UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-K



[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934

for the year ended December 31, 2011



[ ]Transition report Pursuant to Section 13 or 15(d) of the Exchange  Act



Commission File Number:    333-116324



ROTOBLOCK CORPORATION

(Name of Small Business Issuer In Its Charter)



Nevada                                                                             20-08987999

(State or other jurisdiction  of incorporation or organization)             (I.R.S. Employer Identification No.)



300 B Street, Santa Rosa, CA.                      
         95401

(Address of principal executive offices)            
    (Zip Code)



(707) 578-5220

(Issuer's Telephone Number)



Securities registered under Section 12(b) of the Exchange Act:

Title of each class registered:  None                               
Name of each exchange on which registered:   None



Securities registered under Section 12(g) of the Exchange Act:

Common Stock, par value $.001

(Title of class)



Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act.    YES       NO [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13
or Section 15(d) of the Act.    YES      NO  [X]



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



Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website,
if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).     YES         NO  [X]



Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in
this form, and no disclosure will be contained, to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [X]



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



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



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

Yes  [  ]   No [ X ]



The aggregate market value of voting and non-voting
common equity held by non-affiliates of the Registrant computed by reference to the price at which the common equity was sold
or the average bid and asked prices as of June 30, 2011 was $10,005,350.



There were a total of 80,305,349 shares of the Registrant’s Common Stock outstanding
as of April 9,2012.







1













TABLE OF CONTENTS





|         | PART I                                                                                                           | Page
|-------- | ---------------------------------------------------------------------------------------------------------------- | ----
|ITEM 1.  | Description of Business                                                                                          | 4   
|         |                                                                                                                  |     
|ITEM 1A. | Risk Factors                                                                                                     | 9   
|         |                                                                                                                  |     
|ITEM 1B. | Unresolved Staff Comments                                                                                        | 11  
|         |                                                                                                                  |     
|ITEM 2.  | Description of Properties                                                                                        | 11  
|         |                                                                                                                  |     
|ITEM 3.  | Legal Proceedings                                                                                                | 11  
|         |                                                                                                                  |     
|ITEM 4.  | Reserved                                                                                                         |     
|         |                                                                                                                  |     
|         | PART II                                                                                                          |     
|ITEM 5.  | Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 12  
|         |                                                                                                                  |     
|ITEM 6.  | Selected Financial Data                                                                                          | 16  
|         |                                                                                                                  |     
|ITEM 7.  | Management's Discussion and Analysis of Financial Condition and Results of Operations                            | 16  
|         |                                                                                                                  |     
|ITEM 7A. | Quantitative and Qualitative Disclosures About Market Risk                                                       | 18  
|         |                                                                                                                  |     
|ITEM 8.  | Financial Statements and Supplementary Data                                                                      | 18  
|         |                                                                                                                  |     
|ITEM 9.  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                             | 18  
|         |                                                                                                                  |     
|ITEM 9A. | Controls and Procedures                                                                                          | 19  
|         |                                                                                                                  |     
|ITEM 9B. | Other Information                                                                                                | 19  
|         |                                                                                                                  |     
|         | PART III                                                                                                         |     
|ITEM 10. | Directors, Executive Officers and Corporate Governance                                                           | 20  
|         |                                                                                                                  |     
|ITEM 11. | Executive Compensation                                                                                           | 21  
|         |                                                                                                                  |     
|ITEM 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                   | 22  
|         |                                                                                                                  |     
|ITEM 13. | Certain Relationships and Related Transactions, and Director Independence                                        | 23  
|         |                                                                                                                  |     
|ITEM 14. | Principal Accounting Fees and Services                                                                           | 23  
|         |                                                                                                                  |     
|         | PART IV                                                                                                          |     
|ITEM 15. | Exhibits                                                                                                         | 24  
|         |                                                                                                                  |     
|         | Signatures                                                                                                       | 24  
|         |                                                                                                                  |     
|         |                                                                                                                  |     









2







PART I





SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS



This annual report on Form 10-K, or Form 10-K, including the sections entitled “Risk Factors,”
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and  “Business”
contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended, which are intended to convey our expectations or predictions regarding the
occurrence of possible future events or the existence of trends and factors that may impact our future plans and operating results.
These forward-looking statements are derived, in part, from various assumptions and analyses we have made in the context of our
current business plan and information currently available to us and in light of our experience and perceptions of historical trends,
current conditions and expected future developments and other factors we believe to be appropriate in the circumstances. You can
generally identify forward-looking statements through words and phrases such as “seek”, “anticipate”,
“believe”, “estimate”, “expect”, “intend”, “plan”, “budget”,
“project”, “may be”, “may continue”, “may likely result”, and similar expressions.
When reading any forward-looking statement you should remain mindful that all forward-looking statements are inherently uncertain
as they are based on current expectations and assumptions concerning future events or future performance of our company, and are
subject to risks, uncertainties, assumptions and other factors relating to our industry and results of operations, including but
not limited to the following factors:



|· | our ability to establish, maintain and strengthen our brand;
|- | ------------------------------------------------------------



|· | our ability to successfully integrate acquired subsidiaries, into our company and business;
|- | -------------------------------------------------------------------------------------------



|· | our ability to maintain effective disclosure controls and procedures;
|- | ---------------------------------------------------------------------



|· | our limited operating history, particularly of Rotoblock  and daifuWaste Management on a consolidated basis;
|- | ------------------------------------------------------------------------------------------------------------



|· | whether the medical waste treatment service market and medical waste treatment equipment market continue to grow and, if they does, the pace at which they may grow;
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



|· | our ability to attract and retain the personnel qualified to implement our growth strategies;
|- | ---------------------------------------------------------------------------------------------



|· | our ability to obtain approval from government authorities for our medical service treatment centers;
|- | -----------------------------------------------------------------------------------------------------



|· | our ability to protect the patents on our proprietary technology;
|- | -----------------------------------------------------------------



|· | our ability to fund our short-term and long-term financing needs;
|- | -----------------------------------------------------------------



|· | our ability to compete against our competitors;
|- | -----------------------------------------------



|· | changes in our business plan and corporate strategies; and
|- | ----------------------------------------------------------



|· | other risks and uncertainties discussed in greater detail in various sections of this report, particularly the section captioned “Risk Factors.”
|- | ------------------------------------------------------------------------------------------------------------------------------------------------





3









Should one or more of these risks or uncertainties materialize, or should the underlying assumptions
prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.



Each forward-looking statement should be read in context with, and with an understanding of, the various
other disclosures concerning our company and our business made in our filings. You should not place undue reliance on any forward-looking
statement as a prediction of actual results or developments. We are not obligated to update or revise any forward-looking statement
contained in this report to reflect new events or circumstances unless and to the extent required by applicable law.



In this annual report on Form 10-K the term refers to Rotoblock refers to Rotoblock, the term
Daifu refers to daifuWaste Management Holdings , Ltd. and “we,” “us” and “our” refer to
Rotoblock , as the context indicates.





Item 1.  Business



Overview



Rotoblock Corporation was incorporated in the State of Nevada on March 22, 2004. We were formed to
engage in the development and licensing of an Oscillating Piston Engine (OPE) which we are still developing. We maintain our statutory
registered agent's office in Carson City, Nevada and our US business office is located at 300 B Street Santa Rosa ,California
95401.



As disclosed in the Form 8KA filed November 15, 2011, and as subsequently amended, Rotoblock and the
shareholders of Daifu entered into an Amended and Restated Agreement and Plan of Share Exchange dated November 11, 2010
(Share Exchange Agreement”) pursuant to which the Daifu shareholders  transferred 100% of the outstanding shares of
Daifu to Rotoblock in exchange for the issuance of 73,801,525 shares of Rotoblock’s common stock to the Daifu
Shareholders.





Rotoblock maintains its corporate administrative office in Santa Rosa, California, at 300 B Street,
Phone 707-578-5220. There are also two small operational offices, one in Hong Kong and one in Beijing.



As a result of the Share Exchange Agreement, our business now includes the operations of Dairu, PHKJ,
Daifu’s People’s Republic of China subsidiary. PHKJ designs, develops and sells medical waste treatment
non-incinerator systems in China.





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Our current corporate structure is set forth below:



|Rotoblock Corporation   
|------------------------
|(Nevada)                
|100%                    
|                        
|100%                    
|diafu Waste Management  
|Holding Limited (Cayman)
|(Cayman Islands)        
|                        
|                        
|                        
|                        
|                        
|                        
|                        
|95%                     
|Hydoclave China, Inc    
|(BVI)                   
|                        
|                        
|                        
|                        
|                        
|                        
|                        
|                        
|                        
|                        



Our Overall Business



Rotoblock Corporation is currently involved in the development, licensing and marketing of a new type of
patented oscillating piston engine “OPS” and other energy-efficient and environmental equipment in China for distribution
worldwide. The Company is also seeking to become the leading medical waste management company in PRC with the recent acquisition
of Daifu.



Rotoblock Oscillating Piston Engine Technology (OPE)



Prior to the acquisition of Daifu,  we were a development stage enterprise, as defined in Accounting
Standards Codification (the “Codification” or “ASC”) 915-10, “Development Stage Entities”.
The Company is focused on the development and manufacturing of a new type of patented oscillating piston engine “OPS”
and other energy-efficient and environmental equipment in China for distribution worldwide.



The OPE patented internal combustion engine is different than conventional reciprocating engine technology
in that the current oscillating piston design incorporates four pairs of pistons. Each of these eight pistons is alternately attached,
through two oppositely rotating adjacent discs, to two coaxial drive shafts extending from the center of one face of the





5









cylinder
block. Each piston is attached to a single disc such that four non-adjacent pistons are rigidly affixed to the upper disc and
the remaining four to the lower. Each concentric shaft is attached, respectively, to the connecting discs. The discs, in turn,
couple the motion of the oscillating pistons to a single crankshaft, via a dual scotch yoke mechanism. Each piston is a segmented
toroidal section traveling within the closed toroidal chamber of the cylinder block.



The round cylinder block containing the pistons, connecting discs and coaxial output shafts is free to continuously
rotate in a counter clockwise direction. It is caused to revolve ninety degrees for every complete revolution of the rotating crankshaft.
This action is accomplished by a four-to-one ratio gear reduction mechanism which couples the two components together.





Rotation of the cylinder block causes a pair of intake and exhaust ports, as well as two diametrically positioned
spark plugs, to regularly appear in the intervening spaces formed between the faces of the pistons as they oscillate backwards
and forwards between the limits of allowed travel within the toroidal cylinder. When in operation, the diametrically opposed inlet
ports in the cylinder block are supplied with a combustible fuel/air mixture through an attached intake manifold, such that the
separating opposing piston pairs each draws in a fresh charge mixture as the rotating cylinder block passes through the first of
four combustion cycles.



The second cycle begins as the same piston pairs reach their limits of travel, reverse direction and proceed
to compress the charge mixture captured between their faces. Compression continues until the approaching piston faces reach their
closest point at the end of their range of travel.



The third cycle starts with the appearance of the spark plugs in the intervening space between the moving
pistons just at the point in the cycle when they make their closest approach to each other.  At this juncture, timed firing
of the spark plugs ignites the compressed charge mixture confined between the faces of each of the two piston pairs. The exploding
fuel/air mixture is rapidly heated and expands, thereby forcing the opposing piston pair faces apart and, by so doing, produces
the power cycle. The force applied to the separating pistons by the expanding gas is coupled, through the two connecting discs,
to the scotch yokes, which, in turn cause the continuous rotation of the crankshaft and output shaft.



As the cylinder block continues to rotate, the fourth cycle begins. Next, exhaust ports appear between the
piston pairs coincident with their change of direction at the end of the power stroke. The approaching piston faces now expel the
burnt exhaust gases through the exhaust ports. This brings to a close the final cycle of the four cycle sequence.



The endless repetition of these four combustion cycles produces sixteen power strokes for each revolution
of the cylinder block. Momentum stored in the inertial mass of the rotating cylinder block substitutes for the action of the flywheel
found in conventional reciprocating engine designs.



Simplicity of Design, Assembly and Repair



The OPE engine is comprised of four major mechanical sub-assemblies. Each sub-assembly can be easily removed
from the engine, allowing for rapid factory assembly and easy replacement or field servicing. We believe this feature should permit
the engine to be totally field maintainable, to the degree that a major overhaul should be able to be completed by a qualified
mechanic using only conventional hand tools in just a few hours. The simple design of the engine should also help reduce the costs
of manufacturing because of the reduced parts count. In addition, the elimination of a valve train and liquid cooling system components
in the oscillating piston engine design should lessen the engine's complexity, which could further reduce costs to achieve overall
engine efficiency. We are currently still in the testing and development stages of the engine design and as a result, have not
yet completed the final prototype for further testing.









6







Departure from conventional engine design, resulting in fewer moving parts, has allowed us to produce an engine
with reduced frictional losses, which if proven in testing, could lead to increased reliability, improved performance and longer
engine life. As is typical with mechanical systems, simplicity is the key to a successful design. In keeping with this philosophy,
the OPE engine uses standardized components, common to the  industry, wherever possible.



There is no certainty, however, that our research and development activities will result in a marketable engine
that: can be assembled more quickly than a conventional engine; - is easier to service in the field; - is totally field maintainable;
or - will reduce the costs of manufacturing.



Versatility of Use



The OPE engine has been specifically designed to maximize versatility of use. The engine's extreme horsepower
to weight ratio, when finally tested and proven, could lend itself useful to a wide variety of both industrial and consumer applications.
The advantage of having high power-to-weight ratio and air-cooled design fits perfectly with the specialized requirements of many
recreational vehicles and portable power tools. Here, engines in the range of several hundred to several thousand horsepower are
employed to power electric generators, pumps and compressors, as well as a wide variety of other industrial and agricultural types
of machinery.  If we are successful in completing our proposed model and technology, it could be an ideal choice for applications
such as these.



Environmental Impact



The OPE design is totally valve-less. As such, there are no moving intake or exhaust valves to limit combustion
temperature, as with typical internal combustion engines.  If we are successful in developing an operational engine on this
basis, it would  allow the engine to be operated with a leaner fuel/air mixture and a consequent higher combustion temperature.
The result would be  increased Carnot cycle efficiency when used with gasoline or similar hydrocarbon fuels. Carnot cycle
efficiency is the ratio of the output work to the input heat.  Leaner mixture and higher combustion temperature promotes more
complete oxidation of the burning fuel, which would reduce carbon monoxide emission, while increasing efficiency and reducing fuel
consumption for a given equivalent power output.  While there is no guarantee we will be successful in developing an operational
engine on this basis, we will attempt to make the engine's environmental impact minimal.



Research, Development and Testing Since Acquisition



|We have conducted a number of test runs with the engine and are continuing to improve upon the technology. The milestones we have set for ourselves have been reached and we are in the process of discussing potential joint ventures and/or co-development arrangements with qualified manufacturers. We are researching technologies that could be used in conjunction with the OPE, therefore enhancing the uses for this unique engine. The market has a need for technologically advanced and efficient propulsion systems, be they straight mechanical or hybrid in nature. One of the greatest challenges when incorporating hybrid technology into a vehicle is space limitation. Due to the projected high power-to-weight ratio of the OPE, at a given horsepower output OPE technology will result in a smaller, more compact engine, hence being ideally suited for such applications. We have also been contacted by manufacturers in the following areas who feel that the OPE exhibits attributes and characteristics that would benefit their product lines: -  High power marine outboard motors and axiliary-power units for the trucking industry.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





With the successful test run of the OPE, the Company has established the viability of the OPE. Current events
and the needs of international markets to capitalize on technological advances in propulsion technology immediately have necessitated
an expansion of our mission. Global supply issues of conventional fuels and rapid advances of software and electric control, measurement
and communication techniques have changed the competitive environment. Thus, the Company is concentrating on licensing the OPE
technology to all available markets. Concurrently, the Company is inviting new technologies that may be used in conjunction with
the OPE in order to be able to eventually offer complete propulsion and/or power generating systems to the market.





7









The Company’s marketing efforts will be focused on selling manufacturing licenses or rights to
use the technology. Sale of the technology rights would be preferred, as the administration and enforcement of licensing agreements
can be very complex and costly.



The Company considers it important that a new engine concept be introduced in a low-key manner and
in applications that are not mission-critical in order to build a reputation of reliability over time. We intend to pursue a marketing
strategy that primarily targets manufacturers of general purpose engines and secondarily, manufacturers of engines used in recreational
vehicles, such as outboard motors and other weight critical uses. A review of the general purpose engine market is presently underway.
To date it has been determined that several large companies, such as Honda, Briggs & Stratton, Tecumseh, Kawasaki, Kohler
and Stihl, dominate the industry. Initially, we intend to focus our marketing efforts on these 6 largest manufactures of general
purpose engines. The manufacturers produce engines for a large variety of applications, including portable chain saws, weeding
machines, portable turbo generators, portable crushers, portable arc welders and generators, snow blowers, lawn mowers and air
and gas compressors, among others.



Because of the anticipated high power to weight ratio and the intensive battle for market share, we
are hopeful that we will be successful in convincing one or more of these and other not so well known small engine manufacturers
to include our OPE technology in their product offerings.



Articles in appropriate trade journals, prominent newspapers and direct marketing campaigns will be
used to promote the OPE technology. We will also send out special invitations, solicit inquiries and encourage visits our laboratory
and testing facilities for the purpose of demonstrating the engine and its technology to potential customers to demonstrate the
engine and its unique technology, educate the potential buyer/licensee and establish essential relationships.



We intend to expand our marketing efforts to the marine outboard motor industry, as well as other small
engine applications used in the recreational and other markets, such as snowmobiles, small water craft such as Seadoos and all-terrain
vehicles. We are confident that a high power to weight ratio engine, similar to our proposed product design will fit into a large
area of applications. We are seeking strategic business partners to manufacture and market the OPE.



Daifu





General





Daifu is a holding company that only operates through our direct Chinese subsidiary. Through our Chinese subsidiary,
we design, develop, manufacture and sell medical waste treatment (“MWT”) non-incinerator systems in China. We market,
sell and service our 5 series of “海卓科 (HAI ZHUO KE)” branded medical waste treatment systems in
China. There are over 10 sets of systems in operation in China currently. Our client bases are hospitals and non-hospital medical
institutions in China, including No. 302 Hospital in Beijing, a leading hospital in China. We also donated a mobile MWT system
to Sichuan province, the most populous province in China, after the May 2008 earthquake.



Daifu’s goal is to become the leading medical waste management company in China, by leveraging our
existing leadership position as a medical waste technology provider to expand the company from a solution provider to service-solution
provider.

Daifu has started to expand to servicing by investing and acquiring centralized medical waste treatment centers
in China. We are prepared to make additional investments in medical waste treatment centers after becoming a public company with
access to more funding sources.



Daifu Products



Daifu markets sells and services its 5 series of “海卓科 (HAI ZHUO KE)” branded
medical waste treatment (MWT) non-incinerator system in China. The MWT system we manufacture and sell is based on the licensed
technology from Hydroclave Systems Corp. (“Hydroclave Canada”), a Canadian company that specializes in MWT and Special
Waste





8









Treatment (“SWT”). The systems works under high-pressure and high-temperature environment and use steam to sterilize
and disinfect the medical waste materials. The medical waste is also shredded into small proportions during the treatment. After
the treatment, the medical waste is non-recognizable and harmless and ready for landfill. The daifu technology has the advantages
of high-efficiency, environment-friendly and low operation and maintenance cost. Also, the daifu system is in full compliance with
the specification and emission requirements issued by World Health Organization (WHO) and “The Technical Specifications Regarding
the High-Temperature Steam Centralized Treatment of Medical Waste”, issued by China Ministry of Environment Protection (MEP).



Daifu Product Series



The MWT non-incinerator system has the following series, capacity and applications:



|Series Name | Working Temperature  (C) | Batch Name (L) | Batch Capacity (Kg) | Application                                                                     
|----------- | ------------------------ | -------------- | ------------------- | --------------------------------------------------------------------------------
|H25 Series  | 134                      | 700            | 115                 | In-house hospital; mobile system; or small centralized waste management facility
|H35 Series  | 134                      | 1000           | 160                 | In-house hospital; mobile system; or small centralized waste management facility
|H65 Series  | 134                      | 1800           | 300                 | Centralized waste management facility                                           
|H100 Series | 134                      | 2800           | 450                 | Centralized waste management facility                                           
|H250 Series | 134                      | 7000           | 1200                | Centralized waste management facility                                           





We have registered the trademark of “海卓科 (HAI ZHUO KE)” with the Trademark
Office of the State Administration for Industry and Commerce of China. Daifu uses the trademark for the sales and marketing of
our products. Our trademark expires in May 2013 and may be renewed thereafter.



Working Principle of Our Daifu Products



The “海卓科 HAI ZHUO KE)”-branded MWT non-incinerator system
applies high-temperature and high-pressure steam to treat all kinds of medical waste materials. To achieve the goal of thorough
and even sterilization of infectious waste material, we applied 2 principles when designing our systems:



·       The waste is treated in a continual mixing and fragmenting hot vessel, to ensure that all waste particles from small needles to
bulk liquid infectious wastes are subjected thoroughly and evenly to a heat temperature that kills micro organisms;



·       Instead
of exposing the medical waste to be treated to direct steam, indirect steam is used. The indirect steam ensures uniform heat and
allows the waste to generate its own steam from its moisture. The indirect process also greatly reduces emission of hazardous
materials into the air.

Components of the Daifu System



The Daifu MWT system is usually made up of the following components:



Sterilizer



The system is the main component. The sterilizer sterilizes the waste with high temperature and pressure and
simultaneously fragments and dries the waste to reduce significantly the weight and volume of the waste.. The sterilize has 2 different
styles: 1) front loading systems and 2) top loading systems.



Boiler



The boiler generates the high temperature steam used in the sterilizer. The boiler can be operated using various
fuel types based on availability and customer preferences. The most common fuels are oil, natural gas, propane, coal or diesel.
Steam from the boiler can also be used to heat water for the Container Cleaning System.





9









Conveyor



The conveyer moves the treated waste from the sterilizer to the shredder and to a compactor or a collection
container or truck. The conveyors are custom designed and built to suit the specific installations.



VOC Waste Gas Filter System



The filter system is an important component that condenses and filters the pressurized gases generated during
treatment of the medical waste in the sterilizer. Volatile organic compounds (“VOCs”) are produced during the high
temperature treatment and must be filtered before being released to the atmosphere. This specially engineered system ensures that
these gases are cooled below 40°C and filtered to release environmentally non-harmful emissions to the atmosphere.



Shredder



The shredder (or grinder) is used to further reduce the size of the waste fragments after the treatment cycle.
The waste is already fragmented and considerably reduced in size within the sterilizer’s treatment cycle. However, some local
regulations or landfill operators require additional shredding to ensure the fragments are “unrecognizable” to prevent
reclamation of any waste residues.



Container Cleaning System



The cleaning system is automated and is used to clean the soiled waste bins that are used to transport the
waste to the facility from the hospitals or other sources. A chain conveyor method conveys the soiled waste bins through a series
of high pressure hot water sprays and then through another series of sprays that chemically sanitize the containers. The excess
water is blown off to dry the waste bins before they are shipped back to customers for reuse.



Control Panel



The control panel fully automates the system by using state-of-the-art logic controllers and a large touch
screen. The panel is designed for ease of use and requires minimal operator training. Smaller remote panels can be used for ease
of access by connection to the main control panel. The system logs all treatment cycle data and is accessible via the internet,
making data retrieval convenient and allowing technicians to troubleshoot remotely.

Technical Advantages of Our System

Compared to other MWT techniques, such as incinerator, microwaving and heat-pressure, the Daifu
system has the following advantages:



·       Zero-emission of Dioxin, the most toxic elements often found in medical wastes treatment;

·       The sterilization result passes the industrial standard of LOG4 (for which the survival probability rate after-treatment is 1:10,000),
reaching LOG6 (for which the survival probability rate is 1:1,000,000) to LOG8 (for which the survival probability rate is 1:100,000,000);

·       The steam generated can be recycled and reused, thus saving energy and cost;

·      
Low operating and maintenance cost and low emission;

·       Complete automated operation, ensuring safety;

·       No emission of any toxic, hazardous and infectious substances into the air;

·       Greatly reduce the volume and weight of disposable post-treatment waste.







10











Manufacturing



Currently Daifu has OEM agreements for the manufacture of its system through our third-party partners,
including Tianjin Huatai Pressure Container Corporation Ltd. (“Tianjin Huatai”) and Zhejiang Muopeng Machinery
Corporation, Ltd (“Zhejiang Muopeng”). Tianjin Huatai is mainly responsible for the manufacturing of the
sterilizer. Zhejiang Muopeng is mainly responsible for the manufacturing of the periphery components, such as the conveyor
and loading platform. We purchase the control panel and other parts from third-party suppliers based on quality, price and
other terms.



When we receive a firm order with a deposit from our clients, we place the order with our manufacturing partners.
The usual manufacturing time is between 30 and 60 days. We have been satisfied with our partners from working with them for over
5 years. We also have a plan to acquire a specialized pressurized vessel company in China so that we can start to manufacture our
systems internally. The discussion with the target is underway and we hope to complete the acquisition soon.





Environmental Protection



Our manufacturing operations are subject to the environmental laws and regulations of the People’s
Republic of China on air emission, solid waste emission, sewage and waste water, discharge of waste and pollutants, and noise
pollution. These laws and regulations include the Law on Environmental Protection, the Law on the Prevention and Control of
Water Pollution, the Law on the Prevention and Control of Atmospheric Pollution, the Law on the Prevention and Control of
Pollution from Environmental Noise and the Law on the Prevention and Control of Environmental Pollution of Solid
Waste. We are also subject to periodic monitoring by relevant local government environmental protection authorities.



According to these environmental laws and regulations, all business operations that may cause environmental
pollution and other public hazards are required to incorporate environmental protection measures into their operations and establish
a reliable system for environmental protection. The operations must adopt measures to prevent and control pollution levels and
harm caused to the environment in the form of waste gas, waste water and solid waste, dust, malodorous gas, radioactive substance,
noise, vibration and electromagnetic radiation generated in the course of production, construction or other activities. Companies
in the PRC are also required to carry out an environment impact assessment before starting construction of production facilities
and the installation of pollution treatment facilities. The assessment shows that the construction or instruction will meet the
relevant environmental standards and treat pollutants before discharge. Daifu has done the required environment impact assessment
before selecting our OEM third-party partners and all of our third-party partners have obtained all the required permits and environmental
approvals.



Health and Safety Matters



The PRC Production Safety Law (the “Production Safety Law”) requires that our third-party partners
maintain safe working conditions under the Production Safety Law and other relevant laws, administrative regulations, national
standards and industrial standards. Our third-party partners are required to offer education and training programs to their employees
about production safety. The design, manufacture, installation, use and maintenance of our safety equipment must conform to applicable
national and industrial standards. In addition, our third –party partners are required to provide employees with safety and
protective equipment that meet national and industrial standards and to supervise and educate employees to wear or use such equipment
according to the prescribed rules.



Daifu complies with all applicable labor and safety laws and regulations and has implemented internal safety
guidelines and operating procedures.





11











Daifu also complies with the new Chinese Labor Contract Law, which came into effect on January 1, 2008, and does
not believe this new law will have any adverse impact on our business and operations. Since Daifu started business, no employee
has been involved in any major accident at work, and we have never been subject to governmental disciplinary actions over the labor
protection issues.

Daifu Research and Development Efforts - How We Create New Products and Enhance Existing Ones



Daifu currently operate one research and development center located in Beijing. As of December 31, 2011, we
had 6 research and development staff (all of whom hold college degrees in mechanical engineering and automation) who independently
manage new product development projects. Our research and development center’s mission is to develop advanced system, lower
emission and achieve higher efficiency in treatment process, and to provide training. We have also recruited renowned experts in
the industry to be our technology advisors. Their contribution and insights also helped us to develop new and advanced products.

Sales Process



We have established a sales network nationwide which is composed of sales representatives, agents and third-party
partners. Most of our projects are centralized municipal waste treatment centers. The centers usually finance the projects through
special government bonds. Daifu also sells to hospitals and medical institutions

nationwide. We usually obtain the potential project leads through our contacts in various cities. Then we
will contact the contractor who will operate the waste treatment centers. We will work with the contractor to incorporate our technology
and specifications in the feasibility study that is prepared by the local Development and Reform Commission (DRC). Then the feasibility
study will be presented to the provincial (municipal) DRC for environmental impact study and be submitted to the National Development
and Reform Commission (NDRC) for evaluation and approval. The NDRC has the final authority to approve the project and allocate
the government bonds for the construction. Usually the NDRC only approve the projects presented to it twice per year.



After the project is approved and the funds allocated, the local contractor will start the project design
process. In this process, we work together with them to include our technology and specifications into the final design. Then a
bidding process for the equipment of the treatment center takes place. If daifu wins the bidding, we will start the manufacturing
process and deliver the system to the contractor based on the time frame of the contract. An indicative sales cycle for our system
is between 6 to 12 months, depending on the size and sophistication of the system.



Once Daifu wins the bidding and sign the sales contract with a customer, we will ask them to pay a deposit
between 30% and 50% of the total contract value. When the system is delivered, 90% to 95% of the total contract value will be paid.
The balance will be held to cover the warranty and will be paid at the end of the warranty period (typically 12 months) provided
that no warranty repairs are required from the operation of the system and all technical specifications are met to the satisfaction
of the owner and operator.

Sales and Marketing Strategy



In the future, Daifu's sales and marketing strategy will focus on the following aspects:



Strengthen our sales efforts through hiring more sales representatives



We plan to hire more full-time sales representatives and to establish more branch offices in China, especially
in the regions that we have established market awareness and reputation, such as Southeastern China. This will improve our contacts
with existing and potential clients as well as enable collection of market intelligence for potential clients.







12











Expand our nationwide agents and business partner networks



Besides establishing in-house sales force, we will also depend on our agents and business partner network
for sales leads and market intelligence. As discussed above, the sales process for selling our systems is usually complicated and
multiple government bodies and regulators are involved. This complexity means that we have to rely on our local contacts for the
most recent and accurate market information. Establishing a reliable and long-term sales agent network nationwide is critical for
our future growth.



Improve the name-recognition of our company and products



Since Daifu started operations in 2001, we have witnessed the growth and development of the MWT industry in
China as well as the gradual increase in the awareness of the need to protect the environment in China. The general population
in China is becoming more aware about environmental protection issues. We believe that this development is a good trend for Daifu.
Through participating in related conferences and exhibitions, as well as making selective social welfare donations, such as to
the earthquake-struck regions of Sichuan Province, we will try to increase the market awareness of our technology and system and
improve our competitive position as a result.



Next Step: Entry into Waste Management Services



Daifu wants to become the leading medical waste management company in PRC, by leveraging our present leadership
position as a medical waste technology provider and expanding our business from a solution provider to a service+solution provider.
Daifu estimates that the medical waste market is a RMB 5 billion market, in both equipment and services.



Daifu started in 2002 and has a strong brand as a technology provider to the medical waste market and government
in China for over the past nine years. Government agencies have approved our products and granted licenses. Provinces and cities
are using our technology and systems. This government acceptance gives Daifu a competitive advantage to enter the medical waste
service business in a market that is still fragmented. Daifu has a good chance to become a leader in the service business.



As China’s economy continues its growth and the living standard keeps rising, the demand for high-quality
and affordable healthcare will continue to increase. To meet the ever-present popular demand as well as to harness social harmony,
the Chinese government has encouraged the entry of private capital into all sectors relating to healthcare, including hospital,
medical institutions and other industries. According to the MOH statistics, the number of hospitals in China in 2010 exceeded 20,900
with over 4.78 million hospital beds. The overall utilization rate of hospital beds stood at the high level of 90% nationwide in
2011. The total number of in-patients and out-patients in China in 2010 was 5.838 billion and 141.4 million. These numbers represent
over 10% increase annually from 2008.



The growth in use of hospitals and medical institutions has increased production of medical waste. By industry
standard, one hospital bed will produce 0.5-1.0 Kg of waste per day when occupied and 20 to 30 out-patients will produce 1.0 Kg
of waste. Daifu estimates the amount of medical waste produced in China now totals approximately 3,000 tons per day and over 1
million tons annually. How to cope with the this medical waste has become a huge challenge to China’s environment and public
safety. The Chinese government has continued to implement policies to improve environmental protections and public hygiene for
the last ten years. Such incidents as the SARS epidemic catalyzed improvement in rapid response to public health emergencies. In
2008, China encountered difficulties in medical waste treatment in the earthquake area of Sichuan. As one of the waste industry
leaders, Daifu developed and made its first mobile medical waste treatment unit and donated to the Chinese government to aid in
Sichuan emergency . This mobile unit demonstrates the importance of readiness to deal with medical waste in emergency situations.
The government is considering the purchase of more mobile units for cities all over China and to allow Daifu to provide long term
mobile unit services under joint venture agreement or BOT (Build, Operate and Transfer) structure.





13











Currently, China’s medical waste management industry is in its infancy and fragmented. Only
first-tier cities, such as Beijing, Shanghai and Guangzhou, enforce government regulations on medical waste treatment. Most
Chinese cities, except large first tier cities such as Beijing, Shanghai and Guangzhou, lack centralized MWT centers that the
Ministry of Environment Protection (“MEP”) requires. The proportion of medical waste that is centrally treated is
small. In most small cities and the countryside, the government-issued rules and regulations on the proper and safe treatment
of medical wastes are often neglected. Sales of used medical wastes, such as needles and blood bags, for profit are still
widespread in these cities and countryside. However, Daifu expects the second and third tier cities to follow first tier
cities to comply with the medical waste treatment policy issued by the central and local governments. This development will
create new market opportunities for Daifu in both system sales and the MWT center business.



Daifu is constantly evaluating the needs of the market by direct discussion with city environmental agencies
and medical waste management operators. Daifu also participates in conferences and research forums and maintains good communication
with MEP to learn about waste policy updates. Our active presence in the field is valuable to the company in assessing potential
investments and acquisitions.



Daifu plans to leverage our superior technology and market positioning to expand into the business of operation
and management of municipal MWT centers. The current conventional technology is the incinerator, which creates significant air
pollution issues. Daifu believes that our technology is superior and more environment-friendly than the competing technologies.
Our strategy is to enter into the business of managing the MWT centers in various cities. Expert in non-incinerating technology,
Daifu plans to invest in centers with conventional incinerators and converting the incinerators to Daifu's non-incinerating technology
for added efficiency and environmental friendliness. This plan is consistent with the direction of development encouraged by current
governmental policy.



Daifu has started expansion to the service-solution business by investing and acquiring centralized medical
service centers in a few Chinese cities .We entered a joint venture with Hainanzhou Luhuan Medical Waste Disposal Co. Ltd. 
in October 2009 to provide medical waste treatment to the city of Hainanzhou, in Qinghai province.  Under the current arrangement,
Daifu starts with a minority position which will enlarge to a majority in the future. This project is scheduled to be in operation
in the second quarter of 2012



As we implement our plan to enter into the business of managing medical waste treatment centers, Daifu intends
to become an integrated player in the medical waste treatment industry in China, covering equipment sales, technology transfer
and consulting, as well as management of treatment centers. We believe that, there are few companies in China with a similar business
model and that we will enjoy an early entry advantage over our competitors.



Customers



We currently have approximately sixteen customers located in China. The installations range from the planning
phase, under construction or completed. The usage is for medical waste or specific hospitals or entire provinces in China. The
installations are located as follows: Seven in Sichuan province, Two in Beijing and four more in the planning phase in Sichuan
province, one in Guangdong Province and one in Guangxi Province.



Back Log



As of April 10, 2012, Rotoblock had over $2.7 million in backlog orders for installations. The Company anticipates
completing these installations by December 31, 2012.









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Warranty Program



Our products vary by geography and product and are competitive with other suppliers of these types of products.
Generally, our product warranties are 12 months after installation. The customer will hold back between 5% and 10% of the contract
value will be kept as warranty cost and will be pay the balance to Daifu after the warranty period expires if no defect in the
operation of the system and all technical specifications are met to the satisfaction of the owner and operator during the warranty
period.



Our warranties generally cover defects in workmanship and materials and are limited to specific usage parameters.



After Sales Service



Daifu strives to serve our customers as quickly as practicable. After receiving a complaint which requires
immediate attention, an engineer will be dispatched to the customer to resolve the problem generally within 24 hours. We have set
up a major client response line to communicate with end users and customers. We have also established a department and data collection
center that monitor our after-service department and provide it with support.

Daifu’s Indusrty

Governmental legislation and regulation increasingly require the proper handling and disposal of
regulated wastes like medical waste and hazardous industrial waste. Medical waste are composed of infectious, toxic and other hazardous
wastes which are directly or indirectly produced in the medical care, prevention, health care and other related activities by medical
institutions. Medical wastes specifically include infectious wastes, pathological wastes, traumatic wastes, chemical wastes, and
drugs.

These wastes contain a large number of bacterial viruses and have the characteristics of space pollution,
acute viral infection and latent infection. If the wastes are thrown away and mixed with other living garbage, they will pollute
air, water, land, animals and plants, resulting in the spread of diseases, and serious harm to human health.

Medical Wastes
in China

The collection and treatment of medical wastes and solid hazardous wastes collection
has become a booming industry since 2003 when SARS broke out, growing fast especially in the past three years. Medical waste production
grows with an increase in hospital bed usage and outpatient visits. According to the national Ministry of Health (MOH), the number
of outpatients in China increased to 5.84 billion in 2010 from 2.446 billion in 2006, or a compound annual growth rate (CAGR)
of 24.3%. Inpatients grew at a CAGR of 15.6 % from 79.04 million in 2006 to 141.4 million in 2010; and the number of beds used
reached 4.79 million in 2010, representing a CAGR of 8.1% from 2006.

We estimate that medical waste production exceeded 1.15 million tons in 2010,
representing 15 % CAGR since 2006, based on various government-issued data and our internal analysis.

|Medical Wastes (Outpatients)                          | Year
    2006 | Year
    2007 | Year
    2008 | Year
    2009 | Year
    2010
|----------------------------------------------------- | ------------- | ------------- | ------------- | ------------- | -------------
|Out patients per year (Million)                       | 2,446         | 2,842         | 3,532         | 5,490         | 5,838        
|Outpatients per KG                                    | 25            | 25            | 25            | 25            | 25           
|Medical Wastes per year by Outpatients (million Tons) | 0.098         | 0.114         | 0.141         | 0.220         | 0.234        
|Medical Wastes (Used beds)                            | Year
    2006 | Year
    2007 | Year
    2008 | Year
    2009 | Year
    2010
|Liscensed Beds (Million)                              | 3,51          | 3,70          | 4,04          | 4,42          | 4,79         
|Wastes (Kg/Day/Bed)                                   | 0.75          | 0.75          | 0.75          | 0.75          | 0.75         
|Bed Usage Rate per Year                               | 64.9%         | 70.9%         | 74.7%         | 77.7%         | 77.7%*       
|Medical Wastes/Day                                    | 1,709         | 1,968         | 2,263         | 2,573         | 2,790        
|Operating days/Year                                   | 330           | 330           | 330           | 330           | 330          
|Medical Wastes per Year by Used Beds (million Tons)   | 0.564         | 0.649         | 0.747         | 0.849         | 0.921        
|Medical Wastes in Total  (million Tons)               | 0.662         | 0.763         | 0.888         | 1.069         | 1.154        



Source to: Ministry of Health (MOH) Statistics Year Book 2009 and internal analysis.

*: bed usage rate is not available in 2010. However, according to the first 3 quarters
statistics by MOH and past tendency analysis, we believe the rate should be higher than that of 2009.



15







According to the MOH statistics and our analysis, we estimates that the annual
market size for medical wastes collection and treatment was at least RMB 3 billion (or more than $450 million) in 2010, and we
believe the market will grow at 10-15% in the next 5 years.

According to the “Hazardous waste and medical waste disposal facility construction
planning” of 2004 (the “Planning Report”), which was jointly published by the Ministry of Environmental Protection
and the State Finance Department of Commerce Ministry, a total of 342 medical waste treatment centers and hazardous waste treatment
centers would be established in 326 first-tier and second-tier cities (covering almost all prefecture-level cities). Among these
centers, non-incinerator technology (which we use) would be employed in 287 centers which would deal with 3 to 15 tons daily medical
wastes; incineration technology would be used in 28 large cities which are mostly capitals in each province. However, our technology
can be used to update these incinerators when updating is preferred.

In the Planning Report, there would be another 24 centers/cities which are supposed
to deal with medical wastes and hazardous wastes in each center. They are typically incinerators.

Outside of these large and medium sized cities, we believe there is a significant
untapped market for our mobile devices. According to Administrative Divisions Forum (www.xzqh.org),
in 2010 there are a total of 356 prefecture-level cities, 845 county-level cities and 357 counties in the mainland of China (excluding
Taiwan, Hong Kong and Macau). According to the Planning Report, only 326 cities have planned to establish medical centers., There
would be 1,202 counties/county-level cities which have not installed and even planned to install qualified facilities to dispose
of medical wastes.

Regulation

China’s medical waste equipment industry and medical waste collection and treatment industry are regulated
by various government agencies, including the Ministry of Environmental Protection (“MEP”). The MEP has branch offices
across China to oversee the medical waste industry at the provincial and county levels. The MEP and other government agencies such
as the National Development and Reform Commission (“NDRC”), the MOH, the General Administration of Quality Supervision,
Inspection and Quarantine of the PRC (“AQSIQ”) and the Ministry of Commerce (“MOFCOM”), have promulgated
rules and regulations relating to the production and the procurement of medical waste equipment, the pricing of medical waste collection,
the operation of the equipment, and the licensing and operation of medical waste treatment centers.



The medical waste industry is also subject to extensive provincial and local laws and regulations. This statutory
and regulatory framework imposes a variety of compliance requirements, including requirements to obtain and maintain government
permits. These permits grant the authority among other things:



·       to make medical waste equipment;

·       to construct and operate collection,
transfer and processing facilities.



Permits must be periodically renewed and are subject to modification or revocation by the issuing authority.
Regulations also govern the definition, generation, segregation, handling, packaging, transportation, treatment, storage and disposal
of medical waste. In addition, extensive regulations minimize employee exposure to medical waste.



Permits licensing China’s medical waste equipment industry and medical waste collection and treatment
industry are subject to two types of permits: Boiler and Pressure Vessel Manufacturing Permit and Hazardous Waste Management Permit.



·       Boiler and Pressure Vessel Manufacturing
Supervision and Management Methods of 2002. The Boiler and Pressure Vessel Manufacturing Supervision and Management Methods of
2002 authorize the AQSIQ and its provincial branches to issue and review Boiler and Pressure Vessel Manufacturing Permits.



·       Hazardous Waste Management Permit
Management Methods of 2004. The Hazardous Waste Management Permit Management Methods of 2004 authorize the MEP and its county level
branches to issue and review hazardous waste management permits. Comprehensive hazardous waste management permit allows the handling
of hazardous waste collection, storage and treatment; Hazardous waste collection permits allow only the collection of hazardous
waste. Only an enterprise that holds a comprehensive hazardous waste management permit is allowed to collect, store, transport
and dispose of medical waste.



16







Technology Regulations Different regulations apply to the four technologies used in medical waste treatment
centers. The technologies are incineration; steam based engineering chemical disinfection and microwave disinfection. All regulations
govern waste collection, storage and treatment, daily capacity limitations, selection of plant, facilities infrastructure, and
green protection methods for a medical waste incineration plant (or medical waste disposal center). The regulations require the
plant (or medical waste disposal center) to acquire a hazardous waste management permit.



State Planning: After SARS (Severe acute respiratory syndrome) broke out in 2003, the MEP issued the Hazardous
Waste and Medical Waste Disposal Facility Construction Planning Of 2004. This policy had the following goals.



·       By the end of 2006, to eliminate
hazardous waste, medical waste and radioactive waste pollution issues, and achieve the safe storage and disposal of the nationwide
hazardous waste, medical waste and radioactive waste.



·       To plan and construct 31 large
hazardous waste disposal centers to increase hazardous waste disposal capacity by 2.82 million tons per year; 300 medical waste
disposal centers to increase medical waste disposal capacity to 2,080 tons per day.



·       To invest RMB14.92 billion, including
RMB6.98 billion in 31 large hazardous waste disposal centers, and RMB6.89 billion in medical waste disposal centers.



·       To support installment of large
hazardous waste disposal centers and medical waste disposal centers with national bond funds issued by the central government and
local governments; to attracts private capital to the operations of large hazardous waste disposal centers and medical waste disposal
centers.



·       To take full advantage of franchise
and other methods to prevent low level, disorderly competition and duplicate construction of hazardous waste centers and medical
waste disposal centers.



·       To implement a pricing policy for
the treatment of hazardous waste and medical waste, establish reasonable pricing criteria; to provide preferential policies to
those disposal centers that efficiently treat waste.



Important Domestic Regulations in P.R.C.: After the 2003 SARS breakout, government authority agencies including
the MEP and MOH issued laws and regulations to regulate the development of medical waste collection, storage and treatment.



·       Management Regulations on Medical
Waste of Medical Institutions of 2003. These regulations regulate medical institutions in the collection, transportation storage
and disposal of medical waste. The regulations give the MOH and its branches power to punish violations of the regulations..



·       Medical Waste Management Regulations
of 2003 by the State Council. These regulations govern the storage, transfer and disposition of medical waste. The regulations
prohibit any company or individuals from transferring or selling medical waste illegally and provide for punishment of violations.
.. The regulations provide that medical waste is not permitted to be mixed with other waste and garbage. Medical waste is to be
sorted and stored in special containers with special logos. The regulations also require medical institutions and medical waste
management centers to provide training and protection for employees who are engaged in collection, transport, storage and disposal
of medical waste. The regulations also require registration of medical waste with information about the source, species, weight
or quantity, the transfer time, disposal methods, the final destination and the persons handling the treatment and disposal. The
registration information is to be kept at least three years.



·       Medical Waste Management Rules
of Administrative Penalty of 2004 by MOH. These rules set forth sanctions for violations the above regulations.







17









·       The Chinese Solid Waste
Pollution Prevention Law of 2004. Under this law, any companies, agencies and individuals engaged in collection, storage,
disposal and management activities of hazardous waste, must obtain an operations license from municipal and provincial-level
branches of MEP.



-        The
Chinese Enterprise Income Tax Law of 2007. This income tax provides for tax
incentives for investment and operations in state supported public infrastructure or environmental protection projects. The
incentives include tax reduction or credits for investment in equipment that protects the environment, or promote energy and
water conservation and production safety.

Competition



The market for MWT systems is still relatively new and fragmented in China. No company, either foreign or
Chinese, dominates the industry. A few foreign companies are seeking to take advantage of the growth of the Chinese environment
protection market. The foreign companies include Bondtech of USA, Webeco of Germany and Ecodas of France.



Only a few domestic companies are in the industry because of the newness of the market. Some of the domestic
competitors are state-owned.and tend to be aggressive in prices when bidding on projects. The domestic companies include Shandong
Xinhua, Chongqing Zhide Boiler and Tianjin Green Tech.



Daifu competes on the basis of price and quality of our products, the ability to produce a diverse range of
products and customer service. Our high-temperature, high-pressure treatment technology is more advanced and environment-friendly
than the competing technologies, such as incineration, vacuuming or microwaving.





Item 1A. Risk Factors



RISK FACTORS



Report investors should carefully consider and evaluate each of the following considerations and all other
information set forth in this Report before deciding to invest in our common stock. To the best of our knowledge and belief, all
risk factors that are material to investors in making an informed judgment have been set out below. If any of the following considerations
and uncertainties develops into actual events, our business, financial conditions, results of operations and prospects could be
materially and adversely affected. In such cases, the trading price of our Shares could decline and you may lose all or part of
your investment in our Shares.



This Report also contains forward-looking statements having direct and/or indirect implications on our future
performance. Our actual results may differ materially from those anticipated by these forward looking statements due to certain
factors including the risks and uncertainties faced by us, as described below and elsewhere in this Report.

RISKS RELATED TO OUR BUSINESS

Daifu is a relatively new company and may experience volatility in our business.



Daifu only started to operate in 2001 and has not achieved significant revenue through 2010. During
this period, it has experienced significant challenges in expanding its business and selling its systems. The reason for the challenges
is that the MWT industry was nonexistent in China until the 2001 SARS outbreak. Hospitals and medical institutions reused the medical
supplies like needles. Selling used medical supplies for profit was common. Daifu had to educate medical institutions and the Chinese
government about the critical need treat medical waste properly. While Daifu has seen significant improvement in the general public’s
knowledge and awareness of the MWT industry, we cannot assure that the MWT industry will grow as Diafu has projected. Not meeting
projections will impact Daifu's business negatively.







18











Our planned expansion into the Medical Waste Treatment Management Center business is a new business
for us and we may experience difficulties implementing the plan.



Daifu plans to expand into the MWT center operation and management business by leveraging our industry leadership
in the equipment sector. If successfully implemented, the strategy will greatly enhance our industrial and competitive position
and generate recurring revenue for us. However, the MWT industry, especially the operation and management of treatment centers,
is competitive and undeveloped. Because every city has one or two centers, the operators have close connections with the regulatory
agency in the city. One consequence is a lack of transparency or predictability in the MWT center operation and management business.
Our plan to acquire these centers may not succeed because of the lack of transparency or predictability. The failure would result
in slower growth of Daifu's business than projected.



Our Oscillating Piston Engine is in the small engine industry which is highly competitive and our technology
may not be well received or successful.



The small engine industry is highly competitive with respect to technology, performance, quality and availability
of service/parts. There are numerous well-established competitors, including national, regional and local small engine manufacturers
and distributors who have substantially greater financial, marketing, personnel and other resources than our company.  There
can be no assurance that we will be able to respond to various competitive factors affecting our industry and technology. The need
for small engine equipment is also generally affected by changes in consumer preferences, national, regional and local economic
and environmental regulations and demographic trends.  Prior to our acquisition of the engine and technology, it experienced
a critical mechanical failure and was disassembled to investigate the cause of the problem. Failure analyses showed metal fatigue
to be the cause of the critical component having failed. It was subsequently determined that choice of materials specified in the
original design was ultimately the cause of the failure. A replacement component was re-specified and fabricated from a more suitable
material. There can be no assurance that we will be able to successfully develop our proposed technology sufficient to create our
planned model or, that if developed, it will suitably pass future testing and not fail again. If we are unable to successfully
compete in the development and marketing of our finished product, we may be unable to generate any revenues and you could suffer
a total loss of any investment you make in our securities.



We may be unable to protect the proprietary rights to the Oscillating Piston Engine technologies, patents
and intellectual property, which may hamper our ability to license and/or sell the manufacturing rights to the technology, thereby
impacting our ability to earn revenues and become profitable.



Our success and ability to compete depend in part on the protection of the patents to the technology. We rely
on patent and copyright laws to protect the intellectual property that was developed and have an option to acquire several patents
on the technology. However, such laws may provide insufficient protection. Moreover, other companies may develop products that
are similar or superior to our prototype engine,  or may copy or otherwise obtain and use proprietary information we develop
or use without our authorization. If a third party were to violate one or more of the patents or the new technology we develop,
we may not have the resources to bring suit or protect the intellectual property underlying the patents. In the event of such a
violation or if a third party appropriated any of our unpatented technology, such party may develop and market technology and/or
products which we intend to develop and/or market. We would lose any revenues, which we would otherwise have received from the
sale or licensing of that technology or those products. This could prevent our ever making a profit on any licensing and/or sale
of any technology or products we develop.



We do not currently own the intellectual property underlying the engine's technology, but rather, have an
option agreement to use the technology. Our business plans are to develop the technology and build a prototype engine that can
be sub-licensed to third party manufacturers for amounts sufficient to generate the funds to purchase the patent rights subject
of the option agreement;  however, if we are unable to do so prior to the expiration date of the option, we would need to
raise additional capital through loans or equity sales. We cannot guarantee that we will ever develop a successful prototype or
that, if successfully developed, we will be able to sublicense the rights to any manufacturer for production and sale. As a result,
we may never have the funds to purchase the patents, which would result in a total failure of our business and a complete loss
of any investment you make in our securities.





19











Policing unauthorized use of the patents, proprietary and other intellectual property rights could entail
significant expense and could be difficult or impossible. In addition, third parties may bring claims of copyright or trademark
infringement against us or claim that certain of our processes or features violate a patent, that we have misappropriated their
technology, or formats or otherwise infringed upon their proprietary rights. Any claims of infringement, with or without merit,
could be time consuming to defend, result in costly litigation, divert management attention and/or require us to enter into costly
royalty and/or licensing arrangements to prevent further infringement on the technology we develop or use, any of which could increase
our operating expenses and thus prevent us from becoming profitable.



Our competitive position also depends upon unpatented trade secrets. Trade secrets are difficult to protect.
Our competitors may independently develop proprietary information and techniques that are substantially equivalent to the technology
we use, or otherwise gain access to trade secrets we develop surrounding the engine development, such as through unauthorized or
inadvertent disclosure of our trade secrets. If this occurs, our competitors may use our processes or techniques to develop competing
products and bring them to market ahead of us. This could prevent us from becoming profitable.  As a result of any of the
aforementioned circumstances, you could suffer a total loss of any investment you make in our securities.



We may not be able to successfully develop an Oscillating Piston Engine to a marketable product.



We cannot guarantee that we will be able to successfully complete an engine that meets the specifications
we have set forth and are attempting to develop. Our final product may not function as we believe it will; its projected potential
applications may be limited; and it may never be a viable product. If we are unable to successfully develop the engine technology
as planned and it is not functional or commercially attractive to third parties, we may never be able to license the technology
or sell the rights to manufacture our products. In such event, we would not be able to generate any revenues and any investment
you made in our securities would be a total loss.





Daifu does not own any manufacturing facilities so our product quality and delivery time may experience
negative variances.



Currently, Daifu manufactures our MWT systems through third-party OEM partners. The relationship is mutually
beneficial, and we are satisfied with the quality of the manufactured systems and the price and terms. Still, because China has
special requirements for pressurized containers, Daifu wants to start manufacturing directly. We are thus considering the acquisition
of a special boiler company in China so that we can start to make the systems. However, no understandings, commitments or agreements
are in place for the acquisition at this time, and we cannot assure that the acquisition can be completed timely on favorable terms
and price. Not having our own manufacturing facilities may our hinder our future growth.



The medical waste treatment industry is heavily regulated by Chinese government and changes in government
regulation may negatively impact Daifu's business.



The Chinese government has issued rules, regulations and standards for the disposal and treatment of medical
waste as well as other hazardous waste. It also regulates who can operate and manage the municipal treatment centers. The standards
and regulations regarding the treatment centers also change frequently. This regulatory environment creates uncertainty for us,
and future changes may adversely affect our business.



Failure to achieve our acquisition strategy would impact our ability to grow.



Part of Daifu's strategy is to grow through acquisitions of other product lines, technologies or facilities
that will complement or expand our existing business. We may fail to achieve this part of our business strategy. A limited number
of potential targets are available in the MWT industry, including both system manufacturers and MWT centers. Daifu may not identify
suitable acquisition candidates or negotiate attractive terms. In addition, Daifu may have difficulty obtaining financing necessary
to complete acquisitions.





20











Acquisitions may dilute equity ownership and value and may result in more negatives than benefits.



Future acquisitions may involve the issuance of our equity securities that would dilute ownership interests
of current shareholders. In addition, future acquisitions may adversely affect Daifu earnings or earnings per share. We also may
incur additional debt or suffer adverse tax and accounting consequences from future acquisitions, and then the benefits from an
acquisition may be less than the negatives.



Failure to integrate acquired companies successfully could disrupt Daifu, and integration issues could distract
management.



Even if we succeed in completing acquisitions, we might experience difficulties integrating the acquired businesses
or assets. Acquisitions might result in unanticipated liabilities, unforeseen expenses and distraction of management’s time
and attention.



Daifu now has a small number of customers, and results from operations and shareholder value could be adversely
affected if we fail to acquire new customers.



Daifu has a limited history of operation. In 2009, we acquired one new customer. In 2010, we acquired six
new customers and in the six months ended June 30, 2011, we acquired two new customers. As discussed before, the sale cycle for
our MWT systems is time-consuming and unpredictable. Failure to achieve significant sales growth, would adversely affect future
revenues and stockholder value.



Our products could be subject to product liability claims by customers and/or consumers, which would adversely
affect our profit margins, results of operations and stockholder value.



Daifu's MWT system is used in hospital, medical institutions and municipal medical waste treatment centers.
If our products are not properly designed or built and/or personal injuries or environmental accidents are sustained from our equipment,
we could be subject to claims for damages based on theories of product liability and other legal theories. The costs and resources
to defend claims could be substantial. We could be responsible for paying some or all of the damages if the claims succeed in court
or through settlement. Also, our reputation could be adversely affected, whether or not the claims are successful. Any of these
results would adversely affect our profit margins, results from operations and stockholder value.



Expansion of our business may put added pressure on our management and operational infrastructure impeding
our ability to meet any increased demand for our system and possibly hurting our operating results.



Our business plan is to grow significantly to meet the anticipated growth in demand for our MWT systems and
enter into the MWT center management business. Growth in our business may significantly strain our personnel, management, financial
systems and other resources. The evolution of our business also presents numerous risks and challenges, including:



| | our ability to successfully and rapidly expand
    sales of our system nationwide to meet the expected increased                demand;
| | ---------------------------------------------------------------------------------------------------------------------------------------
| | unexpected changes in the regulatory environment of our industry;                                                                      
| | the costs associated with growth that are difficult to quantify, but could be significant; and                                         
| | technological change.                                                                                                                  



To accommodate the expected growth and compete effectively, daifu will need to obtain additional funding to
improve information systems, procedures and controls and expand, train, motivate and manage our employees. Our operating results
could be adversely affected if the needed funding is not obtained.





21









We depend heavily on key personnel



Our future business and results of operations depend on the our key technical and senior management personnel,
including Dr. Michael Hon Choi Choy, our director, Mr. Andrew P. Schneider, our Chief Executive Officer, and Ms. Yin Jie, our
Chief Operating Officer. They also depend on our ability to attract and retain additional qualified management, technical, marketing
and sales and support personnel for our business. If we lose a key employee or if a key employee fails to perform as expected,
or if we are unable to attract and retain skilled employees as needed, our business could be adversely affected. Turnover in our
senior management would result in the loss of institutional knowledge held by our existing senior management team and could adversely
affect our company.



Our holding company structure may limit the payment of dividends to our stockholders.



We have no direct business operations, other than our ownership of our subsidiaries. While we have no current
intention of paying dividends, should we decide in the future to do so, as a holding company, our ability to pay dividends and
meet other obligations depends upon the receipt of dividends or other payments from our operating subsidiaries and other holdings
and investments. In addition, our operating subsidiaries, from time to time, may be subject to restrictions on their ability to
make distributions to us, including as a result of restrictive covenants in loan agreements, restrictions on the conversion of
local currency into U.S. dollars or other hard currency and other regulatory restrictions as discussed below. If future dividends
are paid in RMB, fluctuations in the exchange rate for the conversion of RMB into U.S. dollars may reduce the amount received by
U.S. stockholders upon conversion of the dividend payment into U.S. dollars.



Chinese regulations currently permit the payment of dividends only out of accumulated profits as determined
in accordance with Chinese accounting standards and regulations. Our subsidiaries in China are also required to set aside a portion
of their after tax profits according to Chinese accounting standards and regulations to fund certain reserve funds. Currently,
our subsidiaries in China are the only sources of revenues or investment holdings for the payment of dividends. If they do not
accumulate sufficient profits under Chinese accounting standards and regulations to first fund certain reserve funds as required
by Chinese accounting standards, we will be unable to pay any dividends.



The majority of our business is solely in the PRC.



All our Daifu products have been sold to the PRC market. As such, our business and prospects are susceptible
to changes in the PRC MWT market that could adversely affect demand for our systems. Our business could be adversely affected if
our PRC business drops, and if we are unable to make up the decline with sales outside the PRC.



Our competitiveness is dependent on our continuing R&D.



We emphasize R&D, in particular to develop advanced systems that lower emissions and increase efficiency
of our MWT systems. Our continuing emphasis on R&D to improve product quality and develop new products to meet changing market
demands is important to our future growth and prospects. We cannot assure that our R&D efforts in the development of new products
will yield commercially viable products. or the sale of such products.



Achieving or maintaining our profitability and adequate working capital



We cannot assure that our achieve profitability. Our plan to expand our product line and sales force and to
enter into the operation and management of MWT centers in the PRC will increase our operating costs. This increase in operating
costs without a corresponding revenue increase will have a negative impact on our operating results.



We cannot assure that we will be able to secure funding on acceptable terms when required. The inability to
maintain sufficient working capital to meet our business requirements, implement plans or react to changes in our business and
industry will negatively affect our business and financial condition.







22









Relationship between Hydroclave Canada and Hydroclave China, our subsidiary



Daifu sells non-incinerator medical waste treatment products using technology developed by Hydroclave Systems
Corporation, a Canadian company (“Hydroclave Canada”). Hydroclave Canada has granted in a technology transfer agreement
the rights to manufacture non-incinerator medical waste treatment systems using Hydroclave Canada technology to Hydroclave China
for sale only to daifu Waste Solutions and to Hydroclave Canada. The consideration for the technology transfer agreement is a 5%
share ownership in Hydroclave China and 5% royalty fee payable by Hydroclave China for every product that Hydroclave China supplies
to daifu Waste Solutions.



Hydroclave Canada and Hydroclave China had a dispute over the technology transfer agreement in the past, but
no dispute has happened in the last three years. Nonetheless, a risk remains that a dispute with Hydroclave Canada may arise again
over the technology transfer agreement.



Protection of our intellectual property



Currently Daifu has three patents on its technology registered in the PRC:



| | 1. | Steam-Base Medical Waste Treatment
                                                           Vessel Patent by Hydroclave China Inc.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------

| | 2. | Anti-Wrapping Device Patent for Steam-Base
                                                           Medical Waste Treatment Vessel by Puhua Kangjian Environmental Technology
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3. | Waste Bin Washing & Cleaning
                                                           System Patent by Puhua Kangjian Environmental Technology
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------



We also applied Mobile Steam-Base Medical Waste Treatment System by Puhua Kangjian Environmental Technology,
which combines our system with tow truck.

RISKS RELATING TO OUR INDUSTRY

Competition



We face competition from local and overseas companies. producers. Some competitors have longer operating histories,
larger customer bases, stronger relationships with their customers, greater brand or name recognition and greater financial, technical,
marketing and public relations resources than we have. Our business will be adversely affected if we are unable to compete effectively.



We compete on the basis of price, quality and brand recognition. If we are not competitive on pricing, our
business and results of operations may be adversely affected. Any deficiencies in the quality of our MWT systems or the level
of our service to our customers or any price war will also affect our business and results of operations.



Dependency on the hospital and medical institution industry



The principal customers for our MWT systems are hospital, medical institutions and waste disposal facilities
in the PRC. Any adverse change in the outlook or growth of the hospital and medical institution industry in the PRC may adversely
affect the demand for our MWT systems. Our business will also be adversely affected if we are unable to expand our customer base.





Environmental protection laws and regulations



Daifu is required to comply with the environmental protection laws and regulations promulgated by the state
and local governments of the PRC and the standards applicable to the discharge of waste water, solid waste, effluents and gases.
These regulations impose penalties for noncompliance. The nature of our business is that waste water and wastes are regularly discharged
from our production processes.





23









Our OEM partners have installed waste treatment facilities in their production facilities to treat the discharges.
However, there can be no assurance that we will at all times be in full compliance with the laws and regulations. Any failure by
us to discharge the waste generated in the production process in could subject us to warnings, fines or other penalties. If our
business operations result in environmental pollution, we will also be obliged to cure the harm caused to the environment and pay
compensation to the entity or individual that suffers direct losses from the pollution. These events may negatively affect our
business.



In addition, the promulgation of any new environmental laws or regulations that require us to acquire equipment
or incur additional capital expenditure will increase our costs and affect the profitability of our business.

RISKS RELATING TO THE PRC

Uncertainties in PRC economic conditions that may arise from changes in government policies and social
conditions



Since 1978, the PRC government has undertaken various reforms of its economic systems. The reforms have resulted
in economic growth for the PRC in the last two decades. However, many of the reforms are unprecedented or experimental, and are
expected to be refined and modified. Other political, economic and social factors may also lead to further adjustments to the reforms.
This refinement and readjustment of policies, laws, regulations or their interpretation or implementation create uncertainty in
economic conditions that may materially and adversely impact our operations in the PRC or our financial performance.



PRC laws and regulations



Our business and operations in the PRC are subject to the legal system of the PRC. The PRC legal system is
a codified system with written laws, regulations, circulars, administrative directives and internal guidelines. A violation of
these laws, regulations and the like by our PRC subsidiaries will subject them to prescribed penalties. The PRC government is
still developing its legal system to meet the needs of investors and to encourage foreign investment. Further, the PRC economy
is generally undergoing development at a faster pace than its legal system. These two facts create uncertainty about the applicability
laws and regulations. Some of the laws and regulations, and their interpretation, implementation and enforcement are still developing,
and subject to policy changes. Also, precedents on the interpretation, implementation and enforcement of the PRC laws and regulations
are limited, and higher court decisions in the PRC do not have any binding effect on lower courts. Thus, the results of legal
disputes may not be as consistent or predictable as in other more developed countries. It may also be hard to obtain quick and
equitable enforcement of laws in the PRC, or to obtain enforcement of a judgment of a court of another jurisdiction.



Compliance with the United States Foreign Corrupt Practices Act



Daifu is required to comply with the United States Foreign Corrupt Practices Act. This act prohibits U.S.
companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining
business. Foreign companies, including some of our competitors, are not subject to these prohibitions. Corruption, extortion, bribery,
pay-offs, theft and other fraudulent practices occur from time-to-time in mainland China. If our competitors engage in these practices,
they may receive preferential treatment from governmental customers to give our competitors an advantage in securing business or
from government officials who might give them priority in obtaining new licenses. These practices would put us at a disadvantage.
Although we inform our employees that such practices are illegal, we cannot assure that our employees or other agents will not
engage in conduct that would violate the US Foreign Corrupt Practices Act. If our employees or other agents are found to have engaged
in such practices, we could suffer severe penalties under the act.



PRC foreign exchange control of dividends and other payments from our PRC subsidiary



The applicable law in respect of the conversion of RMB into other currencies is the Regulation for Foreign
Exchange Controls of the PRC (“Regulation”), which came into effect on 1 April 1996 and was amended as of 14 January
1997.





24









Under the Regulation, the conversion of RMB into foreign currencies for the use of recurring items, including
the distribution of dividends and profits to foreign investors of foreign investment enterprises is permissible and foreign investment
enterprises are permitted to remit foreign currencies from their foreign currency bank accounts in the PRC upon the presentation
of board resolutions authorizing the distribution of profits or dividends, subject to other requirements being satisfied; and



The conversion of RMB into foreign currencies for capital items, such as repatriation of capital, repayment
of loans and securities investment, is still under control.



In addition, in December 2006, the People's Bank of China promulgated the Administrative Measures for Individual
Foreign Exchange, which set forth the respective requirements for foreign exchange transactions by PRC individuals under either
current account or the capital account. In January 2007, the PRC State Administration for Foreign Exchange (“SAFE”)
issued the Implementation Rules of the Administrative Measures for Individual Foreign Exchange, which, among other things, specified
approval requirements for certain capital account transactions such as a PRC citizen's participation in employee stock ownership
plans or stock option plans of an overseas publicly-listed company. On March 28, 2007, SAFE promulgated the Processing Guidance
on Foreign Exchange Administration for Domestic Individuals Participating in Employee Stock Ownership Plans or Stock Option Plans
of Overseas-Listed Companies. PRC citizens who are granted stock options by an overseas publicly-listed company are required, through
a qualified PRC domestic agent or PRC subsidiary of such overseas publicly-listed company, to register with SAFE and complete certain
other procedures.



Our PRC employees and shareholders are subject to the stock option rules and guidance. Our PRC employees and
shareholders have yet to complete the registration process upon the completion of the merger. Failure to comply with the stock
option rule and related rules will subject us or our PRC citizen employees participating in our stock incentive plan to fines and
other legal or administrative sanctions Restrictions could be imposed on our execution of option plans, including the grant of
options under the plans to our employees. The restrictions could adversely affect our ability to hire and retain employees.



Effect on our financial performance of changes of PRC laws and regulations on currency conversion

Under the present unified floating exchange rate system, the People’s Bank of China publishes a daily
exchange rate for the RMB based on the previous day dealings in the inter-bank foreign exchange market. Under this unified floating
exchange rate system, fluctuations in the exchange rate of the RMB against other currencies are to some extent subject to market
forces. Moreover, no assurance can be given that the RMB will not be subject to devaluation or depreciation from administrative
or legislative intervention by the PRC government or adverse market movements. A devaluation of the RMB may adversely affect our
cash flow position in the repayment of any foreign currency debt. Conversely, an appreciation of RMB could lead to a reduction
in the prices of imported products that would adversely our competitiveness against foreign MWT systems imported to the PRC.



Expected increase in competition following the PRC’s entry into the World Trade Organization (WTO)

The PRC has gained entry into the WTO. The entry may result in the lowering or elimination of trade tariffs
and import controls on imports of foreign MWT products into the PRC may be lowered or removed. A reduction of import tariffs and
barriers will tend to increase competition from competitive foreign MWT products. The increased competition may result in lower
prices and profitability for daifu's MWT systems.













25









RISKS RELATING TO AN INVESTMENT IN OUR COMMON STOCK



Our directors,  certain of our shareholders and their affiliates, who will in aggregate own
approximately 87% of our enlarged share capital and Common Stock equivalents (including the shares underlying the Rotoblock
Warrants)., will retain significant control, which will allow them to influence the
outcome of matters submitted to stockholders for approval. As a result, these persons, if they act together, will be able to
exercise significant influence over all matters requiring stockholder approval, including the election of Directors and
approval of significant corporate transactions, and will have veto power in respect of any stockholder action or approval
requiring a majority vote. Such concentration of ownership may also have the effect of delaying, preventing or deterring a
change in control of our Company which may not benefit all stockholders.



There may not be sufficient liquidity in the market for our securities in order for investors to sell their
securities



We have currently only a limited public market for our Common Stock, which is listed on the
Over-the-Counter Bulletin Board. No assurance can be given that a trading market will develop further or be maintained in the
future.



The price of our Common Stock may be volatile, which could result in substantial losses for stockholders



The market price of our Common Stock may be highly volatile and could be subject to wide fluctuations
in response to variations in operating results. These fluctuations may be exaggerated if the trading volume of the stock is low.
In addition, the market price of  our Common Stock may also rise and fall as a result of, among others, the following
factors, some of which are beyond our control:-



(i)                
the success of our management team in implementing business and growth Strategies;

(ii)              
gain or loss of an important business relationship;

(iii)            
 changes in analysts’ recommendations or perceptions;

(iv)            
 changes in general economic conditions or stock market sentiments or other events or factors;

(v)               changes in share prices or prospects of companies with similar businesses as our Group that are listed in     Singapore or elsewhere;
and broad stock market fluctuations.



Future sales of our common stock could adversely affect our share price



Our directors and controlling shareholders collectively hold approximately 70.87% percent of our issued
and outstanding Common Stock and Common Stock equivalents (including the shares underlying our Warrants). Any sale of
our Common Stock by our directors and substantial shareholders could cause the price of the Common Stock to fall and
may thereby also affect our ability to raise funds through issuance of equities or other forms of securities.  Our
securities are highly speculative and involve a high degree of risk, including among other items the risk factors described
below. You should carefully consider the following risk factors and other information in this 10-K before deciding to invest
in our securities.



Item 1B. Unresolved Staff Comments



None.





Item 2. Properties



We do not own any property.





26









We currently are using office space located at 300 B Street in Santa Rosa, California for the overall administration
of the Company. The space consists of approximately 500 sq ft.  We also have two small operational offices one in Hong Kong
and the other in Beijing.



Item 3. Legal Proceedings



None.



Item 4. Removed and Reserved



PART II



Item 5.   Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities.



Market Information



Our common stock is quoted on the OTC Bulletin Board under the symbol “RTBC”.



|                       |  | Bid
    price |     
|---------------------- |  | ------------- | ----
|Period                 |  | High          |     
|Fiscal
    Year 2011:  |  |               |     
|December 31,
    2011  |  | $             | 1.03
|September 30,
    2011 |  |               | 1.05
|June 30,
    2011      |  |               | 2.00
|March 31,
    2011     |  |               | 2.90
|Fiscal
    Year 2010:  |  |               |     
|December 31,
    2010  |  | $             | 1.10
|September 30,
    2010 |  |               | 2.70
|June 30,
    2010      |  |               | 3.00
|March 31,
    2010     |  |               | 1.44



Holders



We have approximately 178 record holders as of April 9, 2012. The number of registered shareholders
does not include any estimate by us of the number of beneficial owners of common stock held in street name. The transfer agent
and registrar for our common stock is Holladay Transfer & Trust Company.



Dividends



We have never declared or paid any cash dividends on our common stock, and we do
not anticipate that we will pay any cash dividends on our common stock in the foreseeable future. Any future
determination to declare and pay cash dividends will be at the discretion of our Board of Directors and will be
dependent upon our financial condition, results of operations, capital requirements and other factors as our Board of
Directors may deem relevant at that time.



Recent Sales of  Unregistered Securities



Other than the issuance of our common stock to the Daifu Shareholders pursuant to the Share Exchange
Agreement, we have not engaged in any sales of any other unregistered securities.





27









Equity Compensation Plans



On December 15, 2011 we filed a Form S-8 Registration Statement with the SEC to register 10 million shares
of our common stock for future issuances to consultants, employees, attorneys, officers and directors at a proposed maximum offering
price of $0.25 per common share. At December 31, 2011 no shares have been issued under the plan.



There were no stock options granted, issued or outstanding as of December 31, 2011.





Item 6.  Selected Financial Data



Not applicable





Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations



Overview and 2011 Highlights



In November 2011, the reverse acquisition of Rotoblock by Daifu was completed. This
transaction provides the Company with the opportunity to become the leading medical waste management company in PRC, by
leveraging our existing leadership position as a medical waste technology provider to expand the company from a solution
provider to service-solution provider.



Results of Operations



Year Ended December 31, 2011 Compared to Year Ended December 31, 2010



Sales for the year ended December 31, 2011 were $1.7 million compared to $3.2
million for the year ended December 31, 2010, which is an decrease of $1.5 million. The decrease was due to fewer high priced
contracts in 2011 where we had five installations compared with six installations in 2010.



Cost of Goods Sold decreased by $1 million from $2.1 millions for the year ended December
31, 2010 to $1.1 million for the year ended December 31, 2011.  This decrease was due to fewer installations in 2011.
As a percentage of sales the cost of goods sold was 62% and 67% for the year ended December 31, 2011 and 2010 respectively.



Gross profit decreased by $412,000 from $1.1 millions for the year ended December 31,
2010 to $645,000 for the year ended December 31, 2011. This decrease related principally as a result of a lower sales volume
of high margin installations in the year ended December 31, 2011.



Sales and distribution expenses increased by $22,000 for the year ended December
31, 2011 compared to the year ended December 31, 2010. The primary reason for the increase was the transfer of staff person
salary from general and administrative expenses to sales and marketing in 2011.



Administrative and other operating costs decreased by approximately $61,000 from $1.3
million for the year ended December 31, 2010 to $1.2 million for the year ended December 31, 2011. The decrease was partially due
to the transfer of a staff’s salary to selling expenses per above and offset by the inclusion of Rotoblock since acquisition
of $45,000 in addition expenses. In the year ended December 31, 2010, we had certain equity compensation expenses that were not
incurred in 2011.



Other income of $1.8 million in 2011 is primarily due to the cancellation of two sales
contract by customers where installation deposits of approximately $1.7 million was forfeited to us.





28









Financial expense increased from $3,361 for the year ended December 31, 2010 to $8,582 for the year ended
December 31, 2011. The increase was primarily due to interest accrued on the $2 million convertible debt.



Interest income decreased slightly from $1,782 in 2010 to $1,132 in 2011 due to less
overall Company balances in bank savings accounts.



Net Income (loss). Net Income for the year ended December 31, 2011 was $ 764,000 compared
to a net loss of $715,000 for the year ended December 31, 2010.





Liquidity and Capital Resources



In assessing our liquidity, we monitor and analyze our cash on-hand, liquidation value
of our investment in securities, and our operating and capital expenditure commitments.  Our principal liquidity needs
are to meet our working capital requirements, operating expenses and capital expenditure obligations.



Our principal sources of liquidity consist of our existing cash on hand, bank loans,
our investment in securities with Samyang Optics, Ltd of $990,000. As of December 31, 2011, we had a loan of $410,000 due to American
Pacific Medical Group Limited, a related party of daifuWaste Group, with loan interest rate at 7% per annum, from January 1, 2012.



We will require additional capital to expand our current operations.  In particular,
we require additional capital to expand our customer base by the addition of qualified sales and professional staff to execute
on our business plan and pursue our efforts in the research and development.



We intend to fund our long term liquidity needs related to operations through the incurrence
of indebtedness, equity financing or a combination of both.  Although we believe that these sources will provide sufficient
liquidity for us to meet our future liquidity and capital obligations, our ability to fund these needs will depend on our future
performance, which will be subject in part to general economic, financial, regulatory and other factors beyond our control, including
trends in our industry and technological developments.  However, we may not be able to obtain this additional financing
on terms acceptable to us or at all.



We used cash in operations of $61,042 and $888,728 during the years ended December 31,
2011 and 2010 respectively. Cash used in operations in 2011 was the result of the net income incurred for the year of $764,385,
plus the addition of non-cash expenses of $98,864. In 2011, non-cash expenses were due to depreciation and amortization, non-cash
interest and stock based compensation. Cash used in operations in 2010 was the result of the net loss of $715,391, offset by non-cash
expenses of $164,980. In 2010, non-cash expenses were due to depreciation and amortization and stock based compensation for certain
equity instruments.



In 2011, the net change in operating assets and liabilities resulted in a cash decrease
of $924,291. The change was primarily due to the following: a decrease in other receivables and prepayments of $501,176 as a result
of payments to suppliers and a decrease in customer’s deposits offset by an increase in other payables and accrued liabilities
of $877,136 as a result of accruals of $340,000 for executive pay, a loan from Pacific Medical Group Limited of $410,000 and Vat
Taxes of $80,000.



In 2010, the net change in operating assets and liabilities resulted in a cash decrease
of $338,317. The change was primarily due to the following: an increase of $295,720 in accounts receivable for project revenue
earned but not paid, a decrease in the inventory of $478,669 for materials used in completed projects, increase in other receivables
and prepayments of $633,897 for guaranteed customer deposits and deposits to suppliers and a increase in other receivables and
accrued liabilities of $474,387 due to accruals of $230,000 for executive pay and a $150,000 accrual for VAT taxes.





29









Investing activities used cash of $217,406 and $0 during the year ended December 31,
2011 and 2010, respectively.

In 2011, the cash was invested to acquire a 35% share interest in a MWT center in Qinghai Province. The center
is expected to start business in the second quarter of 2012.



Financing activities used cash of $138,627 and $50,414 during the year ended December 31,
2011 and 2010 respectively. In 2011, restricted cash in the amount of $4.1 million was released to redeem all of our outstanding
preferred stock for $4.3 million. The company also received $100,000 in cash from the exercise of stock options.



In 2010, we used cash of $50,414 to secure performance on a certain installation.





We had cash and cash equivalents of $144,000 at December 31, 2011 as compared to
$566,000 at December 31, 2010. We had a working capital deficit of $2.6 million at December 31, 2011 versus working capital
of $3.1 millions at December 31, 2010.



We believe that our currently available working capital should be adequate to sustain
our operations at our current levels through at least the next twelve months.



Critical Accounting Policies and Use of Estimates



The discussion and
analysis of our financial condition and results of operations are based upon our consolidated financial statements which have
been prepared in conformity with U.S. generally accepted accounting principles which requires our management to make estimates
and assumptions affecting the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, as well as revenues and expenses during the reporting period. The amounts estimated could
differ from actual results.



Critical Accounting Policies and Use of Estimates



The discussion and analysis of our financial condition and results of operations are based upon our consolidated
financial statements which have been prepared in conformity with U.S. generally accepted accounting principles which requires
our management to make estimates and assumptions affecting the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements, as well as revenues and expenses during the reporting period.
The amounts estimated could differ from actual results.



Off-Balance Sheet Arrangements



We have no off-balance sheet arrangements or contractual or commercial commitments.





Item 7A. Quantitative and Qualitative Disclosures About Market Risk



Rotoblock’s foreign currency exchange risks are as follows:



Rotoblock benefits from a weaker dollar and is adversely affected by a stronger dollar relative to major
currencies worldwide.  Accordingly, changes in exchange rates, and in particular a strengthening of the US dollar, may
negatively affect the company’s consolidated revenues or operating costs and expenses as expressed in U.S. Dollars.  Adjustments
resulting from the process of translating foreign functional currency financial statements into US dollars are included in accumulated
other comprehensive income (loss) in common shareholders equity.  Foreign currency transaction gains and losses are
included in current earnings.  China uses their currency as the functional currency.



Item 8. Financial Statements and Supplementary Data





The information required by Item 8 and the index thereto commences on the next page.





30















ROTOBLOCK CORPORATION





consolidated financial statements

FOR THE Year ENDED December 31, 2011

(Expressed in US dollars)



































ROTOBLOCK CORPORATION



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS





CONTENTS







|                                                        | Pages
|------------------------------------------------------- | -----
|                                                        |      
|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 2    
|                                                        |      
|CONSOLIDATED BALANCE SHEET                              | 3-4  
|                                                        |      
|CONSOLIDATED STATEMENT OF INCOME                        | 5    
|                                                        |      
|CONSOLIDATED STATEMENT OF CASH FLOWS                    | 6    
|                                                        |      
|CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY          | 7    
|                                                        |      
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS          | 8-32 



























31























Report of Independent Registered Public Accounting
Firm









To the Board of Directors and stockholders of Rotoblock Corporation



We have audited the accompanying consolidated balance sheet of Rotoblock Corporation
(the “Company”) as of December 31, 2011 and the related consolidated statements of income and comprehensive income,
stockholders' equity and cash flows for the year then ended. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.



We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of December 31, 2011 and the results of its operations and its
cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.





/s/ Parker Randall CF

Parker Randall CF (H.K.) CPA Limited

Certified Public Accountant

Hong Kong

April 13, 2012







32











|ROTOBLOCK
    CORPORATION                   |      |                 |                 | 
|------------------------------------------- | ---- | --------------- | --------------- | 
|                                            |      |                 |                 | 
|CONSOLIDATED
    BALANCE SHEET              |      |                 |                 | 
|AS
    OF DECEMBER 31, 2011                 |      |                 |                 | 
|(Expressed
    in U.S. Dollars)             |      |                 |                 | 
|                                            |      | December
    31 | December
    31 | 
|ASSETS                                      | Note | 2011            | 2010            | 
|Current assets                              |      | $               | $              
|Cash and cash equivalents                   |      | 144,202         | 566,085        
|Restricted cash                             |      | -               | 4,067,777      
|Accounts receivable                         |      | 538,513         | 494,243        
|Prepayments, deposits and other receivables | 4    | 641,454         | 1,070,582      
|Inventory                                   | 5    | 600,963         | 398,384        
|                                            |      |                 |                
|Total current assets                        |      | 1,925,132       | 6,597,071      
|                                            |      |                 |                
|Non-current assets                          |      |                 |                
|Property, plant and equipment,
    net      | 6    | 123,493         | 34,675         
|Goodwill                                    | 1    | 3,480,852       | -              
|Investments in associates                   | 7    | 293,590         | -              
|Available-for-sale investments              | 8    | 990,533         | -              
|                                            |      |                 |                
|Total non-current assets                    |      | 4,888,468       | 34,675         
|                                            |      |                 |                
|TOTAL ASSETS                                |      | 6,813,600       | 6,631,746      
|                                            |      |                 |                
|LIABILITIES                                 |      |                 |                
|Current liabilities                         |      |                 |                
|Accounts payable and accrued liabilities    | 10   | 1,273,610       | 747,998        
|Deferred revenue                            |      | 651,117         | 2,710,005      
|Due to related parties                      | 11   | 410,000         | -              
|Convertible promissory note                 | 12   | 2,226,192       | -              
|                                            |      |                 |                
|Total current liabilities                   |      | 4,560,919       | 3,458,003      
|                                            |      |                 |                
|TOTAL LIABILITIES                           |      | 4,560,919       | 3,458,003      
|                                            |      |                 |                





|SHAREHOLDERS'
    EQUITY                            |    | $           | $          
|--------------------------------------------------- | -- | ----------- | -----------
|Common stock                                        | 14 | 79,509      | 960,731    
|Preferred stock                                     | 14 | -           | 318,875    
|Additional paid in capital                          |    | 5,886,251   | 7,781,014  
|Warrants                                            | 14 | 1,401,514   | -          
|Available-for-sale investment valuation
    reserve |    | (24,131)    | -          
|Accumulated other comprehensive income              |    | 72,667      | 40,461     
|Deficit                                             |    | (5,162,176) | (5,926,561)
|                                                    |    |             |            
|TOTAL SHAREHOLDERS’ EQUITY                          |    | 2,253,634   | 3,174,520  
|                                                    |    |             |            
|Non-controlling interests                           | 16 | (953)       | (777)      
|                                                    |    |             |            
|TOTAL LIABILITIES
    AND SHAREHOLDERS’ EQUITY      |    | 6,813,600   | 6,631,746  







Nature and Continuance of Operations (Note 1), Commitments
and Contingencies (Note 18), and Subsequent Events (Note 21)







- See Accompanying Notes -





33









|ROTOBLOCK CORPORATION                                         |      |                 |                
|------------------------------------------------------------- | ---- | --------------- | ---------------
|                                                              |      |                 |                
|CONSOLIDATED STATEMENT OF
    INCOME AND COMPREHENSIVE INCOME
|FOR THE YEAR ENDED DECEMBER
    31, 2011                      |     
|(Expressed
    in U.S. Dollars)                               |      |                 |                
|                                                              |      | Year
    ended  | Year
    ended 
|                                                              |      | December
    31 | December
    31
|                                                              | Note | 2011            | 2010           
|                                                              |      | $               | $              
|Sales                                                         |      | 1,699,637       | 3,184,332      
|Cost of sales                                                 |      | (1,054,969)     | (2,127,075)    
|Gross profit                                                  |      | 644,668         | 1,057,257      
|                                                              |      |                 |                
|Selling and distribution expenses                             |      | (467,518)       | (445,245)      
|Administrative and other operating
    costs                  |      | (1,253,504)     | (1,314,464)    
|Depreciation and amortization                                 |      | (13,716)        | (11,542)       
|Loss from operations                                          |      | (1,090,070)     | (713,994)      
|                                                              |      |                 |                
|Other income                                                  | 3    | 1,861,725       | -              
|Financial income and (expense)                                |      | (8,578)         | (3,361)        
|Interest income                                               |      | 1,132           | 1,782          
|Income (loss) before taxes                                    |      | 764,209         | (715,573)      
|                                                              |      |                 |                
|Income tax                                                    | 17   | -               | -              
|Net income (loss) after taxes                                 |      | 764,209         | (715,573)      
|                                                              |      |                 |                
|Non-controlling interests                                     | 16   | 176             | 182            
|                                                              |      |                 |                
|Income (Loss) for the year                                    |      | 764,385         | (715,391)      
|                                                              |      |                 |                
|Other comprehensive income                                    |      |                 |                
|Foreign currency translation
    adjustment                   |      | 32,206          | 40,829         
|Loss on share exchange                                        |      | -               | (2,952)        
|Unrealized gain (loss) on
    available for sale investments  |      | (24,131)        | -              
|                                                              |      |                 |                
|Total comprehensive income
    (loss)                         |      | 772,460         | (677,514)      
|                                                              |      |                 |                
|Income (Loss) per share –
    basic                           |      | 0.01            | (0.01)         
|                                                              |      |                 |                
|Income (Loss) per share –
    diluted                         |      | 0.01            | (0.01)         
|                                                              |      |                 |                
|Weighted average share outstanding
    - basic                |      | 73,867,810      | 66,280,233     
|                                                              |      |                 |                
|Weighted average share outstanding
    - diluted              |      | 76,265,030      | 66,280,233     
|                                                              |      |                 |                



- See Accompanying Notes -





34













|ROTOBLOCK CORPORATION                                               |  |      |                 |  |                
|------------------------------------------------------------------- |  | ---- | --------------- |  | ---------------
|                                                                    |  |      |                 |  |                
|CONSOLIDATED STATEMENT OF CASH FLOWS                                |  |      |                 |  |                
|FOR THE YEAR ENDED DECEMBER 31, 2011                                |  |      |                 |  |                
|(Expressed in U.S. Dollars)                                         |  |      |                 |  |                
|                                                                    |  |      | Year ended      |  | Year ended     
|                                                                    |  |      | December
    31 |  | December
    31
|                                                                    |  | Note | 2011            |  | 2010           
|                                                                    |  |      | $               |  | $              
|Cash Flows from Operating Activities                                |  |      |                 |  |                
|Income (Loss) for the period                                        |  |      | 764,385         |  | (715,391)      
|Depreciation and amortization                                       |  |      | 13,716          |  | 11,542         
|Non-cash interest                                                   |  |      | 14,466          |  | -              
|Non-controlling interest                                            |  |      | (176)           |  | (182)          
|Stock-based compensation                                            |  |      | 70,858          |  | 153,620        
|Decrease/(Increase) in accounts receivable                          |  |      | (30,040)        |  | (295,720)      
|Decrease/(Increase) in inventory                                    |  |      | (184,703)       |  | 478,669        
|Decrease/(Increase) in other receivables and prepayments            |  |      | 501,176         |  | (633,897)      
|Increase/(Decrease) in other payables and accrued liabilities       |  |      | 877,136         |  | 474,387        
|Increase/(Decrease) in deferred revenue                             |  |      | (2,087,860)     |  | (361,756)      
|                                                                    |  |      |                 |  |                
|Net cash used in operating activities                               |  |      | (61,042)        |  | (888,728)      
|                                                                    |  |      |                 |  |                
|Cash Flows from Investing Activities                                |  |      |                 |  |                
|Investment in associates                                            |  | 7    | (293,590)       |  | -              
|Cash acquired on share exchange                                     |  | 1    | 76,182          |  | -              
|                                                                    |  |      |                 |  |                
|Net cash used in investing activities                               |  |      | (217,406)       |  | -              
|                                                                    |  |      |                 |  |                
|Cash Flows from Financing Activities                                |  |      |                 |  |                
|Common shares issued for cash                                       |  | 14   | 100,000         |  | -              
|Decrease/(increase) in restricted cash                              |  |      | 4,071,373       |  | (50,414)       
|Redemption of preference shares                                     |  | 14   | (4,310,000)     |  | -              
|                                                                    |  |      |                 |  |                
|Net cash used in financing activities                               |  |      | (138,627)       |  | (50,414)       
|                                                                    |  |      |                 |  |                
|Net decrease in cash and cash equivalents                           |  |      | (417,077)       |  | (939,142)      
|                                                                    |  |      |                 |  |                
|Effect of foreign currency translation on cash and cash equivalents |  |      | (4,806)         |  | 1,665          
|                                                                    |  |      |                 |  |                
|Cash and cash equivalents – beginning of year                       |  |      | 566,085         |  | 1,503,562      
|                                                                    |  |      |                 |  |                
|Cash and cash equivalents – end of year                             |  |      | 144,202         |  | 566,085        







- See Accompanying Notes -







35











|ROTOBLOCK CORPORATION                                   |            |  |           |  |           |  |                 |  |           |  |                    |  |               |  |             |  |            
|------------------------------------------------------- | ---------- |  | --------- |  | --------- |  | --------------- |  | --------- |  | ------------------ |  | ------------- |  | ----------- |  | -----------
|                                                        |            |  |           |  |           |  |                 |  |           |  |                    |  |               |  |             |  |            
|CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY          |            |  |           |  |           |  |                 |  |           |  |                    |  |               |  |             |  |            
|FOR THE YEAR ENDED DECEMBER 31, 2011                    |            |  |           |  |           |  |                 |  |           |  |                    |  |               |  |             |  |            
|(Expressed in U.S. Dollars)                             |            |  |           |  |           |  |                 |  |           |  |                    |  | Accumulated   |  |             |  |            
|                                                        | Number of  |  |           |  |           |  |                 |  |           |  | Available-for-sale |  | other         |  | Accumulated |  |            
|                                                        | Common     |  | Common    |  | Preferred |  | Additional      |  |           |  | investment         |  | comprehensive |  | deficit     |  | Total      
|                                                        | Shares     |  | Stock     |  | Stock     |  | paid-in capital |  | Warrants  |  | valuation reserve  |  | income        |  |             |  |            
|                                                        |            |  | $         |  | $         |  | $               |  | $         |  | $                  |  | $             |  | $           |  | $          
|                                                        |            |  |           |  |           |  |                 |  |           |  |                    |  |               |  |             |  |            
|Balance – 31 December 2010                              | 66,665,853 |  | 960,731   |  | 318,875   |  | 7,781,014       |  | -         |  | -                  |  | 40,461        |  | (5,926,561) |  | 3,174,520  
|                                                        |            |  |           |  |           |  |                 |  |           |  |                    |  |               |  |             |  |            
|Issuance of shares for cash                             | 6,939,076  |  | 100,000   |  | -         |  | -               |  | -         |  | -                  |  | -             |  | -           |  | 100,000    
|Issuance of shares for settlement of debt               | 196,596    |  | 2,833     |  | -         |  | 68,025          |  | -         |  | -                  |  | -             |  | -           |  | 70,858     
|Redemption of preferred stock                           | -          |  | -         |  | (318,875) |  | (3,991,125)     |  | -         |  | -                  |  | -             |  | -           |  | (4,310,000)
|Share exchange between Rotoblock and daifuWaste         | 5,706,977  |  | (984,055) |  | -         |  | 2,028,337       |  | 1,401,514 |  | -                  |  | -             |  | -           |  | 2,445,796  
|Net loss for the year                                   | -          |  | -         |  | -         |  | -               |  | -         |  | -                  |  | -             |  | 764,385     |  | 764,385    
|Unrealized gain (loss) on available for sale investment | -          |  | -         |  | -         |  | -               |  | -         |  | (24,131)           |  | -             |  | -           |  | (24,131)   
|Foreign currency translation adjustment                 | -          |  | -         |  | -         |  | -               |  | -         |  | -                  |  | 32,206        |  | -           |  | 32,206     
|                                                        |            |  |           |  |           |  |                 |  |           |  |                    |  |               |  |             |  |            
|Balance – 31 December 2011                              | 79,508,502 |  | 79,509    |  | -         |  | 5,886,251       |  | 1,401,514 |  | (24,131)           |  | 72,667        |  | (5,162,176) |  | 2,253,634  
|                                                        |            |  |           |  |           |  |                 |  |           |  |                    |  |               |  |             |  |            



















- See Accompanying Notes -









36









ROTOBLOCK CORPORATION



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)



| | 1. | Nature
                                                                                                and Continuance of Operations
| | -- | ------------------------------------------------------------------------------------------------------------------------------------



Rotoblock Corporation (“Rotoblock” or the “Company”)
was incorporated under the laws of the State of Nevada on 22 March 2004.



On 30 March 2004, the Company entered into a Share Exchange Agreement (the
“Agreement”) with Rotoblock Inc., a Canadian corporation incorporated on 2 September 2003, wherein the Company agreed
to issue to the stockholders of Rotoblock Inc. 300,000 common shares in exchange for the 144,000 shares that constituted all the
issued and outstanding shares of Rotoblock Inc. Effective 30 March 2004, Rotoblock Inc. completed the reverse acquisition under
the Agreement with the Company.



Immediately after the acquisition, the management of Rotoblock Inc. took control
of the board and office positions of the Company, constituting a change of control. Because the former owners of Rotoblock Inc.
gained control of the Company, the transaction would normally have been considered a purchase by Rotoblock Inc. However, since
the Company was not a business, the transaction was not considered to be a business combination, and the transaction was accounted
for as a recapitalization of Rotoblock Inc. and the issuance of stock by Rotoblock Inc. for the assets and liabilities of the Company.
The value of the net assets of the Company acquired by Rotoblock Inc. was the same as their historical book value, being a deficiency
of $138.



On 18 November 2011, the Company completed its acquisition by
daifuWaste Management Holding Limited, (“daifu”), a Cayman Islands company, via Share Exchange Agreement
(“Share Exchange Agreement”). Pursuant to the Share Exchange Agreement, the shareholders of daifu transferred all
of the daifu ordinary shares outstanding to the Company in exchange for issuance of 73,801,525 common shares of the Company,
par value $0.001 per share, to the daifu shareholders. As at the date of the Share Exchange Agreement, daifu had 106,356,423
ordinary shares outstanding.



As at 18 November 2011, the Company had an aggregate of 9,281,160 share purchase
warrants and a convertible promissory note outstanding. Both instruments remained intact after the Share Exchange Agreement. As
a result, daifu shareholders acquired approximately 81.28% of the Company’s issued and outstanding common stock and common
stock equivalents.



Because the former owners of daifu obtained control of Rotoblock, the transaction
was considered a purchase of Rotoblock’s operations by daifu, accordingly:





37











ROTOBLOCK CORPORATION



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)



| | 1. | Nature
                                                                  and Continuance of Operations (Continued)
| | -- | ------------------------------------------------------------------------------------------------------------------



| | (a) | daifu is deemed to be the acquirer
                                                            for accounting purposes and, as such,
                                                            its assets and liabilities are included in the consolidated financial
                                                            statements of the combined entity at their historical carrying values.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | The
                                                            consolidated financial statements of the combined entity are issued
                                                            under the name of the legal parent, being Rotoblock, but are a continuation
                                                            of the historical consolidated financial statements of daifu.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | The
                                                            transaction shares were recorded at the fair value of the assets of
                                                            Rotoblock.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (d) | The
                                                            accumulated deficit of Rotoblock as at 17 November 2011 has been eliminated.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------



| | (e) | The
                                                            capital structure of the Company is that of Rotoblock, but the dollar
                                                            amount of the issued share capital in the consolidated balance sheet
                                                            immediately prior to the acquisition is that of daifu plus the value
                                                            of shares issued by Rotoblock to acquire daifu.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (f) | For
                                                            the results of operations for the year ended 31, December 2011, daifu
                                                            results are included from 1 January 2011 to 31 December 2011 and for
                                                            Rotoblock from 18 November 2011 to 31 December 2011.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



At the date of acquisition, the determination
and allocation of the purchase price is summarized below:



|Purchase
    Price                           |   |            |  
|-------------------------------------------- | - | ---------- | -
|                                             |   |            |  
|Shares of daifu (i)                          |   | 24,497,207 |  
|Fair value per share
    of daifu (ii)       | $ | 0.0998     |  
|Total Purchase Price                         |   |            | $
|                                             |   |            |  
|Allocation of
    Purchase Price             |   |            |  
|Cash                                         |   |            | $
|Accounts receivable                          |   |            |  
|Prepaid expenses                             |   |            |  
|Accounts payable
    and accrued liabilities |   |            |  
|Convertible promissory
    note              |   |            |  
|Available-for-sale
    investments           |   |            |  
|Property, plant and
    equipment            |   |            |  
|Goodwill                                     |   |            |  
|                                             |   |            | $







38









ROTOBLOCK CORPORATION



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)



| | 1. | Nature
                                                                  and Continuance of Operations (Continued)
| | -- | ------------------------------------------------------------------------------------------------------------------



| | i. | As the
                                                           transaction is determined to be a purchase of Rotoblock’s operations
                                                           by daifu, the consideration transferred by daifu for its interest in
                                                           Rotoblock is based on the number of ordinary shares to be issued by
                                                           daifu to give the original shareholders of Rotoblock an 18.72% (81.28%
                                                           interest held by original daifu shareholders) interest in consolidated
                                                           Rotoblock after the Acquisition.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ii. | Determined
                                                            based on appraised fair value of daifu’s net assets of $10,618,613
                                                            and 106,356,423 ordinary shares outstanding on the date of Acquisition.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



daifu (formerly named China Healthcare Holdings Limited), was incorporated
in Cayman on 1 August 2000.



On 30 June 2008, daifu underwent a reverse merger with its subsidiaries involving
an exchange of shares (“Share Exchange”) between daifu and daifuWaste Management Holding Limited (Samoa) (“daifuWaste
Samoa”), daifuWaste Solutions Inc. (“daifuWaste Solutions”), daifuWaste Investment Limited (“daifuWaste
Investment”), Hydroclave China Inc. (“Hydroclave”) and daifuWaste Investment (Hong Kong) Limited (“daifuWaste
HK”). For financial reporting purposes, this transaction was classified as a recapitalization of daifuWaste Samoa, daifuWaste
Solutions, daifuWaste Investment, Hydroclave and daifuWaste HK. On 13 January 2009, daifuWaste HK acquired Puhua Kangjian Environment
Technology (Shenzhen) Limited (“PHKJ”).



On 25 January 2011, daifuWaste HK invested Renminbi (“RMB”) 1,960,000,
35% of the registered capital to incorporate a joint venture – Hainanzhou daifu-Luhuan Medical Waste Disposal Co., Ltd. –
in the People’s Republic of China (“PRC”) (Note 6).



daifu and its subsidiaries are principally engaged in holding medical waste
technology, medical waste equipment trading and holding investments in medical waste treatment centres.



The Company’s consolidated financial statements as at 31 December 2011
and for the year then ended have been prepared on a going concern basis, which contemplates the realization of assets and the settlement
of liabilities and commitments in the normal course of business. The Company has net income of $764,385 for the year ended 31 December
2011 (31 December 2010 – net loss of $715,391) and has a working capital deficiency of $2,635,787 at 31 December 2011 (31
December 2010 – working capital of $3,139,068).









39









ROTOBLOCK CORPORATION



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)



| | 1. | Nature
                                                                  and Continuance of Operations (Continued)
| | -- | ------------------------------------------------------------------------------------------------------------------



Management cannot provide assurance that the Company will become cash flow
positive, or raise additional debt and/or equity capital. However, based on its prior demonstrated ability to raise capital, management
believes that the Company’s capital resources should be adequate to continue operating and maintaining its business strategy
during the fiscal year ending 2012. If the Company is unable to raise additional capital in the near future, due to the Company’s
liquidity problems, management expects that the Company will need to curtail operations, liquidate assets, seek additional capital
on less favorable terms and/or pursue other remedial measures. These consolidated financial statements do not include any adjustments
related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern.





| | 2. | Significant
                                                                                                Accounting Policies
| | -- | -------------------------------------------------------------------------------------------------------------------------------



The following is a summary of significant accounting policies used in the
preparation of these consolidated financial statements.



| | (a) | Basis
                                                                                                        of presentation
| | --- | -----------------------------------------------------------------------------------------------------------------------------



The consolidated financial statements of the Company have been prepared in
accordance with U.S. GAAP and are expressed in U.S. dollars.



| | (b) | Fiscal
                                                                                                        period
| | --- | ---------------------------------------------------------------------------------------------------------------------



During the year, the Company changed its fiscal year end from 30 April
to 31 December due to the share exchange with and reverse acquisition by  daifu, which has a fiscal year end of 31
December.



| | (c) | Risks
                                                                                                        and uncertainties
| | --- | -------------------------------------------------------------------------------------------------------------------------------



The Company operates in an emerging industry that is subject to market acceptance
and technological change. daifu’s operations are conducted in the PRC. The Company’s operations are subject to significant
risks and uncertainties, including financial, operational, technological and other risks associated with operating an emerging
business, including the potential risk of business failure. Other risks include the political, economic and legal environments
and foreign currency exchange. The Company’s results may be adversely affected by changes in political and social conditions
and by changes in governmental policies with respect to laws and regulations, anti-inflationary measure, currency conversion, remittances
abroad, and rates and methods of taxation, among other things.







40











ROTOBLOCK CORPORATION



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)



| | 2. | Significant
                                                                  Accounting Policies (Continued)
| | -- | -------------------------------------------------------------------------------------------------------------



| | (d) | Cash
                                                            and cash equivalents
| | --- | -------------------------------------------------------------------------------------



Cash and cash equivalents include highly liquid investments with original
maturities of three months or less.



| | (e) | Inventories
| | --- | -----------



Inventories are valued at the lower of cost or market value with cost
determined on a specific identification basis. In assessing the ultimate realization of inventories, management makes
judgments as to future demand requirements compared to current or committed inventory levels. The Company’s reserve
requirements generally increase/decrease due to management’s projected demand requirements, market conditions and
product life cycle changes. During the year ended December 31, 2011, the Company did not make any allowance for slow-moving
or defective inventories.



| | (f) | Property,
                                                                                                 equipment and depreciation
| | --- | -------------------------------------------------------------------------------------------------------------------------------------



Property and equipment have been recorded at cost, net of accumulated depreciation
(Note 5). Improvements are capitalized and maintenance, repairs and minor replacements are expensed as incurred. Depreciation is
determined using straight-line method in PRC and declining-balance in basis in US, over its estimated useful life of:



|                             | PRC         | US       
|---------------------------- | ----------- | ---------
|                             | Vehicles    | Equipment
|Useful
    life              | 5
    years | -        
|Residual
    value           | 5%          | 0%       
|Annual
    depreciation rate | 19%         | 20%      



| | (g) | Long
                                                            lived assets
| | --- | -----------------------------------------------------------------------------



Long-term assets of the Company are reviewed for impairment whenever events
or circumstances indicate that the carrying amount of assets may not be recoverable, pursuant to guidance established in ASC 360-10-35-15,
“Impairment or Disposal of Long-Lived Assets”.



Management considers assets to be impaired if the carrying value exceeds the
future projected cash flows from related operations (undiscounted and without interest charges). If impairment is deemed to exist,
the assets are written down to fair value. Fair value is generally determined using a discounted cash flow analysis.





41









ROTOBLOCK CORPORATION



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)



| | 2. | Significant
                                                                                                Accounting Policies (Continued)
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------



| | (h) | Goodwill
| | --- | --------



Recently, goodwill was acquired in the share
exchange between the Company and daifu in 2011. Financial Accounting Standards Board (FASB), Goodwill and Other Intangible Assets
(“ASC 350-20”) requires goodwill to be tested for impairment on an annual basis, and between annual tests in certain
circumstances, and written down when impaired. The Company performs this analysis during the fourth quarter of each year. Goodwill
for transactions previously completed by daifu have been written off, as management believes that no benefit is expected to be
received by the Company in the foreseeable future. The amount of goodwill remaining as at 31 December 2011 relates to the share
exchange between the Company and daifu.



| | (i) | Revenue
                                                                                                     recognition
| | --- | ------------------------------------------------------------------------------------------------------------------------



Revenue represents the invoiced value of
goods sold and is recognized upon the delivery of goods to customers. Revenue is recognized when all of the following criteria
are met:



-       
Persuasive evidence of an arrangement exists;

-       
Delivery has occurred or services have been rendered;

-       
The seller’s price to the buyer is fixed or determinable; and

-       
Collectability is reasonably assured (payments have been established).



| | (j) | Cost
                                                                                                     of revenue
| | --- | --------------------------------------------------------------------------------------------------------------------



Regarding the trading of machine that deals
with medical waste, the respective cost of revenue consists primarily of material cost, labor cost, subcontracting expenses and
related expenses which are directly attributable to the trading.

















42











ROTOBLOCK CORPORATION



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)



| | 2. | Significant
                                                                                                Accounting Policies (Continued)
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------



| | (k) | Basic
                                                            and diluted net income (loss) per share
| | --- | ---------------------------------------------------------------------------------------------------------



The Company computes net income (loss) per share in accordance with ASC 260,
“Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”)
on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common stockholders (numerator)
by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive
potential common shares outstanding during the period using the treasury stock method for share purchase warrants and for convertible
preferred stock and promissory note using the if-converted method. In computing diluted EPS, the average stock price for the period
is used in determining the number of shares assumed to be purchased from the exercise of stock warrants. Diluted EPS excludes all
dilutive potential shares if their effect is anti-dilutive.



| | (l) | Comprehensive
                                                            income
| | --- | --------------------------------------------------------------------------------



ASC 220, “Comprehensive Income”, establishes standards for the
reporting and display of comprehensive income and its components in the financial statements. As at 31 December 2011, the Company
has items that represent a comprehensive income and, therefore, has included a schedule of comprehensive income in the consolidated
financial statements.



| | (m) | Income
                                                            taxes
| | --- | ------------------------------------------------------------------------



Deferred income taxes are reported for timing differences between items of
income or expense reported in the financial statements and those reported for income tax purposes in accordance with ASC 740, “Income
Taxes”, which requires the use of the asset/liability method of accounting for income taxes. Deferred income taxes and tax
benefits are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases, and for tax losses and credit carry-forwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The Company provides for deferred taxes for the estimated future tax effects
attributable to temporary differences and carry-forwards when realization is more likely than not.













43











ROTOBLOCK CORPORATION



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)



| | 2. | Significant
                                                                                                Accounting Policies (Continued)
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------



| | (n) | Segments
                                                            of an enterprise and related information
| | --- | -------------------------------------------------------------------------------------------------------------



ASC 280, “Segment Reporting” establishes guidance
for the way that public companies report information about operating segments in annual financial statements and requires reporting
of selected information about operating segments in financial statements issued to the public. It also establishes standards for
disclosures regarding products and services, geographic areas and major customers. ASC 280 defines operating segments as components
of a company about which separate financial information is available that is evaluated regularly by the chief operating decision
maker in deciding how to allocate resources and in assessing performance.



| | (o) | Stock-based
                                                            compensation
| | --- | ------------------------------------------------------------------------------------



The Company accounts for stock-based compensation using the provisions of
ASC 718, “Compensation – Stock Compensation”, which establishes accounting for equity instruments exchanged for
employee services. Under the provisions of ASC 718, stock-based compensation cost is measured at the grant date, based on the calculated
fair value of the award, and is recognized as an expense over the employees’ requisite service period (generally the vesting
period of the equity grant).



| | (p) | Foreign
                                                            currency translation
| | --- | ----------------------------------------------------------------------------------------



The accompanying consolidated financial statements are presented in U.S. dollars.
The functional currency of Rotoblock Inc. is the Canadian Dollar (“CAD”) and the functional currencies of daifu and
its subsidiaries are the Hong Kong Dollar (“HK$”) and RMB. The consolidated financial statements of the Company are
translated to U.S. dollars in accordance with ASC 830, “Foreign Currency Matters”. The consolidated financial statements
are translated into United States Dollars from Canadian Dollars, Hong Kong Dollars and Renminbi at year-end exchange rates as to
assets and liabilities and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical
exchange rates when the capital transactions occurred. The effect of exchange rate differences is recorded in Accumulated Other
Comprehensive Income.



| | (q) | Research
                                                            and development
| | --- | ------------------------------------------------------------------------------------



Research and development costs are expensed as incurred.









44











ROTOBLOCK CORPORATION



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)



| | 2. | Significant
                                                                                                Accounting Policies (Continued)
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------



| | (r) | Patents
| | --- | -------



The Company accounts for patent costs in accordance with ASC 350, “Intangibles
-Goodwill and Other”. In accordance with that statement, intangible assets with estimable lives, such as a patent,
are amortized on a straight-line basis over the estimated useful lives and are reviewed for impairment in accordance with ASC 350-35-14,
“Recognition and Impairment of an Impairment Loss”.



| | (s) | Use
                                                            of estimates
| | --- | ----------------------------------------------------------------------------



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



| | (t) | Comparatives
| | --- | ------------



Certain comparative figures have been reclassified in order to comply with
the presentation adopted in the current year.



| | (u) | Recent
                                                            Accounting Pronouncements
| | --- | --------------------------------------------------------------------------------------------



In December 2011, the Financial Accounting Standards Board (“FASB”)
issued Accounting Standards Update (“ASU”) No. 2011-12, “Comprehensive Income”. This ASU effectively defers
the changes in ASU No. 2011-05, “Presentation of Comprehensive Income” that relate to the presentation of reclassification
adjustments out of accumulated other comprehensive income. ASU No. 2011-12 should be applied retrospectively and is effective for
fiscal years, and interim periods within those years, beginning after 15 December 2011. As ASU No. 2011-12 relates only to the
presentation of Comprehensive Income, the Company does not expect the adoption of this update will have a material effect on its
consolidated financial statements.













45













ROTOBLOCK CORPORATION



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)



| | 2. | Significant
                                                                                                Accounting Policies (Continued)
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------



| | (u) | Recent
                                                            Accounting Pronouncements (Continued)
| | --- | --------------------------------------------------------------------------------------------------------



In June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive
Income”. This ASU presents an entity with the option to present the total of comprehensive income, the components of net
income, and the component of other comprehensive income either in a single continuous statement of comprehensive income or in two
separate but consecutive statements. In both choices, an entity is required to present each component of other comprehensive income
along with a total for other comprehensive income, and a total amount for comprehensive income. This update eliminates the option
to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity/deficit.
The amendments in this update do not change the items that must be reported in other comprehensive income or when an item of other
comprehensive income must be reclassified to net income. ASU No. 2011-05 should be applied retrospectively and is effective for
fiscal years, and interim periods within those years, beginning after 15 December 2011. As ASU No. 2011-05 relates only to the
presentation of Comprehensive Income, the Company does not expect the adoption of this update will have a material effect on its
consolidated financial statements.



In May 2011, the FASB issued ASU No. 2011-04, “Fair Value Measurement”
to amend the accounting and disclosure requirements on fair value measurements. This ASU limits the highest-and-best-use measure
to nonfinancial assets, permits certain financial assets and liabilities with offsetting positions in market or counterparty credit
risks to be measured at a net basis, and provides guidance on the applicability of premiums and discounts. Additionally, this update
expands the disclosure on Level 3 inputs by requiring quantitative disclosure of the unobservable inputs and assumptions, as well
as description of the valuation processes and the sensitivity of the fair value to changes in unobservable inputs. ASU No. 2011-04
is to be applied prospectively and is effective during interim and annual periods beginning after 15 December 2011. The Company
does not expect the adoption of this update will have a material effect on its consolidated financial statements.



















46













ROTOBLOCK CORPORATION



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)







| | 3. | Other
                                                                                                income
| | -- | ------------------------------------------------------------------------------------------------------------



Other income as at 31 December 2011 and 2010 consist of the following:



|                                         |  | December
    31 |  | December
    31
|---------------------------------------- |  | --------------- |  | ---------------
|                                         |  | 2011            |  | 2010           
|                                         |  | $               |  | $              
|Sundry income                            |  | 1,742,969       |  | -              
|Management fee income                    |  | 96,634          |  | -              
|Gain on write-off
    of amounts payable |  | 22,122          |  | -              
|                                         |  |                 |  |                
|                                         |  | 1,861,725       |  | -              



During the year ended 31 December 2011, daifu recorded
sundry income of $1,742,969 upon recognition of advance payments received from a customer in previous years.







| | 4. | Prepayments,
                                                                                                Deposits and Other Receivables
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------



Prepayments, deposits and other receivables as at 31 December 2011 and 2010
consist of the following:



|                                 |  | December
    31 |  | December
    31
|-------------------------------- |  | --------------- |  | ---------------
|                                 |  | 2011            |  | 2010           
|                                 |  | $               |  | $              
|Temporary payment                |  | 38,610          |  | 22,359         
|Deposits to suppliers            |  | 349,101         |  | 523,207        
|Contract guarantee
    deposits  |  | 208,319         |  | 255,387        
|Premises and sundry
    deposits |  | 25,206          |  | 269,629        
|Advances to employees            |  | 20,000          |  | -              
|GST payable                      |  | 218             |  | -              
|                                 |  |                 |  |                
|                                 |  | 641,454         |  | 1,070,582      





| | 5. | Inventory
| | -- | ---------



Inventories as of 31 December 2011 and 2010
consist of the following:



|              |  | December
    31 |  | December
    31
|------------- |  | --------------- |  | ---------------
|              |  | 2011            |  | 2010           
|              |  | $               |  | $              
|Raw materials |  | 600,963         |  | 398,384        









47











ROTOBLOCK CORPORATION



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)



| | 6. | Property,
                                                                                                Plant and Equipment
| | -- | -----------------------------------------------------------------------------------------------------------------------------



|                                                       |         | Accumulated
        depreciation | Net
    book value       |       
|------------------------------------------------------ | ------- | -------------------------------- | ------------------------ | ------
|                                                       | Cost    | 31 December
        2011         | 31 December
        2010
|                                                       | $       | $                                | $                        | $     
|Equipment                                              | 52,940  | 18,440                           | 34,500                   | -     
|                                                       |         |                                  |                          |       
|Vehicles                                               | 137,291 | 49,411                           | 87,880                   | 33,436
|                                                       |         |                                  |                          |       
|Effect of foreign exchange on fixed asset
    balances | 2,340   | 1,227                            | 1,113                    | 1,239 
|                                                       |         |                                  |                          |       
|                                                       | 192,571 | 69,078                           | 123,493                  | 34,675
|                                                       |         |                                  |                          |       



During the year ended 31 December 2011, total
additions to property and equipment were $nil (31 December 2010 – $nil).  During the year ended 31 December 2011, total
dispositions of property and equipment were $nil (31 December 2010 - $nil).





| | 7. | Investments
                                                                                                in Associates
| | -- | -------------------------------------------------------------------------------------------------------------------------





|                                                                             | Fair
    Value          
|---------------------------------------------------------------------------- | ------------------------
|                                                                             | 31 December
        2011
|                                                                             | $                       
|Investment in Hainanzhou   daifu-Luhuan
    Medical Waste Disposal   Co.,Ltd | 293,590                 









On 25 January 2011, daifuWaste (HK) invested RMB 1,960,000 ($293,590), 35% of the registered capital, associated
with Hainanzhou Luhuan Medical Waste Disposal Co., Ltd invested RMB 3,640,000, 65% of the registered capital, to corporate a joint
venture – Hainanzhou daifu–Luhuan Medical Waste Disposal Co, Ltd in PRC. The net assets of Hainanzhou daifu–Luhuan
Medical Waste Disposal., Ltd are RMB 5,600,000. It is expected to start business in the 2nd quarter of 2012.











48









ROTOBLOCK CORPORATION



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)





| | 8. | Available-for-sale Investments
| | -- | ------------------------------



|                                                      |           | Unrealized
    Gain/(Loss) | Fair
    Value          
|----------------------------------------------------- | --------- | -------------------------- | ------------------------
|                                                      | Cost      | 31 December
        2011   | 31 December
        2010
|                                                      | $         | $                          | $                       
|977,966 common shares of Samyang Optics
    Co., Ltd. | 1,000,000 | (9,467)                    | 990,533                 





On 11 February 2010, the Company entered into an Investment Agreement with
Samyang Optics Co., Ltd. (“Samyang”), a South Korean Corporation listed on the Korea Exchange, whereby Samyang loaned
the Company $2,000,000 in the form of a convertible promissory note (Note 11). In turn, the Company acquired 977,966 common shares
of Samyang valued at $1,000,000. The investment is classified as Available for Sale and is carried at fair value, with unrealized
gains and losses recorded as Other Comprehensive Income and other than temporary losses recorded in net income.





| | 9. | Patents
| | -- | -------

The Company has entered into an agreement for certain patents related to
the Oscillating Piston Engine (“OPE”) pursuant to which the Company must pay a royalty of $50 per engine on the sale
of up to 10,000 OPE, a royalty of $20 per engine on the sale of up to 100,000 OPE, and a royalty of $2 per engine thereafter.
As at 31 December 2011, no engines have been sold. The Company has not capitalized any amount related to the patents.













49













ROTOBLOCK CORPORATION



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)





| | 10. | Accounts
                                                                                                 Payable and Accrued Liabilities
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------



Accounts payable and accrued liabilities as
at 31 December 2011 and 2010 consist of the following:



|                                      |  | December
    31 |  | December
    31
|------------------------------------- |  | --------------- |  | ---------------
|                                      |  | 2011            |  | 2010           
|                                      |  | $               |  | $              
|Value added taxes
    (“VAT”) payable |  | 102,795         |  | 22,491         
|Trade payables                        |  | 72,235          |  | 29,643         
|Accrued liabilities                   |  | 228,051         |  | 170,726        
|Director remuneration                 |  | 870,529         |  | 525,138        
|                                      |  |                 |  |                
|                                      |  | 1,273,610       |  | 747,998        



As at the year ended December 31, 2011, the
Company has accrued the salaries of the following directors: Michael Choy with $621,172 and Chow Chu Keung with $249,357.



| | 11. | Due
                                                                                                to Related Parties
| | --- | ----------------------------------------------------------------------------------------------------------------------



Due to related parties at
December 31, 2011 and December 31, 2010 are consisted of the following:



|                                           | 2011    |  | 2010
|------------------------------------------ | ------- |  | ----
|                                           | $       |  | $   
|American Pacific
    Medical Group Limited | 410,000 |  | -   



During the year ended December 31, 2011, $410,000
was borrowed from a related party for redemption of outstanding preferred stocks of daifu.















50









ROTOBLOCK CORPORATION



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)





| | 12. | Convertible
                                                                                                 Promissory Note
| | --- | ----------------------------------------------------------------------------------------------------------------------------



On 11 February 2010, the Company entered into
a Convertible Promissory Note Agreement (the “Convertible Promissory Note Agreement”) with Samyang for $2,000,000
cash (Note 8). The principal balance bears interest at a rate of 6% per annum. All unpaid principal, together with any unpaid
and accrued interest will be due and payable on the earlier of 11 February 2012 or when such amounts are declared due and payable
by Samyang.



All principal, together with all accrued and
unpaid interest, shall automatically convert into common shares of the Company at a price of $1.10 per share on 11 February 2012
or such other date designated by Samyang at its discretion.



At present the parties are determining
a new mutually agreeable maturity date for the note.



Since 18 November 2011, the date of the Share
Exchange Agreement with daifu, the Company has accrued $14,466 in interest related to the Promissory Note. The balance of the
Promissory Note as at 31 December 2011 consists of principal and accrued interest of $2,000,000 and $226,192, respectively.





| | 13. | Related
                                                                                                 Party Transactions
| | --- | ---------------------------------------------------------------------------------------------------------------------------



Since 18 November 2011, the date of the Share
Exchange Agreement with Daifu, the Company paid/accrued $15,209 to related parties for salaries and wages.



During the year
end 31 December 2011, daifu paid/accrued $425,800 to related parties for salaries and wages.



During the year ended 31 December 2011, daifu
borrowed $410,000 from a related party for redemption of outstanding preferred shares of daifu (Note 11 and Note 14).





| | 14 | Capital
                                                                                                Stock
| | -- | -------------------------------------------------------------------------------------------------------------



Authorized capital stock of the Company consists
of 200,000,000 common shares with par value of $0.001 per share and 50,000,000 preferred shares with par value of $0.001 per share.



On 18 November 2011, the Company completed
its acquisition of daifu (Note 1). Pursuant to the Share Exchange Agreement, the daifu shareholders transferred all of the daifu









51









ROTOBLOCK CORPORATION



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)



| | 14. | Capital
                                                                                                 Stock (Continued)
| | --- | --------------------------------------------------------------------------------------------------------------------------



ordinary shares outstanding to Rotoblock in exchange for issuance of 73,801,525
common shares of Rotoblock, par value $0.001 per share, to the daifu shareholders.



As at 1 January 2011, daifu had 96,073,105 common shares issued and outstanding.
During the year ended 31 December 2011, daifu issued 283,318 common shares in settlement of certain debt obligations of daifu,
and also issued 10,000,000 common shares at $0.01 per share upon exercise of original daifu stock options. The 96,073,105 shares
outstanding on 1 January 2011 and 10,283,318 shares issued by daifu during the year ended 31 December 2011 are adjusted for presentation
in the consolidated financial statements to 66,665,853 and 7,135,672 respectively to reflect the ratio of shares exchanged between
Rotoblock and daifu.



During the year ended 31 December 2011, daifu redeemed its outstanding preferred
stock at a price of $4,310,000.



As a result of the reverse acquisition of daifu, the Company changed its year
end from 30 April to 31 December. On 30 April 2011, the Company had 5,710,311 shares outstanding.



On 7 January 2011, the Company issued 3,334 common shares valued at $nil per
common share in error. On 14 July 2011, the Company cancelled these shares and is in the process of obtaining the common shares
to be returned to treasury for cancellation.



On December 15, 2011 the Company filed a Form S-8 Registration Statement
with the SEC to register 10 million shares of our common stock for future issuances to consultants, employees, attorneys, officers
and directors. At December 31, 2011 no shares have been issued under the plan.



As at 31 December 2011, 5,706,977 outstanding shares of the Company were owned
by the original Rotoblock shareholders before the Share Exchange Agreement with daifu.









52









ROTOBLOCK CORPORATION



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)



| | 14. | Capital
                                                                                                 Stock (Continued)
| | --- | --------------------------------------------------------------------------------------------------------------------------



Share Purchase Warrants



The following share purchase warrants were outstanding at 31 December 2011:



|         |  | Exercise
    price |  | Number
        of warrants |  | Remaining
        contractual life (years)
|-------- |  | ------------------ |  | -------------------------- |  | ------------------------------------------
|         |  | $                  |  |                            |  |                                           
|Warrants |  | 12.50              |  | 7,600                      |  | 0.69                                      
|Warrants |  | 7.50               |  | 20,000                     |  | 1.25                                      
|Warrants |  | 7.50               |  | 16,000                     |  | 1.39                                      
|Warrants |  | 12.50              |  | 3,333                      |  | 1.51                                      
|Warrants |  | 0.25               |  | 25,000                     |  | 2.54                                      
|Warrants |  | 0.25               |  | 25,000                     |  | 2.56                                      
|Warrants |  | 0.50               |  | 200,000                    |  | 2.56                                      
|Warrants |  | 2.50               |  | 57,144                     |  | 2.56                                      
|Warrants |  | 0.25               |  | 2,181,750                  |  | 3.12                                      
|Warrants |  | 1.00               |  | 50,000                     |  | 3.12                                      
|Warrants |  | 0.25               |  | 333,333                    |  | 3.16                                      
|Warrants |  | 1.00               |  | 300,000                    |  | 3.21                                      
|Warrants |  | 0.25               |  | 12,000                     |  | 3.28                                      
|Warrants |  | 0.25               |  | 6,000,000                  |  | 8.22                                      
|         |  |                    |  |                            |  |                                           
|         |  |                    |  | 9,231,160                  |  |                                           







53











ROTOBLOCK CORPORATION



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)



| | 14. | Capital
                                                                                                 Stock (Continued)
| | --- | --------------------------------------------------------------------------------------------------------------------------



The following is a summary of warrant activities during the years ended 31
December 2011 and 2010:



|                                                                    |  | Number
    of warrants |  | Weighted
    average exercise price
|------------------------------------------------------------------- |  | ---------------------- |  | -----------------------------------
|                                                                    |  |                        |  | $                                  
|Outstanding and exercisable
    at 18 November 2011                 |  | 9,281,160              |  | 0.38                               
|Expired                                                             |  | (50,000)               |  | 7.50                               
|                                                                    |  |                        |  |                                    
|Outstanding and exercisable
    at 31 December 2011                 |  | 9,231,160              |  | 0.34                               
|                                                                    |  |                        |  |                                    
|Weighted
    average fair value of warrants granted during the year |  | 0                     



The weighted average grant date fair value of the 9,281,160 warrants outstanding
on 18 November 2011 and left intact as part of the Shares Exchange Agreement with daifu amounted to $1,401,514. The fair value
of each warrant granted was determined using the Black-Scholes Option Pricing Model and the following assumptions:



|                            |  |  |  |                         
|--------------------------- |  |  |  | ------------------------
|                            |  |  |  |                         
|Risk free interest
    rate |  |  |  | 1.49%
    - 3.72%       
|Expected life               |  |  |  | 4.8
    years - 10 years
|Annualized volatility       |  |  |  | 119.3%
    - 656.25%    
|Expected
    dividends      |  |  |  | -                       



Restricted Common Shares



As at 31 December 2011, a total of 79,508,502 common shares are outstanding.
Of these, 73,842,860 were restricted from trading as defined under Rule 144 of the United States Securities Act of 1933.













54













ROTOBLOCK CORPORATION



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)







| | 15. | Earnings
                                                                                            Per Share
| | --- | --------------------------------------------------------------------------------------------------------------



Earnings (loss) per share, calculated on a basic and diluted basis, is as
follows:



|                                                                                |  | Year ended
        31 December
        2011 |  | Year ended
        31 December
        2010
|------------------------------------------------------------------------------- |  | ------------------------------------------- |  | -------------------------------------------
|                                                                                |  | $                                           |  | $                                          
|Earnings (loss) per
    share                                                   |  |                                             |  |                                            
|Basic                                                                           |  | 0.01                                        |  | (0.01)                                     
|Diluted                                                                         |  | 0.01                                        |  | (0.01)                                     
|                                                                                |  |                                             |  |                                            
|Net income (loss)                                                               |  | 764,385                                     |  | (715,391)                                  
|                                                                                |  |                                             |  |                                            
|Net
    income (loss) available (attributable) to common shareholders – basic   |  | 764,385                                     |  | (715,391)                                  
|Net
    income (loss) available (attributable) to common shareholders – diluted |  | 778,851                                     |  | (715,391)                                  
|                                                                                |  |                                             |  |                                            
|Weighted
    average number of shares outstanding                               |  |                                             |  |                                            
|Weighted
    average number of shares outstanding – basic                       |  | 73,867,810                                  |  | 66,280,233                                 
|Dilutive
    securities:                                                        |  |                                             |  |                                            
|Warrants                                                                        |  | 373,409                                     |  | -                                          
|Convertible debt                                                                |  | 2,023,811                                   |  | -                                          
|Weighted
    average number of shares outstanding – diluted                     |  | 76,265,030                                  |  | 66,280,233                                 



For the year ended 31 December 2011, exercisable common equivalent shares
totaling 654,077 (consisting of shares issuable on the exercise of share purchase warrants) have been excluded from the calculation
of diluted loss per share because the effect is anti-dilutive.









55











ROTOBLOCK CORPORATION



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)





| | 16. | Non-Controlling
                                                                                                        Interest
| | --- | --------------------------------------------------------------------------------------------------------------------------------



daifu has a non-controlling interest in one
of its subsidiaries. The balance of the non-controlling interests as of 31 December 2011 and 2010 are as follows:



|Subsidiary            | Non-Controlling Interest
        % | 31 December
    2011 | 31 December
        2010
|--------------------- | ---------------------------------- | -------------------- | ------------------------
|                      |                                    |                      |                         
|Hydroclave China Inc. | 5%                                 | (953)                | (777)                   





| | 17. | Income
                                                                                                 Taxes
| | --- | -------------------------------------------------------------------------------------------------------------



Income tax expense differs from the amount
that would result from applying the federal and state income tax rates to earnings before income taxes. These differences result
from the following items:



|                                                 |  | For the
        year
        ended
        31 December
        2011 |  | For the
        year
        ended
        31 December
        2010
|------------------------------------------------ |  | ------------------------------------------------------------------- |  | -------------------------------------------------------------------
|                                                 |  | $                                                                   |  | $                                                                  
|Earnings (loss) before
    income taxes          |  | 764,385                                                             |  | (715,391)                                                          
|                                                 |  |                                                                     |  |                                                                    
|Federal and state
    income tax rates           |  | 35.00%                                                              |  | 0.00%                                                              
|                                                 |  |                                                                     |  |                                                                    
|Income tax recovery
    based on the above rates |  | 267,535                                                             |  | -                                                                  
|                                                 |  |                                                                     |  |                                                                    
|Increase (decrease)
    due to:                  |  |                                                                     |  |                                                                    
|Non-deductible
    expenses                      |  | 1,158                                                               |  | (29,190)                                                           
|Effect
    of change in foreign tax rates        |  | (325,301)                                                           |  | (86,374)                                                           
|Deferred
    income tax on share exchange        |  | (1,347,344)                                                         |  | -                                                                  
|Change
    in valuation allowance                |  | 1,415,260                                                           |  | 92,625                                                             
|Foreign
    exchange and other                   |  | (11,308)                                                            |  | 22,939                                                             
|                                                 |  |                                                                     |  |                                                                    
|Income tax expense
    (recovery)                |  | -                                                                   |  | -                                                                  







56













ROTOBLOCK CORPORATION



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)





| | 17. | Income
                                                                                                 Taxes (Continued)
| | --- | -------------------------------------------------------------------------------------------------------------------------



The components of deferred income
taxes are as follows:



|                                           | December
    31 | December
    31
|------------------------------------------ | --------------- | ---------------
|                                           | 2011            | 2010           
|                                           | $               | $              
|Deferred income tax
    assets:            |                 |                
|                                           |                 |                
|Non-capital losses                         | 1,757,494       | 336,432        
|Property, plant and
    equipment          | (5,802)         | -              
|                                           |                 |                
|Total unrecognized
    deferred tax assets | 1,751,692       | 336,432        
|                                           |                 |                
|Valuation allowance                        | (1,751,692)     | (336,432)      
|                                           |                 |                
|Net deferred income
    tax assets         | -               | -              



The Company has non-capital loss carry-forwards
that will expire if unused of approximately $5,731,508 that may be available for tax purposes.



As at 31 December 2011, the Company has unused non-capital losses for U.S.
federal income tax purposes of approximately $3,510,666 that are available to offset future taxable income. This unused net operating
loss carry forward balance for income tax purposes expires between the years 2025 and 2031.



As at 31 December 2011, the Company has unused non-capital losses for Canadian
tax purposes of approximately $557,266 that are available to offset future taxable income. This unused non-capital loss carry forward
balance for income tax purposes expires between the years 2014 and 2030.



As at 31 December 2011, the Company has unused non-capital losses for tax
purposes in the PRC of approximately $956,311 that are available to offset future taxable income. This unused non-capital loss
carry forward balance for income tax purposes expires between the years 2012 and 2016.



As at 31 December 2011, the Company has unused non-capital losses for tax
purposes in Hong Kong and Samoa of approximately $707,265 that are available to offset future taxable income. This unused non-capital
loss carry forward balance for income tax purposes has no expiry date.









57











ROTOBLOCK CORPORATION



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)





| | 18. | Commitments
                                                                                                 and Contingencies
| | --- | ------------------------------------------------------------------------------------------------------------------------------



Liabilities for loss contingencies arising from claims, assessments, litigation,
fines and penalties and other sources are recorded when it is possible that a liability has been incurred and the amount of the
assessment can be reasonably estimated. As at 31 December 2011, there are no material litigations pending or threatened against
the Company.



The Company’s commitments are as follows:



| | (a) | On 7
                                                            January 2011, the Company issued 3,334 common shares valued at $nil
                                                            per common share in error. On 14 July 2011, the Company cancelled
                                                            these 3,334 common shares. As at 31 December 2011, the Company is
                                                            in the process of obtaining the 3,334 common shares to be returned
                                                            to treasury for cancellation (Note 14).
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | On 11
                                                            February 2010, the Company entered into a Convertible Promissory Note
                                                            Agreement with Samyang for $2,000,000 (Note 8 and 12). The principal
                                                            balance bears interest at a rate of 6% per annum. All principal, together
                                                            with all accrued and unpaid interest, shall automatically convert
                                                            into common shares of the Company at a price of $1.10 per share on
                                                            11 February 2012 or such other date designated by Samyang at its discretion.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



At present the parties are determining a new
mutually agreeable maturity date for the note.



As at 31 December 2011, should Samyang exercise its option under the Convertible
Promissory Note Agreement, the Company would be required to issue 2,023,811 common shares in settlement of its obligation to Samyang.





















58











ROTOBLOCK CORPORATION



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)





| | 19. | Segmented
                                                                                                 Information
| | --- | ----------------------------------------------------------------------------------------------------------------------



The Company, after the
acquisition of daifu, operates in one reportable segment, that being the treatment of medical waste. Revenues are generated from
trading of medical waste equipment. The Company’s operations are conducted primarily in two geographic segments, being Asia,
specifically PRC, and the British Virgin Islands (“BVI”). Geographic segmentation of revenue and assets is based on
the country of origin.



|Year
    ended 31 December 2011      |   | PRC         |   | BVI       |   | Other     |   | Total      
|------------------------------------ | - | ----------- | - | --------- | - | --------- | - | -----------
|                                     |   |             |   |           |   |           |   |            
|Revenues and other
    income        | $ | 1,715,133   | $ | 1,727,473 | $ | 118,756   | $ | 3,561,362  
|Cost of sales
    and other expenses |   | (1,802,790) |   | (49,017)  |   | (945,170) |   | (2,796,977)
|Capital assets                       |   | 23,698      |   | -         |   | 99,795    |   | 123,493    
|Goodwill                             |   | -           |   | -         |   | 3,480,852 |   | 3,480,852  
|Total assets                         |   | 1,775,126   |   | 53,746    |   | 4,984,728 |   | 6,813,600  



|Year
    ended 31 December 2010      |   | PRC         |   | BVI       |   | Other     |   | Total      
|------------------------------------ | - | ----------- | - | --------- | - | --------- | - | -----------
|                                     |   |             |   |           |   |           |   |            
|Revenues and other
    income        | $ | 1,817,739   | $ | 1,366,593 | $ | -         | $ | 3,184,332  
|Cost of sales
    and other expenses |   | (1,963,547) |   | (951,786) |   | (984,390) |   | (3,899,723)
|Capital assets                       |   | 34,675      |   | -         |   | -         |   | 34,675     
|Total
    assets                     |   | 1,927,543   |   | 246,407   |   | 4,457,796 |   | 6,631,746  





| | 20. | Financial
                                                                                                 Instruments
| | --- | ----------------------------------------------------------------------------------------------------------------------



The carrying value of cash and cash equivalents,
amounts receivable, accounts payable and accrued liabilities, and convertible promissory note approximates fair value due to the
short term maturity of these financial instruments.



| | (a) | Credit
                                                            Risk
| | --- | -----------------------------------------------------------------------



Financial instruments that potentially subject
the Company to credit risk consist of cash and cash equivalents and amounts receivable. The Company deposits cash and cash equivalents
with high credit quality financial institutions as determined by rating agencies.





















59











ROTOBLOCK CORPORATION



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)





| | 20. | Financial
                                                                                                 Instrument (Continued)
| | --- | ---------------------------------------------------------------------------------------------------------------------------------



| | (a) | Credit
                                                            Risk (Continued)
| | --- | -----------------------------------------------------------------------------------



daifu extends unsecured credit to its customers
in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due
accounts. An allowance for doubtful accounts is established and determined based on management’s assessment of known requirements,
aging of receivables, payment history, the customer’s current credit worthiness and the economic environment.



| | (b) | Currency
                                                            Risk
| | --- | -------------------------------------------------------------------------



The Company’s reporting currency is the
U.S. dollar. Foreign currency transactions are primarily undertaken in CAD, HK$ and RMB. The Company has not, to the date of these
consolidated financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.



If the Canadian dollar had weakened (strengthened)
against the U.S. dollar, with all other variables held constant, by 100 basis points (1%) at year end, the impact on net loss
and other comprehensive loss would have been $4 higher ($4 lower).



If the Hong Kong dollar had weakened (strengthened)
against the U.S. dollar, with all other variables held constant, by 100 basis points (1%) at year end, the impact on net loss
and other comprehensive loss would have been $434 higher ($434 lower).



If the Renminbi had weakened (strengthened)
against the U.S. dollar, with all other variables held constant, by 100 basis points (1%) at year end, the impact on net loss
and other comprehensive loss would have been $9,716 higher ($9,716 lower).



| | (c) | Interest
                                                            Rate Risk
| | --- | ------------------------------------------------------------------------------



The Company has cash balances and an interest-bearing
debt.  It is management’s opinion that the Company is not exposed to significant interest risk arising from these financial
instruments.



| | (d) | Liquidity
                                                            Risk
| | --- | --------------------------------------------------------------------------



Liquidity risk is the risk that an entity will
encounter difficulty in meeting obligations associated with its financial liabilities. The Company is reliant upon successful
financing and the operations of daifu as its sources of cash. The Company has received financing from private placements in the
past; however, there is no assurance that it will be able to continue obtaining financing or maintain profitable operations in
the future.







60









ROTOBLOCK CORPORATION



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)



| | 21. | Subsequent
                                                                                                 Events
| | --- | ------------------------------------------------------------------------------------------------------------------



The Company appointed a new Chief Executive
Office (“CEO”) on 20 January 2012 with an employment agreement term effective for twelve months. The employment agreement
stipulates an annual salary of $125,000, issuance of 1,000,000 shares of the Company’s common stock, share purchase warrants
to purchase up to an additional 1,000,000 shares of the Company’s common stock at a price of $0.25 per share and Employee
Common Stock Awards of 500,000 shares of common stock based on targeted increases in the Company’s market capital valuation.



























































61











Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosures



Change in Independent Accountants



Effective February 28, 2012, the certifying auditor of daifuWaste Management Holding Company Limited
(“Daifu”) Parker Randall CF (H.K.) CPA Limited (“Parker Randall”), submitted its resignation. James Stafford
Chartered Accountants, Vancouver, B.C. Canada was to continue as the certifying accountants for the Company and Daifu on a consolidated
basis. However on March 21, 2012, James Stafford Chartered Accountants, (“Stafford”) Vancouver, B.C. Canada submitted
their resignation as certifying accountants of the Company.

Effective March 21, 2012, Parker Randall CF (H.K.) CPA Limited (“Parker”)
has been engaged as the certifying accountants for the Company. The Company believes that Parker Randall, because their familiarity
with the business of daifu Waste Management Holding Limited (“Daifu”) and because of Parker Randall’s location
in Hong Kong, they are best able to assume the overall audit responsibility for the consolidated financials of the Company.

During the period of engagement from November 2006 through March 21, 2012, the
auditor’s reports issued by Stafford did not contain an adverse opinion, a disclaimer of opinion, nor were the reports qualified
or modified as to uncertainly, audit scope or accounting principles. However, the audit reports did reflect uncertainties regarding
the ability of the Company to continue as a going concern. During the referenced period, there were no disagreements between the
Company and Stafford on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure
which, if not resolved to the satisfaction of Stafford would have caused Stafford to make reference to the matter in reports on
the Company’s financial statements, had any such reports been issued. During the period of engagement, there were no reportable
events as that term is defined in Item 304(a)(1)(iv) of Regulation S-K.

Change in Fiscal Year



Effective February 28, 2012, the board of directors of the Company approved the change
of the Company’s fiscal year end from April 30 to December 31. The change in fiscal year end will commence with the fiscal
ended December 31, 2011 on Form 10-K.



Item 9A. Controls and Procedures.



Evaluation of Disclosure Controls and Procedures



Under the supervision and with the participation of our management, including our Chief Executive Officer
and our Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined
under Securities and Exchange Act of 1934 Rules 13a-15(f). Based on this evaluation, our co-Chief Executive Officers and our
Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of December 31,
2011.



Management’s Report on Internal Control over Financial Reporting





We maintain disclosure controls and procedures designed to ensure that information required to be disclosed
in reports filed under the Securities Exchange Act of 1934 (“Exchange Act”) is recorded, processed, summarized and
reported within the specified time periods. Our Chief Executive Officer and our Principal Financial Officer (collectively, the
“Certifying Officers”) are responsible for maintaining our disclosure controls and procedures. Prior to the filing
of this report, our Certifying Officers evaluated the effectiveness of our disclosure controls and procedures for the period covered
by this report. Based on the evaluation, our Certifying Officers concluded that our disclosure controls and procedures were effective
to provide reasonable assurance that (a) information required to be disclosed by us in the reports we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms
and (b) that it is accumulated and communicated to our management, including the Certifying Officers, as appropriate to allow
timely decisions regarding required disclosure. We have conducted a review of the effectiveness of our internal control over financial
reporting as disclosed herein.





62









Our management is also responsible for establishing and maintaining a system of adequate internal control
over financial reporting. Internal control over financial reporting is defined as a process designed by, or under the supervision
of, our principal executive officer and principal financial officer, or persons performing similar functions, and effected by our
board of directors, management and other personnel, to provide assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes
those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect
the transactions and dispositions of the our assets; (2) provide reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally accepted accounting principles, and receipts and expenditures
are being made only in accordance with authorizations of management and our directors; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect
on our financial statements. We believe our internal control over financial reporting is effective to provide reasonable assurance
that our financial statements are fairly presented in conformity with generally accepted accounting principles. Since our most
recent evaluation, there have been no changes in our internal control or in other factors that could significantly affect our internal
control, nor were any corrective actions required with regard to significant deficiencies and material weaknesses. Because of its
inherent limitations, internal control over financial reporting may not prevent or detect every misstatement and instance of fraud.
Internal control is susceptible to manipulation, especially in instances of fraud caused by the collusion of two or more people,
including our senior management. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that internal control may become inadequate because of changes in conditions, or that the degree of compliance with the policies
or procedures may deteriorate.



Under the supervision and with the participation of our Certifying Officers, our management conducted an evaluation
of the effectiveness of our internal control over financial reporting based upon the framework in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the results of our evaluation,
our management concluded that our internal control over financial reporting was effective as of December 31, 2011 and the date
of the filing of the annual report.



This annual report does not include an attestation report of our independent registered public accounting
firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent
registered public accounting firm, pursuant to provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act that
permit us to provide only management’s report in this Annual Report on Form 10-K.



This report shall not be deemed to be filed for purposes of Section 18 of the Exchange
Act, or otherwise subject to the liabilities of that section, and is not incorporated by reference into any filing of Rotoblock,
whether made before or after the date hereof, regardless of any general incorporation language in such filing.





PART III



Item 10.  Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a)
of the Exchange Act



Management



The following table sets forth the names, positions and ages of the executive officers and directors. Directors
are elected at the annual meeting of stockholders and serve for one year or until their successors are elected and qualify. Officers
are elected by the Board of Directors and their terms of office are, except to the extent governed by employment contract, at
the discretion of the Board of Directors.







63











|Name of Director or Officer and Position in the Company                    | Officer or Director Since   |  | Age |  |  | Office(s) Held and Other Business Experience                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |  | 
|-------------------------------------------------------------------------- | --------------------------- |  | --- |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | 
|                                                                           |                             |  |     |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |  | 
|Andrew P. Schneider, Chief Executive Officer                               | January 20, 2012 to present |  | 37  |  |  | Prior to joining the Company, Mr. Schneider was the founder and Managing Partner of HedgeCo Networks from
        May 2001 to August 2011. HedgeCo Networks is a hedge fund research and services firm. From September 2011 to the present, Mr. Schneider
        was the Chief Executive Officer of Global Hedge Fund Advisors, a consulting firm to the hedge fund industry. Mr. Schneider attended
        the State University at Albany, New York.                                                                                                                                                                                                                     |  |  | 
|                                                                           |                             |  |     |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |  | 
|Chu Keung Andrew Chow
        Chief Financial Officer and
        Director | March 28, 2011 to present   |  | 46  |  |  | Since 1996, Mr. Chow has been the Director and Senior Vice President of Finance for American Pacific Medical Group, a privately-held medical group owning 10 hospitals in China, started by 35 medical doctors. He is Fellow of the Chartered Association of Certified Accountants, as well as an associate of the Chartered Institute of Management Accountants in the United Kingdom and an Associate of the Hong Kong Institute of Certified Public Accountants. Mr. Chow received his Diploma in Accountancy from Morrison Hill Technical Institute in Hong Kong in 1987. He devotes his time as required to the business of our company.                               |  |  | 
|                                                                           |                             |  |     |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |  | 
|Michael H. Choy, D.P.M., F.A.A.C.F.S., Director and
        Chairman       | March 28, 2011 to present   |  | 58  |  |  | Dr. Choy has been the Chairman and Chief Executive Officer of Asia Pacific Medical Group, a privately-held health care services company, since 1993. He graduated from the University of California, Berkeley, with a Bachelor of Arts Degree in 1974 and from the California College of Podiatric Medicine with a Doctor of Podiatric Medicine (D.P.M.) degree in 1980.. He holds a Diplomat Certification from the American Board of Podiatric Surgery and a Fellow Certification from the American College of Foot Surgery. Dr. Choy devotes his time as required to the business of our company.                                                                        |  |  | 
|                                                                           |                             |  |     |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |  | 
|Chien Chih Liu, Director                                                   | November 1, 2007            |  | 40  |  |  | Mr. Liu has over 15 years of experience in international trade and project management. From 2002 to 2007, he was Vice President of Tianyi Group, a company engaged in the business of international trade and project management in California.  Prior to Tianyi Group, he was in the real estate investment business in both the US and China. Mr. Liu received a BS in Chemical Engineering from the University of California-Berkeley. He devotes his time as required to the business of our company.                                                                                                                                                                   |  |  | 
|                                                                           |                             |  |     |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |  | 
|Freddy Goman Yu Ting Chong                                                 | November 11, 2011           |  | 36  |  |  | Freddy Goman Yu Ting Chong. Mr. Chong was appointed President on November 11, 2011. Mr. Goman Chong has been the President of daifuWaste Management Limited since September 2007. Prior to that, Mr. Chong was the senior director of Videonline, Inc., an Internet technology company. Mr. Chong has worked as a business development manager for News Corporation’s China Representative Office and Star TV. Mr. Chong received his MBA degree from Tsinghua-M.I.T. Sloan joint program at Tsinghua School of Economic and Management in 2004 and his Hon. Bachelor of Arts degree in Economics, Statistics and Actuarial Science from the University of Toronto in 1997. |  |  | 
|                                                                           |                             |  |     |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |  | 
|Jie Yin                                                                    | November 11, 2011           |  | 47  |  |  | Ms. Yin was appointed Chief Operating Officer on November 11, 2011. Ms. Yin has been the Chief Operating Officer
        of daifuWaste Management Limited since 2007. She has wide experience in the medical waste treatment business in China. Ms. Yin
        has also been employed in the medical, hospital and environmental industry in China and Singapore. Ms. Yin received her MBA degree
        from Capital Economy University in China in 2001.                                                                                                                                                                                                                |  |  | 





64









During 2011, the Company accepted the resignations of Mariya Petrovska and Ching Chuen Chan and appointed
Chu Keung Andrew Chow and Michael H. Choy as Directors.  The officers and directors listed above are expected to hold their
offices/positions until the next annual meeting of our stockholders. The officers and directors are our only officers, directors
and control persons.



Section 16(a) Beneficial Ownership Reporting Compliance



Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and persons
who own more than ten percent of our common stock, to file with the Securities and Exchange Commission initial reports of ownership
and reports of changes of ownership of our common stock. Officers, directors and greater than ten percent stockholders are required
by SEC regulation to furnish us with copies of all Section 16(a) forms they file. To the best of our knowledge, all Section 16(a)
filing requirements applicable to our officers, directors and greater than ten percent beneficial owners were complied with. In
making these disclosures, we have relied solely on a review of the copies of such reports furnished to us and written representations
by our directors, executive officers and greater than ten percent stockholders.



than ten percent of our common stock, to file with the Securities and Exchange Commission initial reports
of ownership and

reports of changes of ownership of our common stock. Officers, directors and greater than ten percent stockholders
are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. To the best of our knowledge, all
Section 16(a) filing requirements applicable to our officers, directors and greater than ten percent beneficial owners were complied
with. In making these disclosures, we have relied solely on a review of the copies of such reports furnished to us and written
representations by our directors, executive officers and greater than ten percent stockholders.



Code of Ethics



At this time, we have not adopted a formal Code of Ethics that applies to the Chief Financial Officer. 
We have, however, followed an informal Code of Ethics requiring Board of Director approval of any material transaction involving
our Chief Financial Officer. We believe this procedure reasonably deters material wrongdoing and promotes honest and ethical conduct
from our executive officers.



Nominating Committee

At the present time, we do not have a standing nominating committee or a committee performing similar
functions. At the present stage of our business development, it is the view of our Board of Directors that such a committee would
be of little assistance in recommending nominations for director-nominees. In addition, at the present time we do not have a defined
policy or procedure for shareholders to submit recommendations or nominations for directors. The Board of Directors believes that,
given the current stage of our development, a specific nominating policy would be premature and of little assistance until the
Company’s operations develop to a more advanced level. We do not currently have any specific or minimum criteria for the
selection of nominees to the Board of Directors and the Board does not have any specific process or procedure for evaluating such
nominees. The Board of Directors assesses all candidates, whether submitted by management or shareholders and makes recommendations
for election or appointment.

Item 11.  Executive Compensation



The following table sets out the compensation received for the fiscal years ended December 31, 2011 and 2010
with respect to each of the individuals who were our principal executive officers at any time during the last fiscal year and
the  most highly compensated executive officers whose total salary and bonus exceeded $100,000.





65













|SUMMARY COMPENSATION TABLE                     
|-----------------------------------------------
|                                               
|                                               
|Name and Principal Position                    
|                                               
|                                               
|Chien Chih Liu, Principal Executive Officer (1)
|                                               
|                                               
|                                               
|                                               
|                                               



(1)  During the fiscal year ended April 30, 2010, on July 1, 2009, we entered into an Employment Agreement
with Mr. Chien Chih Liu. The terms of the agreement provide that Mr. Liu will receive an annual base salary of $125,000 per year,
as well as a one-time bonus of $75,000 in restricted common stock. On January 12, 2012.Mr. Lui resigned as CEO of Rotoblock and
replaced by Andrew P. Schneider.



Employment Agreements



On January 12, 2012  the Company entered into an employment agreement with Andrew P. Schneider as CEO.

Mr. Schneider’s Employment Agreement is effective for an initial term of twelve (12) months commencing
January 20, 2012 with a salary of $125,000 per year. In addition, Mr. Schneider will be issued 1,000,000 shares of the Company’s
common stock; Common Stock Purchase Warrants to purchase up to an additional 1,000,000 shares of the Company’s common stock
at a price of $0.25 per share; and Employee Common Stock Awards of 500,000 shares based on targeted increases in the Company’s
market cap valuation.





OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END



None of our officers or directors exercised any warrants since acquisition date of November 18, 2011.



No pension or retirement benefit plan has been adopted and none is proposed at this time.



Director Compensation



The Company has not yet established a policy to compensate independent directors of the company.



ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters



The following table sets forth information known to Rotoblock with respect to beneficial ownership of Rotoblock’s
Common Stock as ofApril 9, 2012 for (i) each director, (ii) each holder of 5.0% or greater of Rotoblock’s Common Stock,
(iii) Rotoblock’s Chief Executive Officers and the two most highly compensated executive officers other than the Chief Executive
Officers and the Chief Financial Officer named in the table entitled “Summary Compensation Table” below (the “named
executive officers”), and (iv) all executive officers and directors as a group. Unless otherwise listed below, the address
for each investor is Rotoblock’s address: 300 B Street, Santa Rosa, CA 95401.





66











Beneficial ownership is determined under the rules of the Securities and Exchange Commission and generally
includes voting or investment power with respect to securities. Except as indicated in the footnotes to this table and pursuant
to applicable community property laws, to Rotoblock’s knowledge the persons named in the table below have sole voting and
investment power with respect to all shares of Common Stock beneficially owned. In addition, unless otherwise indicated, all persons
named below can be reached at Rotoblock, 300B Street, Santa Rosa, CA 95401. The number of shares beneficially owned by each person
or group as of April 9, 2012 includes shares of Common Stock that such person or group had the right to acquire on or within 60
days after April 9, 2012, including, but not limited to, upon the exercise of options or the vesting of restricted stock units.
References to options in the footnotes of the table below include only options to purchase shares outstanding as of April 9, 2012
that were exercisable on or within 60 days after April 9, 2012, and references to restricted stock units in the footnotes of the
table below include only restricted stock units outstanding as of April 9, 2012 that would vest and could settle on or within 60
days after April 9, 2012. For each individual and group included in the table below, percentage ownership is calculated by dividing
the number of shares beneficially owned by such person or group by the sum of the 298,712,792 shares of Common Stock outstanding
on April 9, 2012 plus the number of shares of Common Stock that such person or group had the right to acquire on or within 60 days
after April 9, 2012.





|Name and Address of Beneficial Owner           | Nature and Amount of Beneficial Ownership (1) | Percent of Outstanding Common Stock
|---------------------------------------------- | --------------------------------------------- | -----------------------------------
|Beneficial Owners of More Than 5%              |                                               |                                    
|Evereach  Capital                              | 5,447,752                                     | 6.7%                               
|                                               |                                               |                                    
|Current Directors and Named Executive Officers |                                               |                                    
|Andrew P. Schneider (2)                        | 2,000,000                                     | 2.5%                               
|                                               |                                               |                                    
|Chu Keung Andrew Chow                          | 2,151,114                                     | 2.6 %                              
|                                               |                                               |                                    
|Freddy Goman Yu Ting Chong                     | 1,063,899                                     | 1.3%                               
|                                               |                                               |                                    
|Jie Yin                                        | 4,961,439                                     | 6.2%                               
|                                               |                                               |                                    
|Daifu Holding Company (3)                      | 26,229,705                                    | 32.7%                              
|Michael Choy                                   | 8,371,995                                     | 10.4%                              
|                                               |                                               |                                    
|Chien Chih Liu                                 | 768,164                                       | *                                  
|                                               |                                               |                                    
|All Officers and Directors as a group          | 45,546,316                                    | 55.7%                              



(1) In general, a person is considered a beneficial owner of a security if that person has or shares the power
to vote or direct the voting of such security, or the power to dispose of such security. A person is also considered to be a beneficial
owner of any securities of which the person has the right to acquire beneficial ownership within (60) days.



(2) Includes 1 million shares issuable upon exercise of warrants



(3) Michael Choy owns 26% of stock and has beneficial control.



* Less than 1%





67











Changes in Control



As disclosed in the Form 8KA filed on November 15, 2011 Rotoblock and the shareholders of Daifu entered into
an Amended and Restated Agreement and Plan of Share Exchange dated November 11, 2010 (Share Exchange Agreement) pursuant to which
the Daifu Shareholders transferred 100% of the outstanding shares of Daifu to Rotoblock in exchange for the issuance of 73,801,525
shares of the Rotoblock’s common stock to the Daifu Shareholders.



Item 13.  Certain Relationships and Related Transactions



Note Payable to a Related Party



During 2011, we borrowed $410,000 from a related entity,American Pacific Medical Group Limited at 7% interest
per annum. The funds were used to redeem our preferred stock.





Item 14. Principal Accountant Fees and Services



Principal Accountant Fees and Services



The following is a summary of the fees billed to Rotoblock by and Parker Randall CF (H.K.) CPA Limited and
James Stafford, Chartered Accountants for professional services rendered for the fiscal years ended December 31, 2011 and December
31, 2010:



|Fee Category       | Fiscal 2011 Fees
        __________ | Fiscal 2010 Fees
        __________
|------------------ | ----------------------------------- | -----------------------------------
|Audit Fees         | $31,500                             | $9,881                             
|Audit-Related Fees | —                                   | —                                  
|Tax Fees           | —                                   | —                                  
|All Other Fees     | —
        __________                | —
        __________               
|Total Fees         | $31,500                             | $9,881                             





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Audit Fees. Consists of fees billed for professional services rendered for the integrated audit of
Rotoblock’s consolidated financial statements and of its internal control over financial reporting, for review of the interim
consolidated financial statements included in quarterly reports and for services that are normally provided by Parker Randall
in connection with statutory and regulatory filings or engagements.



Audit-Related Fees. Consists of fees billed for assurance and related services that are reasonably
related to the performance of the audit or review of Rotoblock’s consolidated financial statements and are not reported
under “Audit Fees.” These services include employee benefit plan audits, accounting consultations in connection with
transactions, merger and acquisition due diligence, attest services that are not required by statute or regulation, and consultations
concerning financial accounting and reporting standards.



Tax Fees. Consists of fees billed for professional services for tax compliance, tax advice and tax
planning. These services include assistance regarding federal, state and international tax compliance, assistance with tax reporting
requirements and audit compliance, assistance with customs and duties compliance, value-added tax compliance, mergers and acquisitions
tax compliance, and tax advice on international, federal and state tax matters. None of these services were provided under contingent
fee arrangements.



All Other Fees. Consists of fees for products and services other than the services reported above.
These services included translation of filings and other miscellaneous services. No management consulting services were provided.



Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered
Public Accounting Firm



The Board of Director’s functions as the Audit Committee. The policy is to pre-approve all audit and
permissible non-audit services to be provided by the independent registered public accounting firm. These services may include
audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year
and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget.
The independent registered public accounting firm and management are required to report periodically to the Audit Committee regarding
the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval, and
the fees for the services performed to date. The Board of Director’s may also pre-approve particular services on a case-by-case
basis.



All audit fees were approved by the Board of Directors.



Item 15.  Exhibits



The following Exhibits 3(i) and 3 (ii), marked with an asterisk and required to be filed hereunder, are incorporated
herein by reference and can be found in their entirety in our original Form  SB-2 Registration Statement, filed on June 7,
2004.  Exhibit 99.1 can be found in its entirety in our Form 10K-SB for the fiscal year ended April 30, 2006, filed on July
31, 2006. Those exhibits are incorporated herein by this reference.



Exhibit No.                 
Description



|*3(i)  | Articles of Incorporation                                                                                                                                                                  
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*3(ii) | Bylaws                                                                                                                                                                                     
|*99.1  | Agreement with Obvio!                                                                                                                                                                      
|10.1   | Amended and Restated Agreement and Plan of Share Exchange dated November 11, 2012 (a)                                                                                                      
|23.1   | Consent of Independent Accountants                                                                                                                                                         
|31.1   | Certification of Principal Executive Officer pursuant to Rule 13a-14/15d-14 of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                     
|31.2   | Certification of Principal Financial Officer pursuant to Rule 13a-14/15d-14 of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                     
|32.1   | Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (39)
|*99.1  | Agreement with Obvio! Automotoveiculos S.A.                                                                                                                                                



* Incorporated by reference



(a) Previously filed as an exhibit to the Registrant’s Current Report on Form 8-K of November 15,
2011, as amended, but included herein with all schedules and exhibits.





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POWER OF ATTORNEY



KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes
and appoints each of Andrew P Schneider and Chow Chu Keung as his or her attorney-in-fact for him or her, in any and all capacities,
to sign this annual report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact or his or her substitute
or substitutes may lawfully do or cause to be done by virtue hereof.



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



|Name | Position | Date
|---- | -------- | ----



|By: /S/ Andrew P. SCHNEIDER
        Andrew P. Schneider | Director and Chief Executive Officer
        (principal executive officer) | April 13, 2012
|------------------------------------------------------- | -------------------------------------------------------------------------- | --------------



|By: /S/ Chow Chu Keung
        Chow Chu Keung | Chief Financial Officer and Director
        (principal financial and accounting officer) | April 13, 2012
|--------------------------------------------- | ----------------------------------------------------------------------------------------- | --------------



|By: /S/ Jie Yin
        Jie Yin | Chief Operating Officer | April 13, 2012
|------------------------------- | ----------------------- | --------------



|By: /S/ Freddy Goman Yu Ting Chong
        Freddy Goman Yu Ting Chong | President | April 13, 2012
|--------------------------------------------------------------------- | --------- | --------------



|By: /S/ Michael Hon Choi Choy
        Michael Hon Choi Choy | Director and Chairman | April 13, 2012
|----------------------------------------------------------- | --------------------- | --------------



|By: /S/ Chien Chih Liu
        Chien Chih Liu | Director | April 13, 2012
|--------------------------------------------- | -------- | --------------









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