What changed in this filing

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Item 1A. Risk Factors

2010-08-30 compared with 2009-09-15 · 388 added, 180 removed, 357 unchanged (61% of the section changed)

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affected by a number of economic factors, including, but not limited to,

interest rates, market and government

confidence, political priorities, level of

construction of commercial, government and residential projects, and

the level of construction financing available.

Also, our revenue is dependent

upon the cost and availability of raw materials, the cost of labor, increased

taxes, and other costs of doing business.

If there is a decline in

construction activity in China or a rise in the costs of doing business in

China, demand for our concrete products may decline and our revenue will

Competition in

the concrete industry could adversely affect our results of

interest rates, market and government confidence, political

priorities, level of construction of commercial, government and

residential projects, and the level of construction financing available.

our revenue is dependent upon the cost and availability of raw materials, the

cost of labor, increased taxes, and other costs of doing business.

there is a decline in construction activity in China or a rise in the costs of

doing business in China, demand for our concrete products may decline and our

revenue will decrease.

in the concrete industry could adversely affect our results of

operate in local and regional markets in China, and many factors affect the

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terms we may not accomplish our strategic plan.

expansion plans for the Tianjin region are premised upon our raising sufficient

capital to timely build or acquire two new production plants to accommodate the

increased concrete production needs for that developing

Although we believe that, given our current level of revenue

and net income, our management team, and our track record of

performance, we may be able to raise sufficient capital to carry out our

strategic plan, there can be no assurance that we will do so.

Our inability to

raise sufficient capital on favorable terms to fund these new production plants

would negatively impact our projected revenues and our projected

construction of the new plant in Tangshan may not be completed if we fail to

obtain a construction permit from the local construction

successful completion of the construction of the new mixing concrete batch plant

in Tangshan city, Hebei Province in China is contingent on the review and

investigation of the local Commission of Construction in Tangshan.

the Tangshan Commission of Construction includes but is not limited to the

proper installation of the facilities, the geographical features of the subsoil

that the foundation of the plant is based on, and the environmental impact of

the facilities.

If we fail to obtain the required permit from the

Tangshan Commission of Construction, we may not be able to operate the new

expansion plans are premised upon our raising sufficient capital to timely build

or acquire two to three new production plants in the next two to three years to

accommodate the increased concrete production needs.

believe that, given our current level of revenue and net income, our management

team, and our track record of performance, we may be able to raise

sufficient capital to carry out our strategic plan, there can be no assurance

that we will do so.

Our inability to raise sufficient capital or inability to

raise capital on acceptable terms to fund these new production plants would

negatively impact our projected revenues and our projected growth.

collection of accounts receivable and potential bad debts may impose a threat to

our operations and expansion.

among most of the businesses in the concrete industry, we have a large amount of

accounts receivable, which accounts for over 50% of the total assets.

substantial majority of our outstanding trade receivables are not secured by any

collaterals or credit insurance.

While we have procedures to monitor and limit

exposure to credit risk on our trade and non-trade receivables, there is no

assurance that such procedures will effectively limit our risks of bad debts and

avoid losses, which could have a material adverse effect on our financial

condition, operating results and business expansion.

depend heavily on key personnel, and turnover of key employees and senior

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continued contributions of our key technical and senior management personnel,

including Rong Yang, our Chairman and Chief Executive Officer and Chief

Financial Officer.

They also depend in significant part upon our ability

to attract and retain additional qualified management, technical, marketing and

sales and support personnel for our operations.

If we lose a key employee,

or if we are not able to attract and retain skilled employees as needed, our

business could suffer.

Significant turnover in our senior management could

significantly deplete our institutional knowledge held by our existing senior

management team.

We depend on the skills and abilities of these key

employees in managing the manufacturing, technical, marketing and sales aspects

of our business, any part of which could be harmed by turnover in the

including Rong Yang, our Chairman and Chief Executive Officer.

depend in significant part upon our ability to attract and retain additional

qualified management, technical, marketing and sales and support personnel for

our operations.

If we lose a key employee, or if we are not able to

attract and retain skilled employees as needed, our business could suffer.

Significant turnover in our senior management could significantly deplete

our institutional knowledge held by our existing senior management team.

We depend on the skills and abilities of these key employees in managing

the manufacturing, technical, marketing and sales aspects of our business, any

part of which could be harmed by turnover in the future.

expect approximately 60% of our sales revenues will be derived from our ten

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In fiscal year 2009, we derived 48% from our ten largest

We believe we are favorably diversifying our customer

base to put less reliance on any one customer;

however, the loss of a major

customer could significantly decrease our revenues and net income.

properties and production lines may be terminated due to unexpected

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and have built our offices and manufacturing facilities on this site.

believe this lease is secure for us, under our laws, the lease could be

terminated for unexpected reasons.

In Tangshan, we built our production base on

land owned and provided by our client, Beijing Coking and Chemical Group.

have a good relationship with this client and expect this relationship to

However, the relationship could terminate for unexpected reasons.

are currently negotiating to expand plant facilities in Tangshan with an

independent developer, and will report such terms when and if agreed

land for our Xi’an production facility.

While we believe this lease is secure

for us, under our laws, the lease could be terminated for unexpected reasons.

intellectual property rights in our proprietary admixture products may be hard

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We currently use such products in our own

operations and sell such products to competitors.

These proprietary admixture

products are protected by trade secrets only, and are not patented.

we cannot ensure that a competitor may not be able to duplicate and

commercialize our proprietary products.

Litigation may be necessary to enforce

our intellectual property rights and given the relative unpredictability of

China’s legal system and potential difficulties enforcing a court judgment in

China, there is no guarantee litigation would result in an outcome favorable to

Further, any such litigation could be costly and divert management away from

our core business.

Our financial results could be negatively affected if we

cannot protect or timely develop our admixture products.

rapid expansion could significantly strain our resources, management and

operational infrastructure which could impair our ability to meet increased

These proprietary admixture products are protected by trade secrets

only, and are not patented.

Accordingly, we cannot ensure that a

competitor may not be able to duplicate and commercialize our proprietary

Litigation may be necessary to enforce our intellectual property

rights and given the relative unpredictability of China’s legal system and

potential difficulties enforcing a court judgment in China, there is no

guarantee litigation would result in an outcome favorable to us.

such litigation could be costly and divert management away from our core

Our financial results could be negatively affected if we cannot

protect or timely develop our admixture products.

continuing rapid expansion could significantly strain our resources, management

and operational infrastructure which could impair our ability to meet increased

demand for our products and hurt our business results.

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hurt our overall financial performance.

disruption in the supply chain of raw materials and our products could adversely

impact our ability to produce and deliver products.

upon the purchase of raw materials for the production of our concrete products.

While we have established good relationships with our suppliers, and we

typically pass on any cost increases to our customers, any significant change in

demand or cost or disruption of supply chain could impair our revenue and hurt

our overall financial performance .

may lose business to competitors who underbid us, and we may be otherwise unable

to compete favorably in our highly competitive industry.

competitive position in a given market depends largely on the location and

operating costs of our plants and prevailing prices in that market.

Generally, our products are price-sensitive.

Our prices are subject to changes

in response to relatively minor fluctuations in supply and demand, general

economic conditions and market conditions, all of which are beyond our control.

Because of the fixed-cost nature of our business, our overall profitability is

sensitive to minor variations in sales volumes and small shifts in the balance

between supply and demand.

Price is the primary competitive factor among

suppliers for small or simple jobs, principally in residential construction.

However, timeliness of delivery and consistency of quality and service, as well

as price, are the principal competitive factors among suppliers for large or

complex jobs.

Concrete manufacturers like us generally obtain customer contracts

through local sales and marketing efforts directed at general contractors,

developers and homebuilders.

As a result, we depend on local

relationships.

We generally do not have any long-term sales contracts with

our customers.

competitors range from small, owner-operated private companies to subsidiaries

or operating units of large, vertically integrated manufacturers of cement and

Our vertically integrated competitors generally have greater

manufacturing, financial and marketing resources than we have, providing them

with a competitive advantage.

Competitors having lower operating costs than we

do or having the financial resources to enable them to accept lower margins than

we do will have a competitive advantage over us for projects that are

particularly price-sensitive.

Competitors having greater financial resources or

less financial leverage than us may have a competitive advantage because of

their greater financial flexibility to invest in new mixer trucks, build plants

in new areas or pay for acquisitions.

contracts may require us to perform extra or change order work, which can result

in disputes and adversely affect our working capital, profits and cash

contracts may require us to perform extra or change order work as directed by

the customer even if the customer has not agreed in advance on the scope or

price of the work to be performed.

This process can result in disputes over

whether the work performed is beyond the scope of the work included in the

original project plans and specifications or, if the customer agrees that the

work performed qualifies as extra work, the price the customer is willing to pay

for the extra work.

Even when the customer agrees to pay for the extra work, we

may be required to fund the costs of such work for a lengthy period of time

until the change order is approved and funded by the customer.

may incur material costs and losses as a result of claims if our products do not

meet regulatory requirements or contractual specifications.

operations involve providing products that must meet building code or other

regulatory requirements and contractual specifications for durability,

stress-level capacity, weight-bearing capacity and other characteristics.

fail or are unable to provide products meeting these requirements and

specifications, material claims may arise against us and our reputation could be

We expect that in the future there may be claims of this kind asserted

If a significant product-related claim or claims are resolved

against us in the future, that resolution may have a material adverse effect on

our financial condition, results of operations and cash flows.

net sales attributable to public infrastructure projects could be negatively

impacted by a decrease or delay in governmental spending.

business depends in part on the level of governmental spending on infrastructure

projects in our markets.

Reduced levels of governmental funding for public works

projects or delays in that funding could adversely affect our business,

financial condition, results of operations and cash flows.

The timing of bid

activity may be negatively affected by the economy, municipal budgets and

availability of financing.

weather can reduce construction activity and lead to a decrease in demand for

the Company’s products in areas affected by adverse weather

Company’s operations and the demand for a number of the Company’s products are

affected by weather conditions in the markets where the Company operates.

Sustained adverse weather conditions such as rain, extreme cold or snow could

disrupt or curtail outdoor construction activity which in turn could reduce

demand and the quality of our products and have a material adverse effect on our

operations, financial performance or prospects.

of our existing stockholders have substantial influence over our company, and

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stockholders.

Shen is the beneficial owner of approximately 52% of our common stock.

a result, he has significant influence over our business, including decisions

regarding mergers, consolidations and the sale of all or substantially all of

our assets, election of directors and other significant corporate actions.

concentration of ownership may also have the effect of discouraging, delaying or

preventing a future change of control, which could deprive our stockholders of

an opportunity to receive a premium for their shares as part of a sale of our

company and might reduce the price of our shares.

Shen is the owner of approximately 45.7% of our common stock.

He has given the

voting power of approximately 87.3% of his shares to Mr.

Rong Yang, CEO and

Chairman of the Company, and approximately 12.7% to Mr.

Xiao, a former

As a result, Mr.

Xiao may have significant influence

over our business, including decisions regarding mergers, consolidations and the

sale of all or substantially all of our assets, election of directors and other

significant corporate actions.

This concentration of ownership may also have the

effect of discouraging, delaying or preventing a future change of control, which

could deprive our stockholders of an opportunity to receive a premium for their

shares as part of a sale of our company and might reduce the price of our

Environmental

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uncovered risks of operation, our financial condition may be significantly

do not have any independent directors and there is no assurance that any

independent directors will be appointed.

currently seeking independent directors for our Board of Directors;

do not presently have independent directors, and there is no assurance that any

independent directors will be appointed in the future.

non-independent directors owe fiduciary duties to our Company and our

shareholders, they may also determine compensation packages in cash, stock,

benefits and /or a combination of those items that will accrue to their own

may be exposed to potential risks relating to our internal controls over

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attest to and report on the operating effectiveness of the company’s internal

These requirements will first apply to our annual report on Form

10-K for the fiscal year ending May 31, 2010 with respect to the filing of

an auditor’s report.

controls if the company's public float is over $75 million.

requirements do not currently apply to us with respect to the filing of an

auditor’s report.

We can provide no assurance that we will comply with all of

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in leadership, social or political disruption, or other circumstances affecting

the PRC's political, economic and social life.

the PRC political, economic and social life.

PRC laws and regulations governing the Company’s current business operations are

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involve substantial uncertainty.

For example, if the China Securities

Regulatory Commission, or CSRC, or another PRC regulatory agency, determines

that CSRC approval is required in connection with the share exchange

transaction, the share exchange transaction may be delayed or cancelled, or we

may become subject to penalties.

effectiveness of newly enacted laws, regulations or amendments may be delayed,

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cause the Chinese government to impose controls on credit and/or prices, or to

take other action, which could inhibit economic activity in

China, reduce demand, materially increase our costs, and

thereby harm the market for our products and our Company.

take other action, which could inhibit economic activity in China, reduce

demand, materially increase our costs, and thereby harm the market for our

products and our Company.

control of currency conversion may affect the value of an investment in the

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stockholders to liability under PRC law.

issued a public notice (the “October Notice”) effective November 1, 2005, which

requires registration with SAFE by the PRC resident stockholders of any foreign

holding company of a PRC entity.

Without registration, the PRC entity cannot

remit any of its profits out of the PRC as dividends or otherwise;

is uncertain how the October Notice will be interpreted or implemented regarding

specific documentation requirements for a foreign holding company formed prior

to the effective date of the October Notice, such as in the Company’s case.

While the Company’s PRC counsel advised it that only the PRC resident

stockholders who receive the ownership of the foreign holding company in

exchange for ownership in the PRC operating company are subject to the October

Notice, there can be no assurance that SAFE will not require the Company’s other

PRC resident stockholders to make disclosure.

In addition, the October Notice

requires that any monies remitted to PRC residents outside of the PRC be

returned within 180 days;

however, there is no indication of what the penalty

will be for failure to comply or if stockholder non-compliance will be

considered to be a violation of the October Notice by the Company or otherwise

affect the Company.

event that the proper procedures are not followed under the SAFE October Notice,

event that the proper procedures are not followed under the SAFE Circular 75,

the Company could lose the ability to remit monies outside of the PRC and would

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determination that we violated the Foreign Corrupt Practices Act could hurt our

we are currently not subject to these regulations, we anticipate to become

subject to the Foreign Corrupt Practices Act, or FCPA, and other laws that

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the Company’s principal assets are located outside of the United States and the

Company’s directors and officers reside outside of the United States, it may be

difficult for investors to enforce their rights in the U.S.

Company’s officers and some of the directors reside outside of the United

States, it may be difficult for investors to enforce their rights in the U.S.

based on U.S.

federal securities laws against the Company and the Company’s officers and

directors or to enforce U.S.

court judgments against the Company or them in the

federal securities laws against the Company and the Company’s

officers and directors or to enforce U.S.

court judgments against the Company or

them in the PRC.

Concrete is located in the PRC and substantially all of its assets are located

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practices that meet western standards.

regulations also involve complex procedures for acquisitions conducted by

foreign investors that could make it more difficult for us to grow through

acquisitions.

to the Regulations on Mergers and Acquisitions of Domestic Enterprises by

Foreign Investors, effective as of September 8, 2006 and revised as of June 22,

2009, additional procedures and requirements were established that are expected

to make merger and acquisition activities in China by foreign investors more

time-consuming and complex, including requirements in some instances that the

Ministry of Commerce of the PRC (“MOFCOM”) be notified in advance of any

change-of-control transaction in which a foreign investor takes control of a PRC

domestic enterprise, or that the approval from MOFCOM be obtained in

circumstances where overseas companies established or controlled by PRC

enterprises or residents acquire affiliated domestic companies and special

anti-monopoly submissions for parties meeting certain reporting thresholds.

may grow our business in part by acquiring other companies engaged in the

production of ready-mixed concrete for developers and the construction industry

Complying with the requirements of the new regulations to complete

such transactions could be time-consuming, and any required approval processes,

including approval from MOFCOM, may delay or inhibit our ability to complete

such transactions, which could affect our ability to expand our business or

maintain our market share.

addition, our Chief Executive Officer, President and Chairman Mr.

certain call option agreements between Mr.

Shen, has an option to

purchase 5,113,384 shares of common stock held by Mr.

Shen over the course of

approximately two years in installments upon achievement of certain performance

milestones by the Company.

While it is the case that our PRC counsel believes

that this arrangement is lawful under PRC laws and regulations, there are,

however, substantial uncertainties regarding the interpretation and application

of the current or future PRC laws and regulations, including regulations

governing the validity and legality of such call options.

Accordingly, we cannot

assure you that PRC government authorities will not ultimately take a view

contrary to the opinion of our PRC legal counsel.

PRC stockholders are required to register with SAFE;

their failure to do so

could cause us to lose our ability to remit profits out of the PRC as

promulgated several regulations, including Circular No.

75 (“Circular 75”),

which became effective in November 2005, requiring PRC residents, including both

PRC legal person residents and PRC natural person residents, to register with

the competent local SAFE branch before establishing or controlling any company

outside of the PRC for the purpose of equity financing with assets or equities

of PRC companies, referred to in the Circular 75 as an “offshore special purpose

company.” PRC residents that have established or controlled an offshore special

purpose company, which has finished a round-trip investment before the

implementation of Circular 75, are required to register their ownership

interests or control in such “special purpose vehicles” with the local offices

Under Circular 75, the term “PRC legal person residents” as used in

Circular 75 refers to those entities with legal person status or other economic

organizations established within the territory of the PRC.

The term “PRC natural

person residents” as used in Circular 75 includes all PRC citizens and all other

natural persons, including foreigners, who habitually reside in the PRC for

economic benefit.

The term “special purpose vehicle” refers to an offshore

entity established or controlled, directly or indirectly, by PRC residents or

PRC entities for the purpose of seeking offshore equity financing using assets

or interests owned by such PRC residents or PRC entities in onshore companies,

and the term “round-trip investment” refers to the direct investment in PRC by

PRC residents through “special purpose vehicles,” including without limitation,

establishing foreign invested enterprises and using such foreign invested

enterprises to purchase or control (by way of contractual arrangements) onshore

The term “control” includes the possession of the operating rights and

decision making rights in the “special purpose vehicles” through trust, voting

trust, holding shares on behalf of others, or other methods.

addition, any PRC resident that is the shareholder of an offshore special

purpose company is required to amend his/her/its SAFE registration with the

local SAFE branch upon (i) injection of equity interests or assets of an onshore

enterprise to the offshore entity, or (ii) subsequent overseas equity financing

by such offshore entity.

PRC residents are also required to complete amended

registrations or filing with the local SAFE branch within 30 days of any

material change in the shareholding or capital of the offshore entity not

involving a round-trip investment, such as changes in share capital, share

transfers and long-term equity or debt investments or, already organized or

gained control of offshore entities that have made onshore investments in the

PRC before Circular 75 was promulgated must register with their shareholdings in

the offshore entities with the local SAFE branch on or before March 31,

Circular 75, PRC residents are further required to repatriate into the PRC all

of their dividends, profits or capital gains obtained from their shareholdings

in the offshore entity within 180 days of their receipt of such dividends,

profits or capital gains.

The registration and filing procedures under the

Circular 75 are prerequisites for other approval and registration procedures

necessary for capital inflow from the offshore entity, such as inbound

investments or shareholders loans, or capital outflow to the offshore entity,

such as the payment of profits or dividends, liquidating distributions, equity

sale proceeds, or the return of funds upon a capital reduction.

further clarify the implementation of Circular 75, SAFE issued Circular No.

(“Circular 106”) on May 9, 2007, which is guidance that SAFE issued to its local

branches with respect to the operational process for SAFE registration that

standardized more specific and stringent supervision on the registration

relating to the Circular 75.

Under Circular 106, PRC subsidiaries of an offshore

special purpose company are required to coordinate and supervise the filing of

SAFE registrations by the offshore holding company’s shareholders who are PRC

residents in a timely manner.

If these shareholders and/or beneficial owners

fail to comply, the PRC subsidiaries are required to report such failure to the

local SAFE authorities and, if the PRC subsidiaries do report the failure, the

PRC subsidiaries may be exempted from any potential liability to them related to

the stockholders’ failure to comply.

The failure of these shareholders and/or

beneficial owners to timely amend their SAFE registrations pursuant to the

Circular 75 and Circular 106 or the failure of future shareholders and/or

beneficial owners of our company who are PRC residents to comply with the

registration procedures set forth in the Circular 75 and Circular 106 may

subject such shareholders, beneficial owners and/or our PRC subsidiaries to

fines and legal sanctions and may also limit our ability to contribute

additional capital into our PRC subsidiaries, limit our PRC subsidiaries ability

to distribute dividends to our company or otherwise adversely affect our

regulations apply to our stockholders who are PRC residents.

In the event that

our PRC-resident stockholders do not follow the procedures required by SAFE, we

could (i) be exposed to fines and legal sanctions, (ii) lose the ability to

contribute additional capital into our PRC subsidiaries or distribute dividends

to our company, (iii) face liability for evasion of foreign-exchange

regulations, and/or (iv) lose the ability to consolidate the financial

statements of our PRC subsidiaries under applicable accounting

our Chief Executive Officer, President and Chairman, may be required

to register with the competent SAFE branch prior to exercise of his call option.

However, it is not clear whether Mr.

Yang’s call option will be deemed as a way

of control of the Company.

There are substantial uncertainties regarding the

interpretation and application of the Circular 75 on the call

RELATED TO THE MARKET FOR OUR STOCK

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adverse impact on our ability to raise capital in the future.

are subject to penny stock regulations and restrictions.

Company’s common stock may be subject to the “penny stock” rules adopted under

section 15(g) of the Exchange Act.

The penny stock rules apply to

companies whose common stock is not listed on the NASDAQ Stock Market or other

national securities exchange and trades at less than $5.00 per share.

rules require, among other things, that brokers who trade penny stock to persons

other than “established customers” complete certain documentation, make

suitability inquiries of investors and provide investors with certain

information concerning trading in the security, including a risk disclosure

document and quote information under certain circumstances.

Many brokers have

decided not to trade penny stocks because of the requirements of the penny stock

rules and, as a result, the number of broker-dealers willing to act as market

makers in such securities is limited.

If the Company remains subject to the

penny stock rules for any significant period, it could have an adverse effect on

the market, if any, for the Company’s securities.

If the Company’s securities

are subject to the penny stock rules, investors will find it more difficult to

dispose of the Company’s securities

There is currently no liquid trading

market for the Company’s common stock and the Company cannot ensure that one

will ever develop or be sustained .

currently no liquid trading market on the OTCBB for the Company’s common stock,

and there is no assurance that one will develop or be sustained.

Company currently does not satisfy the initial listing standards for a higher

exchange than the OTCBB, and cannot ensure that it will be able to satisfy such

listing standards on a higher exchange, or that its common stock will be

accepted for listing on any such exchange.

There is currently limited trading

market for our common stock and we cannot ensure that one will ever develop or

be sustained .

currently limited trading market on the OTCBB for our common stock, and there is

no assurance that one will develop or be sustained.

We have applied to

have our common stock listed on the NASDAQ Global Market, but we cannot ensure

that our common stock will be accepted for listing on such

elimination of monetary liability against the Company’s directors, officers and

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1933, as amended, and is therefore unenforceable.

not meet the performance targets specified in our financing documents, we could

be required to issue shares of common stock to certain of our investors, which

would result in dilution to your ownership interest in the Company.

October 16, 2009, we consummated a private placement of a total of approximately

2,564,108 shares of our common stock (“2009 Private Placement”) to a number of

investors (“2009 Investors”) pursuant to a subscription agreement dated October

16, 2009, which was amended on March 5, 2010.

Under the subscription agreement,

as amended (“2009 Subscription Agreement”), we will be required to issue shares

of common stock to the 2009 Investors if certain performance thresholds are not

If our after tax net income (“Targeted Net Income”) for the

fiscal year ended May 31, 2011 is less than $18,000,000 (which shall be

increased to $19,800,000 in the event that we do not consummate a public

offering on or before the date on which we file our annual report on Form 10-K

for the fiscal year ended May 31, 2011), we will be required to issue to the

2009 Investors additional shares of common stock representing a fraction of

shares issued in the 2009 Private Placement calculated using the percentage of

variation of our actual after tax net income to the Targeted Net Income for such

period (the “Adjustment Percentage”) (for example, if our after tax net income

for fiscal 2011 were $16,200,000, which is a variation of 10% of the respective

Targeted Net Income, we would be required to issue an aggregate of 256,410

shares of common stock to the 2009 Investors).

On March 11, 2010, we consummated

a private placement of a total of approximately 1,282,091 shares of our common

stock (“2010 Private Placement”) to a number of investors.

Under the 2009

Subscription Agreement, we will be required to issue additional shares of common

stock to the 2009 Investors who invested in the 2010 Private Placement, if the

Targeted Net Income thresholds are not met.

The number of such

additional shares shall equal the Adjustment Percentage times the number of

shares of Common Stock acquired by the 2009 Investor in the 2010 Private

Placement, minus the Adjustment Percentage times the number of shares acquired

by such investor in the 2009 Private Placement that have been sold by such

investor as of the date on which the Company releases its respective net income

data in a Form 10-K filed with the SEC.

Any issuance of equity securities to

satisfy our obligations pursuant to the 2009 Subscription Agreement as described

above will result in dilution to our existing shareholders and could adversely

affect the market price of our common stock.

eligible for future sale may adversely affect the market price of our common

stock, as the future sale of a substantial amount of outstanding stock in the

public marketplace could reduce the price of our common stock.

August 27, 2010, there were issued and outstanding (i) 12,930,620 shares of our

common stock, (ii) warrants to purchase 1,504,160 shares of our common stock,

(iii) options to purchase 740,000 shares of our common stock of which options to

purchase 300,000 shares will become exercisable in December 2010 and the balance

will become exercisable in February and March 2011.

4,141,449 shares of our

common stock are currently eligible for resale under Rule 144.

In addition to

these shares, we currently have obligation to register 1,282,091 shares of our

common stock.

Future sales of substantial amounts of our common stock in the

trading market could adversely affect market price of our common

DESCRIPTION OF

we do not own any land, as the PRC does not permit private land ownership.

Company is leasing land site for their production bases from Beijing Guang Da

Company is leasing land for its Beijing Yizhuang factory from Beijing Guang Da

Yuan Logistic Company.

In our Beijing production base, we currently lease

a land lot of approximately 22,000 square meters.

The term of the lease is 10

years and will expire in 2016.

In our Beijing stationary factory, we

currently lease two parcels of land for this factory.

One lot is approximately

22,538 square meters.

The term of the lease is 10 years and will expire in 2018.

The rent is approximately $49,000 per annum.

We also built on site our own

buildings and offices of approximately 600 square meters.

The other lot is

approximately 14,673 square meters.

The term of the lease is 1 year and can be

The rent is $32,353 per annum.

We built on site

our own buildings and offices of approximately 600 square meters.

Tangshan production base, we are using approximately 5,300 square meters of land

provided by our client, Beijing Coking and Chemical Group.

As a result, we do

not pay rent for using this site.

We anticipate being at this site

for two more years while we help complete their Phase III project.

are building a new production base in Tangshan at a different location.

new facility will have a much larger space.

We use this lot to store our raw

These two lots are located next to each other.

Beijing Shidu station, we are using approximately 5,000 square meters of land

provided by our customer, Jiangxi Jinggang Roads & Bridges (Group) Co.,

Ltd., which is constructing Zhangzhou Highway.

We are in the process of setting

up the batching plants on such land to supply the concrete mix to the highway

construction projects, and do not pay rent for such land.

anticipate operating at this site for two more years.

recently combined Tangshan Caofeidian mobile station, we are using approximately

8,000 square meters of land provided by our customer, China Construction Second

Engineering Bureau, Ltd., which is constructing a highway in the Tangshan area.

Because we set up the batching plants on such land to supply the concrete mix to

the on-going projects, we do not pay rent for such land.

anticipate operating at this site for one more

Xi’an factory, we leased the land lot of 106,667 square meters from the local

government for a term of 15 years.

The lease will expire in 2024.

rent for the land lot is RMB 441,741 (or approximately US$65,000).

believe that all our properties have been adequately maintained, are generally

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What changed 10-K

Item 1A. Risk Factors