UNITED STATES



SECURITIES AND EXCHANGE COMMISSION



WASHINGTON, D.C. 20549



FORM 10-K



(Mark One)





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





For the fiscal year ended December 31, 2013



OR



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



For the transition period from ____________ to ____________



Commission file number 000-28767



YOSEN GROUP, INC.



(Exact name of registrant as specified
in its charter)



|Nevada                                                                 |  | 88-0403070                          
|---------------------------------------------------------------------- |  | ------------------------------------
|(State or Other Jurisdiction of Incorporation or
        Organization) |  | (I.R.S. Employer Identification No.)



368 HuShu Nan Road



HangZhou City, Zhejiang Province, China
310014



(Address of Principal Executive Offices)
(Zip Code)



Registrant’s telephone number,
including area code: 086-0571-88381700



Securities registered pursuant to Section 12(b) of the Act:
None



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



Common Stock, $0.001 par value



Title of class



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



Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ̈Nox



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.   YesxNo ̈



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). YesxNo ̈



Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is
not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ̈









Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of “large accelerated filer,”“accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.



| | Large accelerated filer ☐                                                     | Accelerated filer ☐         
| | ----------------------------------------------------------------------------- | ----------------------------
| | Non-accelerated filer ☐
        (Do not check if a smaller reporting company) | Smaller reporting company  x



Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ̈Nox



The aggregate market value of the 13,287,356
shares of voting and non-voting common equity stock held by non-affiliates of the registrant was approximately $4,384,327 as of
June 30, 2013, the last business day of the registrant’s most recently completed second fiscal quarter, based on the last
sale price of the registrant’s common stock on such date of $0.33 per share, as reported on the OTC Bulletin Board.



As of April 11, 2014, there were 23,542,527
shares of the registrant’s common stock outstanding.



Documents incorporated by reference: None.





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EXPLANATORY NOTE



This Amendment to our Annual Report
on Form 10-K/A ("Form 10-K/A") is being filed to amend our Annual Report on 10-K for the year ended December 31, 2013
("Form 10-K"), which was originally filed with the Securities and Exchange Commission (the "SEC") on April
11, 2014,. We are filing this Amendment to include disclosure consistent with comments received by the SEC. We are amending and
restating Items 7 and 15 in this Form 10-K/A.



Below is a summary of these errors and
the related corrections:



| | · | The amount of $500,000
    was previously classified as other payables as of December 31, 2012. The Company moved the amount to notes payable.  The
    reclassification caused accrued expenses and other payable to decrease $500,000 from $698,924 to $198,924 and notes payable
    to increase $500,000 from zero to $500,000 on the consolidated balance sheets.  The total current liabilities remained
    unchanged on the consolidated balance sheets. The reclassification also affected the consolidated statements of cash flows.  The
    Company reclassified $500,000 from net cash used in operating activities to net cash provided by financing activities on the
    consolidated statements of cash flows.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The impact of the reclassification was limited to the presentation
of the consolidated balance sheets and the consolidated statements of cash flows. The consolidated statements of operations and
comprehensive loss and the consolidated statements of stockholders’ deficit remained unaffected.





The reclassification above also affected the disclosure
of notes payable and Liquidity and Capital Resources. As a result, we have amended Note 4 and ITEM 7. MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS





In addition, as required by Rule 12b-15 of the Securities
Exchange Act of 1934, this Amendment contains new certifications by our Chief Executive Officer and our Chief Financial Officer,
filed as exhibits hereto.











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YOSEN GROUP, INC.



Table of Contents



|PART I   |                                                                                                              |   
|-------- | ------------------------------------------------------------------------------------------------------------ | --
|         |                                                                                                              |   
|Item 1   | Business                                                                                                     | 4 
|         |                                                                                                              |   
|Item 1A  | Risk Factors                                                                                                 | 9 
|         |                                                                                                              |   
|Item 1B  | Unresolved Staff Comments                                                                                    | 12
|         |                                                                                                              |   
|Item 2   | Properties                                                                                                   | 13
|         |                                                                                                              |   
|Item 3   | Legal Proceedings                                                                                            | 13
|         |                                                                                                              |   
|Item 4   | Mine Safety Disclosures                                                                                      | 13
|         |                                                                                                              |   
|PART II  |                                                                                                              |   
|         |                                                                                                              |   
|Item 5   | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 14
|         |                                                                                                              |   
|Item 6   | Selected Financial Data                                                                                      | 16
|         |                                                                                                              |   
|Item 7   | Management’s Discussion and Analysis of Financial Condition and Results of Operations                        | 16
|         |                                                                                                              |   
|Item 7A  | Quantitative and Qualitative Disclosure About Market Risk                                                    | 24
|         |                                                                                                              |   
|Item 8   | Financial Statements and Supplementary Data                                                                  | 24
|         |                                                                                                              |   
|Item 9   | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         | 24
|         |                                                                                                              |   
|Item 9A  | Controls and Procedures                                                                                      | 24
|         |                                                                                                              |   
|Item 9B  | Other Information                                                                                            | 25
|         |                                                                                                              |   
|PART III |                                                                                                              |   
|         |                                                                                                              |   
|Item 10  | Directors, Executive Officers and Corporate Governance                                                       | 26
|         |                                                                                                              |   
|Item 11  | Executive Compensation                                                                                       | 29
|         |                                                                                                              |   
|Item 12  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               | 30
|         |                                                                                                              |   
|Item 13  | Certain Relationships and Related Transactions, and Director Independence                                    | 31
|         |                                                                                                              |   
|Item 14  | Principal Accountant Fees and Services                                                                       | 31
|         |                                                                                                              |   
|PART IV  |                                                                                                              |   
|         |                                                                                                              |   
|Item 15  | Exhibits, Financial Statement Schedules                                                                      | 32
|         |                                                                                                              |   
|         | Index to Consolidated Financial Statements                                                                   |   





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Forward Looking Statements



We have included
and from time to time may make in our public filings, press releases or other public statements, certain statements, including,
without limitation, those under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
in Part II, Item 7 “forward-looking statements”. In some cases these statements are identifiable through the use of
words such as “anticipate,”“believe,”“estimate,”“expect,”“intend,”“plan,”“project,”“target,”“can,”“could,”“may,”“should,”“will,”“would”
and similar expressions. In addition, our management may make forward-looking statements to analysts, investors, representatives
of the media and others. These forward-looking statements are not historical facts nor guarantees or assurances of future performance
and represent only our beliefs regarding future events, many of which, by their nature, are inherently uncertain and beyond our
control. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes
in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking
statements. You are therefore cautioned not rely on these forward-looking statements.



Except as required
by applicable law, including securities laws, we do not intend to update any of the forward-looking statements to conform to actual
results.





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PART I



ITEM 1. BUSINESS



Overview



Yosen Group, Inc. (formerly known as
“China 3C Group”) (including our subsidiaries unless the context indicates otherwise, the “Company”, “Yosen,”“Yosen
Group,”“we,” or “us”) was incorporated on August 20, 1998 under the laws of the State of Nevada.
Before July 2009, we were only engaged in the resale and distribution of third party products and generated 100% of our revenue
from resale of items such as mobile phones, facsimile machines, DVD players, stereos, speakers, MP3 and MP4 players, iPods, electronic
dictionaries, CD players and audio systems. On July 6, 2009, we acquired Jinhua Baofa Logistic Ltd. (“Jinhua”).  At
that point, we started providing transportation logistics services to businesses in Eastern China.



In 2007 we began operating under a “store
in store” business model. The “store in store” business model resulted in expanded marketing channels, thus,
stimulated the growth of sales in 2007 and 2008. We used to operate “stores in stores” under the brand names Hangzhou
Wang Da, Yiwu YongXin, Shanghai Joy & Harmony and Hangzhou Sanhe. However, starting in 2009, we had declining sales under
the model due to increased competition from direct stores and large department stores and the impact of the economic slowdown.
As a result, we closed Shanghai Joy & Harmony and Hangzhou Sanhe in 2011. During 2012, Yiwu YongXin ceased operations and Hangzhou
Wang Da’s business was split between Hangzhou Wang Da and Zhejiang YongXin. Jinhua ceased operations during 2012 due to higher
fuel cost and competition in the logistics market in China. As of December 31, 2013, we operated 28 “stores in stores”, under
the brand names Hangzhou Wang Da and Zhejiang YongXin.



Under the stores in stores model, we
distribute our products mainly via the so-called concessionaire agreements with larger department stores, supermarkets, large electronics
retail stores, and other retailers. Under this model, companies such as Yosen own their own outlets within larger stores and in
so doing assume responsibility for most financial and operational aspects of those outlets including capital cost, inventory, wages,
product selections, pricing, and general management. Our retail partners are compensated via margin they earn on the products we
sell. This model is similar to that employed by many department stores in the US. However, it is different from the model found
at large electronics retailers like Best Buy and general retailers like Wal-Mart. We found that many investors are curious as to
why the model in China differs from that in the US. We believe the main reasons are:



·We
decrease the financial risk for our retail partners by assuming responsibility for the inventory and capital expense associated
with distributing our products.



·We
decrease operational risk for our retail partners by hiring and managing employees and handling logistics issues such as wholesale
purchase and delivery and returns and after-sales service.



·We
decrease merchandising risk for our retail partners by bringing product expertise and specific market knowledge that is difficult
for large retailers to develop on their own across a broad range of product categories.



·China’s
size, regional differences, logistical difficulties, managerial challenges, underdeveloped credit markets, and rapid growth rate
increases risk for all retailers and drive the need to mitigate risk which is why our retail partners rely on us.



On December 21, 2012, we received confirmation
from the Secretary of State of the State of Nevada that the Certificate of Change Pursuant to NRS 78.209 (the “Certificate
of Change”) to our Amended and Restated Articles of Incorporation to effect a reverse split of our common stock, $0.001,
par value per share (the “Common Stock”), at a ratio of 1-for-5 with all fractional shares rounded up to the next whole
share (the “Reverse Stock Split”) was duly filed on December 21, 2012. Immediately prior to the Reverse Stock Split,
we had 93,911,327 shares of Common Stock outstanding. After the Reverse Stock Split, we had 18,782,356 shares outstanding. Pursuant
to the Reverse Stock Split, the number of authorized shares of our Common Stock was reduced from 100,000,000 to 20,000,000 shares
of Common Stock. Each shareholder's percentage ownership interest in the Company and proportional voting power remained unchanged
after the Reverse Stock Split except for minor changes and adjustments resulting from rounding up the fractional shares.



Immediately, following the consummation
of the Reverse Stock Split, on December 21, 2012, we filed a Certificate of Amendment to our Amended and Restated Articles of Incorporation
pursuant to NRS 78.385 and 78.390 (the “Certificate of Amendment”) to increase our number of authorized shares of Common
Stock from 20,000,000 to 50,000,000 shares (the “Capital Increase Amendment”) and to approve the amendment of our Articles
of Incorporation to change our name to “Yosen Group, Inc.” (the “Name Change Amendment)”. The Reverse Stock
Split, Capital Increase Amendment and the Name Change Amendment were approved by the board of directors (“BOD” or “Board”)
of the Company on October 10, 2012. In addition, the actions taken by the BOD with respect to the Capital Increase Amendment and
the Name Change Amendment were subsequently adopted by the written consent dated as of October 10, 2012 of our stockholders entitled
to vote a majority of the shares of Common Stock then outstanding. The Reverse Stock Split was also ratified by these stockholders.



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Following the filing of the Name Change
Amendment, we changed our stock symbol to "YOSN" effective as of the opening of trading on January 30, 2013 on the OTCBB.



On January 6, 2014 the Company established
a US based wholly-owned subsidiary, Yosen Trading Inc., a New York corporation (“Yosen Trading”), for the purpose of
engaging primarily in international trade and wholesale business, initially with tile, kitchen cabinet, granite and marble products.



Organizational Structure



Capital Future Developments Limited
(“Capital”) was incorporated on July 22, 2004 under the laws of the British Virgin Islands. Zhejiang YongXin Digital
Technology Company Limited (“Zhejiang”), Yiwu YongXin Communication Limited (“Yiwu”), Hangzhou Wang Da
Electronics Company Limited (“Wang Da”), Hangzhou Sanhe Electronic Technology, Limited (“Sanhe”), and Shanghai
Joy & Harmony Electronic Development Company Limited (“Joy & Harmony”) were incorporated under the laws of
the Peoples Republic of China (“PRC” or “China”) on July 11, 2005, July 18, 1997, March 30, 1998, April
12, 2004, and August 25, 2003, respectively. Yosen owns 100% of Capital and Capital owns 100% of Joy & Harmony and Sanhe. Until
August 14, 2007, when it changed its ownership structure described in the next paragraph to comply with certain requirements of
PRC law, Capital owned 100% of the capital stock of Zhejiang. Zhejiang owns 90% and Yiwu owns 10% of Wang Da. Zhejiang owns 90%
and Wang Da owns 10% of Yiwu. On March 10, 2009 Zhejiang set up a new operating entity, Hangzhou Letong Digital Technology Co.,
Ltd. (“Letong”) to establish an electronic retail franchise operation for Yosen Group. On July 6, 2009, Zhejiang and
Yiwu acquired Jinhua. Jinhua was incorporated under the laws of the PRC on December 27, 2001.



On December 21, 2005, Capital became
a wholly owned subsidiary of Yosen through a merger with a wholly owned subsidiary of the Company (the “Merger Transaction”).
Yosen acquired all of the issued and outstanding capital stock of Capital pursuant to a Merger Agreement dated at December 21,
2005 by and among Yosen, XY Acquisition Corporation, Capital and the shareholders of Capital (the “Merger Agreement”).
Pursuant to the Merger Agreement, Capital became a wholly owned subsidiary of Yosen and, in exchange for the Capital shares, Yosen
issued 7,million shares of its common stock to the shareholders of Capital, or 93% of the issued and outstanding capital stock
of Yosen at the time and cash of $500,000.



On August 3, 2006, Capital completed
the acquisition of a 100% interest in Sanhe for a cash and stock transaction valued at $8.75 million. The consideration consisted
of 183,150 newly issued shares of the Company’s common stock and $5 million in cash.



On November 28, 2006, Capital completed
the acquisition of a 100% interest in Joy & Harmony for a cash and stock transaction valued at $18.5 million. The consideration
consisted of 544,622 shares of the Company’s common stock and $7.5 million in cash.



On August 15, 2007, we executed a series
of contractual agreements between Capital and Zhejiang. The contractual agreements give Capital and its equity owners an obligation,
and having ability to absorb, any losses, and rights to receive returns; however, these contractual agreements did not change the
equity ownership of Zhejiang. We did not dispose Capital’s actual equity ownership of Zhejiang when we executed the contractual
agreements. Capital entered into share-holding entrustment agreements with five individuals - Zhenggang Wang, Yimin Zhang, Huiyi
Lv, Xiaochun Wang and Zhongsheng Bao to hold 35%, 20%, 20%, 15% and 10%, respectively, of the equity interest of Zhejiang on behalf
of Capital on November 21, 2005. The entrustment agreements confirm that Capital is the actual owner of Zhejiang. Capital enjoys
the actual shareholder’s rights and has the right to obtain any benefits received by the nominal holders. Zhenggang Wang
is the CEO and shareholder of Yosen. Yimin Zhang, Huiyi Lv, Xiaochun Wang and Zhongsheng Bao have no other relationship with Yosen.
No consideration was given to these individuals who held the equity of Zhejiang on behalf of Capital.



On July 6, 2009, Yosen and its subsidiary
Zhejiang and Yiwu purchased 100% of Jinhua for RMB 120 million ($17.5 million) in cash.  Zhejiang acquired 90% and Yiwu acquired
10% of the equity interests in Jinhua.



We sell products mostly through retail
stores, with a small percentage sold directly to distributors on a wholesale basis. We operate most of our retail operations through
our “store in store” model. Under this model, the Company leases space in major department stores and retailers. Leasing
costs can vary based on the percentage of sales, or can be fixed. In 2013 and 2012, all of our stores in stores leases were variable
based on sales. Wang Da focuses on distributing domestic brands mobile phones and some brand name computers. Zhejiang focuses on
distributing Samsung and Apple brand products.



Sanhe, Joy& Harmony and Letong ceased
operations in 2011. Yiwu closed all its stores in stores locations in 2012. Jinhua ceased operation in October 2012 due to higher
fuel cost and higher competition in the logistics market in China.





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Our corporate structure as of December
31, 2013 was as follows:



ORGANIZATIONAL CHART











* These entities ceased operation as of December 31, 2011.

** These entities ceased operation as of December 31, 2012.



Our Business



Information about Our Segments



During 2013 and 2012, we only had one
reportable segment in mobile phones through two business organizations (Wang Da and Zhejiang). Wang Da focuses on distributing
domestic brands mobile phones and some brand name computers. Zhejiang focuses on distributing Samsung and Apple brand products.
As a result, Zhejiang’s operations, together with Wang Da, are reported in the “Mobile Phones” segment.





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Wang Da



Wang Da is an authorized sales agent
focusing on the selling domestic brands cell phones, cell phone products and some brand name IT products (including notebook or
laptop computers) in China. Wang Da mainly distributes its products through retail “stores in stores” located in major
department stores throughout the “Huadong” region of China (consisting of the Chinese provinces of Zhejiang, Jiangsu
and Anhui). Wang Da had 9 retail locations in 2013, contributing 10.7% of the Company’s revenue. Wang Da closed all its retail
locations at the end of 2013 with some wholesale business still in operation.



The five largest suppliers and customers
for Wang Da in 2013 were:



|Top 5 suppliers                                         |  | Top 5 customers                                                                       
|------------------------------------------------------- |  | --------------------------------------------------------------------------------------
|China PTAC Communication Services Co., Ltd (Hangzhou)   |  | Lianhua Supermarket Holdings Co. Limited (Hangzhou)                                   
|China United Internet Communication Co., Ltd (Hangzhou) |  | Jiande Deyi Trade Co. Limited                                                         
|Phone World Digital Chain Group Co., Ltd.,              |  | Lianhua Supermarket Holdings Co. Limited Gongshu Shiji Lianhua Supermarket Co. Limited
|Unicom VSENS Co., Ltd                                   |  | Hangzhou Lianhua Fresh Supermarket Co. Limited                                        
|Shenzhen Tianyin Telecommunication Company Limited      |  | Zhuji Pengcheng Electronics Co., Limited                                              



The five largest suppliers contributed
100.0% of Wang Da’s purchases, four of which accounted for more than 10% representing 47.7%, 26.6%, 13.6% and 11.9%, respectively.
The five largest customers contributed 92.8% of revenues of Wang Da in 2013. Two customers accounted for more than 10% of Wang
Da’s sales representing 64.8% and 10.8%.



Wang Da has one single customer that
contributed more than 50% of Wang Da’s sales in 2013. Losing that customer could have a material adverse effect on the Company’s
business and operations. Wang Da did not spend a material amount of money on research and development (“R&D”) and
did not have a significant backlog as of December 31, 2013.



The main competitors of Wang Da include
Hangzhou Legend Technology Co., Ltd., Zhejiang Datang Digital Communication Co. Ltd., Lin’An Jinda Digital Electronics Co.,
Ltd., Hangzhou Zhongyi Communication Co., Ltd., Ningbo Hongtu Sanbao Technology Development Co., Ltd.



Zhejiang



Zhejiang focuses on selling Samsung
and Apple brand products. Zhejiang had 28 retail locations in 2013.



The five largest suppliers and customers
for Zhejiang in 2013 were:



|Top 5 suppliers                                       |  | Top 5 customers                                                                       
|----------------------------------------------------- |  | --------------------------------------------------------------------------------------
|China PTAC Communication Services Co., Ltd (Zhejiang) |  | Lianhua Supermarket Holdings Co. Limited                                              
|Tianyin Telecommunication Company Limited (Zhejiang)  |  | Lianhua Supermarket Holdings Co. Limited Gongshu Shiji Lianhua Supermarket Co. Limited
|Sichuang Changhong IT products Company Limited        |  | Zhejiang Shiji Lianhua Supermarket Holdings Co. Limited (Jiangsu)                     
|Zhejiang Wangyuda Trade Company Limited               |  | Hangzhou Tiantian WuMart Group                                                        
|ESC Technology (Shanghai ) Ltd                        |  | Huarun Vanguard Supermarket (Zhejiang) Company Limited                                



The five largest suppliers contributed
65.5% of the purchases, four of which accounted for more than 10%, representing 19.1%, 17.7%, 11.0% and 10.3%, respectively. The
five largest customers contributed 73.1% of revenues of Zhejiang in 2013, four of which accounted for more than 10%, representing
23.3%, 15.9%, 12.4% and 12.3%, respectively.



Zhejiang has a diverse customer base
and the loss of any single customer is not expected to have a material adverse affect on the Company’s business and operations.
Zhejiang did not spend a material amount of money on R&D and did not have a significant backlog as of December 31, 2013.



The main competitors of Zhejiang include
Ningbo Haishu Xunda Communications Equipment Co., Ltd, Hangzhou Jingjie Telecom Technology Co., Ltd, Phone World Digital Chain
Group Co., Ltd., Zhejiang Gomei Electronics Group Co., Ltd and Hangzhou Tianxiang Telecom Equipment Co., Ltd.



Financial information about our segments
is included in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, and Note 14, Segment
Information, of the Notes to the Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary
Data of this Annual Report on Form 10-K.



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Intellectual Property



We consider our logos important to our
business.  We applied to register 10 logos with the State Administration of Industry and Commerce in China in 2007 and
are currently awaiting their approval. We have one registered trademark.



Seasonality and Quarterly Fluctuations



Our businesses experience fluctuations
in quarterly performance. Traditionally, the first quarter has a greater amount of sales reflected by our electronics business
due to the New Year’s holiday in China. Nevertheless, at times, China can experience particularly inclement weather in January
and February which can disrupt the Company’s supply chain management systems. As our business model is to operate only on
several days of inventory, the effects of such weather disruptions can be severe.



Customers



Four customers accounted for 10% or
more of our total revenue in 2013, representing 20.8%, 14.1%, 11.1% and 11.0% respectively. Therefore, the loss of any one of these
four customers would have a material impact on our business.



Backlog



We do not have a material amount of
backlog orders as of December 31, 2013.



Government Contracts



No material portion of our business
is subject to renegotiation of profits or termination of contracts or subcontracts at the election of the Chinese government.



Competition



We compete against other consumer electronics
retailers and wholesalers. We compete principally on the basis of product assortment and availability and value pricing, customer
service, store location and convenience and after-sales services. We believe our broad product assortment, competitive pricing
and convenient store locations differentiate us from most competitors. Our stores compete by emphasizing a complete product and
service solution and value pricing. In addition, our trained and knowledgeable sales and service staff allow us to tailor the offerings
to meet the needs of our customers.



Research and Development



We have not engaged in any material
R&D activities during the past two years.



Environmental Matters



We are subject to China’s National
Environmental Protection Law, as well as a number of other national and local laws and regulations regulating air, water and noise
pollution and setting pollutant discharge standards. We believe that all our operations are in material compliance with all applicable
environmental laws. We did not incur any costs to comply with environmental laws in 2013 or 2012.



Employees



The Company currently has 122 employees,
all of whom are full time located in China. Zhejiang has 110 employees, Yiwu 3 and Wang Da 9, all of whom are full-time.



The Company has no collective bargaining
agreements with any unions.





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ITEM 1A.   RISK FACTORS



Risk Factors Associated with Our Business



A general economic downturn, a
recession in China or sudden disruption in business conditions may affect consumer purchases of discretionary items, including
consumer and business products, which could adversely affect our business. Consumer spending is affected by a number of
factors, including general economic conditions, the level of unemployment, inflation, interest rates, energy costs, gasoline prices
and consumer confidence generally, all of which are beyond our control. Consumer purchases of discretionary items tend to decline
during recessionary periods, when disposable income is lower, and may impact sales of our products. In addition, disruptions in
business conditions as a result of a terrorist attack, retaliation and the threat of further attacks or retaliation, war, adverse
weather conditions and climate changes or other natural disasters, pandemic situations or large scale power outages can have a
short or, sometimes, long-term impact on consumer spending. A downturn in the economy in China, including any recession or a sudden
disruption of business conditions in China’s economy, could adversely affect our business, financial condition, and results
of operation.



Non-performance by our suppliers
may adversely affect our operations by delaying delivery or causing delivery failures, which may negatively affect demand, sales
and profitability. We purchase various products from our suppliers.  We would be materially and adversely affected
by the failure of our suppliers to perform as expected.  We could experience delivery delays or failures caused by production
issues or delivery of non-conforming products if its suppliers failed to perform, and we also face these risks in the event any
of its suppliers becomes insolvent or bankrupt.



With the markets being highly
competitive, we may not be able to compete successfully. Many of our competitors have substantially greater revenues and
financial resources than we do. We may not be able to compete favorably and increased competition may substantially harm our business,
business prospects and results of operations. If we are not successful in our target markets, our sales could decline, our margins
could be negatively impacted and we could lose market share, any of which could materially harm our business, results of operations
and profitability.



If we are unable to successfully
integrate the businesses we acquire, our ability to expand our product offerings and geographic reach may be significantly limited.
To expand our product offerings and grow our customer base by reaching new customers through expanded geographic coverage, we may
acquire businesses we believe are complementary to our growth strategy. Acquisitions involve numerous risks, including difficulties
in the assimilation of acquired operations, loss of key personnel, distraction of management’s attention from other operational
concerns, failure to maintain supplier relationships, inability to maintain goodwill of customers from acquired businesses, and
the inability to meet projected financial results that supported how much was paid for the acquired businesses.



Our business will be harmed if
we are unable to maintain our supplier alliance agreements. We have exclusive licensing/distribution agreements with key
suppliers in a number of product categories in Eastern China, in particular Zhejiang and Jiangsu provinces and Shanghai City. Our
business will be harmed if we are unable to maintain these agreements or are limited in our ability to gain access to additional
agreements with suppliers with terms as favorable as our current agreements .



If we do not anticipate and respond
to changing consumer preferences in a timely manner, our operating results could materially suffer. Our business depends,
in part, on our ability to introduce successfully new products to consumers, the frequency of such introductions, the level of
consumer acceptance, and the related impact on the demand for existing products. Failure to predict accurately constantly changing
consumer tastes, preferences, spending patterns and other lifestyle decisions, or to address effectively consumer concerns, could
have a material adverse effect on our revenue, results of operations and standing with our customers.



We have a material weakness in
our internal control over financial reporting (“ICFR”), and if we fail to maintain an effective system of internal
control over financial reporting, we may be unable to accurately report our financial results or prevent fraud, and investor confidence
and the market price of our shares may be adversely affected. We and our independent registered public accounting firm,
in connection with the audit of the consolidated financial statements for 2013, have identified the following material weaknesses
in our internal control over financial reporting: the ability of the Company to record transactions and provide disclosures in
accordance with accounting principles generally accepted in the United States (“US GAAP”).



A “material weakness” is
a deficiency, or a combination of deficiencies, in ICFR, such that there is a reasonable possibility that a material misstatement
of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. We plan to take
measures to remediate these deficiencies, such as providing additional training to our accounting staff in US GAAP. However, the
implementation of these measures may not fully address the control deficiencies in our ICFR. Our failure to address any control
deficiency could result in inaccuracies in our financial statements and could also impair our ability to comply with applicable
financial reporting requirements and related regulatory filings on a timely basis. Moreover, effective ICFR is important to prevent
fraud. As a result, our business, financial condition, results of operations and prospects, as well as the trading price of our
shares, may be negatively impacted by a failure to accurately report financial results.



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Because our operating/business
model continues to evolve it is difficult to predict our future performance, and our business is difficult to evaluate.
Our business model continues to evolve over time. We do not have an extensive operating history upon which you can easily and accurately
evaluate our business, or our ongoing financial condition. As our model evolves over time, we face risks and challenges due to
a lack of meaningful historical data upon which we can develop budgets and make forecasts.



Future acquisitions may result
in potentially dilutive issuances of equity securities, the incurrence of further indebtedness, and increased amortization expense.
Our growth model has in the past and may in the future involve acquisitions that may result in potentially dilutive issuances of
equity securities or the incurrence of debt and unknown liabilities. Such acquisitions may result in significant write-offs and
increased amortization expenses that could adversely affect our business and the results of our operations.



If our products fail to perform
properly our business could suffer significantly. Although we do not currently develop or manufacturer our existing products,
should they fail to perform we may suffer lost sales and customer goodwill, ongoing liability claims, license terminations, severe
harm to our brand and overall reputation, unexpected costs, and reallocation of resources to resolve product issues.



Rapid and substantial growth is
important to our overall strategy, if we are unable to manage our growth profitably and effectively, we may incur unexpected expenses
and be unable to meet our financial and customer obligations. For us to meet our financial objectives we need to expand
our operations to achieve necessary market share. We cannot be certain that our IT infrastructure, financial controls, systems,
and processes will be adequate to support our expansion. Our future results will depend on the ability of our officers and key
employees to manage changing business conditions in administration, reporting, controls, and operations.



If we are unable to obtain additional
financing for our future needs we may be unable to respond to competitive pressures and our business may be impaired. We
cannot be certain that financing with favorable terms, or at all, will be available for us to pursue any future expansion initiatives.
We may be unable to take advantage of favorable acquisitions or to respond to competitive pressures. This inability may harm our
operations or financial results.



If we are forced to lower our
prices to compete, our financial performance may be negatively impacted. We derive our sales from the resale of products.
If we are forced to lower our prices due to added competition, inferior feature offerings, excess inventory, pressure for cash,
declining economic climate, or any other reason, our business may suffer.



If we are unable to maintain existing
supplier relationships or form new ones, our business and financial condition may suffer. We rely on our current and new
suppliers to provide us access to competitive products for resale. If we are unable to gain access to suppliers with needed products
on favorable terms our business may be negatively impacted.



If we incur litigation costs in
excess of our existing insurance coverage, it could adversely affect our business and financial condition. We maintain
third party insurance coverage against product liability risks. However, the potential liabilities associated with product liability
claims could exceed the coverage provided by such insurance, adversely affecting our financial condition.



We depend on the continued services
of our executive officers and the loss of key personnel could affect our ability to successfully operate our business.
We are highly dependent upon the services of our senior management team, particularly Zhenggang Wang, our Chairman and Chief Executive
Officer and Weiping Wang, our Chief Financial Officer. The loss of any of our key executives could have a material adverse effect
upon our operating results. We may not be able to hire and retain suitable replacements for our executives if their services were
lost. We do not maintain key man life insurance on any of these individuals.



Risks Related to Doing Business in
China



Our business operations take place
primarily in China. Because Chinese laws, regulations and policies are continually changing, our Chinese operations will
face several risks summarized below.



Limitations on Chinese economic
market reforms may discourage foreign investment in Chinese businesses. The value of investments in Chinese businesses
could be adversely affected by political, economic and social uncertainties in China. The economic reforms in China in recent years
are regarded by China’s central government as a way to introduce economic market forces into China. Given the overriding
desire of the central government leadership to maintain stability in China amid rapid social and economic changes in the country,
the economic market reforms of recent years could be slowed, or even reversed.





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Certain political and economic
considerations relating to China could adversely affect our company. China is transitioning from a planned to a market
economy. While the PRC government has pursued economic reforms since its adoption of the open-door policy in 1978, a large portion
of the Chinese economy still operates under five-year and annual state plans. Through these plans and other economic measures,
such as control on foreign exchange, taxation and restrictions on foreign participation in the domestic market of various industries,
the PRC government exerts considerable direct and indirect influence on the economy. Many of the economic reforms carried out by
the PRC government are unprecedented or experimental, and are expected to be refined and improved. Other political, economic and
social factors can also lead to further readjustment of such reforms. This refining and readjustment process may not necessarily
have a positive effect on our operations or future business development. Our operating results may be adversely affected by changes
in China’s economic and social conditions as well as by changes in the policies of the PRC government, such as changes in
laws and regulations, or the official interpretation thereof, which may be introduced to control inflation, changes in the interest
rate or method of taxation, and the imposition of additional restrictions on currency conversion.



Accordingly, government actions in the
future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy
or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions
in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties
or joint ventures.



Due to various restrictions under
PRC laws on the distribution of dividends by our PRC operating companies, we may not be able to pay dividends to our stockholders
.. The Wholly Foreign Owned Enterprise (“WFOE”) Law (1986), as amended and The WFOE Law Implementing Rules (1990),
as amended, contain the principal regulations governing dividend distributions by WFOEs. Under these regulations, WFOEs, such as
Zhejiang and Wang Da, may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting
standards and regulations. Additionally, Zhejiang and Wang Da are required to set aside a certain amount of any accumulated profits
each year (a minimum of 10%, and up to half of their registered capitals), to fund certain reserve funds. These reserves are not
distributable as cash dividends except in the event of liquidation and cannot be used for working capital purposes. The PRC government
also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC.  If
we ever determine to pay a dividend, we may experience difficulties in completing the administrative procedures necessary to obtain
and remit foreign currency for the payment of such dividends from the profits of Wang Da and Zhejiang.



Currency conversion and exchange
rate volatility could adversely affect our financial condition and the value of our common stock. The PRC government imposes
control over the conversion of Renminbi, or RMB, into foreign currencies. Under the current unified floating exchange rate system,
the People’s Bank of China, or PBOC, publishes an exchange rate, which we refer to as the PBOC exchange rate, based on the
previous day’s dealings in the inter-bank foreign exchange market. Financial institutions authorized to deal in foreign currency
may enter into foreign exchange transactions at exchange rates within an authorized range above or below the PBOC exchange rate
according to market conditions.



Pursuant to the Foreign Exchange Control
Regulations of the PRC issued by the State Council which came into effect on April 1, 1996, and the Regulations on the Administration
of Foreign Exchange Settlement, Sale and Payment of the PRC which came into effect on July 1, 1996, regarding foreign exchange
control, conversion of RMB into foreign exchange by Foreign Investment Enterprises, or FIEs, for use on current account items,
including the distribution of dividends and profits to foreign investors, is permissible. FIEs are permitted to convert their after-tax
dividends and profits to foreign exchange and remit such foreign exchange to their foreign exchange bank accounts in China. Conversion
of RMB into foreign currencies for capital account items, including direct investment, loans, and security investment, is still
under certain restrictions. On January 14, 1997, the State Council amended the Foreign Exchange Control Regulations and added,
among other things, an important provision, which provides that the PRC government shall not impose restrictions on recurring international
payments and transfers under current account items.



Enterprises in China, including FIEs,
which require foreign exchange for transactions relating to current account items, if within a certain limited amount may, without
approval of the State Administration of Foreign Exchange, or SAFE, effect payment from their foreign exchange account or convert
and pay at the designated foreign exchange banks by providing valid receipts and proofs.



Convertibility of foreign exchange for
capital account items, such as direct investment and capital contribution, is still subject to certain restrictions, and prior
approval from the SAFE or its relevant branches must be sought.



Our wholly owned subsidiaries, Wang
Da and Zhejiang are FIEs to which the Foreign Exchange Control Regulations are applicable. There can be no assurance that we will
be able to obtain sufficient foreign exchange to pay dividends or satisfy other foreign exchange requirements in the future.





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Between 1994 and 2004, the exchange
rate for RMB against the US dollar remained relatively stable, most of the time in the region of RMB8.28 to $1.00. However, in
2005, the Chinese government announced it would begin pegging the exchange rate of the RMB against a number of currencies, rather
than just the US dollar. As our operations are primarily in China, any significant revaluation of the RMB may materially and adversely
affect our cash flows, revenues, financial condition and the value of our common stock. For example, to the extent that we need
to convert US dollars into RMB for our operations, appreciation of this currency against the US dollar could have a material adverse
effect on our business, financial condition, results of operations and the value of our common stock. Conversely, if we decide
to convert our Renminbi into US dollars for the purpose of declaring dividends on our common stock or for other business purposes
and the US dollar appreciates against the RMB, the US dollar equivalent of our earnings from our subsidiaries in China would be
reduced.



The legal system in China has
inherent uncertainties that may limit the legal protections available in the event of any claims or disputes with third parties.
The legal system in China is based on written statutes. Prior court decisions may be cited for reference but have limited precedential
value. Since 1979, the central government has promulgated laws and regulations dealing with economic matters such as foreign investment,
corporate organization and governance, commerce, taxation and trade. As China’s foreign investment laws and regulations are
relatively new and the legal system is still evolving, the interpretation of many laws, regulations and rules is not always uniform
and enforcement of these laws, regulations and rules involve uncertainties, which may limit the remedies available in the event
of any claims or disputes with third parties. In addition, any litigation in China may be protracted and result in substantial
costs and diversion of resources and management attention.



Risks Associated With Our Common
Stock



There is a limited public market
for our common stock. There is currently a limited public market for our common stock. Holders of our common stock may,
therefore, have difficulty selling them, should they decide to do so. In addition, there can be no assurances that such markets
will continue or that any shares of common stock will be able to be sold without incurring a loss. Any such market price of the
common stock may not necessarily bear any relationship to our book value, assets, past operating results, financial condition or
any other established criteria of value, and may not be indicative of the market price for the common stock in the future. Further,
the market price for the common stock may be volatile depending on a number of factors, including business performance, industry
dynamics, news announcements or changes in general economic conditions.



Our common stock is subject to
the "penny stock" rules of the SEC. The SEC has adopted Rule 15g-9 which establishes the definition of a "penny
stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with
an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless
exempt, the rules require: (i) that a broker or dealer approve a person's account for transactions in penny stocks; and (ii) the
broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the
penny stock to be purchased. In order to approve a person's account for transactions in penny stocks, the broker or dealer must:
(i) obtain financial information and investment experience objectives of the person; and (ii) make a reasonable determination that
the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial
matters to be capable of evaluating the risks of transactions in penny stocks.



The broker or dealer must also deliver,
prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which,
in highlight form: (i) sets forth the basis on which the broker or dealer made the suitability determination; and (ii) that the
broker or dealer received a signed, written agreement from the investor prior to the transaction.



Generally, brokers may be less willing
to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors
to dispose of our common stock and cause a decline in the market value of our stock.



Disclosure also has to be made about
the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both
the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available
to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price
information for the penny stock held in the account and information on the limited market in penny stocks.



Because we do not intend to pay
cash dividends on our common stock, stockholders will not be able to receive a return on their shares unless they sell them..
Although the Company’s two operating subsidiaries in China paid $525 in dividends during 2005, we have no current plans for
declaring or paying dividends in the foreseeable future. We intend to retain earnings, if any, to provide funds for the development
of our business.  Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they
sell them at a price higher than that which they initially paid for such shares. Also, as described in the risk factor entitled
“Due to various restrictions under PRC laws on the distribution of dividends by our PRC operating companies, we may not be
able to pay dividends to our stockholders” above, the laws of the PRC may prohibit or restrict us from paying dividends,



ITEM 1B. UNRESOLVED STAFF COMMENTS



None.

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ITEM 2. PROPERTIES



The Company does not own any real estate
properties and leases the following:



Yiwu



| | 1. | Yiwu’s headquarters consisting of office space located in Yiwu, Zhejiang province, China, under a one year lease agreement which expires in August 2014.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | Yiwu’s staff dormitory, located in Yiwu, Zhejiang province, China, under a one year lease agreement which expires in August 2014.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------



Zhejiang



| | 1. | Zhejiang’s headquarters consisting of office space located in Hangzhou, Zhejiang province, China, under a three-year lease which expires in August 2014.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | Zhejiang’s parking space consisting of four parking spaces located in Hangzhou, Zhejiang province, China, under a three-year lease which expires in August 2014.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | Zhejiang’s second office located in Hangzhou, Zhejiang province, China, under a one-year lease which expires in October 2014.
| | -- | -----------------------------------------------------------------------------------------------------------------------------



Wang Da



| | 1. | Wang Da’s headquarters consisting of office space located in Hangzhou, Zhejiang province, China, under a three-year lease which expires August 2014.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------



The Company believes its leased spaces
are adequate and suitable to maintain and develop its business operations.



ITEM 3. LEGAL PROCEEDINGS



Neither we nor our subsidiaries are
party to any material pending legal proceedings, and neither our property nor our subsidiaries’ property is not the subject
of any material pending legal proceedings. None of our directors, officers, affiliates or holders of 5% or more of our common stock,
or any associate or any such person, is currently a party adverse to us or our subsidiaries.



ITEM 4. MINE SAFETY DISCLOSURE



Not Applicable.





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Part II



ITEM 5. MARKET FOR THE REGISTRANT’S
COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES



The Company’s common stock is
quoted on the OTCBB under the symbol “YOSN.OB.” The following table sets forth the quarterly high and low closing bids
of our common stock as quoted on the OTCBB during 2012 and 2013.





|                           |  | Low Bid* |      |  | High Bid* |  
|-------------------------- |  | -------- | ---- |  | --------- | -
|2012                       |  |          |      |  |           |  
|Quarter ended March 31     |  | $        | 0.20 |  |           | $
|Quarter ended June 30      |  | $        | 0.20 |  |           | $
|Quarter ended September 30 |  | $        | 0.20 |  |           | $
|Quarter ended December 31  |  | $        | 0.20 |  |           | $
|                           |  |          |      |  |           |  
|2013                       |  |          |      |  |           |  
|Quarter ended March 31     |  | $        | 0.21 |  |           | $
|Quarter ended June 30      |  | $        | 0.13 |  |           | $
|Quarter ended September 30 |  | $        | 0.01 |  |           | $
|Quarter ended December 31  |  | $        | 0.16 |  |           | $





| | * | The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. The quotations were adjusted for the Company’s 1-for-5 reverse stock split.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Stockholders



As of the close of business on April
11, 2014, there were 98 holders of record of the Company’s common stock.



Dividends



The Company did not pay any dividends
during 2012 and 2013. The Company has no current plans to declare cash dividends on its common stock in the future. If the Company
ever determines to pay a dividend, it may experience difficulties in completing the administrative procedures necessary to obtain
and remit foreign currency from the PRC for the payment of such dividends from the profits of its operating subsidiaries in China.





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Securities Authorized For Issuance Under Equity Compensation
Plans



Equity Compensation Plan Information



The following is a summary of all of our equity compensation
plans as of December 31, 2013:



|Plan Category                                          |  | Number of securitiesissued uponexercise ofoutstanding options,warrants and rights |   |  | Number of restrictedshares issued |  |           | Weighted averageexercise price ofoutstanding options,warrants and rights |  |   | Number of securitiesremaining availablefor future issuanceunderequity compensationplan (excludingsecurities reflectedin column (a) | 
|------------------------------------------------------ |  | --------------------------------------------------------------------------------- | - |  | --------------------------------- |  | --------- | ------------------------------------------------------------------------ |  | - | ---------------------------------------------------------------------------------------------------------------------------------- | 
|                                                       |  | (a)                                                                               |   |  | (b)                               |  |           | (c)                                                                      |  |   | (d)                                                                                                                                | 
|Equity Compensation Plans Approved by Shareholders     |  |                                                                                   | - |  |                                   |  | 7,600,000 | (1)                                                                      |  | $ | -                                                                                                                                  | 
|Equity Compensation Plans Not Approved by Shareholders |  |                                                                                   | - |  |                                   |  | -         |                                                                          |  | $ | -                                                                                                                                  | 





| | (1) | Represents 4,100,000 shares issued under the 2011 Plan and 3,500,000 shares issued under the 2012 Plan to employees and consultants of the Company.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------



On March 3, 2011, the Company’s
BOD adopted the Yosen Group 2011 Restricted Stock Plan (the “2011 Plan”).  The 2011 Plan provides for the
granting of restricted stock awards to employees, directors and consultants of the Company and the employees, directors and consultants
of the Company’s affiliates. Under the 2011 Plan, 600,000 shares of the Company’s common stock were initially available
for issuance for awards.  The 2011 Plan shall continue in effect, unless sooner terminated, or until the tenth anniversary
of the date on which it is adopted by the Board is reached. On May 17, 2012, the Company amended the 2011 Plan to increase the
number of shares of common stock available for issuance to 4,100,000. Effective May 17, 2012, the Company granted 3,500,000 shares
of restricted common stock to the Company’s Chief Executive Officer pursuant to the terms of his employment agreement. The
shares shall vest over three years with 1,166,666 vesting on the first anniversary of the grant date, 1,166,666 on the second and
1,166,667 on the third. As of December 31, 2013, all shares available for issuance under the 2011 Plan were issued.



On July 19, 2012, the BOD adopted the
Yosen Group, Inc. 2012 Omnibus Securities and Incentive Plan (the “2012 Plan”).  The 2012 Plan provides for granting
of distribution equivalent rights, incentive stock options, non-qualified stock options, performance share awards, performance
unit awards, restricted stock awards, stock appreciation rights, tandem stock appreciation rights, unrestricted stock awards or
any combination of the foregoing, as may be best suited to the circumstances of the particular employee, director or consultant. 
Under the 2012 Plan, 3,500,000 shares of the Company’s common stock are available for issuance for awards.  Each award
shall remain exercisable for a term of 10 years from the date of its grant. The price at which a share of common stock may be purchased
upon exercise of an option shall not be less than the closing sales price of the common stock on the date such option is granted. 
As of December 31, 2013, all shares available for issuance under the 2012 Plan were issued.



Repurchase of Securities



We did not repurchase any of shares
of our common stock during 2013 and 2012.



Recent Sales of Unregistered Securities



Other than described below, there were
no sales of unregistered securities during 2013, the period covered by this Annual Report, which were not previously reported on
a Quarterly Report on Form 10-Q or Current Report on Form 8-K filed with the SEC.



On August 23, 2013, the Company consummated
the sale of 2,000,000 Units to two investors with each Unit consisting of: (i) one share of common stock, $0.001 par value per
share (the "Common Stock"), of the Company and (ii) a three-year warrant to purchase one share of Common Stock of the
Company at an exercise price of $0.25 per share, for an aggregate total purchase price of $500,000.



On December 30, 2013, the Company issued
an aggregate of 2,760,000 shares of common stock to two consultants as compensation for services provided to the Company. Neither
of such issuances involved any underwriters, underwriting discounts or commissions, or any public offering and we believe were
exempt from the registration requirements of the Securities Act of 1933 by virtue of Section 4(2) thereof and/or Regulation D promulgated
thereunder.



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ITEM 6. SELECTED FINANCIAL DATA



Not applicable.



ITEM 7. MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



The following discussion and analysis
of financial condition and results of operations of the Company is based upon, and should be read in conjunction with, the audited
consolidated financial statements and related notes thereto appearing elsewhere in this Annual Report on Form 10-K. The following
discussion contains forward-looking statements. Our actual results may differ significantly from those projected in the forward-looking
statements. Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements
that are forward-looking. Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties
include international, national and local general economic and market conditions; our ability to sustain, manage, or forecast growth;
our ability to successfully make and integrate acquisitions; new product development and introduction; existing government regulations
and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant
customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development
plans; business disruptions; the ability to attract and retain qualified personnel; and other risks be detailed from time to time
in our filings with the SEC.



Because forward-looking statements are
inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes
discussed in the forward-looking statements.





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Results of Operations



Year Ended December 31, 2013
compared to Year Ended December 31, 2012



Reportable Operating Segments



In 2011, Sanhe closed all its 210 stores
in stores, Joy & Harmony closed all its 196 stores in stores, and Letong closed its direct retail and franchise operations.
In 2012, Yiwu closed all its 178 stores in stores and Jinhua closed its logistics operations. As such, Sanhe, Joy & Harmony,
Letong, Yiwu and Jinhua were reported as discontinued operations in the financial statements.



The Company reports financial and operating
information in continuing operations only in the mobile phones segment through Wang Da and Zhejiang:



Wang Da



Wang Da focuses on distributing domestic
brands mobile phones.

|                    |  | Year Ended December 31, |            |    | Percentage |  
|------------------- |  | ----------------------- | ---------- | -- | ---------- | -
|Wang Da             |  | 2013                    |            |    | 2012       |  
|Revenue             |  | $                       | 1,373,752  |    |            | $
|Gross Profit (Loss) |  |                         | (1,122,742 | )  |            |  
|Profit Margin       |  |                         | (81.7      | )% |            |  
|Operating (Loss)    |  |                         | (208,741   | )  |            |  



For 2013, Wang Da generated revenue
of $1,373,752, a decrease of $15,816,635 or 92.0% compared to $17,190,387 for 2012. Gross profit decreased $1,885,075 or 247.3%
from $762,333 for 2012 to $(1,122,742) for 2013. The decrease in revenue was primarily due to closing of Wang Da’s retail
stores. The decrease in revenue was also a result of splitting part of the mobile business to Zhejiang. Operating losses was $208,741
in 2013, decreased $5,873,849 or 96.6% compared to $6,082,590 in 2012. Operating losses as a percentage of sales decreased from
35.4% in 2012 to 15.2% in 2013, primarily as a result of closing retail stores to cut losses in 2013.



Profit margin decreased from 4.4% in
2012 to (81.7)% in 2013. The decrease in profit margin was primarily due to adjustment for remaining inventory which resulted in
an increase in cost of goods sold and a decrease in gross profit of $853,478. The decrease in profit margin was also a result of
lower profit margin on cell phone products.



Zhejiang



Zhejiang focuses on distribution of
Samsung and Apple brand mobile phone products.



|                 |  | Year Ended December 31, |            |   | Percentage |  
|---------------- |  | ----------------------- | ---------- | - | ---------- | -
|Zhejiang         |  | 2013                    |            |   | 2012       |  
|Revenue          |  | $                       | 11,414,126 |   |            | $
|Gross Profit     |  |                         | 338,645    |   |            |  
|Profit Margin    |  |                         | 3.0        | % |            |  
|Operating (Loss) |  |                         | (1,679,534 | ) |            |  



For 2013, Zhejiang generated revenue
of $11,414,126, an increase of $7,107,390 or 165.0% compared to $17,190,387 for 2012. Gross profit increased $196,069 or 137.5%
from $142,576 for 2012 to $338,645 for 2013. The increase in revenue was a result of Wang Da splitting part of the mobile business
to Zhejiang. Operating losses was $1,679,534 in 2013, increased $546,038 or 48.2% compared to $1,133,496 in 2012. Operating losses
as a percentage of sales decreased from 26.3% in 2012 to 14.7% in 2013. The increase in operating losses was primarily due to increase
in staff cost and new stores opening cost.



Profit margin was 3.0% in 2013, remained
relatively stable compared to 3.3% in 2012.





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Total Company



Net Sales



Net sales for 2013 totaled $12,787,878,
a year-over-year decrease of $8,709,246 or 40.5% compared to $21,497,124 for 2012. The decrease was primarily due to the Company’s
reorganization and refocusing its product mix. The decrease is also attributable to the increased competition in the cell phone
products market in China.



Percentage of Sales



In 2013, the Company earned 92.2% of
its sales from its retail and 7.8% from its wholesale operations compared to 92.9% from retail and 7.1% from wholesale in 2012.



Percentage of sales from retail and
wholesale operations for each segment is as follows in 2013:



|          |  |  | Wang Da |   |  |  | Zhejiang |   |  |  | Total |  
|--------- |  |  | ------- | - |  |  | -------- | - |  |  | ----- | -
|Retail    |  |  | 85.6    | % |  |  | 98.8     | % |  |  | 92.2  | %
|Wholesale |  |  | 14.4    | % |  |  | 1.2      | % |  |  | 7.8   | %



Percentage of sales from retail and
wholesale operations for each segment is as follows in 2012:



|          |  |  | Wang Da |   |  |  | Zhejiang |   |  |  | Total |  
|--------- |  |  | ------- | - |  |  | -------- | - |  |  | ----- | -
|Retail    |  |  | 87.9    | % |  |  | 98.0     | % |  |  | 92.9  | %
|Wholesale |  |  | 12.1    | % |  |  | 2.0      | % |  |  | 7.1   | %



Cost of Sales



Cost of sales (“COS”) for
2013 totaled $12,630,598, or 98.8% of sales compared to $20,592,214, or 95.8% of for 2012. The decrease in the COS was a result
of the decrease in sales. The COS as a percentage increased during 2013 primarily due to an adjustment of $853,478 made at the
end of 2013 to remaining inventory.



Top Ten Suppliers of Each of Our
Subsidiaries in 2013



|   |  | Wang Da                                                       |  | Zhejiang                                                    | 
|-- |  | ------------------------------------------------------------- |  | ----------------------------------------------------------- | 
|1  |  | China PTAC Communication Services Co., Ltd (Hangzhou)         |  | China PTAC Communication Services Co., Ltd (Zhejiang)       | 
|2  |  | China United Internet Communication Co., Ltd (Hangzhou)       |  | Tianyin Telecommunication Company Limited (Zhejiang)        | 
|3  |  | Phone World Digital Chain Group Co., Ltd.,                    |  | Sichuang ChanghongIT products Company Limited               | 
|4  |  | Unicom VSENS Co., Ltd                                         |  | Zhejiang Wangyuda Trade Company Limited                     | 
|5  |  | Shenzhen Tianyin Telecommunication Company Limited            |  | ESC Technology (Shanghai ) Ltd                              | 
|6  |  | Shenzhen Aisidi Company Limited                               |  | Hangzhou Dingfeng Digital Telecommunication Company Limited | 
|7  |  | China United Internet Communication Co., Ltd (Ningbo Yinzhou) |  | Beijing Jinke Xin’an Technology Company Ltd                 | 
|8  |  | N/A                                                           |  | Hangzhou Zhisheng Digital Technology Company Ltd            | 
|9  |  | N/A                                                           |  | Shenzhen Aisidi Company Limited                             | 
|10 |  | N/A                                                           |  | Marketing 133                                               | 



Profit Margin



Profit margin in 2013 decreased to 1.2%
compared to 4.2% in 2012. The profit margin decrease was mainly due to an adjustment of $853,478 made at the end of 2013 to remaining
inventory, which resulted in an increase in COS and a decrease in gross profit.



Because the Company does not include
the costs for its distribution network in COS, its gross profit and profit margin as a percentage of net sales (“profit margin”)
may not be comparable to those of other retailers that may include distribution costs in cost of sales and in gross profit and
profit margin.



Selling, General and Administrative
Expenses



Selling, general and administrative
expenses for 2013 totaled $3,630,578, or 28.4% of net sales, compared to $10,158,291, or 47.3% for 2012. General and administrative
expense decreased as a percentage of sales, primarily due to Wang Da closing its retail stores to cut expenses.



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Loss from Continuing Operations



Operating loss for 2013 was $3,473,298
or (27.2)% of net sales compared to $9,253,381 or (43.0)% for 2012. Lower general and administrative expenses contributed to the
decrease in loss from operations.



Provision for Income Taxes



Provision for income taxes for 2013
and 2012 were $0 due to losses incurred by both Wang Da and Zhejiang.



Net Loss from Continuing Operations



Net loss from continuing operations
for 2013 was $3,441,949 or (26.9)% of net sales compared to $9,213,515 or (42.9)% for 2012. Lower general and administrative expenses
contributed to the decrease in loss from operations.



Net Loss from Discontinued Operations



Net loss from discontinued operations
for 2013 was $184,739 compared to $6,653,484 for 2012, a decrease of $6,468,745. The decrease in net loss from discontinued operations
was due to Yiwu and Jinhua having net losses in 2012 but not operating in 2013.



Net Loss



Net loss for 2013 was $3,626,688 compared
to $15,866,999 for 2012, a decrease of $12,240,311. The decrease in net loss was primarily due to Yiwu and Jinhua having net
losses in 2012 and not operating in 2013. Wang Da closed stores to cut operating losses also contributed to the decrease in total
net loss of the Company.



Foreign Currency Translation Adjustments



The impact of foreign translation from
our accounts in RMB to US dollar on Yosen’s operating results was not material. During the translation process, the assets
and liabilities of all PRC subsidiaries are translated into US dollars at period-end exchange rates. The revenues and expenses
are translated into US dollars at average exchange rates of the periods. Resulting translation adjustments are recorded as a component
of accumulated other comprehensive income within stockholders’ equity.



|                                          |  | 2013 |        |  | 2012 | 
|----------------------------------------- |  | ---- | ------ |  | ---- | 
|RMB/$ exchange rate at year end           |  |      | 0.1637 |  |      | 
|Average RMB/$ exchange rate for the years |  |      | 0.1615 |  |      | 



Transaction gains or losses arising
from exchange rate fluctuation on transactions denominated in a currency other than the functional currency were included in the
consolidated results of operations. As a result of the translation, Yosen recorded a foreign currency gain of $7,768 in 2013 and
$131,905 in 2012, which is a separate line item on the Statements of Operations and Comprehensive Loss.



Retail locations



The following table reflects a roll
forward during 2012 and 2013 of our retail locations (i.e., number of stores opened, number of stores closed and number of stores
open at year-end). “ Store in store” refers to the sales counters where the Company’s products are displayed
for sale within large-scale supermarkets, department stores and other sites. At present, all of our “stores in stores”
are in Zhejiang province.



|(Number of Locations)          |  | Wang Da |      |   | Yiwu |  |      | Zhejiang |  |  | Total |  
|------------------------------ |  | ------- | ---- | - | ---- |  | ---- | -------- |  |  | ----- | -
|Locations at January 1, 2012   |  |         | 153  |   |      |  | 178  |          |  |  | -     |  
|Opened during 2012             |  |         | 8    |   |      |  | -    |          |  |  | 37    |  
|Closed during 2012             |  |         | (154 | ) |      |  | (178 | )        |  |  | (3    | )
|Locations at December 31, 2012 |  |         | 7    |   |      |  | -    |          |  |  | 34    |  
|                               |  |         |      |   |      |  |      |          |  |  |       |  
|Opened during 2013             |  |         | 2    |   |      |  | -    |          |  |  | 8     |  
|Closed during 2013             |  |         | (9   | ) |      |  | -    |          |  |  | (14   | )
|Locations at December 31, 2013 |  |         | -    |   |      |  | -    |          |  |  | 28    |  





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|
|





The following table reflects the square footage of each store
space during 2012 and 2013.



|(In Square Foot)          |  | Wang Da |         |   | Yiwu |  |         | Zhejiang |  |  | Total  |  
|------------------------- |  | ------- | ------- | - | ---- |  | ------- | -------- |  |  | ------ | -
|Area at January 1, 2012   |  |         | 21,383  |   |      |  | 27,442  |          |  |  | -      |  
|Opened during 2012        |  |         | 5,160   |   |      |  | -       |          |  |  | 19,410 |  
|Closed during 2012        |  |         | (23,603 | ) |      |  | (27,442 | )        |  |  | (1,350 | )
|Area at December 31, 2012 |  |         | 2,940   |   |      |  | -       |          |  |  | 18,060 |  
|                          |  |         |         |   |      |  |         |          |  |  |        |  
|Opened during 2013        |  |         | 254     |   |      |  | -       |          |  |  | 4,838  |  
|Closed during 2013        |  |         | (3,194  | ) |      |  | -       |          |  |  | (7,436 | )
|Area at December 31, 2013 |  |         | -       |   |      |  | -       |          |  |  | 15,462 |  





The following table reflects net sales
per square foot for 2012 and 2013.



|     |  | Wang Da |       |  | Zhejiang |   |       | Average | 
|---- |  | ------- | ----- |  | -------- | - | ----- | ------- | 
|2012 |  | $       | 5,847 |  |          | $ | 248   |         | 
|2013 |  |         | 626   |  |          |   | 4,216 |         | 



The following table reflects the amount
of comparable or same store sales for each period (i.e., the change in sales from stores that were open for each year presented).  A
“comparable store” is defined as the same “store in store,” for which sales of that “store in store”
is compared in the same month or same quarter of different years, such as the comparison of the sales occurring during March 2011
and March 2012 in the same “store in store.”



|     |  | Wang Da |       |  | Zhejiang |   |       | Average | 
|---- |  | ------- | ----- |  | -------- | - | ----- | ------- | 
|2012 |  | $       | 5,219 |  |          | $ | 6,251 |         | 
|2013 |  |         | 2,194 |  |          |   | 4,077 |         | 



Assessment of whether the stores are “comparable”
is based on:



(1)  stores are in the same
address;



(2)  relatively same business
area (e.g. if the business area of a store has changed no more than 30%, it is regarded as having same business area; if the change
in business area is more than 30%, the change in business area will be regarded as too significant as to be comparable;



(3)  relatively same business
layout (e.g. if the layout of sales counter in a store remains unchanged over time, then that store would be regarded as a comparable
store; if there is significant change in layout of a sales counter in a store, that store will not be regarded as a comparable
store);



(4)  stores with same product
mix would be regarded as comparable; if there is significant change in product mix in a store, that store will not be regarded
as a comparable store;



(5) with respect to net sales per square
foot each year and how we treat changes in square footage, this depends on the materiality of the impact on sales per square foot
as a result of an increase or decrease in square footage. By way of example, a store with an area of 130 square feet had sales
of $14,000 per month in 2006, which results in approximately $108 in sales per square foot. In 2007, if the same store increased
the area of operation to 140 square feet and had sales of $16,000 per month that would result in approximately $114 in sales per
square foot. We would deem the $6 increase in sales per square foot to be immaterial.  Accordingly, in this case, we
will use the area of 130 square feet to compare same store sales, and the additional 10 square feet will be ignored in the calculation
of same store sales.





|20
|--











|
|





We consider changes in store square
footage of more than 30% to be material. Stores that undergo such changes will not be accounted for as “comparable stores”
because the change is too significant.



(6)  with respect to net sales
per square foot each year and how we treat relocated stores, if a “store in store” is relocated to a different retail
location, which we would refer to as a different operating environment, during the period, then that “store in store”
will not be used in the same store comparison.  However, if the “store in store” is relocated to another
location within the same retail location (or same operating environment) then the “store in store” sales will be used
in the calculation of the same store comparison; and



(7)  with respect to net sales
per square foot each year and how we treat closed stores, we treat a closed “store in store” the same way we treat
a “store in store” relocated to different retail location. A closed “store in store” is not used in the
same store comparison.



Opened and closed “stores in stores”
are primarily recognized based on the duration of the agreements with the shopping centers, as well as the sale and profits of
a “store in store.” Prior to opening a new “store in store” we are usually approached by a large-scale
department store or supermarket that offers us the opportunity to open a “store in store.” Our decision is based on
our study of the population traffic flow, the department store and supermarkets themselves, and the level of expected profitability
of a potential “store in store.” Following our inspection, we sign contracts with the department store and supermarkets,
which specifically address the terms and conditions of opening, closing and relocating the “stores in stores.”



Liquidity and Capital Resources



Cash has historically been generated
from operations. Operations and liquidity needs are funded primarily through cash flows from operations and short-term borrowings.



Cash and equivalents were $1,426,018
at December 31, 2013 and current assets totaled $3,927,806. The Company’s current liabilities were $5,264,878 at December
31, 2013. Working capital deficiency at December 31, 2013 was $(1,337,072). During 2013, net cash used in operating activities
was $962,511.



Cash and equivalents were $456,495 at
December 31, 2012 and current assets totaled $4,738,249. The Company’s current liabilities were $4,820,284 at December 31,
2012. Working capital deficit at December 31, 2012 was $(82,035). During 2012, net cash used in operating activities was $8,515,081.



The Company had short-term loans of
$2,618,487 and $2,545,541, respectively as of December 31, 2013 and 2012. The Company had long-term loan of $490,966 and $0, respectively
as of December 31, 2013 and 2012.



The WFOE Law (1986), as amended and
The WFOE Law Implementing Rules (1990), as amended, contain the principal regulations governing dividend distributions by WFOEs.
Under these regulations, WFOEs, such as Wang Da and Zhejiang may pay dividends only out of their accumulated profits, if any, determined
in accordance with PRC accounting standards and regulations. Additionally, Wang Da and Zhejiang are required to set aside
a certain amount of any accumulated profits each year (a minimum of 10%, and up to an aggregate amount equal to half of its registered
capital), to fund certain reserve funds. These reserves are not distributable as cash dividends except in the event of liquidation
and cannot be used for working capital purposes. The PRC government also imposes controls on the conversion of RMB into foreign
currencies and the remittance of currencies out of the PRC. The Company’s two operating subsidiaries in China paid $525 in
dividends during 2005, however, we do not intend to pay dividends on our common stock in the foreseeable future. If we ever determine
to pay a dividend, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign
currency for the payment of such dividends from the profits of Wang Da and Zhejiang.



|                                                       |  | Year Ended December 31, |          
|------------------------------------------------------ |  | ----------------------- | ---------
|                                                       |  | 2013                    |          
|Net cash used in operating activities                  |  | $                       | (962,511 
|Net cash provided by investing activities              |  |                         | -        
|Net cash provided by financing activities              |  |                         | 1,857,686
|Effect of exchange rate change on cash and equivalents |  |                         | 74,347   
|Net increase (decrease) in cash and equivalents        |  |                         | 969,522  
|Cash and equivalents at beginning of year              |  |                         | 456,496  
|Cash and equivalents at end of year                    |  | $                       | 1,426,018







|21
|--











|
|





Operating Activities



Net cash used in operating activities
was $962,511 in 2013 compared to $8,515,081 in 2012. This decrease was mainly attributable to (i) a decrease in net losses
of $12,240,312 from $(15,867,000) in 2012 to $(3,626,688) in 2013, (ii) decrease in accounts receivable of $665,568, decrease in
inventory of $529,964, offset by the decrease in accounts payable and accrued expenses of $574,465 in 2013, adding back the non-cash
item, stock compensation expense of $1,241,333.



Investing Activities



|                                      |  | 2013 |   |  | 2012 |  
|------------------------------------- |  | ---- | - |  | ---- | -
|Net cash used in investing activities |  | $    | - |  |      | $
|                                      |  |      |   |  |      |  



Net cash used in investing activities
in 2013 was $0. Net cash used in investing activities in 2012 was $143,244, which included proceeds from disposal of property and
equipment of $146,905 and purchase of equipment of $3,661.



Financing Activities



The Company had short-term loans of
$2,618,487 and $3,045,541, respectively as of December 31, 2013 and 2012. The Company had long-term loan of $490,966 as of December
31, 2013.



|                                          |  | 2013 |           |  | 2012 |  
|----------------------------------------- |  | ---- | --------- |  | ---- | -
|Net cash provided by financing activities |  | $    | 1,857,686 |  |      | $
|                                          |  |      |           |  |      |  



Net Decrease in Cash and Equivalents



|                                                |  | 2013 |         |  | 2012 |  
|----------------------------------------------- |  | ---- | ------- |  | ---- | -
|Net increase (decrease) in cash and equivalents |  | $    | 969,523 |  |      | $
|                                                |  |      |         |  |      |  



Cash and Equivalents



|                     |  | 2013 |           |  | 2012 |  
|-------------------- |  | ---- | --------- |  | ---- | -
|Cash and equivalents |  | $    | 1,426,018 |  |      | $
|                     |  |      |           |  |      |  



Cash and equivalents as of December
31, 2013 and 2012 were solely bank accounts in the US and China. Specifically, cash and equivalents for each subsidiary as of December
31, 2013 and 2012 included:



|Name of Entity |  | Region         |  | Currency |  | 2013 |           |  | 2012 | 
|-------------- |  | -------------- |  | -------- |  | ---- | --------- |  | ---- | 
|Yosen Group    |  | US entity      |  | USD      |  |      | 135       |  |      | 
|Capital        |  | BVI entity     |  | USD      |  |      | -         |  |      | 
|Zhejiang       |  | Chinese entity |  | RMB      |  |      | 167,678   |  |      | 
|Yiwu           |  | Chinese entity |  | RMB      |  |      | 8,526,143 |  |      | 
|Sanhe          |  | Chinese entity |  | RMB      |  |      | 743       |  |      | 
|Wang Da        |  | Chinese entity |  | RMB      |  |      | 17,694    |  |      | 
|Joy & Harmony  |  | Chinese entity |  | RMB      |  |      | -         |  |      | 
|Jinhua         |  | Chinese entity |  | RMB      |  |      | 458       |  |      | 



Cash equivalents held in the PRC subsidiaries
are not freely transferrable outside the country. The amounts not freely transferable as of December 31, 2013 and 2012 were RMB8,712,716
($1,425,883) and RMB456,711 ($72,661), respectively.





|22
|--











|
|





Capital Expenditures



Capital expenditures for purchase of
fixed assets during 2013 and 2012 were $0 and $3,661, respectively.



Working Capital Requirements



We have funded our business operations
through cash generated from operations and short-term loans. However, our actual working capital needs for the long and short term
will depend upon numerous factors, including operating results, competition, and the availability of credit facilities, none of
which can be predicted with certainty. We believe our currently available working capital, primarily cash from operations, may
not be adequate to execute our business operations. This would likely require us to obtain additional funds from equity or debt
markets. We currently have no commitments from any financing sources. There is no assurance we will be able to raise any funds
on terms favorable to us, or at all. In the event we issue shares of equity or convertible securities, the shares held by our existing
stockholders would be diluted. Future expansion will be limited by the availability of financing products and raising capital.



Going Concern



As discussed in Note 2 to the financial
statements, The Company realized net loss of $3,626,688 and $15,866,999 for 2013 and 2012, respectively. The Company had accumulated
deficit of $47,124,250 as of December 31, 2013. In addition, the Company’s cash position substantially deteriorated from
2010. These issues raise substantial doubt regarding the Company’s ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.



Off-Balance Sheet Arrangements



We have no off-balance sheet arrangements.



Critical Accounting Policies



Our discussion and analysis of our financial
condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements
requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and
expenses, and the related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on
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. Actual results
may differ from these estimates.



An accounting policy is considered to
be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the
time the estimates are made, and if different estimates that reasonably could have been used, or changes in the accounting estimates
that are reasonably likely to occur, could materially impact the consolidated financial statements. We believe the following critical
accounting policies reflect the more significant estimates and assumptions used in the preparation of the consolidated financial
statements.



Revenue Recognition



Our revenues are generated from sales
of consumer electronics products. All of our revenue transactions contain standard business terms and conditions. We determine
the appropriate accounting for these transactions after considering (1) whether a contract exists; (2) when to recognize revenue
on the deliverables; (3) whether all elements of the contract have been fulfilled and delivered; and (4) whether collection is
reasonably assured, which inherently requires us to evaluate the creditworthiness of our customers. Changes in judgments on these
assumptions and estimates could materially impact the timing or amount of revenue recognition.



Please refer to Note 2 in the footnotes
to the financial statements for detailed description of our revenue recognition policy.



After Sales Service



The after-sales services that we provide
to our customers are primarily repair and maintenance. If a customer buys a product from us and needs repairs, we can usually arrange
to have the manufacturer repair the product. In certain cases, clerks in our stores are able to make the repairs directly.





|23
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|
|





Recent Accounting Pronouncements



In July 2012, FASB issued ASU No. 2012-02,
Intangibles—Goodwill and Other (Topic 350), “Testing Indefinite-Lived Intangible Assets for Impairment.”
ASU 2012-02 simplifies the guidance for testing the decline in the realizable value (impairment) of indefinite-lived intangible
assets other than goodwill. ASU 2012-02 allows an entity the option of first performing a qualitative assessment to determine whether
it is more likely than not that an indefinite-lived intangible asset is impaired. The adoption of ASU 2012-02 did not have a material
impact on the Company’s consolidated financial statements.



The FASB has issued ASU No. 2013-04,
Liabilities (Topic 405), “Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount
of the Obligation Is Fixed at the Reporting Date .” ASU 2013-04 provides guidance for the recognition, measurement, and
disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation
within the scope of this ASU is fixed at the reporting date, except for obligations addressed within existing guidance in US GAAP.
The guidance requires an entity to measure those obligations as the sum of the amount the reporting entity agreed to pay on the
basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors.
The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15,
2013. The Company does not expect the adoption of this guidance to have a material impact on the Company’s consolidated financial
statements.



In July 2013, the FASB issued ASU 2013-11,
Income Taxes (Topic 740): “Presentation of Unrecognized Tax Benefit When a Net Operating Loss Carryforward, A Similar
Tax Loss, or a Tax Credit Carryforward Exists (A Consensus the FASB Emerging Issues Task Force)”. ASU 2013-11 provides
guidance on financial statement presentation of unrecognized tax benefit when a net operating loss carryforward, a similar tax
loss, or a tax credit carryforward exists. The FASB’s objective in issuing this ASU is to eliminate diversity in practice
resulting from a lack of guidance on this topic in current US GAAP. This ASU applies to all entities with unrecognized tax benefits
that also have tax loss or tax credit carryforwards in the same tax jurisdiction as of the reporting date. This amendment is effective
for public entities for fiscal years beginning after December 15, 2013 and interim periods within those years. The Company does
not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements.



Other recent accounting pronouncements
issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the Securities Exchange Commission (the “SEC”)
did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial
statements.



ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK



Not applicable.



ITEM 8. FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA



The financial statements of the Company
are included following the signature page to this Form 10-K.



ITEM 9. CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE



None.



ITEM 9A. CONTROLS AND PROCEDURES



Evaluation of Disclosure Controls
and Procedures



Under the supervision and with the participation
of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our
disclosure controls and procedures as of December 31, 2013, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer have concluded that as
of December 31, 2013, the Company’s disclosure controls and procedures were not effective due to the material weakness in
our internal controls identified below.



Disclosure controls and procedures are
designed to provide that information required to be disclosed by us in reports that we file or submit under the Exchange Act is
accumulated, recorded, processed, summarized, communicated to our management, including our principal executive officer and principal
financial officer and reported within the time periods specified in Securities and Exchange Commission rules and forms.





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|
|





Management’s Report on Internal
Control over Financial Reporting



Our management is responsible for establishing
and maintaining adequate internal control over financial reporting (“ICFR”), as such term is defined in Exchange Act
Rules 13a-15(f) and 15d-15(f). ICFR refers to the process designed by, or under the supervision of, our principal executive and
principal financial officers, and effected by the BOD, 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 (“US GAAP”) and includes those policies and procedures
that:



1. Pertain to the maintenance of records that in reasonable
detail accurately and fairly reflect the transactions and dispositions of our assets;



2. Provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with US GAAP, and that our receipts
and expenditures are being made only in accordance with authorization of our management and directors; and



3. Provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisitions, use or disposition of our assets that could have a material effect
on the financial statements.



Under the supervision and with the participation
of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the
effectiveness of our ICFR based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on our evaluation, and due to the material weakness described below, management
concluded that our ICFR was not effective as of December 31, 2013.



Our management identified the following
material weakness: the ability of the Company to record transactions and provide disclosures in accordance with US GAAP. The current
staff in our accounting department is inexperienced in US GAAP. They need substantial training to meet the demands of a US public
company. The accounting skills and understanding necessary to fulfill the requirements of US GAAP-based reporting, including the
preparation of financial statements and consolidation, are inadequate.



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



Remediation Initiative



We intend to provide additional training
in US GAAP and disclosure requirements under US securities law to our staff, in particular, to our key accounting personnel.



Attestation Report of the Independent
Registered Public Accounting Firm



This Annual Report on Form 10-K does
not include an attestation report of our registered public accounting firm. Our management’s report was not subject to attestation
by our registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit us to provide
only our management’s report in this Annual Report.



Changes in Internal Control over
Financial Reporting



There were no changes in our internal
control over financial reporting that occurred during our fourth fiscal quarter that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.



|ITEM 9B. | OTHER INFORMATION
|-------- | -----------------



None.





|25
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|
|





PART III



ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE



The following table sets forth the name,
age and position of each of our executive officers and directors.



|Name           |  | Age |  | Position                                         
|-------------- |  | --- |  | -------------------------------------------------
|Zhenggang Wang |  | 45  |  | Chief Executive Officer and Chairman of the Board
|Weiping Wang   |  | 47  |  | Chief Financial Officer                          
|Xinchuan Kong  |  | 39  |  | President                                        
|Chenghua Zhu   |  | 38  |  | Director                                         
|Mingjun Zhu    |  | 45  |  | Director                                         
|Rongjin Weng   |  | 50  |  | Director                                         
|Wei Kang Gu    |  | 68  |  | Director                                         



There are no family relationships between
or among any of the executive officers or directors of the Company. Below are brief descriptions of the backgrounds and experiences
of the officers and directors:



Zhenggang Wang, Chief Executive
Officer and Chairman of the Board



Mr. Wang has been the Company’s
chief executive officer and chairman of its BOD since December 2005. He is also the founder, chairman and chief executive officer
of Zhejiang YongXin Digital Technology Company Limited, a holding company to hold interests in Hangzhou Wang Da Electronics Company,
Limited and Yiwu YongXin Telecommunication Company, Limited, both of which are based in China. Mr. Wang established Yiwu YongXin
Telecommunication Company, Limited in 1997, and he serves as its chairman and chief executive officer. In 1998, Mr. Wang established
Hangzhou Wang Da Electronics Company, Limited, which is in the business of distributing cellular telephone phones. Mr. Wang
is the chairman and chief executive officer of Hangzhou Wang Da Electronics Company, Limited.  Mr. Wang does not
hold any other directorships with reporting companies in the United States.



Weiping Wang, Chief Financial
Officer



Mr. Weiping Wang has been the Company’s
Chief Financial Officer since June 21, 2011. Mr. Weiping Wang joined the Company in January 2010 and served as Assistant General
Manager of Zhejiang Yongxin Technology Limited, a subsidiary of the Company. Before joining the Company, Mr. Wang served as Deputy
General Manager in Shaanxi Aokai Food Co., Ltd, a food producer from 2005 to 2009, where his responsibilities included overseeing
customer relations and supporting the General Manager with management of day-to-day operations. In 2004, Mr. Wang worked as a sales
manager for Jinhua Aokai Trade Co. Ltd. From 1986 until 2003, Mr. Wang worked as a regional sales manager for Zhejiang Mifeng Group
Co., Ltd. Mr. Wang received his Bachelor’s Degree in Business Administration from Zhejiang University, China.



Xinchuan Kong, President



Mr. Kong has been the Company’s
President since December 2010. Mr. Kong served as the chief executive officer of Zhejiang YongXin Digital Technology Company, a
subsidiary of the Company, from February 2010 to December 2010.  From May 2005 to January 2010, Mr. Kong served as a
project manager at Hangzhou Ruisi Management Consulting Group.  From May 2003 to April 2005, Mr. Kong served as the assistant
to the Chairman of Shanghai Jinjian Food Co. Ltd.  Mr. Kong received his Bachelor’s Degree in English from Henan
Institute of Education and a Master’s Degree in Economics from Zhejiang University, China.



Chenghua Zhu, Director



Ms. Zhu has been a director of the Company
since June 2006.  Ms. Zhu has been a senior project manager of Shanghai Shengzhang, a certified public accounting firm
since 2004. Prior thereto, she was project manager at Shanghai Jiarui and Hubei Dahua, two certified public accounting firms in
China.  Ms. Zhu does not hold any other directorships with reporting companies in the United States.



Mingjun Zhu, Director



Mr. Zhu has been a director of the Company
since June 2006. Mr. Zhu has been General Manager of Zhejiang Mingda, a certified public accounting firm, since 2006. Mr. Zhu was
General Manager of Zhejiang Mingda Management Consulting Company from 2004 to 2006. From 1993 to 2004, he was Deputy Director of
Yiwu Zhicheng, a certified public accounting firm.  Mr. Zhu does not hold any other directorships with reporting companies
in the United States.





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Rongjin Weng, Director



Mr. Weng has been a director of the
Company since December 2005.  Mr. Weng has been Chairman of Langsha Group, a large sock manufacturer in China, since
1995. Mr. Weng established Langsha Knitting Company Limited in 1995, and has served as its chairman and chief executive officer
since that time. Mr. Weng holds a MBA from Shanghai Jiao Tong University. Mr. Weng does not hold any other directorships with reporting
companies in the United States.



Wei Kang Gu, Director



Mr. Gu has been a director of the Company
since December 2005. Mr. Gu has been a Professor of Electronic Engineering at Zhejiang University, a major research university
comprised of 22 colleges, since 1999. Mr. Gu also serves on the Board of Bird Ningbo Company, a Chinese manufacturer of mobile
phones. Mr. Gu also serves as Vice Chairman of Zhejiang Electronic Association. Mr. Gu received a bachelors’ degree from
Zhejiang University.  Mr. Gu does not hold any other directorships with reporting companies in the United States.



Term



Each director serves for a one-year
term after which they may stand for re-election at the Company’s annual meeting of stockholders. Each of our directors serves
until his resignation or removal. Our officers serve at the pleasure of our BOD.



Involvement in Certain Legal Proceedings



There are no legal proceedings that
have occurred within the past ten years concerning our directors, or control persons which involved a criminal conviction, a criminal
proceeding, an administrative or civil proceeding limiting one's participation in the securities or banking industries, or a finding
of securities or commodities law violations.



Director Qualifications



We seek directors with established strong
professional reputations and experience in areas relevant to the strategy and operations of our businesses. We also seek directors
who possess the qualities of integrity and candor, who have strong analytical skills and who are willing to engage management and
each other in a constructive and collaborative fashion, in addition to the ability and commitment to devote significant time and
energy to service on the Board and its committees. We believe that all of our directors meet the foregoing qualifications.



The Nominating and Corporate Governance
Committee and the Board believe that the leadership skills and other experiences of its Board members, as described below, provide
the Company with a range of perspectives and judgment necessary to guide our strategies and monitor their execution and led to
the decision to appoint them to the Board.



Zhenggang Wang: Mr. Zhenggang Wang has
more than 20 years of experience in the PRC electronics market. He is the founder of the Company and has demonstrated strong leadership
throughout the development of the Company.



Chenghua Zhu: Ms. Chenghua Zhu has a
strong accounting background and has worked as a manager in various CPA firms. Her expertise in financial reporting qualifies her
to be a member of the Board and the Audit Committee.



Mingjun Zhu: Mr. Mingjun Zhu has extensive
knowledge in accounting and financial reporting. His prior work as a consultant and his expertise in accounting enables him to
offer valuable perspectives on the Company’s budgeting and financial reporting.



Rongjin Weng: Mr. Weng as Chairman of
Langsha Group, brings leadership and management expertise to the Board.



Wei Kang Gu: Mr. Gu had previously served
as a director to a Chinese electronic company. He is also Vice Chairman of Zhejiang Electronic Association, which provides the
Board with industry expertise.



Board Practices



Our business and affairs are managed
under the direction of our BOD. The primary responsibilities of our BOD are to provide oversight, strategic guidance, counseling
and direction to our management. It is our current expectation that the BOD will meet regularly on a quarterly basis and additionally
as required.



Board’s Role in Risk Oversight



The BOD as a whole has responsibility
for risk oversight, with reviews of certain areas being conducted by the relevant BOD committees. These committees then provide
reports to the full BOD. The oversight responsibility of the BOD and its committees is enabled by management reporting processes
that are designed to provide visibility to the BOD about the identification, assessment, and management of critical risks. These
areas of focus include strategic, operational, financial and reporting, succession and compensation, compliance, and other risks.
The BOD and its committees oversee risks associated with their respective areas of responsibility, as summarized below.





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Board Committees and
Designated Directors



The BOD has a Compensation Committee,
a Nominating and Corporate Governance Committee and an Audit Committee.  Our BOD has determined that Chenghua Zhu, Mingjun
Zhu, Rongjin Weng and Wei Kang Gu, are “independent” under the current independence standards of NASDAQ Marketplace
Rule 4200(a)(15) and meet the criteria for independence set forth in Rule 10A-3(b)(1) under the US Securities Exchange Act of 1934,
as amended (the “Exchange Act”). Our BOD has also determined that these persons have no material relationships with
us — either directly or as a partner, stockholder or officer of any entity — which could be inconsistent with a finding
of their independence as members of our BOD.



Audit Committee



The Company’s Audit Committee
consists of Mingjun Zhu, Chairman and members Rongjin Weng and Chenghua Zhu. All such audit committee members are considered “independent”
under the current independence standards of NASDAQ Marketplace Rule 4200(a)(15) and meet the criteria for independence set forth
in Rule 10A-3(b)(1) of the Exchange Act as determined by the BOD.  The BOD has determined that we have at least one audit
committee financial expert, as defined in the Exchange Act, serving on our audit committee. Mingun Zhu is the “audit committee
financial expert”.



Compensation Committee



Our Compensation Committee consists
of Wei Kang Gu, Chairman and Rongjin Weng. Each of the above-listed compensation committee members were or are considered “independent”
under the current independence standards of NASDAQ Marketplace Rule 5605(a)(2) and meet the criteria for independence set forth
in Rule 10A-3(b)(1) of the Exchange Act as determined by the BOD. The Compensation Committee makes recommendations to the BOD concerning
salaries and incentive compensation for our officers, including our Chief Executive Officer, and employees and administers our
stock option plans. No member of our Compensation Committee has at any time been an officer or employee of ours or our subsidiaries.
No interlocking relationship exists between our BOD or Compensation Committee and the BOD or compensation committee of any other
company, nor has any interlocking relationship existed in the past.



Communications with the Board of
Directors



The BOD maintains a process for stockholders
to communicate with the Board. Stockholders wishing to communicate with the BOD or any individual director must mail a communication
addressed to the Secretary of the Company, Yosen Group, 368 HuShu Nan Road, HangZhou City, Zhejiang Province, China 310014. Any
such communication must state the number of shares of our common stock beneficially owned by the stockholder making the communication.
All of such communications will be forwarded to the full BOD or to any individual director or directors to whom communication is
directed unless the communication is clearly of a marketing nature or is inappropriate, in which case we have the authority to
discard the communication or taking appropriate legal action regarding the communication.



Nominating and Corporate Governance
Committee



Our Nominating and Corporate Governance
Committee (“NCGC”) consists of Mingjun Zhu, Chairman and member Wei Kang Gu. Each of the above-listed nominating committee
members are considered “independent” under the current independence standards of NASDAQ Marketplace Rule 5605(a)(2)
and meet the criteria for independence set forth in Rule 10A-3(b)(1) of the Exchange Act as determined by the BOD.  The
Nominating and Corporate Governance Committee assists the BOD in identifying qualified individuals to become board members, in
determining the composition of the BOD and in monitoring a process established to assess Board effectiveness.



Changes in Director Nomination Process
for Stockholders



There have been no material changes
to the procedures by which security holders may recommend nominees to the Company’s BOD since the filing of the Company’s
Annual Report on Form 10-K for 2012.



Section 16(a) Beneficial Ownership
Reporting Compliance



Section 16(a) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), requires the executive officers and directors of the Company and every
person who is directly or indirectly the beneficial owner of more than 10% of any class of security of the Company to file reports
of ownership and changes in ownership with the SEC. Such persons also are required to furnish our company with copies of all Section
16(a) forms they file. Based solely on our review of copies of such forms received by us, we believe that during 2013, the executive
officers and directors of the Company and every person who is directly or indirectly the beneficial owner of more than 10% of any
class of security of the Company complied with the filing requirements of Section 16(a) of the Exchange Act.



Code of Ethics



We adopted a corporate code of
ethics that establishes the standards of ethical conduct applicable to our officers, directors and employees, including our
principal executive officer and our principal financial and accounting officer and persons performing similar functions. The
Code of Business Conduct and Ethics is filed as Exhibit 14 to our Annual Report on Form 10-K. A written copy of the Code of
Business Conduct and Ethics will be provided upon request at no charge by writing to our Chief Financial Officer, Yosen
Group, Inc., 368 HuShu Nan Road, HangZhou City, Zhejiang Province, China 310014.





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ITEM 11.
EXECUTIVE COMPENSATION



The following table sets forth the cash
and other compensation paid by us in 2013 and 2012 to our Chief Executive Officer (the “named executive officer”. Our
Chief Executive Officer was the only executive officer who received total compensation greater than $100,000 in 2013.



SUMMARY COMPENSATION TABLE



|Name and            |  |      |      |  |        |   |        |       |  |   |        |  |  |        |             |  |       |  
|------------------- |  | ---- | ---- |  | ------ | - | ------ | ----- |  | - | ------ |  |  | ------ | ----------- |  | ----- | -
|Principal           |  |      |      |  |        |   |        |       |  |   | Stock  |  |  | Option |             |  |       |  
|Position            |  | Year |      |  | Salary |   |        | Bonus |  |   | Awards |  |  | Awards |             |  | Total |  
|Zhenggang Wang, CEO |  |      | 2013 |  |        | $ | 30,805 |       |  | $ | -      |  |  | $      | 350,000 (1) |  |       | $
|                    |  |      | 2012 |  |        |   | 43,050 |       |  |   | -      |  |  |        | 218,750 (1) |  |       |  



| | (1) | Valuation based on the dollar amount of option grants recognized for financial statement reporting purposes pursuant to ASC 718. The stock value was calculated based on the closing price of $ 0.3 per share on the date of grant.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Employment Agreements



On May 17, 2012, we entered into an
employment agreement with Zhenggang Wang, to serve as our Chief Executive Officer and Chairman. The term of the Employment Agreement
shall continue for a period of 36 months until May 17, 2015 unless earlier terminated as set forth in the employment agreement,
and thereafter on a month to month basis unless and until terminated upon no less than 30 days prior written notice by either us
or Mr. Wang.



Pursuant to the terms of the employment
agreement, we will pay Mr. Wang as compensation a base salary in cash of (i) $40,000 per annum for the year beginning on May 17,
2012 (the “Effective Date”) and ending on the first anniversary of the Effective Date, (ii) $20,000 per annum for the
year beginning on the first anniversary of the Effective Date and ending on the second anniversary of the Effective Date and (iii)
$20,000 per annum for the year beginning on the second anniversary of the Effective Date and ending on the third anniversary of
the Effective Date . In addition, we granted 3,500,000 shares of restricted common stock to Mr. Wang. The shares shall vest over
three years with 1,1666,666 vesting on the first anniversary of the grant date. 1,1666,666 on the second and 1,1666,667 on the
third, in each case, subject to Mr. Wang continuing to serve the Company as the Chief Executive Officer on such applicable vesting
date.



Pursuant to the terms of Mr. Wang’s
Employment Agreement, if Mr. Wang’s employment is terminated by us without cause (as defined in the employment agreement),
then we shall pay Mr. Wang in lieu of other damages, an amount equal to his then current base salary payable in installments at
the same time the Company pays salary to its other senior executive employees for a period of one year, provided Mr. Wang complies
with all confidentiality, non-solicitation and non-compete provisions set forth in the employment agreement. In addition, upon
any termination of Mr. Wang’s employment by us without cause (i) any shares of restricted stock granted to Mr. Wang pursuant
to his employment agreement and not vested at the time of termination but that are scheduled to vest within one year of the termination
date shall immediately vest and (ii) we shall maintain during the one year period following his termination all employee benefit
plans and programs which Mr. Wang participated in immediately prior to such termination.



We do not have employment agreements
with any other of our executive officers.



Outstanding Equity Awards At Year-End



There were no outstanding unexercised
options, unvested stock or other equity incentive plan awards held by the named executive officer as of December 31, 2013.



Pension Benefits



We do not have any pension benefit plans.



Nonqualified Deferred Compensation



We do not maintain any non-qualified
defined contribution or deferred compensation plans.



Potential Payments Upon Termination
or Change in Control



See “Employment Agreements”
above for a description of potential payments to Mr. Wang upon termination.





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Compensation of Directors



The following table summarizes compensation
that our directors earned during 2013 for services as members of the Company’s Board:



DIRECTOR COMPENSATION



|Name              |  | FeesEarned orPaid inCash |       |  | StockAwards($) |  |   | OptionAwards($) (1) |  |  | Non-EquityIncentivePlanCompensation($) |  |  | Change inPensionValue andNonqualifiedDeferredCompensationEarnings ($) |   |  | AllOtherCompensation($) |  |   | Total
|----------------- |  | ------------------------ | ----- |  | -------------- |  | - | ------------------- |  |  | -------------------------------------- |  |  | --------------------------------------------------------------------- | - |  | ----------------------- |  | - | -----
|Xinchuan Kong (2) |  | $                        | 5,443 |  |                |  | - |                     |  |  | -                                      |  |  |                                                                       | - |  |                         |  | - |      
|Wei Kang Gu       |  |                          | -     |  |                |  | - |                     |  |  | -                                      |  |  |                                                                       | - |  |                         |  | - |      
|Chenghua Zhu      |  |                          | -     |  |                |  | - |                     |  |  | -                                      |  |  |                                                                       | - |  |                         |  | - |      
|Mingjun Zhu       |  |                          | -     |  |                |  | - |                     |  |  | -                                      |  |  |                                                                       | - |  |                         |  | - |      
|Rongjin Weng      |  |                          | -     |  |                |  | - |                     |  |  | -                                      |  |  |                                                                       | - |  |                         |  | - |      
|Total             |  | $                        | 5,443 |  |                |  | - |                     |  |  | -                                      |  |  |                                                                       | - |  |                         |  | - |      





(1) Valuation based on the dollar amount of option grants
recognized for financial statement reporting purposes pursuant to ASC 718.

(2) Xinchuan Kong serves as our President.



ITEM 12. SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS



The following table lists, as of April
11, 2014, the number of shares of common stock beneficially owned by (i) each person, entity or group (as that term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934) known to the Company to be the beneficial owner of more than 5% of the
outstanding common stock; (ii) each of our directors and our named executive officer and (iii) all officers and directors as a
group. Information relating to beneficial ownership of common stock by our principal stockholders and management is based upon
information furnished by each person using “beneficial ownership” concepts under the rules of the SEC. Under these
rules, a person is deemed to be a beneficial owner of a security if that person directly or indirectly has or shares voting power,
which includes the power to vote or direct the voting of the security, or investment power, which includes the power to dispose
or direct the disposition of the security. The person is also deemed to be a beneficial owner of any security of which that person
has a right to acquire beneficial ownership within 60 days. Under the SEC rules, more than one person may be deemed to be a beneficial
owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have
any pecuniary interest. Except as noted below, each person has sole voting and investment power with respect to the shares beneficially
owned and each stockholder’s address is c/o Yosen Group, Inc., 368 HuShu Nan Road, Hang Zhou City, Zhejiang Province, China
310014.



The percentages below are calculated
based on 23,542,527 shares of common stock issued and outstanding on April 11, 2014:



|                                                            |  | Amount of            |  |  | Percentage of       
|----------------------------------------------------------- |  | -------------------- |  |  | --------------------
|Name of Beneficial Owner                                    |  | Beneficial Ownership |  |  | Beneficial Ownership
|Zhenggang Wang                                              |  | 5,445,000            |  |  | 23.1%               
|Wei Kang Gu                                                 |  | -                    |  |  | -                   
|Chenghua Zhu                                                |  | -                    |  |  | -                   
|Mingjun Zhu                                                 |  | -                    |  |  | -                   
|Rongjin Weng                                                |  | -                    |  |  | -                   
|All directors and executive officers as a group (7 persons) |  | 5,495,000            |  |  | 23.3%               
|                                                            |  |                      |  |  |                     
|30                                                         





|
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|
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ITEM 13. CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE



Transactions with Related Parties



None.



Director Independence



The BOD has determined that each of
our directors, except Zhenggang Wang, is an “independent director” as defined in the Marketplace Rules of the Nasdaq
Stock Market (“NASDAQ”).



ITEM 14. PRINCIPAL ACCOUNTANT
FEES AND SERVICES



On January 5, 2009, the Company, on
the recommendation of the Audit Committee of its BOD, engaged Goldman Kurland and Mohidin LLP (“GKM”) as its independent
registered public accounting firm.



The following represents fees for professional
audit services rendered by GKM for 2013 and 2012.



Audit Fees



The aggregate fees billed by our current
auditors, GKM, for professional services rendered for the audit of our annual financial statements for 2013 and 2012 was $100,448
and $188,000, respectively.



Audit Related Fees



We incurred no audit related fees to
GKM during 2013 and 2012.



Tax Fees



GKM did not render any services for
tax compliance, tax advice and tax planning during the years ended December 31, 2013 and 2012.



All Other Fees



GKM did not bill us any additional fees
that are not disclosed under audit fees, audit related fees or tax fees during 2013 and 2012.



Audit Committee Pre-Approval Process,
Policies and Procedures



The Audit Committee has adopted pre-approval
policies for all services, including both audit and non-audit services, provided by our independent auditors.  For audit
services, each year the independent auditor provides the Audit Committee with an engagement letter outlining the scope of the audit
services proposed to be performed during the year, which must be formally accepted by the Audit Committee before the audit process
commences.  The independent auditor also submits an audit services fee proposal, which also must be approved by the Audit
Committee before the audit process commences.  The audit, tax, and all other fees and services described above were pre-approved
for 2013 and 2012.





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|
|





PART IV



ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES



(a)          
(b)           The exhibits listed on the Exhibit Index are filed as part
of this Annual Report.



EXHIBIT INDEX





|ExhibitNo |  | Document Description                                                                                                                                                                                                                                                                                                                                                                               
|--------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1       |  | Amended and Restated Articles of Incorporation of the Registrant (24)                                                                                                                                                                                                                                                                                                                              
|3.2       |  | By-laws of the Registrant (1)                                                                                                                                                                                                                                                                                                                                                                      
|4.1       |  | Yosen Group Amended 2005 Equity Incentive Plan (2)                                                                                                                                                                                                                                                                                                                                                 
|4.2       |  | Yosen Group 2011 Restricted Stock Plan (19)                                                                                                                                                                                                                                                                                                                                                        
|4.3       |  | Amendment to the Company’s 2011 Restricted Stock Plan (20)                                                                                                                                                                                                                                                                                                                                         
|4.4       |  | The Company’s 2012 Omnibus Securities and Incentive Plan (22)                                                                                                                                                                                                                                                                                                                                      
|10.1      |  | Stock Purchase Agreement, dated as of October 17, 2005, by and among Sun Oil & Gas, Inc., EH&P Investments, John D. Swain, Fred Holcapek, PH Holding Group, Ma Cheng Ji, Zhou Wei, Zeng Xiu Lan, Gu Xiao Dong, Jacksonville Management Limited, Colin Wilson, Alliance Capital Management, Inc., Hanzhong Fang and China US Bridge Capital, Limited (3)                                            
|10.2      |  | Consulting Services Agreement dated as of November 1, 2005 between Capital Development Limited and Zhejiang YongXin Digital Technology Company Limited (4)                                                                                                                                                                                                                                         
|10.3      |  | Operating Agreement dated as of November 1, 2005 between Capital Development Limited and Zhejiang YongXin Digital Technology Company Limited (4)                                                                                                                                                                                                                                                   
|10.4      |  | Proxy and Voting Agreement dated as of November 1, 2005 between Capital Development Limited and Zhejiang YongXin Digital Technology Company Limited (4)                                                                                                                                                                                                                                            
|10.5      |  | Option Agreement dated as of November 1, 2005 between Capital Development Limited and Zhejiang YongXin Digital Technology Company Limited (4)                                                                                                                                                                                                                                                      
|10.6      |  | Equity Pledge Agreement dated as of November 1, 2005 between Capital Development Limited and Zhejiang YongXin Digital Technology Company Limited (4)                                                                                                                                                                                                                                               
|10.7      |  | Subscription Agreement, dated as of December 20, 2005, between the Registrant and Huiqi Xu. (5)                                                                                                                                                                                                                                                                                                    
|10.8      |  | Consulting Agreement, dated as of December 20, 2005, among the Registrant, Wen-An Chen and Huoqing Yang. (5)                                                                                                                                                                                                                                                                                       
|10.9      |  | Guarantee Contract between the Registrant and Shenzhen Shiji Ruicheng Guaranty and Investment Company Limited, dated as of December 21, 2005. (6)                                                                                                                                                                                                                                                  
|10.10     |  | Agreement and Plan of Merger, dated as of December 21, 2005, among the Registrant, YX Acquisition Corporation, Capital Future Development Limited, Zhenggang Wang, Yimin Zhang, Weiyi Lv, Xiaochun Wang, Zhongsheng Bao, Simple (Hongkong) Investment & Management Company Limited, First Capital Limited, Shenzhen Dingyi Investment & Consulting Limited and China US Bridge Capital Limited. (6)
|10.11     |  | Form of Promissory Note dated December 21, 2005. (6)                                                                                                                                                                                                                                                                                                                                               
|10.12     |  | Share Exchange Agreement, dated as of November 28, 2006, among Yosen Group, Capital Future Development Limited (“Capital”), Shanghai Joy & Harmony Electronics Company Limited, and the shareholders of Capital. (7)                                                                                                                                                                               
|10.13     |  | Form of Securities Purchase Agreement, dated July 13, 2007, by and among the Registrant and certain subscribers (8)                                                                                                                                                                                                                                                                                
|10.14     |  | Letter of Intent for Strategic Partnership, dated November 22, 2007, between the Registrant’s subsidiary Zhejiang Yongxin Technology Limited and Hangzhou Xituo Network Technology Company (9)                                                                                                                                                                                                     
|10.15     |  | Consignment Agreement, dated January 2, 2008, between the Registrant’s subsidiary Hangzhou Shan He Electric Company Limited and Hangzhou Lotour Digital Products Business Company Limited (10)                                                                                                                                                                                                     
|10.16     |  | Consignment Agreement, dated January 3, 2008, between the Registrant’s subsidiary Hangzhou Wang Da Electric Company Limited and Hangzhou Lotour Digital Products Business Company Limited (10)                                                                                                                                                                                                     
|10.17     |  | Acquisition Agreement dated December 19, 2008 by and among Zhejiang YongXin Digital Technology Company Limited, Yiwu YongXin Communication Limited Jinhua Baofa Logistic Limited and the shareholders of Jinhua Baofa Logistic Limited (12)                                                                                                                                                        
|10.18     |  | Amendment to Acquisition Agreement dated April 4, 2009 by and among Zhejiang YongXin Digital Technology Company Limited, Yiwu YongXin Communication Limited and the shareholders of Jinhua Baofa Logistic Limited (13)                                                                                                                                                                             







|32
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|
|







|10.19 |  | Compensation Agreement, dated November 27, 2009, between Yosen Group and Joseph Levinson (14)                                                                                                                     
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.20 |  | Board of Directors Agreement, dated December 8, 2006, among Yosen Group and Kenneth T. Berents (15)                                                                                                               
|10.21 |  | Yosen Group 2008 Omnibus Securities and Incentive Plan (16)                                                                                                                                                       
|10.22 |  | Stock Option Agreement Director Non-Qualified Stock Option, dated December 1, 2008 and effective as of January 15, 2009, between Yosen Group and Kenneth Berents (16)                                             
|10.23 |  | Stock Option Agreement Director Non-Qualified Stock Option, dated December 1, 2008 and effective as of January 15, 2009, between Yosen Group and Kenneth Berents (16)                                             
|10.24 |  | Stock Option Agreement Director Non-Qualified Stock Option, dated December 1, 2008 and effective as of January 15, 2009, between Yosen Group and Kenneth Berents (16)                                             
|10.25 |  | Stock Option Agreement with Todd L. Mavis, dated April 21, 2009, between Yosen Group and Todd L. Mavis (16)                                                                                                       
|10.26 |  | Agreement dated May 3, 2007 between Yosen Group and Joseph Levinson (16)                                                                                                                                          
|10.27 |  | Letter Agreement dated June 16, 2009 between Yosen Group and Jian Zhang (17)                                                                                                                                      
|10.28 |  | Share-holding entrustment agreement dated November 21,2005 between Capital Future Developments Limited and Huiyi Lv (23)                                                                                          
|10.29 |  | Share-holding entrustment agreement dated November 21,2005 between Capital Future Developments Limited and Xiaochun Wang (23)                                                                                     
|10.30 |  | Share-holding entrustment agreement dated November 21,2005 between Capital Future Developments Limited and Yimin Zhang (23)                                                                                       
|10.31 |  | Share-holding entrustment agreement dated November 21,2005 between Capital Future Developments Limited and Zhenggang Wang (23)                                                                                    
|10.32 |  | Share-holding entrustment agreement dated November 21,2005 between Capital Future Developments Limited and Zhongsheng Bao (23)                                                                                    
|10.33 |  | Employment Agreement dated May 17, 2012 by and between the Company and Zhenggang Wang (20)                                                                                                                        
|10.34 |  | Loan Agreements, dated July 16, 2012, between the Company and Zhejiang Chouzhou Commercial Bank, dated July 16, 2012 (21)                                                                                         
|10.35 |  | Subscription Agreement, dated as of August 23, 2013, between the Registrant and Jessie Wong (25)                                                                                                                  
|10.36 |  | Subscription Agreement, dated as of August 23, 2013, between the Registrant and Wa Cheung (25)                                                                                                                    
|10.37 |  | Consulting Agreement, dated as of December 30, 2013, between the Registrant and Yunge Huang (25)                                                                                                                  
|10.38 |  | Consulting Agreement, dated as of December 30, 2013, between the Registrant and Weiguo Xu (25)                                                                                                                    
|14.1  |  | Code of Business Conduct and Ethics (11)                                                                                                                                                                          
|21.1  |  | List of Subsidiaries (18)                                                                                                                                                                                         
|31.1  |  | Certification of Principal Executive Officer pursuant to Rule 13A-14(A)/15D-14(A) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *                  
|31.2  |  | Certification of the Principal Accounting and Financial Officer pursuant to Rule 13A-14(A)/15D-14(A) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
|32.1  |  | Certification of Principal Executive Officer Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)*                                                                                          
|32.2  |  | Certification of Principal Accounting and Financial Officer Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002)*                                                                           





|101.INS |  | XBRL Instance Document *                                
|------- |  | --------------------------------------------------------
|101.SCH |  | XBRL Taxonomy Extension Schema Document. *              
|101.CAL |  | XBRL Taxonomy Extension Calculation Linkbase Document * 
|101.DEF |  | XBRL Taxonomy Extension Definition Linkbase Document *  
|101.LAB |  | XBRL Taxonomy Extension  Labels Linkbase Document *     
|101.PRE |  | XBRL Taxonomy Extension Presentation Linkbase Document *





|33
|--











|
|







|(1)  | Incorporated by reference from the Registrant’s Current Report filed with the SEC on Form 8-K on January 3, 2007.            
|---- | -----------------------------------------------------------------------------------------------------------------------------
|(2)  | Incorporated by reference from the Registrant’s Registration Statement on Form S-8 (File No. 333-141173) dated March 9, 2007.
|(3)  | Incorporated by reference from the Registrant’s Current Report filed with the SEC on Form 8-K on October 21, 2005.           
|(4)  | Incorporated by reference from the Registrant’s Current Report filed with the SEC on Form 8-K on September 11, 2007.         
|(5)  | Incorporated by reference from the Registrant’s Current Report filed with the SEC on Form 8-K on December 20, 2005.          
|(6)  | Incorporated by reference from the Registrant’s Current Report filed with the SEC on Form 8-K on December 22, 2005.          
|(7)  | Incorporated by reference from the Registrant’s Current Report filed with the SEC on Form 8-K on December 11, 2006.          
|(8)  | Incorporated by reference from the Registrant’s Current Report filed with the SEC on Form 8-K on July 17, 2007.              
|(9)  | Incorporated by reference from the Registrant’s Current Report filed with the SEC on Form 8-K on November 28, 2007.          
|(10) | Incorporated by reference from the Registrant’s Current Report filed with the SEC on Form 8-K on January 17, 2008.           
|(11) | Incorporated by reference from the Registrant’s Annual Report filed with the SEC on Form 10-K on March 27, 2008.             
|(12) | Incorporated by reference from the Registrant’s Current Report filed with the SEC on Form 8-K on December 29, 2008.          
|(13) | Incorporated by reference from the Registrant’s Current Report filed with the SEC on Form 8-K on April 9, 2009.              
|(14) | Incorporated by reference from the Registrant’s Annual Report filed with the SEC on Form 10-K on April 16, 2009.             
|(15) | Incorporated by reference from the Registrant’s Current Report filed with the SEC on Form 8-K on December 14, 2006.          
|(16) | Incorporated by reference from the Registrant’s Registration Statement on Form S-8 (File No. 333-159200) dated May 13, 2009. 
|(17) | Incorporated by reference from the Registrant’s Current Report filed with the SEC on Form 8-K on June 22, 2009.              
|(18) | Incorporated by reference from the Registrant’s Annual Report filed with the SEC on Form 10-K on April 16, 2010.             
|(19) | Incorporated by reference from the Registrant’s Annual Report filed with the SEC on Form 10-K on May 18, 2011.               
|(20) | Incorporated by reference from the Registrant’s Current Report filed with the SEC on Form 8-K on May 23, 2012.               
|(21) | Incorporated by reference from the Registrant’s Quarterly Report filed with the SEC on Form 10-Q on November 14, 2012.       
|(22) | Incorporated by reference from the Registrant’s Registration Statement on Form S-8 (File No. 333-182754) dated July 19, 2012.
|(23) | Incorporated by reference from the Registrant’s Annual Report on Form 10-K filed with the SEC on April 16, 2012.             





| | (24) | Incorporated by reference from the Registrant’s Annual Report on Form 10-K filed with the SEC on April 12, 2013. 
| | ---- | -----------------------------------------------------------------------------------------------------------------
| | (25) | Incorporated by reference from the Registrant’s Current Report filed with the SEC on Form 8-K on August 26, 2013.





* Filed herewith





|34
|--











|
|





SIGNATURES



Pursuant to the requirements of Section
13 or 15(d) of the Securities and Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on this 11th day of April 2014.



| | YOSEN GROUP, INC.
| | -----------------
| |                  
| |                  
| |                  
| |                  
| |                  



Pursuant to the requirements of the Securities Exchange Act
of 1934, this amended report has been signed below by the following persons on behalf of the Company and in the capacities indicated
below and on the dates indicated.



|Signatures         |  | Title                              |  | Date            
|------------------ |  | ---------------------------------- |  | ----------------
|                   |  |                                    |  |                 
|/s/ Zhenggang Wang |  |                                    |  | February 2, 2015
|Zhenggang Wang     |  | Chief Executive Officer and        |  |                 
|                   |  | Chairman (Principal Executive      |  |                 
|                   |  | Officer)                           |  |                 
|                   |  |                                    |  |                 
|/s/ Xinchuan Kong  |  |                                    |  |                 
|Xinchuan Kong      |  | President                          |  | February 2, 2015
|                   |  |                                    |  |                 
|/s/ Weiping Wang   |  |                                    |  |                 
|Weiping Wang       |  | Chief Financial Officer (Principal |  | February 2, 2015
|                   |  | Accounting and Financial Officer)  |  |                 
|                   |  |                                    |  |                 
|/s/ Chenghua Zhu   |  |                                    |  |                 
|Chenghua Zhu       |  | Director                           |  | February 2, 2015
|                   |  |                                    |  |                 
|/s/ Mingjun Zhu    |  |                                    |  |                 
|Mingjun Zhu        |  | Director                           |  | February 2, 2015
|                   |  |                                    |  |                 
|/s/ Rongjin Weng   |  |                                    |  |                 
|Rongjin Weng       |  | Director                           |  | February 2, 2015
|                   |  |                                    |  |                 
|/s/ Wei Kang Gu    |  |                                    |  |                 
|Wei Kang Gu        |  | Director                           |  | February 2, 2015





|35
|--











|
|





YOSEN GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013



TABLE OF CONTENTS



|Report of Independent Registered Public Accounting Firm      | F-1
|------------------------------------------------------------ | ---
|                                                             |    
|Consolidated Balance Sheets                                  | F-2
|                                                             |    
|Consolidated Statements of Operations and Comprehensive Loss | F-3
|                                                             |    
|Consolidated Statements of Stockholders’ Equity              | F-4
|                                                             |    
|Consolidated Statements of Cash Flows                        | F-5
|                                                             |    
|Notes to Consolidated Financial Statements                   | F-6





|
|











|
|





REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM



To the Board of Directors and
Stockholders of Yosen Group, Inc.



We have audited the accompanying consolidated
balance sheets of Yosen Group, Inc. and subsidiaries (the “Company”) as of December 31, 2013 and 2012, and the related
consolidated statements of operations and comprehensive loss, stockholders’ equity (deficit), and cash flows for each of
the years in the two-year period ended December 31, 2013. Yosen Group, Inc.’s management is responsible for these financial
statements. Our responsibility is to express an opinion on these financial statements based on our audits.



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



In our opinion, the financial statements
referred to above present fairly, in all material respects, the financial position of Yosen Group, Inc. as of December 31, 2013
and 2012, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31,
2013 in conformity with accounting principles generally accepted in the United States of America.



The accompanying financial statements
were prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company
has incurred significant losses from operations and has stockholders’ deficit of $1,786,463. These conditions raise substantial
doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.



|Goldman Kurland and Mohidin LLP
|-------------------------------
|Encino, CA                     
|April 4, 2014                  





|F - 1
|-----











|
|





YOSEN GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                 |  | December 31, |             |   | December 31, |  
|------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------ | ----------- | - | ------------ | -
|                                                                                                                                                 |  | 2013         |             |   | 2012         |  
|                                                                                                                                                 |  |              |             |   |              |  
|ASSETS                                                                                                                                           |  |              |             |   |              |  
|                                                                                                                                                 |  |              |             |   |              |  
|Current assets:                                                                                                                                  |  |              |             |   |              |  
|Cash and equivalents                                                                                                                             |  | $            | 1,426,018   |   |              | $
|Accounts receivable, net                                                                                                                         |  |              | 214,260     |   |              |  
|Inventories                                                                                                                                      |  |              | 1,490,415   |   |              |  
|Advances to suppliers                                                                                                                            |  |              | 756,779     |   |              |  
|Advance to related party                                                                                                                         |  |              | -           |   |              |  
|Prepaid expenses and other current assets                                                                                                        |  |              | 40,334      |   |              |  
|Total current assets                                                                                                                             |  |              | 3,927,806   |   |              |  
|                                                                                                                                                 |  |              |             |   |              |  
|Property and equipment, net                                                                                                                      |  |              | 41,575      |   |              |  
|Total assets                                                                                                                                     |  | $            | 3,969,381   |   |              | $
|                                                                                                                                                 |  |              |             |   |              |  
|LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                                                            |  |              |             |   |              |  
|                                                                                                                                                 |  |              |             |   |              |  
|Current liabilities:                                                                                                                             |  |              |             |   |              |  
|Short-term loans                                                                                                                                 |  | $            | 2,618,487   |   |              | $
|Notes payable                                                                                                                                    |  |              | 1,391,071   |   |              |  
|Accounts payable                                                                                                                                 |  |              | 217,670     |   |              |  
|Accrued expenses and other payable                                                                                                               |  |              | 197,893     |   |              |  
|Income tax payable                                                                                                                               |  |              | 839,757     |   |              |  
|Total current liabilities                                                                                                                        |  |              | 5,264,878   |   |              |  
|Long-term loans                                                                                                                                  |  |              | 490,966     |   |              |  
|Total liabilities                                                                                                                                |  | $            | 5,755,844   |   |              | $
|                                                                                                                                                 |  |              |             |   |              |  
|Commitments and contingencies                                                                                                                    |  |              |             |   |              |  
|                                                                                                                                                 |  |              |             |   |              |  
|Stockholders’ deficit:                                                                                                                           |  |              |             |   |              |  
|Common stock, $0.001 par value, 50,000,000 shares authorized, 23,542,527 and 18,782,356 issued and outstanding as of December 31, 2013 and 2012. |  |              | 23,542      |   |              |  
|Additional paid-in capital                                                                                                                       |  |              | 25,918,351  |   |              |  
|Subscription receivable                                                                                                                          |  |              | (50,000     | ) |              |  
|Statutory reserve                                                                                                                                |  |              | 11,542,623  |   |              |  
|Other comprehensive income                                                                                                                       |  |              | 7,903,271   |   |              |  
|Accumulated deficit                                                                                                                              |  |              | (47,124,250 | ) |              |  
|Total stockholders’ deficit                                                                                                                      |  |              | (1,786,463  | ) |              |  
|Total liabilities and stockholders’ deficit                                                                                                      |  | $            | 3,969,381   |   |              | $



The accompanying notes are an integral
part of these consolidated financial statements.





|F - 2
|-----











|
|





YOSEN GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS

YEARS ENDED DECEMBER 31,





|                                                           |  | 2013 |            |   | 2012 |  
|---------------------------------------------------------- |  | ---- | ---------- | - | ---- | -
|Net sales                                                  |  | $    | 12,787,878 |   |      | $
|Cost of sales                                              |  |      | 12,630,598 |   |      |  
|Gross profit                                               |  |      | 157,280    |   |      |  
|Selling, general and administrative expenses               |  |      | 3,630,578  |   |      |  
|Loss from continuing operations                            |  |      | (3,473,298 | ) |      |  
|Other (income) expense                                     |  |      |            |   |      |  
|Interest income                                            |  |      | (5,323     | ) |      |  
|Other income                                               |  |      | (213,191   | ) |      |  
|Other expense                                              |  |      | 187,165    |   |      |  
|Total other income                                         |  |      | (31,349    | ) |      |  
|                                                           |  |      |            |   |      |  
|Loss from continuing operations before income taxes        |  |      | (3,441,949 | ) |      |  
|Provision for income taxes                                 |  |      | -          |   |      |  
|Net loss from continuing operations                        |  |      | (3,441,949 | ) |      |  
|                                                           |  |      |            |   |      |  
|Net loss from discontinued operations, net of income taxes |  |      | (184,739   | ) |      |  
|                                                           |  |      |            |   |      |  
|Net loss                                                   |  |      | (3,626,688 | ) |      |  
|                                                           |  |      |            |   |      |  
|Foreign currency translation adjustments                   |  |      | 7,768      |   |      |  
|Comprehensive loss                                         |  | $    | (3,318,920 | ) |      | $
|                                                           |  |      |            |   |      |  
|Basic and diluted loss per share:                          |  |      |            |   |      |  
|Continuing operations                                      |  |      | (0.18      | ) |      |  
|Discontinued operations                                    |  |      | (0.01      | ) |      |  
|Net loss per share                                         |  | $    | (0.19      | ) |      | $
|                                                           |  |      |            |   |      |  
|Weighted average shares outstanding:                       |  |      |            |   |      |  
|Basic                                                      |  |      | 19,472,767 |   |      |  
|Diluted                                                    |  |      | 20,163,178 |   |      |  





The accompanying notes are an integral
part of these consolidated financial statements.





|F - 3
|-----











|
|



YOSEN GROUP INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
DEFICIT

YEARS ENDED DECEMBER 31, 2013 AND
2012



|                                          |  |              |            |  |         |   |        |              |  |   |            |  |  |               |         |   |              |   |            | Retained      |  |   |           | 
|----------------------------------------- |  | ------------ | ---------- |  | ------- | - | ------ | ------------ |  | - | ---------- |  |  | ------------- | ------- | - | ------------ | - | ---------- | ------------- |  | - | --------- | 
|                                          |  |              |            |  |         |   |        | Additional   |  |   |            |  |  |               |         |   | Other        |   |            | Earnings      |  |   | Total     | 
|                                          |  | Common Stock |            |  | Paid-In |   |        | Subscription |  |   | Statutory  |  |  | Comprehensive |         |   | (Accumulated |   |            | Stockholders' | 
|                                          |  | Shares       |            |  | Amount  |   |        | Capital      |  |   | Receivable |  |  | Reserve       |         |   | Income       |   |            | Deficit)      |  |   | Equity    | 
|Balance at January 1, 2012                |  |              | 11,782,527 |  |         | $ | 11,782 |              |  | $ | 21,721,876 |  |  | $             | (50,000 | ) |              | $ | 11,542,623 |               |  | $ | 7,763,598 | 
|Foreign currency translation adjustments  |  |              | -          |  |         |   | -      |              |  |   | -          |  |  |               | -       |   |              |   | -          |               |  |   | 131,905   | 
|Issuance of common stock for compensation |  |              | 7,000,000  |  |         |   | 7,000  |              |  |   | 2,319,903  |  |  |               | -       |   |              |   | -          |               |  |   | -         | 
|Net loss                                  |  |              | -          |  |         |   | -      |              |  |   | -          |  |  |               | -       |   |              |   | -          |               |  |   | -         | 
|Balance at December 31, 2012              |  |              | 18,782,527 |  |         | $ | 18,782 |              |  | $ | 24,041,779 |  |  | $             | (50,000 | ) |              | $ | 11,542,623 |               |  | $ | 7,895,503 | 
|Foreign currency translation adjustments  |  |              | -          |  |         |   | -      |              |  |   | -          |  |  |               | -       |   |              |   | -          |               |  |   | 7,768     | 
|Issuance of common stock for financing    |  |              | 2,000,000  |  |         |   | 2,000  |              |  |   | 638,000    |  |  |               | -       |   |              |   | -          |               |  |   | -         | 
|Issuance of common stock for compensation |  |              | 2,760,000  |  |         |   | 2,760  |              |  |   | 1,238,572  |  |  |               | -       |   |              |   | -          |               |  |   | -         | 
|Net loss                                  |  |              | -          |  |         |   | -      |              |  |   | -          |  |  |               | -       |   |              |   | -          |               |  |   | -         | 
|Balance at December 31, 2013              |  |              | 23,542,527 |  |         | $ | 23,542 |              |  | $ | 25,918,351 |  |  | $             | (50,000 | ) |              | $ | 11,542,623 |               |  | $ | 7,903,271 | 



The accompanying notes are an integral
part of these consolidated financial statements.





|F - 4
|-----











|
|





YOSEN GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31,

(dollars in thousands)



|                                                                            |  | 2013 |            |   | 2012 |  
|--------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | -
|Operating activities:                                                       |  |      |            |   |      |  
|Net loss                                                                    |  | $    | (3,626,688 | ) |      | $
|Adjustments to reconcile net loss to net cash used in operating activities: |  |      |            |   |      |  
|Depreciation                                                                |  |      | 1,517      |   |      |  
|Gain on disposal of property, plant and equipment                           |  |      | -          |   |      |  
|Loss on settlement of debt                                                  |  |      | 140,000    |   |      |  
|Stock based compensation                                                    |  |      | 1,241,333  |   |      |  
|(Increase)/decrease in assets:                                              |  |      |            |   |      |  
|Accounts receivable                                                         |  |      | 665,568    |   |      |  
|Inventories                                                                 |  |      | 529,964    |   |      |  
|Prepaid expenses and other current assets                                   |  |      | 161,717    |   |      |  
|Advances to suppliers                                                       |  |      | 11,650     |   |      |  
|Advance to related party                                                    |  |      | 501,814    |   |      |  
|(Increase)/decrease in current liabilities:                                 |  |      |            |   |      |  
|Accounts payable                                                            |  |      | (574,465   | ) |      |  
|Accrued expenses and other payables                                         |  |      | (2,346     | ) |      |  
|Income tax payable                                                          |  |      | (12,575    | ) |      |  
|Net cash used in operating activities                                       |  |      | (962,511   | ) |      |  
|                                                                            |  |      |            |   |      |  
|CASH FLOW FROM INVESTING ACTIVITIES:                                        |  |      |            |   |      |  
|Purchase of property and equipment                                          |  |      | -          |   |      |  
|Proceeds from disposal of property, plant and equipment                     |  |      | -          |   |      |  
|Net cash provided by investing activities                                   |  |      | -          |   |      |  
|                                                                            |  |      |            |   |      |  
|CASH FLOW FROM FINANCING ACTIVITIES:                                        |  |      |            |   |      |  
|Net proceeds from short-term bank loans                                     |  |      | -          |   |      |  
|Net proceeds from long-term bank loans                                      |  |      | 484,614    |   |      |  
|Net proceeds from notes payable                                             |  |      | 1,373,072  |   |      |  
|Net cash provided by financing activities                                   |  |      | 1,857,686  |   |      |  
|                                                                            |  |      |            |   |      |  
|Effect of exchange rate changes on cash and equivalents                     |  |      | 74,348     |   |      |  
|Net increase (decrease) in cash and equivalents                             |  |      | 969,523    |   |      |  
|Cash and equivalents, beginning of year                                     |  |      | 456,495    |   |      |  
|Cash and equivalents, end of year                                           |  | $    | 1,426,018  |   |      | $
|                                                                            |  |      |            |   |      |  
|Supplemental disclosure of cash flow information:                           |  |      |            |   |      |  
|Income taxes paid                                                           |  | $    | -          |   |      | $
|Interest paid                                                               |  | $    | 230,552    |   |      | $



The accompanying notes are an integral
part of these consolidated financial statements.





|F - 5
|-----











|
|





YOSEN GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 AND 2012



Note 1 - ORGANIZATION



Yosen Group, Inc. (the “Company”
or “Yosen”) was incorporated on August 20, 1998 under the laws of the State of Nevada. Capital Future Developments
Limited - BVI (“Capital”) was incorporated on July 22, 2004 under the laws of the British Virgin Islands (“BVI”).
Zhejiang YongXin Digital Technology Company Limited (“Zhejiang”), Yiwu YongXin Communication Limited (“Yiwu”),
Hangzhou Wang Da Electronics Company Limited (“Wang Da”), Hangzhou Sanhe Electronic Technology Limited (“Sanhe”),
Shanghai Joy & Harmony Electronics Company Limited (“Joy & Harmony”), and Jinhua Baofa Logistic Ltd (“Jinhua”)
were incorporated under the laws of Peoples Republic of China (“PRC”) on July 11, 2005, July 18, 1997, March, 30, 1998,
April 12, 2004, August 20, 2003 and December 27, 2001, respectively. All dollar amounts are in thousands, unless otherwise indicated.



On December 21, 2005, Capital became
a wholly owned subsidiary of Yosen through a reverse merger (“Merger Transaction”). Yosen acquired all of the issued
and outstanding capital stock of Capital pursuant to a Merger Agreement dated December 21, 2005 by and among Yosen, XY Acquisition
Corporation, Capital and the shareholders of Capital (the “Merger Agreement”). Pursuant to the Merger Agreement, Capital
became a wholly owned subsidiary of Yosen and, in exchange for the Capital shares, Yosen issued 7,000,000 shares of its common
stock to the shareholders of Capital, representing 93% of the issued and outstanding capital stock of Yosen at that time and cash
of $500.



On August 3, 2006, Capital completed
the acquisition of a 100% interest in Sanhe for a cash and stock transaction valued at $8,750. The consideration consisted of 183,150
newly issued shares of the Company’s common stock and $5,000 in cash.



On November 28, 2006, Capital completed
the acquisition of a 100% interest in Joy & Harmony for a cash and stock transaction valued at $18,500. The consideration consisted
of 544,622 shares of the Company’s common stock and $7,500 in cash.



On August 15, 2007, we executed a series
of contractual agreements between Capital and Zhejiang. The contractual agreements give Capital and its equity owners an obligation,
and having ability to absorb, any losses, and rights to receive returns; however, these contractual agreements did not change the
equity ownership of Zhejiang. We did not dispose Capital’s actual equity ownership of Zhejiang when we execute the contractual
agreements. Capital entered into share-holding entrustment agreements with five individuals - Zhenggang Wang, Yimin Zhang, Huiyi
Lv, Xiaochun Wang and Zhongsheng Bao to hold 35%, 20%, 20%, 15% and 10%, respectively, of the equity interest of Zhejiang on behalf
of Capital on November 21, 2005. The entrustment agreements confirm that Capital is the actual owner of Zhejiang. Capital enjoys
the actual shareholder’s rights and has the right to obtain any benefits received by the nominal holders. Zhenggang Wang
is the CEO and shareholder of Yosen. Yimin Zhang, Huiyi Lv, Xiaochun Wang and Zhongsheng Bao have no other relationship with Yosen.
No consideration was given to these individuals who held the equity of Zhejiang on behalf of Capital.



On July 6, 2009, Yosen and its subsidiary
Zhejiang and Yiwu purchased 100% of Jinhua for RMB 120 million ($17,500) in cash.  Zhejiang acquired 90% and Yiwu acquired
10% of the equity interests in Jinhua.





|F - 6
|-----











|
|





ORGANIZATIONAL CHART



Our corporate structure as of December
31, 2013 is as follows:



ORGANIZATIONAL CHART







* These entities ceased operation as of December 31, 2011.

** These entities ceased operation as of December 31, 2012.





|F - 7
|-----











|
|





Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Basis of Presentation



The accompanying consolidated financial
statements were prepared in conformity with accounting principles generally accepted in the United States of America (“US
GAAP”).  The Company’s subsidiaries – Wang Da, Yiwu, Joy & Harmony, Sanhe, Jinhua and Zhejiang’s
functional currency is the Chinese Renminbi (“RMB”), however, the accompanying consolidated financial statements were
translated and presented in United States Dollars (“$”, or “USD”). Yosen is the parent company incorporated
on August 20, 1998 under the laws of the State of Nevada. The parent company does not have operations. Its main activities were
incurring public company expenses. Yosen pays all its expenses in USD, its functional currency. Capital was incorporated on July
22, 2004 under the laws of the BVI. Capital is a holding company and does not have operations. As a result, we determined its functional
currency is USD.



Reverse Stock Split



On December 31, 2012, the Company effected
a reverse split of its Common Stock, $0.001, par value per share, at a ratio of 1-for-5 with all fractional shares rounded up to
the next whole share. Immediately prior to the Reverse Stock Split, the Company had 93,911,327 shares of Common Stock outstanding.
After the Reverse Stock Split, the Company had 18,782,356 shares outstanding. Pursuant to the Reverse Stock Split, the number of
authorized shares of the Company’s Common Stock was reduced from 100,000,000 to 20,000,000 shares of Common Stock.



Immediately, following the consummation
of the Reverse Stock Split, the Company filed a Certificate of Amendment to its Amended and Restated Articles of Incorporation
to increase the number of authorized shares of the Company’s Common Stock from 20,000,000 to 50,000,000 shares and to approve
the amendment of the Company’s Articles of Incorporation to change the name of the Company to “Yosen Group, Inc.”.
The par value of our common stock remains unchanged at $0.001 per share and the number of authorized shares of common stock remains
the same after the reverse stock split.



As the par value per share of our common
stock remained unchanged at $0.001 per share, a total of $75 was reclassified from common stock to additional paid-in capital.
All references to shares of common stock and per share data for all periods presented in the accompanying financial statements
and notes thereto have been adjusted to reflect the reverse stock split on a retroactive basis.



Going Concern



The accompanying consolidated financial
statements have been prepared on a going concern basis which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. The Company realized net loss of $3,626,688 and $15,866,999 for 2013 and 2012, respectively.
The Company had accumulated deficit of $47,124,251 as of December 31, 2013. In addition, the Company’s cash position substantially
deteriorated from 2010. There can be no assurance that the Company will become profitable or that it will survive as a public company.
These issues raise substantial doubt regarding the Company’s ability to continue as a going concern.



Starting from 2011, we closed most of
our stores in stores locations and laid off most of our employees. We retained highly qualified personnel and a small number of
stores with stable revenues. As a result, we significantly cut our operating expenses and our losses are decreasing over time.
We are now concentrating on improving our product mix, upgrading the stores that are currently open and strengthening cooperation
with China Telecom, China Unicom and other large state-owned operators to develop new businesses.



Principles of Consolidation



The consolidated financial statements
include the accounts of Yosen and its wholly owned subsidiaries Capital, Wang Da, Yiwu, Joy & Harmony, Sanhe and Jinhua and
variable interest entity Zhejiang, collectively referred to as the Company. All material intercompany accounts, transactions and
profits were eliminated in consolidation.



Currency Translation



The accounts of Zhejiang, Wang Da, Yiwu,
Sanhe, Joy & Harmony and Jinhua were maintained, and its financial statements were expressed RMB. Such financial statements
were translated into USD in accordance with FASB ASC Topic 830-10, “Foreign Currency Translation,” with the
RMB as the functional currency. According to FASB ASC Topic 830-10, assets and liabilities were translated at the ending exchange
rate, stockholders’ equity is translated at the historical rates and income statement items are translated at the average
exchange rate for the year. The resulting translation adjustments are reported as other comprehensive income in accordance with
FASB ASC Topic 220, “Reporting Comprehensive Income,” as a component of shareholders’ equity. Transaction
gains and losses are reflected in the consolidated statements of operations and comprehensive loss.





|F - 8
|-----









|
|





Use of Estimates



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



Risks and Uncertainties



The Company is subject to risks from,
among other things, intense competition associated with the industry in general, other risks associated with financing, liquidity
requirements, rapidly changing customer requirements, limited operating history, foreign currency exchange rates and the volatility
of public markets.



Contingencies



Certain conditions may exist as of the
date the financial statements are issued, which could result in a loss to the Company but which will only be resolved when one
or more future events occur or fail to occur. The Company’s management assesses such contingent liabilities, and such assessment
inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against
the Company or unasserted claims that may result in such proceedings, the Company’s management evaluates the perceived merits
of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be
sought.



If the assessment of a contingency indicates
that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated
liability is accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency
is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability,
together with an estimate of the range of possible loss if determinable and material would be disclosed.



Loss contingencies considered to be
remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.



Accounts Receivable, net



The Company maintains reserves for potential
credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts,
customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate
the adequacy of these reserves. Terms of the sales vary. Reserves are recorded primarily on a specific identification basis. Allowances
for doubtful debts were as follows:



|     |  |                      |         |  | Additions         |   |         |                                  |  |   |            | 
|---- |  | -------------------- | ------- |  | ----------------- | - | ------- | -------------------------------- |  | - | ---------- | 
|Year |  | Balance atJanuary 1, |         |  | Chargedtoexpenses |   |         | Charged toothercomprehensiveloss |  |   | Deductions | 
|2013 |  | $                    | 959,026 |  |                   | $ | 43,458  |                                  |  | $ | -          | 
|2012 |  | $                    | 750,700 |  |                   | $ | 208,326 |                                  |  | $ | -          | 



Inventories



Inventories are valued at the lower
of cost (determined on a weighted average basis) or market.  Management compares the cost of inventories with the market
value and allowance is made for writing down their inventories to market value, if lower. As of December 31, 2013 and 2012, inventory
consisted entirely of finished goods valued at $1,490,415 and $1,970,850, respectively.





|F - 9
|-----











|
|





Property and Equipment, net



Property and equipment are stated at
cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized.
When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from
the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using
the straight-line method for substantially all assets with estimated lives of:



|Automotive       | 5 years
|---------------- | -------
|Office Equipment | 5 years



As of December 31, 2013 and 2012, property
and equipment consisted of the following:



|                               |  | 2013 |          |   | 2012 |  
|------------------------------ |  | ---- | -------- | - | ---- | -
|Automotive                     |  | $    | 63,254   |   |      | $
|Office equipment               |  |      | 184,007  |   |      |  
|Sub Total                      |  |      | 247,261  |   |      |  
|Less: accumulated depreciation |  |      | (205,686 | ) |      |  
|Total                          |  | $    | 41,575   |   |      | $



Long-Lived Assets



The Company periodically evaluates the
carrying value of long-lived assets to be held and used in accordance with FASB ASC Topic 360, “Property, Plant and Equipment”
, requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and
the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that
event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets.
Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair market values are reduced for
the cost of disposal. Based on its review, the Company believes that, as of December 31, 2013 and 2012, there were no significant
impairments of its long-lived assets.



Fair Value of Financial Instruments



FASB ASC Topic 825, “Financial
Instruments” , requires that the Company disclose estimated fair values (“FVs”) of financial instruments.
The carrying amounts reported in the statements of financial position for current assets and current liabilities qualifying as
financial instruments are a reasonable estimate of FV.

|
|

Short-term Bank Loans



As of December 31, 2013 and December 31, 2012, short-term
loans consisted of the following:



|                                                                                                                                                                   |  | 2013 |           |  | 2012 |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | --------- |  | ---- | -
|                                                                                                                                                                   |  |      |           |  |      |  
|Bank loan from Bank of Chouzhou, dated July 16, 2013, due on July 15, 2014, with an annual interest rate of 6.6% payable monthly, personally guaranteed by the CEO |  | $    | 818,277   |  |      | $
|                                                                                                                                                                   |  |      |           |  |      |  
|Bank loan from Bank of Chouzhou, dated July 16, 2012, due on July 15, 2013, with an annual interest rate of 6.6% payable monthly, personally guaranteed by the CEO |  |      | -         |  |      |  
|                                                                                                                                                                   |  |      |           |  |      |  
|Bank loan from Bank of Chouzhou, dated July 17, 2013, due on July 16, 2014, with an annual interest rate of 6.6% payable monthly, personally guaranteed by the CEO |  |      | 1,636,554 |  |      |  
|                                                                                                                                                                   |  |      |           |  |      |  
|Bank loan from Bank of Chouzhou, dated July 17, 2012, due on July 16, 2013, with an annual interest rate of 6.6% payable monthly, personally guaranteed by the CEO |  |      | -         |  |      |  
|                                                                                                                                                                   |  |      |           |  |      |  
|Bank loan from Bank of Hangzhou, dated September 24, 2013, due on March 21, 2014, with an annual interest rate of 12.0% payable monthly*                           |  |      | 163,656   |  |      |  
|                                                                                                                                                                   |  |      |           |  |      |  
|Bank loan from Bank of Hangzhou, dated September 10, 2013, due on March 8, 2013, with an annual interest rate of 11.2% payable quarterly                           |  |      | -         |  |      |  
|                                                                                                                                                                   |  | $    | 2,618,487 |  |      | $



* Bank loan has been repaid without renewal.





|F - 10
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|
|





Long-term Loans



As of December 31, 2013 and December 31, 2012, long-term
loan consisted of the following:



|                                                                                                                                 |  | 2013 |         |  | 2012 |  
|-------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- |  | ---- | -
|                                                                                                                                 |  |      |         |  |      |  
|Bank loan from Bank of Hangzhou, dated July 11, 2013, due on July 8, 2016, with an annual interest rate of 7.38% payable monthly |  | $    | 490,966 |  |      | $
|                                                                                                                                 |  | $    | 490,966 |  |      | $



Revenue Recognition



In accordance with FASB ASC Topic 605,
“Revenue Recognition,” the Company recognizes revenues when there is persuasive evidence of an arrangement,
product delivery and acceptance have occurred, the sales price is fixed and determinable, and collectability of the resulting receivable
is reasonably assured.



The Company records revenues when title
and the risk of loss pass to the customer.  Generally, these conditions occur on the date the customer takes delivery
of the product.  Revenue is generated from sales of Yosen products through two main revenue streams:



| | 1. | Retail. 92.2% and 92.9% of the Company's revenue came from sales to customers at outlets installed inside department stores etc. (i.e. store in store model) during 2013 and 2012, respectively and is mainly achieved through two broad categories:
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a. | Purchase contracts . Sales by purchase contracts have terms of 15-30 days from the transfer of goods to the customer. Under this method, the Company delivers goods to places designated by the customers and receives confirmation of delivery. At that time, ownership and all risks associated to the goods are transferred to the customers and payment is made within 30 days. The Company relieves its inventory and recognizes revenue upon receipt of confirmation from the customer.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | Point of sale transfer of ownership . Under this method, the Company’s products are placed in third party stores and sold by the Company’s sales people. Upon purchase of the item by the customer, the Company relieves its inventory and recognizes revenue related to that item.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | Wholesale. 7.8% and 7.1% of the Company's revenue came from wholesale during 2013 and 2012, respectively. Recognition of income in wholesales is based on the contract terms. In 2013, all wholesale payments were made at point of sale. Upon purchase of the item by the customer, the Company relieves its inventory and recognizes revenue related to that item.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Sales revenue is therefore recognized
on the following basis:



| | 1. | Store in store:
| | -- | ---------------



| | a. | For goods sold under sales and purchase contracts, revenue is recognized when goods are received by customers.
| | -- | --------------------------------------------------------------------------------------------------------------



| | b. | For goods at customer outlets
        which the Company’s sales people operate, and inventory of goods is under joint control by the customers and the Company,
        revenue is recognized at the point of sale to the end buyer. Yosen has title and owns the inventory under joint control. Such joint
        controlled inventory has been properly included in reported inventory balance of Yosen’s financial statements.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

During public holidays or department
store celebration periods, we provide certain sales incentives to retail customers to increase sales, such as gift giving and price
reductions. These are the only temporary incentives during the specified periods. Sales made to our retail customers as a result
of incentives are immaterial as a percentage of total sales revenue.



| | 2. | Wholesale:
| | -- | ----------



| | a. | Revenue is recognized at the date of goods are received by wholesale customers. We operate our wholesale business by selling large volume orders to second-tier distributors. Revenues from wholesale are recognized at point of sale. Net sales already take into account revenue dilution as they exclude inventory credit, discount for early payment, product obsolescence and return of products and other allowances. Net sales also take into account the return of products in accordance with relevant laws and regulations in China. The Company is in the process of winding down its wholesale business. It will only focus on retail business in the future.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|F - 11
|------











|
|



Return policies



Our return policy complies with China’s
laws and regulations on consumer’s rights and product quality. In accordance with Chinese law, consumers can return or exchange
used products within seven days only if the goods do not meet safety and health requirements, endanger a person’s property,
or do not meet the advertised performance. If the conditions and requirements as set out in the relevant laws and regulations are
met, the retail stores are entitled to accept a return of the goods from the consumer. In such cases, the Company shall accept
the returns unconditionally. Goods returned will be redirected to the production factory or supplier who shall bear all losses
on the returns in accordance the laws and regulations. Consumer returns or exchanges of products that have not been used, where
the packaging has not been damaged, are honored if such return or exchange is within seven days. If a consumer returns a product,
the Company must refund the invoice price to the consumer. The Company will then be responsible for returning the goods to the
production factory or supplier. At that time the Company can recover the price based on the purchase and sale contract with the
producer or supplier. However, when goods are returned, the Company loses the profit margin that it records when revenue is recognized,
regardless of whether the production factory or supplier takes the product back or not.



The return rights granted to wholesale
customers are similar to the rights granted to retail customers. Once wholesale customers purchase the products, they follow the
same return policy as retail customers. We do not honor any return from wholesale customers other than if the products don’t
meet laws and regulations or quality requirements. If the wholesale customers have a high inventory level or product obsolescence
caused by lower market demands or other operational issues, the wholesale customers bear their own losses. When a wholesale customer
returns products, the Company will return the products to the suppliers or manufacturers. A sales return and allowance is recorded
at the sales price. Meanwhile, a purchase return and allowance entry is recorded at the invoice price because the suppliers or
manufacturers bear the losses. The net effect is that the Company derecognizes the gross profit when a return takes place, but
does not record any loss on the cost of the returned item back to the supplier or manufacturer.



In light of the aforesaid PRC laws and
regulations and the Company's arrangements with suppliers, we do not provide an accrual for any estimated losses on subsequent
sale of the return of products.  As a result we do not engage in assessing levels of inventory in the distribution channel,
product obsolescence and/or introductions of new products, as none of those factors have any impact on us with respect to estimating
losses on subsequent sale of returned goods.  Goods return policy strictly complies with the laws and regulations in China
on consumer rights and product quality requirements. If the conditions and requirements as set out in the relevant laws and regulations
are met, customers are able to return the goods unconditionally. In such cases, the Company shall accept the returns unconditionally.
Goods returned will be redirected back to the manufacturers or suppliers who shall meet all losses on returns in accordance the
laws and regulations. The Company will only be responsible for assisting the process of execution of goods return. The Company
shall not bear any loss from goods returned. As a result, we do not provide any accrual on subsequent return of goods sold.



Unlike the US retail market, sellers
do not accept returns caused by any change in the sales market or change in customers’ preferences in China. Therefore, the
Company generally does not honor any return except for a product defect. As such, situations relating to return of goods from overstock
in distribution channels, product obsolescence and over-budgeted goods from launching of new products will not exist.



The reported sales do not include estimate
of returns due to defects for the period presented because we do not offer customers the right to return in China. We do not allow
the customers to return the products for cash refunds, credit, or exchange for other products through general rights of return.
If the products are defective, manufacturers are directly responsible for the defects. Yosen Group, as a distributor, only assists
customers in returning the defective products to manufacturers. The manufacturers send replacement products to customers directly.





|F - 12
|------











|
|



Cost of Sales



Cost of sales (“COS”) consists
of actual product cost, which is the purchase price of the product less any discounts.  COS excludes freight charges,
purchase and delivery costs, internal transfer, freight charges and the other costs of the Company’s distribution network,
which are identified in general and administrative expenses.



General and Administrative Expenses



General and administrative (“G&A”)
expenses are comprised principally of payroll and benefits costs for retail and corporate employees, occupancy costs of corporate
facilities, lease expenses, management fees, traveling expenses and other operating and administrative expenses, including freight
charges, purchase and delivery costs, internal transfer freight charges and other distribution costs.



Shipping and Handling Fees



The Company follows FASB ASC 605-45,
“Handling Costs, Shipping Costs” .  The Company does not charge its customers for shipping and handling.
The Company classifies shipping and handling fees as part of G&A expenses which were $8,864 and $23,193 for 2013 and 2012,
respectively.



Vendor Discounts



The Company has negotiated preferred
pricing arrangements with certain vendors on certain products. These arrangements are not contingent on any levels of volume and
are considered vendor discounts as opposed to rebates. The Company records these discounts along with the purchase of the discounted
items, resulting in lower inventory cost and a corresponding lower COS as the products are sold.



Management Fees Paid to the Department
Stores Under “Store in Store” Model



Under the “store in store”
business operation model, the Company may pay management fees to the department stores, which are in the form of service charges.
The management fees are reflected in G&A expenses. Such management fees were $80,111 and $1,651,127 in G&A expenses for
2013 and 2012, respectively.





Share Based Payment



The Company follows FASB ASC 718-10,
“Stock Compensation” , which addresses the accounting for transactions in which an entity exchanges its equity
instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based
payment transactions. ASC 718-10 requires measurement of the cost of employee services received in exchange for an award of equity
instruments based on the grant-date FV of the award (with limited exceptions). Incremental compensation costs arising from subsequent
modifications of awards after the grant date must be recognized.



Advertising



Advertising expenses consist primarily
of costs of promotion for corporate image and product marketing and costs of direct advertising. The Company expenses all advertising
costs as incurred. Advertising expense was $19,110 and $0 for 2013 and 2012, respectively.



Other Income



Other income was $213,191 and $42,411
for the years ended December 31, 2013 and 2012, respectively. Other income consists of the following:



|                                    |  | 2013 |         |  | 2012 |  
|----------------------------------- |  | ---- | ------- |  | ---- | -
|Commission income from China Unicom |  | $    | 112,254 |  |      | $
|Miscellaneous                       |  |      | 100,937 |  |      |  
|Total other income                  |  | $    | 213,191 |  |      | $



Commission income from China Unicom
is related to the sales of China Unicom’s wireless service and products (i.e., rechargeable mobile phone cards).



Other Expense



Other expense was $187,165 and $6,279
for the years ended December 31, 2013 and 2012, respectively. Other expense consists of the following:





|                               |  |   | 2013    |  |  |   | 2012  | 
|------------------------------ |  | - | ------- |  |  | - | ----- | 
|Loss on settlement
    of debt |  | $ | 140,000 |  |  | $ | -     | 
|Interest expense               |  |   | 38,160  |  |  |   | 4,697 | 
|Bank fees                      |  |   | 6,916   |  |  |   | 1,463 | 
|Miscellaneous                  |  |   | 2,089   |  |  |   | 119   | 
|Total other expense            |  | $ | 187,165 |  |  | $ | 6,279 | 



|F - 13
|------









Income Taxes



The Company utilizes FASB ASC Topic
740, “Income Taxes” . Deferred income taxes are recognized for the tax consequences in future years of differences
between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws
and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances
are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.



Basic and Diluted Earnings (Loss)
per Share



Earnings (loss) per share are calculated
in accordance with FASB ASC Topic 260, “Earnings per Share” . Basic earnings (loss) per share is based upon
the weighted average number of common shares outstanding. Diluted earnings (losses) per share is based on the assumption that all
dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock
method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance,
if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. If
convertible shares and stock options are anti-dilutive, the impact of conversion is not included in the diluted net income per
share. Excluded from the calculation of diluted earnings per share for 2013 and 2012 were 10,000 options, as they were not dilutive.



Statement of Cash Flows



In accordance with FASB ASC Topic 230,
“Statement of Cash Flows” , cash flows from the Company’s operations are calculated based upon the functional
currency, in our case the RMB. As a result, amounts related to changes in assets and liabilities reported on the statement of cash
flows will not necessarily agree with the changes in the corresponding balances on the balance sheet.



Concentration of Credit Risk



Financial instruments that potentially
subject the Company to concentrations of credit risk are cash, accounts receivable, advances to suppliers and other receivables
arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions.
The Company has a diversified customer base, most of which is in China. The Company controls credit risk related to accounts receivable
through credit approvals, credit limits and monitoring procedures. The Company routinely assesses the financial strength of its
customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for uncollectible accounts
and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is limited.



Segment Reporting



FASB ASC Topic 280, “Segment
Reporting”, requires use of the “management approach” model for segment reporting. The management approach
model is based on the way a company’s management organizes segments within the company for making operating decisions and
assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure,
or any other manner in which management disaggregates a company. The Company operated in four segments before the acquisition of
Jinhua in July 2009. Since then, the Company operated in five segments until Sanhe and Joy & Harmony ceased operations at the
end of 2011 and Yiwu and Jinhua ceased operations in 2012. As a result, the Company operated only in mobile phone segment in 2013
(see Note 14).





|F - 14
|------











|
|



Recent Accounting Pronouncements



In July 2012, FASB issued ASU No. 2012-02,
Intangibles—Goodwill and Other (Topic 350), “Testing Indefinite-Lived Intangible Assets for Impairment.”
ASU 2012-02 simplifies the guidance for testing the decline in the realizable value (impairment) of indefinite-lived intangible
assets other than goodwill. ASU 2012-02 allows an entity the option of first performing a qualitative assessment to determine whether
it is more likely than not that an indefinite-lived intangible asset is impaired. The adoption of ASU 2012-02 did not have a material
impact on the Company’s consolidated financial statements.



The FASB has issued ASU No. 2013-04,
Liabilities (Topic 405), “Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount
of the Obligation Is Fixed at the Reporting Date .” ASU 2013-04 provides guidance for the recognition, measurement, and
disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation
within the scope of this ASU is fixed at the reporting date, except for obligations addressed within existing guidance in US GAAP.
The guidance requires an entity to measure those obligations as the sum of the amount the reporting entity agreed to pay on the
basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors.
The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15,
2013. The Company does not expect the adoption of this guidance to have a material impact on the Company’s consolidated financial
statements.



In July 2013, the FASB issued ASU 2013-11,
Income Taxes (Topic 740): “Presentation of Unrecognized Tax Benefit When a Net Operating Loss Carryforward, A Similar
Tax Loss, or a Tax Credit Carryforward Exists (A Consensus the FASB Emerging Issues Task Force)”. ASU 2013-11 provides
guidance on financial statement presentation of unrecognized tax benefit when a net operating loss carryforward, a similar tax
loss, or a tax credit carryforward exists. The FASB’s objective in issuing this ASU is to eliminate diversity in practice
resulting from a lack of guidance on this topic in current US GAAP. This ASU applies to all entities with unrecognized tax benefits
that also have tax loss or tax credit carryforwards in the same tax jurisdiction as of the reporting date. This amendment is effective
for public entities for fiscal years beginning after December 15, 2013 and interim periods within those years. The company does
not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements.



Other recent accounting pronouncements
issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the Securities Exchange Commission (the “SEC”)
did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial
statements.



Note 3 –ADVANCES TO SUPPLIERS



Advances to suppliers represent advance
payments to suppliers for the purchase of inventory.



Note 4 – NOTES PAYABLE



The company issued two promissory notes
for $736,448 and $654,623 to Bank of Chouzhou, on August 17, 2013 and August 18, 2013, respectively, for inventory purchase. The
notes bear zero interest and matured on January 17, 2014. The promissory notes were renewed in 2014 and the new terms are as follows:



|Promissory note issued by Bank of Chouzhou, dated February 13, 2014, due on August 13, 2014, bearing zero interest |  | $ | 327,311   | 
|------------------------------------------------------------------------------------------------------------------ |  | - | --------- | 
|                                                                                                                   |  |   |           | 
|Promissory note issued by Bank of Chouzhou, dated February 16, 2014, due on August 15, 2014, bearing zero interest |  |   | 392,773   | 
|                                                                                                                   |  |   |           | 
|Promissory note issued by Bank of Chouzhou, dated February 17, 2014, due on August 15, 2014, bearing zero interest |  |   | 670,987   | 
|                                                                                                                   |  | $ | 1,391,071 | 



The company had notes payable of $500,000
to two individuals at December 31, 2012. The notes bear zero interest and due on demand.



Note 5 -COMMON STOCK



On January 17, 2011, Yosen entered into
a Registered Trademark Transfer Agreement to purchase the registered trademark, “Lotour.”  The trademark
expires July 6, 2020.  The consideration for the trademark was RMB 2,280,000 ($346,000), which was paid in the form of
216,000 shares of the Company’s common stock, valued at $1.6 per share.



On January 20, 2011, Zhejiang entered
into a Design and Development Engagement Agreement to design and develop an electronic book product under the brand name “Lotour.” The
total consideration for the design and development of the electronic book product is RMB3,160,000 ($480,000), which was paid
in the form of 320,000 shares of the Company’s common stock, valued at $1.5 per share. The term of the Development Agreement
was from January 20, 2011 to July 19, 2011, at which date, the design and development agreement was completed and the “Lotour”
electronic book started trial production.



|F - 15
|------









|
|



On March 7, 2011, the Company issued
200,000 shares to 23 managing members of Yosen and its subsidiaries, pursuant to the 2011 Restricted Stock Plan.



On September 14, 2011, the Company issued
80,000 shares, under the 2011 plan, to our CFO and former CFO as stock compensations, pursuant to the 2011 Restricted Stock Plan.



On May 17, 2012, the Company amended
the 2011 Restricted Stock Plan and increased the number of shares of common stock that may be granted to 4,100,000. Effective May
17, 2012, the Company granted 3,500,000 shares of restricted common stock to our CEO pursuant to his employment agreement. The
shares shall vest over three years with 1,166,666 vesting on the first anniversary of the grant date, 1,166,666 on the second and
1,166,667 on the third. The common stock was valued at grant date with a FV of $1,050,000. During 2012 and 2013, $218,750 and $350,000
was recognized as stock based compensation expense.



On July 19, 2012, the Company’s
BOD adopted the Yosen Group, Inc. 2012 Omnibus Securities and Incentive Plan (the “2012 Plan”).  Under the 2012
Plan, 3,500,000 shares of the Company’s common stock were issued.  The common stock was valued at grant date with a
FV of $1,750,000, which was recognized as stock based compensation expensed in 2012.



On August 23, 2013, the Company consummated
the sale of 2,000,000 Units to two investors with each Unit consisting of: (i) one share of common stock, $0.001 par value per
share (the "Common Stock"), of the Company and (ii) a three-year warrant (“Warrant”) to purchase one share
of Common Stock of the Company at an exercise price of US$0.25 per share, for an aggregate total purchase price of $500,000. Pursuant
to the agreement, 2,000,000 shares of Common Stock and 2,000,000 Warrant were issued in 2013. The Common Stock was valued at $320,000
using the market price of $0.16 per share at the grant date. The Warrant was valued using Black-Scholes option pricing model at
the grant date with a FV of $320,000, see Note 6 for the assumptions used in valuing the Warrant. The FV of Warrant was credited
to the additional paid in capital as these are equity instruments.



On December 30, 2013, the Company issued
2,760,000 shares of common stock, under the 2012 Plan to two consultants. The common stock was valued at grant date with a FV of
$828,000, which was recognized as stock based compensation expensed in 2013.



Note 6 - STOCK WARRANTS, OPTIONS,
AND COMPENSATION



Stock options - Options issued have
a ten-year life and were fully vested upon issuance. The option holder has no voting or dividend rights. The grant price was the
market price at the date of grant. The Company records the expense of the stock options over the related vesting period. The options
were valued using the Black-Scholes option-pricing model at the date of grant stock option pricing.



Outstanding options and warrants by
exercise price consisted of the following as of December 31, 2013:



|Outstanding    |      |  | Exercisable     | 
|-------------- | ---- |  | --------------- | 
|Exercise Price |      |  | Number ofShares | 
|Options:       |      |  |                 | 
|$              | 20.8 |  |                 | 
|Warrants:      |      |  |                 | 
|$              | 0.25 |  |                 | 



During 2012 and 2013, the Company did
not issue any stock options. The 10,000 stock options outstanding as of December 31, 2013 were issued in 2007 to our former director
Mr. Kenneth Berents, have a 10 year term and vested immediately upon issuance.



In August 2013, the Company issued stock
warrants to purchase 2,000,000 shares of common stock at an exercise price of $0.25 in conjunction with the common stock offering
(See Note 5). The stock warrants expire on August 23, 2016. Outstanding stock warrants are valued using the Black-Scholes option
pricing model. Assumptions used to value the warrants are similar to those used in valuing the stock options as described below.



|Term                           |  |   | 3 years |  
|------------------------------ |  | - | ------- | -
|Expected volatility            |  |   | 340     | %
|Risk – free interest rate      |  |   | 0.80    | %
|Dividend yield                 |  |   | 0       | %
|Weighted-average grant date FV |  | $ | 0.16    |  



The Company determined the FV of the
2,000,000 warrants was $320,000.





|F - 16
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|
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Note 7 - COMPENSATED ABSENCES



Regulation 45 of the labor laws in the
PRC entitles employees to annual vacation leave after one year of service. In general all leaves must be utilized annually, with
proper notification, any unutilized leave is cancelled.



Note 8 - INCOME TAXES



The Company’s policy is to recognize
interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. The Company did not have
any accrued interest or penalties associated with any unrecognized tax benefits, nor were any interest expense or penalties recognized
during 2013 and 2012.



Under ASC 740-10-25, evaluation of a
tax position is a two-step process. The first step is to determine whether it is more-likely-than-not that a tax position will
be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that
position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of
benefit to be recognized in the financial statements.



The US entity, Yosen is subject to the
US federal income tax at a rate of 34%. The US entity does not conduct any operations and only incurs public company expenses,
such as legal fees, accounting fees, investor relations expenses and filing fees. In the process of applying step one, we determined
it is more likely than not that all of the Company’s deferred tax assets will not be realized. As of December 31, 2013, the
US entity has incurred net accumulated operating losses of approximately $5,345,053 for income tax purposes. As a result, $1,817,318
of valuation allowance was recorded to reduce the deferred tax asset to zero. The net change in valuation allowance was $556,942
in 2013 and $952,086 in 2012 for the US entity.



The PRC subsidiaries, Sanhe, Wang Da,
Joy& Harmony, Yiwu and Zhejiang are subject to the PRC income tax at a rate of 25%. Jinhua is subject to PRC income tax using
simplified tax system. In 2013, the PRC operating subsidiaries incurred an adjusted net operating loss of $1,988,624. In the process
of applying step one, management believes these subsidiaries will continue to incur losses in the near future due to high market
competition, slowing market demand, rising labor and fuel costs. We believe it is more likely than not that the subsidiaries will
not be able to benefit from the deferred tax assets in association with the operating losses. The net change in valuation allowance
was $450,971 in 2013 and $1,603,316 in 2012 for the PRC subsidiaries.



The components of deferred income tax
assets and liabilities as of December 31, 2013 and 2012 are as follows:



|                          |  | 2013 |            |   | 2012 |  
|------------------------- |  | ---- | ---------- | - | ---- | -
|Deferred tax assets:      |  |      |            |   |      |  
|U.S. net operating losses |  | $    | 556,942    |   |      | $
|PRC net operating losses  |  |      | 450,971    |   |      |  
|Total deferred tax assets |  |      | 1,007,913  |   |      |  
|Less valuation allowance  |  |      | (1,007,913 | ) |      |  
|                          |  | $    | -          |   |      | $



Reconciliation of the differences between
the statutory US Federal income tax rate and the effective rate is as follows for 2013 and 2012.



|                                 |  | 2013 |       |    | 2012 | 
|-------------------------------- |  | ---- | ----- | -- | ---- | 
|Tax benefit at US Statutory Rate |  |      | (34.0 | )% |      | 
|Tax rate difference              |  |      | 4.7   | %  |      | 
|Valuation allowance              |  |      | 29.3  | %  |      | 
|Effective rate                   |  |      | -     | %  |      | 



Note 9 - COMMITMENTS



The Company leases office facilities
under operating leases that terminate through 2014. Rent expense for 2013 and 2012 was $54,277 and $59,242, respectively.



The future minimum obligations under
these agreements are as follows by years as of December 31, 2013:



|2014 |  | $ | 65,436 | 
|---- |  | - | ------ | 
|     |  | $ | 65,436 | 



|      
|------
|F - 17









Note 10 - STATUTORY RESERVE



In accordance with the laws and regulations
of the PRC, a wholly-owned Foreign Invested Enterprise’s income, after the payment of the PRC income taxes, shall be allocated
to the statutory surplus reserves and statutory public welfare fund. Prior to January 1, 2006, the proportion of allocation for
reserve was 10 percent of the profit after tax to the surplus reserve fund and additional 5-10 percent to the public affair fund.
The public welfare fund reserve was limited to 50 percent of the registered capital. Effective January 1, 2006, there is now only
one fund requirement. The reserve is 10 percent of income after tax, not to exceed 50 percent of registered capital.



Statutory reserve funds are restricted
to offset against losses, expansion of production and operation or increase in register capital of the respective company. Statutory
public welfare fund is restricted to the capital expenditures for the collective welfare of employees. These reserves are not transferable
to the Company in the form of cash dividends, loans or advances. These reserves are therefore not available for distribution except
in liquidation. As of December 31, 2013 and 2012, the Company had allocated $11,542,623 and $11,542,623 to these non-distributable
reserve funds.



Note 11 – DISCONTINUED OPERATIONS



In 2011, Sanhe closed all its 210 stores
in stores. Joy & Harmony closed all its 196 stores in stores. Letong closed its direct retail and franchise operation. All
three entities ceased operation as of December 31, 2011. In 2012, Yiwu closed all its 178 stores in stores. Jinhua ceased its logistics
operation. As such, Sanhe, Joy & Harmony, Letong, Yiwu and Jinhua met the conditions to be reported as discontinued operations
in the financial statements, and accordingly, the results of operations have been reclassified for all periods to conform to the
current period's presentation.



The following table summarizes the assets
and liabilities of the discontinued operations as of December 31, 2013 and 2012 included in the Consolidated Balance Sheets:



|                                  |  | 2013 |            |   | 2012 |  
|--------------------------------- |  | ---- | ---------- | - | ---- | -
|Cash                              |  | $    | 1,395,546  |   |      | $
|Prepaid expenses and other assets |  |      | 37,666     |   |      |  
|Property, plant and equipment     |  |      | 892        |   |      |  
|Total assets                      |  |      | 1,434,104  |   |      |  
|Short-term loans                  |  |      | 2,454,831  |   |      |  
|Notes payable                     |  |      | 1,391,071  |   |      |  
|Accrued expenses                  |  |      | -          |   |      |  
|Income tax payable                |  |      | 863,705    |   |      |  
|Other payable                     |  |      | 679        |   |      |  
|Total liabilities                 |  |      | 4,710,286  |   |      |  
|Net assets                        |  | $    | (3,276,182 | ) |      | $



The following table summarizes the operating
results of the discontinued operations included in the Consolidated Statements of Operations and Comprehensive Loss:



|                                                         |  | 2013 |          |   | 2012 |  
|-------------------------------------------------------- |  | ---- | -------- | - | ---- | -
|Sales, net                                               |  | $    | -        |   |      | $
|Cost of sales                                            |  |      | -        |   |      |  
|Gross profit (loss)                                      |  |      | -        |   |      |  
|General and administrative expenses                      |  |      | (31,055  | ) |      |  
|Loss from discontinued operations                        |  |      | 31,055   |   |      |  
|Other income (expenses)                                  |  |      | (215,794 | ) |      |  
|Loss before income taxes                                 |  |      | (184,739 | ) |      |  
|Provision for income taxes                               |  |      | -        |   |      |  
|Net loss from discontinued operations, net of income tax |  | $    | (184,739 | ) |      | $



|F - 18
|------









|
|





Note 12 - OTHER COMPREHENSIVE
INCOME



Other comprehensive income, included
in stockholders’ equity for 2013 and 2012, represents foreign currency translation adjustments.



Note 13- CURRENT VULNERABILITY
DUE TO CERTAIN RISK FACTORS



The Company’s operations are carried
out in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the
political, economic and legal environments in the PRC and by the general state of the PRC’s economy. The Company’s
business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures,
currency conversion and remittance abroad, and rates and methods of taxation, among other things.



Note 14 - MAJOR CUSTOMERS, VENDORS
AND CREDIT RISK



During 2013, four customers accounted
for 10% or more of our total revenue in 2013, representing 20.8%, 14.1%, 11.1% and 11.0% respectively. No customer accounted for
more than 10% of the Company’s sales in 2012. Two vendors accounted for more than 10% of the Company’s purchases,
which represented 16.9% and 15.7%, respectively in 2013. Four vendors accounted for more than 10% of the Company’s purchases
in 2012, which represented 13.7%, 11.5%, 10.3% and 10.2%, respectively of the Company’s purchase.  As of December 31,
2013 and 2012, the Company had no customer or vendor which comprised more than 10% of the Company’s accounts receivable or
accounts payable.



Note 15 - SEGMENT INFORMATION



We separately operate and prepare accounting
and other financial reports to management for two business organizations (Wang Da and Zhejiang). Starting from the third quarter
2012, mobile phones businesses are split between Wang Da and Zhejiang. Wang Da focuses on distributing domestic brands mobile phones.
Zhejiang focuses on distributing Samsung and Apple brand products. As a result, Zhejiang’s operations, together with Wang
Da, are reported in “Mobile Phones” segment for 2013, as disclosed in the Consolidated Statements of Operations and
Comprehensive Loss.



We only have one reportable segment
- mobile phones, required by FASB ASC Topic 280, “Segment Reporting” , operated by Wang Da and Zhejiang. The
operating results for mobile phones segment for 2013 and 2012 are disclosed in the Consolidated Statements of Operations and Comprehensive
Loss.



Note 16 –SUBSEQUENT EVENT



On January 6, 2014 the Company established
Yosen Trading Inc. (“Yosen Trading”), its wholly owned US based subsidiary in New York. Yosen Trading will be engaged
primarily in international trade and wholesale business. Initially, tile, kitchen cabinet, granite and marble products will be
the primary drivers of reaching the New York Market.





|F - 19
|------













Exhibit 31.1

CERTIFICATION



I, Zhenggang Wang, certify that:

1. I have reviewed
this Annual Report on Form 10-K of Yosen Group, Inc.;

2. Based on my knowledge,
this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by
this report;

3. Based on my knowledge,
the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s
other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such
disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared;

(b) Designed such
internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the
effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

(d) Disclosed in
this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s
other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing
the equivalent functions):

(a) All significant
deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether
or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.



|Dated: February 2, 2015 | By:    | /s/ Zhenggang Wang                                                
|----------------------- | ------ | ------------------------------------------------------------------
|                        | Name:  | Zhenggang Wang                                                    
|                        | Title: | Chief Executive Officer and Chairman (Principal Executive Officer)





|
|













Exhibit 31.2

CERTIFICATION

I, Weiping Wang certify that:

1.
I have reviewed this Annual Report on Form 10-K of Yosen Group, Inc.;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to
the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;

4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;

(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;

(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation;

(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and

5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):

(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and

(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.



|Dated: February 2, 2015 | By:    | /s/ Weiping Wang                                                    
|----------------------- | ------ | --------------------------------------------------------------------
|                        | Name:  | Weiping Wang                                                        
|                        | Title: | Chief Financial Officer (Principal Accounting and Financial Officer)





|
|













Exhibit 32.1

WRITTEN STATEMENT
PURSUANT TO 18 USC. SECTION 1350



In connection
with the Annual Report of Yosen Group, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2013 as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Zhenggang Wang, Chief
Executive Officer of the Company certifies, pursuant to 18 USC. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:

(1) The Report
fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information
contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



|Dated: February 2, 2015 | By:    | /s/ Zhenggang Wang                                                
|----------------------- | ------ | ------------------------------------------------------------------
|                        | Name:  | Zhenggang Wang                                                    
|                        | Title: | Chief Executive Officer and Chairman (Principal Executive Officer)





|
|













Exhibit 32.2

WRITTEN STATEMENT
PURSUANT TO 18 USC. SECTION 1350



In connection
with the Annual Report of Yosen Group, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2013 as
filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Weiping Wang,
Chief Financial Officer of the Company certifies, pursuant to 18 USC. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:

(1)
The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.



|Dated: February 2, 2015 | By:    | /s/ Weiping Wang                                                    
|----------------------- | ------ | --------------------------------------------------------------------
|                        | Name:  | Weiping Wang                                                        
|                        | Title: | Chief Financial Officer (Principal Accounting and Financial Officer)





|
|