| x | Quarterly Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of 1934 |
|---|-----------------------------------------------------------------------------------------|

|  ̈ | Transition Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of 1934 |
|--------|------------------------------------------------------------------------------------------|

| Nevada                                                        | 20-8658254                              |
|---------------------------------------------------------------|-----------------------------------------|
| (State or other jurisdiction of incorporation of origination) | (I.R.S. Employer Identification Number) |

| 11/F., 157 Taidong RoadXiamen Guanyin Shan International Commercial OperationCentre, A3-2Siming DistrictXiamen, Fujian ProvincePeople’s Republic of China | N/A        |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| (Address of principal executive offices)                                                                                                                        | (Zip code) |

| Large accelerated filer    ̈ | Accelerated filer   ̈    |
|--------------------------------------------|-----------------------------------|
|                                       |                              |
| Non-accelerated filer   ̈         | Smaller reporting company  x |

----

|       |   |                                                                                                                             |   | Page   |
|------------|--------|----------------------------------------------------------------------------------------------------------------------------------|--------|--------|
| PART I     |   | FINANCIAL INFORMATION                                                                                                            |   |   |
| Item 1.    |   | Financial Statements (unaudited)                                                                                                 |   | 4      |
|       |   | Consolidated Balance Sheets as of June 30, 2011 (unaudited) and December 31, 2010                                                |   | 4      |
|       |   | Consolidated Statements of Income and Comprehensive Income for the three and six months ended June 30, 2011 and 2010 (unaudited) |   | 5      |
|       |   | Consolidated Statements of Cash Flows for the three and six months ended June 30, 2011 and 2010 (unaudited)                      |   | 7      |
|       |   | Notes to the Consolidated Financial Statements                                                                                   |   | 8      |
| Item 2.    |   | Management's Discussion and Analysis of Financial Condition and Results of Operations                                            |   | 24     |
| Item 3.    |   | Quantitative and Qualitative Disclosures about Market Risk                                                                       |   | 31     |
| Item 4.    |   | Controls and Procedures                                                                                                          |   | 31     |
|       |   |                                                                                                                             |   |   |
| PART II    |   | OTHER INFORMATION                                                                                                                |   |   |
| Item 1.    |   | Legal Proceedings                                                                                                                |   | 32     |
| Item 1A.   |   | Risk Factors                                                                                                                     |   | 32     |
| Item 2.    |   | Unregistered Sales of Equity Securities and Use of Proceeds                                                                      |   | 32     |
| Item 3.    |   | Defaults Upon Senior Securities                                                                                                  |   | 32     |
| Item 4.    |   | Reserved                                                                                                                         |   | 32     |
| Item 5.    |   | Other Information                                                                                                                |   | 32     |
| Item 6.    |   | Exhibits                                                                                                                         |   | 32     |
| Signatures |   |                                                                                                                             |   | 34     |

----

----

|                                                                                                                                                                                                                               |   | June 30, 2011 |   |   | December 31, |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|--------|--------|-------------------|--------|
|                                                                                                                                                                                                                               |   | (unaudited)        |   |   | 2010              |   |
|                                                                                                                                                                                                                               |   |               |   |   |              |   |
| ASSETS                                                                                                                                                                                                                             |   |               |   |   |              |   |
| Current Assets:                                                                                                                                                                                                                    |   |               |   |   |              |   |
| Cash and cash equivalents                                                                                                                                                                                                          |   | $                  | 15,674 |   |              | $      | 12,013 |   |
| Time deposits                                                                                                                                                                                                                      |   |               | -      |   |              |   | 3,020 |   |
| Accounts and other receivables                                                                                                                                                                                                     |   |               | 16,711 |   |              |   | 21,222 |   |
| Trade deposits                                                                                                                                                                                                                     |   |               | 4,389  |   |              |   | 4,806 |   |
| Inventories                                                                                                                                                                                                                        |   |               | 5,968  |   |              |   | 654 |   |
| Prepaid expenses                                                                                                                                                                                                                   |   |               | -      |   |              |   | 110 |   |
| Total current assets                                                                                                                                                                                                               |   |               | 42,742 |   |              |   | 41,825 |   |
| Payment for distributor acquisition                                                                                                                                                                                                |   |               | 6,684  |   |              |   | - |   |
| Property, plant and equipment, net                                                                                                                                                                                                 |   |               | 46     |   |              |   | 947 |   |
| Land use rights                                                                                                                                                                                                                    |   |               | -      |   |              |   | 261 |   |
| TOTAL ASSETS                                                                                                                                                                                                                       |   | $                  | 49,472 |   |              | $      | 43,033 |   |
|                                                                                                                                                                                                                               |   |               |   |   |              |   |   |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                                                                                         |   |               |   |   |              |   |   |   |
| Current Liabilities:                                                                                                                                                                                                               |   |               |   |   |              |   |   |   |
| Accounts payable                                                                                                                                                                                                                   |   | $                  | 2,139  |   |              | $      | 3,254 |   |
| Accrued expenses and other payables                                                                                                                                                                                                |   |               | 1,437  |   |              |   | 1,446 |   |
| Amount due to a director/officers                                                                                                                                                                                                  |   |               | 791    |   |              |   | 162 |   |
| Derivative liability - common stock warrants                                                                                                                                                                                       |   |               | 733    |   |              |   | 1,312 |   |
| Short-term bank loans                                                                                                                                                                                                              |   |               | -      |   |              |   | 607 |   |
| Income taxes payable                                                                                                                                                                                                               |   |               | 1,141  |   |              |   | 2,259 |   |
| Total current liabilities                                                                                                                                                                                                          |   |               | 6,241  |   |              |   | 9,040 |   |
|                                                                                                                                                                                                                               |   |               |   |   |              |   |   |   |
| Stockholders’ Equity:                                                                                                                                                                                                        |   |               |   |   |              |   |   |   |
| Common stock, $0.00001 par value, 100,000,000 shares authorized, 18,605,969 and 18,444,169 shares issued and outstanding as of June 30, 2011 and December 31, 2010, respectively                                                   |   |               | 1      |   |              |   | 1 |   |
| Preferred stock, $0.00001 par value, 100,000,000 shares authorized, 896,959 and 1,048,759 shares issued and outstanding as of June 30, 2011 and December 31, 2010, respectively (liquidation preference $2,565,301 and $2,999,451) |   |               | 1,276  |   |              |   | 1,492 |   |
| Additional paid-in capital                                                                                                                                                                                                         |   |               | 9,267  |   |              |   | 8,873 |   |
| Statutory reserve                                                                                                                                                                                                                  |   |               | 913    |   |              |   | 913 |   |
| Retained earnings                                                                                                                                                                                                                  |   |               | 29,392 |   |              |   | 21,159 |   |
| Accumulated other comprehensive income                                                                                                                                                                                             |   |               | 2,382  |   |              |   | 1,555 |   |
| Total stockholders' equity                                                                                                                                                                                                         |   |               | 43,231 |   |              |   | 33,993 |   |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                                                                                    |   | $                  | 49,472 |   |              | $      | 43,033 |   |

----

|                                                                                     |   | Three Months Ended June 30, |       |   | Six Months Ended June 30, |   |
|------------------------------------------------------------------------------------------|--------|-------------------------------------------------|------------|--------|-----------------------------------------------|--------|
|                                                                                     |   | 2011                                            |       |   | 2010                                          |   |   | 2011 |   |   | 2010 |   |
|                                                                                     |   |                                            |       |   |                                          |   |   |   |   |   |   |   |
| Net sales                                                                                |   | $                                               | 20,588     |   |                                          | $      | 17,946 |   |   | $ | 41,761 |   |   | $ | 36,013 |   |
| Cost of sales                                                                            |   |                                            | 11,332     |   |                                          |   | 11,109 |   |   |   | 23,189 |   |   |   | 22,254 |   |
| Gross profit                                                                             |   |                                            | 9,256      |   |                                          |   | 6,837 |   |   |   | 18,572 |   |   |   | 13,759 |   |
|                                                                                     |   |                                            |       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| Operating expenses:                                                                      |   |                                            |       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| Selling expenses                                                                         |   |                                            | 3,897      |   |                                          |   | 2,556 |   |   |   | 6,100 |   |   |   | 4,039 |   |
| General and administrative expenses                                                      |   |                                            | 992        |   |                                          |   | 1,071 |   |   |   | 2,331 |   |   |   | 1,901 |   |
|                                                                                     |   |                                            | 4,889      |   |                                          |   | 3,627 |   |   |   | 8,431 |   |   |   | 5,940 |   |
|                                                                                     |   |                                            |       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| Income from operations                                                                   |   |                                            | 4,367      |   |                                          |   | 3,210 |   |   |   | 10,141 |   |   |   | 7,819 |   |
|                                                                                     |   |                                            |       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| Other income (expenses):                                                                 |   |                                            |       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| Change in fair value of derivative liability                                             |   |                                            | 357        |   |                                          |   | 2,166 |   |   |   | 579 |   |   |   | (175 | ) |
| Interest income                                                                          |   |                                            | 22         |   |                                          |   | 18 |   |   |   | 57 |   |   |   | 44 |   |
| Interest expense                                                                         |   |                                            |       |   |                                          |   | (16 | ) |   |   | (8 | ) |   |   | (37 | ) |
|                                                                                     |   |                                            | 379        |   |                                          |   | 2,168 |   |   |   | 628 |   |   |   | (168 | ) |
|                                                                                     |   |                                            |       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| Income before provision for income taxes                                                 |   |                                            | 4,746      |   |                                          |   | 5,378 |   |   |   | 10,769 |   |   |   | 7,651 |   |
| Provision for income taxes                                                               |   |                                            | 984        |   |                                          |   | 911 |   |   |   | 2,536 |   |   |   | 2,107 |   |
|                                                                                     |   |                                            |       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                                                               |   |                                            | 3,762      |   |                                          |   | 4,467 |   |   |   | 8,233 |   |   |   | 5,544 |   |
|                                                                                     |   |                                            |       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive income:                                                              |   |                                            |       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| Foreign currency translation adjustment                                                  |   |                                            | 623        |   |                                          |   | 101 |   |   |   | 827 |   |   |   | 102 |   |
|                                                                                     |   |                                            |       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive income                                                                     |   | $                                               | 4,385      |   |                                          | $      | 4,568 |   |   | $ | 9,060 |   |   | $ | 5,646 |   |
|                                                                                     |   |                                            |       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| Allocation of net income for calculating basic earnings per share:                       |   |                                            |       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| Net income attributable to common shareholders                                           |   |                                            | 3,589      |   |                                          |   | 3,911 |   |   |   | 7,854 |   |   |   | 4,800 |   |
| Net income attributable to preferred shareholders                                        |   |                                            | 173        |   |                                          |   | 556 |   |   |   | 379 |   |   |   | 744 |   |
| Net income                                                                               |   | $                                               | 3,762      |   |                                          | $      | 4,467 |   |   | $ | 8,233 |   |   | $ | 5,544 |   |
|                                                                                     |   |                                            |       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| Basic earnings per share- common                                                    |   | $                                               | 0.19       |   |                                          | $      | 0.23 |   |   | $ | 0.42 |   |   | $ | 0.28 |   |
|                                                                                     |   |                                            |       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| Diluted earnings per share                                                               |   | $                                               | 0.19       |   |                                          | $      | 0.22 |   |   | $ | 0.42 |   |   | $ | 0.28 |   |
|                                                                                     |   |                                            |       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average number of common shares and participating preferred shares outstanding: |   |                                            |       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                     |   |                                            |       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                    |   |                                            | 18,591,582 |   |                                          |   | 17,042,685 |   |   |   | 18,560,703 |   |   |   | 16,856,357 |   |
|                                                                                     |   |                                            |       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| Diluted                                                                                  |   |                                            | 19,502,487 |   |                                          |   | 20,070,771 |   |   |   | 19,497,336 |   |   |   | 20,070,619 |   |

----

|                                          |   | Common stock |       |   | Preferred stock |   |   | Additionalpaid-in |   |   | Statutory |   |   | Accumulatedothercomprehensive |   |    | Retained |   |   | Total  |   |
|-----------------------------------------------|--------|-------------------|------------|--------|----------------------|--------|--------|-------------------|--------|--------|-----------|--------|--------|-------------------------------|--------|---------|----------|--------|--------|--------|--------|
|                                          |   | Shares            |       |   | Amount               |   |   | Shares            |   |   | Amount    |   |   | capital                       |   |    | reserve  |   |   | income |   |   | earnings |   |   | equity |   |
|                                          |   |              |       |   |                 |   |   |              |   |   |      |   |   |                          |   |    |     |   |   |   |   |   |   |   |   |   |   |
| Balance at January 1, 2011               |   |              | 18,444,169 |   |                 | $      | 1      |              |   |   | 1,048,759 |   |   | $                             | 1,492  |    |     | $      | 8,873  |   |   | $ | 913 |   |   | $ | 1,555 |   |   | $ | 21,159 |   |   | $ | 33,993 |   |
|                                          |   |              |       |   |                 |   |   |              |   |   |      |   |   |                          |   |    |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income                                    |   |              |       |   |                 |   |   |              |   |   |      |   |   |                          |   |    |     |   |   |   |   |   |   |   |   |   |   |   |   |   | 8,233 |   |   |   | 8,233 |   |
| Foreign Currency Translation Adjustment       |   |              |       |   |                 |   |   |              |   |   |      |   |   |                          |   |    |     |   |   |   |   |   |   |   |   |   | 827 |   |   |   | - |   |   |   | 827 |   |
| Conversion of Preferred Stock to Common Stock |   |              | 151,800    |   |                 |   | -      |              |   |   | (151,800  | )      |   |                          | (216   | )  |     |   | 216    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | - |   |
| Issuance of shares to director / officer |   |              | 10,000     |   |                 |   | -      |              |   |   |      |   |   |                          |   |    |     |   | 117    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 117 |   |
| Stock compensation expense                    |   |              |       |   |                 |   |   |              |   |   |      |   |   |                          |   |    |     |   | 61     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 61 |   |
| Balance at June 30, 2011                      |   |              | 18,605,969 |   |                 | $      | 1      |              |   |   | 896,959   |   |   | $                             | 1,276  |    |     | $      | 9,267  |   |   | $ | 913 |   |   | $ | 2,382 |   |   | $ | 29,392 |   |   | $ | 43,231 |   |

----

|                                                                                         |   | Six Months Ended June 30, |   |
|----------------------------------------------------------------------------------------------|--------|-----------------------------------------------|--------|
|                                                                                         |   | 2011                                          |   |   | 2010 |   |
|                                                                                         |   |                                          |   |   |   |   |
| Cash flows from operating activities:                                                        |   |                                          |   |   |   |   |
| Net income                                                                                   |   | $                                             | 8,233  |   |   | $ | 5,544 |   |
| Adjustments to reconcile net income to net cash  provided by operating activities: |   |                                          |   |   |   |   |   |   |
| Depreciation and amortization                                                                |   |                                          | 24     |   |   |   | 35 |   |
| Loss on disposal of property, plant and equipment                                            |   |                                          | 15     |   |   |   | - |   |
| Stock compensation expense                                                                   |   |                                          | 61     |   |   |   | - |   |
| Change in fair value of derivative liability                                                 |   |                                          | (579   | ) |   |   | 175 |   |
| (Increase) decrease in assets:                                                               |   |                                          |   |   |   |   |   |   |
| Accounts receivable                                                                          |   |                                          | 4,876  |   |   |   | (4,099 | ) |
| Trade deposits                                                                               |   |                                          | 507    |   |   |   | 1,710 |   |
| Inventories                                                                                  |   |                                          | (5,240 | ) |   |   | (669 | ) |
| Prepaid expenses                                                                             |   |                                          | 180    |   |   |   | 231 |   |
| Increase (decrease) in liabilities:                                                          |   |                                          |   |   |   |   |   |   |
| Accounts payable                                                                             |   |                                          | (1,166 | ) |   |   | 322 |   |
| Accrued expenses and other payables                                                          |   |                                          | 5      |   |   |   | 321 |   |
| Income and other tax payables                                                                |   |                                          | (1,144 | ) |   |   | (522 | ) |
| Net cash provided by operating activities                                                    |   |                                          | 5,772  |   |   |   | 3,048 |   |
|                                                                                         |   |                                          |   |   |   |   |   |   |
| Cash flows from investing activities:                                                        |   |                                          |   |   |   |   |   |   |
| Purchases of property, plant and equipment                                                   |   |                                          | (46    | ) |   |   | (7 | ) |
| Acquisition of a business                                                                    |   |                                          | (6,684 | ) |   |   | - |   |
| Disposals of property, plant and equipment                                                   |   |                                          | 1,179  |   |   |   | - |   |
| Amount due from a director                                                                   |   |                                          | 736    |   |   |   | - |   |
| Time deposits                                                                                |   |                                          | 3,020  |   |   |   | (3,020 | ) |
| Net cash used in investing activities                                                        |   |                                          | (1,795 | ) |   |   | (3,027 | ) |
|                                                                                         |   |                                          |   |   |   |   |   |   |
| Cash flows from financing activities:                                                        |   |                                          |   |   |   |   |   |   |
| Amount due from a director                                                                   |   |                                          | -      |   |   |   | 2,428 |   |
| Proceeds from debt financing                                                                 |   |                                          | -      |   |   |   | 315 |   |
| Payments of short-term debt                                                                  |   |                                          | (612   | ) |   |   | (440 | ) |
| Warrants exercised                                                                           |   |                                          | -      |   |   |   | 22 |   |
| Net cash provided by (used in) financing activities                                          |   |                                          | (612   | ) |   |   | 2,325 |   |
|                                                                                         |   |                                          |   |   |   |   |   |   |
| Effect of exchange rate changes                                                              |   |                                          | 296    |   |   |   | 55 |   |
| Net increase in cash and cash equivalents                                                    |   |                                          | 3,661  |   |   |   | 2,401 |   |
| Cash and cash equivalents, beginning of period                                               |   |                                          | 12,013 |   |   |   | 11,036 |   |
| Cash and cash equivalents, end of period                                                     |   | $                                             | 15,674 |   |   | $ | 13,437 |   |
|                                                                                         |   |                                          |   |   |   |   |   |   |
| Supplemental disclosure of cash flow information:                                            |   |                                          |   |   |   |   |   |   |
| Interest paid                                                                                |   | $                                             | 8      |   |   | $ | 37 |   |
| Income taxes paid                                                                            |   | $                                             | 3,333  |   |   | $ | 2,288 |   |

----

| (1)  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|-----------|--------------------------------------------|

| (a)  | Description of business and organization |
|-----------|------------------------------------------|

| Name             |   | Background   |                                                                                                                                                                    | Ownership |                               |
|------------------|--------|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------|------------------------------------|
| PXPF             |   | ·       | A British Virgin Islands limited liability company                                                                                                                      |      | 100%                               |   |
|             |   | ·       | Incorporated on April 30, 2008                                                                                                                                          |      |                               |   |
| HK Dong Rong     |   | ·       | A Hong Kong limited liability company                                                                                                                                   |      | 100%                               |   |
|             |   | ·       | Incorporated on January 5, 2005 originally under the name “Korea Jinduren International Dress Limited”                                                      |      |                               |   |
|             |   | ·       | Acquired by PXPF from the majority shareholders of PXPF on September 22, 2008                                                                                           |      |                               |   |
| China Dong Rong  |   | ·       | A PRC limited liability company and deemed a wholly foreign owned enterprise (“WFOE”)                                                                       |      | 100%                               |   |
|             |   | ·       | Incorporated on November 19, 2009                                                                                                                                       |      |                               |   |
|             |   | ·       | Registered capital of $8 million fully funded                                                                                                                           |      |                               |   |
| Yinglin Jinduren |   | ·· | A PRC limited liability companyIncorporated on January 19, 2002                                                                                                         |      | VIE by contractualarrangements (1) |   |
|             |   | ·       | Registered capital of RMB 10,000,000 ($1,237,000) fully paid by the majority shareholders of PXPF, Qingqing Wu and Zhifan Wu.                                           |      |                               |   |
|             |   | ·       | 65.91% of equity interests held by Qingqing Wu, the Company’s Chief Executive Officer and Chairman of the Board of Directors, and 34.09% by his brother Zhifan Wu |      |                               |   |

----

|   | (1) | On December 28, 2005, HK Dong Rong (then known as Korea Jinduren International Dress Limited) entered into certain exclusive agreements with Yinglin Jinduren and its equity owners. Pursuant to these agreements, HK Dong Rong provides exclusive consulting services to Yinglin Jinduren in return for a consulting services fee which is equal to Yinglin Jinduren’s net profits. Prior to the Share Exchange, however, certain dividends were declared and paid from Yinglin Jinduren’s net income to the equity owners of Yinglin Jinduren. In addition, Yinglin Jinduren’s equity owners have pledged their equity interests in Yinglin Jinduren to HK Dong Rong, irrevocably granted HK Dong Rong an exclusive option to purchase all or part of the equity interests in Yinglin Jinduren and agreed to entrust all the rights to exercise their voting power to the person(s) appointed by HK Dong Rong. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b)  | Basis of presentation and consolidation |
|-----------|-----------------------------------------|

----

| (c) | Use of Estimates |
|-----|------------------|

| (d) | Revenue Recognition |
|-----|---------------------|

| (e) | Cash and Cash Equivalents |
|-----|---------------------------|

| (f) | Time Deposits |
|-----|---------------|

| (g) | Accounts receivable |
|-----|---------------------|

| (h) | Depreciation and Amortization |
|-----|-------------------------------|

| Buildings                         | 30 years      |
|-----------------------------------|---------------|
| Furniture, fixtures and equipment | 5 years       |
|  Motor vehicles              | 5 years       |
| Office equipment                  | 3 to 5 years  |
| Plant and machinery               | 5 to 15 years |

| (i) | Inventories |
|-----|-------------|

----

| (j) | Trade deposits |
|-----|----------------|

| (k) | Foreign Currency Translation |
|-----|------------------------------|

| (l) | Land Use Rights |
|-----|-----------------|

| (m) | Long-Lived Assets |
|-----|-------------------|

| (n) | Comprehensive Income |
|-----|----------------------|

----

| (o) | Income Taxes |
|-----|--------------|

| (p) | Advertising Costs |
|-----|-------------------|

| (q) | Shipping and Handling Costs |
|-----|-----------------------------|

| (r) | Research and Development Costs |
|-----|--------------------------------|

| (s) | Derivative Financial Instruments |
|-----|----------------------------------|

| (t) | Fair Value of Financial Instruments |
|-----|-------------------------------------|

----

| (u)  | Earnings Per Share |
|-----------|--------------------|

| (v) | Recent Accounting Pronouncements |
|-----|----------------------------------|

| (2) | TIME DEPOSITS |
|-----|---------------|

|          |   | December 31, |   |
|---------------|--------|-------------------|--------|
|          |   | 2010              |   |
|          |   |              |   |
| Time deposits |   | $                 | 3,020  |   |
|          |   |              |   |   |
|          |   | $                 | 3,020  |   |

----

| (3) | INVENTORIES |
|-----|-------------|

|           |   | June 30,    |   |   | December 31, |   |
|----------------|--------|-------------|--------|--------|-------------------|--------|
|           |   | 2011        |   |   | 2010              |   |
|           |   | (unaudited) |   |   |              |   |
| Finished goods |   |        | 5,968  |   |              |   | 654 |   |
|           |   |        |   |   |              |   |   |   |
|           |   | $           | 5,968  |   |              | $      | 654 |   |

| (4) | TRADE DEPOSITS |
|-----|----------------|

|           |   | June 30,    |   |   | December 31, |   |
|----------------|--------|-------------|--------|--------|-------------------|--------|
|           |   | 2011        |   |   | 2010              |   |
|           |   | (unaudited) |   |   |              |   |
| Trade deposits |   |        | 4,389  |   |              |   | 4,806 |   |
|           |   |        |   |   |              |   |   |   |
|           |   | $           | 4,389  |   |              | $      | 4,806 |   |

| (5) | PAYMENT FOR DISTRIBUTOR ACQUISITION |
|-----|-------------------------------------|

|                                |   | June 30,    |   |   | December 31, |   |
|-------------------------------------|--------|-------------|--------|--------|-------------------|--------|
|                                |   | 2011        |   |   | 2010              |   |
|                                |   | (unaudited) |   |   |              |   |
| Payment for distributor acquisition |   |        | 6,684  |   |              |   | - |   |
|                                |   |        |   |   |              |   |   |   |
|                                |   | $           | 6,684  |   |              | $      | - |   |

|                                |   | June 30,    |   |    | December 31, |   |
|-------------------------------------|--------|-------------|--------|---------|-------------------|--------|
|                                |   | 2011        |   |    | 2010              |   |
|                                |   | (unaudited) |   |    |              |   |
| Buildings                           |   | $           | -      |    |              | $      | 946 |   |
| Furniture, fixtures and equipment   |   |        | -      |    |              |   | 86 |   |
| Motor vehicles                      |   |        | 55     |    |              |   | 202 |   |
| Office equipment                    |   |        | 36     |    |              |   | 34 |   |
| Plant and machinery                 |   |        | -      |    |              |   | 214 |   |
|                                |   |        |   |    |              |   |   |   |
| Total property, plant and equipment |   |        | 91     |    |              |   | 1,482 |   |
| Less: accumulated depreciation      |   |        | (45    | )  |              |   | (535 | )  |
|                                |   |        |   |    |              |   |   |   |
| Property, plant and equipment, net  |   | $           | 46     |    |              | $      | 947 |   |

----

|                           |   | December 31, |   |
|--------------------------------|--------|-------------------|--------|
|                           |   | 2010              |   |
|                           |   |              |   |
| Land use right                 |   | $                 | 325    |   |
| Less: accumulated amortization |   |              | (64    | ) |
| Land use right, net            |   | $                 | 261    |   |

| (8) | ACCRUED EXPENSES AND OTHER PAYABLES |
|-----|-------------------------------------|

|                           |   | June 30,    |   |   | December 31, |   |
|--------------------------------|--------|-------------|--------|--------|-------------------|--------|
|                           |   | 2011        |   |   | 2010              |   |
|                           |   | (unaudited) |   |   |              |   |
| Accrued salaries and wages     |   | $           | 40     |   |              | $      | 36 |   |
| Accrued expenses               |   |        | 1,197  |   |              |   | 1,215 |   |
| Advertising subsidies payables |   |        | 200    |   |              |   | 195 |   |
|                           |   | $           | 1,437  |   |              | $      | 1,446 |   |

| (9) | RELATED PARTY TRANSACTIONS |
|-----|----------------------------|

|                          |   | June 30,    |   |   | December 31, |   |
|-------------------------------|--------|-------------|--------|--------|-------------------|--------|
|                          |   | 2011        |   |   | 2010              |   |
|                          |   | (unaudited) |   |   |              |   |
| Mr. Qingqing Wu (1) |   | $           | 769    |   |              | $      | 45 |   |
| Mr. Bennet Tchaikovsky (2)    |   |        | 12     |   |              |   | 68 |   |
| Ms. Ying (Teresa) Zhang (2)   |   |        | 10     |   |              |   | 49 |   |
|                          |   | $           | 791    |   |              | $      | 162 |   |

| (1) | The amount due to this director is unsecured, interest-free and repayable on demand. |
|-----|--------------------------------------------------------------------------------------|

| (2) | Represents cash and share compensation owed. |
|-----|----------------------------------------------|

----

| (10)  | SALE OF PREFERRED STOCK, COMMON STOCK AND WARRANTS |
|------------|----------------------------------------------------|

----

| (11)  | DERIVATIVE FINANCIAL INSTRUMENTS |
|------------|----------------------------------|

| Issue Date  |   | Expiration Date |   | # ofWarrants |      |   | ExercisePrice PerShare |   |   | Value -December 31,2010 |   |   | Value -June 30,2011 |   |
|------------------|--------|----------------------|--------|-------------------|-----------|--------|-----------------------------|--------|--------|-----------------------------------|--------|--------|--------------------------|--------|
|             |   |                 |   |              |      |   |                        |   |   |                              |   |   |                     |   |
| October 27, 2009 |   | October 27, 2012     |   |              | 723,052   |   |                        | $      | 3.43   |                              |   | $      | 547                      |   |   | $ | 311 |   |
|             |   |                 |   |              |      |   |                        |   |   |                              |   |   |                     |   |   |   |   |   |
| November 17 2009 |   | November 17, 2012    |   |              | 667,058   |   |                        |   | 3.43   |                              |   |   | 512                      |   |   |   | 288 |   |
|             |   |                 |   |              |      |   |                        |   |   |                              |   |   |                     |   |   |   |   |   |
| December 1, 2009 |   | December 1, 2012     |   |              | 326,767   |   |                        |   | 3.43   |                              |   |   | 253                      |   |   |   | 144 |   |
|             |   |                 |   |              |      |   |                        |   |   |                              |   |   |                     |   |   |   |   |   |
|             |   |                 |   |              | 1,716,877 |   |                        |   |   |                              |   | $      | 1,312                    |   |   | $ | 733 |   |

----

|                            |   | Warrants (inthousands) |   |
|---------------------------------|--------|------------------------|--------|
|                            |   |                   |   |
| Balance – January 1, 2010 |   | $                      | 3,684  |   |
| Issued                          |   |                   | -      |   |
| Exercised                       |   |                   | (18    | ) |
| Fair value adjustments          |   |                   | 174    |   |
| Balance- June 30, 2010          |   |                   | 3,840  |   |
| Issued                          |   |                   | -      |   |
| Exercised                       |   |                   | (3     | ) |
| Fair value adjustments          |   |                   | (2,525 | ) |
| Balance- December 31, 2010      |   |                   | 1,312  |   |
| Issued                          |   |                   | -      |   |
| Exercised                       |   |                   | -      |   |
| Fair value adjustments          |   |                   | (579   | ) |
| Balance June 30, 2011           |   |                   | 733    |   |

|      |   | December 31 ,2010 |   |
|-----------|--------|-----------------------------|--------|
|      |   | Amount                      |   |   | InterestRate |   |
|      |   |                        |   |   |   |   |
| Bank loan |   | $                           | 607    |   |   |   | 8.153 | % |

| (13) | COMMON STOCK |
|------|--------------|

----

|                            |   |   |   |   | Weighted-Average |   |
|---------------------------------|--------|--------|--------|--------|------------------|--------|
|                            |   |   |   |   | Grant Date       |   |
| Non-vested shares               |   | Shares |   |   | Fair Value       |   |
| Non-vested at January 1, 2010   |   |   | -      |   |             |   | - |   |
| Granted                         |   |   | 30,000 |   |             | $      | 5.33 |   |
| Vested                          |   |   | 6,062  |   |             | $      | 5.33 |   |
| Forfeited                       |   |   | -      |   |             |   | - |   |
| Non-vested at June 30, 2010     |   |   | 23,938 |   |             | $      | 5.33 |   |
| Granted                         |   |   | -      |   |             | $      | - |   |
| Vested                          |   |   | 15,082 |   |             | $      | 5.33 |   |
| Forfeited                       |   |   | -      |   |             |   | - |   |
| Non-vested at December 31, 2010 |   |   | 8,856  |   |             | $      | 5.33 |   |
| Granted                         |   |   | 10,000 |   |             | $      | 1.57 |   |
| Vested                          |   |   | 8,856  |   |             | $      | 5.33 |   |
| Forfeited                       |   |   | -      |   |             |   | - |   |
| Non-vested at June 30, 2011     |   |   | 6,667  |   |             | $      | 1.57 |   |

| (14) | PREFERRED STOCK |
|------|-----------------|

----

| (15) | EARNINGS PER SHARE |
|------|--------------------|

|                                                         |   | Three Months Ended June 30, |       |   | Six Months Ended June 30, |   |
|--------------------------------------------------------------|--------|-------------------------------------------------|------------|--------|-----------------------------------------------|--------|
|                                                    |   | 2011                                            |       |   | 2010                                          |   |   | 2011 |   |   | 2010 |   |
| Income attributable to common shareholders of the Company    |   |                                            | 3,589      |   |                                          |   | 3,911 |   |   |   | 7,854 |   |   |   | 4,800 |   |
| Income attributable to preferred shareholders of the Company |   |                                            | 173        |   |                                          |   | 556 |   |   |   | 379 |   |   |   | 744 |   |
| Net income                                                   |   | $                                               | 3,762      |   |                                          | $      | 4,467 |   |   | $ | 8,233 |   |   | $ | 5,544 |   |
| Weighted average number of common shares outstanding         |   |                                            | 18,591,582 |   |                                          |   | 17,042,685 |   |   |   | 18,560,703 |   |   |   | 16,856,357 |   |

| (b) | Diluted |
|-----|---------|

|                                            |   | Three Months Ended June 30, |       |   | Six Months Ended June 30, |   |
|------------------------------------------------------|--------|-------------------------------------------------|------------|--------|-----------------------------------------------|--------|
|                                            |   | 2011                                            |       |   | 2010                                          |   |   | 2011 |   |   | 2010 |   |
| Net income                                           |   | $                                               | 3,762      |   |                                          | $      | 4,467 |   |   | $ | 8,233 |   |   | $ | 5,544 |   |
| Weighted average number of common shares outstanding |   |                                            | 18,591,582 |   |                                          |   | 17,042,685 |   |   |   | 18,560,703 |   |   |   | 16,856,357 |   |
|                                                 |   |                                            |       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| Adjustment for:                                 |   |                                            |       |   |                                          |   |   |   |   |   |   |   |   |   |   |   |
| Preferred stock                                      |   |                                            | 910,905    |   |                                          |   | 2,424,543 |   |   |   | 936,633 |   |   |   | 2,614,527 |   |
| Warrants                                             |   |                                            |       |   |                                          |   | 603,543 |   |   |   |   |   |   |   | 599,735 |   |
|                                                 |   |                                            | 19,502,487 |   |                                          |   | 20,070,771 |   |   |   | 19,497,336 |   |   |   | 20,070,619 |   |

| (16) | INCOME TAXES |
|------|--------------|

|                                |   | Six Months Ended June 30, |   |
|-------------------------------------|--------|------------------------------------------|--------|
|                           |   | 2011                                     |   |   | 2010 |   |
|                                |   | (unaudited)                              |   |   | (unaudited) |   |
| PRC enterprise income tax - current |   | $                                        | 2,536  |   |   | $ | 2,107 |   |

----

|                                  |   | For Six Months Ended June 30, |   |
|---------------------------------------|--------|-------------------------------|--------|
|                                  |   | 2011                          |   |   | 2010 |   |
|                                  |   | (Unaudited)                   |   |   | (Unaudited) |   |
| U.S. statutory rates                  |   |                          | 34     | % |   |   | 34 | % |
| Foreign income not recognized in U.S. |   |                          | (34    | ) |   |   | (34 | ) |
| China income tax rate                 |   |                          | 25     |   |   |   | 25 |   |
| Effective tax rate                    |   |                          | 25     | % |   |   | 25 | % |

|                                                                                  |   | For Six Months Ended June 30, |   |
|---------------------------------------------------------------------------------------|--------|-------------------------------|--------|
|                                                                                  |   | 2011                          |   |   | 2010 |   |
|                                                                                  |   | (Unaudited)                   |   |   | (Unaudited) |   |
| Theoretical tax expense calculated at PRC statutory enterprise income tax rate of 25% |   | $                             | 2,707  |   |   | $ | 1,990 |   |
| Tax effect of non-deductible expenses                                                 |   |                          | (171   | )  |   |   | 117 |   |
| Effective tax expense                                                                 |   | $                             | 2,536  |   |   | $ | 2,107 |   |

|                           |   | Futureminimumpayments |   |
|--------------------------------|--------|-----------------------|--------|
| Six Months Ending December 31: |   |                  |   |
| 2011 (1)                       |   | $                     | 38     |   |
| Year Ending December 31:       |   |                  |   |   |
| 2012 (1)                       |   |                  | 56     |   |
| 2013 (1)                       |   |                  | -      |   |
|                           |   | $                     | 94     |   |

----

|          |   | Three Months Ended June 30, |   |   | Six Months Ended June 30, |   |
|---------------|--------|-------------------------------------------------|--------|--------|-----------------------------------------------|--------|
|          |   | 2011                                            |   |   | 2010                                          |   |   | 2011 |   |   | 2010 |   |
| Distributors  |   |                                            |   |   |                                          |   |   |   |   |   |   |   |
| Distributor A |   |                                            | 20.21  | %      |                                          |   | 16.94 | % |   |   | 19.67 | % |   |   | 15.89 | % |
| Distributor B |   |                                            | 11.06  | %      |                                          |   | 12.25 | % |   |   | 10.76 | % |   |   | 12.99 | % |
| Distributor C |   |                                            | 11.49  | %      |                                          |   | 12.27 | % |   |   | 11.18 | % |   |   | 13.01 | % |

|          |   | June 30, |   |
|---------------|--------|---------------|--------|
|          |   | 2011          |   |   | 2010 |   |
| Distributors  |   |          |   |   |   |   |
| Distributor A |   |          | 12.33  | % |   |   | 12.97 | % |
| Distributor B |   |          | *      |   |   |   | 12.44 | % |
| Distributor C |   |          | *      |   |   |   | 11.20 | % |
| Distributor D |   |          | 26.82  | % |   |   | 18.58 | % |

|     |   | Three Months Ended June 30, |   |    | Six Months Ended June 30, |   |
|----------|--------|-------------------------------------------------|--------|---------|-----------------------------------------------|--------|
|     |   | 2011                                            |   |    | 2010                                          |   |   | 2011 |   |   | 2010 |   |
| Vendors  |   |                                            |   |    |                                          |   |   |   |   |   |   |   |
| Vendor A |   |                                            | 14.94  | %       |                                          |   | 12.53 | % |   |   | * |   |   |   | 14.39 | % |
| Vendor B |   |                                            | 21.43  | %       |                                          |   | 10.32 | % |   |   | 12.44 | % |   |   | 11.75 | % |
| Vendor C |   |                                            | *      |    |                                          |   | * |   |   |   | 12.24 | % |   |   | * |   |
| Vendor D |   |                                            | 13.05  | %  |                                          |   | * |   |   |   | * |   |   |   | 10.13 | % |

|       |   | June 30, |   |
|------------|--------|---------------|--------|
|       |   | 2011          |   |   | 2010 |   |
| Creditors  |   |          |   |   |   |   |
| Creditor A |   |          | 13.13  | %  |   |   | * |   |
| Creditor B |   |          | *      |   |   |   | 21.61 | % |
| Creditor C |   |          | 36.85  | % |   |   | * |   |
| Creditor D |   |          | *      |   |   |   | 12.35 | % |
| Creditor E |   |          | *      |   |   |   | 13.71 | % |
| Creditor F |   |          | 10.04  | % |   |   | * |   |
| Creditor G |   |          | 17.30  | % |   |   | * |   |
| Creditor H |   |          | 15.44  | % |   |   | * |   |

----

----

----

| From date of Invoice to Customer |   | June 30,2011 |   |   | December 31,2010 |    |
|----------------------------------|--------|--------------|--------|--------|------------------|---------|
| 0-30 days                        |   |         | 4,027  |   |             |    | 10,158 |   |
| 31-60 days                       |   |         | 12,650 |   |             |    | 11,028 |   |
| 61-90 days                       |   |         | -      |   |             |    | - |   |
| Allowance for Doubtful Accounts  |   |         | -      |   |             |    | - |   |
| Total Accounts receivable        |   | $       | 16,677 |   |             |  $ | 21,186 |   |

----

|                 |   | Three Month Periods Ended June 30,                                  |   |   | Six Month Periods Ended June 30,                                    |   |
|---------------------------|--------|----------------------------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------------|--------|
|                      |   | 2011                                                                                         |   |   | 2010                                                                                         |   |   | 2011 |   |   | 2010 |   |
|                      |   | Amount                                                                                       |   |   | % of totalnet sales                                                                          |   |   | Amount |   |   | % of totalnet sales |   |   | Amount |   |   | % of totalnet sales |   |   | Amount |   |   | % of totalnet sales |   |
|                      |   | (Amounts in thousands, in U.S. Dollars,except for percentages) |   |   | (Amounts in thousands, in U.S. Dollars,except for percentages) |   |
| Net Sales                 |   | $                                                                                            | 20,588 |   |                                                                                         |   | 100.00 | % |   | $ | 17,946 |   |   |   | 100.00 | % |   | $ |    41,761 |   |   |   | 100.00 | % |   | $ | 36,013 |   |   |   | 100.00 | % |
| Gross Profit              |   |                                                                                         | 9,256  |   |                                                                                         |   | 44.96 | % |   |   | 6,837 |   |   |   | 38.10 | % |   |   | 18,572 |   |   |   | 44.47 | % |   |   | 13,759 |   |   |   | 38.21 | % |
| Operating Expense         |   |                                                                                         | 4,889  |   |                                                                                         |   | 23.75 | % |   |   | 3,627 |   |   |   | 20.21 | % |   |   | 8,431 |   |   |   | 20.19 | % |   |   | 5,940 |   |   |   | 16.49 | % |
| Income From Operations    |   |                                                                                         | 4,367  |   |                                                                                         |   | 21.21 | % |   |   | 3,210 |   |   |   | 17.89 | % |   |   | 10,141 |   |   |   | 24.48 | % |   |   | 7,819 |   |   |   | 21.71 | % |
| Other Expenses / (Income) |   |                                                                                         | 379    |   |                                                                                         |   | 1.84 | % |   |   | (2,168 | ) |   |   | (12.08 | )% |   |   | 628 |   |   |   | 1.50 | % |   |   | 168 |   |   |   | 0.47 | % |
| Income tax expenses       |   |                                                                                         | 984    |   |                                                                                         |   | 4.78 | % |   |   | 911 |   |   |   | 5.08 | % |   |   | 2,533 |   |   |   | 6.07 | % |   |   | 2,107 |   |   |   | 5.85 | % |
|                      |   |                                                                                         |   |   |                                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Income                |   | $                                                                                            | 3,762  |   |                                                                                         |   | 18.27 | % |   | $ | 4,467 |   |   |   | 24.89 | % |   | $ |    8,233 |   |   |   | 19.71 | % |   | $ | 5,544 |   |   |   | 15.39 | % |

----

|            |   | Three Month Periods Ended June 30,      |   |   | Six Month Periods Ended June 30,        |   |
|-----------------|--------|------------------------------------------------------------------|--------|--------|------------------------------------------------------------------|--------|
|            |   | 2011                                                             |   |   | 2010                                                             |   |   |   |   |   | 2011 |   |   | 2010 |   |   |   |   |
|            |   |                                                             |   |   |                                                             |   |   |   |   |   |   |   |   | Growth |   |   |   |   |   |   |   |   |   |   |   |   |   |   | Growth |   |
|            |   |                                                             |   |   |                                                             |   |   |   |   |   |   |   |   | (Decline) |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (Decline) |   |
|            |   |                                                             |   |   |                                                             |   |   |   |   |   |   |   |   | in 2011 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | in 2011 |   |
|            |   |                                                             |   |   |                                                             |   |   |   |   |   |   |   |   | compared |   |   |   |   |   |   |   |   |   |   |   |   |   |   | compared |   |
|            |   |                                                             |   |   | % of net                                               |   |   |   |   |   | % of net |   |   | with |   |   |   |   |   | % of net |   |   |   |   |   | % of net |   |   | with |   |
|            |   | Amount                                                           |   |   | sales                                                            |   |   | Amount |   |   | sales |   |   | 2010 |   |   | Amount |   |   | sales |   |   | Amount |   |   | sales |   |   | 2010 |   |
|            |   | (Amounts in thousands, in U.S. Dollars, |   |   | (Amounts in thousands, in U.S. Dollars, |   |
|            |   | except for percentages)                                |   |   | except for percentages)                                |   |
|            |   |                                                             |   |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Beijing         |   | $                                                                | 1,869  |   |                                                             |   | 9.08 | % |   | $ | 984 |   |   |   | 5.48 | % |   |   | 89.94 | % |   | $ | 3,692 |   |   |   | 8.84 | % |   | $ | 1,936 |   |   |   | 5.38 | % |   |   | 90.70 | % |
| Zhejiang        |   |                                                             | 4,162  |   |                                                             |   | 20.22 | % |   |   | 3,040 |   |   |   | 16.94 | % |   |   | 36.91 | % |   |   | 8,215 |   |   |   | 19.67 | % |   |   | 5,723 |   |   |   | 15.89 | % |   |   | 43.54 | % |
| Shandong        |   |                                                             | 2,365  |   |                                                             |   | 11.49 | % |   |   | 2,202 |   |   |   | 12.27 | % |   |   | 7.40 | % |   |   | 4,670 |   |   |   | 11.18 | % |   |   | 4,684 |   |   |   | 13.01 | % |   |   | (0.30 | )% |
| Jiangxi         |   |                                                             | 1,772  |   |                                                             |   | 8.61 | % |   |   | 1,749 |   |   |   | 9.75 | % |   |   | 1.32 | % |   |   | 3,500 |   |   |   | 8.38 | % |   |   | 2,947 |   |   |   | 8.18 | % |   |   | 18.76 | % |
| Yunnan          |   |                                                             | 1,678  |   |                                                             |   | 8.15 | % |   |   | 1,480 |   |   |   | 8.25 | % |   |   | 13.38 | % |   |   | 3,314 |   |   |   | 7.94 | % |   |   | 2,910 |   |   |   | 8.08 | % |   |   | 13.88 | % |
| Shanxi          |   |                                                             | 1,032  |   |                                                             |   | 5.01 | % |   |   | 1,264 |   |   |   | 7.04 | % |   |   | (18.35 | )% |   |   | 2,040 |   |   |   | 4.88 | % |   |   | 2,485 |   |   |   | 6.90 | % |   |   | (17.91 | )% |
| Liaoning        |   |                                                             | 1,629  |   |                                                             |   | 7.91 | % |   |   | 1,483 |   |   |   | 8.26 | % |   |   | 9.84 | % |   |   | 3,217 |   |   |   | 7.70 | % |   |   | 3,269 |   |   |   | 9.08 | % |   |   | (1.59 | )% |
| Hubei           |   |                                                             | 2,277  |   |                                                             |   | 11.06 | % |   |   | 2,198 |   |   |   | 12.25 | % |   |   | 3.59 | % |   |   | 4,495 |   |   |   | 10.76 | % |   |   | 4,676 |   |   |   | 12.98 | % |   |   | (3.87 | )% |
| Henan           |   |                                                             | 970    |   |                                                             |   | 4.71 | % |   |   | 1,135 |   |   |   | 6.32 | % |   |   | (14.54 | )% |   |   | 1,917 |   |   |   | 4.59 | % |   |   | 2,440 |   |   |   | 6.78 | % |   |   | (21.43 | )% |
| Guangxi         |   |                                                             | 1,395  |   |                                                             |   | 6.78 | % |   |   | 1,176 |   |   |   | 6.55 | % |   |   | 18.62 | % |   |   | 2,755 |   |   |   | 6.60 | % |   |   | 2,426 |   |   |   | 6.74 | % |   |   | 13.56 | % |
| Sichuan         |   |                                                             | 771    |   |                                                             |   | 3.74 | % |   |   | 900 |   |   |   | 5.02 | % |   |   | (14.33 | )% |   |   | 1,520 |   |   |   | 3.64 | % |   |   | 1,770 |   |   |   | 4.91 | % |   |   | (14.12 | )% |
| Fujian          |   |                                                             | 688    |   |                                                             |   | 3.24 | % |   |   | 335 |   |   |   | 1.87 | % |   |   | 99.40 | % |   |   | 2,426 |   |   |   | 5.81 | % |   |   | 747 |   |   |   | 2.07 | % |   |   | 224.77 | % |
| Total Net Sales |   | $                                                                | 20,588 |   |                                                             |   | 100.00 | % |   | $ | 17,946 |   |   |   | 100.00 | % |   |   | 14.72 | % |   | $ | 41,761 |   |   |   | 100.00 | % |   | $ | 36,013 |   |   |   | 100.00 | % |   |   | 15.96 | % |

----

|                        |   | Three Month Periods Ended June 30,                                       |   |   | Six Month Periods Ended June 30,                                         |   |
|-----------------------------|--------|---------------------------------------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------------------------------------|--------|
|                        |   | 2011                                                                                              |   |   | 2010                                                                                              |   |   | 2011 |   |   | 2010 |   |
|                        |   | Amount                                                                                            |   |   | % of net sales                                                                                    |   |   | Amount |   |   | % of net sales |   |   | Amount |   |   | % of net sales |   |   | Amount |   |   | % of net sales |   |
|                        |   | (Amounts in thousands, in U.S. Dollars, exceptfor percentages) |   |   | (Amounts in thousands, in U.S. Dollars, exceptfor percentages) |   |
| Net Sales                   |   | $                                                                                                 | 20,588 |   |                                                                                              |   | 100.00 | % |   | $ | 17,946 |   |   |   | 100.00 | % |   | $ | 41,761 |   |   |   | 100.00 | % |   | $ | 36,013 |   |   |   | 100.00 | % |
| O.E.M. Finished Goods       |   |                                                                                              | 11,332 |   |                                                                                              |   | 55.04 | % |   |   | 10,490 |   |   |   | 58.45 | % |   |   | 23,189 |   |   |   | 55.53 | % |   |   | 21,371 |   |   |   | 59.34 | % |
| Raw Materials               |   |                                                                                              |   |   |                                                                                              |   |   | % |   |   | 331 |   |   |   | 1.84 | % |   |   |   |   |   |   |   | % |   |   | 483 |   |   |   | 1.34 | % |
| Labor                       |   |                                                                                              |   |   |                                                                                              |   |   | % |   |   | 215 |   |   |   | 1.20 | % |   |   |   |   |   |   |   | % |   |   | 282 |   |   |   | 0.78 | % |
| Overhead and Other Expenses |   |                                                                                              |   |   |                                                                                              |   |   | % |   |   | 73 |   |   |   | 0.41 | % |   |   |   |   |   |   |   | % |   |   | 118 |   |   |   | 0.33 | % |
|                        |   |                                                                                              |   |   |                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Cost of Sales         |   |                                                                                              | 11,332 |   |                                                                                              |   | 55.04 | % |   |   | 11,109 |   |   |   | 61.90 | % |   |   | 23,189 |   |   |   | 55.53 | % |   |   | 22,254 |   |   |   | 61.79 | % |
|                        |   |                                                                                              |   |   |                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross Profit                |   | $                                                                                                 | 9,256  |   |                                                                                              |   | 44.96 | % |   | $ | 6,837 |   |   |   | 38.10 | % |   | $ | 18,572 |   |   |   | 44.47 | % |   | $ | 13,759 |   |   |   | 38.21 | % |

|     |   | Three Months Ended June 30,                                                         |   |
|----------|--------|---------------------------------------------------------------------------------------------------------|--------|
|     |   | 2011                                                                                                    |   |   | 2010 |   |
|     |   | Net Sales                                                                                          |   |   | Cost of sales |   |   | Gross profit |   |   | Grossmargin |   |   | Net Sales |   |   | Cost ofsales |   |   | Grossprofit |   |   | Grossmargin |   |
|     |   | (Amounts in thousands, in U.S. Dollars, except for percentages) |   |
|     |   |                                                                                                    |   |
| Beijing  |   | $                                                                                                       | 1,869  |   |   | $ | 1,041 |   |   | $ | 828 |   |   |   | 44.30 | % |   | $ | 984 |   |   | $ | 609 |   |   | $ | 375 |   |   |   | 38.11 | % |
| Zhejiang |   |                                                                                                    | 4,162  |   |   |   | 2,318 |   |   |   | 1,844 |   |   |   | 44.31 | % |   |   | 3,040 |   |   |   | 1,883 |   |   |   | 1,157 |   |   |   | 38.06 | % |
| Shandong |   |                                                                                                    | 2,365  |   |   |   | 1,317 |   |   |   | 1,048 |   |   |   | 44.31 | % |   |   | 2,202 |   |   |   | 1,363 |   |   |   | 839 |   |   |   | 38.10 | % |
| Jiangxi  |   |                                                                                                    | 1,772  |   |   |   | 987 |   |   |   | 785 |   |   |   | 44.30 | % |   |   | 1,749 |   |   |   | 1,084 |   |   |   | 665 |   |   |   | 38.02 | % |
| Yunnan   |   |                                                                                                    | 1,678  |   |   |   | 935 |   |   |   | 743 |   |   |   | 44.28 | % |   |   | 1,480 |   |   |   | 916 |   |   |   | 564 |   |   |   | 38.11 | % |
| Shaanxi  |   |                                                                                                    | 1,032  |   |   |   | 575 |   |   |   | 457 |   |   |   | 44.28 | % |   |   | 1,264 |   |   |   | 782 |   |   |   | 482 |   |   |   | 38.13 | % |
| Liaoning |   |                                                                                                    | 1,629  |   |   |   | 908 |   |   |   | 721 |   |   |   | 44.26 | % |   |   | 1,483 |   |   |   | 917 |   |   |   | 566 |   |   |   | 38.17 | % |
| Hubei    |   |                                                                                                    | 2,277  |   |   |   | 1,269 |   |   |   | 1,008 |   |   |   | 44.27 | % |   |   | 2,198 |   |   |   | 1,361 |   |   |   | 837 |   |   |   | 38.08 | % |
| Henan    |   |                                                                                                    | 970    |   |   |   | 540 |   |   |   | 430 |   |   |   | 44.33 | % |   |   | 1,135 |   |   |   | 702 |   |   |   | 433 |   |   |   | 38.15 | % |
| Guangxi  |   |                                                                                                    | 1,395  |   |   |   | 777 |   |   |   | 618 |   |   |   | 44.30 | % |   |   | 1,176 |   |   |   | 728 |   |   |   | 448 |   |   |   | 38.10 | % |
| Sichuan  |   |                                                                                                    | 771    |   |   |   | 429 |   |   |   | 342 |   |   |   | 44.36 | % |   |   | 900 |   |   |   | 557 |   |   |   | 343 |   |   |   | 38.11 | % |
| Fujian   |   |                                                                                                    | 668    |   |   |   | 236 |   |   |   | 432 |   |   |   | 64.67 | % |   |   | 335 |   |   |   | 207 |   |   |   | 128 |   |   |   | 38.21 | % |
| Total    |   | $                                                                                                       | 20,588 |   |   | $ | 11,332 |   |   | $ | 9,256 |   |   |   | 44.96 | % |   | $ | 17,946 |   |   | $ | 11,109 |   |   | $ | 6,837 |   |   |   | 38.10 | % |

----

|     |   | Six Months Ended June 30,                                                           |   |
|----------|--------|---------------------------------------------------------------------------------------------------------|--------|
|     |   | 2011                                                                                                    |   |   | 2010 |   |
|     |   | Net Sales                                                                                          |   |   | Cost ofsales |   |   | Grossprofit |   |   | Grossmargin |   |   | Net Sales |   |   | Cost ofsales |   |   | Grossprofit |   |   | Grossmargin |   |
|     |   | (Amounts in thousands, in U.S. Dollars, except for percentages) |   |
|     |   |                                                                                                    |   |
| Beijing  |   | $                                                                                                       | 3,692  |   |   | $ | 2,062 |   |   | $ | 1,630 |   |   |   | 44.15 | % |   | $ | 1,936 |   |   | $ | 1,196 |   |   | $ | 740 |   |   |   | 38.22 | % |
| Zhejiang |   |                                                                                                    | 8,215  |   |   |   | 4,589 |   |   |   | 3,626 |   |   |   | 44.14 | % |   |   | 5,722 |   |   |   | 3,535 |   |   |   | 2,187 |   |   |   | 38.22 | % |
| Shandong |   |                                                                                                    | 4,670  |   |   |   | 2,609 |   |   |   | 2,061 |   |   |   | 44.13 | % |   |   | 4,684 |   |   |   | 2,894 |   |   |   | 1,790 |   |   |   | 38.22 | % |
| Jiangxi  |   |                                                                                                    | 3,500  |   |   |   | 1,955 |   |   |   | 1,545 |   |   |   | 44.14 | % |   |   | 2,947 |   |   |   | 1,823 |   |   |   | 1,124 |   |   |   | 38.14 | % |
| Yunnan   |   |                                                                                                    | 3,314  |   |   |   | 1,851 |   |   |   | 1,463 |   |   |   | 44.15 | % |   |   | 2,910 |   |   |   | 1,798 |   |   |   | 1,112 |   |   |   | 38.21 | % |
| Shaanxi  |   |                                                                                                    | 2,040  |   |   |   | 1,139 |   |   |   | 901 |   |   |   | 44.17 | % |   |   | 2,485 |   |   |   | 1,536 |   |   |   | 949 |   |   |   | 38.19 | % |
| Liaoning |   |                                                                                                    | 3,217  |   |   |   | 1,797 |   |   |   | 1,420 |   |   |   | 44.14 | % |   |   | 3,269 |   |   |   | 2,019 |   |   |   | 1,250 |   |   |   | 38.24 | % |
| Hubei    |   |                                                                                                    | 4,495  |   |   |   | 2,511 |   |   |   | 1,984 |   |   |   | 44.14 | % |   |   | 4,676 |   |   |   | 2,889 |   |   |   | 1,787 |   |   |   | 38.22 | % |
| Henan    |   |                                                                                                    | 1,917  |   |   |   | 1,071 |   |   |   | 846 |   |   |   | 44.13 | % |   |   | 2,440 |   |   |   | 1,507 |   |   |   | 933 |   |   |   | 38.24 | % |
| Guangxi  |   |                                                                                                    | 2,755  |   |   |   | 1,539 |   |   |   | 1,216 |   |   |   | 44.14 | % |   |   | 2,426 |   |   |   | 1,499 |   |   |   | 927 |   |   |   | 38.21 | % |
| Sichuan  |   |                                                                                                    | 1,520  |   |   |   | 849 |   |   |   | 671 |   |   |   | 44.14 | % |   |   | 1,770 |   |   |   | 1,094 |   |   |   | 676 |   |   |   | 38.19 | % |
| Fujian   |   |                                                                                                    | 2,426  |   |   |   | 1,217 |   |   |   | 1,209 |   |   |   | 49.84 | % |   |   | 748 |   |   |   | 464 |   |   |   | 284 |   |   |   | 37.97 | % |
| Total    |   | $                                                                                                       | 41,761 |   |   | $ | 23,189 |   |   | $ | 18,572 |   |   |   | 44.47 | % |   | $ | 36,013 |   |   | $ | 22,254 |   |   | $ | 13,759 |   |   |   | 38.21 | % |

|                                |   | Three Months Ended June 30,                                                         |   |   | Six Months Ended June 30,                                                           |   |
|-------------------------------------|--------|---------------------------------------------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------------------------------------------|--------|
|                                |   | 2011                                                                                                    |   |   | 2010                                                                                                    |   |   | 2011 |   |   | 2010 |   |
|                                |   | $                                                                                                       |   |   | % ofTotalNet Sales                                                                            |   |   | $ |   |   | % ofTotalNet Sales |   |   | $ |   |   | % ofTotalNet Sales |   |   | $ |   |   | % ofTotalNet Sales |   |
|                                |   | (Amounts in thousands, in U.S. Dollars, except for percentages) |   |   | (Amounts in thousands, in U.S. Dollars, except for percentages) |   |
| Gross Profit                   |   | $                                                                                                       | 9,256  |   |                                                                                                    |   | 44.96 | % |   | $ | 6,837 |   |   |   | 38.10 | % |   | $ | 18,572 |   |   |   | 44.47 | % |   | $ | 13,759 |   |   |   | 38.21 | % |
| Operating Expenses:                 |   |                                                                                                    |   |   |                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling Expenses                    |   |                                                                                                    | 3,897  |   |                                                                                                    |   | 18.93 | % |   |   | 2,556 |   |   |   | 14.24 | % |   |   | 6,100 |   |   |   | 14.61 | % |   |   | 4,039 |   |   |   | 11.22 | % |
| General and Administrative Expenses |   |                                                                                                    | 924    |   |                                                                                                    |   | 4.82 | % |   |   | 1,071 |   |   |   | 5.97 | % |   |   | 2,331 |   |   |   | 5.58 | % |   |   | 1,901 |   |   |   | 5.28 | % |
| Total                               |   |                                                                                                    | 4,889  |   |                                                                                                    |   | 23.75 | % |   |   | 3,627 |   |   |   | 20.2 | % |   |   | 8,431 |   |   |   | 20.19 | % |   |   | 5,940 |   |   |   | 16.49 | % |
| Income from Operations              |   | $                                                                                                       | 4,367  |   |                                                                                                    |   | 21.21 | % |   | $ | 3,210 |   |   |   | 17.89 | % |   | $ | 10,141 |   |   |   | 24.28 | % |   | $ | 7,819 |   |   |   | 21.71 | % |

----

----

|                 |    | Payments Due by Period    |    |
|--------------------------------|--------------|------------------------------------------|--------------|
|                      |    | Total                                    |    |    | ThroughDecember31, 2011 |    |    | December 31,2011and Thereafter |    |
|                      |    | (in thousands of dollars) |    |
| Contractual Obligations : |    |                                     |         |   |   |   |   |   |   |
| Operating Leases (1)           |         |                                     | 94           |   |   |   | 38 |   |   |   | 56 |   |
|                           |         |                                     |         |   |   |   |   |   |   |   |   |   |
| Total Contractual Obligations: |         | $                                        | 94           |   |   | $ | 38 |   |   | $ | 56 |   |

|   | (1) | Our lease commitments as of June 30, 2011, do not include the 13 retail store leases that we assumed from our Fujian distributor, which leases we assumed effective July 1, 2011. Once these leases have been evaluated, they will result in additional lease commitments. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Exhibit   |   |                                                                                                                                                                        |
|-----------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Number    |   | Description                                                                                                                                                                 |
|      |   |                                                                                                                                                                        |
| 2.1  |   | Share Exchange Agreement (1)                                                                                                                                                |
| 3.1  |   | Articles of Incorporation (2)                                                                                                                                               |
| 3.2       |   | Amendment to Articles of Incorporation (for 1-for-100 reverse stock split), filed with the Nevada Secretary of State on January 12, 2009 (9)                                |
| 3.3       |   | Articles of Merger filed on March 4, 2009 and effective March 20, 2009 (3)                                                                                                  |
| 3.4       |   | Certificate of Correction filed on March 6, 2009 (3)                                                                                                                        |
| 3.5       |   | Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock, filed with the Nevada Secretary of State on October 23, 2009 (4) |
| 3.6       |   | Bylaws (2)                                                                                                                                                                  |
| 3.7       |   | Amendment to the Bylaws (1)                                                                                                                                                 |
| 4.1       |   | Specimen Common Stock Certificate (2)                                                                                                                                       |
| 4.2       |   | Specimen Series A Convertible Preferred Stock Certificate (4)                                                                                                               |
| 4.3       |   | Form of Common Stock Purchase Warrant for the Preferred Shares Financing (4)                                                                                                |
| 4.4       |   | Form of Common Stock Purchase Warrant for the Common Shares Financing (5)                                                                                                   |

----

| 4.5   |   | Form of Common Stock Purchase Warrant issued to American Capital Ventures, Inc. (15)                                             |
|-------|--------|----------------------------------------------------------------------------------------------------------------------------------|
| 10.1  |   | Consulting Services Agreement (1)                                                                                                |
| 10.2  |   | Operating Agreement (1)                                                                                                          |
| 10.3  |   | Equity Pledge Agreement (1)                                                                                                      |
| 10.4  |   | Option Agreement (1)                                                                                                             |
| 10.5  |   | Voting Rights Proxy Agreement (1)                                                                                                |
| 10.6  |   | Form of Securities Purchase Agreement for the Preferred Shares Financing (4)                                                     |
| 10.7  |   | Form of Escrow Agreement for the Preferred Shares Financing (4)                                                                  |
| 10.8  |   | Form of Securities Purchase Agreement for the Common Shares Financing (5)                                                        |
| 10.9  |   | Supplemental Agreement dated February 18, 2009 (7)                                                                               |
| 10.10 |   | Form of Director Offer Letter entered into with Ying Zhang and Jianwei Shen (10)                                                 |
| 10.11 |   | Bridge Loan and Financing Agreement dated June 11, 2008 (14)                                                                     |
| 10.12 |   | Form of Securities Purchase Agreement dated February 13, 2009 (11)                                                               |
| 10.13 |   | Form of Securities Purchase Agreement dated February 12, 2009 (11)                                                               |
| 10.14 |   | Loanout Agreement with Worldwide Officers, Inc. dated April 27, 2010 (12)                                                        |
| 10.15 |   | Director Offer Letter with Jianhui Wang dated June 1, 2010 (13)                                                                  |
| 10.16 |   | Acquisition of Distributorship Agreement between China Dong Rong and Xiamen Lianyu Commerce Co., Ltd. dated May 26, 2011 *       |
| 14.1  |   | Code of Ethics (6)                                                                                                               |
| 21.1  |   | List of Subsidiaries (11)                                                                                                        |
| 31.1  |   | Section 302 Certification by the Corporation’s Chief Executive Officer *                                                   |
| 31.2  |   | Section 302 Certification by the Corporation’s Chief Financial Officer *                                                   |
| 32.1  |   | Section 906 Certification by the Corporation’s Chief Executive Officer *                                                   |
| 32.2  |   | Section 906 Certification by the Corporation’s Chief Financial Officer *                                                   |
| 99.1  |   | Trademark License Contract for serial number 3871951 dated February 12, 2009 (11)                                           |
| 99.2  |   | Trademark License Contract for serial number 3884844 dated February 12, 2009 (11)                                           |
| 99.3  |   | Trademark License Contract for serial number 3884845 dated February 12, 2009 (11)                                           |
| 99.4  |   | Trademark License Contract for serial number 4247545 dated February 12, 2009 (11)                                           |
| 99.5  |   | Regional Distributorship Agreement between Yinglin Jinduren and C-002 of Mingzhu 100 Market dated May 25, 2009 (15)              |
| 99.6  |   | Regional Distributorship Agreement between Yinglin Jinduren and Jinyang Commerce Co., Ltd. dated May 25, 2009 (15)               |
| 99.7  |   | Regional Distributorship Agreement between Yinglin Jinduren and Jinduren Store, Tianqiao District, Jinan dated May 25, 2009 (15) |
| 99.8  |   | Regional Distributorship Agreement between Yinglin Jinduren and Clothwork Apparel, Wanma Plaza dated May 25, 2009 (15)           |
| 99.9  |   | Land Use Right and Building Transfer Agreement between Yinglin Jinduren and Zhimeng Wu dated February 20, 2011 (16)              |
| 99.10 |   | Property Transfer Agreement between Yinglin Jinduren and Zhimeng Wu dated January 25, 2011 (16)                                  |
| 99.11 |   | Purchase Agreements between Yinglin Jinduren and its major suppliers for 2010 (16)                                               |
| 99.12 |   | Purchase Agreements between China Dong Rong and its major suppliers for 2011 (16)                                                |

| * | Filed herewith. |
|---|-----------------|

| (1)  |   | Filed on February 13, 2009 as an exhibit to our Current Report on Form 8-K, and incorporated herein by reference.                              |
|------|--------|------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)  |   | Filed on February 9, 2007 as an exhibit to our Registration Statement on Form SB-2, and incorporated herein by reference.                      |
| (3)  |   | Filed on March 20, 2009 as an exhibit to our Current Report on Form 8-K, and incorporated herein by reference.                                 |
| (4)  |   | Filed on October 30, 2009 as an exhibit to our Current Report on Form 8-K, and incorporated herein by reference.                               |
| (5)  |   | Filed on December 2, 2009 as an exhibit to our Current Report on Form 8-K, and incorporated herein by reference.                               |
| (6)  |   | Filed on March 7, 2008 as an exhibit to our Annual Report on Form 10-K, and incorporated herein by reference.                                  |
| (7)  |   | Filed on February 20, 2009 as an exhibit to our Current Report on Form 8-K, and incorporated herein by reference.                              |
| (8)  |   | Filed on April 15, 2009, as an exhibit to our Current Report on Form 8-K, and incorporated herein by reference.                                |
| (9)  |   | Filed on December 17, 2009, as an exhibit to our Registration Statement on Form S-1, and incorporated herein by reference.                     |
| (10) |   | Filed on March 16, 2010, as an exhibit to our Current Report on Form 8-K, and incorporated herein by reference.                                |
| (11) |   | Filed on April 15, 2010, as an exhibit to our Annual Report on Form 10-K, and incorporated herein by reference.                                |
| (12) |   | Filed on May 3, 2010, as an exhibit to our Current Report on Form 8-K, and incorporated herein by reference.                                   |
| (13) |   | Filed on June 3, 2010, as an exhibit to our Current Report on Form 8-K, and incorporated herein by reference.                                  |
| (14) |   | Filed on August 27, 2010, as an exhibit to our Amendment to Registration Statement on Form S-1/A, and incorporated herein by reference.        |
| (15) |   | Filed on October 27, 2010, as an exhibit to our Amendment No. 3 to Registration Statement on Form S-1/A, and incorporated herein by reference. |
| (16) |   | Filed on March 31, 2011, as an exhibit to our Annual Report on Form 10-K, and incorporated herein by reference.                                |

----

|                  | VLOV INC.(Registrant) |
|-----------------------|-----------------------|
|                  |                  |   |
| Date: August 22, 2011 | By:         | /s/ Qingqing Wu |   |
|                  |                  | Qingqing Wu |   |
|                  |                  | Chief Executive Officer |   |

| Date: August 22, 2011 | By:    | /s/ Bennet P. Tchaikovsky |   |
|-----------------------|--------|---------------------------|--------|
|                  |   | Bennet P. Tchaikovsky     |   |
|                  |   | Chief Financial Officer   |   |

----