity is translated at historical exchange
rates.  Any resulting translation adjustments are not included in
determining net income but are included in determining other comprehensive
income, a component of shareholders’ equity.  An average appreciation
(depreciation) of the RMB against the U.S. dollar of 5% would increase
(decrease) our comprehensive income by $0.03 million based on our outstanding
revenues, costs and expenses, assets, and liabilities denominated in RMB as of
December 31, 2009.  We have not entered into any hedging transactions
in an effort to reduce our exposure to foreign exchange risk.
  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.
 
 Inflation
 
 Inflationary
factors such as increases in the cost of our product and overhead costs may
adversely affect our operating results.  Although we do not believe
that inflation has had a material impact on our financial position or results of
operations to date, 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 with these increased
costs.
 
 ITEM
12.      DESCRIPTION OF SECURITIES OTHER THAN
EQUITY SECURITIES
 
 Debt
Securities
 
 Not
applicable.
 
 Warrants
and Rights
 
 Not
applicable.
 
 Other
Securities
 
 Not
applicable.
 
 American
Depositary Shares
 
 The
Company does not have any American Depositary Receipts.
 
 PART II
  ITEM
13.      DEFAULTS, DIVIDEND ARREARAGES AND
DELINQUENCIES
 
 None.
 
 ITEM
      14.
                MATERIAL
      MODIFICATIONS TO THE RIGHTS OF SECURITIES HOLDERS AND USE OF
      PROCEEDS
 
 None.
  60
  ITEM
15.      CONTROLS AND PROCEDURES
 
 Evaluation
of Disclosure Controls and Procedures
 
 We
maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under
the Exchange Act) that are designed to ensure that information that would be
required to be disclosed in Exchange Act reports is recorded, processed,
summarized and reported within the time period specified in the SEC’s rules and
forms, and that such information is accumulated and communicated to our
management, including to our Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required
disclosure.
 
 As
required by Rule 13a-15 under the Exchange Act, our management,
including our Chief Executive Officer and Chief Financial Officer,
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures as of December 31, 2009.  Based on that
evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that as of December 31, 2009, and as of the date that the
evaluation of the effectiveness of our disclosure controls and procedures was
completed, our disclosure controls and procedures were effective to satisfy the
objectives for which they are intended.
 
 Management’s
Annual Report on Internal Control Over Financial Reporting
 
 Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act. The Exchange Act defines internal control over financial
reporting as a process designed by, or under the supervision of, our principal
executive and principal financial officers and effected by our board of
directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with accounting
principles generally accepted in the United States of America and includes those
policies and procedures that:
 
 ·
              Pertain
      to the maintenance of records that in reasonable detail accurately and
      fairly reflect the transactions and dispositions of the assets of the
      Company;
 
 ·
              Provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with accounting
      principles generally accepted in the United States of America, and that
      our receipts and expenditures are being made only in accordance with
      authorizations of our management and directors;
  and
 
 ·
              Provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of our assets that could have
      a material effect on our financial
statements.
 
 All
internal control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement
preparation and presentation. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
  Management
assessed the effectiveness of our internal control over financial reporting as
of December 31, 2009. In making this assessment, management used the framework
set forth in the report entitled Internal Control - Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission, or
COSO. The COSO framework summarizes each of the components of a company’s
internal control system, including (i) the control environment, (ii) risk
assessment, (iii) control activities, (iv) information and communication, and
(v) monitoring. Based on our assessment we determined that, as of December 31,
2009, our internal control over financial reporting is effective based on those
criteria.
  Changes
in Internal Control Over Financial Reporting
 
 There
have been no changes in our internal control over financial reporting during the
fourth quarter of fiscal year 2009 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
  61
  ITEM
16A.   AUDIT COMMITTEE FINANCIAL EXPERT
  Our board
of directors established an audit committee on March 17, 2009.  Our
audit committee consists of three members: Maotong Xu, Kwok Keung Wong and J.P.
Huang, with Maotong Xu serving as chairman.  Each of the audit
committee members is “independent” as that term is defined under the Nasdaq
Listing Rules.  Our audit committee oversees our accounting and
financial reporting processes and the audits of the financial statements of our
company.  Our board of directors has determined that Mr. J.P. Huang
meets the criteria for an “audit committee financial expert,” as established by
the SEC.
  J.P.
Huang will not be deemed an “expert” for any other purpose, including, without
limitation, for purposes of Section 11 of the Securities Act, as a result of
being designated or identified as an audit committee financial
expert.  The designation or identification of Mr. J.P. Huang as an
audit committee financial expert does not impose on him any duties, obligations
or liability that are greater than the duties, obligations and liability imposed
on him as a member of our Audit Committee and board of directors in the absence
of such designation or identification.
 
 ITEM
16B.   CODE OF ETHICS
  On July
10, 2009, our board of directors adopted a code of ethics that applies to all of
our directors, officers and employees, including our principal executive
officer, principal financial officer, and principal accounting officer or
controller, or persons performing similar functions.  The code of
ethics addresses, among other things, ethical conduct, conflicts of interest,
compliance with laws, regulations and policies, including disclosure
requirements under the federal securities laws, confidentiality, trading on
inside information, and reporting of violations of the code.  A copy
of the code of ethics has been attached as Exhibit 14.1 to our Annual Report on
Form 20-F, filed with the SEC on July 15, 2009.
 
 ITEM
16C.   PRINCIPAL ACCOUNTANT FEES AND SERVICES
  The
following table sets forth the aggregate fees by categories specified below in
connection with certain professional services rendered by UHY Vocation HK CPA
Limited, our independent registered public accounting firm, for the fiscal years
ended December 31, 2009 and 2008:
 
 Fiscal
      Year Ended December 31,2009
                  
                  
                  2008Audit
      Fees (1)
                  
                  $
                  121,800
                  
                  
                  $
                  120,000Audit-Related
      Fees (2)
                  
                  
                  15,000
                  
                  
                  
                  15,000Tax
      Fees
                  
                  
                  0
                  
                  
                  
                  0Re-IPO
      Audit Fees
                  
                  
                  146,100
                  
                  
                  
                  0TOTAL
                  
                  $
                  282,900
                  
                  
                  $
                  135,000
 
 (1)
              Consists
      of fees billed for each of the fiscal years ended December 31, 2009 and
      2008 for professional services rendered by the principal accountant for
      the audit of our annual financial statements or services that are normally
      provided by the accountant in connection with statutory and regulatory
      filings or engagements for the fiscal years ended December 31, 2009 and
      2008.
 
 (2)
              Consists
      of fees billed for each of the fiscal years ended December 31, 2009 and
      2008 for services rendered in connection with the review of our regulatory
      filings.
 
 Audit
Committee Pre-Approval Policies and Procedures
  Our Audit
Committee pre-approves all auditing services and permitted non-audit services to
be performed for us by our independent auditor, including the fees and terms
thereof (subject to the de minimums exceptions for non-audit services described
in Section 10A(i)(l)(B) of the Exchange Act that are approved by our Audit
Committee prior to the completion of the audit).
 
 ITEM
16D.   EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
COMMITTEES
 
 We have
not asked for nor have we been granted an exemption from the applicable listing
standards for our audit committee.
  62
  ITEM
16E.   PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND
AFFILIATED PURCHASERS
 
 There
were no purchases of equity securities by us or by any of our affiliates during
the period covered by this Annual Report.
 
 ITEM
16F.   CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
 
 Not
applicable.
 
 ITEM
16G.   CORPORATE GOVERNANCE
 
 Nasdaq
Marketplace Rule 5615(a)(3) permits foreign private issuers like us to follow
“home country practice” with respect to certain corporate governance matters. We
have not elected to follow any “home country practice” in lieu of any
requirement of the Nasdaq Marketplace Rules.  We intend to satisfy our
requirement under Nasdaq Marketplace Rule 5250(d)(1) to distribute to
shareholders copies of our annual report by posting our annual reports on Form
20-F on our company website at: http://www.geruigroup.com, providing a hard copy
of our annual report free of charge to shareholders upon request with a
reasonable period following such request, and including a prominent undertaking
to this effect.  Simultaneous with such posting we will issue a press
release containing this and certain other information required by Nasdaq to
distribute annual reports to shareholders in this manner.  Domestic
company issuers listed on Nasdaq may satisfy this requirement by furnishing a
copy of their annual report to shareholders in the manner provided by Rule
14a-16 under the Exchange Act.  As a foreign private issuer, we are
not subject to the requirements of Rule 14a-16.  We have determined
that this requirement under the Nasdaq Marketplace Rules would be most
efficiently addressed in the manner described above.
 
 PART III
  ITEM
17.      FINANCIAL STATEMENTS
 
 We have
elected to provide financial statements pursuant to Item 18.
 
 ITEM
18.      FINANCIAL STATEMENTS
 
 The full
text of our audited consolidated financial statements for the years ended
December 31, 2009 and 2008 begins on page F-1 of this annual
report.
 
 ITEM
19.      EXHIBITS
 
 Exhibit No.
                                                                    
                                                                    Description1.1
                                                                    
                                                                    Amended
      and Restated Memorandum and Articles of Association, adopted on March 17,
      2009 [incorporated by reference to Exhibit 3.1 to the registrant’s
      Amendment No. 1 to Form 20-F filed on March 23, 2009]2.1
                                                                    
                                                                    Specimen
      Unit Certificate [incorporated by reference to Exhibit 4.6 to the
      registrant’s Registration Statement on Form S-4/A filed on December 24,
      2008 in commission file number 333-155312-01]2.2
                                                                    
                                                                    Specimen
      Ordinary Share Certificate [incorporated by reference to Exhibit 4.7 to
      the registrant’s Registration Statement on Form S-4/A filed on February
      17, 2009  in commission file number
    333-155312-01]2.3
                                                                    
                                                                    Specimen
      Warrant Certificate [incorporated by reference to Exhibit 4.8 to the
      registrant’s Registration Statement on Form S-4/A filed on December 24,
      2008 in commission file number 333-155312-01]2.4
                                                                    
                                                                    Form
      of Underwriter Representative Warrant [incorporated by reference to
      Exhibit 4.4 of Amendment No. 3 to the registrant’s Registration Statement
      on Form F-1 (File No. 333-161924) filed on November 5,
    2009]4.1
                                                                    
                                                                    Agreement
      of Merger and Plan of Reorganization, dated as of November 12, 2008 by and
      among the registrant, China Opportunity Acquisition Corp., Wealth Rainbow
      Development Limited, Henan Green Complex Materials Co., Ltd and certain
      shareholders of the registrant [incorporated by reference to Exhibit 2.1
      to the registrant’s Registration Statement on Form S-4 filed on November
      12, 2008 in commission file number
  333-155312-01]
 
 63
  Exhibit No.
                                                      
                                                      Description4.2
                                                      
                                                      Form
      of Escrow Agreement by and among the registrant, Oasis Green Investments
      Limited and Continental Stock Transfer & Trust Company [incorporated
      by reference to Exhibit 10.14 to the registrant’s Registration Statement
      on Form S-4 filed on November 12, 2008 in commission file number
      333-155312-01]4.3
                                                      
                                                      Form
      of Voting Agreement [incorporated by reference to Exhibit 10.15 to the
      registrant’s Registration Statement on Form S-4 filed on November 12, 2008
      in commission file number 333-155312-01]4.4
                                                      
                                                      Form
      of Lock-Up Agreement [incorporated by reference to Exhibit 10.16 to the
      registrant’s Registration Statement on Form S-4 filed on November 12, 2008
      in commission file number 333-155312-01]4.5
                                                      
                                                      English
      Translation of Short-Term Loan Agreement, dated July 23, 2008, between
      Sub-branch of Zhengzhou Branch of Shanghai Pudong Development Bank and
      Henan Green Complex Materials Co., Ltd [incorporated by reference to
      Exhibit 10.17.1 to the registrant’s Amendment No. 2 to Registration
      Statement on Form S-4 filed on January 29, 2009 in commission file number
      333-155312-01]4.6
                                                      
                                                      English
      Translation of Agreement for Established of Bank Payable Bills, dated
      October 14, 2008, between Shanghai Pudong Development Bank and Henan Green
      Complex Materials Co., Ltd [incorporated by reference to Exhibit 10.17.2
      to the registrant’s Amendment No. 2 to Registration Statement on Form S-4
      filed on January 29, 2009 in commission file number
      333-155312-01]4.7
                                                      
                                                      English
      Translation of Renminbi Loan Agreement, dated July 16, 2008, between
      Zhengzhou Branch of China CITIC Bank and Henan Green Complex Materials
      Co., Ltd [incorporated by reference to Exhibit 10.17.3 to the registrant’s
      Amendment No. 2 to Registration Statement on Form S-4 filed on January 29,
      2009 in commission file number 333-155312-01]4.8
                                                      
                                                      English
      Translation of Loan Agreement, dated November 9, 2007, between Commodity
      World Branch of Commercial Bank of Zhengzhou and Henan Green Complex
      Materials Co., Ltd [incorporated by reference to Exhibit 10.17.4 to the
      registrant’s Amendment No. 2 to Registration Statement on Form S-4 filed
      on January 29, 2009 in commission file number
    333-155312-01]4.9
                                                      
                                                      English
      Translation of Real Estate Maximum Mortgage Agreement, dated March 26,
      2007, between Zhengzhou Branch of Shanghai Pudong Development Bank and
      Henan Green Complex Materials Co., Ltd [incorporated by reference to
      Exhibit 10.17.5 to the registrant’s Amendment No. 2 to Registration
      Statement on Form S-4 filed on January 29, 2009 in commission file number
      333-155312-01]4.10
                                                      
                                                      English
      Translation of Maximum Mortgage Agreement, dated April 21, 2008, between
      Xiangyang Credit Union of Zhengzhou Rural Credit Cooperatives and Henan
      Green Complex Materials Co., Ltd [incorporated by reference to Exhibit
      10.17.6 to the registrant’s Amendment No. 2 to Registration Statement on
      Form S-4 filed on January 29, 2009 in commission file number
      333-155312-01]4.11
                                                      
                                                      English
      Translation of Credit Granting Agreement, valid from July 21, 2008,
      between Guangdong Development Bank Zhengzhou Huanghe Road Sub-branch and
      Henan Green Complex Materials Co., Ltd [incorporated by reference to
      Exhibit 10.17.7 to the registrant’s Amendment No. 2 to Registration
      Statement on Form S-4 filed on January 29, 2009 in commission file number
      333-155312-01]4.12
                                                      
                                                      English
      Translation of Agreement, dated September 16, 2003, between Xinzheng City
      Longhu Town People’s Government and Henan Green Complex Materials Co., Ltd
      [incorporated by reference to Exhibit 10.17.8 to the registrant’s
      Amendment No. 2 to Registration Statement on Form S-4 filed on January 29,
      2009 in commission file number 333-155312-01]4.13
                                                      
                                                      English
      Translation of Lease Agreement for Land Use Right and Buildings, dated
      November 10, 2008, between Zhengzhou the Second Iron & Steel Co., Ltd.
      and Henan Green Complex Materials Co., Ltd [incorporated by reference to
      Exhibit 10.17.9 to the registrant’s Amendment No. 2 to Registration
      Statement on Form S-4 filed on January 29, 2009 in commission file number
      333-155312-01]4.14
                                                      
                                                      English
      Translation of Agreement for the Repayment, dated March 30, 2008, by and
      among Lu Mingwang, Lu Baiwang, Ren Shouze, Yue Tiansui, Bai Zhengsheng, Lu
      Yi, Zhang Qihong, Lu Mingwang, Chen Zheyu, Zhang Shuiping, Liu Bingshen,
      and Henan Green Complex Materials Co., Ltd [incorporated by reference to
      Exhibit 10.17.10 to the registrant’s Amendment No. 2 to Registration
      Statement on Form S-4 filed on January 29, 2009 in commission file number
      333-155312-01]
 
 64
  Exhibit No.
                                                                
                                                                Description4.15
                                                                
                                                                English
      Translation of Bank Payable Bills Agreement, dated October 14, 2008,
      between Huang Sub-Branch of Zhengzhou Branch of Guangfa Bank, Da
      Sub-Branch of Zhengzhou Branch of Pufa Bank, and Henan Green Complex
      Materials Co., Ltd [incorporated by reference to Exhibit 10.17.11 to the
      registrant’s Amendment No. 2 to Registration Statement on Form S-4 filed
      on January 29, 2009 in commission file number
    333-155312-01]4.16
                                                                
                                                                English
      Translation of Form of Labor Contract for all employees of Henan Green,
      including executive officers [incorporated by reference to Exhibit 4.15 to
      the registrant’s Annual Report on Form 20-F filed on July 15,
      2009]4.17
                                                                
                                                                Form
      of Agreement, dated as of September 15, 2009, by and among the registrant,
      Oasis Green Investments Limited, Plumpton Group Limited, and Honest Joy
      Group Limited.[incorporated by reference to Exhibit 10.16 to the
      registrant’s Registration Statement on Form F-1 filed on September 15,
      2009 in commission file number 333-161924]4.18
                                                                
                                                                Underwriting
      Agreement, dated November 9, 2009 [incorporated by reference to Exhibit
      1.1 to the registrant’s Report on Form 6-K/A filed on November 10,
      2009]8.1
                                                                
                                                                List
      of the registrant’s subsidiaries [incorporated by reference to Exhibit 8.1
      to the registrant’s Annual Report on Form 20-F filed on July 15,
      2009]11.1
                                                                
                                                                Code
      of Ethics [incorporated by reference to Exhibit 14.1 to the registrant’s
      Annual Report on Form 20-F filed on July 15, 2009]12.1
                                                                
                                                                CEO
      Certification Pursuant to Rule 13a-14(a) (17 CFR 240.13a-14(a)) (17 CFR
      240.13a-14(a)) or Rule 15d-1(a) (17 CFR 240.15d-14(a))12.2
                                                                
                                                                CFO
      Certification Pursuant to Rule 13a-14(a) (17 CFR 240.13a-14(a)) or Rule
      15d-1(a) (17 CFR 240.15d-14(a))13.1
                                                                
                                                                CEO
      Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
      200213.2
                                                                
                                                                CFO
      Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002
  65
  SIGNATURE
  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 annual report on its
behalf.
  CHINA
      GERUI ADVANCED MATERIALS GROUP LIMITED/s/
      Mingwang LuMingwang
      LuMay
      4, 2010
                    Chief
      Executive Officer
 
 66





CHINA
GERUI ADVANCED MATERIALS GROUP LIMITED


(FORMERLY
GOLDEN GREEN ENTERPRISES LIMITED)





CONSOLIDATED
FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008




F-1




CHINA
GERUI ADVANCED MATERIALS GROUP LIMITED


(FORMERLY
GOLDEN GREEN ENTERPRISES LIMITED)


CONSOLIDATED
FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008





CONTENTS





PagesReport
      of Independent Registered Public Accounting Firm
                
                F-3Consolidated
      Balance Sheets
                
                F-4Consolidated
      Statements of Income
                
                F-5Consolidated
      Statements of Changes in Stockholders’ Equity
                
                F-6Consolidated
      Statements of Cash Flows
                
                F-7Notes
      to the Consolidated Financial Statements
                
                F-8
      - 28




F-2





REPORT
OF INDEPENDENT REGISTERED


PUBLIC
ACCOUNTING FIRM





TO
THE BOARD OF DIRECTORS AND STOCKHOLDERS OF


CHINA
GERUI ADVANCED MATERIALS GROUP LIMITED





We have
audited the accompanying consolidated balance sheets of China Gerui Advanced
Materials Group Limited (formerly named “Golden Green Enterprises Limited”)
(the “Company”) as of December 31, 2009 and 2008, and the related consolidated
statements of income, changes in stockholders’ equity, and cash flows for the
years then ended. These consolidated financial statements are the responsibility
of the Company’s management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.





We
conducted our audits in accordance with the auditing standards of the Public
Company Accounting Oversight Board (United States).  Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting.  Our 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 purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such
opinion. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.





In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of China
Gerui Advanced Materials Group Limited as of December 31, 2009 and 2008, and the
consolidated 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 of America.





UHY
VOCATION HK CPA LIMITED


Certified
Public Accountants





Hong
Kong, the People’s Republic of China,


April
30, 2010


F-3





CHINA
GERUI ADVANCED MATERIALS GROUP LIMITED




(FORMERLY
GOLDEN GREEN ENTERPRISES LIMITED)


CONSOLIDATED
BALANCE SHEETS


(IN
US DOLLARS)





December 31,
                                    2009
                                  
                                  
                                  December 31,
                                    2008AssetsCurrent
      assetsCash
                                  
                                  $
                                  79,607,369
                                  
                                  
                                  $
                                  42,622,404Restricted
      cash
                                  
                                  
                                  37,498,169
                                  
                                  
                                  
                                  24,712,349Accounts
      receivable, net
                                  
                                  
                                  4,808,184
                                  
                                  
                                  
                                  10,304,724Inventories
                                  
                                  
                                  5,958,880
                                  
                                  
                                  
                                  3,554,313Prepaid
      expenses and other deposits
                                  
                                  
                                  16,473,710
                                  
                                  
                                  
                                  10,921,055Other
      receivables
                                  
                                  
                                  2,292,133
                                  
                                  
                                  
                                  1,266,097Total
      current assets
                                  
                                  
                                  146,638,445
                                  
                                  
                                  
                                  93,380,942Non-current
      assetsProperty,
      plant and equipment, net
                                  
                                  
                                  22,338,210
                                  
                                  
                                  
                                  19,941,521Prepaid
      machinery deposits
                                  
                                  
                                  13,973,966
                                  
                                  
                                  
                                  637,882Land
      use right, net
                                  
                                  
                                  1,399,026
                                  
                                  
                                  
                                  1,416,220Total
      non-current assets
                                  
                                  
                                  37,711,202
                                  
                                  
                                  
                                  21,995,623Total
      assets
                                  
                                  $
                                  184,349,647
                                  
                                  
                                  $
                                  115,376,565Liabilities
      and stockholders' equityCurrent
      LiabilitiesAccounts
      payable
                                  
                                  $
                                  7,617,953
                                  
                                  
                                  $
                                  5,339,350Notes
      payable
                                  
                                  
                                  41,013,622
                                  
                                  
                                  
                                  26,910,956Term
      loans
                                  
                                  
                                  33,982,715
                                  
                                  
                                  
                                  30,677,903Income
      tax payable
                                  
                                  
                                  3,817,304
                                  
                                  
                                  
                                  2,188,677Customers
      deposits
                                  
                                  
                                  8,146,611
                                  
                                  
                                  
                                  17,484,708Accrued
      liabilities and other payables
                                  
                                  
                                  2,728,585
                                  
                                  
                                  
                                  6,294,406Dividend
      payable
                                  
                                  
                                  -
                                  
                                  
                                  
                                  9,601,549Due
      to former minority shareholders
                                  
                                  
                                  -
                                  
                                  
                                  
                                  4,310,087Total
      current liabilities
                                  
                                  
                                  97,306,790
                                  
                                  
                                  
                                  102,807,636Non-current
      liabilitiesLand
      use right payable, net
                                  
                                  
                                  -
                                  
                                  
                                  
                                  28,521Total
      non-current liabilities
                                  
                                  
                                  -
                                  
                                  
                                  
                                  28,521Total
      liabilities
                                  
                                  
                                  97,306,790
                                  
                                  
                                  
                                  102,836,157Stockholders'
      equityCommon
      stock,Common
      stock, 100,000,000 shares authorized with no par value;40,692,323
      and 30,000,000 shares outstanding as ofDecember
      31, 2009 and  2008 respectively
                                  
                                  
                                  45,261,630
                                  
                                  
                                  
                                  300Additional
      paid-in capital
                                  
                                  
                                  6,930,944
                                  
                                  
                                  
                                  6,930,944Retained
      earnings
                                  
                                  
                                  32,438,982
                                  
                                  
                                  
                                  7,515,704Subscription
      receivable
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (4,310,087
                                  )Accumulated
      other comprehensive income
                                  
                                  
                                  2,411,301
                                  
                                  
                                  
                                  2,403,547Total
      stockholders' equity
                                  
                                  
                                  87,042,857
                                  
                                  
                                  
                                  12,540,408Total
      liabilities and stockholders' equity
                                  
                                  $
                                  184,349,647
                                  
                                  
                                  $
                                  115,376,565




See notes
to financial statements.


F-4





CHINA
GERUI ADVANCED MATERIALS GROUP LIMITED


(FORMERLY
GOLDEN GREEN ENTERPRISES LIMITED)


CONSOLIDATED
STATEMENTS OF INCOME


(IN
US DOLLARS)




For the Year Ended December 31,2009
              
              
              2008Revenue
              
              $
              218,902,632
              
              
              $
              196,264,731Cost
      of revenue
              
              
              (153,095,354
              )
              
              
              (142,407,995
              )Gross
      Profit
              
              
              65,807,278
              
              
              
              53,856,736Operating
      expenses:General
      and administrative expenses
              
              
              (4,573,512
              )
              
              
              (3,431,745
              )Selling
      and marketing expenses
              
              
              (919,049
              )
              
              
              (831,108
              )Total
      operating expenses
              
              
              (5,492,561
              )
              
              
              (4,262,853
              )Operating
      income
              
              
              60,314,717
              
              
              
              49,593,883Other
      income and (expense):Interest
      income
              
              
              829,056
              
              
              
              1,395,121Interest
      expenses
              
              
              (3,237,757
              )
              
              
              (3,769,423
              )Sundry
      income
              
              
              293,831
              
              
              
              155,687Income
      before income taxes and non-controlling interest
              
              
              58,199,847
              
              
              
              47,375,268Income
      tax expense
              
              
              (14,751,569
              )
              
              
              (11,869,735
              )Net
      income before non-controlling interest
              
              
              43,448,278
              
              
              
              35,505,533Net
      income attributable to non- controlling interest
              
              
              -
              
              
              
              (13,920,944
              )Net
      income attributable to common stockholders
              
              $
              43,448,278
              
              
              $
              21,584,589Earnings
      per share-
      Basic
              
              $
              1.29
              
              
              $
              0.72-
      Diluted
              
              $
              1.15
              
              
              $
              0.72Weighted
      average common shares outstanding-
      Basic
              
              
              33,751,844
              
              
              
              30,000,000-
      Diluted
              
              
              37,675,479
              
              
              
              30,000,000




See notes
to financial statements.




F-5




CHINA
GERUI ADVANCED MATERIALS GROUP LIMITED


(FORMERLY
GOLDEN GREEN ENTERPRISES LIMITED)


CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY


FOR THE YEARS ENDED
DECEMBER 31, 2009 AND 2008


(IN
US DOLLARS)





CommonStock,withnoParValue
                          
                          
                          Additional
                          
                          
                          
                          
                          
                          Accumulated OtherNumber of
                          
                          
                          
                          
                          
                          Paid-in
                          
                          
                          Subscription
                          
                          
                          Comprehensive
                          
                          
                          Retained
                          
                          
                          TotalShares
                          
                          
                          Amount
                          
                          
                          Capital
                          
                          
                          receivable
                          
                          
                          Income
                          
                          
                          Earnings
                          
                          
                          EquityBalance,
      December 31, 2007
                          
                          
                          30,000,000
                          
                          
                          $
                          300
                          
                          
                          $
                          1,834,940
                          
                          
                          $
                          -
                          
                          
                          $
                          1,057,886
                          
                          
                          $
                          14,462,559
                          
                          
                          $
                          17,355,685Net
      income
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          21,584,589
                          
                          
                          
                          21,584,589Foreign
      currency translation gain
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          1,345,661
                          
                          
                          
                          -
                          
                          
                          
                          1,345,661Subscription
      for ordinary shares
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          4,310,087
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          4,310,087Subscription
      receivable
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (4,310,087
                          )
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (4,310,087
                          )Contribution
      to capital on purchase of minority interest
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          785,917
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          785,917Dividend
      declared
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (51,856,496
                          )
                          
                          
                          (51,856,496
                          )Dividend
      allocated to minority interest
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          23,325,052
                          
                          
                          
                          23,325,052Balance,
      December 31, 2008
                          
                          
                          30,000,000
                          
                          
                          $
                          300
                          
                          
                          $
                          6,930,944
                          
                          
                          $
                          (4,310,087
                          )
                          
                          $
                          2,403,547
                          
                          
                          $
                          7,515,704
                          
                          
                          $
                          12,540,408Net
      income
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          43,448,278
                          
                          
                          
                          43,448,278Foreign
      currency translation gain
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          7,754
                          
                          
                          
                          -
                          
                          
                          
                          7,754Subscription
      receivable settlement
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          4,310,087
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          4,310,087Issuance
      of shares in connection with recapitalization
                          
                          
                          2,245,723
                          
                          
                          
                          1,955,386
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          1,955,386Issuance
      of shares in connection with earn-out share agreement accounted for as a
      dividend
                          
                          
                          2,850,000
                          
                          
                          
                          18,525,000
                          
                          
                          
                          -
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          (18,525,000
                          )
                          
                          
                          -Issuance
      of shares for offering
                          
                          
                          4,800,000
                          
                          
                          
                          21,085,944
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          21,085,944(net
      of expenses amounting to $2,914,056)Issuance
      of over allotment shares
                          
                          
                          720,000
                          
                          
                          
                          3,312,000
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          3,312,000(net
      of expenses amounting to  $288,000)  Shares issuance for
      warrant conversion
                          
                          
                          76,600
                          
                          
                          
                          383,000
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          383,000Balance,
      December 31, 2009
                          
                          
                          40,692,323
                          
                          
                          $
                          45,261,630
                          
                          
                          $
                          6,930,944
                          
                          
                          $
                          -
                          
                          
                          $
                          2,411,301
                          
                          
                          $
                          32,438,982
                          
                          
                          $
                          87,042,857





See notes
to financial statements.


F-6





CHINA
GERUI ADVANCED MATERIALS GROUP LIMITED


(FORMERLY
GOLDEN GREEN ENTERPRISES LIMITED)


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(IN
US DOLLARS)





For the year ended December 31,2009
                                                      
                                                      
                                                      2008Cash
      flows from operating activities:Net
      income
                                                      
                                                      $
                                                      43,448,278
                                                      
                                                      
                                                      $
                                                      21,584,589Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
      of property, plant and equipment
                                                      
                                                      
                                                      2,792,547
                                                      
                                                      
                                                      
                                                      2,447,626Amortization
      of land use right
                                                      
                                                      
                                                      30,827
                                                      
                                                      
                                                      
                                                      30,280Net
      income attributable to non-controlling interest
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      13,920,944Changes
      in assets and liabilities:Accounts
      receivable, net
                                                      
                                                      
                                                      5,496,540
                                                      
                                                      
                                                      
                                                      (128,270
                                                      )Inventories
                                                      
                                                      
                                                      (2,404,567
                                                      )
                                                      
                                                      
                                                      5,106,310Prepaid
      expenses and other deposits
                                                      
                                                      
                                                      (5,552,655
                                                      )
                                                      
                                                      
                                                      (311,563
                                                      )Other
      receivables
                                                      
                                                      
                                                      (1,026,036
                                                      )
                                                      
                                                      
                                                      (630,379
                                                      )Accounts
      payable
                                                      
                                                      
                                                      2,278,603
                                                      
                                                      
                                                      
                                                      (547,173
                                                      )Income
      tax payable
                                                      
                                                      
                                                      1,628,627
                                                      
                                                      
                                                      
                                                      (408,010
                                                      )Customers
      deposit
                                                      
                                                      
                                                      (9,338,097
                                                      )
                                                      
                                                      
                                                      9,035,743Accrued
      liabilities and other payables
                                                      
                                                      
                                                      (3,565,821
                                                      )
                                                      
                                                      
                                                      1,005,235Net
      cash provided by operating activities
                                                      
                                                      
                                                      33,788,246
                                                      
                                                      
                                                      
                                                      51,105,332Cash
      flows from investing activities:Capital
      expenditures for addition of property, plant and equipment
                                                      
                                                      
                                                      (5,213,329
                                                      )
                                                      
                                                      
                                                      (6,572,185
                                                      )Capital
      expenditures on addition of land use right
                                                      
                                                      
                                                      (14,648
                                                      )
                                                      
                                                      
                                                      -Changes
      in restricted cash
                                                      
                                                      
                                                      (12,785,820
                                                      )
                                                      
                                                      
                                                      (5,485,798
                                                      )Changes
      in prepaid machinery deposits
                                                      
                                                      
                                                      (13,336,084
                                                      )
                                                      
                                                      
                                                      (637,882
                                                      )Proceeds
      from former owners
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      25,126,394Net
      cash (used in)/provided by investing activities
                                                      
                                                      
                                                      (31,349,881
                                                      )
                                                      
                                                      
                                                      12,430,529Cash
      flows from financing activities:Repayment
      of term loans
                                                      
                                                      
                                                      (37,269,379
                                                      )
                                                      
                                                      
                                                      (26,662,742
                                                      )Proceeds
      from term loans
                                                      
                                                      
                                                      40,574,191
                                                      
                                                      
                                                      
                                                      39,985,342Proceeds
      from common stock issued, net
                                                      
                                                      
                                                      26,736,329
                                                      
                                                      
                                                      
                                                      -Proceeds
      from notes payable
                                                      
                                                      
                                                      14,102,666
                                                      
                                                      
                                                      
                                                      6,430,053Proceeds
      from collection of subscription receivable
                                                      
                                                      
                                                      4,310,087
                                                      
                                                      
                                                      
                                                      -Dividends
      paid
                                                      
                                                      
                                                      (9,601,549
                                                      )
                                                      
                                                      
                                                      (42,254,947
                                                      )Land
      use right payable
                                                      
                                                      
                                                      (28,521
                                                      )
                                                      
                                                      
                                                      (125,604
                                                      )Amount
      paid to former minority shareholders
                                                      
                                                      
                                                      (4,310,087
                                                      )
                                                      
                                                      
                                                      -Amount
      paid to former owners
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      (61,688
                                                      )Net
      cash provided by / (used in) financing activities
                                                      
                                                      
                                                      34,513,737
                                                      
                                                      
                                                      
                                                      (22,689,586
                                                      )Net
      increase in cash
                                                      
                                                      
                                                      36,952,102
                                                      
                                                      
                                                      
                                                      40,846,275Effect
      on change of exchange rates
                                                      
                                                      
                                                      32,862
                                                      
                                                      
                                                      
                                                      1,557,778Cash
      as of January 1
                                                      
                                                      
                                                      42,622,404
                                                      
                                                      
                                                      
                                                      218,351Cash
      as of December 31
                                                      
                                                      $
                                                      79,607,368
                                                      
                                                      
                                                      $
                                                      42,622,404Supplemental
      disclosures of cash flow information:Cash
      paid during the year for:Interest
      paid
                                                      
                                                      $
                                                      3,237,757
                                                      
                                                      
                                                      $
                                                      3,769,423Income
      tax paid
                                                      
                                                      $
                                                      13,122,287
                                                      
                                                      
                                                      $
                                                      12,277,745Non-cash
      paid during the year for:Dividend
      paid
                                                      
                                                      $
                                                      18,525,000
                                                      
                                                      
                                                      $
                                                      -




See notes
to financial statements.


F-7





CHINA
GERUI ADVANCED MATERIALS GROUP LIMITED


(FORMERLY
GOLDEN GREEN ENTERPRISES LIMITED)


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(IN
US DOLLARS)





1.
            DESCRIPTION
      OF BUSINESS AND ORGANIZATION





On
November 30, 2009, the Board of Directors of Golden Green Enterprises Limited
(“Golden Green”) authorized the Company’s corporate name change to China Gerui
Advanced Materials Group Limited ("the Company" or "China Gerui"), effective as
of December 14, 2009.




The
Company was established in the British Virgin Islands ("BVI") on March 11, 2008
as a limited liability Company, for the purpose of effectuating a reorganization
and merger with Wealth Rainbow Development Limited (“Wealth Rainbow”) and Henan
Green Complex Materials Co., Ltd (“Henan Green”) as discussed in Note
2.




China
Gerui's holdings are comprised of Wealth Rainbow, also a holding company and
Henan Green, an operating company and a leading China-based specialty precision
cold-rolled steel producer.  Through its investment in these entities,
The Company manufactures and sells specialty, high-end, high precision, ultra
thin, high strength, cold-rolled, narrow strip steel products that are
characterized by stringent performance and specification requirements that
mandate a high degree of manufacturing and engineering expertise, and are
extensively used in the manufacturing industry throughout mainland China. The
Company's products are not standardized commodity products, but are tailored to
customers' requirements and then incorporated into products they and end-users
make for various applications. The Company sells its products directly to its
customers in the People's Republic of China (PRC) in a diverse range of
industries, including the food packaging, telecommunication, electrical
appliance, and construction materials industries.




Wealth
Rainbow was formed on March 1, 2007 by Lu Mingwang's family as the Company. On
October 21, 2008, Wealth Rainbow acquired 100% of the outstanding shares of
Henan Green pursuant to a stock transfer agreement. Subsequent to the stock
transfer, Wealth Rainbow became the sole shareholder of Henan Green. The change
of ownership was approved by the Chinese Government on October 21, 2008.
The principal activity of Wealth Rainbow is to hold its interest in Henan
Green.




The
consolidated financial statements include the financial statements of China
Gerui and its subsidiaries (together referred to as the "Group"). The Company
owns 100% equity interests directly and indirectly, in two subsidiaries, namely
Wealth Rainbow and Henan Green. The organization chart of the Group is as
follows:







F-8





CHINA
GERUI ADVANCED MATERIALS GROUP LIMITED


(FORMERLY
GOLDEN GREEN ENTERPRISES LIMITED)


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(IN
US DOLLARS)





2.
            REORGANIZATION
      AND ACQUISITION OF NON-CONTROLLING
INTEREST





On
October 21, 2008, Wealth Rainbow acquired the non-controlling interest in Henan
Green for $4,310,087 with the issuance of a promissory note to the minority
stockholders. This amount represented the fair value of Henan Green as
determined by an independent valuation which was performed during August 2008.
On the effective acquisition date, October 21, 2008, the fair value of
Henan Green exceeded the agreed purchase price by $785,917. Such amount has been
recorded as a contribution of capital by Henan Green during 2008.




The net
assets of Henan Green were recorded by Wealth Rainbow at historical cost to the
extent of the common control group’s 55.02% ownership of Henan Green. The
remaining 44.98% of Henan Green shares acquired were accounted for as a purchase
(fair value) of the non-controlling interest.





The
common control group comprised of three direct relatives of the Lu's family
which held approximately 55.02% of the shares of Henan Green on the date it was
acquired by Wealth Rainbow. Wealth Rainbow was wholly owned by another direct
relative of the Lu's family. Under the common control reporting rules, the
control group’s 55.02% interest of Henan Green that was acquired by Wealth
Rainbow constitutes an exchange of equity interests between entities under the
common control.





Subsequent
to the Henan Green acquisition, Wealth Rainbow entered into a reorganization and
capitalization agreement with the Company during November 2008 in which all of
the shares of Wealth Rainbow were exchanged with shares of the Company. As a
result of these transactions, Wealth Rainbow and Henan Green became wholly owned
subsidiaries of the Company. These transactions have been accounted for as a
reorganization under common control with the purchase of a minority interest. On
September 9, 2009, the Company has fully settled the amount of $4,310,087 which
was recorded as amount due to former minority shareholders.





The
consolidated financial statements of the Company have been prepared as if the
existing corporate structure had been in existence throughout the periods
presented and as if the reorganization had occurred as of the beginning of the
earliest period presented.





During
March 2009, the Company amended its memorandum of association by increasing its
authorized number of ordinary shares from 50,000 with a $1 par value to
100,000,000 with no par value.  Simultaneously with the amendment, the
Company effected a stock split by an additional 29,999,900 shares to the current
shareholders.  Accordingly, immediately after the amendment and prior
to the merger with China Opportunity Acquisition Corp. (“COAC”), the Company had
30,000,000 ordinary shares outstanding. On March 17, 2009, the Company
consummated a merger with COAC.





In
connection with the merger, the Company issued 2,245,723 shares of its ordinary
shares in exchange for all the outstanding shares of COAC. The Company also
granted, in connection with the merger, 17,266,667 of warrants in exchange for
all the outstanding warrants of COAC. The Company is deemed to be the surviving
entity and registered its shares pursuant to a registration statement filed with
the U.S. Securities and Exchange Commission.  Accordingly, after the
merger, the former shareholders of COAC own approximately 6.5% of the Company’s
ordinary shares.


F-9





CHINA
GERUI ADVANCED MATERIALS GROUP LIMITED


(FORMERLY
GOLDEN GREEN ENTERPRISES LIMITED)


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(IN
US DOLLARS)





3.
            BASIS
      OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES





(a)
            Basis
      of presentation





The
accompanying audited consolidated financial statements and related notes have
been prepared in conformity with accounting principles generally accepted in the
United States of America (US GAAP). The preparation of the consolidated
financial statements in accordance with US GAAP requires management of the Group
to make a number of estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts
of   revenues  and   expenses  during  the  reporting
year.   Significant items subject to such estimates and
assumptions include the recoverability of the carrying amount and the estimated
useful lives of long-lived assets; valuation allowances for receivables,
realizable values for inventories. Actual results could differ from those
estimates.





The
consolidated financial statements include all accounts of the Company and its
wholly-owned subsidiaries.  All material inter-company balances and
transactions have been eliminated.




In June
2009, the Financial Accounting Standards Board (“FASB”) issued Accounting
Standards Update No. 2009-01, “Generally Accepted AccountingPrinciples”
(ASC Topic 105) which establishes the FASB Accounting Standards Codification
(“the Codification” or “ASC”) as the official single source of authoritative
U.S. generally accepted accounting principles (“GAAP”).  All existing
accounting standards are superseded.  All other accounting guidance
not included in the Codification will be considered
non-authoritative.  The Codification also includes all relevant
Securities and Exchange Commission (“SEC”) guidance organized using the same
topical structure in separate sections within the Codification.  Following
the Codification, the FASB will not issue new standards in the form of
Statements, FASB Staff Positions or Emerging Issues Task Force
Abstracts.  Instead, it will issue Accounting Standards Updates
(“ASU”) which will serve to update the Codification, provide background
information about the guidance and provide the basis for conclusions on the
changes to the Codification.





The
Codification is not intended to change GAAP, but it will change the way GAAP is
organized and presented. The adoption of ASC 105 does not have an impact on the
Group's financial statements.





(b)
            Foreign
      currency translation





Assets
and liabilities of foreign operation are translated at the rate of exchange in
effect on the balance sheet date; income and expenses are translated at the
average rate of exchange prevailing during the year. The year-end rates for
December 31, 2009 and 2008 of Renminbi to one US dollar were 6.8270 and 6.8225
respectively; average rates for the year-end December 31, 2009 and 2008 were
6.8303 and 6.9351   respectively. The related translation
adjustments are reflected in "Accumulated other comprehensive income" in the
stockholder's equity section of the balance sheet. As of December 31, 2009 and
2008, the accumulated foreign currency translation gain was $2,411,301 and
$2,403,547 respectively. Foreign currency gains and losses resulting from
transactions are included in earnings.





The
year-end rates for December 31, 2009 and 2008 of Hong Kong dollar to one US
dollar were 7.7543 and 7.7499 respectively; average rates for the year-end
December 31, 2009 and 2008 were 7.7515 and 7.7818 respectively.





(c)
            Cash





Cash represents cash in banks and cash
on hand.





The Group
considers all highly liquid investments with original maturities of three months
or less to be cash. The Group maintains bank accounts in the
PRC.


F-10





CHINA
GERUI ADVANCED MATERIALS GROUP LIMITED


(FORMERLY
GOLDEN GREEN ENTERPRISES LIMITED)


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(IN
US DOLLARS)





3.
            BASIS
      OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (.../Cont'd)




(d)
            Accounts
      receivable





Accounts
receivable are recorded at the invoiced amount, net of allowances for doubtful
accounts sales returns and trade discounts.  The allowance for
doubtful accounts is the Group’s best estimate of the amount of probable credit
losses in the Group’s existing accounts receivable.  Management
determines the allowance based on historical write-off experience, customer
specific facts and economic conditions.  The Group has historically
been able to collect all of its receivable balances, and accordingly, 2%
allowance has been provided for doubtful accounts.





Outstanding
account balances are reviewed individually for collectability. Account balances
are charged off against the allowance after all means of collection have been
exhausted and the potential for recovery is considered remote. The Group does
not have any off-balance-sheet credit exposure to its customers.





(e)
            Inventories





Inventories
are stated at the lower of cost or market and consist primarily of flat rolled
steel. Cost is determined using the weighted average cost method.  In
the case of work in process and finished goods, such costs comprise of direct
materials, direct labor and an appropriate proportion of overheads.





(f)
            Property,
      plant and equipment





Property,
plant and equipment are recorded at cost less accumulated
depreciation.  Expenditures for major additions and betterments are
capitalized.  Maintenance and repairs are charged to general and
administrative expenses as incurred. Depreciation of property, plant and
equipment is computed by the straight-line method over the assets estimated
useful lives ranging from five to fifty years. Building improvements, if any,
are amortized on a straight-line basis over the estimated useful
life.




Upon sale
or retirement of property, plant and equipment, the related cost and accumulated
depreciation are removed from the accounts and any gain or loss is reflected in
operations.




Construction
in progress represents the costs of property, plant and equipment under
construction or installation. Depreciation commences when the asset is placed in
service. The accumulated costs are reclassified as property, plant and equipment
when installation or construction is completed. Government subsidies received
reduce the cost of construction.




The
estimated useful lives of the assets are as follows:




Estimated LifeLand
      use right
                      
                      
                      50Leasehold
      land improvement
                      
                      
                      46.5Buildings
                      
                      
                      10
      - 20Machinery
      and equipment
                      
                      
                      5 -
      20Vehicles
                      
                      
                      5Furniture
      fixtures and office equipment
                      
                      
                      5




Expenditures
for repairs and maintenance, which do not extend the useful life of the assets,
are expensed as incurred.


F-11





CHINA
GERUI ADVANCED MATERIALS GROUP LIMITED


(FORMERLY
GOLDEN GREEN ENTERPRISES LIMITED)


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(IN
US DOLLARS)





3.
            BASIS
      OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (.../Cont'd)




(g)
            Land
      use right





Land use
right is recorded at cost less accumulated amortization. Under ASC 350,
“Intangible, Goodwill and Other", land use right classified as definite lived
intangible assets and are amortized over its useful life.  According
to the laws of the PRC, the government owns all of the land in the PRC.
Companies or individuals are authorized to possess and use the land only through
land use rights granted by the PRC government.  Land use right is
amortized using the straight-line method over the lease term of 50
years.




(h)
            Impairment
      of long-lived assets




Long-lived
assets, including property, plant and equipment are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to the estimated
undiscounted future cash flows expected to be generated by the asset. If the
carrying amount of an asset exceeds its estimated future cash flows, an
impairment charge is recognized by the amount by which the carrying amount of
the asset exceeds the fair value of the asset.




Assets to
be disposed of are separately presented in the balance sheet and reported at the
lower of the carrying amount or fair value less costs to sell, and are no longer
depreciated. The assets and liabilities of a disposed group classified as held
for sale are presented separately in the appropriate asset and liability
sections of the balance sheet.




No
impairment was recognized as at December 31, 2009 and 2008.




(i)
            Fair
      value measurements




In April
2009, the FASB issued ASC 820-10-65-4 (formerly FSP No. 157-4, “Determining Fair
Value When the Volume and Level of Activity for the Asset and Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly”).
This standard emphasizes that even if there has been a significant decrease in
the volume and level of activity, the objective of a fair value measurement
remains the same. Fair value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction (that is, not a
forced liquidation or distressed sale) between market participants. This
standard provides a number of factors to consider when evaluating whether there
has been a significant decrease in the volume and level of activity for an asset
or liability in relation to normal market activity. In addition, when
transactions or quoted prices are not considered orderly, adjustments to those
prices based on the weight of available information may be needed to determine
the appropriate fair value. This standard is effective for interim and annual
reporting periods ending after June 15, 2009, and shall be applied
prospectively. Early adoption is permitted for periods ending after March 15,
2009. The adoption of this standard did not have a material effect on the
consolidated financial statements.




In August
2009, the FASB issued Accounting Standards Update “ASU” 2009-5 “Measuring
Liabilities at Fair Value”. This ASU provides amendments to ASC 820-10 “Fair
Value Measurements and Disclosures” to address concerns regarding the
determination of the fair value of liabilities. Because liabilities are often
not “traded”, due to restrictions placed on their transferability, there is
typically a very limited amount of trades (if any) from which to draw market
participant data. As such, many entities have had to determine the fair value of
a liability through the use of a hypothetical transaction. This ASU clarifies
the valuation techniques that must be used when the liability subject to the
fair value determination is not traded as an asset in an active market. The
management does not expect the adoption of this ASU to have a material effect on
the consolidated financial statements.


F-12





CHINA
GERUI ADVANCED MATERIALS GROUP LIMITED


(FORMERLY
GOLDEN GREEN ENTERPRISES LIMITED)


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(IN
US DOLLARS)





3.
            BASIS
      OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (.../Cont'd)




(j)
            Revenue
      recognition




The Group generates revenue primarily
from sales of steel mill flat-rolled products.




Revenue
is recognized when products have been delivered to the buyer and title and risk
of ownership has passed to the buyer, the sales price is fixed and determinable
and collectability is reasonably assured.




In the
PRC, value added tax (“VAT”) of 17% on the invoice amount is collected in
respect of the sales of goods on behalf of tax authorities. The VAT collected is
not revenue of the Group; instead, the amount is recorded as a liability on the
balance sheet until such VAT is paid.




(k)
            Income
      taxes




The Group
accounts for income taxes under ASC 740 "Income Taxes". Deferred income tax
assets and liabilities are determined based upon differences between the
financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be effective when the differences
are expected to reverse.




Deferred
tax assets are reduced by a valuation allowance to the extent management
concludes it is more likely than not that the assets will not be
realized.  Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled.  The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in the statements of income in the period that
includes the enactment date.




The Group
adopted ASC 740, "Income Taxes", which prescribes a more-likely-than-not
threshold for financial statement recognition and measurement of a tax position
taken in the tax return. This interpretation also provides guidance on
de-recognition of income tax assets and liabilities, classification of current
and deferred income tax assets and liabilities, accounting for interest and
penalties associated with tax positions, accounting for income taxes in
interim periods and income tax disclosures.




(l)
            Comprehensive
      income




The Group
has adopted ASC 220 "Comprehensive Income".  This statement
establishes rules for the reporting of comprehensive income and its
components.  Comprehensive income consists of net income and foreign
currency translation adjustments.




Comprehensive
income consists of the following for the years ending December 31, 2009 and
2008:




For the Year Ended December 31,2009
                        
                        
                        2008Net
      income attributable tocommon
      stock
                        
                        $
                        43,448,278
                        
                        
                        $
                        21,584,589Other
      comprehensive income-
      Foreign currency translation adjustments
                        
                        
                        7,754
                        
                        
                        
                        1,345,661Total
      comprehensive income
                        
                        $
                        43,456,032
                        
                        
                        $
                        22,930,250




F-13




CHINA
GERUI ADVANCED MATERIALS GROUP LIMITED


(FORMERLY
GOLDEN GREEN ENTERPRISES LIMITED)


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(IN
US DOLLARS)





3.
            BASIS
      OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (.../Cont'd)




(m)
            Commitments
      and contingencies




In
      the normal course of business, the Group is subject to contingencies,
      including legal proceedings and claims arising out of the normal course of
      businesses that relate to a wide range of matters, including among others,
      product liability. The Group records accruals for such contingencies based
      upon the assessment of the probability of occurrence and, where
      determinable, an estimate of the liability. Management may consider many
      factors in making these assessments including past history, scientific
      evidence and the specifics of each matter. As management has not become
      aware of any product liability claims arising from any incident over the
      year, the Group has not recognized a liability for product liability
      claims.




(n)
            Earnings
      per share




Basic
earnings per share is computed on the basis of the weighted-average number of
shares of our common stock outstanding during the period. Diluted earnings per
share is computed on the basis of the weighted-average number of shares of our
common stock plus the effect of dilutive potential common shares outstanding
during the period using the treasury method. Dilutive potential common shares
include 15,990,067 warrants and a Unit Purchase Option, which consists of
600,000 units (each unit consisting 1 share and 2 warrants).




The
following table sets forth the computation of basic and diluted net income per
common share:




For the Year Ended December 31,2009
                                      
                                      
                                      2008Net
      income per common stock
                                      
                                      $
                                      43,448,278
                                      
                                      
                                      $
                                      21,584,589Weighted
      average outstanding
                                      
                                      
                                      33,751,844
                                      
                                      
                                      
                                      30,000,000shares
      of common stockDilutive
      effect of Warrants
                                      
                                      
                                      3,659,717
                                      
                                      
                                      
                                      -Dilutive
      effect of Unit Purchase Option
                                      
                                      
                                      263,918
                                      
                                      
                                      
                                      -Diluted
      weighted average outstanding shares
                                      
                                      
                                      37,675,479
                                      
                                      
                                      
                                      30,000,000Earnings
      per common stock:Basic
                                      
                                      $
                                      1.29
                                      
                                      
                                      $
                                      0.72Diluted
                                      
                                      $
                                      1.15
                                      
                                      
                                      $
                                      0.72




F-14





CHINA
GERUI ADVANCED MATERIALS GROUP LIMITED


(FORMERLY
GOLDEN GREEN ENTERPRISES LIMITED)


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(IN
US DOLLARS)





3.
            BASIS
      OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (.../Cont'd)




(o)
            Segment
      information




ASC 280
"Segment reporting" establishes standards for reporting information on operating
segments in interim and annual financial statements.  The Group has
only one segment, all of the Group's operations and customers are in the PRC and
all income are derived from the sales of steel mill flat-rolled products.
Accordingly, no geographic information is presented.




(p)
            Recently
      issued accounting standards




We
describe below recent pronouncements that have had or may have a significant
effect on our financial statements. We do not discuss recent pronouncements that
are not anticipated to have an impact on or are unrelated to our financial
condition, results of operations, or disclosures.




In
December 2007, the FASB issued FASB ASC 810-10, “Noncontrolling Interest in
Consolidated Financial Statements” (“FASB ASC 810-10”). This Statement amends
ARB 51 to establish accounting and reporting standards for the noncontrolling
interest in a subsidiary and for the deconsolidation of a subsidiary. It
clarifies that a noncontrolling interest in a subsidiary is an ownership
interest in the consolidated entity that should be reported as equity in the
consolidated financial statements. Before this Statement was issued, limited
guidance existed for reporting noncontrolling interests. As a result,
considerable diversity in practice existed. So-called minority interests were
reported in the consolidated statement of financial position as liabilities or
in the mezzanine section between liabilities and equity. This Statement improves
comparability by eliminating that diversity. FASB ASC 810-10 is effective for
fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2008. Earlier adoption is prohibited. Effective January 1,
2009, the Group adopted the provisions of FASB ASC 810-10.




In April
2009, the FASB issued guidance within ASC Topic 805, “Business
Combinations”  ASC Topic 805 amends the initial recognition and
measurement, subsequent measurement and accounting, and disclosure of assets and
liabilities arising from contingencies in a business
combination.  This guidance is effective for assets or liabilities
arising from contingencies in business combinations for which the acquisition
date is on or after the beginning of the first annual reporting period beginning
on or after December 15, 2008. The adoption of of this guidance did not have a
material impact on our consolidated financial position, results of operations or
cash flows as of the date of adoption. ASC 805 will be applied to any future
business combinations.




In June
2009, the FASB issued FASB ASC 105-10-05, 10, 15, 65, 70 (“FASB ASC 105-10-05,
10, 15, 65, 70”), (formerly FASB Statement No. 168, The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles - a replacement of FASB Statement No. 162). FASB ASC 105-10-05, 10,
15, 65, 70 establishes the FASB ASC as the source of authoritative GAAP for
nongovernmental entities. The ASC does not change GAAP, instead it takes
individual pronouncements that currently comprise GAAP and reorganizes
them into Topics. Contents in each Topic are further organized by Subtopic,
then Section and finally Paragraph. The Paragraph level is the only level that
contains substantive content. Citing particular content in the ASC involves
specifying the unique numeric path to the content through the Topic,
Subtopic, Section and Paragraph structure. FASB suggests that all citations
begin with “FASB ASC.” FASB ASC 105-10-05, 10, 15, 65, 70 was effective for
interim and annual periods ending after September 15, 2009 and does not have an
impact on our financial position.




Management
does not believe that any other recently issued, but not yet effective
accounting pronouncements, if adopted, would have a material effect on the
accompanying financial statements.


F-15




CHINA
GERUI ADVANCED MATERIALS GROUP LIMITED


(FORMERLY
GOLDEN GREEN ENTERPRISES LIMITED)


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(IN
US DOLLARS)





3.
            BASIS
      OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (.../Cont'd)




(q)
            Subsequent
      events




In May
2009, the FASB issued guidance within Topic 855-10 relating to subsequent
events.  This guidance establishes principles and requirements for
subsequent events.  This guidance defines the period after the balance
sheet date during which events or transactions that may occur would be required
to be disclosed in a company’s financial statements.  Public entities
are required to evaluate subsequent events through the date that financial
statements are issued.  This guidance also provides guidelines in
evaluating whether or not events or transactions occurring after the balance
sheet date should be recognized in the financial statements.  This
guidance requires disclosure of the date through which subsequent events have
been evaluated. Adoption of this standards did not result in significant
changes in the subsequent events that we are required to recognize or disclosure
in our financial statements.




The Group
accounts for and discloses events that occur after the balance sheet but before
financial statements are issued or are available to be issued through March 9,
2010.




4.
            CASH




Cash
represents cash in bank and cash on hand. Cash as of December 31, 2009 and 2008
consists of the following:




2009
                    
                    
                    2008Bank
      balances and cash
                    
                    $
                    117,105,538
                    
                    
                    $
                    67,334,753Less:
      Restricted cash
                    
                    
                    (37,498,169
                    )
                    
                    
                    (24,712,349
                    )$
                    79,607,369
                    
                    
                    $
                    42,622,404




Renminbi
is not a freely convertible currency and the remittance of funds out of the PRC
is subject to the exchange restrictions imposed by the PRC
government.




As at
December 31, 2009 and 2008, the Group’s cash of amounting to $37,498,169 and
$24,713,349, respectively, were restricted and deposited in certain banks as
guarantee deposits for the benefit of issuance of notes payable granted by the
banks.




The
restricted cash guaranteed $41,013,622 and $26,910,956 of notes payable as of
December 31, 2009 and  2008 respectively. It can only be released at
the expiration date of corresponding notes payable.




5.
            ACCOUNTS
      RECEIVABLE




The Group
performs ongoing credit evaluations of its customers' financial conditions. The
Group generally encourages its customers to use its products and settle the
outstanding balance within credit terms. As of  December 31, 2009 and
2008, the provision on accumulated allowance for doubtful accounts was
$31,446 and $126,790 respectively.


F-16




CHINA
GERUI ADVANCED MATERIALS GROUP LIMITED


(FORMERLY
GOLDEN GREEN ENTERPRISES LIMITED)


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(IN
US DOLLARS)




6.
            INVENTORIES




Inventories as of December 31, 2009
and  2008 consist of the following:




2009
                    
                    
                    2008Raw
      materials
                    
                    $
                    2,152,547
                    
                    
                    $
                    936,280Work-in-process
                    
                    
                    1,345,715
                    
                    
                    
                    1,378,067Finished
      goods
                    
                    
                    2,460,618
                    
                    
                    
                    1,239,966$
                    5,958,880
                    
                    
                    $
                    3,554,313




7.
            PREPAID
      EXPENSES AND OTHER DEPOSITS




Prepaid expenses and other deposits as
of  December 31, 2009 and 2008 consist of the following:




2009
                      
                      
                      2008Prepaid
      purchases
                      
                      $
                      16,411,723
                      
                      
                      $
                      10,896,840Prepaid
      general expenses
                      
                      
                      61,987
                      
                      
                      
                      24,215$
                      16,473,710
                      
                      
                      $
                      10,921,055




Prepaid
purchases represent amounts prepaid for the purchases of raw materials and
accessories to suppliers. Prepaid machinery deposit represents part of cost of
machinery prepaid before delivery.




8.
            OTHER
      RECEIVABLES




Other
receivables as of December 31, 2009 and 2008 consist of the
following:




2009
                    
                    
                    2008Advances
      to staff
                    
                    $
                    265,402
                    
                    
                    $
                    381,224Others
                    
                    
                    2,026,731
                    
                    
                    
                    884,873$
                    2,292,133
                    
                    
                    $
                    1,266,097




Other
receivables represent advances to staff and petty cash to department staff for
daily expenditures. These amounts are interest free and with no fixed repayment
terms.




Included
in other receivables is $1,349,453 of funds held by unrelated third parties to
provide a standby guarantee for Henan Green to obtain additional bank
loans.   There was no agreement signed with the third parties and
no interest income was received.


F-17




CHINA
GERUI ADVANCED MATERIALS GROUP LIMITED


(FORMERLY
GOLDEN GREEN ENTERPRISES LIMITED)


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(IN
US DOLLARS)




9.
            PROPERTY,
      PLANT AND EQUIPMENT




Property, plant and equipment as of
December 31, 2009 and 2008 consist of the following:




2009
                  
                  
                  2008Buildings
                  
                  $
                  4,996,924
                  
                  
                  $
                  5,000,219Leasehold
      land improvement
                  
                  
                  20,170
                  
                  
                  
                  20,183Plant
      machinery and equipment
                  
                  
                  23,518,194
                  
                  
                  
                  22,769,678Vehicles
                  
                  
                  2,306,841
                  
                  
                  
                  1,615,780Office
      equipment
                  
                  
                  148,652
                  
                  
                  
                  139,189Construction
      in progress
                  
                  
                  4,977,442
                  
                  
                  
                  1,233,93835,968,223
                  
                  
                  
                  30,778,987Less:
      Accumulated depreciation
                  
                  
                  (13,630,013
                  )
                  
                  
                  (10,837,466
                  )$
                  22,338,210
                  
                  
                  $
                  19,941,521





Depreciation
expense for the years ended December 31, 2009 and 2008 was
$2,792,547 and $2,447,626  respectively.




Construction
in progress consists of the construction of a research and development center
("R&D center"), buildings of staff accommodation and production lines on 300
acres land. The total construction in progress as at December 31, 2009 and 2008
was $4,977,442 and $1,233,938 respectively.




Estimated costBalance at
                      
                      
                      to complete as of
                      
                      
                      Balance atDecember 31, 2009
                      
                      
                      December 31, 2009
                      
                      
                      December 31, 2008R&D
      center
                      
                      $
                      1,920,387
                      
                      
                      $
                      2,197,158
                      
                      
                      $
                      474,703Staff
      accommodation
                      
                      
                      494,756
                      
                      
                      
                      878,863
                      
                      
                      
                      494,790Production
      lines
                      
                      
                      2,562,299
                      
                      
                      
                      3,076,022
                      
                      
                      
                      264,445$
                      4,977,442
                      
                      
                      $
                      6,152,043
                      
                      
                      $
                      1,233,938




The three
projects are expected to be completed in the first quarter of 2010.




No
depreciation has been provided for construction in progress.




10.
            PREPAID
      MACHINERY DEPOSITS




Prepaid machinery deposits as of December 31, 2009
and 2008 consist of the following:




2009
                      
                      
                      2008Prepaid
      machinery deposits
                      
                      $
                      13,973,966
                      
                      
                      $
                      637,882




Prepaid
machinery deposit represents part of cost of machinery prepaid before delivery.
The Group paid deposits for the acquisition of equipment and machinery which
will be used for the expansion of production.




The
prepaid machinery deposits was classified as current assets in the previous
issued reports and has now been reclassified as non-current assets to conform a
more correct classification.


F-18




CHINA
GERUI ADVANCED MATERIALS GROUP LIMITED


(FORMERLY
GOLDEN GREEN ENTERPRISES LIMITED)


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(IN
US DOLLARS)




11.
            LAND
      USE RIGHT




Land use right as of December 31, 2009
and 2008 consists of the following:




2009
                  
                  
                  2008Land
      use right, net
                  
                  $
                  1,399,026
                  
                  
                  $
                  1,416,220




Land use
right represents prepaid lease payments to the local government for land use
right held for a period of 50 years from July 9, 2004 to June 30, 2054 in
Zhengzhou, People's Republic of China. Land use right payable as at December 31,
2009 and 2008 were zero and $28,521 respectively.




Land use
right is amortized using the straight-line method over the lease term of 50
years.  The amortization expense for the years ended December 31, 2009
and 2008 were $30,827 and $30,280 respectively.




12.
            NOTES
      PAYABLE




Notes payable as of December 31, 2009
and 2008 consist of the following:




2009
                  
                  
                  2008Classified
      by financial institutions:China
      Citic Bank
                  
                  $
                  7,470,338
                  
                  
                  $
                  5,862,953Commercial
      Bank of Zhengzhou
                  
                  
                  6,957,668
                  
                  
                  
                  2,711,616Minsheng
      Bank of China
                  
                  
                  6,152,043
                  
                  
                  
                  -Guangdong
      Development Bank
                  
                  
                  2,343,636
                  
                  
                  
                  6,903,628Shanghai
      Pudong Development Bank
                  
                  
                  13,402,666
                  
                  
                  
                  10,260,169Shanghai
      Pudong Development Bank
                  
                  
                  1,904,204
                  
                  
                  
                  -China
      Merchants Bank
                  
                  
                  2,783,067
                  
                  
                  
                  1,172,590Bank
      of Communications Branch
                  
                  
                  -
                  
                  
                  
                  -$
                  41,013,622
                  
                  
                  $
                  26,910,956Additional
      information:Maximum
      balance outstanding during the year
                  
                  $
                  48,879,449
                  
                  
                  $
                  44,902,894Finance
      cost
                  
                  $
                  941,644
                  
                  
                  $
                  1,333,746Finance
      charge per contract
                  
                  
                  0.050
                  %
                  
                  
                  0.050
                  %Weighted
      average interest rate
                  
                  
                  2.41
                  %
                  
                  
                  2.03
                  %




All the
above notes payable are secured by either 50% or 100% corresponding restricted
cash.  As at December 31,  2009 and 2008, the Group's cash
of $37,498,169 and $24,712,349, respectively were restricted for such purpose.
All the notes payable have terms of six months. Commercial Bank of Zhenzhou had
imposed covenant on the Company’s subsidiary, Henan Green, that not more than
10% of the net profit could be distributed as dividend. Shanghai Pudong
Development Bank imposed covenant on the Company’s subsidiary, Henan Green, that
they should be notified for any transaction which is over 10% of Henan Green’s
net assets.  The Company was not in compliance with its financial
covenants at the balance sheet date and it subsequently received waivers from
the two banks.


F-19





CHINA
GERUI ADVANCED MATERIALS GROUP LIMITED


(FORMERLY
GOLDEN GREEN ENTERPRISES LIMITED)


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(IN
US DOLLARS)




13.         TERM
LOANS




In order
to provide working capital for operations, the Group entered into the following
short term loan agreements as of December 31, 2009 and 2008:




2009
                        
                        
                        2008Classified
      by financial institutions:China
      Citic Bank
                        
                        $
                        3,661,930
                        
                        
                        $
                        3,664,345China
      Development Bank
                        
                        
                        -
                        
                        
                        
                        4,397,216China
      Merchants Bank
                        
                        
                        4,394,317
                        
                        
                        
                        4,397,216Commercial
      Bank of Zhengzhou
                        
                        
                        7,323,861
                        
                        
                        
                        7,328,691Guangdong
      Development Bank
                        
                        
                        2,929,544
                        
                        
                        
                        2,198,607Minsheng
      Bank of China Branch
                        
                        
                        2,783,067
                        
                        
                        
                        1,465,739Shanghai
      Pudong Development Bank
                        
                        
                        5,859,089
                        
                        
                        
                        5,862,953Zhengzhou
      City Rural Credit Cooperative
                        
                        
                        1,171,818
                        
                        
                        
                        806,156Zhengzhou
      City Urban Credit Cooperative
                        
                        
                        -
                        
                        
                        
                        556,980Bank
      of Communications
                        
                        
                        1,464,772
                        
                        
                        
                        -Bank
      of Luoyang  Branch
                        
                        
                        4,394,317
                        
                        
                        
                        -$
                        33,982,715
                        
                        
                        $
                        30,677,903Additional
      information:Maximum
      balance outstanding during the year
                        
                        $
                        37,791,123
                        
                        
                        $
                        31,117,626Interest
      paid during the year
                        
                        $
                        2,266,504
                        
                        
                        $
                        2,430,590Range
      of interest rate
                        
                        
                        0.531 - 0.965
                        %
                        
                        
                        0.487 - 0.965
                        %Weighted
      average interest rate
                        
                        
                        3.46
                        %
                        
                        
                        4.04
                        %




All of
the above terms loans are fixed term loans with a period of 12 months or
less.  Commercial Bank of Zhenzhou had imposed covenant on the
Company’s subsidiary, Henan Green, that not more than 10% of the net profit
could be distributed as dividend. Shanghai Pudong Development Bank imposed
covenant on the Company’s subsidiary, Henan Green, that any transaction which is
over 10% of Henan Green’s net assets must be approved by the
Bank.  For those loan facilities obtained from banks, all these terms
loans are either guaranteed and secured by Henan Green's fixed assets, including
its machinery and land use right, or guaranteed and secured by a related party,
Zhengzhou No.2 Iron and Steel Company Limited's land and plant properties, or
guaranteed by Henan Green’s former owners or other third parties.




14.         ACCRUED
LIABILITIES AND OTHER PAYABLES




Accrued liabilities and other payables
as of December 31, 2009 and  2008 consist of the
following:




2009
                      
                      
                      2008Accrued
      expenses
                      
                      $
                      1,713,874
                      
                      
                      $
                      1,142,668Other
      payables
                      
                      
                      499,046
                      
                      
                      
                      4,278,620Other
      tax payables
                      
                      
                      515,665
                      
                      
                      
                      873,118$
                      2,728,585
                      
                      
                      $
                      6,294,406




Other tax
payables represent payables other than income tax which consist of value added
tax and city maintenance and construction tax.


F-20





CHINA
GERUI ADVANCED MATERIALS GROUP LIMITED


(FORMERLY
GOLDEN GREEN ENTERPRISES LIMITED)


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(IN
US DOLLARS)




15.         STOCKHOLDERS’
EQUITY




(a)
            Capital




The
Company was established in the British Virgin Islands ("BVI") on March 11, 2008
as a limited liability company. Authorized common stock of the Company included
50,000 ordinary shares with a $1.00 par value. Prior to the stock split
described below, the Company had 100 shares outstanding. During March 2009, the
Company amended its memorandum of association by effecting a stock split
resulting in the issuance of 29,999,999 shares and increasing the total
authorized shares from 50,000 to 100,000,000.  Accordingly,
immediately after this amendment of its memorandum of association, the Company
had 30,000,000 shares outstanding.




In
connection with the merger of COAC, on March 17, 2009, the Company issued
2,245,723 ordinary shares.




In
connection with the merger between the Company and COAC, the Company is the
surviving entity, up to 17,866,667 ordinary shares of the Company has been
reserved for issuance upon exercise of the warrants to subscribe for ordinary
shares of the Company at $5.00 per share.  Also, there is one unit
purchase option to purchase 600,000 units, each at $6.60 consisting of one share
of common stock and two warrants.




During
November 2009, 76,600 warrants were exercised, for which the Company received
proceeds of $383,000.




The
Company and the Original Shareholders including Oasis Green Investment Limited,
Plumpton Group Limited and Honest Joy Limited entered into an agreement dated
September 15, 2009, pursuant to which, the Company agreed to issue to the
Original Shareholders an aggregate of 2,850,000 ordinary shares within ten days
of entering into the agreement. The 2,850,000 shares are to be divided among the
Original Shareholders in the same proportion to the amounts of the Earn-Out
Shares that they would have received under the terms of the Earn-Out in the
Merger Agreement. In consideration of the issuance of the ordinary shares, the
Company and the Original Shareholders agreed to a mutual release of all claims
relating to the merger, the redemptions, and the Earn-Out Shares.  The
issuance of such Earn-out shares was recorded as a dividend since the merger was
deemed to be a recapitalization.




On
November 9, 2009, the Company entered into an Underwriting Agreement (the
“Underwriting Agreement”) with Maxim Group LLC (the “Underwriter
Representative”) to sell in a public offering 4,800,000 ordinary shares, no par
value (“Ordinary Shares”), of the Company at a price of $5.00 per share for
aggregate proceeds of $24,000,000. The Company netted proceeds amounting to
$21,085,944 after commissions, fees and other expenses amounting to
$2,914,056.




In
addition, the Company has granted the underwriters an option to purchase up to
720,000 additional Ordinary Shares to cover over-allotments which was exercised
in full during December 2009. The gross proceeds for the over allotment were
$3,600,000 which yielding $3,312,000 additional proceeds to the Company after
deducting the underwriter commissions, discounts and other fees amounting
$288,000.


F-21




CHINA
GERUI ADVANCED MATERIALS GROUP LIMITED


(FORMERLY
GOLDEN GREEN ENTERPRISES LIMITED)


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(IN
US DOLLARS)




15.         STOCKHOLDERS’
EQUITY (.../Cont’d)




(a)
            Capital
      (.../Cont’d)




As
disclosed in the Form 6-K, the Company also has granted the Underwriter
Representative (and its designees) a warrant (the “Underwriter Representative
Warrant”) for the purchase of an aggregate of 144,000 Ordinary Shares (the
“Warrant Shares”) for an aggregate purchase price of $100.00.  The
Underwriter Representative Warrant may be exercised in full or part
to purchase Warrant Shares at an initial exercise price of $6.00 per
share.  The Underwriter Representative Warrant is exercisable for five
years beginning on August 9, 2010. The fair value of warrants amounts to
approximately $740,000 which is calculated by using Black Scholes Option
Calculator. Such amount has been recorded through the equity accounts having to
impact on stockholders' equity. The fair value of each of warrant was estimated
using the following assumptions:




2009Expected
      volatility
                            
                            
                            150.00
                            %Expected
      dividends
                            
                            
                            -Expected
      term (in years)
                            
                            
                            5Risk
      free rate
                            
                            
                            2.69
                            %




A summary
of all warrants outstanding as of December 31, 2009, and changed during the year
then ended is presented below:




Warrants
                    
                    
                    Exercise Price
                    
                    
                    Weighted
                      Average
      LifeIssued
      on March 17, 2009
                    
                    
                    17,266,667
                    
                    
                    $
                    5.00
                    
                    
                    1
      yearGranted
                    
                    
                    144,000
                    
                    
                    
                    6.00
                    
                    
                    5
      yearsExercised
                    
                    
                    (76,600
                    )
                    
                    
                    5.00
                    
                    
                    
                    -Outstanding
      as of December 31, 2009
                    
                    
                    17,334,067
                    
                    
                    
                    
                    
                    
                    1
      year




17,266,667
issued warrants are expected to be exercised on or before March 19, 2011,
144,000 granted warrants are expected to be exercised on or before August 8,
2015. The average remaining life of warrants is about 1 year.


F-22




CHINA
GERUI ADVANCED MATERIALS GROUP LIMITED


(FORMERLY
GOLDEN GREEN ENTERPRISES LIMITED)


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(IN
US DOLLARS)




15.         STOCKHOLDERS’
EQUITY (.../Cont’d)




(b)
            Retained
      Earnings




Retained
earnings as of December 31, 2009 and 2008 consist of the following




2009
                          
                          
                          2008Retained
      earnings
                          
                          $
                          30,856,080
                          
                          
                          $
                          5,932,802Statutory
      surplus reserves
                          
                          
                          1,582,902
                          
                          
                          
                          1,582,902$
                          32,438,982
                          
                          
                          $
                          7,515,704




In
accordance with PRC Company Law, the Group is required to allocate at least 10%
profit to the statutory surplus reserve.  Appropriation to the
statutory surplus reserve by the Group is based on profit arrived under PRC
accounting standards for business enterprises for each year.




The
profit arrived at must be set off against any accumulated losses sustained by
the Group in prior years, before allocation is made to the statutory surplus
reserve.  Appropriation to the statutory surplus reserve must be made
before distribution of dividends to shareholders.  The appropriation
is required until the statutory surplus reserve reaches 50% of the stockholder's
equity.  This statutory surplus reserve is not distributable in the
form of cash dividends.




As the
statutory surplus reserve has reached 50% of the stockholder's equity in 2005,
the Group ceased to allocate.


F-23




CHINA
GERUI ADVANCED MATERIALS GROUP LIMITED


(FORMERLY
GOLDEN GREEN ENTERPRISES LIMITED)


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(IN
US DOLLARS)




16.         INCOME
TAXES




All of the Company's income is
generated in the PRC.




For the Year Ended December 31,2009
              
              
              2008Current
      income tax expense
              
              $
              14,751,569
              
              
              $
              11,869,735




The
Group's income tax provision in respect of operations in PRC is calculated at
the applicable tax rates on the estimated assessable profits for the year based
on existing legislation, interpretations and practices in respect thereof. The
standard tax rate applicable to the Group changed from 33% to 25%, effective on
January 1, 2008.




A
reconciliation of the expected income tax expense to the actual income tax
expense for the years ended December 31, 2009 and 2008 are as
follows:




For the Year Ended December 31,2009
              
              
              2008Income
      before tax
              
              $
              58,199,847
              
              
              $
              47,375,268Expected
      PRC income tax expense at statutory tax rate of 25%
              
              
              14,549,961
              
              
              
              11,843,817Income
      not subject to tax
              
              
              -
              
              
              
              77,518Effect
      on exchange rate
              
              
              201,608
              
              
              
              (51,600
              )Actual
      income tax expense
              
              $
              14,751,569
              
              
              $
              11,869,735




The PRC
tax system is subject to substantial uncertainties and has been subject to
recently enacted changes, the interpretation and enforcement of which are also
uncertain. There can be no assurance that changes in PRC tax laws or their
interpretation or their application will not subject the Group to substantial
PRC taxes in future.




No
deferred tax liability has been provided as the amount involved is immaterial.
The Group has analyzed the tax positions taken or expected to be taken in its
tax filings and has concluded it has no material liability related to uncertain
tax positions.


F-24




CHINA
GERUI ADVANCED MATERIALS GROUP LIMITED


(FORMERLY
GOLDEN GREEN ENTERPRISES LIMITED)


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(IN
US DOLLARS)




17.         SUNDRY
INCOME




Sundry income as of  December
31, 2009 and 2008 consists of the following:




For
      the Year Ended December 31,2009
              
              
              2008Local
      government subsidies
              
              $
              87,844
              
              
              $
              79,365Transferred
      from receipts in advance and accounts payable
              
              
              83,772
              
              
              
              71,605Subcontracting
      income
              
              
              69,567
              
              
              
              -Others
              
              
              52,648
              
              
              
              4,717$
              293,831
              
              
              $
              155,687




During
the years ended December 31, 2009 and 2008, the Group received special one time
subsidies from local government of Zhengzhou, China amounting to $87,844 and
79,365 respectively for its advance technology in manufacturing precision steel
mill flat-rolled products. The subsidy is not a continuing nature, it depends on
the local government's policy announced within a valid period.




The Group
earned its subcontracting income by providing services for other companies
during the fourth quarter of 2009. This income is not constant, and services are
subject to the need of other companies.




18.         RELATED
PARTY TRANSACTIONS




In 2004,
the Company’s subsidiary, Henan Green, entered into a rental agreement for land
use right with Zhengzhou No.2 Iron and Steel Company Limited, the former owner
of Henan Green, from January 1, 2005 to December 31, 2027. Rental paid to
Zhengzhou No.2 Iron and Steel Company Limited for the years ended December 31,
2009 and 2008 was $8,916 and $8,781 respectively.




19.         SIGNIFICANT
CONCENTRATIONS




Our
credit risk is somewhat limited due to a relatively large customer base and its
dispersion across geographic areas of the PRC. During the year ended December
31, 2009, the Company had no customer which accounted for 10% or more of total
revenue. During the year ended December 31, 2008, the Company had only one
customer which accounted for approximately 10% of total revenue. As of December
31, 2009, the Company had two customers which accounted for approximately 66%
and 11%, respectively of total accounts receivable. As of December 31, 2008, the
Company had three customers which accounted for approximately 46%, 14% and 14%,
respectively of total accounts receivable.




All of
the Group's suppliers are located in the PRC. During the year ended December 31,
2009, the Company had four suppliers which each accounted for approximately 11%,
17%, 20% and 28% of total purchases, respectively. During the year ended
December 31, 2008, the Company had three suppliers which each accounted for
approximately 12%, 22% and 47% of total purchases, respectively.  As
of December 31, 2009, the Company had three suppliers which accounted for
approximately 37%, 33% and 15%, respectively of total accounts payable. As of
December 31, 2008, the Company had three suppliers which accounted for
approximately 37%, 23% and 14%, respectively of total accounts
payable.


F-25





CHINA
GERUI ADVANCED MATERIALS GROUP LIMITED


(FORMERLY
GOLDEN GREEN ENTERPRISES LIMITED)


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(IN
US DOLLARS)




20.         FOREIGN
OPERATIONS




Operations




All of
the Group’s operations are carried out and all of its assets are located in the
PRC. Accordingly, the Group’s business, financial condition and results of
operations may be influenced by the political, economic and legal environments
in the PRC. The Group’s business may be influenced by changes in governmental
policies with respect to laws and regulations, anti-inflationary measures,
currency fluctuation and remittances and methods of taxation, among other
things.




Dividends and reserves




Under
laws of the PRC, net income after taxation can only be distributed as dividends
after appropriation has been made for the following: (i) cumulative prior years'
losses, if any; (ii) allocations to the "Statutory Surplus Reserve" of at least
10% of net income after tax, as determined under PRC accounting rules and
regulations, until the fund amounts to 50% of the equity of the Company’s
subsidiary, Henan Green; (iii) allocations of 5-10% of income after tax, as
determined under PRC accounting rules and regulations, to Henan Green's
"Statutory Common Welfare Fund", which is established for the purpose of
providing employee facilities and other collective benefits to employees in
China; and (iv) allocations to any discretionary surplus reserve, if approved by
equity stockholders.




21.         OPERATING
LEASE COMMITMENTS




Rental
expense for obligations under operating leases was $23,556 (RMB160,900) for the
year ended December 31, 2009. The total future minimum lease payments under
non-cancellable operating leases with respect to premises as of December 31,
2009 are payable as follows:




December
      31,
                  
                  Leasehold
                  
                  
                  Reservoir rental
                  
                  
                  Total2010
                  
                  $
                  9,813
                  
                  
                  $
                  14,648
                  
                  
                  $
                  24,4612011
                  
                  
                  10,794
                  
                  
                  
                  14,648
                  
                  
                  
                  25,4422012
                  
                  
                  11,873
                  
                  
                  
                  14,648
                  
                  
                  
                  26,5212013
                  
                  
                  13,060
                  
                  
                  
                  14,648
                  
                  
                  
                  27,7082014
                  
                  
                  14,366
                  
                  
                  
                  14,648
                  
                  
                  
                  29,014Over
      five years
                  
                  
                  387,536
                  
                  
                  
                  58,591
                  
                  
                  
                  446,127$
                  447,442
                  
                  
                  $
                  131,831
                  
                  
                  $
                  579,273




Land use
right is granted by Zhengzhou No.2 Iron and Steel Company Limited, who sub-lets
a part of its land with 27,066 m2 to Henan Green for use. The rental period is
from January 1, 2005 to December 31, 2027. Annual rental paid for the land use
right is about $8,781 (RMB 60,900) for the period of January 1, 2005 to December
31, 2009. The rental payment will increase by 10% annually from 2010 onwards.
Such related party commitments are included in the above table.


F-26




CHINA
GERUI ADVANCED MATERIALS GROUP LIMITED


(FORMERLY
GOLDEN GREEN ENTERPRISES LIMITED)


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(IN
US DOLLARS)




22.         COMMITMENTS




The Group had the following capital
commitments at of December 31, 2009:




Contracted,
      but not provided for:-Acquisition
      of machinery and equipment
                    
                    $
                    27,682,115




According
to the purchase contracts, the Company should pay 50% deposit within 10 days
after the purchase contracts are signed, all the machinery and equipment are
estimated to be delivered and completed installation in 2010.  The
Group estimates those machinery and equipment will be used for production in the
last quarter of 2010.




23.         SUBSEQUENT
EVENTS




Post-closing
warrants exercise Through March 3, 2010, the Company issued 737,566 shares in
connection with the exercise of 737,566 warrants. As a result, the Company
received $3,679,345 (after deducting bank charges of $8,485).


F-27





CHINA
GERUI ADVANCED MATERIALS GROUP LIMITED


(FORMERLY
GOLDEN GREEN ENTERPRISES LIMITED)


NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS


(IN
US DOLLARS)




24.         QUARTERLY
CONSOLIDATED FINANCIAL DATA (UNAUDITED)




2009March 31
                      
                      
                      June 30
                      
                      
                      September 30
                      
                      
                      December 31Revenue:Steel
      mill flat-rolled products
                      
                      $
                      46,973,387
                      
                      
                      $
                      102,408,628
                      
                      
                      $
                      59,252,619
                      
                      
                      $
                      57,241,385Operating
      expenses:Cost
      of revenue
                      
                      
                      (33,272,665
                      )
                      
                      
                      (71,773,082
                      )
                      
                      
                      (41,101,974
                      )
                      
                      
                      (40,220,298
                      )General
      and administrative expenses
                      
                      
                      (853,409
                      )
                      
                      
                      (1,654,792
                      )
                      
                      
                      (1,820,762
                      )
                      
                      
                      (1,097,958
                      )Selling
      and marketing expenses
                      
                      
                      (157,254
                      )
                      
                      
                      (539,097
                      )
                      
                      
                      (175,698
                      )
                      
                      
                      (204,254
                      )Total
      operating expenses
                      
                      
                      (34,283,328
                      )
                      
                      
                      (73,966,971
                      )
                      
                      
                      (43,098,434
                      )
                      
                      
                      (41,522,510
                      )Operating
      income
                      
                      
                      12,690,059
                      
                      
                      
                      28,441,657
                      
                      
                      
                      16,154,185
                      
                      
                      
                      15,718,875Other
      income (expenses)Interest
      income
                      
                      
                      234,509
                      
                      
                      
                      426,542
                      
                      
                      
                      252,722
                      
                      
                      
                      149,792Interest
      expenses
                      
                      
                      (851,134
                      )
                      
                      
                      (1,569,568
                      )
                      
                      
                      (940,118
                      )
                      
                      
                      (728,071
                      )Sundry
      income
                      
                      
                      87,756
                      
                      
                      
                      152,450
                      
                      
                      
                      63,482
                      
                      
                      
                      77,899Income
      tax expense
                      
                      
                      (3,025,890
                      )
                      
                      
                      (6,897,115
                      )
                      
                      
                      (4,037,233
                      )
                      
                      
                      (3,817,221
                      )Net
      income attributable to common stockholders
                      
                      $
                      9,135,300
                      
                      
                      $
                      20,553,966
                      
                      
                      $
                      11,493,038
                      
                      
                      $
                      11,401,274Net
      income per shareBasic
                      
                      $
                      0.28
                      
                      
                      $
                      0.64
                      
                      
                      $
                      0.35
                      
                      
                      $
                      0.30Diluted
                      
                      $
                      0.26
                      
                      
                      $
                      0.59
                      
                      
                      $
                      0.29
                      
                      
                      $
                      0.272008March 31
                      
                      
                      June 30
                      
                      
                      September 30
                      
                      
                      December
      31Revenue:Steel
      mill flat-rolled products
                      
                      $
                      46,956,701
                      
                      
                      $
                      100,979,009
                      
                      
                      $
                      55,881,554
                      
                      
                      $
                      39,404,168Operating
      expenses:Cost
      of revenue
                      
                      
                      (32,587,779
                      )
                      
                      
                      (71,776,231
                      )
                      
                      
                      (41,223,269
                      )
                      
                      
                      (29,408,495
                      )General
      and administrative expenses
                      
                      
                      (647,158
                      )
                      
                      
                      (1,483,492
                      )
                      
                      
                      (890,469
                      )
                      
                      
                      (1,057,784
                      )Selling
      and marketing expenses
                      
                      
                      (138,203
                      )
                      
                      
                      (405,346
                      )
                      
                      
                      (175,762
                      )
                      
                      
                      (250,000
                      )Total
      operating expenses
                      
                      
                      (33,373,140
                      )
                      
                      
                      (73,665,069
                      )
                      
                      
                      (42,289,500
                      )
                      
                      
                      (30,716,279
                      )Operating
      income
                      
                      
                      13,583,561
                      
                      
                      
                      27,313,940
                      
                      
                      
                      13,592,054
                      
                      
                      
                      8,687,889Other
      income (expenses)Interest
      income
                      
                      
                      341,529
                      
                      
                      
                      743,134
                      
                      
                      
                      334,813
                      
                      
                      
                      317,174Interest
      expenses
                      
                      
                      (890,112
                      )
                      
                      
                      (1,961,981
                      )
                      
                      
                      (1,007,838
                      )
                      
                      
                      (799,604
                      )Sundry
      income
                      
                      
                      76,882
                      
                      
                      
                      84,022
                      
                      
                      
                      888
                      
                      
                      
                      70,777Income
      tax expense
                      
                      
                      (3,200,858
                      )
                      
                      
                      (6,422,773
                      )
                      
                      
                      (3,244,752
                      )
                      
                      
                      (2,202,210
                      )Net
      income before non-controlling interest
                      
                      
                      9,911,002
                      
                      
                      
                      19,756,342
                      
                      
                      
                      9,675,165
                      
                      
                      
                      6,074,026Net
      income attributable tonon-controlling
      interest
                      
                      
                      (4,457,969
                      )
                      
                      
                      (8,886,403
                      )
                      
                      
                      (4,351,889
                      )
                      
                      
                      (682,652
                      )Net
      income attributable to common stockholders
                      
                      $
                      5,453,033
                      
                      
                      $
                      10,869,939
                      
                      
                      $
                      5,323,276
                      
                      
                      $
                      5,391,374Net
      income per shareBasic
                      
                      $
                      0.18
                      
                      
                      $
                      0.36
                      
                      
                      $
                      0.18
                      
                      
                      $
                      0.18Diluted
                      
                      $
                      0.18
                      
                      
                      $
                      0.36
                      
                      
                      $
                      0.18
                      
                      
                      $
                      0.18




F-28