UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 20-F

o
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

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

For the fiscal year ended ______________
 
OR
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR
 
x
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report: July 7, 2010
 
Commission file number: 000-53914
 
Ossen Innovation Co. Ltd.
(formerly Ultra Glory International Ltd.)
(Exact name of Registrant as Specified in its Charter)
 
British Virgin Islands
(Jurisdiction of Incorporation or Organization)
 
518 Shangcheng Road, Floor 17, Shanghai, 200120, Peoples Republic of China
(Address of Principal Executive Offices)
 
Tel: +86 (21) 6888-8886      Fax: +86 (21) 6888-8666 .
(Name, Telephone, E-mail and/or Facsimile Number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:
 
Title of Each Class
 
Name of Each Exchange On Which Registered
None
 
None
 
Securities registered or to be registered pursuant to Section 12(g) of the Act:
 
Ordinary Shares, par value $0 .0 1 per share
(Title of Class)
 
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
 
None
(Title of Class)
 
The number of outstanding shares of each of the issuer’s classes of capital or common stock as of July 7, 2010 was: 15,000,000 ordinary shares, par value $0.01 per share .
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
 
Yes o No x
 
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
 
Yes o No o
 
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 o No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
Yes o No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer o        Accelerated filer o      Non-accelerated filer x
 
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
 
x U.S. GAAP o International Financial Reporting Standards as issued by the International Accounting
Standards Board o   Other o
 
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow: Item 17 o   Item 18 o
 
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  x No o
 
 
OSSEN INNOVATION CO. LTD.
(formerly Ultra Glory International Ltd.)
FORM 20-F SHELL COMPANY REPORT
TABLE OF CONTENTS
 
 
     
Page
 
PART I
Item 1.
 
Identity of Directors, Senior Management and Advisors
 
2
Item 2.
 
Offer Statistics and Expected Timetable
 
2
Item 3.
 
Key Information
 
3
Item 4.
 
Information on the Company
 
18
Item 4A.
 
Unresolved Staff Comments
 
35
Item 5.
 
Operating and Financial Review and Prospects
 
35
Item 6.
 
Directors, Senior Management, and Employees
 
48
Item 7.
 
Major Shareholders and Related Party Transactions
 
52
Item 8.
 
Financial Information
 
53
Item 9.
 
The Offer and Listing
 
53
Item 10.
 
Additional Information
 
54
Item 11.
 
Quantitative and Qualitative Disclosures About Market Risk
 
61
Item 12.
 
Description of Securities Other Than Equity Securities
 
62
 
PART II
Item 13.
 
Defaults, Dividend Arrearages and Delinquencies
 
62
Item 14.
 
Material Modifications to the Rights of Security Holders and Use of Proceeds
 
62
Item 15.
 
Controls and Procedures
 
62
Item 16.
 
Reserved
 
62
Item 16A.
 
Audit Committee Financial Expert
 
62
Item 16B.
 
Code of Ethics
 
62
Item 16C.
 
Principal Accountiing Fees and Services
 
62
Item 16D.
 
Exemptions from the Listing Standards for Audit Committees
 
62
Item 16E.
 
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
 
62
Item 16F.
 
Change in Registrant's Certifying Accountant
 
63
Item 16G.
 
Corporate Governance
 
63
 
PART III
Item 17.
 
Financial Statements
 
64
Item 18.
 
Financial Statements
 
64
Item 19.
 
Exhibits
 
64
 
 
CERTAIN INFORMATION
 
In this shell company report on Form 20-F, unless otherwise indicated, “we,” “us,” “our,” the “Company” and “Ossen” refer to Ossen Innovation Co., Ltd., formerly known as Ultra Glory International Ltd., or Ultra Glory, a company organized in the British Virgin Islands, and its subsidiaries, subsequent to the business combination referred to below. Unless the context indicates otherwise, all references to “Ossen Materials” in this shell company report refer to Ossen Innovation Materials Co., Ltd., a subsidiary of Ossen and one of the entities through which the operating business is held, all references to “Ossen Jiujiang” in this shell company report refer to Ossen (Jiujiang) Steel Wire & Cable Co., Ltd., a subsidiary of Ossen Materials and one of the entities through which our operating business is held, and all references to “Ossen Materials Group” refer to Ossen Innovation Materials Group, Co., Ltd., our wholly-owned subsidiary, which is a holding company that indirectly owns Ossen Materials and Ossen Jiujiang. The “business combination” refers to the share exchange between Ultra Glory, the sole shareholder of Ultra Glory, Ossen and the shareholders of Ossen, resulting in the acquisition of all of the outstanding securities of Ossen by Ultra Glory, which was consummated on July 7, 2010.
 
Unless the context indicates otherwise, all references to “China” refer to the People’s Republic of China.  All references to “Renminbi” or “RMB” are to the legal currency of the People’s Republic of China and all references to “U.S. dollars,” “dollars” and “$” are to the legal currency of the United States. This shell company report contains translations of Renminbi amounts into U.S. dollars at specified rates solely for the convenience of the reader. We make no representation that the Renminbi or U.S. dollar amounts referred to in this report could have been or could be converted into U.S. dollars or Renminbi, as the case may be, at any particular rate or at all. On June 28, 2010, the cash buying rate announced by the People’s Bank of China was RMB 6.789 to $1.00.
 
FORWARD-LOOKING STATEMENTS
 
This report contains “forward-looking statements” that represent our beliefs, projections and predictions about future events. All statements other than statements of historical fact are “forward-looking statements,” including any projections of earnings, revenue or other financial items, any statements of the plans, strategies and objectives of management for future operations, any statements concerning proposed new projects or other developments, any statements regarding future economic conditions or performance, any statements of management’s beliefs, goals, strategies, intentions and objectives, and any statements of assumptions underlying any of the foregoing. Words such as “may”, “will”, “should”, “could”, “would”, “predicts”, “potential”, “continue”, “expects”, “anticipates”, “future”, “intends”, “plans”, “believes”, “estimates” and similar expressions, as well as statements in the future tense, identify forward-looking statements.
 
These statements are necessarily subjective and involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from any future results, performance or achievements described in or implied by such statements. Actual results may differ materially from expected results described in our forward-looking statements, including with respect to correct measurement and identification of factors affecting our business or the extent of their likely impact, and the accuracy and completeness of the publicly available information with respect to the factors upon which our business strategy is based or the success of our business.
 
Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of whether, or the times by which, our performance or results may be achieved. Forward-looking statements are based on information available at the time those statements are made and management’s belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to, those factors discussed under the headings “Risk Factors”, “Operating and Financial Review and Prospects,” and elsewhere in this report.
 
1
 
PART I
 
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
 
1.A.  Directors and Senior Management
 
The following table lists the members of the Company’s board of directors:
 
Name
 
Age
 
Position(s) 
Liang Tang
 
42
 
Chairman of the Board
Zhiping Gu
 
50
 
Director
Wei Hua
 
47
 
Director
 
The business address of each of the directors is: c/o Ossen Innovation Materials Co. Ltd., 518 Shangcheng Road, Floor 17, Shanghai, 200120, People’s Republic of China.
 
The following table lists the senior management of the Company:
 
Name
 
Age
 
Position(s) 
Wei Hua
 
47
 
Chief Executive Officer
Zhiping Gu
 
47
 
Chief Financial Officer

The business address for each of the members of senior management is: c/o Ossen Innovation Materials Co. Ltd., 518 Shangcheng Road, Floor 17, Shanghai, 200120, Peoples Republic of China.

See Item 6.A . – Directors and Senior Management below for more information about our directors and executive officers .
 
1.B.  Advisors
 
The Company’s legal advisors in the People’s Republic of China are: Grandall Legal Group, 31/F, Nanzheng Building, 580 Nanjing Road West, Shanghai 200041, People’s Republic of China.
 
The Company’s legal advisors in the U.S. are: Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of the Americas, New York, NY 10036.

T he Company’s legal advisors in the British Virgin Islands are : Withers BVI, 3 rd Floor, Little Denmark, Main Street, Road Town, Tortola , BVI .
 
1.C.  Auditors
 
T he Company’s auditors are: Sherb & Co. LLP, 805 Third Avenue, New York, NY 10022.  See Item 16.F Change in Registrant’s Certifying Accountant below for information about the change in our auditor following the business comination .
 
Sherb & Co. LLP has confirmed that it is independent with respect to the Company under the guidelines of the SEC and the Independence Standards Board.
 
ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE
 
Not Applicable.
 
2
 
ITEM 3.
KEY INFORMATION
 
3.A.  Selected Financial Data
 
T he following selected financial information should be read in connection with, and is qualified by reference to, our consolidated financial statements and their related notes and the section entitled “Operating and Financial Review and Prospectus,” each of which is included elsewhere in this report.  The consolidated statements of operations and comprehensive income data for the fiscal years ended December 31, 2008 and 2009 and the balance sheets data as of December 31, 2008 and 2009 are derived from the audited consolidated financial statements included elsewhere in this report.  The consolidated statements of operations and comprehensive income data for the fiscal years ended December 31, 2005, 2006 and 2007 and the balance sheets data as of December 31, 2005, 2006 and 2007 have been derived from unaudited financial statements that are not included in this prospectus.  Our historical results for any of these periods are not necessarily indicative of results to be expected in any future period .

   
Year Ended December 31,
 
    
2009
(Audited)
   
2008
(Audited)
   
2007
(Unaudited)
   
2006
(Unaudited)
   
2005
(Unaudited)
 
                               
Revenues
  $ 101,087,796     $ 82,742,310     $ 71,909,873     $ 59,547,454     $ 17,195,347  
Cost of goods sold
    87,659,925       70,532,733       63,340,890       56,853,946       15,216,951  
Gross profit
    13,427,871       12,209,577       8,568,983       2,693,508       1,978,395  
Selling and distribution expenses
    503,724       4,326,491       3,662,373       1,024,209       219,650  
General and administrative expenses
    1,143,672       1,316,606       571,498       340,847       255,270  
   Total Operating Expenses
    1,647,396       5,643,097       4,288,796       1,410,056       501,920  
                                         
Income from operations
    11,780,475       6,566,480       4,280,187       1,283,451       1,476,475  
Interest expenses, net
    (1,496,712 )     (1,891,671 )     (1,189,027 )     (359,130 )     (22,920 )
Other income, net
    183,495       380,766       278,924       211,875       56,362  
Income before income taxes
    10,467,258       5,055,575       3,370,084       1,136,196       1,509,917  
Income taxes
    (740,053 )     (291,520 )     (233,674 )     -       -  
Net income
    9,727,205       4,764,055       3,136,410       1,136,196       1,509,917  
Less: Net Income Attributable to non- controlling interest
    1,714,670       809,437       -       -       -  
Net income attributable to controlling interest
    8,012,535       3,954,618       3,136,410       1,136,196       1,509,917  
Other comprehensive income
                                       
Foreign currency translation gain, net of tax
    31,146       420,883       66,913       360,384       37,135  
Total Other comprehensive income, net of tax
    31,146       420,883       66,913       360,384       37,135  
Comprehensive Income
  $ 8,043,681     $ 4,375,501       3,203,323       1,496,580       1,547,052  
 
3
 
Balance Sheet Data (at end of period)
 
December 31,
 
(in U.S. Dollars)
 
2009
   
2008
   
2007
   
2006
   
2005
 
   
Audited
   
Audited
   
Unaudited
   
Unaudited
   
Unaudited
 
Cash and cash equivalents
  $ 8,409,467     $ 3,761,315     $ 6,735,616     $ 7,828,750     $ 3,120,317  
Total current assets
    68,374,508       47,316,208       35,162,129       18,712,764       9,901,704  
Total assets
    85,717,587       65,896,382       52,626,708       31,436,385       19,799,869  
                                         
Total liabilities
    65,538,241       55,475,387       47,390,651       18,297,807       8,317,707  
Total shareholders’ equity
    20,179,346       10,420,995       5,236,057       13,138,578       11,482,162  
Total liabilities and shareholders’ equity
    85,717,587       65,896,382       52,626,708       31,436,385       19,799,869  
 
4
 
3.A.3.  Exchange Rates
 
Not Applicable.

3.B.  Capitalization and Indebtedness
 
The following table sets forth our capitalization and indebtedness as of December 31, 2009 on an actual basis. This information should be read in conjunction with our consolidated financial statements and the notes relating to such statements appearing elsewhere in this report.
 
As of December 31, 2009
     
           
Cash:
     
Cash and cash equivalents
  $ 8,409,467  
Restricted cash (1)
    11,824,214  
         
Debt:
       
Notes payable - bank acceptance notes (1)
    19,744,925  
Short-term bank loans (2)
    27,350,377  
         
Shareholders’ equity:
       
Common shares, no par value
    500  
Accumulated other comprehensive income
    543,036  
Statutory Reserve
    1,093,331  
Retained earnings
    13,069,401  
Non-controlling interest
    5,473,078  
Total shareholders’ equity
  $ 20,179,346  
 
(1)       Restricted cash represents amounts held by a bank as security for bank acceptance notes and therefore is not available for the Company’s use until such time as the bank acceptance notes have been fulfilled or expired, normally within a twelve month period.  All the notes payable are subject to bank charges of 0.05% of the principal amount as commission on each loan transaction.
 
(2)       Short-term bank loans are obtained from local banks in China. All the short-term bank loans are repayable within one year and are secured by property, plant and equipment and land use rights owned by us, as well as by guarantees made by our affiliates.
 
3.C.  Reasons For The Offer And Use Of Proceeds
 
Not Applicable.
 
3.D.  Risk Factors
 
You should carefully consider the risks described below in evaluating our business before investing in our ordinary shares. If any of the following risks were to occur, our business, results of operations and financial condition could be harmed. In that case, the trading price of our ordinary shares could decline and you might lose all or part of your investment in our ordinary shares. You should also refer to the other information set forth in this shell company report, including our consolidated financial statements and the related notes and the section captioned “Operating and Financial Review and Prospects” before deciding whether to invest in our ordinary shares.
 
5
 
Risks Related to Our Business and Our Industry
 
Our revenues are highly dependent on a limited number of customers and the loss of any one of our major customers could materially and adversely affect our growth and our revenues.
 
During the years ended December 31, 2008 and 2009, our s ix largest customers contributed 80.8% and 86.6 % of our total sales, respectively.  As a result of our reliance on a limited number of customers, we may face pricing and other competitive pressures , which may have a material adverse effect on our profi ts and our revenues. The volume of products sold for specific customers varies from year to year, especially since we are not the exclusive provider for any customers.  In addition, there are a number of factors, other than our performance, that could cause the loss of a customer or a substantial reduction in the products that we provide to any customer and that may not be predictable. For example, our customers may decide to reduce spending on our products or a customer may no longer need our products following the completion of a project. The loss of any one of our major customers, a decrease in the volume of sales to these customers or a decrease in the price at which we sell our products to them could materially adversely affect our profi ts and our revenues.  
 
In addition, this customer concentration may subject us to perceived or actual leverage that our customers may have in negotiations with us, given their relative size and importance to us. If our customers seek to negotiate their agreements on terms less favorable to us and we accept such unfavorable terms, such unfavorable terms may have a material adverse effect on our business, financial condition and results of operations. Accordingly, unless and until we diversify and expand our customer base, our future success will significantly depend upon the timing and volume of business from our largest customers and the financial and operational success of these customers.
 
Anti-dumping duties imposed by foreign governments on our products have caused us to cease doing business with some of our international customers.
 
In 2008, we sold approximately 32% of our products to customers in the United States and Europe.  The Crispin Corporation, a US company, and Ibercordones Pretensados S.L., a Spanish Company, were two of our top three customers in 2008.
 
However, in May 2009, the Council of the European Union imposed an anti-dumping duty on imports of certain prestressed wires and wire strands originating in China.  Dumping occurs when a foreign company sells a product at a price that is considered less than fair value in the country into which the product is imported.  Following an anti-dumping investigation initiated in February 2008, the Council concluded that imports of these products originating in China caused material injury to the European industry. The rate of the anti-dumping duty applicable to us has been set at 31.1% and the duty applicable to our competitors generally has been set at 46.2%.
 
On May 17, 2010, the U.S. Department of Commerce announced an affirmative final decision, imposing an anti-dumping rate of 193.55% for imports of certain prestressed concrete steel wire strands, including the plain surface materials we had been selling to our U.S. customers, exported from China to the U.S.  The U.S. Customs and Border Protection has been instructed to collect a cash deposit or bond based on this rate.
 
In anticipation of these rulings, we discontinued sales to these regions at the end of 2008.  If these anti-dumping measures remain in place and we are unable to continue increasing our sales to customers in China or other regions in which we sell our products, these measures could have a negative impact on our business and results of operations.
 
Because we decreased sales to international customers and increased sales to domestic PRC customers in 2009 as a result of the global economic crisis, we have experienced , and will continue to experience , increased needs to finance our working capital requiremen ts , which may materially and adversely affect our financial position and resul ts of operations.
 
Historically, we sold a significant portion of our produc ts to international customers, who generally pay by letter of credit, enabling us to convert our accoun ts receivable into cash more quickly, prepay our suppliers and reduce the amount of funds that we needed to finance our working capital requiremen ts . However, at the end of 2008, as a result of the global economic crisis and in anticipation of the anti-dumping measures ultimately imposed by the U.S. and the European Union , we had to exit some of these international marke ts entirely and turn to the domestic PRC customers, which generally pay approximately 40 days after receiving the materials at the construction site.  These longer payment terms have negatively impacted our short-term liquidity. Although we have been able to maintain adequate working capital primarily through short-term borrowing, any failure by our customers to settle ou ts tanding accoun ts receivable in the future could materially and adversely affect our cash flow, financial condition and resul ts of operations.
 
Some of the terms of the agreements between Ossen Materials and its affiliates may be less favorable to us than similar agreements negotiated between unaffiliated third parties.
 
We purchase a significant amount of our raw materials from Shanghai Z.F.X. Steel Co., Ltd., or Shanghai ZFX, an affiliate of ours.  Specifically, Ossen Materials acquired 26.4% and 15.0%, and Ossen Jiujiang acquired 25.8% and 4.3%, of their raw materials from Shanghai ZFX in 2008 and 2009, respectively.  While we believe we benefit from these agreements, such agreements were negotiated between two affiliated companies, and therefore may not reflect the terms that would have been reached by two unaffiliated parties negotiating at arm’s length.  The transactions may be less favorable to us than would be the case if they were negotiated with unaffiliated third parties.
 
6
 
As we expand our operations, we may need to establish a more diverse supplier network for our raw materials.  The failure to secure a more diverse and reliable supplier network could have an adverse effect on our financial condition.
 
We currently purchase almost all of our raw materials from a small number of suppliers.  Purchases from our five largest suppliers amounted to 86.5% and 89.5% of our total cost of supplies in 2008 and 2009, respectively.  As we increase the scale of our production, we may need to establish a more diverse supplier network, while attempting to continue to leverage our purchasing power to obtain favorable pricing and delivery terms.  However, in the event that we need to diversify our supplier network, we may not be able to procure a sufficient supply of raw materials at a competitive price, which could have an adverse effect on our results of operations, financial condition and cash flows.
 
Furthermore, despite our efforts to control our supply of raw materials and maintain good relationships with our existing suppliers, we could lose one or more of our existing suppliers at any time.  The loss of one or more key suppliers could increase our reliance on higher cost or lower quality supplies, which could negatively affect our profitability.  Any interruptions to, or decline in, the amount or quality of our raw materials supply could materially disrupt our production and adversely affect our business and financial condition and financial prospects.
 
Volatile steel prices can cause significant fluctuations in our operating results. Our sales and operating income could decrease if steel prices decline or if we are unable to pass price increases on to our customers.
 
Our principal raw material is high carbon steel wire rods that we typically purchase from multiple primary steel producers. The steel industry as a whole is cyclical and, at times, pricing and availability of steel can be volatile due to numerous factors beyond our control, including general domestic and international economic conditions, labor costs, sales levels, competition, levels of inventory held by us and other steel service centers, consolidation of steel producers, higher raw material costs for steel producers, import duties and tariffs and currency exchange rates. This volatility can significantly affect the availability and cost of raw materials for us.
 
We, like many other steel manufacturers , maintain substantial inventories of steel to accommodate the short lead times and just-in-time delivery requirements of our customers. Accordingly, we purchase steel in an effort to maintain our inventory at levels that we believe to be appropriate to satisfy the anticipated needs of our customers based upon historic buying practices, supply agreements with customers and market conditions. Our commitments to purchase steel are generally at prevailing market prices in effect at the time we place our orders. We have no long-term, fixed-price steel purchase contracts. When steel prices increase, as they did in 2008, competitive conditions will influence how much of the price increase we can pass on to our customers. To the extent we are unable to pass on future price increases in our raw materials to our customers, the net sales and profitability of our business could be adversely affected.
 
When steel prices decline, as they did in the fourth quarter of 2008 and through the first half of 2009, customer demands for lower prices and our competitors' responses to those demands could result in lower sale prices, lower margins and inventory valued at the lower of cost or market adjustmen ts as we use existing steel inventory . Significant or rapid declines in steel prices or reductions in sales volumes could result in us incurring inventory or goodwill impairment charges. Changing steel prices therefore could significantly impact our net sales, gross margins, operating income and net income.
 
7
 
We are subject to various risks and uncertainties that might affect our ability to procure quality raw materials.
 
Our performance depends on our ability to procure low cost, high quality raw materials on a timely basis from our suppliers.  Our supplies are subject to certain risks, including availability of raw materials, labor disputes, inclement weather, natural disasters, and general economic and political conditions, which might limit the ability of our suppliers to provide us with low cost, high quality merchandise on a timely basis.  Furthermore, for these or other reasons, one or more of our suppliers might not adhere to our quality control standards, and we might not identify the deficiency.  Our suppliers’ failure to supply quality materials at a reasonable cost on a timely basis could reduce our net sales, damage our reputation and have an adverse effect on our financial condition.
 
Our operations are cash intensive, and our business could be adversely affected if we fail to maintain sufficient levels of liquidity and working capital.
 
Historically, we have spent a significant amount of cash on our operational activities, principally to procure raw materials for our products.  We financed our operations mainly through cash flows from our operations, short-term bank loans and proceeds from bank acceptance notes.  If we fail to continue to generate sufficient cash flow from these sources, we may not have sufficient liquidity to fund our operating costs and our business could be adversely affected.
 
Our short-term loans are from Chinese banks and are generally secured by our fixed assets, receivables and/or guarantees by third parties.  The term of almost all such loans is one year or less.  Historically, we have rolled over such loans on an annual basis.  However, we may not have sufficient funds available to pay all of our borrowings upon maturity in the future.  Failure to roll over our short-term borrowings at maturity or to service our debt could result in the imposition of penalties, including increases in interest rates, legal actions against us by our creditors, or even insolvency.
 
If available liquidity is not sufficient to meet our operating and loan obligations as they come due, our plans include considering pursuing alternative financing arrangements, reducing expenditures as necessary, or limiting our plans for expansion to meet our cash requirements.  However, there is no assurance that, if required, we will be able to raise additional capital, reduce discretionary spending or efficiently limit our expansion to provide the required liquidity.  Currently, the capital markets for small capitalization companies are extremely difficult and banking institutions have become stringent in their lending requirements.  Accordingly, we cannot be sure of the availability or terms of any third party financing.  If we are unable to raise additional financing, we may be unable to implement our long-term business plan, develop or enhance our products, take advantage of future opportunities or respond to competitive pressures on a timely basis.  In the alternative, if we raise capital by issuing equity or convertible debt securities, such issuances could result in substantial dilution to our shareholders.
 
Our inability to manage our growth may have a material adverse effect on our business, results of operations and financial condition.
 
We have experienced significant growth since we began operations in 2004.  Our revenues have grown from approximately $17.2 million in 2005 to approximately $101.1 million in 2009.
 
8
 
We expect our growth to continue to place significant demands on both our management and our resources. This requires us to continuously evolve and improve our operational, financial and internal controls across our organization. In particular, continued expansion increases the challenges we face in:
 
 
·
recruiting, training and retaining sufficient skilled sales and management personnel;
 
·
adhering to our high quality and process execution standards;
 
·
maintaining high levels of customer satisfaction;
 
·
creating and managing economies of scale;
 
·
maintaining and managing costs to correspond with timeliness of revenue recognition; and
 
·
developing and improving our internal administrative infrastructure, including our financial, operational and communication systems, processes and controls.
 
Any inability to manage our growth may have a material adverse effect on our business, results of operations and financial condition.
 
We face intense competition, and if we are unable to compete effectively we may not be able to maintain profitability.
 
We compete with many other companies located in the PRC and internationally that manufacture materials similar to ours.  Many of our competitors are larger companies with greater financial resources than us.  In addition, we expect that as demand in the PRC and in other foreign countries for high quality, prestressed materials continues to grow, new competitors will enter the market.  Increased competition may adversely affect our future financial performance or reputation.  Moreover, increased competition may result in potential or actual litigation between us and our competitors relating to such activities as competitive sales practices, relationships with key suppliers and customers or other matters.
 
We may lose our competitive advantage, and our operations may suffer, if we fail to prevent the loss or misappropriation of, or disputes over, our intellectual property.
 
We rely on a combination of patents, trademarks, trade secrets and confidentiality agreements to protect our intellectual property rights. While we are not currently aware of any infringement on our intellectual property rights, our ability to compete successfully and to achieve future revenue growth will depend, in significant part, on our ability to protect our proprietary technology.  Despite many laws and regulations promulgated, and other efforts made, by China over the past several years in an attempt to protect intellectual property rights, intellectual property rights are not as certain in China as they would in many Western countries, including the United States.  Furthermore, enforcement of such laws and regulations in China has not been fully developed.  Neither the administrative agencies nor the court systems in China are equipped as their counterparts in developed countries to deal with violations or handle the nuances and complexities between compliant technological innovation and non-compliant infringement.
 
Our competitors may independently develop proprietary methodologies similar to ours or duplicate our products or services. Unauthorized parties may infringe upon or misappropriate our services or proprietary information, which could have a material adverse effect on our business, results of operations and financial condition. The misappropriation or duplication of our intellectual property could disrupt our ongoing business, distract our management and employees, reduce our revenues and increase our expenses. We may need to litigate to enforce our intellectual property rights. Any such litigation could be time consuming and costly and the outcome of any such litigation cannot be guaranteed.
 
Our revenues, expenses and profits are difficult to predict and can vary significantly from quarter to quarter. This could cause the trading price of our ordinary shares to decline.
 
Our operating results may vary significantly from quarter to quarter. Therefore, we believe that period-to-period comparisons of our results of operations are not necessarily meaningful and should not be relied upon as an indication of our future performance. It is possible that in the future some of our quarterly results of operations may be below the expectations of market analysts and our investors, which could lead to a significant decline in the trading price of our ordinary shares.
 
9
 
Factors which affect the fluctuation of our revenues, expenses and profits include:
 
 
·
changes in prices of our raw materials, with higher prices leading to reduced operating income;
 
·
variations, expected or unexpected, in the duration, size, timing and scope of purchase orders;
 
·
changes in our pricing policies or those of our competitors;
 
·
changes in compensation, which may reduce our gross profit for the quarter in which they are effected;
 
·
our inability to manage costs, including those related to our raw materials, personnel, infrastructure and facilities;
 
·
exchange rate fluctuations; and
 
·
general economic conditions.

A portion of our expenses, particularly those related to personnel and facilities, are generally fixed in advance of any particular quarter. As a result, unanticipated variations in the number and timing of our purchase orders or prices of our raw materials may cause significant variations in our operating results in any particular quarter.
 
We may undertake strategic acquisitions, joint ventures and alliances, which may prove to be difficult to integrate and manage or may not be successful, and may result in increased expenses or write-offs.
 
We may over time pursue strategic acquisitions, joint ventures and alliances to enhance our capabilities and expand our industry expertise and geographic coverage. It is possible that we may not identify suitable acquisition candidates, alliances or joint venture partners, or if we do identify suitable candidates or partners, we may not complete those transactions on terms commercially acceptable to us or at all. The inability to identify suitable acquisition targets, joint ventures or alliances, or our inability to complete such transactions on terms commercially acceptable to us or at all, may adversely affect our ability to compete and grow.
 
These types of transactions involve numerous risks, including:
 
 
·
difficulties in integrating operations, systems, technologies, accounting methods and personnel;
 
·
difficulties in supporting and transitioning clients of our acquired companies or strategic partners;
 
·
disruption of our ongoing business;
 
·
diversion of financial and management resources from existing operations;
 
·
risks of entering new markets;
 
·
potential loss of key employees; and
 
·
inability to generate sufficient revenue to offset transaction costs and expenses.  

Furthermore, any such transaction that we attempt, whether or not completed, or any media reports or rumors with respect to any such transactions, may materially and adversely affect the value of our ordinary shares.
 
We may finance future transactions through debt financing or the issuance of our equity securities or a combination of the foregoing. Acquisitions financed with the issuance of our equity securities could be dilutive, which could affect the market price of our ordinary shares. Acquisitions financed with debt could require us to dedicate a substantial portion of our cash flow to principal and interest payments and could subject us to restrictive covenants. Acquisitions also frequently result in the recording of goodwill and other intangible assets that are subject to potential impairments in the future that could harm our financial results.  Moreover, if we fail to properly evaluate acquisitions, alliances or investments, we may not achieve the anticipated benefits of those transactions, and we may incur costs in excess of what we had anticipated.
 
10
 
Our success depends in large part upon our senior management and key personnel. Our inability to attract and retain these individuals could materially and adversely affect our business, results of operations and financial condition.
 
We are highly dependent on our senior management and other key employees, including our Chairman, Dr. Tang, Mr. Hua and Mr. Gu.  Our future performance will be dependent upon the continued service of members of our senior management and key employees. We do not maintain key man life insurance for any of the members of our management team or other key personnel. Competition for senior management in our industry is intense, and we may not be able to retain our senior management and key personnel or attract and retain new senior management and key personnel in the future, which could materially and adversely affect our business, results of operations and financial condition.
 
We have limited insurance coverage and may incur losses resulting from product liability claims, business interruption or natural disasters.
 
We are exposed to risks associated with product liability claims in the event that the use of our products results in property damage or personal injury. Since our products are ultimately incorporated into bridges, buildings, railways and other large structures, it is possible that users of these structures or people installing our products could be injured or killed by such structures, whether as a result of defects, improper installation or other causes. Because we continue to expand our customer base, we are unable to predict whether product liability claims will be brought against us in the future or to predict the impact of any resulting adverse publicity on our business. The successful assertion of product liability claims against us could result in potentially significant monetary damages and require us to make significant payments. We do not carry product liability insurance and may not have adequate resources to satisfy a judgment in the event of a successful claim against us. As the insurance industry in China is still in its early stages of development, even the insurance that we currently carry offers limited coverage compared with that offered in many other countries. Any business interruption or natural disaster could result in substantial losses and diversion of our resources and materially and adversely affect our business, financial condition and results of operations.
 
One shareholder owns a large percentage of our outstanding stock and could significantly influence the outcome of our corporate matters.
 
Currently, Dr. Tang, our chairman, beneficially owns approximately 79% of our outstanding ordinary shares.  As our majority shareholder, Dr. Tang is able to exercise significant influence over all matters that require shareholder approval, including the election of directors to our board and approval of significant corporate transactions that we may consider, such as a merger or other sale of our company or its assets.  This concentration of ownership in our shares by Dr. Tang will limit your ability to influence corporate matters and may have the effect of delaying or preventing a third party from acquiring control over us.
 
If we are unable to maintain appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanction, and cause investors to lose confidence in our reported financial information.
 
Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud.
 
As a public company, we have significant requirements for enhanced financial reporting and internal controls. We will be required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires annual management assessments of the effectiveness of our internal controls over financial reporting and, for many companies, a report by the independent registered public accounting firm addressing these assessments. The process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company.
 
11
 
We cannot assure you that we will not in the future identify areas requiring improvement in our internal control over financial reporting. We cannot assure you that the measures we will take to remediate any areas in need of improvement will be successful or that we will implement and maintain adequate controls over our financial processes and reporting in the future as we continue our growth. If we are unable to establish appropriate internal financial reporting controls and procedures, it could cause us to fail to comply with Sarbanes-Oxley and meet our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanction, and cause investors to lose confidence in our reported financial information.
 
We will incur increased costs as a result of being a public company.
 
As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. We expect the rules and regulations to which public companies are subject, including the Sarbanes-Oxley Act of 2002, to increase our legal, accounting and financial compliance costs and to make certain corporate activities more time-consuming and costly. In addition, we will incur additional costs associated with our public company reporting requirements.
 
Risks Related to Doing Business in China
 
Changes in China’s political or economic situation could harm us and our operating results.
 
Economic reforms adopted by the Chinese government have had a positive effect on the economic development of the country, but the government could change these economic reforms or any of the legal systems at any time. This could either benefit or damage our operations and profitability. Some of the things that could have this effect are:
 
 
·
Level of government involvement in the economy;
 
 
·
Control of foreign exchange;
 
 
·
Methods of allocating resources;
 
 
·
Balance of payments position;
 
 
·
International trade restrictions; and
 
 
·
International conflict.
 
The Chinese economy differs from the economies of most countries belonging to the Organization for Economic Cooperation and Development, or OECD, in many ways. For example, state-owned enterprises still constitute a large portion of the Chinese economy, and weak corporate governance and the lack of a flexible currency exchange policy still prevail in China. As a result of these differences, we may not develop in the same way or at the same rate as might be expected if the Chinese economy was similar to those of the OECD member countries.
 
The PRC government exerts substantial influence over the manner in which we must conduct our business activities.
 
The PRC government has exercised, and continues to exercise, substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, import and export tariffs, environmental regulations, land use rights, property, and other matters. We believe that our operations in China are in material compliance with all applicable legal and regulatory requirements. However, the central or local governments of the jurisdictions in which we operate may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations.  Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof.
 
12
 
Future inflation in China may inhibit our ability to conduct business in China.
 
In recent years, the Chinese economy has experienced periods of rapid expansion and highly fluctuating rates of inflation. During the past ten years, the rate of inflation in China has been as high as 5.9% and as low as (0.8)%. These factors have led to the adoption by the Chinese government, from time to time, of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. High inflation may in the future cause the Chinese government to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity in China, and thereby harm the market for our products and our company.
 
You may have difficulty enforcing judgments against us.
 
Our assets are located, and our operations are conducted, in the PRC. In addition, all of our directors and officers are nationals and residents of the PRC and a substantial portion of their assets is located outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon these persons. In addition, there is uncertainty as to whether the courts of the PRC would recognize or enforce judgments of U.S. courts because China does not have any treaties or other arrangements that provide for the reciprocal recognition and enforcement of foreign judgments with the United States. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates basic principles of PRC law or national sovereignty, security, or the public interest.
 
Most of our revenues are denominated in Renminbi, which is not freely convertible for capital account transactions and may be subject to exchange rate volatility.
 
We are exposed to the risks associated with foreign exchange controls and restrictions in China, as our revenues are primarily denominated in Renminbi, which is currently not freely exchangeable. The PRC government imposes control over the convertibility between Renminbi and foreign currencies. Under the PRC foreign exchange regulations, payments for “current account” transactions, including remittance of foreign currencies for payment of dividends, profit distributions, interest and operation-related expenditures, may be made without prior approval but are subject to procedural requirements. Strict foreign exchange control continues to apply to “capital account” transactions, such as direct foreign investment and foreign currency loans. These capital account transactions must be approved by, or registered with, the PRC State Administration of Foreign Exchange, or SAFE. Further, capital contribution by an offshore shareholder to its PRC subsidiaries may require approval by the Ministry of Commerce in China or its local counterparts. We cannot assure you that we are able to meet all of our foreign currency obligations to remit profits out of China or to fund operations in China.
 
On August 29, 2008, SAFE promulgated the Circular on the Relevant Operating Issues concerning the Improvement of the Administration of Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or Circular 142, to regulate the conversion by foreign invested enterprises, or FIEs, of foreign currency into Renminbi by restricting how the converted Renminbi may be used. Circular 142 requires that Renminbi converted from the foreign currency-dominated capital of a FIE may be used only for purposes within the business scope approved by the applicable government authority and may not be used for equity investments within the PRC unless specifically provided. In addition, SAFE strengthened its oversight over the flow and use of Renminbi funds converted from the foreign currency-dominated capital of a FIE. The use of such Renminbi may not be changed without approval from SAFE, and may not be used to repay Renminbi loans if the proceeds of such loans have not yet been used. Compliance with Circular 142 may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business.
 
Fluctuation in the value of the Renminbi and of the U.S. dollar may have a material adverse effect on investments in our ordinary shares.
 
Any significant revaluation of the Renminbi may have a material adverse effect on the U.S. dollar equivalent amount of our revenues and financial condition as well as on the value of, and any dividends payable on, our ordinary shares in foreign currency terms. For instance, a decrease in the value of Renminbi against the U.S. dollar could reduce the U.S. dollar equivalent amounts of our financial results, the value of your investment in our ordinary shares and the dividends we may pay in the future, if any, all of which may have a material adverse effect on the prices of our common shares. A significant portion of our revenues are denominated in Renminbi. Any further appreciation of Renminbi against U.S. dollars may result in significant exchange losses.
 
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Prior to 1994, the Renminbi experienced a significant net devaluation against most major currencies, and there was significant volatility in the exchange rate during certain periods. Upon the execution of the unitary managed floating rate system in 1994, the Renminbi was devalued by 50% against the U.S. dollar. Since 1994, the Renminbi to U.S. dollar exchange rate has largely stabilized. On July 21, 2005, the People’s Bank of China announced that the exchange rate of U.S. dollar to Renminbi would be adjusted from $1 to RMB8.27 to $1 to RMB8.11, and it ceased to peg the Renminbi to the U.S. dollar. Instead, the Renminbi would be pegged to a basket of currencies, whose components would be adjusted based on changes in market supply and demand under a set of systematic principles. On September 23, 2005, the PRC government widened the daily trading band for Renminbi against non-U.S. dollar currencies from 1.5% to 3.0% to improve the flexibility of the new foreign exchange system. Since the adoption of these measures, the value of Renminbi against the U.S. dollar has fluctuated on a daily basis within narrow ranges, but overall has further strengthened against the U.S. dollar. There remains significant international pressure on the PRC government to further liberalize its currency policy, which could result in a further and more significant appreciation in the value of the Renminbi against the U.S. dollar. The Renminbi may be revalued further against the U.S. dollar or other currencies, or may be permitted to enter into a full or limited free float, which may result in an appreciation or depreciation in the value of the Renminbi against the U.S. dollar or other currencies.
 
China’s legal system is different from those in some other countries.
 
China is a civil law jurisdiction. Under the civil law system, prior court decisions may be cited as persuasive authority but do not have binding precedential effect. Although progress has been made in the promulgation of laws and regulations dealing with economic matters, such as corporate organization and governance, foreign investment, commerce, taxation and trade, China’s legal system remains less developed than the legal systems in many other countries. Furthermore, because many laws, regulations and legal requirements have been recently adopted, their interpretation and enforcement by the courts and administrative agencies may involve uncertainties. Sometimes, different government departments may have different interpretations. Licenses and permits issued or granted by one government authority may be revoked by a higher government authority at a later time. Government authorities may decline to take action against unlicensed operators which may work to the disadvantage of licensed operators, including us. The PRC legal system is based in part on government policies and internal rules that may have a retroactive effect. We may not be aware of our violation of these policies and rules until some time after the violation. Changes in China’s legal and regulatory framework, the promulgation of new laws and possible conflicts between national and provincial regulations could adversely affect our financial condition and results of operations. In addition, any litigation in China may result in substantial costs and diversion of resources and management attention.
 
Our business and financial performance may be materially adversely affected if the PRC regulatory authorities determine that our acquisition of Ossen Materials constitutes a round-trip investment without MOFCOM approval.
 
On August 8, 2006, six PRC regulatory agencies promulgated the Regulation on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the 2006 M&A Rule, which became effective on September 8, 2006. According to the 2006 M&A Rule, a “round-trip investment” is defined as having taken place when a PRC business that is owned by PRC individuals is sold to a non-PRC entity that is established or controlled, directly or indirectly, by those same PRC individuals. Under the 2006 M&A Rules, any round-trip investment must be approved by MOFCOM, and any indirect arrangement or series of arrangements which achieves the same end result without the approval of MOFCOM is a violation of PRC law.
 
The direct shareholders of Ossen Materials, Ossen Asia and Topchina, are British Virgin Islands limited liability companies that were owned by Ossen Materials Group, a British Virgin Islands limited liability company that was controlled by Dr. Tang prior to our business combination.  Topchina also holds shares in Ossen Jiujiang.  We have been advised that we are not required to obtain MOFCOM approval because the relevant transactions occurred prior to the effectiveness of the 2006 M&A Rule.
 
14
 
However, the PRC regulatory authorities may take the view that the acquisition of shares in our PRC operating subsidiaries by Ossen Asia and Topchina, and the share exchange between Ultra Glory and Ossen Materials Group, are part of an overall series of arrangements which constitute a round-trip investment. If the PRC regulatory authorities take this view, we cannot assure you we may be able to obtain the approval required from MOFCOM. It is also possible that the PRC regulatory authorities could invalidate our acquisition and ownership of our Chinese subsidiaries, and that these transactions require the prior approval of the China Securities Regulatory Commission, or CSRC, before MOFCOM approval is obtained.
 
If these regulatory actions occur, we cannot assure you that we will be able to re-establish control of our Chinese subsidiaries’ business operations, that any such contractual arrangements will be protected by PRC law, or that we would receive as complete or effective an economic benefit and control of our Chinese subsidiaries’ business as if we had direct ownership of our Chinese subsidiaries.
 
Under the New Enterprise Income Tax Law, we may be classified as a “resident enterprise” of China. Such classification will likely result in unfavorable tax consequences to us and our non-PRC shareholders.
 
China passed a New Enterprise Income Tax Law, or the New EIT Law, which became effective on January 1, 2008. Under the New EIT Law, an enterprise established outside of China with de facto management bodies within China is considered a resident enterprise, meaning that it can be treated in a manner similar to a Chinese enterprise for enterprise income tax purposes. The implementing rules of the New EIT Law define de facto management as “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise. In addition, a circular issued by the State Administration of Taxation on April 22, 2009 clarified that dividends and other income paid by such resident enterprises will be considered to be PRC source income, subject to PRC withholding tax, currently at a rate of 10%, when recognized by non-PRC enterprise shareholders. This recent circular also subjects such resident enterprises to various reporting requirements with the PRC tax authorities.
 
Although substantially all of our management is currently located in the PRC, it remains unclear whether the PRC tax authorities would require or permit our overseas registered entities to be treated as PRC resident enterprises. We do not currently consider our company to be a PRC resident enterprise. However, if the PRC tax authorities determine that we are a resident enterprise for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income as well as PRC enterprise income tax reporting obligations. In our case, this would mean that income such as interest on offering proceeds and non-China source income would be subject to PRC enterprise income tax at a rate of 25%. Second, although under the New EIT Law and its implementing rules dividends paid to us from our PRC subsidiaries would qualify as tax-exempt income, we cannot guarantee that such dividends will not be subject to a 10% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax, have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes. Finally, it is possible that future guidance issued with respect to the new resident enterprise classification could result in a situation in which a 10% withholding tax is imposed on dividends we pay to our non-PRC shareholders and with respect to gains derived by our non-PRC shareholders from transferring our shares.
 
Restrictions under PRC law on our PRC subsidiaries' ability to pay dividends and make other distributions could materially and adversely affect our ability to grow, make investments or acquisitions that could benefit our business, pay dividends to you, and otherwise fund and conduct our business.
 
Our revenues are generated by our PRC subsidiaries. However, PRC regulations restrict the ability of our PRC subsidiaries to pay dividends and make other payments to their offshore parent company. PRC legal restrictions permit payments of dividends by our PRC subsidiaries only out of their accumulated after-tax profits, if any, determined in accordance with PRC accounting standards and regulations. Our PRC subsidiaries are also required under PRC laws and regulations to allocate at least 10% of their annual after-tax profits determined in accordance with PRC GAAP to a statutory general reserve fund until the amounts in said fund reaches 50% of their registered capital. Allocations to these statutory reserve funds can be used only for specific purposes and are not transferable to us in the form of loans, advances, or cash dividends. Any limitations on the ability of our PRC subsidiaries to transfer funds to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends and otherwise fund and conduct our business.
 
15
 
Any failure to comply with PRC environmental laws may require us to incur significant costs.
 
We carry on our business in an industry that is subject to PRC environmental protection laws and regulations.  These laws and regulations require enterprises engaged in manufacturing and construction that may cause environmental waste to adopt effective measures to control such waste.  In addition, such enterprises are required to pay fines, or to cease operations entirely under extreme circumstances, should they discharge waste substances.  The Chinese government may also change the existing laws or regulations or impose additional or stricter laws or regulations, compliance with which may cause us to incur significant capital expenditures, which we may be unable to pass on to our customers through higher prices for our products.
 
We must comply with the Foreign Corrupt Practices Act.
 
We are required to comply with the United States Foreign Corrupt Practices Act, which prohibits U.S. companies from making prohibited payments to foreign officials for the purpose of obtaining or retaining business.  Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time to time in mainland China.  If any of our non-U.S. listed competitors that are not subject to the Foreign Corrupt Practices Act engage in these practices, they may receive preferential treatment and secure business from government officials in a way that is unavailable to us.  Furthermore, although we inform our personnel that such practices are illegal, we cannot assure you that our employees or other agents will not engage in illegal conduct for which we might be held responsible under U.S. law.  If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties.
 
Because our funds are held in banks that do not provide insurance, the failure of any bank in which we deposit our funds could affect our ability to continue our business operations.
 
Banks and other financial institutions in the PRC do not provide insurance for funds held on deposit. As a result, in the event of a bank failure, we may not have access to funds on deposit. Depending upon the amount of money we maintain in a bank that fails, our inability to have access to our cash could impair our operations, and, if we are not able to access funds to pay our suppliers, employees and other creditors, we may be unable to continue our business operations.
 
If relations between the United States and China worsen, investors may be unwilling to hold or buy our ordinary shares and our share price may decrease.
 
At various times during recent years, the United States and China have had significant disagreements over political and economic issues. Controversies may arise in the future between these two countries. Any political or trade controversies between the United States and China, whether or not directly related to our business, could reduce the price of our ordinary shares.
 
Risks Related to Our Ordinary Shares
 
The market price for our ordinary shares may be volatile.
 
The market price for our ordinary shares is likely to be highly volatile and subject to wide fluctuations in response to various factors, including the following:
 
 
·
actual or anticipated fluctuations in our quarterly operating results and revisions to our expected results;
 
 
·
changes in financial estimates by securities research analysts;
 
 
·
conditions in the markets for our products;
 
16
 
 
·
changes in the economic performance or market valuations of companies specializing in our industry or our customers or their industries;
 
 
·
announcements by us or our competitors of new products, acquisitions, strategic relationships, joint ventures or capital commitments;
 
 
·
addition or departure of our senior management and key personnel;
 
 
·
fluctuations of exchange rates between the Renminbi and the U.S. dollar;
 
 
·
litigation related to our intellectual property;
 
 
·
release or expiry of lock-up or other transfer restrictions on our outstanding ordinary shares; and
 
 
·
sales or perceived potential sales of our ordinary shares.
 
In addition, the securities market has from time to time, and to an even greater degree since the last quarter of 2007, experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also have a material adverse effect on the market price of our ordinary shares.  Furthermore, in the past, following periods of volatility in the market price of a public company’s securities, shareholders have frequently instituted securities class action litigation against that company. Litigation of this kind could result in substantial costs and a diversion of our management’s attention and resources.
 
We may not be able to pay any dividends on our ordinary shares.
 
Under British Virgin Islands law, we may pay dividends if the directors declare that the company is able to satisfy the provisions of Section 57 of the BVI Companies Act, 2004.  Pursuant to this provision, the company, immediately after the distribution must satisfy the solvency test, in so far as its assets exceeds its liabilities, and the company must be able to pay its debts as they become due. Our ability to pay dividends will therefore depend on our ability to generate sufficient profits. We cannot give any assurance that we will declare dividends of any amounts, at any rate or at all in the future. We have not paid any dividends in the past. Future dividends, if any, will be at the discretion of our board of directors, subject to the approval of our shareholders, and will depend upon our results of operations, our cash flows, our financial condition, the payment of our subsidiaries of cash dividends to us, our capital needs, future prospects and other factors that our directors may deem appropriate.
 
There is no public market for our ordinary shares, and you may not be able to resell our ordinary shares at or above the price you paid, or at all.
 
There is no public market for our ordinary shares. If an active trading market for our ordinary shares does not develop, the market price and liquidity of our ordinary shares will be materially and adversely affected and you may not be able to resell our ordinary shares at or above the price you paid, or at all. An active trading market for our ordinary shares may not develop in a timely manner or at all.
 
If equity research analysts do not publish research reports about our company or if they issue unfavorable commentary or downgrade our ordinary shares, the price of our ordinary shares could decline.
 
The trading market for our ordinary shares will rely in part on the research reports that equity research analysts publish about us and our company. We do not control these analysts. The price of our ordinary shares could decline if one or more equity analysts downgrade our ordinary shares or if they issue other unfavorable commentary, or cease publishing reports, about us or our company.
 
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ITEM 4.
INFORMATION ON THE COMPANY
 
4A.  History and Development of the Company
 
We are a British Virgin Islands limited liability company organized on January 21, 2010 under the BVI Business Companies Act, 2004 under the name Ultra Glory International Ltd., or Ultra Glory, as a blank check company for the purpose of acquiring, through a share exchange, asset acquisition or other similar business combination, an operating business.
 
Business Combination
 
O n July 7, 2010, Ultra Glory and its sole shareholder entered into a share exchange agreement with Ossen Innovation Group, a British Virgin Islands limited liability company organized on April 30, 2010 under the British Virgin Islands Companies Act (2004) and the shareholders of Ossen Innovation Group. Pursuant to the share exchange agreement, Ultra Glory acquired from the shareholders of Ossen Innovation Group all of the issued and outstanding shares of Ossen Innovation Group, in exchange for an aggregate of 10,000,000 newly issued ordinary shares issued by Ultra Glory to the shareholders of Ossen Innovation Group.  In addition, the sole shareholder of Ultra Glory sold all of the 5,000,000 ordinary shares of Ultra Glory that were issued and outstanding prior to the business combination, to the shareholders of Ossen Innovation Group for cash, at a price of $0.03 per share.  As a result, the individuals and entities that owned shares of Ossen Innovation Group prior to the business combination acquired 100% of the equity of Ultra Glory, and Ultra Glory acquired 100% of the equity of Ossen Innovation Group.  Ossen Innovation Group is now a wholly owned subsidiary of Ultra Glory.  In conjunction with the business combination, Ultra Glory filed an amended charter, pursuant to which Ultra Glory changed its name to Ossen Innovation Co., Ltd., changed its fiscal year end to December 31, changed the par value of its ordinary shares to $0.01 per share and increased its authorized shares to 100,000,000.  Upon the consummation of the business combination, we ceased to be a shell company .
 
Our Shareholders
 
Dr. Tang, our chairman, owns 100% of the shares of Effectual Strength Enterprises Ltd., a British Virgin Islands company, which owned 79% of the shares of Ossen Innovation Group prior to the business combination, and owns 79% of our shares since the business combination.  The holders of the remaining 21% of our shares are investors that are residents of the PRC and are unaffiliated with Ossen.
 
Our Subsidiaries
 
British Virgin Islands Companies
 
Ossen Innovation Group, our wholly owned subsidiary, is the sole shareholder of two holding companies organized in the British Virgin Islands: Ossen Group (Asia) Co., Ltd., or Ossen Asia, and Topchina Development Group Ltd., or Topchina.  All of the equity of Ossen Asia and Topchina had been held by Dr. Tang since inception.  In May 2010, Dr. Tang transferred these shares to Ossen Innovation Group in anticipation of the public listing of our company’s shares in the United States.
 
Ossen Asia is a British Virgin Islands limited liability company organized on February 7, 2002.  Ossen Asia has one direct operating subsidiary in China, Ossen Innovation Materials Co. Ltd., or Ossen Materials.  Ossen Asia owns 81% of the equity of Ossen Materials.
 
Topchina is a British Virgin Islands limited liability company organized on November 3, 2004.  Ossen Materials and Topchina directly own an operating subsidiary in China, Ossen (Jiujiang) Steel Wire & Cable Co., Ltd., or Ossen Jiujiang.  Ossen Materials owns 75% of the equity of Ossen Jiujiang and Topchina owns 25%.
 
Ossen Materials
 
Ossen Materials was formed in China on October 27, 2004 as a Sino-foreign joint venture limited liability company under the name Ossen (Ma’anshan) Steel Wire and Cable Co., Ltd.  On May 8, 2008, Ossen Materials was restructured from a Sino-foreign joint venture limited liability company to a corporation.  The name of the entity was changed at that time to Ossen Innovation Materials Co., Ltd.

 
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Ossen Asia owns 81% of the equity of Ossen Materials.  The remaining 19% is held in the aggregate by four Chinese entities, two of which are controlled by Chinese governmental entities, one of which is controlled by Zhonglu Co. Ltd., a company whose shares are listed on the Shanghai Stock Exchange, and one of which is controlled by Chinese citizens.
 
Through Ossen Materials, we have manufactured and sold plain surface prestressed concrete (“PC”) strands, galvanized PC steel wires and PC wires in our Maanshan City, PRC, facility since 2004.  The primary products manufactured in this facility are our plain surface PC strands.  The primary markets for the products manufactured at our Maanshan facility are Anhui Province, Jiangsu Province, Zhejiang Province and Shanghai City, each in the PRC.
 
Ossen Jiujiang
 
On April 6, 2005, Ossen Shanghai Investment Co., Ltd., or Ossen Shanghai, acquired a portion of the bankruptcy assets of Jiujiang Tianlong Galvanized Prestressing Steel Strand LLC, including equipment, land use rights and inventory for approximately $3.9 million.  Ossen Jiujiang was formed by Ossen Shanghai in the PRC as a Sino-foreign joint venture limited liability company on April 13, 2005.  Ossen Shanghai then transferred the newly acquired assets to Ossen Jiujiang. At its inception, Ossen Jiujiang was owned by two entities: 33.3% of its equity was held by Ossen Asia and 66.7% by Ossen Shanghai.  Ossen Shanghai is a Chinese company owned by five Chinese individuals, one of whom is a director of our subsidiary, Ossen Materials. In June 2005, Ossen Shanghai transferred its entire interest in Ossen Jiujiang to Topchina in exchange for approximately $2.9 million. In October 2007, Topchina transferred 41.7% of the equity in Ossen Jiujiang to Ossen Asia for no consideration. On December 17, 2007, Ossen Asia transferred all of its shares in Ossen Jiujiang to Ossen Materials for no consideration.  Since that date 75% of the equity of Ossen Jiujiang has been held by Ossen Materials and 25% by Topchina.
 
Through Ossen Jiujiang, we manufacture galvanized PC wires, plain surface PC strands, galvanized PC strands, unbonded PC strands, helical rib PC wires, sleeper PC wires and indented PC wires.  The primary products manufactured in this facility are our galvanized PC wires.  The primary markets for the PC strands manufactured in our Jiujiang facility are Jiangxi Province, Wuhan Province, Hunan Province, Fujian Province and Sichuan Province, each in the PRC.
 
Organizational Structure Chart
 
T he following chart reflects our organizational structure since the date of the business combination between Ultra Glory and the shareholders of Ossen Innovation Group :

 
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Capital Expenditures
 
Our capital expenditures consist primarily of expenditures on property, plant and equipment. Capital expenditures on property, plant and equipment were $2.9 million in 2007, $2.3 million in 2008 and $0.2 million in 2009. We financed our capital expenditure requirements from the cash flows generated by our operating activities and from short-term bank loans.  We have no current commitments for capital expenditures.
 
Registered office
 
The address of our registered office in the British Virgin Islands is: Akara Building, 24 De Castro Street, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands. The telephone number of the registered office is (284) 494-4840.

 
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4B.  Business Overview

General
 
Ossen is one of the largest producers of prestressed steel materials in China.  Our facilities are located in Maanshan City, Anhui Province and in Jiujiang City, Jiangxi Province, in the People’s Republic of China. We manufacture and sell an array of plain surface and rare earth galvanized prestressed steel materials, which we believe is the most comprehensive amongst our competitors in China.  According to the PRC PC Strand Industry Investment and Market Operation Research Report, in 2008, our rare earth coated PC strand products were ranked third in sales in the PRC and first in export sales by Chinese prestressed steel manufacturers.
 
Ossen is one of the leading enterprises in the PRC in the design, engineering, manufacture and sale of customized prestressed steel materials used in the construction of railways, highways, bridges and buildings in China and is a member of the China Prestressed Association.  Since 2007, we have also been one of the leading Chinese exporters of customized prestressed steel materials to other countries, including the United States, Canada, Spain, Italy and South Asian countries.  Currently, our best-selling products are our plain surface PC wires and rare earth galvanized PC strands.  The primary characteristics that make our prestressed steel products suitable for this wide range of projects are their high strength and low relaxation rate.  Prestressed materials of high strength and low relaxation, which comprised approximately 80% of our revenues in 2009, are currently in high demand in major construction projects in China.
 
Ossen’s product offerings incorporate proprietary designs and are known for their high level of reliability and performance. Our products are marketed under the “Ossen” brand name both domestically and internationally. Our management’s core strategy is to leverage our expertise in research and development of customized products by providing solutions to our customers’ unique needs, as evidenced by our continuous introduction of new product lines since our inception. We handle all aspects of market research, product design, engineering, manufacturing, sales and marketing.  We conduct our manufacturing operations in our ISO 9001 manufacturing facilities in Maanshan City and Jiujiang City, in the PRC.
 
Ossen Materials, our operating subsidiary, was founded in 2004 by Ossen Shanghai and Ossen Asia.  In 2005, we expanded our manufacturing capabilities by acquiring a new facility in Jiujiang City in the PRC and forming Ossen Jiujiang.  The founders of Ossen were among the first in China to introduce and promote the use of prestressed steel materials in construction projects. The founders of Ossen have been involved in producing prestressed materials since 1994 and have accumulated more than 15 years of experience in the prestressed materials industry.
 
We are affiliated with the Ossen Group, which is a Chinese conglomerate controlled by our Chairman, Dr. Tang, whose core businesses include steel manufacturing and real estate, among others.  The annual revenue of the Ossen Group in 2009 was approximately $1.5 billion.
 
Our Growth Strategy
 
We intend to expand our industry position while maximizing shareholder value and pursuing a growth strategy that includes increasing our production capacity and strengthening our relationships with key customers, diversifying our customer base and pursuing strategic relationships and acquisition opportunities.
 
Increasing our production capacity and developing new higher margin products.
 
We believe that we will be able to increase our production capacity from 140,000 tons to 200,000 tons in the next five years.  We believe that the expansion of our production capacity will enable us to benefit from the continued growth in overall demand for prestressed steel materials in China.  A significant portion of our growth would be devoted to galvanized materials, which have higher profit margins and which we could sell to customers in the United States because the anti-dumping measures recently imposed by the U.S. on Chinese steel exporters do not cover these galvanized materials.

 
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Strengthening our relationships with key customers and diversifying our customer base.
 
We intend to strengthen our relationships with key customers while further expanding our customer base. We plan to continue providing high-quality and cost-competitive products to our existing customers and to use our existing customer network and strong industry reputation to expand into new regions within the PRC, beyond the local regions in which we currently sell our products, and internationally.  We intend to continue to use customer feedback to improve the quality of our products and technical after-sales services and to strengthen our long-term base of domestic and international customers.
 
Pursuing strategic relationships and acquisition opportunities
 
We intend to evaluate and pursue acquisition opportunities and strategic partner relationships which could enhance our product offerings, customer base or geographic reach, or which could allow us to achieve economies of scale and operating efficiencies.  We currently have no plans, agreements or commitments with respect to any material acquisitions or strategic relationships.
 
Competitive Advantages
 
Our management believes that the following competitive strengths differentiate us from other domestic and international competitors and are the key factors to our success:
 
We are Taking Advantage of Industry Trends
  
Due to the demand for new prestressed materials in infrastructure construction and the domestic market, we believe that our industry will grow significantly for at least the next five years. Specifically, we expect the market for premium rare earth products, including rare earth galvanized prestressed steel strands and wires, to grow.
 
Many reports indicate that our industry will experience significant growth in the coming years . For example, based on the 11th five-year plan for highway and waterway transportation by the Ministry of Transportation of the PRC, the government plans to invest $730 billion in the national highway network from 2009 to 2013, which drives huge demand for prestressed materials.  Similarly, the Railway Network Plan issued by the Ministry of Railways of the PRC has indicated that $290 billion will be invested in railway construction from 2009 to 2013, which further drives the demands for prestressed materials. From now until 2020, we believe that 200 new bridges will be built on dozens of rivers in the PRC, including the Yangtze River, Yellow River, Songhua River, Jiangxi River, Xiangjiang River, Han River, Minjiang River and Pearl River. The bridge projects will require approximately 6 million tons of rare earth galvanized prestressed materials in the aggregate.
 
In addition, over the next decade, China is expected to build four cross-sea bridges and tunnels, such as the Bohai Bay Cross-Sea Bridge, the Hong Kong-Zhuhai-Macao Cross-Sea Bridge, the Qiongzhou Strait Bridge and the Taiwan Strait Tunnel. These projects are expected to require approximately 8 million tons of rare earth galvanized prestressed materials.
 
The China National Nuclear Industry Group has estimated that the PRC government will invest approximately $60 billion by 2020 for nuclear power construction, which would require approximately two million tons of prestressed materials. Further, the ongoing building of a large number of rural roads , highways and buildings should continue to generate significant demands for prestressed materials.
 
Leading Provider of Customized Prestressed Steel Materials
 
Ossen is one of the leading providers in the design, engineering, manufacture and sale of customized prestressed steel materials used in the construction of railways, highways, bridges and buildings in China and exported from China. Based on our estimates, we believe that in 2008, Ossen held a market share of approximately 30% in China for certain of its coated prestressed steel products and 58.9% in export sales of these materials from China. China is investing heavily in transportation infrastructure, including railways, highways, and urban metro transit systems. Our management anticipates a growing demand for these materials.

 
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Strong In-House Design Capabilities
 
O ur design and engineering team consists of members educated in top universities in China, and our management team has fifteen years of industry experience on average. We have built a recognized brand name in the industry by introducing innovative solutions to the prestressed steel industry in China and internationally. Our engineering team works closely with our customers in order to understand their requirements. We have been able to introduce new equipment to enhance cost saving and time reduction in the construction of bridges, highways, railways and buildings, as well as numerous other projects .
 
Efficient Proprietary Production Technology
 
We continually pursue technological improvements to our manufacturing processes via our strong in-house development teams. We have been granted ten patents by the State Intellectual Property Office of the PRC, including one invention patent and nine utility patents. In addition, we have applied for an additional thirteen invention patents and seven utility model patents, which are currently pending. These patents and patent applications are intended to protect our technologies, including production processes of various wire ropes, pickling methods for steel wire materials and devices designed for the production of steel wire. Our research and development efforts have generated technological improvements that have been instrumental in controlling our production costs and increasing our operational efficiency.
 
Strong Recognition from Domestic and International Customers for Building Projects
 
The solid reputation that our management team has developed over the past 15 years in the prestressed material industry in China and in other countries such as Canada, the United States, South Korea, Italy and Spain, including an established track record for consistently providing quality products at competitive prices, has enabled us to develop a strong customer base and to be involved in major building projects.  Some of our recent projects are listed below under the heading “Recent Projects”.
 
Rigorous Quality Control Standards
 
C onsistent with our continuing commitment to quality, we impose rigorous quality control standards at various stages of our production process.  We strictly comply with various national and international quality standards with respect to the manufacture of prestressed materials. Our certifications and accreditations include the United Kingdom Accreditation Service (UKAS) , the British Standards Institution (BSI) certification , the Korean Standards Association (KS) certification from South Korea, the Market Access certification from the Spanish Ministry of Industry and an ISO 9001 certification.  We believe that these certifications, together with the numerous national awards that we have been awarded demonstrate our commitment to producing high-quality products as well as providing us with a competitive advantage over some of our competitors in certain international markets and in China .
 
Experienced Management and Operational Teams with Domestic PRC Market Knowledge
 
Our senior management team and key operating personnel have extensive management skills, relevant operating experience and industry knowledge.  In particular, Dr. Tang, our Chairman, is a Doctor of Economics, Senior Engineer and Professor of Finance and Statistics at the School of East China Normal University, and has extensive experience managing and operating companies in the prestressed steel industry.  We believe our management team’s experience and in depth knowledge of the market in China will enable us to continue to successfully execute our expansion strategies. In addition, we believe our management team’s strong track record will enable us to continue to take advantage of market opportunities that may arise.

 
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Our Products
 
Our prestressed steel materials are categorized as plain surface products and rare earth coated products.
 
Plain Surface Products
 
Our plain surface products are characterized as follows:
 
 
·
Plain surface prestressed concrete, or PC, strands.  These products consist of PC wires that are twisted into a bundle and used as precast concrete plates on the riding surface of bridges.  These products are categorized based on size, strength and structure.  Sizes range from 9.3mm to 17.8mm.  Strength level ranges from 1570MPa to 2000MPa.  Structures vary between 1x3 and 1x7.
 
 
·
Unbonded plain surface PC strands.  These products consist of plain surface PC strands that are coated with grease and extruded with high-density polyethylene. These products are used primarily in the construction of bridges and buildings.
 
 
·
PC wires.  These products are further divided among the following three categories:
 
 
§
Plain surface PC wires.  This product consists of an individual round wire used in the construction of buildings.
 
 
§
Indented PC wires.  This product consists of an individual round wire that contains an indentation used in the construction of buildings.
 
 
§
Helical (spiral) rib PC wires.  This product consists of an individual round wire whose surface is pulled out into a helical rib pattern used in the construction of railway ties, or sleepers, and buildings.
 
P C wires are categorized based on size, strength and structure.  Sizes range from 4.0mm to 9.0mm.  Strength level ranges from 1570MPa (megapascal) to 2000MPa.  Structures vary between 1x3 and 1x7 .
 
Rare Earth Coated Prestressed Products
 
Our rare earth coated prestressed products are characterized as follows:
 
 
·
Rare earth coated PC wires.  These products are further divided as follows:
 
 
§
Ф5.0 Series, used for suspension bridges.
 
§
Ф7.0 Series, used for cable-stayed bridges.
 
 
·
Rare earth coated PC strands, used for bridges and buildings.
 
Rare earth coated products are plain surface materials that are galvanized, or coated, with a rare earth zinc-plating protective layer so as to produce materials that are more corrosion-resistant and long-lasting. The purpose of galvanizing is to generate a surface layer to protect the materials from erosion, abrasion and oxidization, without changing the elements of the basic materials or weakening the basic material’s strength or other functionality through any techniques that utilize physical chemistry or electrochemistry.  The coating process can cause loss of strength in regular steel materials, but the loss of strength in galvanized prestressed products is minimal.
 
Customers that purchase our prestressed materials also purchase other supporting products, such as anchorage devices and ripple tubes, to complement our materials. These supplementary products are produced by anchorage manufacturing factories that are unaffiliated with us.

 
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Competition
 
China is one of the world’s largest producers and markets for prestressed steel materials. In 2009, our sales were predominantly to customers located in the PRC, and as a result, our primary competitors were PRC domestic companies. To a lesser degree, we faced competition from international companies.  However, as our sales to international markets increase from 2009 levels, we expect to face increasing competition from international companies in those markets.
 
We believe that being located in China provides us with a number of competitive factors within our industry, including the following:
 
 
·
Pricing.   Flexibility to control pricing of products and the ability to use economies of scale to secure competitive pricing advantages;
 
 
·
Technology.   Ability to manufacture products efficiently, utilize low-cost raw materials, and to achieve better production quality; and
 
 
·
Barriers to entry.   Technical knowledge, access to capital, local market knowledge and established relationships with suppliers and customers to support the development of commercially viable production facilities and products.
 
Competition among manufacturers of plain surface steel products in China can be characterized as fragmented, with many large and small companies competing with each other.  Our primary competitors for these products are Jiangyin Foster, Jiangxi Xinhua, Baosteel Group Shanghai Ergang Co. Ltd. and Jiangyin Wabin Steel Cable Co. Ltd.
 
Competition among manufacturers of coated steel products in China is limited to a small group of companies.  Our main competitors for these products are Baosteel Group Shanghai Ergang Co. Ltd. and Jiangyin Wabin Steel Cable Co. Ltd.  We believe that we differentiate ourselves by being an early mover in the industry and by offering superior product quality, timely delivery and high value. We believe that we have the following advantages over many of our competitors:
 
 
·
the performance and cost effectiveness of our products;
 
 
·
our ability to manufacture and deliver products in required volumes, on a timely basis, and at competitive prices;
 
 
·
superior quality and reliability of our products;
 
 
·
our after-sale support capabilities, from both an engineering and an operational perspective;
 
 
·
effectiveness of customer service and our ability to send experienced operators and engineers as well as a seasoned sales force to assist our customers; and
 
 
·
overall management capability.

Seasonality
 
Demand for our products remains fairly consistent throughout the year.
 
Our Raw Materials and Supply
 
Raw Materials
 
High carbon steel wire rods are the primary raw material required to manufacture prestressed steel materials. The quality and cost of the rods we purchase differs between our plain surface products and our coated products. Coated products require higher-priced rods that are higher in purity and durability.  The price for certain rods needed for coated products is approximately $150 per ton higher than rods needed for plain surface products.  B87 MnQL, a type of high carbon steel wire rod, is the most expensive material that we purchase from Chinese suppliers, costing as much as approximately $1,000 per ton.  DLP, a type of high carbon steel wire rod that we import from Japan, is the most expensive material that we purchase overall, costing as much as approximately $1,500 per ton.

 
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Our Supply Sources
 
We select our suppliers by assessing criteria such as the quality of materials supplied, the duration of the supplier’s business relationship with us, pricing, delivery reliability and response time to orders placed by us.  To minimize purchasing costs, we use a limited number of suppliers.  Because we purchase substantial quantities from these suppliers, we are often able to procure these products at competitive prices.  We usually enter into a one-year purchase agreement with each supplier and then order on a spot basis for each delivery.  We negotiate pricing with our suppliers on an arm’s length basis prior to the delivery of these supplies to us, based upon the prevailing market prices at such time.  As we increase the scale of our production, we may need to establish a more diverse supplier network while attempting to continue to leverage our purchasing power to obtain favorable pricing and delivery and payment terms.
 
Historically, we have purchased a significant percentage of our raw materials from an affiliated entity, Shanghai Z.F.X. Steel Co., Ltd., or Shanghai ZFX, a supplier of steel wire rods, which is controlled by our chairman, Dr. Tang.  In 2008 and 2009, we purchased approximately 26.2% and 12.8% of our raw materials from Shanghai ZFX, respectively.  We expect that we will continue to purchase the bulk of our supplies from unaffiliated suppliers in the future, as we did in 2009.
 
The three suppliers that are unaffiliated with us that supplied us with a significant percentage of our raw materials in 2008 or 2009 were Zhangjiagang Free Trade Zone JinDe Trading Co., Ltd., Jiangsu Shagang and LiaoNing TongDa Building Material Industrial, all based in China.  
 
In 2008, purchases from our four largest suppliers, in the aggregate, accounted for approximately 77.7% of our total cost of supplies.  In 2009, purchases from our four largest suppliers, in the aggregate, accounted for approximately 84.9% of our total cost of supplies.
 
We are not dependent on any one of our suppliers, as we are able to source raw materials from alternative vendors should the need arise.  We have not experienced significant production disruptions due to a supply shortage from our suppliers, nor have we had any major dispute with a material supplier.
 
Volatility of Price of Raw Materials
 
We have no long-term, fixed-price steel purchase contracts.  When steel prices increase, as they did in 2008, competitive conditions will influence how much of the price increase we can pass on to our customers.  When steel prices decline, as they did in the fourth quarter of 2008 and through the first half of 2009, customer demands for lower prices and our competitors' responses to those demands could result in lower sale prices, lower margins and inventory valued at lower of cost or market adjustments as we use existing steel inventory.
 
Manufacturing Process
 
Equipment
 
Our production facilities use innovative equipment and machinery imported from France and Italy and is of the highest quality in metal wire drawing, wire stranding, zinc plating and finishing. Our production lines produce prestressed steel materials that meet quality standards mandated by numerous countries, including Spain, the United Kingdom and South Korea.

 
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We own cutting edge technologies in over 20 high-tech fields, including oil-immersion preservation technology, new coating production technology, skin pass coating technology, coating stabilization technology, rare earth alloy plating technology, new high-temperature phosphorization heating technology, new material traction technology, rare earth alloy technology, new fixed scoring technology, new high-temperature low-speed thread stripping technology, and double coating stabilization, among others.  We believe that we are the leading company in our industry with respect to the implementation of innovative technologies in the manufacture of prestressed steel materials.
 
Production Process
 
The production of our products involves various steps, including inspection, pickling, washing, rinsing, phosphatizing, boronizing, surface treatment, plating, baking, coating, cooling, polishing, inspection and packaging.  The technology and procedures used in the above processes vary among the different products that we manufacture and depend upon the product specifications prescribed by a particular customer.
 
Generally, the manufacturing process involves the following:
 
 
·
Cleaning steel wire rods or other similar raw materials by chemical pickling, mechanical de-scaling or a similar process.  The materials are then cold drawn and reduced until the desired diameter and resistance characteristics are achieved. This process is what provides the material with its strength.
 
 
·
In the production of strands, the individual wires (either 3 or 7 wires) are braided together to form a strand.
 
 
·
The final step is to subject the steel material to a thermo-chemical process which endows the material with mechanical properties, such as low relaxation, which enable the material to last over time.
 
Production Lines
 
We currently have 18 production lines, consisting of the following:
 
 
·
Two surface treatment production lines, one located in our Maanshan facility and one in our Jiujiang facility, each composed of an acid pickling bath, rinsing bath, high pressure water rinsing bath, phosphating bath, saponification (boronizing) bath and cleaning bath.
 
 
·
Seven wire drawing production lines, four located in our Maanshan facility and three in our Jiujiang facility, each composed of a pay-off machine, drawn can and take-up machine. Each of our half-finished products is processed on a wire drawing production line.
 
 
·
Three PC strand stabilization treatment production lines, two located in our Maanshan facility and one in our Jiujiang facility, each composed of stranding machines, straightening wheels, jockey wheels, medium frequency furnace, cooling tank, take-up and pay-off machines, a wire arraying machine and a layer winding machine.  The PC strand stabilization product lines in our Jiujiang facility produce plain surface PC strands and galvanized PC strands of various specifications.
 
 
·
One zinc galvanization production line, located in our Jiujiang facility, composed of a pay-off machine, degreasing furnace, acid rinsing pickling tank, assistant plating tank, drying furnace, galvanizing furnace, drawing tower and take-up machine. Half-finished products needed for different series of rare earth galvanized PC wires and strands are produced on this line.
 
 
·
Two surface finishing production lines, both located in our Jiujiang facility, each composed of a pay-off machine, a finishing machine and a take-up machine. These production lines are used to produce half-finished products of rare earth galvanized PC wires and strands.
 
 
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·
Two PC wire stabilization treatment production lines, both located in our Jiujiang facility, each composed of a pay-off machine, jockey wheel, straightening machine, indent marking machine, medium frequency furnace, cooling tank, towing machine, shearing machine and take-up machine. Zinc galvanized PC wires, round PC wires, indented PC wires and helical rib PC wires are produced on these production lines.
 
 
·
One unbonded PC strand production line, located in our Jiujiang facility, composed of a pay-off machine, oiling machine, high-density polyethylene plastic injection machine, water tank, towing machine and take-up machine. This production line is used to produce different series of unbonded plain surface PC strands and unbonded galvanized PC strands.
 
Quality Control
 
Consistent with our continuing commitment to quality, we impose rigorous quality control standards at various stages in the production process.  In addition, our facilities are equipped with first-class testing equipment, such as a tensile strength tester and a relaxation tester, which guarantee the high quality and safety of our products.
 
We strictly comply with various national and international quality standards with respect to the manufacture of pre-stressed materials. Our certifications and accreditations include the United Kingdom Accreditation Service (UKAS) , the British Standards Institution (BSI) certification , the Korean Standards Association (KS) certification from South Korea, Market Access certification from the Spanish Ministry of Industry and an ISO 9001 certification.
 
Our procedure when discovering any product quality problem in the production process includes immediate shut down for inspection. Once the problem is solved, we continue with production.  If a problem occurs with a product, the product inspector stamps a nonconformity seal and hangs a nonconformity label on the problematical product. The nonconforming product is moved to a separate area and is not transferred to the next procedure. We do not deliver nonconforming products to users.
 
Sales, Marketing and Distribution

Sales and Marketing
 
We have been successful to date in maintaining long-term relationships with numerous customers by satisfying their commercial needs. In addition, our marketing team monitors the market and responds accordingly in order to increase our customer base. We have a dedicated marketing and sales team of 11 employees that proactively follows up on new sales leads.
 
Our marketing team develops strategies for the short-term and long-term by obtaining first-hand information about our products’ market positioning, monitoring national macro-economic policies, inquiring about current and future markets needs, following the progress of existing projects and the satisfaction of existing customers.  In addition, our technicians and marketing specialists regularly visit governmental departments, construction development companies, design institutes, supervision institutions, national construction quality inspection institutions and builders to promote new products.  We have also joined the PRC national bridge exhibition for marketing purposes.
 
Distribution
 
Both of our manufacturing plants are equipped with facilities for cargo lifting, shipment and distribution. Products for domestic customers are distributed to the destination designated by our customers. Products for international customers are delivered either to carriers at various ports of exit in China or delivered to a designated destination overseas.

 
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Technical After-Sales Services
 
Our team of experienced engineers and technicians provides after-sales services to our customers.  After the delivery of our materials, our engineers train our customers to install and identify and address safety and maintenance concerns.  After a sale of our product, we introduce and advertise the company brand position, distribute a guide application method process, issue regulation manuals, and explain and solve general and difficult problems.
 
Our Customers
 
We sell the majority of our products domestically in China.  Since our inception, we have also exported our products to foreign countries, including the United States, Spain, South Korea and Saudi Arabia, among others.  Our customers are diverse in nature, as we sell our products directly to end users, to other manufacturers and to distributors, in each case depending on the nature of the product and the utilization of the product.
 
The six customers whose purchases comprised a significant percentage of our sales in 2008 or 2009 were Shanghai Zhaoyang New Metal Material (China), the Crispin Corporation (United States), Ibercordones Pretensados (Spain), National Metal Manufacturing and Casting Co. (Saudi Arabia), Zhangjiagang Ruifeng Iron and Steel Co. (China) and Hada Railway Passenger Dedicated Lines (China).  In anticipation of the imposition of anti-dumping rates by the U.S. and the European Union, which were ultimately implemented in 2009, we discontinued sales of our plain surface materials to Crispin, Ibercordones and our other customers in those regions at the end of 2008.
 
In 2008 and 2009, sales to our six largest customers, in the aggregate, accounted for approximately 80.8% and 86.6% of our total sales, respectively.
 
The following table describes the breakdown of our sales in 2008 and 2009 between our domestic and international customers.
 
   
Year ended December 31,
 
   
2009
   
2008
 
Domestic Sales
  $ 97,361,596     $ 51,611,646  
International Sales
    3,726,200       31,130,664  
Total Sales
  $ 101,087,796     $ 82,742,310  
 
Recent Projects
 
The following list is a sample of some of the recent projects in which our prestressed steel materials were used in both the domestic and the international markets:
 
Nanchang New Bayi Bridge, PRC
 
Jiujiang-Lushan Railway Project, PRC
 
Hefei-Bangbu Passenger Dedicated Line, PRC
 
Beijing-Shanghai Express Rail, PRC
             
Shenzhan Bay Bridge, PRC
 
Boyang Lake Railway Bridge, PRC
 
Wenfu Railway, PRC
 
Wuhan-Guangzhou Railway, PRC
             
Pantian Highway, PRC
 
Shanghai No. 6 Subway, PRC
 
Nanjing-Hangzhou Passenger Dedicated Line, PRC
 
Yunnan Shi-Suo Expressway, PRC
             
Alameda Corridor  Turnpike, Alameda, California, U.S.A.
 
MGM Grand Parking, Las Vegas, Nevada, U.S.A.
 
Dallas Center of Performing Arts, Dallas, Texas, U.S.A.
 
Trois Rivieres Grand Anchors, Canada
             
Nam Chang Bridge, South Korea
  
Parking Apron in the Cadiz Airport, Spain
  
Grand Hyatt San Antonio, Texas, U.S.A.
  
Trump Tower, Las Vegas, Nevada, U.S.A.

 
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Intellectual Property

We rely on a combination of patents, trademarks, domain names and confidentiality agreements to protect our intellectual property. Our manufacturing processes are based on technology developed primarily in-house by our research and development and engineering personnel.
 
With respect to proprietary know-how that is not patentable and processes for which patents are difficult to enforce, we rely on, among other things, trade secret protection and confidentiality agreements to safeguard our interests. All of our research and development personnel have entered into confidentiality and proprietary information agreements with us. These agreements address intellectual property protection issues and require our associates to assign to us all of the inventions, designs and technologies they develop during the course of employment with us.  We are not aware of any material infringement of our intellectual property rights.
 
Patents
 
We have been granted ten patents by the State Intellectual Property Office of the PRC, including one invention patent and nine utility patents. In addition, we have applied for an additional thirteen invention patents and seven utility model patents, which are currently pending. Actual examination times for patent applications in China vary, but examinations of similar patent applications have taken approximately one year. These patents and patent applications are intended to protect the production processes of various wire ropes, pickling methods of materials of steel wire and devices designed for the steel wire production. The term of all of the utility model patents is ten years from the filing of the application and the term of all of the invention patents is twenty years from the filing of the application.  We currently do not have any patents registered or pending in any jurisdiction outside of the PRC.
 
The following table provides the name, application number or patent number, the applicant or patent holder and the status of each of our invention patents and invention patent applications and the expiration date of our registered invention patent :
 
Name
 
ApplicationNo.
/Patent No.
 
Applicant
/Patent
Holder
 
Status
 
Expiration
Date
 
                   
Stabilizing Process of Indented Wire
 
2007101571490
 
Ossen Jiujiang
 
Registered
 
11/23/2027
 
                   
Method to Change the Length of Waste of Stranded Wire Joint
 
200910144241.2
 
Ossen Materials
 
Pending
 
-
 
                   
Stirring & Pickling Process of Raw Materials of Stranded Wire
 
200910144242.7
 
Ossen Materials
 
Pending
 
-
 
                   
Multi-Bath Pickling Process of Materials of Stranded Wire
 
200910144243.1
 
Ossen Materials
 
Pending
 
-
 
                   
Production Process of Galvanized Steel Wire
 
2010101051799
 
Ossen Jiujiang
 
Pending
 
-
 
                   
Production Process of Helical Rib Steel Wire
 
2010101051534
 
Ossen Jiujiang
 
Pending
 
-
 
                   
Production Process of Pre-stressed Galvanized Stranded Wire
 
2010101052062
 
Ossen Jiujiang
 
Pending
 
-
 
 
30
 
Name
 
ApplicationNo.
/Patent No.
 
Applicant
/Patent
Holder
 
Status
 
Expiration
Date
 
                   
Stabilizing Production Process of High Strength Pre-stressed Rare Earth Coated Steel Wire
 
2010101051784
 
Ossen Jiujiang
 
Pending
 
-
 
                   
Precision Measurement Instrument for measuring Indented Depth of Pre-stressed Indented Steel Wire
 
2010201102461
 
Ossen Jiujiang
 
Pending
 
-
 
                   
Double-Pump Spray Device of Galvanized Steel Wire’s Coating- Assistant Tank
 
2010201102599
 
Ossen Jiujiang
 
Pending
 
-
 
                   
Device Designed to Remove Dust of High Strength Pre-stressed Rare Earth Coated Steel Wire
 
2010201102654
 
Ossen Jiujiang
 
Pending
 
-
 
                   
A New Dual-Conical-Surfaces Self-locking Power Lock
 
2010201102809
 
Ossen Jiujiang
 
Pending
 
-
 
                   
A New Stranding Pulley Designed for Production of High Strength Pre-stressed Rare Earth Coated Steel Wire
 
201020117245x
 
Ossen Jiujiang
 
Pending
 
-
 
                   
Stabilizing Temperature Alarm Control Device for High Strength Pre-stressed Rare Earth Coated Steel Wire
 
2010201172407
 
Ossen Jiujiang
 
Pending
 
-
 
 
The following table provides the name, application number or patent number, the applicant or patent holder and the status of each of our utility model patents and utility model patent applications and the expiration date of our registered utility model patents:
 
Name
 
ApplicationNo.
/Patent No.
 
Applicant
/Patent
Holder
 
Status
 
Expiration
Date
 
                   
Loose Tensile Test Device for Pre-stressed Steel Wire
 
ZL200720192927.0
 
Ossen Materials
 
Registered
 
12/03/2017
 
                   
Hanging Box Used in Phosphate Bath of Stranded Wire
 
ZL200820185077.0
 
Ossen Materials
 
Registered
 
08/22/2018
 
                   
Oiling Device for Pre-stressed Stranded Wire
 
ZL200820185079.x
 
Ossen Materials
 
Registered
 
08/22/2018
 
                   
Water Cut-off Device to Test Infrared Temperature of Stranding Machine
 
ZL200820185080.2
 
Ossen Materials
 
Registered
 
08/22/2018
 
                   
Infrared Safety Control Device for Lift Truck
 
ZL200820185081.7
 
Ossen Materials
 
Registered
 
08/22/2018
 
                   
Device Designed to Control Smoke by Temperature
 
ZL200820185082.1
 
Ossen Materials
 
Registered
 
08/22/2018
 
                   
Device Designed to Control Water Temperature When Phosphatizing the Pre-stressed Stranded Wire
 
200920233724.5
 
Ossen Materials
 
Pending
 
-
 
                   
Device for Testing Center Steel Wire Broken for Stranded Wire
 
200920233725.x
 
Ossen Materials
 
Pending
 
-
 
 
31
 
Name
 
ApplicationNo.
/Patent No.
 
Applicant
/Patent
Holder
 
Status
 
Expiration
Date
 
                   
Device Designed to Test Temperature of Steel Wire When Drawing the Stranded Wire
 
200920233726.4
 
Ossen Materials
 
Pending
 
-
 
                   
Steel Wire Joint Machine with Pressure Detecting Function
 
200920233728.3
 
Ossen Materials
 
Pending
 
-
 
                   
Automatic Paper Rolling Device of Asphalt Paper
 
200920233729.8
 
Ossen Materials
 
Pending
 
-
 
                   
Aerial Overhaul Platform for Forklift
 
200920233730.0
 
Ossen Materials
 
Pending
 
-
 
                   
Skid Used When Packing Pre-stressed Stranded Wire
 
200920233731.5
 
Ossen Materials
 
Pending
 
-
 
                   
Cooling Device Designed for the Cutter Bit for Indentation Used for Production of Pre-stressed Indented Wire
 
ZL200720192974.x
 
Ossen Jiujiang
 
Registered
 
12/03/2017
 
                   
Adjustable Ingress Pipe of Steel Wire-rewinding Machine
 
ZL200720192973.5
 
Ossen Jiujiang
 
Registered
 
12/03/2017
 
                   
A Control Device for Alarming the Coating Leakage on the Galvanized Production Line
 
ZL200720192533.x
 
Ossen Jiujiang
 
Registered
 
11/23/2017
 
 
Trademarks

We have been granted a total of five trademarks, three of which are registered trademarks in the PRC and two of which are registered with the World Intellectual Property Organization (WIPO) in accordance with Madrid Agreement. The five trademarks were transferred by Ossen Shanghai to Ossen Materials in 2008 and 2009.
 
Name of Trademark
 
Application No.
/Trademark No.
 
Applicant
/Trademark
Holder
 
Status
             
A Figurative Trademark（Registered under Madrid Agreement）
 
0973552
 
Ossen Materials
 
Registered
             
“OSSEN”（ Registered under Madrid Agreement）
 
0945308
 
Ossen Materials
 
Registered
             
A Figurative Trademark (PRC Domestic Registered)
 
4396898
 
Ossen Materials
 
Registered
             
“OSSEN” (PRC Domestic Registered)
 
4396895
 
Ossen Materials
 
Registered
             
“ ” (Domestic Registered)
 
4396896
 
Ossen Materials
 
Registered
 
 
32
 
 
Environmental Matters
 
The Environmental Protection Law, promulgated by the National People’s Congress on December 26, 1989, is the primary law for environmental protection in China.  The law establishes basic principles for coordinated advancement of economic growth, social progress and environmental protection, and defines the rights and duties of governments at all levels.  Local environmental protection bureaus may set stricter local standards than the national standards and enterprises are required to comply with the stricter of the two sets of standards.  Due to the nature of our business, we produce certain amounts of waste water, gas and solid waste materials during the course of our production.  We believe that we are in compliance in all material respects with applicable PRC laws and regulations, as we do not produce any hazardous materials.  All of our products meet the relevant environmental requirements under PRC laws and we have not been subject to any fines or legal action involving non-compliance with any relevant environmental regulation, nor are we aware of any threatened or pending action, including by any environmental regulatory authority.
 
Governmental Regulations
 
Business license
 
Any company that conducts business in the PRC must have a business license that covers a particular type of work. Our business license covers our present business of manufacturing, processing, procuring and selling metallic materials, metallic products, new alloy materials, rare earth application products, building materials, general machinery and related products. Prior to expanding our business beyond that of our business license, we are required to apply and receive approval from the PRC government.
 
Employment laws
 
We are subject to laws and regulations governing our relationship with our employees, including: wage and hour requirements, working and safety conditions, citizenship requirements, work permits and travel restrictions. These include local labor laws and regulations, which may require substantial resources for compliance. China’s National Labor Law, which became effective on January 1, 1995, and China’s National Labor Contract Law, which became effective on January 1, 2008, permit workers in both state and private enterprises in China to bargain collectively. The National Labor Law and the National Labor Contract Law provide for collective contracts to be developed through collaboration between the labor union (or worker representatives in the absence of a union) and management that specify such matters as working conditions, wage scales, and hours of work. The laws also permit workers and employers in all types of enterprises to sign individual contracts, which are to be drawn up in accordance with the collective contract.
 
Patent protection in China
 
The PRC has domestic laws for the protection of copyrights, patents, trademarks and trade secrets.  The PRC is also signatory to some of the world’s major intellectual property conventions, including:
 
 
·
Convention establishing the World Intellectual Property Organization (WIPO Convention) (June 4, 1980);
 
 
·
Paris Convention for the Protection of Industrial Property (March 19, 1985);
 
 
·
Patent Cooperation Treaty (January 1, 1994); and
 
 
·
The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) (November 11, 2001).

 
33
 
 
Patents in the PRC are governed by the China Patent Law and its Implementing Regulations, each of which went into effect in 1985.  Amended versions of the China Patent Law and its Implementing Regulations came into effect in 2001 and 2003, respectively.
 
The PRC is signatory to the Paris Convention for the Protection of Industrial Property, in accordance with which any person who has duly filed an application for a patent in one signatory country shall enjoy, for the purposes of filing in the other countries, a right of priority during the period fixed in the convention (12 months for inventions and utility models, and 6 months for industrial designs).
 
The Patent Law covers three kinds of patents - patents for inventions, utility models and designs. The Chinese patent system adopts the principle of first to file, which means that a patent may be granted only to the person who first files an application. Consistent with international practice, the PRC allows the patenting of inventions or utility models that possess the characteristics of novelty, inventiveness and practical applicability only. For a design to be patentable it cannot be identical with, or similar to, any design which, before the date of filing, has been publicly disclosed in publications in the country or abroad or has been publicly used in the country, and should not be in conflict with any prior right of another.
 
Value added tax
 
Pursuant to the Provisional Regulation of China on Value Added Tax and their implementing rules, all entities and individuals that are engaged in the sale of goods, the provision of repairs and replacement services and the importation of goods in China are generally required to pay VAT at a rate of 17.0% of the gross sales proceeds received, less any deductible VAT already paid or borne by the taxpayer. Furthermore, when exporting goods, the exporter is entitled to a portion, or in some instances all, of the VAT refund that the exporter previously paid.
 
Foreign currency exchange
 
Under the PRC foreign currency exchange regulations applicable to us, the Renminbi is convertible for current account items, including the distribution of dividends, interest payments, and trade and service-related foreign exchange transactions. Conversion of Renminbi for capital account items, such as direct investment, loan, security investment and repatriation of investment, however, is still subject to the approval of the PRC State Administration of Foreign Exchange, or SAFE. Foreign-invested enterprises may buy, sell and/or remit foreign currencies only at those banks authorized to conduct foreign exchange business, after providing valid commercial documents and, in the case of capital account item transactions, obtaining approval from SAFE. Capital investments by foreign-invested enterprises outside of China are also subject to limitations, which include approvals by the Ministry of Commerce, SAFE and the State Reform and Development Commission.
 
Mandatory statutory reserve and dividend distributions
 
Under applicable PRC regulations, foreign-invested enterprises in China may pay dividends out of their accumulated profits only, if any, as determined in accordance with PRC accounting standards and regulations. In addition, a foreign-invested enterprise in China is required to set aside at least 10% of its after-tax profit based on PRC accounting standards each year for its general reserve until the cumulative amount of such reserve reaches 50% of its registered capital. These reserves are not distributable as cash dividends. The board of directors of a foreign-invested enterprise has the discretion to allocate a portion of its after-tax profits to staff welfare and bonus funds, which may not be distributed to equity owners except in the event of liquidation.
 
Capital Expenditures
 
Our capital requirements are dependent on many factors, including working capital requirements to finance the growth of our company, the allocation of resources to our research and development efforts, and our marketing and sales activities. We anticipate continuing to engage in capital spending consistent with anticipated growth in our operations.

 
34
 
 
4C.  Organizational Structure
 
See “—History and Development of the Company” above in subsection A of Item 4 for a description of our organizational structure.
 
4D.  Property, Plants and Equipment
 
Under PRC law, land is owned by the state.  “Land use rights” are granted to an individual or entity after payment of a land use right fee is made to the applicable state or rural collective economic organization. Land use rights allow the holder the right to use the land for a specified long-term period.
 
We have land-use rights for facilities at two locations in the PRC, one in Maanshan City, Anhui Province and one in Jiujiang City, Jiangxi Province, which are utilized for production, research and development and employee living quarters.  We have paid all amounts relating to these properties. The land-use rights for our Maanshan facility expires in 2058 and the rights for our Jiujiang facilities expire at different intervals ranging from 2055 to 2057.  Our facilities cover an aggregate of approximately 106,136 square meters.
 
As of December 31, 2009, our production facility in Maanshan City had a total gross floor area of approximately 47,356 square meters and we employed 63 production personnel at that facility. Our Maanshan facility contained seven production lines with an annual production capacity of approximately 80,392 tons in 2009.  As of December 31, 2009, our production facility in Jiujiang City had a total gross floor area of approximately 58,780 square meters and we employed 65 production personnel at that facility. Our Jiujiang facility contained eleven production lines with an annual production capacity of approximately 46,495 tons in 2009. Historically, we have not experienced any form of disruption in our production facilities.
 
Our primary products are plain surface PC strands and galvanized PC wires.
 
Due to the nature of our business, we produce certain amounts of waste water, gas and solid waste materials during the course of our production.
 
We believe that our current property rights are sufficient for our current operations. However, to continue growth, we expect to expand our production capacity in the future.
 
ITEM 4A.
UNRESOLVED STAFF COMMENTS
 
Not applicable
 
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 
The following discussion and analysis should be read in conjunction with our consolidated financial statements, the notes to those financial statements and other financial data that appear elsewhere in this report. In addition to historical information, the following discussion contains forward-looking statements based on current expectations that involve risks and uncertainties. Actual results and the timing of certain events may differ significantly from those projected in such forward-looking statements due to a number of factors, including those set forth in “Risk Factors” and elsewhere in this report. Our consolidated financial statements are prepared in conformity with U.S. GAAP.

 
35
 
 
5A.  Operating Results
 
Overview
 
General
 
Ossen is one of the largest producers of prestressed steel materials in China.  Our facilities are located in Maanshan City, Anhui Province and in Jiujiang City, Jiangxi Province, in the People’s Republic of China. We manufacture and sell an array of plain surface and rare earth galvanized prestressed steel materials, which we believe is the most comprehensive amongst our competitors in China.  According to the PRC PC Strand Industry Investment and Market Operation Research Report, in 2008, our high strength, low relaxation  products were ranked third in sales in the PRC and ranked first in export sales by Chinese prestressed steel manufacturers.
 
On July 7, 2010, Ultra Glory and its sole shareholder entered into a share exchange agreement with Ossen Innovation Materials Group Co., Ltd., or Ossen Innovation Group, a British Virgin Islands limited liability company organized on April 30, 2010 under the BVI Companies Act, 2004 and the shareholders of Ossen Innovation Group. Pursuant to the share exchange agreement, Ultra Glory acquired from the shareholders of Ossen Innovation Group all of the issued and outstanding shares of Ossen Innovation Group, in exchange for an aggregate of 10,000,000 newly issued ordinary shares issued by Ultra Glory to the shareholders of Ossen Innovation Group.  In addition, the sole shareholder of Ultra Glory sold all of the 5,000,000 ordinary shares of Ultra Glory that were issued and outstanding prior to the business combination, to the shareholders of Ossen Innovation Group for cash, at a price of $0.03 per share.  As a result, the individuals and entities that owned shares of Ossen Innovation Group prior to the business combination acquired 100% of the equity of Ultra Glory, and Ultra Glory acquired 100% of the equity of Ossen Innovation Group.  Ossen Innovation Group is now a wholly owned subsidiary of Ultra Glory.  In conjunction with the business combination, Ultra Glory filed an amended charter, pursuant to which Ultra Glory changed its name to Ossen Innovation Co., Ltd, changed its fiscal year end to December 31 and increased its authorized shares to 100,000,000.  Upon the consummation of the business combination, we ceased to be a shell company.
 
Important Factors Affecting our Results of Operations and Existing Trends
 
International sales and product mix
 
Our results of operations depend in part on the proportion of international sales to domestic sales that we attain during a particular financial reporting period.  Sales to international customers generally generate higher profit margins for us.  In addition, our international customers generally pay by letter of credit, which enables us to convert accounts receivable into cash more quickly.  Our domestic customers generally pay approximately 40 days after receiving the materials at the construction site.  In 2008, we sold 49.4% of our products to international customers.  However, in 2009, we sold only 4.3% of our products to international customers, as a result of the global economic and financial crisis and the imposition of anti-dumping duties by the U.S. and the European Union.
 
Our results of operations also depend on the product mix that we attain during a particular financial reporting period.  We produce and sell products according to customer orders.  The prices of our rare earth coated products are higher than the prices of our plain surface products because of their antiseptic property and the long service life of the finished products constructed with these materials, such as buildings and bridges. Since the increase in our expenses in developing and selling coated materials is less than the increased sales prices , these products generate higher revenues than our plain surface materials.
 
To counter the adverse impacts brought by the global financial and economic crisis in 2009, we adjusted our strategy by increasing sales to PRC customers in an attempt to take advantage of the RMB 4 trillion stimulus package announced by Chinese government to stimulate the domestic PRC economy.  In 2009, we sold many of our products for use in numerous infrastructure construction projects in the PRC, including bridges, inter-city high speed railways and expressways.  These projects generally required our rare earth coated materials.  As a percentage of overall sales, sales of our rare earth coated products increased from 4.8% in 2008 to 25.4% in 2009, as discussed under “—Results of Operations” below.  Our plan is to continue to increase sales of our rare earth coated products, both in the PRC and internationally, in order to increase our revenues and profits.  We intend to sell these products in the U.S. in future periods as well, since rare earth galvanized products are not subject to the anti-dumping measures imposed by the U.S.
 
Favorable price and terms for supply of principal raw materials
 
Our principal raw material is high carbon steel wire rods that we typically purchase from multiple primary steel producers. The steel industry as a whole is cyclical and, at times, pricing and availability of steel can be volatile due to numerous factors beyond our control, including general domestic and international economic conditions, labor costs, sales levels, competition, levels of inventory held by us and other steel service centers, consolidation of steel producers, higher raw material costs for steel producers, import duties and tariffs and currency exchange rates. This volatility can significantly affect the availability and cost of raw materials for us.

 
36
 
 
We, like many other steel service centers, maintain substantial inventories of steel to accommodate the short lead times and just-in-time delivery requirements of our customers. Accordingly, we purchase steel in an effort to maintain our inventory at levels that we believe to be appropriate to satisfy the anticipated needs of our customers based upon historic buying practices, supply agreements with customers and market conditions. Our commitments to purchase steel are generally at prevailing market prices in effect at the time we place our orders. We have no long-term, fixed-price steel purchase contracts. When steel prices increase, as they did in 2008, competitive conditions will influence how much of the price increase we can pass on to our customers. To the extent we are unable to pass on future price increases in our raw materials to our customers, the net sales and profitability of our business could be adversely affected.
 
When steel prices decline, as they did in the fourth quarter of 2008 and through the first half of 2009, customer demands for lower prices and our competitors' responses to those demands could result in lower sale prices and, consequently, lower margins. Significant or rapid declines in steel prices or reductions in sales volumes could result in us incurring inventory or goodwill impairment charges. Changing steel prices therefore could significantly impact our net sales, gross margins, operating income and net income.
 
We currently purchase almost all of our new materials from a very small number of suppliers.  Purchases from our four largest suppliers amounted to 77.0 % and 84.9 % of our total cost of supplies in 2008 and 2009, respectively.  To date we have been able to obtain favorable pricing and delivery terms from these suppliers.  However, as we continue to increase the scale of our production, we may need to further diversify our supplier network and, as a result, may not be able to obtain favorable pricing and delivery terms from new suppliers.
 
Production capacity
 
In order to capture additional market share for our products, we have expanded over the past several years, and plan to continue to expand, our production capacity.  We are currently producing at nearly full capacity.  Increased capacity has had, and could continue to have, a significant effect on our results of operations, by allowing us to produce and sell more products to generate higher revenues and profits.
 
Growth of the Chinese economy
 
We operate our manufacturing facilities in China and derive the majority of our revenues from sales to customers in China. As such, economic conditions in China affect virtually all aspects of our operations, including the demand for our products, the availability and prices of our raw materials and our other expenses. According to the National Bureau of Statistics of China, China has experienced significant economic growth, achieving a CAGR, of 12.1% in gross domestic product from 1997 through 2007. Domestic demand for, and consumption of, prestressed steel products has increased substantially as a result of this growth. We anticipate that the demand for our materials in China will continue to increase as the Chinese government carries out its stimulus plan and other plans to further develop the transportation infrastructure in the PRC. However, any adverse changes in economic conditions or regulatory environment in China may have a material adverse effect on our future performances.
 
Level of income tax and preferential tax treatment
 
Our net income is affected by the income tax that we pay and any preferential tax treatment that we are able to receive.  Our operating subsidiaries are subject to the PRC enterprise income tax, or EIT.  According to the relevant laws and regulations in the PRC, foreign invested enterprises established prior to January 1, 2008 are entitled to full exemption from income tax for two years beginning with the first year in which such enterprise is profitable and a 50% income tax reduction for the subsequent three years.  Ossen Materials was entitled to an EIT exemption during the two years ended December 31, 2008, was subject to a 50% income tax reduction during the year ended from January 1, 2009, and will be subject to a 50% income tax reduction during the two years ending December 31, 2011.  Ossen Jiujiang was entitled to the EIT exemption in 2009, will be entitled to the EIT exemption in 2010, and will be subject to 50% income tax reduction during the period from January 1, 2011 to December 31, 2013.  As our income tax obligations increase over time, our net income will be affected.
 
 
Our net income is affected by the income tax that we pay and any preferential tax treatment that we are able to receive.  Our operating subsidiaries are subject to the PRC enterprise income tax, or EIT.  According to the relevant laws and regulations in the PRC, foreign invested enterprises established prior to January 1, 2008 are entitled to full exemption from income tax for two years beginning with the first year in which such enterprise is profitable and a 50% income tax reduction for the subsequent three years.  Ossen Materials was entitled to an EIT exemption during the two years ended December 31, 2008, and is subject to 50% income tax reduction during the period from January 1, 2009 to December 31, 2011.  Ossen Jiujiang is entitled to the EIT exemption in 2009 and 2010, and will be subject to 50% income tax reduction during the period from January 1, 2011 to December 31, 2013.  As our income tax obligations increase over time, our net income will be affected.
 
37
 
Costs of being a public company
 
Prior to the business combination, Ossen did not operate as a public company. Ossen has incurred significant accounting, legal and other expenses in connection with the business combination since its year ended December 31, 2009, and it expects that compliance with its obligations as a public company will require significant management time and continued increases in general administrative expenses, including insurance, legal and financial compliance costs.
 
Foreign currency translation
 
Our financial statements are expressed in U.S. dollars but the functional currency of our operating subsidiaries is RMB. Our results of operations are translated at average exchange rates during the relevant financial reporting periods, assets and liabilities are translated at the unified exchange rate at the end of these periods and equity is translated at historical exchange rates. Adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income.
 
Description of Selected Income Statement Items
 
Net Sales .  We generate revenue from sales of our prestressed steel products, including plain surface products and rare earth coated products.
 
Cost of sales .  Cost of sales consists of costs directly attributable to production, including the cost of raw materials, salaries for staff engaged in production activity, electricity, depreciation, packing materials, and related expenses.
 
Selling and distribution expenses.   Selling and distribution expenses consist of sales commissions , payroll, traveling expenses, transportation expenses and advertising expenses.  We pay our distribution customers a commission ranging from 0.6% to 1.4% of invoiced amounts (including VAT) actually paid to us.
 
General and administrative expenses.   General and administrative expenses consist primarily of employee remuneration, payroll taxes and benefits, general office expenses and depreciation.  We expect administrative expenses to continue to increase as we incur additional expenses related to costs of compliance with securities laws and other regulations, including increased audit and legal fees and investor relations expenses.
 
Interest expenses.   Interest expenses consist of interest expense on bank loans.
 
Other Income .  Our other income consisted of government grants and revenue from sales of scrap materials in 2008 and 2009.
 
Income Taxes .  The PRC Enterprise Income Tax Law imposed a unified income tax rate of 33% prior to and including 2007 and of 25% beginning in 2008 for enterprises registered in the PRC.  Both Ossen Materials and Ossen Jiujiang were designated by the local tax authority as a foreign-invested enterprise engaged in manufacturing activities.  As a result, Ossen Jiujiang was entitled to the EIT exemption in 2009, will be entitled to the EIT exemption in 2010, and will be subject to 50% income tax reduction during the period from January 1, 2011 to December 31, 2013.  As our income tax obligations increase over time, our net income will be affected.
 
Results of Operations

The following table sets forth the key components of our results of operations for the periods indicated, in dollars and as a percentage of revenue.

 
38
 
 
(All amounts in U.S. dollars, except for percentages)

   
For Year Ended December 31,
 
   
2009
   
2008
 
   
(Audited)
   
(Audited)
 
   
USD
   
% of
Revenue
   
USD
   
% of
Revenue
 
Revenues
  $ 101,087,796       100 %   $ 82,742,310       100 %
Cost of Goods Sold
    87,659,925       86.7 %     70,532,733       85.2 %
Gross profit
    13,427,871       13.2 %     12,209,577       14.8 %
Selling and distribution expenses
    503,724       0.5 %     4,326,491       5.2 %
General and administrative expenses
    1,143,672               1,316,606          
Total operating expenses
    1,647,396       1.6 %     5,643,097       6.8 %
Income from operation
    11,780,475       11.1 %     6,566,480       7.9 %
Interest expenses, net
    (1,496,712 )     1.5 %     (1,891,671 )     2.3 %
Other income, net
    183,495       0.2 %     380,766       0.5 %
Income before income taxes
    10,467,258       10.4 %     5,055,575       6.1 %
Income Taxes
    (740,053 )     0.8 %     (291,520 )     0.4 %
Net Income
    9,727,205       9.6 %     4,764,055       5.7 %
Less: net income attributable to non-controlling interest
    1,714,670       1.7 %     809,437       1.0 %
Net income attributable to controlling interest
    8,012,535       7.9 %     3,954,618       4.7 %
Other comprehensive income-Foreign currency translation gain, net of tax
    31,146       -       420,883       0.5 %
Total other comprehensive income, net of tax
    31,146       -       420,883       0.5 %
Comprehensive Income
    8,043,681       7.9 %     4,375,501       5.3 %
 
Net Sales .  During the year ended December 31, 2009, we had revenues of approximately $101.1 million as compared to revenues of approximately $82.7 million during year ended December 31, 2008, an increase of approximately $18.3 million, or 22.2%.   The growth in our revenues during the year ended December 31, 2009 was attributable to a significant increase of volume sold during such period as compared to the year ended December 31, 2008.
 
The following table provides a breakdown of the percentages of revenue generated from each of our primary product types during the years ended December 31, 2009 and 2008:
 
   
Year ended December 31,
   
Change
 
   
2008
   
2009
   
from 2008
 
   
% of total revenue
   
% of total revenue
   
to 2009
 
Products:
                 
Plain surface PC strands
    60 %     32 %     (36.2 %)
Rare earth galvanized PC wires and PC strands
    4 %     2 %     (35.1 %)
Stabilized PC wires
    36 %     51 %     69.3 %
Other rare earth coated PC wires and PC strands
    -       15 %     -  
 
The reasons for the change in our product mix from 2008 to 2009, with sales of plain surface products decreasing significantly and sales of galvanized products, including stabilized PC wires, increasing significantly, are twofold.  One, as a result of an overall decrease in demand in international markets for our products due to the global financial and economic crisis and the anti-dumping duties imposed by the U.S. and the European Union, we had to decrease our international sales, which were comprised primarily of plain surface materials in 2008.  Two, we increased sales of our higher margin rare earth galvanized products and other coated products, including stabilized PC wires and other rare earth coated PC wires and PC strands, primarily in the domestic PRC market in 2009 to take advantage of the growth and stimulus measures existing in the PRC.

 
39
 
 
Cost of Sales .  Cost of sales was approximately $87.7 million during the year ended December 31, 2009, as compared to approximately $70.5 million during the year ended December 31, 2008, representing an increase of 24.3%, or approximately $17.2 million. As a percentage of net sales, cost of sales increased from 85.2% to 86.7% during the year ended December 31, 2009.  This increase resulted from the increase in purchases of zinc in order to product greater quantities of our galvanized materials, of which zinc is a crucial element.
 
Gross Profit and Gross Margin.   Our gross profit is equal to the difference between our revenues and our cost of goods sold .  Our gross profit increased 10.0% to approximately $13.4 million during the year ended December 31, 2009, from approximately $12.2 million for the same period in 2008.  The increase was primarily attributable to increased sales volume.
 
For the years ended December 31, 2009 and 2008, our gross margin was 13.2% and 14.8%, respectively. The reason for this decrease in gross margin is that we decreased our international sales, which generally generate higher margins than domestic sales, as a result of the global economic crisis and anti-dumping duties imposed by the U.S. and the European Union.
 
General and Administrative Expenses.   General and administrative expenses totaled approximately $1.1 million for the year ended December 31, 2009, as compared to approximately $1.3 million for the year ended December 31, 2008, representing a decrease of 17.6%. This decrease was primarily attributable to costs incurred in connection with a potential financing transaction in 2008.
 
Selling and Distribution Expenses .  Selling and distribution expenses totaled $0.5 million for the year ended December 31, 2009, as compared to $4.3 million for the year ended December 31, 2008, a decrease of 88.4%.  This decrease was attributable primarily to a significant decrease in our freight costs and other costs related to international sales as a result of the significant decrease in international sales in 2009.
 
Operating Income. As a result of the foregoing, operating income for the year ended December 31, 2009 was approximately $11.8 million, an increase of 78.8% as compared to approximately $6.6 million for the same period in 2008.  As a percentage of net sales, operating income increased from 7.9% to 11.1% during the year ended December 31, 2009.
 
Other Income. Our other income for the year ended December 31, 2009 totaled $0.2 million, compared to other income of $0.4 million for the previous year, a decrease of 51.8%.  This decrease was attributable to the receipt of a government subsidy in 2008 in recognition of our high level of exports, which grant was not made in 2009.
 
Income Taxes . We incurred income tax expenses of $740,053 and $291,520 in fiscal years ended December 31, 2009 and 2008, respectively.
 
Net Income . As a result of the foregoing, our net income totaled approximately $9.7 million for the year ended December 31, 2009, as compared to approximately $4.8 million for the year ended December 31, 2008, an increase of 106%.
 
Net Income Attributable to Non-controlling Interest.   We own 81% of our operating subsidiaries .  Net income attributable to non-controlling interest represents the net income attributable to the holders of the remaining 19%.
 
Foreign Currency Translation. Our financial statements are expressed in U.S. dollars but the functional currency of our operating subsidiary is RMB. Our results of operations are translated at average exchange rates during the relevant financial reporting periods, assets and liabilities are translated at the unified exchange rate at the end of these periods and equity is translated at historical exchange rates. Adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income.

 
40
 
 
Critical Accounting Policies and Estimates
 
Management’s discussion and analysis of its financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. Our financial statements reflect the selection and application of accounting policies, which require management to make significant estimates and judgments. See Note 1 to our consolidated financial statements, “Summary of Significant Accounting Policies.” We believe that the following paragraphs reflect the most critical accounting policies that currently affect our financial condition and results of operations.
 
Revenue Recognition

Revenues represent the invoiced value of goods sold recognized upon the shipment of goods to customers.  Revenues are 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 reasonable assured.
 
Income Taxes
 
Deferred tax assets and liabilities are recognized for the future tax consequence attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statement of income in the period that includes the enactment date. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.

Foreign Currency Translation
 
The accompanying consolidated financial statements are presented in United States dollars (“US$). The functional currency of the Company is Renminbi (“RMB”). The consolidated financial statements are translated into United States dollars from RMB 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 resulting transaction adjustments are recorded as a component of shareholders’ equity. Gains and losses from foreign currency transactions are included in net income.

   
2009
   
2008
 
Year ended RMB: US$ exchange rate
    6.8372       6.8542  
Average yearly RMB: US$ exchange rate
    6.8409       6.9623  

The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US$ at the rates used in translation.

Fair Value of Financial Instruments
 
FASB ASC 820 (formerly SFAS No. 157 Fair Value Measurements) establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market

 
41
 

These tiers include:

 
·
Level 1—defined as observable inputs such as quoted prices in active markets;

 
·
Level 2—defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and

 
·
Level 3—defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
 
The assets measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820 as of December 31, 2009 are as follows:

         
Fair Value Measurements at Reporting Date Using
 
   
Carrying   value
as  of
December   31,
2009
   
Quoted   Prices   in
Active   Markets
for   Identical
Assets
(Level   1)
   
Significant   Other
Observable
Inputs
(Level   2)
   
Significant
Unobservable   Inputs
(Level   3)
 
Cash and cash equivalents
  $ 8,409,467     $ 8,409,467       -       -  
Restricted cash
  $ 11,824,214     $ 11,824,214       -       -  

Property, Plant, and Equipment
 
Property, plant and equipment are stated at cost less accumulated depreciation, and include expenditure that substantially increases the useful lives of existing assets.

Depreciation is provided over their estimated useful lives, using the straight-line method.  Estimated useful lives are as follows:

Buildings and improvements
 
5 ~ 20 years
Machinery and equipment
 
5 ~ 20 years
Motor vehicles
 
5 years
Office Equipment
 
5 ~ 10 years

When assets are sold or retired, their costs and accumulated depreciation are eliminated from the consolidated financial statements and any gain or loss resulting from their disposal is recognized in the period of disposition as an element of other income.  The cost of maintenance and repairs is charged to income as incurred, whereas significant renewals and betterments are capitalized.
 
Recently Issued Accounting Pronouncements

In June 2009, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 105-10 (formerly Statement of Financial Accounting Standards (“SFAS”) No. 168, the FASB ASC and Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162).  ASC 105-10 establishes the FASB ASC as the source of authoritative accounting principles recognized by the FASB to be applied in preparation of financial statements in conformity with generally accepted accounting principles in the United States of America.  The adoption of this standard has no impact on the Company’s consolidated financial statements.  However, reference to specific accounting standards have been changed to refer to appropriate section of the ASC.  Subsequent revisions to GAAP by the FASB will be incorporated into ASC through issuance of Accounting Standards Updates (“ASU”).

 
42
 

Effective January 1, 2009, the Company adopted ASC 805 (formerly SFAS No. 141 R, Business Combinations).  ASC 805 requires an acquirer to measure the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at their fair values on the acquisition date, with goodwill being the excess value over the net identifiable assets acquired.  The adoption of ASC 805 did not have any effect on the Company’s consolidated financial statements.

Effective January 1, 2009, the Company adopted ASC 810-10 (formerly SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements).  This Statement establishes accounting and reporting standards that require the ownership interests in subsidiaries’ non-parent owners be clearly presented in the equity section of the balance sheet; requires the amount of consolidated net income attributable to the parent and to the non-controlling interest be clearly identified and presented on the face of the consolidated statement of income; requires that changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for consistently; requires that when a subsidiary is deconsolidated, any retained non-controlling equity investment in the former subsidiary be initially measured at fair value and the gain or loss on the deconsolidation of the subsidiary be measured using the fair value of any non-controlling equity; requires that entities provide disclosures that clearly identify the interests of the parent and the interests of the non-controlling owners.  The adoption of ASC 810-10 has not had a significant effect on the Company’s consolidated financial statements.

On April 1, 2009, the FASB approved ASC 805 (formerly FSP FAS 141R-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies), which amends Statement 141R and eliminates the distinction between contractual and non-contractual contingencies.  Under ASC 805, an acquirer is required to recognize at fair value an asset acquired or liability assumed in a business combination that arises from a contingency if the acquisition-date fair value of that asset or liability can be determined during the measurement period. If the acquisition-date fair value cannot be determined, the acquirer applies the recognition criteria in SFAS No. 5, Accounting for Contingencies and Interpretation 14, “Reasonable Estimation of the Amount of a Loss – and interpretation of FASB Statement No. 5,” to determine whether the contingency should be recognized as of the acquisition date or after it.  The adoption of ASC 805 has not had a material effect on the Company’s consolidated financial statements.

ASC 320-10 (formerly FSP FAS 115-2 and FAS 124-2) amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements.  It did not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. We are required to adopt ASC 320-10 for our interim and annual reporting periods ending after June 15, 2009.  ASC 320-10 does not require disclosures for periods presented for comparative purposes at initial adoption.  ASC 320-10 requires comparative disclosures only for periods ending after initial adoption.  The adoption of ASC 320-10 has not had a material effect on the Company’s consolidated financial statements.

On April 9, 2009, the FASB also approved ASC 825-10 (formerly FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments )   to require disclosures about fair value of financial instruments in interim period financial statements of publicly traded companies and in summarized financial information required by APB Opinion No. 28, Interim Financial Reporting .  We are required to adopt ASC 825-10 for our interim and annual reporting periods ending after June 15, 2009.  ASC 825-10 does not require disclosures for periods presented for comparative purposes at initial adoption. ASC 825-10 requires comparative disclosures only for periods ending after initial adoption.  The adoption of ASC 825-10 has not had a material effect on the Company’s consolidated financial statements.

In April 2009, the FASB issued FSP No. FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” as incorporated into FASB ASC 820, “Fair Value Measurements and Disclosures”. The guidance relates to determining fair values when there is no active market or where the price inputs being used represent distressed sales.  It reaffirms what FASB ASC 820 states is the objective of fair value measurement—to reflect how much an asset would be sold for in an orderly transaction (as opposed to a distressed or forced transaction) at the date of the financial statements under current market conditions.  Specifically, it reaffirms the need to use judgment to ascertain if a formerly active market has become inactive and in determining fair values when markets have become inactive.  This guidance is effective for interim and annual periods ended after June 15, 2009, but entities may early adopt this guidance for the interim and annual periods ended after March 15, 2009. The adoption of such standard has not had a material impact on the Company’s consolidated financial statements.

 
43
 

In August 2009, the FASB issued FASB ASU 2009-05, “Measuring Liabilities at Fair Value”. FASB ASU 2009-05 amends FASB ASC 820, “Fair Value Measurements”.  Specifically, FASB ASU 2009-05 provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the following methods: 1) a valuation technique that uses a) the quoted price of the identical liability when traded as an asset or b) quoted prices for similar liabilities or similar liabilities when traded as assets and/or 2) a valuation technique that is consistent with the principles of FASB ASC 820 of the Accounting Standards Codification (e.g. an income approach or market approach).  FASB ASU 2009-05 also clarifies that when estimating the fair value of a liability, a reporting entity is not required to adjust to include inputs relating to the existence of transfer restrictions on that liability.  The adoption of such standard has not had a material impact on the Company’s consolidated financial statements.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events”, (FASB ASC 855-10”) which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements.  The statement is effective for interim and annual periods ended after June 15, 2009.  The standard was subsequently amended by FASB ASU 2010-09 which exempts an entity that is an SEC filer from the requirement to disclose the date through which subsequent events have been evaluated.

In September 2009, the Emerging Issues Task Force reached final consensus on FASB ASU 2009-13, “Revenue Arrangements with Multiple Deliverables”.  FASB ASU 2009-13 addresses how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting, and how the arrangement consideration should be allocated among the separate units of accounting.  This ASU will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010.  Early adoption is permitted. The adoption of such standard has not had a material impact on the Company’s consolidated financial statements.

In December 2009, the FASB issued FASB ASU 2009-17, Consolidation (“FASB ASC 810): Improvements to Financial Reporting by Enterprises involved with Variable Interest Entities.  This ASU amends the FASB Accounting Standards Codification for statement No.167.  In June 2009, the FASB issued SFAS No.167, Amendments to FASB Interpretation No. 46(R), which requires an enterprise to perform an analysis and ongoing reassessments to determine whether the enterprises variable interest or interests give it a controlling financial interest in a variable interest entity and amends certain guidance for determining whether an entity is a variable interest entity. It also requires enhanced disclosures that will provide users of financial statements with more transparent information about an enterprises involvement in a variable interest entity.  SFAS No.167 is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009 and for all interim reporting periods after that, with early application prohibited.  The Company is currently evaluating the impact of the adoption of SFAS No.167.

In January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements, which will require companies to make new disclosures about recurring or nonrecurring fair value measurements including significant transfers into and out of Level 1 and Level 2 fair value hierarchies and information on purchases, sales, issuance and settlements on a gross basis in the reconciliation of Level 3 fair value measurements.  The ASU is effective prospectively for financial statements issued for fiscal years and interim periods beginning after December 15, 2009.  The new disclosures about purchases, sales, issuance and settlements on a gross basis in the reconciliation of Level 3 fair value measurements is effective for interim and annual reporting periods beginning after December 15, 2010.  The Company expects that the adoption of ASU 2010-06 will not have a material impact on its consolidated financial statements.
 
Governmental Regulations
 
See the discussion under the heading “Governmental Regulations” in Item 4 above for a discussion of governmental policies or factors that could materially affect our business.

 
44
 
 
5B. Liquidity and Capital Resources
 
The major sources of our liquidity for fiscal year 2008 and 2009 were cash generated from operations and short-term borrowings, including short-term loans from banks and bank acceptance notes.  We expect to continue to finance our operations and working capital needs in the near future from cash generated from operations and short-term borrowings.  Our cash and cash equivalents are denominated in RMB.
 
Our cash and cash equivalents which are denominated in RMB , were approximately $8.4 million at December 31, 2009, as compared to $3.7 million at December 31, 2008, which increase was due to undistributed profits and a prepayment of approximately $0.3 million by one of our customers in 2009.  We believe that our cash reserves, together with expected cash flow from operations and short-term loans, are sufficient to allow us to continue to operate for the next 12 months.  However, we may sell equity or obtain credit facilities to enhance our liquidity position or to increase our cash reserves for future expansion. The sale of additional equity would result in dilution to our shareholders. The incurrence of indebtedness would result in increased fixed obligations and could result in operating covenants that would restrict our operations, or other restrictive covenants. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.
 
Accounts Receivable
 
International sales accounted for 37.6% of our revenues in 2008 but only 3.7% in 2009 as a result of the global financial and economic crisis and the anti-dumping tariffs imposed by the European Union and the U.S.  Our international customers generally pay by letter of credit, which enables us to convert accounts receivable into cash more quickly.  Our domestic customers generally pay approximately 40 days after receiving the materials at their construction site.  As a result, our accounts receivable increased significantly in 2009 as compared to 2008.  We do not expect our accounts receivable to decrease to 2008 levels until we are able to significantly increase our international sales.  We intend to sell our coated products in the U.S. in future periods, since these products are not subject to the anti-dumping measures imposed by the U.S.
 
Bank Loans
 
At December 31, 2009, we had approximately $27.4 million of short-term bank loans and $19.7 million of bank acceptance notes outstanding, as compared to $19.4 million and $18.2 million at December 31, 2008, respectively.
 
Short-term bank loans are obtained from local banks in China. All short-term bank loans are repayable within one year and are secured by property, plant and equipment and land use rights owned by us.
 
The weighted average annual interest rate of our short-term bank loans was 5.5% and 6.42% as of December 31, 2009 and 2008, respectively.  Interest expense was $1.4 and $1.9 million for the years ended December 31, 2009 and 2008, respectively.
 
We have not experienced any difficulties in the acquisition and rollover of the short-term bank loans that we use to fund our daily operations.  We anticipate rollovers of all current facilities that are set to mature in the 2010 and do not foresee a reduction in the availability of bank credit to fund our operations and meet our growth objectives.
 
Working Capital
 
Our working capital was approximately $2.8 million at December 31, 2009 as compared to ($8.2 million) at December 31, 2008, which increase was due primarily to the increase in cash and cash equivalents, a $10.4 million increase in accounts receivable, a $1.8 million note receivable from a related party and a $0.9 million increase in inventories, offset by an increase in short-term bank loans and bank acceptance notes and a $2.2 million increase in customer deposits.

 
45
 

Cash Flows
 
The following table sets forth a summary of our net cash flow information for the periods indicated:
 
(All amounts in U.S. dollars)
   
Year Ended December 31,
 
   
2009
   
2008
 
   
(Audited)
   
(Audited)
 
Net cash used in operating activities
  $ (2,769,330 )   $ (2,234,087 )
Net cash used in investing activities
    (209,511 )     (2,666,665 )
Net cash provided by financing activities
    7,558,779       345,059  

Operating Activities
 
Net cash used in operating activities was approximately $2.8 million in 2009, as compared to $2.2 million in 2008.  This increase in cash used in operating activities was primarily attributable to a $10.4 million increase in accounts receivable in 2009 as compared to a $1.0 million decrease in 2008 due to a shift in sales, with sales to international customers decreasing significantly in 2009, and $1.8 million in notes receivable from a related party in 2009.  This increase in cash used was offset by an increase in our net income for the reasons discussed above under “Results of Operations,” a smaller increase in inventories in 2009 as compared to 2008 because we increased inventories significantly in 2008 in anticipation of the increase in steel prices at the end of 2008, and a smaller increase in prepayments in 2009 as compared to 2008 as a result of required prepayments to a new customer in 2008.
 
Investing Activities
 
Net cash used in investing activities was approximately $0.2 million in 2009, as compared to $2.7 million in 2008.  This decrease in cash used in investing activities was attributable to a smaller increase in purchases of plant and equipment in 2009.  Specifically, in 2008 we incurred approximately $2.3 million of expenses in connection with the purchase of equipment for a new production line.
 
Financing Activities
 
Net cash provided by financing activities for the year ended December 31, 2009 was approximately $7.6 million, as compared to approximately $0.3 million in 2008.  The increase in cash provided by financing activities was primarily due to increased proceeds from short-term bank loans, which were used to purchase raw materials and other working capital requirements, a smaller increase in restricted cash, representing amounts held by banks as security for bank acceptance notes, a decrease in repayments of notes payable to a related party and cash dividends in 2009, offset by an increase in repayments of short-term bank loans and a decrease in proceeds from notes payable.  In 2008, Ossen Materials and Ossen Jiujiang paid an aggregate of $2.4 million in cash dividends to their shareholders, which dividends were declared in 2007.
 
5.C.  Research and Development, Patents and Licenses, etc.
 
Research and Development

Our research and development efforts are focused on three objectives:
 
 
·
Superior product safety and quality;
 
 
·
Reduction of operating costs; and
 
 
·
Sustaining growth through the development of new products.
 
 
46
 
 
We have a research and development staff at each of our facilities.  In total, nineteen employees are dedicated to research and development.  We spent $1.1 million, $1.5 million and $1.7 million in 2009, 2008 and 2007, respectively on our research and development activities.
 
We regularly train the members of our research and development department in order to consistently enhance our research and development capabilities in the field of coating technology. We have developed a business model that involves a very close interrelationship between our research and development department and our product development and marketing departments. As a result, we focus our research and development activities on projects that would enable us to branch out our products into new desired markets.  In addition, we conduct research and development activities that enable us to increase our market share in existing markets in the PRC and internationally.  We also focus certain of our research and development activities on higher margin products that can be sold to customers in international markets.
 
Specifically, we have entered into cooperation agreements with Jiujiang Institute pursuant to which the institute assists us in our efforts to improve the comprehensive function and manufacturing technique of our high strength, anti-erosion galvanized prestressed strands.  These high strength products, which have high endurance against erosion, are sold domestically and internationally.  In addition, we are cooperating with other steel manufacturers in research efforts regarding galvanized PC wires, which serve as raw materials for our galvanized PC strands, indented PC wires and helical rib PC wires with high performance and are designed for our international customers.
 
We have also entered into an agreement with the Shanghai Machinery Manufacturing Technology Research Institute.  Pursuant to this agreement, the institute designs high strength, indented PC wire and galvanized PC wire for us according to our specifications.
 
We believe that our research and development activities and production technology for rare-earth galvanized materials have contributed significantly to our growth.  By using rare earth zinc-plating technology, we are able to lower the temperature for the stabilizing treatment during the production process and thereby minimize the loss of strength during the stabilizing process.  As a result, this technology reduces the level of strength required of our raw materials under circumstances of unvaried finished product strength requirement and enables us to produce materials with greater strength under circumstances in which the strength of raw materials remains firm.  We believe that we are the only enterprise which can produce rare-earth galvanized pre-stressing materials of 1,860 megapascal and 15.20 mm in the world, as a result of our rare earth zinc-plating technology.
 
We plan to continue our research and development efforts to strengthen our leading position in our industry. For example, we plan to develop rare earth coated prestressed materials that are larger (up to 15.24 mm and 1,860 mPa) and can withstand greater levels of pressure as well as new greased prestressed materials of 12.7 mm and 1,860 mPa. We also own or lease various technologies that improve the quality of our products and reduce our operating costs, including coating polished technology, stabilizing treatment technology for dual tension gear galvanized prestressing material, warning technology for missing plating of coating production line, stranded wire greasing technology, water cut-off technology by strander infrared temperature detection and other core technologies.
 
We will continue to focus on developing fundamental coating technology and applications for the following technologies in the future:
 
 
·
Rare earth coating technology;
 
 
·
Surface finishing/ polishing technology;
 
 
·
Dual tension gear wire stabilizing treatment process;
 
 
·
Connector production technology without shutdown;
 
 
·
New technology on constant high temperature constant tension stabilizing treatment; and
 
 
47
 
 
 
·
High speed stabilizing treatment technology.
 
5.D.  Trend Information
 
See discussion in Parts A and B of this item.
 
5.E.  Off-Balance Sheet Arrangements
 
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our investors.
 
5.F.  Tabular Disclosure of Contractual Obligations
 
Contractual Obligations
 
Our contractual obligations consist of short-term debt obligations.  The following table sets forth a breakdown of our contractual obligations as of December 31, 2009:

   
Payments   due   by   period   (in   thousands   of   dollars)
 
Contractual Obligations
 
Total
   
Less   than
1   year
   
1-3   years
   
3-5   years
   
More   than
5   years
 
   
($US in Thousands)
 
Short-term debt obligations  (1)
    47,095,302       47,095,302       -       -       -  
 
(1) Attributable to short-term bank loans.

ITEM 6.
DIRECTORS, SENIOR MANAGEMENT, AND EMPLOYEES
 
6.A.  Directors and Senior Management
 
Prior to the date of our business combination, Wei Guo served as our sole director and executive officer.  Mr. Guo’s service was terminated on the date of our business combination.  Since the date of our business combination, the following individuals have served as our directors and executive officers:

 
48
 
 
Name
 
Positions
 
Age
Liang Tang
 
Chairman of Board
 
42
Wei Hua
 
Chief Executive Officer and Director
 
47
Zhiping Gu
  
Chief Financial Officer and Director
  
50

Mr. Liang Tang was appointed as our Chairman following our business combination.  Dr. Tang   has been the Chairman and President of Ossen Materials, our subsidiary, since 2008.  Dr. Tang has also been President of Shanghai Ossen Investment Holding (Group) Co., Ltd. since 2001.  He has more than 20 years of experience in the steel industry.  Prior to joining our Company in 2004, from 1994 until 1998, Dr. Tang was the President of Zhongmin Group of PRC Ministry of Civil Affairs.  From 1988 until 1994, Dr. Tang was Head of Enterprise Administrative Division of the Shanghai Municipal Metallurgical Industry Bureau.  Prior to that date, Dr. Tang was the Deputy Director of Enterprise Management at Baosteel Group Shanghai Ergang Co., Ltd., a competitor of ours.  Dr. Tang is involved in many charity affairs and social organizations including China Committee of Corporate Citizenship and China Chamber of Metallurgy Industry.  Dr. Tang has received the title of Shanghai Leader by the Shanghai Municipal Government, Outstanding Innovation Entrepreneur by the Symposium on Chinese Enterprise Innovation and the Royal Knight Medal of Spain by the King of Spain. Dr. Tang received a bachelors degree from Shanghai University, a Masters degree in International Finance from Peking University and an MBA from Fordham University.  Dr. Tang also received a doctoral degree in world economics from East China Normal University.
 
Mr. Wei Hua was appointed as a director of ours following our business combination.  Mr. Wei has served as Chairman of the Board of Directors of Ossen Jiujiang since 2007. Since 2000, he has been the Assistant Chief Executive Officer for the Steel Department of Ossen Group.  Before joining Ossen Group in 2000, from 1988 until 2000, Mr. Wei was a vice supervisor of the department of technology and quality supervision at Baosteel Group Shanghai Ergang Co., Ltd.  From 1985 until 1988, Mr. Hua worked at Shanghai No. 5 steel factory.  He graduated from Shanghai University with a degree in Business Management.
 
Mr. Zhiping Gu was appointed as a director of ours following our business combination.  Mr. Gu has been the Vice President of Finance of Ossen Group since 2003.  Mr. Gu received a bachelors degree from Shanghai Lixin University.
 
Messrs. Tang, Hua and Gu, our directors since the date of our business combination, will serve as directors until our next annual general meeting and until their successors are duly elected and qualified.
 
There are no family relationships between any of our directors or senior management. There are no arrangements or understandings with major shareholders, customers, suppliers or others, pursuant to which any person referred to above was selected as a director or member of senior management.
 
6.B.  Compensation
 
Director Compensation
 
Our directors do not currently receive any cash compensation for their service as members of the board of directors.
 
Executive Compensation
 
Prior to the business combination, Mr. Guo, our sole director and officer, did not receive any cash compensation for services rendered to the company.

 
49
 

The following table shows information concerning the annual compensation to executive officers of Ossen:
 
Name
 
Year
 
Salary
   
Bonus
   
All
other
compensation
   
Total
compensation
 
Liang Tang
 
2009
  $ 14,041     $ 8,771       -     $ 22,812  
   
2008
    -       -       -       -  
Wei Hua
 
2009
  $ 9,302     $ 4,388       -     $ 13,690  
   
2008
    -       -       -       -  
Zhiping Gu
 
2009
  $ 8,776     $ 3,657       -     $ 12,432  
   
2008
    -       -       -       -  
 
Ossen currently has no options or long-term compensation plans.
 
Employment Agreement
 
We have entered into an employment agreement with Mr. Liang Tang.  Mr. Tang is employed as Chairman of the Board of our Company.  The term of his agreement is from October 7, 2008 until October 6, 2011.  We will compensate Mr. Tang at an annual rate of $14,041.  We may terminate the employment agreement for cause as specified in the agreement.  Mr. Tang may terminate the employment agreement with thirty days written notice.  The employment agreement may be renewed upon the mutual agreement of the parties.
 
Each executive officer has agreed to hold in confidence any confidential information that he has obtained about the Company.
 
6.C. Board Practices
 
Board Composition and Terms of Directors and Officers
 
O ur board of directors currently consists of three directors, Dr. Tang, Mr. Hua and Mr. Gu , none of whom qualifies as an independent director .
 
Pursuant to our memorandum and articles of association, the business of our company is managed by our board of directors. Commencing with the first annual meeting of the shareholders, directors are elected for a term of office to expire at the next succeeding annual meeting of the shareholders after their election.  Each director holds office until the expiration of his or her term of office and until his or her successor has been elected and qualified, or until his or her earlier death, resignation or removal by resolution of shareholders or a resolution of directors in accordance with the memorandum and articles of association.
 
The directors may at any time by resolution of directors appoint any person to be a director to fill a vacancy.  There is a vacancy if a director dies or otherwise ceases to hold office as a director.  The directors may not appoint a director to fill a vacancy for a term exceeding the term that remained when the person ceasing to be a director ceased to hold office.
 
Our officers are appointed by resolution of our directors and hold office until removed from office by our directors, whether or not a successor is appointed.
 
Committees of the Board of Directors
 
We currently do not have any committees under our board of directors.
 
Duties of Directors
 
Under the laws of the British Virgin Islands, a director in exercising their powers or performing their duties shall act honestly and in good faith and in what the director believes to be the best interests of the company. In fulfilling their duty of care to us, our directors must ensure compliance with our Memorandum and Articles of Association. We have the right to take legal action if a duty owed by our directors is breached.

 
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We have not entered into a director service contract with any of our directors.
 
6.D.  Employees
 
As of March 31, 2010, we had 239 full-time employees. The following table shows the breakdown in numbers and percentages of employees by department:
 
Functions
 
Number of
employees
   
% of total
 
             
Manufacturing
    128       54 %
Technology
    25       11 %
Research & Development
    19       8 %
Quality Control
    9       4 %
General Administration, Purchasing, Sales and Marketing
    24       10 %
Total
    239       100 %

We have not experienced any significant labor disputes and consider our relationship with our employees to be good. Our employees are not covered by any collective bargaining agreement.
 
We have established an employee welfare plan in accordance with the relevant PRC laws and regulations. Our total expenses for this plan was approximately $26,286 and $39,735 in 2008 and 2009, respectively.
 
As we continue to expand our business, we believe it is critical to hire and retain top talent, especially in the areas of marketing, metal surface treatment, materials science, and technology engineering. We believe we have the ability to attract and retain high quality engineering talent in China based on our competitive salaries, annual performance-based bonus system, and equity incentive program for senior employees and executives. In addition, we have a training program for entry-level engineers that allows them to work closely with an experienced mentor to gain valuable hands-on experience and provide other professional development opportunities, including seminars where experienced engineers give lectures on specific engineering topics and new methods that can be applied to various projects.
 
6.E.  Share Ownership
 
As of July 7, 2010, 15,000,000 of our ordinary shares were outstanding. Holders of our ordinary shares are entitled to vote together as a single class on all matters submitted to shareholders for approval. No holder of ordinary shares has different voting rights from other any other holders of ordinary shares. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company. As of July 7, 2010, no ordinary shares were held by record holders in the United States.
 
Beneficial ownership is determined in accordance with the rules and regulations of the SEC. The percentages of shares beneficially owned in the table below are based on 15,000,000 ordinary shares outstanding as of July 7, 2010.
 
The following table sets forth information with respect to the beneficial ownership of our common shares as of July 7, 2010 by:
 
 
·
each of our directors and executive officers; and
 
 
·
each person known to us to beneficially own more than 5% of our outstanding ordinary shares.
 
Except as otherwise noted, the business address of each person listed in the table is 518 Shangcheng Road, Floor 17, Shanghai, 200120, People’s Republic of China.

 
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Shares
Beneficially Owned
 
   
Number
   
%
 
Directors, Executive Officers and 5% Shareholders:
           
Liang Tang
    11,850,000       79 %
Wei Hua
    -       -  
Zhiping Gu
    -       -  
 
Stock Options
 
We do not currently have a stock option plan.
 
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
 
7.A.  Major Shareholders
 
See Item 6.E., “Share Ownership,” for a description of our major shareholders.
 
7.B.  Related Party Transactions
 
Transfers of Shares Between Related Parties
 
Several of our subsidiaries and affiliates which are, or at one time were, controlled by our chairman, transferred shares with other entities controlled by Mr. Tang.  See the discussion under “History and Development of the Company” in Item 4 above for a description of these transactions .
 
Purchase from a Related Party
 
Historically, we have purchased a significant percentage of our raw materials from an affiliated entity, Shanghai Z.F.X. Steel Co., Ltd., or Shanghai ZFX, a supplier of steel wire rods, which is controlled by our chairman, Dr. Tang.  In 2008, we purchased $20.1 million, or approximately 26.2% of our raw materials from Shanghai ZFX.  In 2009, we purchased $11.5 million, or approximately 12.8% of our raw materials from Shanghai ZFX.
 
We have entered into sales contracts with Shanghai ZFX, each of which has a term of one year .  The contracts generally specify the name of the products, specifications, price and quantity.  Pursuant to the contracts, we must take delivery of the materials within a specified number of days.  If we disagree with the quality of the materials received, we must notify Shanghai ZFX . in writing within thirty days of receipt of the materials.  The materials may be paid for by cash or bank acceptance.  If we determine a change is necessary to the method of taking delivery, product ordered, steel or product specifications or quantity, we must notify Shanghai ZFX . in writing at least thirty days in advance.  We, or Shanghai ZFX . may rescind the contract/purchase order, which must be negotiated to the mutual agreement of both parties.
 
Management believes the transactions referenced above were on terms at least as favorable to us as we could have obtained from unaffiliated parties.
 
Guarantees
 
During the years ended December 31, 2008 and 2009, Shanghai Ossen, an affiliate of ours, provided guarantees for certain of our short-term bank loans. Shanghai Ossen guaranteed loans in the amount of $5.4 million in each of 2008 and 2009.
 
The purpose of these loans is to fund our working capital and construction and expansion.  Local banks have required guaranties pursuant to their standard regulations.  The term of each of the loans is one year.  The loans that have come due were repaid in May and June 2010.  The remaining loan is due in November 2010.

 
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The terms of the loan guarantees between the guarantor and the bank provide for the following: if the borrower does not repay its loan, the bank may seek the principal and interest of the loan from the guarantor; the guarantee period is two years from the date the guaranteed loan is due; the bank may change the terms of the loan with the borrower without receiving the consent of the guarantor; the guarantor indemnifies the bank for actual damage or loss because of any fraudulent misrepresentations made by the guarantor and if the guarantor causes the contract to become invalid, the guarantor indemnifies the bank for damages and losses.
 
7.C.  Interests of Experts and Counsel
 
Not applicable.
 
ITEM 8.
FINANCIAL INFORMATION
 
Consolidated Statements and Other Financial Information
 
The financial statements required by this item may be found at the end of this report on 20 - F.
 
Legal Proceedings
 
From time to time, we may be involved in various claims and legal proceedings arising in the ordinary course of business. We are not currently a party to any such claims or proceedings which, if decided adversely to us, would either, individually or in the aggregate, have a material adverse effect on our business, financial condition, results of operations or cash flows.
 
Dividends
 
We have never declared or paid any dividend on our ordinary shares and we do not anticipate paying any dividends on our ordinary shares in the future.  We currently intend to retain all future earnings to finance our operations and to expand our business.
 
No Significant Changes
 
No significant changes to our financial condition have occurred since the date of the annual financial statements contained herein.
 
ITEM 9.
THE OFFER AND LISTING
 
9.A.  Offer and Listing Details
 
Not Applicable.
 
9.B.  Plan of Distribution
 
Not Applicable.
 
9.C.  Markets
 
Our ordinary shares are not currently traded on any exchange.
 
9.D. Selling Shareholders
 
Not Applicable.

 
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9.E. Dilution
 
Not Applicable.
 
9.F. Expenses of the Issuer
 
Not Applicable.
 
ITEM 10.
ADDITIONAL INFORMATION
 
10.A.  Share Capital
 
Authorized/Issued Capital and History of Share Capital
 
Since July 7, 2010, on which date we amended our memorandum and articles of association in connection with our business combination, we are authorized to issue 100,000,000 ordinary shares, par value $0.01 per share.  Ultra Glory issued 50,000 shares to its original shareholder.  These shares were subsequently increased to 5,000,000 upon the change in the par value of our shares from $1.00 to $0.01 on July 7, 2010.  These 5,000,000 shares were transferred to the former shareholders of Ossen Materials Group pursuant to the business combination.  In addition, we issued 10,000,000 new ordinary shares on July 7, 2010 to the former shareholders of Ossen Materials Group pursuant to the business combination.
 
Shares Not Representing Capital
 
Not Applicable.
 
Shares Held By Company
 
Not Applicable.
 
Resolutions/Authorizations/Approvals
 
Not Applicable.
 
10.B.  Memorandum and Articles of Association
 
Charter
 
Our charter documents consist of our amended and restated memorandum of association and our amended and restated articles of association, or the memorandum and articles of association.  We may amend our memorandum and articles of association generally by a resolution of our shareholders.
 
The following description of certain provisions of our memorandum and articles of association does not purpose to be complete and is qualified in its entirety by our memorandum and articles of association included as Exhibit 1.1 to this report.
 
Corporate Powers
 
Ultra Glory was incorporated under the BVI Business Companies Act, 2004 on January 21, 2010.  Pursuant to our memorandum of association, the objects for which we were established are unrestricted and we have full power and authority to carry out any objects not prohibited by the BVI Business Companies Act, 2004,  as the same may be revised from time to time, or any other law of the British Virgin Islands, except that we have no power to carry on banking or trust business, business as an insurance or reinsurance company, insurance agent or insurance broker, the business of company management, the business of providing the registered office or the registered agent for companies incorporated in the British Virgin Islands, or business as a mutual fund, mutual fund management or mutual fund administrator, unless we obtain certain licenses under the laws of the British Virgin Islands.

 
54
 
 
Board Composition
 
Pursuant to our memorandum and articles of association, the business of our company is managed by our board of directors.  Commencing with the first annual meeting of the shareholders, directors are elected for a term of office to expire at the next succeeding annual meeting of the shareholders after their election.  Each director will hold office until the expiration of his or her term of office and until his or her successor has been elected and qualified, or until his or her earlier death, resignation or removal by the shareholders or a resolution passed by the majority of the remaining directors.
 
In the interim between annual meetings of shareholders, or special meetings of shareholders called for the election of directors, any vacancy on the board of directors may be filled by the vote of a majority of the remaining directors then in office, although less than a quorum, or by the sole remaining director. A director elected to fill a vacancy resulting from death, resignation or removal of a director will serve for the remainder of the full term of the director whose death, resignation or removal will have caused such vacancy and until his successor will have been elected and qualified.
 
There is no cumulative voting by shareholders for the election of directors.  We do not have any age-based retirement requirement and we do not require our directors to own any number of shares to qualify as a director.
 
Board Meetings
 
Board meetings may be held at the discretion of the directors at such times and in such manner as the directors may determine upon not less than three days notice having been given to all directors. Decisions made by the directors at meetings shall be made by a majority of the directors.  There must be at least a majority of the directors (with a minimum of two) at each meeting.
 
Directors Interested in a Transaction
 
A director must, immediately after becoming aware of the fact that he is interested in a transaction entered into or to be entered into by us, disclose such interest to the board of directors.  A director who is interested in a transaction entered into, or to be entered into, by the company, may vote on a matter related to the transaction, attend a meeting of directors at which a matter relating to the transaction arises and be included among the directors present at the meeting for the purposes of a quorum and sign a document on behalf of the company, or do any other thin in his capacity as a director, that relates to the transaction.  A director is not required to disclose his interest in a transaction or a proposed transaction to our board of directors if the transaction or proposed transaction is between the director and us, or the transaction or proposed transaction is or is to be entered into the ordinary course of our business and on usual terms and conditions.
 
The directors may exercise all powers of our company to borrow money, mortgage or charge our undertakings and property, issue debentures, debenture shares and other securities whenever money is borrowed or as security for any debt, liability or obligation of the company or of any third party.
 
Our directors may, by resolution, fix the compensation of directors in respect of services rendered or to be rendered in any capacity to us.
 
A director may attend and speak at any meeting of the shareholders and at any separate meeting of the holders of any class of our shares.
 
Rights of Shares
 
We are currently authorized to issue 100,000,000 ordinary shares.  The shares are made up of one class and one series, namely ordinary shares with a par value of $0.01 per share.  The ordinary shares have one vote each and have the same rights with regard to dividends paid by the company and distributions of the surplus assets of the company.

 
55
 
 
The directors may, subject to the BVI Business Companies Act, 2004, by amending the memorandum of association and/or the articles of association, without limiting or affecting any right of holders of existing shares, determine the rights related to any preferred shares that we may issue.  The directors may redeem any of our outstanding shares at a premium.
 
Issuance of Shares; Variation of Rights of Shares
 
Our articles of association provide that directors may, without limiting or affecting any right of holders of existing shares, offer, allot, grant options over or otherwise dispose of our unissued shares to such persons at such times and for such consideration and upon such terms and conditions as the directors may determine.
 
Without prejudice to any special rights previously conferred on the holders of any existing shares or class of shares, we may issue shares, with such preferred, deferred or other special rights or such restrictions, whether in regard to dividend, voting or otherwise, as the directors from time to time may determine.
 
If we issue shares of more than one class, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may be varied with the consent in writing of the holders of not less than three-fourths of the issued shares of that class and the holders of not less than three-fourths of the issued shares of any other class of shares which may be affected by such variation.  The rights conferred upon the holders of the shares of any class issued with preferred or other rights will not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.
 
Shareholders   Meetings
 
Under our memorandum and articles of association, we are required to hold an annual meeting of shareholders each year at such date and time determined by our directors.  Meetings of shareholders may be called pursuant to board resolution or the written request of shareholders holding more than 30% of the votes of our outstanding voting shares.  Written notice of meetings of shareholders must be given to each shareholder entitled to vote at a meeting not fewer than 10 days prior to the date of the meeting, with certain limited exceptions.  The written notice will state the place, time and business to be conducted at the meeting.  The shareholders listed in our share register on the date prior to the date the notice is given shall be entitled to vote at the meeting, unless the notice provides a different date for determining the shareholders who are entitled to vote.
 
A meeting of shareholders held without proper notice will be valid if shareholders holding 90% majority of the total number of shares entitled to vote on all matters to be considered at the meeting, or 90% of the votes of each class or series of shares where shareholders are entitled to vote thereon as a class or series, together with an absolute majority of the remaining votes, have waived notice of the meeting and, for this purpose, presence of a shareholder at the meeting is deemed to constitute a waiver.  The inadvertent failure of the directors to give notice of a meeting to a shareholder, or the fact that a shareholder has not received notice, will not invalidate a meeting.
 
Shareholders may vote in person or by proxy.  No business may be transacted at any meeting unless a quorum of shareholders is present.  A quorum consists of the presence in person or by proxy of holders entitled to exercise at least 50% of the voting rights of the shares of each class or series of shares entitled to vote as a class or series thereon and the same proportion of the votes of the remaining shares entitled to vote thereon.
 
Changes   in the Maximum Number of Shares the Company is Authorized to Issue
 
Subject to the provisions of the BVI Business Companies Act, 2004, we may, by a resolution of shareholders, amend our memorandum and articles of association to increase or decrease the number of shares authorized to be issued.  Our directors may, by resolution, authorize a distribution by us at a time, of an amount, and to any shareholders they think fit if they are satisfied, on reasonable grounds, that we will, immediately after the distribution, satisfy the solvency test as set forth in the BVI Business Companies Act, 2004, which requires that the value of a company’s assets exceeds its liabilities, and the company is able to pay its debts as they fall due.
 
56
 
Indemnification
 
Subject to the provisions of the BVI Business Companies Act, 2004, we may indemnify any person who (a) is or was a party or is threatened to be made a party to any threatened, pending or completed proceedings, whether civil, criminal, administrative or investigative, by reason of the fact that the person is or was a director of our company; or (b) is or was, at our request, serving as a director of, or in any other capacity is or was acting for, another company or a partnership, joint venture, trust or other enterprise, against all expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred in connection with legal, administrative or investigative proceedings.
 
10.C.  Material Contracts
 
Loans and Guarantees
 
We enter in loan agreements from time to time with local banks.  These loans are short-term and are used for capital during production and operation.  The term of each loan is one year.  We must obtain the consent of the bank to change the specified usage of the loans.  The bank sets the interest rate at the time of the distribution of the loan and it will not be adjusted during the term.  The loans are expected to be repaid from operating income.  We are obligated to provide the bank with financial statements during the term and we may not prepay the loan without consent from the bank.  If we engage in a contracted lease, restructuring, joint operation, merger, acquisition, joint venture, decrease in capital contribution or transfer of material assets, we must inform the bank.  We are limited by the bank to the amount of dividends we may pay, and we are prohibited, unless we receive the bank’s permission, from applying for other credit, repaying other long term debt, amending existing credit agreements or providing debt guarantees to third parties.  If we do not use the loan as specified in the loan agreement, the bank may terminate the loan and require payment in full.  If we pay the full principal of the loan before the end of the term, the bank may charge the interest rate agreed for the full term of the loan.
 
Our loans are guaranteed by certain related entities . See Item 7.B. – Related Party Transactions for a description of the loan guarantees.
 
Employment Agreement
 
We have entered into an employment agreement with Liang Tang, Chairman of the Board, dated October 2008.  See Item 6.B - Compensation for a description of the employment agreement.
 
Cooperation Agreement
 
Ossen Jiujiang has entered into a cooperation agreement with Shanghai Machinery Manufacturing Technology Research Institute, Organization Department of Jiujiang Committee of CPC and Jiujiang Bureau of Science and Technology, dated January 2008.  See Item 5.C. -   Research and Development, Paten ts and Licenses, etc. for a description of the cooperation agreement.
 
10.D.  Exchange Controls
 
British Virgin Islands
 
There are no exchange control regulations imposed on us or our shareholders under British Virgin Islands law.
 
The PRC
 
China regulates foreign currency exchanges primarily through the following rules and regulations:
 
 
·
Foreign Currency Administration Rules of 1996, as amended; and

 
57
 

 
·
Administrative Rules of the Settlement, Sale and Payment of Foreign Exchange of 1996.
 
As we disclosed in the risk factors above, Renminbi is not a freely convertible currency at present. Under the current PRC regulations, conversion of Renminbi is permitted in China for routine current-account foreign exchange transactions, including trade and service related foreign exchange transactions, payment of dividends and service of foreign debts. Conversion of Renminbi for most capital-account items, such as direct investments, investments in PRC securities markets and repatriation of investments, however, is still subject to the approval of SAFE.
 
Pursuant to the above-mentioned administrative rules, foreign-invested enterprises, such as our PRC subsidiaries, Ossen Materials and Ossen Jiujiang, may buy, sell and/or remit foreign currencies for current account transactions at banks in China with authority to conduct foreign exchange business by complying with certain procedural requirements, such as presentment of valid commercial documents. For capital-account transactions involving foreign direct investment, foreign debts and outbound investment in securities and derivatives, approval from SAFE is a pre-condition. Capital investments by foreign-invested enterprises outside China are subject to limitations and requirements in China, such as prior approvals from the PRC Ministry of Commerce or SAFE.
 
10.E.  Taxation
 
The following summary of the material tax consequences of an investment in our ordinary shares relevant to our shareholders is based upon laws and relevant interpretations thereof in effect as of the date of this prospectus, all of which are subject to change, possibly with retroactive effect. The discussion is not intended to be, nor should it be construed as, legal or tax advice to any prospective purchaser and is not exhaustive of all possible tax considerations. This summary does not deal with all possible tax consequences relating to an investment in our shares, such as the tax consequences under U.S. federal, state and local tax laws or non-PRC and non-BVI tax laws. You should consult your own tax advisors with respect to the consequences of the acquisition, ownership and disposition of our shares.
 
British Virgin Islands Taxation
 
All dividends, interests, rents, royalties, compensations and other amounts paid by us to persons who are not resident in the British Virgin Islands are exempt from all forms of taxation in the British Virgin Islands and any capital gains realized with respect to any of our shares, debt obligations, or other securities by persons who are not persons resident in the British Virgin Islands are exempt from all forms of taxation in the British Virgin Islands. No estate, inheritance, succession or gift tax, rate, duty, levy or other charge is payable under BVI law by persons who are not persons resident in the British Virgin Islands with respect to any of our shares, debt obligation or other securities. There are currently no withholding taxes or exchange control regulations in the British Virgin Islands applicable to us or our shareholders. Currently, there is no income tax treaty, convention or reciprocal tax treaty regarding withholdings currently in effect between the United States and the British Virgin Islands.
 
People’s Republic of China Taxation
 
Under the former Income Tax Law for Enterprises with Foreign Investment and Foreign Enterprises, any dividends payable by foreign-invested enterprises to non-PRC investors were exempt from PRC withholding tax. In addition, any dividends payable, or distributions made, by us to holders or beneficial owners of our shares would not be subject to any PRC tax, provided that such holders or beneficial owners, including individuals and enterprises, were not deemed to be PRC residents under the PRC tax law and were not otherwise subject to PRC tax.
 
On March 16, 2007, the PRC National People’s Congress approved and promulgated a new PRC Enterprise Income Tax Law, which took effect as of January 1, 2008. Under the new tax law, enterprises established under the laws of non-PRC jurisdictions but whose “de facto management body” are located in China are considered “resident enterprises” for PRC tax purposes. Under the implementation regulations issued by the State Council relating to the new tax law, “de facto management body” is defined as the body that has material and overall management control over the business, personnel, accounts and properties of an enterprise. In April 2009, the PRC State Administration of Taxation promulgated a circular to clarify the definition of “de facto management body” for enterprises incorporated overseas with controlling shareholders being PRC enterprises.  It remains unclear how the tax authorities will treat an overseas enterprise invested or controlled by another overseas enterprise and ultimately controlled by PRC individual residents as is in our case. We are currently not treated as a PRC resident enterprise by the relevant tax authorities. Since substantially all of our management is currently based in China and may remain in China in the future, we may be treated as a “resident enterprise” for the PRC tax purposes, in which case, we will be subject to PRC income tax as to our worldwide income at a uniform income tax rate of 25%. In addition, the new tax law provides that dividend income between qualified “resident enterprises” is exempt from income tax.

 
58
 

Moreover, the new tax law provides that an income tax rate of 10% is normally applicable to dividends payable for earnings derived since January 1, 2008 to non-PRC investors who are “non-resident enterprises,” to the extent such dividends are derived from sources within China. We are a British Virgin Islands holding company and substantially all of our income is derived from dividends, if any, we receive from our operating subsidiaries located in China. Thus, dividends payable to us by our subsidiaries in China may be subject to the 10% withholding tax if we are considered as a “non-resident enterprise” under the new tax law.
 
Under the currently available guidance of the new tax law, dividends payable by us to our shareholders should not be deemed to be derived from sources within China and therefore should not be subject to withholding tax at 10%, or a lower rate if reduced by a tax treaty or agreement. However, what will constitute income derived from sources within China is currently unclear. In addition, gains on the disposition of our shares should not be subject to PRC withholding tax.  However, these conclusions are not entirely free from doubt. In addition, it is possible that these rules may change in the future, possibly with retroactive effect.
 
 
59
 
 
10.F.  Dividends and Paying Agents
 
The Company has no current plans to pay dividends. The Company does not currently have a paying agent.
 
10.G.  Statement by Experts
 
The consolidated financial statements of the Company as of December 31, 2009, and 2008 and for the fiscal years ended December 31, 2009, and 2008, included herein, have been audited by Sherb & Co. LLP, independent registered public accounting firm, as stated in their report appearing herein, and is included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing and their consent and authorization.

 
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10.H.  Documents on Display
 
The Company’s documents can be viewed at its headquarters, located at 518 Shangcheng Road, Floor 17, Shanghai, 200120, China. The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and will file reports, registration statements and other information with the SEC. The Company’s reports, registration statements and other information can be inspected on the SEC’s website at www.sec.gov and such information can also be inspected and copies ordered at the public reference facilities maintained by the SEC at the following location: 100 F Street NE, Washington, D.C.  20549.
 
10.I. Subsidiary Information
 
Not Applicable.
 
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
Quantitative and Qualitative Disclosures about Market Risk
 
Financial instruments that expose us to concentrations of credit risk primarily consist of cash and accounts receivables. The maximum amount of loss due to credit risk in the event of other parties failing to perform their obligations is represented by the carrying amount of each financial asset as stated in our consolidated balance sheets.
 
As of December 31, 2009 and 2008, substantially all of our cash included bank deposits in accounts maintained within the PRC where there is currently no rule or regulation in place for obligatory insurance to cover bank deposits in the event of bank failure. However, we have not experienced any losses in such accounts and we believe we are not exposed to any significant risks on our cash in bank accounts.
 
We are exposed to various types of market risks, including changes in foreign exchange rates, commodity prices and inflation in the normal course of business.
 
Interest rate risk
 
We are subject to risks resulting from fluctuations in interest rates on our bank balances. A substantial portion of our cash is held in China in interest bearing bank deposits and denominated in RMB. To the extent that we may need to raise debt financing in the future, upward fluctuations in interest rates would increase the cost of new debt. We do not currently use any derivative instruments to manage our interest rate risk.
 
Commodity price risk
 
Certain raw materials used by us are subject to price volatility caused by supply conditions, political and economic variables and other unpredictable factors. The primary purpose of our commodity price management activities is to manage the volatility associated with purchases of commodities in the normal course of business. We do not speculate on commodity prices.
 
Foreign exchange risk
 
The RMB is not a freely convertible currency. The PRC government may take actions that could cause future exchange rates to vary significantly from current or historical exchange rates. Fluctuations in exchange rates may adversely affect the value of any dividends we declare.
 
Very limited hedging transactions are available in China to reduce our exposure to exchange rate fluctuations.  To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may enter into hedging transactions in the future, the availability and effectiveness of these transactions may be limited, and we may not be able to successfully hedge our exposure at all. In addition, our foreign currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert RMB into foreign currencies.

 
61
 

Inflation risk
 
In recent years, China has not experienced significant inflation or deflation and thus inflation and deflation have not had a significant effect on our business during the past three years. Inflationary factors such as increases in the cost of our products and overhead costs may adversely affect our operating results.  A high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and selling, general and administrative expenses as a percentage of net revenues if the selling prices of our products do not increase proportionately with these increased costs.
 
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
 
Not Applicable.
 
PART II
 
ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
 
Not Applicable.
 
ITEM 14.
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
 
Not Applicable.
 
ITEM 15.
CONTROLS AND PROCEDURES
 
Not Applicable.
 
ITEM 16.
RESERVED
 
ITEM 16A.
AUDIT COMMITTEE FINANCIAL EXPERT
 
Not Applicable.
 
ITEM 16B.
CODE OF ETHICS
 
Not Applicable.
 
ITEM 16C.
PRINCIPAL ACCOUNTIING FEES AND SERVICES
 
Not Applicable.
 
ITEM 16D.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
 
Not Applicable.
 
ITEM 16E.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
 
Not Applicable.

 
62
 

ITEM 16F.
CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
 
On July 7, 2010, our board of directors approved the engagement of Sherb & Co., LLP as our independent registered public accounting firm for the year ending December 31, 2009. The board determined not to renew the engagement of Li & Company, PC as our independent registered public accounting firm.
 
The Board determined to engage Sherb & Co., LLP in order to realize economies and efficiencies, since Sherb & Co., LLP acted as the independent registered public accounting firm for Ossen prior to the business combination.
 
The report of Li & Company, PC on the financial statements of the Company as of February 28, 2010 did not contain an adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles.
 
In connection with the audit of our financial statements for the period ended February 28, 2010, there were no disagreements with Li & Company, PC on any matters of accounting principles or practices, financial statement disclosure, or auditing scope and procedures which, if not resolved to the satisfaction of Li & Company, PC, would have caused Li & Company, PC to make reference to the matter of such disagreements in their reports.
 
We engaged Sherb & Co., LLP as our new independent registered public accounting firm as of July 7, 2010. During our two most recent fiscal years neither our company nor anyone on its behalf has consulted with Sherb & Co., LLP regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on our financial statements, and neither a written report was provided to us nor oral advice was provided by Sherb & Co. that was an important factor considered by us in reaching a decision as to any accounting, auditing or financial reporting issue; or (ii) any matter that was the subject of a disagreement, as that term is defined by SEC regulations , or a reportable event, as that term is defined by SEC regulations .
 
ITEM 16G.
CORPORATE GOVERNANCE
 
Not Applicable.

 
63
 

PART III
 
ITEM 17.
FINANCIAL STATEMENTS
 
Not applicable.
 
ITEM 18.
FINANCIAL STATEMENTS
 
The consolidated financial statements and related notes required by this item are contained on pages F-1 through F-24.
 
ITEM 19.
EXHIBITS
 
Exhibit
Number
  
Description of Documents
1.1
 
Amended and Restated Memorandum and Articles of Association
4.1
 
Share Exchange Agreement between Ultra Glory International Ltd., the shareholder of Ultra Glory International Ltd., Ossen Innovation Materials Group Co., Ltd. and the Shareholders of Ossen Innovation Materials Group Co., Ltd., dated July 7, 2010
4.2
 
Form of Sales Contract between Ossen Innovation Materials Co. Ltd. and Shanghai Zhaoyang New Metal Material Co., Ltd.
4.3
 
Form of Sales Contract between Ossen (Jiujiang) Steel Wire & Cable Co., Ltd. and The Crispin Corporation
4.4
 
Form of Sales Contract between Ossen (Jiujiang) Steel Wire & Cable Co., Ltd. and Ibercordones Pretensados S. L.
4.5
 
Form of Sales Contract between Ossen Innovation Materials Co., Ltd. and Zhangjiagang Ruifeng Iron and Steel Co., Ltd.
4.6
 
Form of Coating Processing Agreement between Ossen Innovation Materials Co., Ltd. and Zhangjiagang Ruifeng Iron and Steel Co., Ltd.
4.7
 
Form of Purchase Contract between Ossen Innovation Materials Co., Ltd. and Zhangjiagang Free Trade Zone B.M. International Trading Co., Ltd.
4.8
 
Form of Sales Contract between Shanghai Z.F.X. Steel Co., Ltd. and Ossen Innovation Materials Co. Ltd.
4.9
 
Form of Purchase Contract between Ossen Innovation Materials Co., Ltd. and Zhangjiagang Free Trade Zone JinDe Trading Co., Ltd.
4.10
 
Form of Purchase Contract between Ossen Innovation Materials Co., Ltd. and Jiangsu Shagang Group Co., Ltd.
4.11
 
Employment Contract by and between Ossen Innovation Materials Co., Ltd. and Liang Tang, dated October 7, 2008
4.12
 
Form of Stabilization Processing Agreement between Shanghai Zhaoyang New Metal Material Co., Ltd. and Ossen Innovation Materials Co., Ltd.

 
64
 

4.13
 
Form of Loan Contract between Ossen Innovation Materials Co., Ltd. and Feicuiyuan Branch, Huishang Bank
4.14
 
Form of Loan Guarantee Contract between Shanghai Ossen Investment Co., Ltd. and Feicuiyuan Branch, Huishang Bank
4.15
 
Form of Loan Guarantee Contract between Shanghai Z.F.X. Steel Co., Ltd. and Feicuiyuan Branch, Huishang Bank
4.16
 
Cooperation Agreement between Ossen (Jiujiang) Steel Wire & Cable Co., Ltd., Shanghai Machinery Manufacturing Technology Research Institute, Organization Department of Jiujiang Committee of CPC and Jiujiang Bureau of Science and Technology, dated January 2008
8.1
 
Subsidiaries of the Registrant
15.1   Consent of Sherb & Co., LLP 

 
65
 

SIGNATURES
 
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this registration statement   on its behalf.
 
 
OSSEN INNOVATION CO. LTD.
   
 
/s/  Wei Hua
 
Name: Wei Hua
 
Title: Chief Executive Officer
 
Date: July 7, 2010

 
66
 
 
OSSEN INNOVATION MATERIALS CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
 
CONTENTS
 
Report of Independent Registered Public Accounting Firm
F-2
   
Consolidated Financial Statements:
 
   
Consolidated Balance Sheets
F-3
   
Consolidated Statements of Operations
F-4
   
Consolidated Statements of Shareholders’ Equity
F-5
   
Consolidated Statements of Cash Flows
F-6
   
Notes to Consolidated Financial Statements
F-7 to F-24
 
F-1
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Shareholders and Directors
Ossen Innovation Co., Ltd. and Subsidiaries

We have audited the accompanying consolidated balance sheets of Ossen Innovation Co., Ltd. and Subsidiaries as of December 31, 2009 and 2008 and the related consolidated statements of operations, shareholders’ equity and cash flows for the years ended December 31, 2009 and 2008. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ossen Innovation Co., Ltd. as of December 31, 2009 and 2008 and the results of its operations and its cash flows for the years ended December 31, 2009 and 2008 in conformity with accounting principles generally accepted in the United States.

 
/s/ Sherb & Co., LLP
Certified Public Accountants
New York, New York
July 7, 2010
 
F-2
 
OSSEN INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
   
December 31,
 
   
2009
   
2008
 
             
ASSETS
           
Current Assets
           
Cash and cash equivalents
  $ 8,409,467     $ 3,761,315  
Restricted cash
    11,824,214       9,977,092  
Note receivable - bank acceptance note
    150,208       -  
Accounts receivable, net of allowance for doubtful accounts of $42,487 and $35,782 at December 31, 2009 and 2008
    15,157,087       4,713,488  
Inventories
    10,206,861       9,300,261  
Prepayments
    19,833,561       19,270,693  
Other current assets
    964,876       293,359  
Notes receivable from related party-bank acceptance notes
    1,828,234       -  
Total Current Assets
    68,374,508       47,316,208  
Long-term Assets
               
Property, plant and equipment, net
    13,088,809       14,246,542  
Land use rights, net
    4,254,270       4,333,632  
Total Long-term Assets
    17,343,079       18,580,174  
TOTAL ASSETS
  $ 85,717,587     $ 65,896,382  
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
                 
Current Liabilities
               
Notes payable – bank acceptance notes
  $ 19,744,925     $ 18,236,993  
Short-term bank loans
    27,350,377       19,404,161  
Accounts payable
    240,275       428,441  
Customer deposits
    5,189,759       2,936,267  
Taxes payable
    110,493       6,465  
Other payables and accrued expenses
    32,473       1,475,472  
Due to related parties
    12,869,939       1 2 , 987,588  
Total Current Liabilities
    65 , 53 8, 241       55 , 475 , 387  
TOTAL LIABILITIES
    65,538,241       55,475,387  
                 
Shareholders' Equity
               
Common stock , no par value, 50,000 shares authorized, 50,000 shares issued and outstanding
    500       500  
Accumulated other comprehensive income
    543,036       511,890  
Statutory reserve
    1,093,331       661,597  
Retained earnings
    13,069,401       5,488,600  
Non-controlling interest
    5,473,078       3,758,408  
TOTAL SHAREHOLDERS’ EQUITY
    20,179,346       10,420,995  
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
  $ 85,717,587     $ 65,896,382  

See accompanying notes to the consolidated financial statements

 
F-3
 
 
OSSEN INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
 
   
Year Ended December 31,
 
   
2009
   
2008
 
             
REVENUES
  $ 101,087,796     $ 82,742,310  
COST OF GOODS SOLD
    87,659,925       70,532,733  
GROSS PROFIT
    13,427,871       12,209,577  
Selling and distribution expenses
    503,724       4,326,491  
General and administrative expenses
    1 ,143,672       1, 316,606  
Total Operating Expenses
    1,647,396       5,643,097  
                 
INCOME FROM OPERATIONS
    11,780,475       6,566,480  
Interest expenses, net
    (1,496,712 )     (1,891,671 )
Other income, net
    183,495       380,766  
INCOME BEFORE INCOME TAXES
    10,467,258       5,055,575  
INCOME TAXES
    (740,053 )     (291,520 )
NET INCOME
    9,727,205       4,764,055  
LESS: NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST
    1,714,670       809,437  
NET INCOME ATTRIBUTABLE TO CONTROLLING INTEREST
    8,012,535       3,954,618  
OTHER COMPREHENSIVE INCOME
               
Foreign currency translation gain, net of tax
    31,146       420,883  
TOTAL OTHER COMPREHENSIVE INCOME, NET OF TAX
    31,146       420,883  
COMPREHENSIVE INCOME
  $ 8,043,681     $ 4,375,501  

See accompanying notes to the consolidated financial statements

 
F-4
 
 
OSSEN INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
 
   
Common   Stock
   
Accumulated
Other
         
 
   
Non
       
   
Shares
   
Amount
   
Comprehensive
Income
   
Statutory
Reserve
   
Retained
Earnings
   
Controlling
Interest
   
Total
 
Balance, January 1, 2008
    50,000     $ 500     $ 91,007     $ 238,676     $ 1,956,903     $ 2,948,971     $ 5,236,057  
Net income
    -               -               3,954,618       809,437       4,764,055  
Transfer to statutory reserve
    -               -       422,921       (422,921 )     -       -  
Foreign currency translation adjustment, net of tax
    -       -       420,883       -       -       -       420,883  
Balance, December 31, 2008
    50,000       500       511,890       661,597       5,488,600       3,758,408       10,420,995  
Net income
    -               -       -       8,012,535       1,714,670       9,727,205  
Transfer to statutory reserve
    -               -       431,734       (431,734 )     -       -  
Foreign currency translation adjustment, net of tax
    -       -       31,146       -       -       -       31,146  
Balance, December 31, 2009
    50,000     $ 500     $ 543,036     $ 1,093,331     $ 13,069, 4 01     $ 5,473,078     $ 20,179,346  

See accompanying notes to the consolidated financial statements

 
F-5
 
 
OSSEN INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
   
Year ended December 31,
 
   
2009
   
2008
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net income
  $ 9,727,205     $ 4,764,055  
Adjustments to reconcile net income to net cash used in operating activities
               
Depreciation and amortization
    1,457,784       1,555,624  
Deferred taxes
    (838 )     (1,176 )
Changes in operating assets and liabilities:
               
(Increase) Decrease In:
               
Accounts receivable
    (10,443,599 )     1,002,464  
Inventories
    (906,600 )     (2,112,944 )
Prepayments
    (562,867 )     (12,408,746 )
Due from related party
    -       3,846,600  
Note receivable-bank acceptance note from unrelated party
    (150,208 )     -  
Notes receivable from related party
    (1,828,234 )     -  
Other current assets
    (670,679 )     10,680  
Accounts payable
    (188,166 )     (35,011 )
Customer deposits
    2,253,492       2,749,301  
Taxes payable
    104,028       (134,501 )
Other payables and accrued expenses
    (1,442,999 )     (1,616,329 )
Due to related parties
    (1 17 ,6 49 )     145,896  
Net cash used in operating activities
    ( 2,769 , 330 )     (2,234,087 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Purchases of plant and equipment
    (209,511 )     (2,287,268 )
Purchases of land use rights
    -       (379,397 )
Net cash used in investing activities
    (2 09 , 511 )     (2,666,665 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Increase in restricted cash
    (1,847,122 )     (5,465,258 )
Proceeds from short-term bank loans
    35,687,123       22,322,080  
Repayments of short-term bank loans
    (27,789,153 )     (21,446,704 )
Proceeds from notes payable to unrelated parties
    1,507,931       18,236,993  
Repayment of notes payable to related party
    -       (10,937,778 )
Cash dividend paid to a shareholder
    -       (2,364,274 )
Net cash provided by financing activities
    7,5 58 , 779       345,059  
                 
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    4,579,938       (4,555,693 )
Effect of exchange rate changes on cash
    68,214       1,581,392  
Cash and cash equivalents at beginning of year
    3,761,315       6,735,616  
CASH AND CASH EQUIVALENTS AT END OF YEAR
  $ 8,409,467     $ 3,761,315  
                 
SUPPLEMENTARY CASH FLOW INFORMATION
               
Cash paid during the period for:
               
Income taxes paid
  $ 637,267     $ 441,029  
Interest paid
  $ 1,492,404     $ 1,514,114  

See accompanying notes to the consolidated financial statements

 
F-6
 

OSSEN INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES

Ultra Glory International, Ltd., or Ultra Glory is a British Virgin Islands limited liability company organized on January 21, 2010 under the BVI Business Companies Act, 2004. Ultra Glory was a blank check company formed for the purpose of acquiring, through a share exchange, asset acquisition or other similar business combination, an operating business.
 
Business Combination
 
On July 7, 2010, Ultra Glory and its sole shareholder entered into a share exchange agreement with Ossen Innovation Group, a British Virgin Islands limited liability company organized on April 30, 2010 under the British Virgin Islands Companies Act (2004) and the shareholders of Ossen Innovation Group. Pursuant to the share exchange agreement, Ultra Glory acquired from the shareholders of Ossen Innovation Group all of the issued and outstanding shares of Ossen Innovation Group, in exchange for an aggregate of 10,000,000 newly issued ordinary shares issued by Ultra Glory to the shareholders of Ossen Innovation Group.  In addition, the sole shareholder of Ultra Glory sold all of the 5,000,000 ordinary shares of Ultra Glory that were issued and outstanding prior to the business combination, to the shareholders of Ossen Innovation Group for cash, at a price of $0.03 per share.  As a result, the individuals and entities that owned shares of Ossen Innovation Group prior to the business combination acquired 100% of the equity of Ultra Glory, and Ultra Glory acquired 100% of the equity of Ossen Innovation Group.  Ossen Innovation Group is now a wholly owned subsidiary of Ultra Glory.  In conjunction with the business combination, Ultra Glory filed an amended charter, pursuant to which Ultra Glory changed its name to Ossen Innovation Co., Ltd., changed its fiscal year end to December 31 and increased its authorized shares to 100,000,000.  Upon the consummation of the business combination, the company ceased to be a shell company.
 
The company’s Shareholders
 
Dr. Tang, the company’s chairman, owns 100% of the shares of Effectual Strength Enterprises Ltd., a British Virgin Islands company, which owned 79% of the shares of Ossen Innovation Group prior to the business combination, and owns 79% of the Company’s shares since the business combination.  The holders of the remaining 21% of our shares are investors that are residents of the PRC and are unaffiliated with Ossen.
 
Our Subsidiaries
 
British Virgin Islands Companies
 
Ossen Innovation Group, the company’s wholly owned subsidiary, is the sole shareholder of two holding companies organized in the British Virgin Islands: Ossen Group (Asia) Co., Ltd., or Ossen Asia, and Topchina Development Group Ltd., or Topchina. All of the equity of Ossen Asia and Topchina had been held by Dr. Tang since inception.  In May 2010, Dr. Tang transferred these shares to Ossen Innovation Group in anticipation of the public listing of our company’s shares in the United States.
 
Ossen Asia is a British Virgin Islands limited liability company organized on February 7, 2002.  Ossen Asia has one direct operating subsidiary in China, Ossen Innovation Materials Co. Ltd., or Ossen Materials.  Ossen Asia owns 81% of the equity of Ossen Materials.
 
Topchina is a British Virgin Islands limited liability company organized on November 3, 2004.  Ossen Materials and Topchina directly own an operating subsidiary in China, Ossen (Jiujiang) Steel Wire & Cable Co., Ltd., or Ossen Jiujiang.  Ossen Materials owns 75% of the equity of Ossen Jiujiang and Topchina owns 25%.
 
Ossen Materials
 
Ossen Materials was formed in China on October 27, 2004 as a Sino-foreign joint venture limited liability company under the name Ossen (Ma’anshan) Steel Wire and Cable Co., Ltd.  On May 8, 2008, Ossen Materials was restructured from a Sino-foreign joint venture limited liability company to a corporation.  The name of the entity was changed at that time to Ossen Innovation Materials Co., Ltd.

 
F-7
 

OSSEN INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

Ossen Asia owns 81% of the equity of Ossen Materials.  The remaining 19% is held in the aggregate by four Chinese entities, two of which are controlled by Chinese governmental entities, one of which is controlled by Zhonglu Co. Ltd., a company whose shares are listed on the Shanghai Stock Exchange, and one of which is controlled by Chinese citizens.
 
Through Ossen Materials, the company has manufactured and sold plain surface PC strands, galvanized PC steel wires and PC wires in the company’s Maanshan City, PRC, facility since 2004.  The primary products manufactured in this facility are the company’s plain surface PC strands.  The primary markets for the products manufactured at the company’s Maanshan facility are Anhui Province, Jiangsu Province, Zhejiang Province and Shanghai City, each in the PRC.
 
Ossen Jiujiang
 
On April 6, 2005, Ossen Shanghai Investment Co., Ltd., or Ossen Shanghai, acquired a portion of the bankruptcy assets of Jiujiang Tianlong Galvanized Prestressing Steel Strand LLC, including equipment, land use rights and inventory for approximately $3.9 million.  Ossen Jiujiang was formed by Ossen Shanghai in the PRC as a Sino-foreign joint venture limited liability company on April 13, 2005.  Ossen Shanghai then transferred the newly acquired assets to Ossen Jiujiang. At its inception, Ossen Jiujiang was owned by two entities: 33.3% of its equity was held by Ossen Asia and 66.7% by Ossen Shanghai.  Ossen Shanghai is a Chinese company owned by five Chinese individuals, one of whom is a director of our subsidiary, Ossen Materials. In June 2005, Ossen Shanghai transferred its entire interest in Ossen Jiujiang to Topchina in exchange for approximately $2.9 million. In October 2007, Topchina transferred 41.7% of the equity in Ossen Jiujiang to Ossen Asia for no consideration. On December 17, 2007, Ossen Asia transferred all of its shares in Ossen Jiujiang to Ossen Materials for no consideration.  Since that date 75% of the equity of Ossen Jiujiang has been held by Ossen Materials and 25% by Topchina.
 
Through Ossen Jiujiang, the company manufactures galvanized PC wires, plain surface PC strands, galvanized PC strands, unbonded PC strands, helical rib PC wires, sleeper PC wires and indented PC wires.  The primary products manufactured in this facility are the company’s galvanized PC wires.  The primary markets for the PC strands manufactured in the company’s Jiujiang facility are Jiangxi Province, Wuhan Province, Hunan Province, Fujian Province and Sichuan Province, each in the PRC.
 
At December 31, 2009, the subsidiaries of Ossen Innovation Group were as follows:

Name
 
Domicile and Date 
of Incorporation
   
Paid-in Capital
   
Percentage 
of 
Effective Ownership
   
Principal
Activities
                       
Ossen Group (Asia) Co., Ltd. ("Ossen Asia")
 
BVI
February 7, 2002
    USD  -       100 %  
Investments holdings
                           
Topchina Development Group Ltd. ("Topchina")
 
BVI
November 3, 2004
    USD -       100 %  
Investments holdings
                           
Ossen Innovation Materials Co., Ltd. ("Ossen Meterials")
 
The PRC
October 27, 2004
    RMB 75,000,000       81 %   
Design, engeneering, manufacture and sale of customized prestressed steel materials
                           
Ossen (Jiujiang) Steel Wire & Cable Co., Ltd. ("Ossen Jiujiang")
 
The PRC
April 13, 2005
    RMB 50,000,000       85.75 %  
Design, engeneering, manufacture and sale of customized prestressed steel materials

 
F-8
 

OSSEN INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of OSSEN Innovation Materials Co., and its subsidiaries. Intercompany accounts and transactions have been eliminated upon consolidation.

Use of Estimates

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. Actual results could differ from those estimates.

Revenue Recognition

Revenues represent the invoiced value of goods sold recognized upon the shipment of goods to customers.  Revenues are recognized when all of the following criteria are met:

 
l
Persuasive evidence of an arrangement exists,
 
l
Delivery has occurred or services have been rendered,
 
l
The seller’s price to the buyer is fixed or determinable, and
 
l
Collectability is reasonable assured.

Retirement Benefits

Retirement benefits in the form of contributions under defined contribution retirement plans to the relevant authorities are charged to operations as incurred. Retirement benefits amounting to $65,710 and $30,131 were charged to operations for the years ended December 31, 2009 and 2008.

 
F-9
 
OSSEN INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequence attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statement of income in the period that includes the enactment date. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain. See Note 10.

Foreign Currency Translation

The accompanying consolidated financial statements are presented in United States dollars (“US$). The functional currency of the Company is Renminbi (“RMB”). The consolidated financial statements are translated into United States dollars from RMB 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 resulting transaction adjustments are recorded as a component of shareholders’ equity. Gains and losses from foreign currency transactions are included in net income.

   
2008
   
2009
 
Year ended RMB: US$ exchange rate
    6.8372       6.8542  
Average yearly RMB: US$ exchange rate
    6.8409       6.9623  

The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US$ at the rates used in translation.

Comprehensive Income

Comprehensive income is defined as the change in equity during the year from transactions and other events, excluding the changes resulting from investments by owners and distributions to owners, and is not included in the computation of income tax expense or benefit. Accumulated comprehensive income consists of changes in unrealized gains and losses on foreign currency translation.

 
F-10
 

OSSEN INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Cash and Cash Equivalents

For financial reporting purposes, the Company considers all highly liquid investments purchased with original maturity of three months or less to be cash equivalents. The Company maintains no bank account in the United States of America. The Company maintains its bank accounts in China.  Balances at financial institutions or state-owned banks within the PRC are not covered by insurance.  However, the Company has not experienced any losses in such accounts and believes it is not exposed to any significant risks on its cash in bank accounts.

Restricted Cash

Restricted cash represents amounts held by a bank as security for bank acceptance notes and therefore is not available for the Company’s use until such time as the bank acceptance notes have been fulfilled or expired, normally within 12 month period.

Accounts Receivable

Accounts receivable are carried at net realizable value.  An allowance for doubtful accounts is recorded in the period when loss is probable based on an assessment of specific evidence indicating troubled collection, historical experience, accounts aging and other factors.  An account receivable is written off after all collection effort has ceased.

Fair Value of Financial Instruments

FASB ASC 820 (formerly SFAS No. 157 Fair Value Measurements) establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market

These tiers include:

 
•
Level 1—defined as observable inputs such as quoted prices in active markets;
 
 
•
Level 2—defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and
 
 
•
Level 3—defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

 
F-11
 

OSSEN INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The company’s financial instruments primarily consist of cash and cash equivalents, accounts receivable, restricted assets, accounts payable, other payables and accruals, short-term bank loans, other current liabilities.

Cash and cash equivalents include money market securities and commercial paper that are considered to be highly liquid and easily tradable. These securities are valued using inputs observable in active markets for identical securities and are therefore classified as Level 1 within the fair value hierarchy.

As of the balance sheet dates, the estimated fair values of financial instruments were not materially different from their carrying value as presented due to the short maturities of these instruments and that the interest rates on the borrowing approximate those that would have been available for loans of similar remaining maturity and risk profile at respective year ends.

Inventories

Inventories are stated at the lower of cost or market, which is based on estimated selling prices less any further costs expected to be incurred for completion and disposal. Cost of raw materials is calculated using the weighted average method. Finished goods costs are determined using the weighted average method and comprise direct materials, direct labor and an appropriate proportion of overhead. At December 31, 2009 and 2008, the Company has no reserve for inventories. See Note 5.

Prepayments

Prepayments represent cash paid in advance to suppliers for purchases of raw materials.  The balance of prepayments was $19,833,561 and $19,270,693 at December 31, 2009 and 2008, respectively.

Customer Deposit s

Customer deposits consist of amounts paid to the Company in advance for the sale of products in the PRC. The Company receives these amounts and recognizes them as a current liability until the revenue can be recognized when the goods are delivered. The balance of customer deposits was $5,189,759 and $2,936,267 at December 31, 2009 and 2008, respectively.

Property, Plant, and Equipment (“PPE”)

PPE are stated at cost less accumulated depreciation, and include expenditure that substantially increases the useful lives of existing assets.

Transportation charges
 
Transportation charges represent costs to deliver the Company’s inventory to point of sale. Transportation costs are expensed and charged to cost of sales as incurred. Transportation charges represent costs to deliver the Company’s inventory to point of sale. Transportation costs are expensed and charged to selling expense as incurred.

 
F-12
 

OSSEN INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Depreciation is provided over their estimated useful lives, using the straight-line method.  Estimated useful lives are as follows:

Buildings and improvements
5 ~ 20 years
Machinery and equipment
5 ~ 20 years
Motor vehicles
5 years
Office Equipment
5 ~ 10 years

When assets are sold or retired, their costs and accumulated depreciation are eliminated from the consolidated financial statements and any gain or loss resulting from their disposal is recognized in the period of disposition as an element of other income.  The cost of maintenance and repairs is charged to income as incurred, whereas significant renewals and betterments are capitalized.  See Note 7.

Land Use Rights

According to PRC laws, the government owns all the land in the PRC. Companies or individuals are authorized to possess and use the land only through land use rights granted by the Chinese government.  The land use rights granted to the Company, located at Jiu Jiang and Ma’anshan, are being amortized using the straight-line method over the lease term of fifty years.  See Note 8.

Impairment of Long-Lived Assets

Long-term assets of the Company are reviewed annually as to whether their carrying value has become impaired, pursuant to the guidelines established in FASB ASC 360 (formerly SFAS No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets ).  The Company considers assets to be impaired if the carrying value exceeds the future projected cash flows from the related operations.  The Company also re-evaluates the periods of amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives.  There were no impairments for the years ended December 31, 2009 and 2008.

Economic and Political Risks

The Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy.

The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe.  These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange.  The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things.

Exchange risk
 
The Company can not guarantee that the current exchange rate will remain steady, therefore there is a possibility that the Company could post the same amount of profit for two comparable periods and because of a fluctuating exchange rate actually post higher or lower profit depending on exchange rate of PRC Renminbi (RMB) converted to U.S. dollars on the date. The exchange rate could fluctuate depending on changes in the political and economic environments without notice.

 
F-13
 

OSSEN INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recently Issued Accounting Pronouncements

On April 1, 2009, the FASB approved ASC 805 (formerly FSP FAS 141R-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies), which amends Statement 141R and eliminates the distinction between contractual and non-contractual contingencies.  Under ASC 805, an acquirer is required to recognize at fair value an asset acquired or liability assumed in a business combination that arises from a contingency if the acquisition-date fair value of that asset or liability can be determined during the measurement period. If the acquisition-date fair value cannot be determined, the acquirer applies the recognition criteria in SFAS No. 5, Accounting for Contingencies and Interpretation 14, “Reasonable Estimation of the Amount of a Loss – and interpretation of FASB Statement No. 5,” to determine whether the contingency should be recognized as of the acquisition date or after it.  The adoption of ASC 805 has not had a material effect on the Company’s consolidated financial statements.

ASC 320-10 (formerly FSP FAS 115-2 and FAS 124-2) amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements.  It did not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. We are required to adopt ASC 320-10 for our interim and annual reporting periods ending after June 15, 2009.  ASC 320-10 does not require disclosures for periods presented for comparative purposes at initial adoption.  ASC 320-10 requires comparative disclosures only for periods ending after initial adoption.  The adoption of ASC 320-10 has not had a material effect on the Company’s consolidated financial statements.

On April 9, 2009, the FASB also approved ASC 825-10 (formerly FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments )   to require disclosures about fair value of financial instruments in interim period financial statements of publicly traded companies and in summarized financial information required by APB Opinion No. 28, Interim Financial Reporting .  We are required to adopt ASC 825-10 for our interim and annual reporting periods ending after June 15, 2009.  ASC 825-10 does not require disclosures for periods presented for comparative purposes at initial adoption. ASC 825-10 requires comparative disclosures only for periods ending after initial adoption.  The adoption of ASC 825-10 has not had a material effect on the Company’s consolidated financial statements.

In April 2009, the FASB issued FSP No. FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” as incorporated into FASB ASC 820, “Fair Value Measurements and Disclosures”. The guidance relates to determining fair values when there is no active market or where the price inputs being used represent distressed sales.  It reaffirms what FASB ASC 820 states is the objective of fair value measurement—to reflect how much an asset would be sold for in an orderly transaction (as opposed to a distressed or forced transaction) at the date of the financial statements under current market conditions.  Specifically, it reaffirms the need to use judgment to ascertain if a formerly active market has become inactive and in determining fair values when markets have become inactive.  This guidance is effective for interim and annual periods ended after June 15, 2009, but entities may early adopt this guidance for the interim and annual periods ended after March 15, 2009. The adoption of such standard has not had a material impact on the Company’s consolidated financial statements.

In August 2009, the FASB issued FASB ASU 2009-05, “Measuring Liabilities at Fair Value”. FASB ASU 2009-05 amends FASB ASC 820, “Fair Value Measurements”.  Specifically, FASB ASU 2009-05 provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the following methods: 1) a valuation technique that uses a) the quoted price of the identical liability when traded as an asset or b) quoted prices for similar liabilities or similar liabilities when traded as assets and/or 2) a valuation technique that is consistent with the principles of FASB ASC 820 of the Accounting Standards Codification (e.g. an income approach or market approach).  FASB ASU 2009-05 also clarifies that when estimating the fair value of a liability, a reporting entity is not required to adjust to include inputs relating to the existence of transfer  restrictions on that liability.  The adoption of such standard has not had a material impact on the Company’s consolidated financial statements.

 
F-14
 

OSSEN INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events”, (FASB ASC 855-10”) which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements.  The statement is effective for interim and annual periods ended after June 15, 2009.  The standard was subsequently amended by FASB ASU 2010-09 which exempts an entity that is an SEC filer from the requirement to disclose the date through which subsequent events have been evaluated.

In September 2009, the Emerging Issues Task Force reached final consensus on FASB ASU 2009-13, “Revenue Arrangements with Multiple Deliverables”.  FASB ASU 2009-13 addresses how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting, and how the arrangement consideration should be allocated among the separate units of accounting.  This ASU will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010.  Early adoption is permitted. The adoption of such standard has not had a material impact on the Company’s consolidated financial statements.

In December 2009, the FASB issued FASB ASU 2009-17, Consolidation (“FASB ASC 810): Improvements to Financial Reporting by Enterprises involved with Variable Interest Entities.  This ASU amends the FASB Accounting Standards Codification for statement No.167.  In June 2009, the FASB issued SFAS No.167, Amendments to FASB Interpretation No. 46(R), which requires an enterprise to perform an analysis and ongoing reassessments to determine whether the enterprises variable interest or interests give it a controlling financial interest in a variable interest entity and amends certain guidance for determining whether an entity is a variable interest entity. It also requires enhanced disclosures that will provide users of financial statements with more transparent information about an enterprises involvement in a variable interest entity.  SFAS No.167 is effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009 and for all interim reporting periods after that, with early application prohibited.  The Company is currently evaluating the impact of the adoption of SFAS No.167.

In January 2010, the FASB issued ASU 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements, which will require companies to make new disclosures about recurring or nonrecurring fair value measurements including significant transfers into and out of Level 1 and Level 2 fair value hierarchies and information on purchases, sales, issuance and settlements on a gross basis in the reconciliation of Level 3 fair value measurements.  The ASU is effective prospectively for financial statements issued for fiscal years and interim periods beginning after December 15, 2009.  The new disclosures about purchases, sales, issuance and settlements on a gross basis in the reconciliation of Level 3 fair value measurements is effective for interim and annual reporting periods beginning after December 15, 2010.  The Company expects that the adoption of ASU 2010-06 will not have a material impact on its consolidated financial statements.

 
F-15
 

OSSEN INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
 
NOTE 3 – CONCENTRATION RISK

 
Concentration of Major Customers and Suppliers:

   
Year ended December 31,
 
   
2009
   
2008
 
Major customers with revenues of more than 10% of the Company’s sales
           
Sales to major customers
  $ 72,040,540     $ 58,216,143  
Percentage of sales
    71 %     70 %
Number of customers
    2       3  
                 
Major suppliers with purchases of more than 10% of the Company’s purchases
               
Purchases from major suppliers
  $ 74,621,428     $ 54,738,995  
Percentage of purchases
    89 %     72 %
Number of suppliers
    4       3  

Accounts receivable related to the Company’s major customer comprised 36% and 28% of all accounts receivable as of December 31, 2009 and 2008, respectively.

Accounts payable related to the Company’s major suppliers comprised 38% and 33% of all accounts payable as of December 31, 2009 and 2008, respectively.

NOTE 4 – ACCOUNTS RECEIVABLE

Accounts receivable is net of allowance for doubtful accounts as follows:

   
December 31,
 
   
2009
   
2008
 
Accounts receivable
  $ 15,199,574     $ 4,749,270  
Less: allowance for doubtful accounts
    (42,487 )     (35,782 )
Net Accounts receivable
  $ 15,157,087     $ 4,713,488  
 
 
F-16
 

OSSEN INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

NOTE 5 – INVENTORIES

   
December 31,
 
   
2009
   
2008
 
Raw materials
  $ 5,584,313     $ 5,200,622  
Work-in-progress
    237,422       292,997  
Finished goods
    4,385,126       3,806,642  
      10,206,861       9,300,261  
Less: Provision for slow-moving inventories
    -       -  
Inventories, net
  $ 10,206,861     $ 9,300,261  

NOTE 6 – OTHER CURRENT ASSETS

Other current assets consist of the following:

   
December 31,
 
   
2009
   
2008
 
Security deposits
  $ 410,255     $ 51,064  
VAT receivable
    535,824       232,745  
Other
    18,797       9,550  
Total other current assets
  $ 964,876     $ 293,359  

 
F-17
 

OSSEN INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

NOTE 7 – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

   
December 31,
 
   
2009
   
2008
 
At cost:
           
Buildings
  $ 3,899,669     $ 3,878,091  
Machinery and equipment
    13,801,699       13,635,258  
Motor vehicles
    247,926       230,046  
Office equipment
    97,266       93,654  
      18,046,560       17,837,049  
Less: Accumulated depreciation
               
Buildings
    (684,755 )     (442,383 )
Machinery and equipment
    (4,036,209 )     (2,974,065 )
Motor vehicles
    (163,593 )     (118,814 )
Office equipment
    (73,194 )     (55,245 )
      (4,957,751 )     (3,590,507 )
Property, plant and equipment, net
  $ 13,088,809     $ 14,246,542  

Depreciation expense for the years ended December 31, 2009 and 2008 was $1,367,244 and $1,461,337, respectively.

The net book value of property, plant and equipment pledged as collateral for bank loans was $1,923,204 and $1,918,434 at December 31, 2009 and 2008. See Note 9.

 
F-18
 

OSSEN INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

NOTE 8 – LAND USE RIGHTS

Land use rights consist of the following:

   
December 31,
 
   
2009
   
2008
 
Cost of land use rights
  $ 4,506,975     $ 4,495,797  
Less: Accumulated amortization
    (252,705 )     (162,165 )
Land use rights, net
  $ 4,254,270     $ 4,333,632  

The land use rights, located at Jiu Jiang and Ma’anshan, are commenced through 2005 to 2007 with the lease term of fifty years

Amortization expense for the years ended December 31, 2009 and 2008 was $79,361 and $89,733, respectively.

Amortization expense for the next five years and thereafter is as follows:

2010
  $ 90,140  
2011
    90,140  
2012
    90,140  
2013
    90,140  
2014
    90,140  
Thereafter
    3,803,570  
Total
  $ 4,254,270  

 
F-19
 

OSSEN INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

NOTE 9 – RELATED PARTY TRANSACTIONS

(a)
Names and Relationship of Related Parties:

 
Existing Relationship with the Company
Mr. Tang
 
Director and controlling shareholder of the Company
Shanghai Zhengfangxing Steel Co., Ltd. (“SZS”)
 
Under common control of Mr. Tang
Shanghai Ossen Investment Co., Ltd. (“SOI”)
 
Under common control of Mr. Tang

(b)
Summary of Balances with Related Party:

   
December 31,
 
   
2009
   
2008
 
Due from related party:
           
SZS
  $ -     $ -  
    $ -     $ -  

   
December 31,
 
   
2009
   
2008
 
Due to related party:
           
SZS
  $ -     $ 145,896  
    $ -     $ 145,896  

SZS is a supplier of the Company.  For the years ended December 31, 2009 and 2008, the Company purchased $11,487,206 and $20,482,023 of raw materials from SZS, respectively. The balance of due from related party represents bank acceptance from SZS for the sales of the products to SZS.

   
December 31,
 
   
2009
   
2008
 
Notes receivable from related party:
           
SZS, due June 11, 2010
  $ 804,423     $ -  
SZS, due March 25, 2010
    1,023,811       -  
    $ 1,828,234     $ -  

   
December 31,
 
   
2009
   
2008
 
Due to shareholder:
           
Mr. Tang
  $ 12,869,939     $ 12,841,692  

 
F-20
 

OSSEN INNOVATION MATERIALS CO., LTD AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

NOTE 9 – RELATED PARTY TRANSACTIONS (CONTINUED)

(c)
Summary of Related Party Transactions:

           
December 31,
 
       
Note
 
2009
   
2008
 
                     
SZS
 
SZS provided guarantee for the short-term bank loans borrowed by the Company
 
11
  $ 8,775,521     $ 6,857,110  
                         
SZS
 
SZS sold raw materials to the Company
 
8
  $ 11,487,206     $ 20,482,023  
                         
SOI
 
SOI provided guarantee for the short-term bank loans borrowed by the Company
 
11
  $ 5,411,572     $ 5,398,150  

NOTE 10 – OTHER PAYABLES AND ACCRUED LIABILITIES

Other payables and accrued liabilities consist of the following:

   
December 31,
 
   
2009
   
2008
 
             
Deferred government grant
  $ -     $ 1,327,653  
Others
    32,473       147,819  
Total
  $ 32,473     $ 1,475,472  

The deferred government grants represent the wide variety of subsidies from local government of Ma’anshan and are all received by the Company.

 
F-21
 

OSSEN INNOVATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

NOTE 11 – NOTES PAYABLE

Bank acceptance notes:
 
December 31,
 
   
2009
   
2008
 
Due June 10, 2009 (subsequently repaid on its due date)
  $ -     $ 2,188,439  
Due March 7, 2009 (subsequently repaid on its due date)
    -       1,458,959  
Due April 7, 2009 (subsequently repaid on its due date)
    -       1,458,959  
Due May 28, 2009 (subsequently repaid on its due date)
    -       2,917,919  
Due April 24, 2009 (subsequently repaid on its due date)
    -       1,458,959  
Due May 26, 2009 (subsequently repaid on its due date)
    -       1,458,959  
Due May 12, 2009 (subsequently repaid on its due date)
    -       1,458,959  
Due March 12, 2009 (subsequently repaid on its due date)
    -       2,917,920  
Due March 26, 2009 (subsequently repaid on its due date)
    -       2,917,920  
Due March 15, 2010 (subsequently repaid on its due date)
    1,462,587       -  
Due March 26, 2010 (subsequently repaid on its due date)
    1,462,587       -  
Due March 23, 2010 (subsequently repaid on its due date)
    1,462,587       -  
Due March 10, 2010 (subsequently repaid on its due date)
    2,925,173       -  
Due March 15, 2010 (subsequently repaid on its due date)
    2,925,173       -  
Due April 29, 2010 (subsequently repaid on its due date)
    1,462,587       -  
Due May 5, 2010 (subsequently repaid on its due date)
    1,170,070       -  
Due May 18, 2010 (subsequently repaid on its due date)
    1,170,070       -  
Due May 27, 2010 (subsequently repaid on its due date)
    1,170,070       -  
Due June 10, 2010 (subsequently repaid on its due date)
    1,170,070       -  
Due June 8, 2010 (subsequently repaid on its due date)
    1,170,070       -  
Due June 15, 2010 (subsequently repaid on its due date)
    2,193,881       -  
Total
  $ 19,744,925     $ 18,236,993  

The interest-free notes payable are secured by $11,824,214 and $9,977,092 restricted cash as of December 31, 2009 and 2008.

 
F-22
 

OSSEN INNOVATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

NOTE 12 – SHORT TERM BANK LOANS

Short-term loans are summarized as follows:
   
Interest rate
per annum
   
December 31,
 
         
2009
   
2008
 
                   
Due January 6, 2010, guaranteed by SZS, subsequently repaid on due date
    5.31 %   $ 2,925,173     $ -  
Due January 14, 2010, subsequently repaid on due date
    5.35 %     731,294       -  
Due January 15, 2010, subsequently repaid on due date
    5.35 %     1,462,587       -  
Due February 20, 2010, subsequently repaid on due date
    5.84 %     2,925,174       -  
Due February 27, 2010, subsequently repaid on due date
    5.31 %     731,294       -  
Due March 4, 2010 , subsequently repaid on due date
    5.31 %     2,340,139       -  
Due March 8, 2010, subsequently repaid on due date
    5.31 %     731,294       -  
Due March 12, 2010, subsequently repaid on due date
    5.84 %     1,462,587       -  
Due March 27, 2010 subsequently repaid on due date
    5.84 %     1,462,587       -  
Due March 30, 2010 guaranteed by SZS
    5.84 %     1,462,587       -  
Due May 13, 2010 subsequently repaid on due date
    5.31 %     1,316,328       -  
Due May 30, 2010 , guaranteed by SOI, subsequently repaid on due date
    5.31 %     1,462,587       -  
Due June 2, 2010 , guaranteed by SOI, subsequently repaid on due date
    5.31 %     1,462,587       -  
Due September 8, 2010 guaranteed by SZS
    5.31 %     3,948,985       -  
Due September 9, 2010 guaranteed by SZS
    5.31 %     438,776       -  
Due November 6, 2010 guaranteed by SOI
    5.84 %     1,316,328       -  
Due November 9, 2010, guaranteed by SOI
    5.84 %     1,170,070       -  
Due January 8, 2009, guaranteed by SZS, subsequently repaid on due date
    7.28 %     -       2,917,919  
Due January 17, 2009 guaranteed by SOI, subsequently repaid on due date
    5.58 %     -       1,313,064  
Due January 30, 2009, subsequently repaid on due date
    5.54 %     -       1,458,959  
Due January 30, 2009, subsequently repaid on due date
    5.54 %     -       1,458,959  
Due March 3, 2009, subsequently repaid on due date
    7.47 %     -       729,480  
Due March 5, 2009, subsequently repaid on due date
    7.47 %     -       2,188,439  
Due April 1, 2009, guaranteed by SOI, subsequently repaid on due date
    5.58 %     -       1,167,168  
Due May 8, 2009, subsequently repaid on due date
    7.47 %     -       1,313,064  
Due July 17, 2009 , guaranteed by SOI, subsequently repaid on due date
    5.58 %     -       1,458,959  
Due July 17, 2009 , guaranteed by SOI, subsequently repaid on due date
    5.58 %     -       1,458,959  
Due September 18, 2009 guaranteed by SZS, subsequently repaid on due date
    7.56 %     -       3,939,191  
Totals
              $ 27,350,377     $ 19,404,161  

Short-term bank loans are obtained from local banks in China. All the short-term bank loans are repayable within one year and are secured by property, plant and equipment and land use rights owned by the Company.  See Notes 6.

The weighted average annual interest rate of the short-term bank loans was 5.5% and 6.42% as of December 31, 2009 and 2008, respectively.  Interest expense was $1,429,729 and $1,514,114 for the years ended December 31, 2009 and 2008, respectively.

 
F-23
 

OSSEN INNOVATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

NOTE 13 – TAXES

(a) Corporation Income Tax (“CIT”)

On March 16, 2007, the National People’s Congress of China approved the new Corporate Income Tax Law of the People’s Republic of China (the “New CIT Law”), which is effective from January 1, 2008.

Prior to January 1, 2008, the CIT rate applicable to our subsidiaries in the PRC is 33%.  After January 1, 2008, under the New CIT Law, the corporate income tax rate applicable to our subsidiaries is 25%.  The New CIT Law has an impact on the deferred tax assets and liabilities of the Company.  The Company adjusted deferred tax balances as of December 31, 2009 based on their best estimate and will continue to assess the impact of such new law in the future.  The effects arising from the enforcement of the New CIT Law have been reflected in the accounts.

Both Ossen Ma An Shan and Ossen Jiu Jiang received official designation by the local tax authority as a foreign-invested enterprise engaged in manufacturing activities, and they are exempted from corporate income tax for two years commencing from the first profitable year in 2007 and 2009, respectively, followed by a 50% reduction for the next three years.

In accordance with the New CIT Law, enterprises established under the laws of foreign countries or regions and whose “place of effective management” is located within the PRC territory are considered PRC resident enterprises and subject to the PRC income tax at the rate of 25% on worldwide income.  The definition of “place of effective management" refers to an establishment that exercises, in substance, overall management and control over the production and business, personnel, accounting, properties, etc. of an enterprise. As of December 31, 2009, no detailed interpretation or guidance has been issued to define “place of effective management”. Furthermore, as of December 31, 2009, the administrative practice associated with interpreting and applying the concept of “place of effective management” is unclear. If the Company’s non-PRC incorporated entities are deemed PRC tax residents, such entities would be subject to PRC tax under the New CIT Law.  The Company has analyzed the applicability of this law, as of December 31, 2009, and the Company has not accrued for PRC tax on such basis.  The Company will continue to monitor changes in the interpretation or guidance of this law.

The New CIT Law also imposes a 10% withholding income tax, subject to reduction based on tax treaty where applicable, for dividends distributed by a foreign invested enterprise to its immediate holding company outside China.  Such dividends were exempted from PRC tax under the previous income tax law and regulations.  The foreign invested enterprise is subject to the withholding tax starting from January 1, 2008.  There were no dividends distributed in the year ended December 31, 2009 or 2008.

 
F-24
 

OSSEN INNOVATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

NOTE 13 – TAXES (CONTINUED)

Income tax expenses consist of the following:
   
Year Ended December 31,
 
   
2009
   
2008
 
Current tax expenses
  $ 740,880     $ 292,460  
Deferred taxes
    (827 )     (940 )
Income tax expenses
  $ 740,053     $ 291,520  

Reconciliation from the expected income tax expenses calculated with reference to the statutory tax rate in the PRC of 25% for 2009 and 2008 is as follows:

   
Year Ended December 31,
 
   
2009
   
2008
 
Computed "expected" income tax expenses
  $ 1,481,592     $ 1,394,103  
Effect on tax incentive / holiday
    (741,539 )     (1,102,583 )
Income tax expenses
  $ 740,053     $ 291,520  

Components of net deferred tax assets are as follows:

   
December 31,
 
   
2009
   
2008
 
Deferred tax assets:
           
Current portion:
           
Provision of doubtful accounts
  $ 5,311     $ 4,473  

The Company uses FASB ASC 740 (formerly FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”)). – AN INTERPRETATION OF FASB STATEMENT NO. 109, ACCOUNTING FOR INCOME TAXES.  The Interpretation addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements.  Under FIN 48, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.  The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.  FIN 48 also provides guidance on recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.  As of December 31, 2009, the Company does not have a liability for unrecognized tax benefits.

 
F-25
 

OSSEN INNOVATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

NOTE 13 – TAXES (CONTINUED)

(b) Value Added tax (“VAT”)

Enterprises or individuals, who sell commodities, engage in repair and maintenance or import or export goods in the PRC are subject to a value added tax in accordance with Chinese Laws.  The VAT standard rate is 17% of the gross sale price.  A credit is available whereby VAT paid on the purchases of semi-finished products or raw materials used in the production of the Company’s finished products can be used to offset the VAT due on the sales of the finished products.

On January 1, 2002, the export policy of VAT "Exemption, Credit and Refund" began to apply to all exports by manufacture-based enterprises. In accordance with this policy, exported goods are exempted from output VAT and the input VAT charged for purchases of the raw materials, components and power consumed for the production of the exported goods may be refunded.  The refund rates of strand products applicable to Ossen Ma An Shan and Ossen Jiujiang was 5%.

The VAT refundable balance of $535,824 and $66,252 at December 31, 2009 and 2008, respectively are included in Other Current Assets in the accompanying consolidated balance sheets.

NOTE 13 – GEOGRAPHICAL SALES AND SEGMENTS

Information for the Company’s sales by geographical area for the years ended December 31, 2009, 2008 and 2007 are as follows:
 
   
Year ended December 31,
 
   
2009
   
2008
 
Domestic Sales
  $ 97,361,596     $ 51,611,646  
International Sales
    3,726,200       31,130,664  
Total Sales
  $ 101,087,796     $ 82,742,310  

The Company operates in one business segment for the years ended December 31, 2009 and 2008.

NOTE 14 – SUBSEQUENT EVENTS

We have evaluated all events or transactions that occurred after December 31, 2009 up through the date we issued the consolidated financial statements. We did not have any material subsequent events to disclose.

 
F-26
 
 
Exhibit 1.1

TERRITORY OF THEBRITISH VIRGIN ISLANDS
 
THE BVI BUSINESS COMPANIES ACT, 2004
 
(No. 16 of 2004)
 
AMENDED AND RESTATED
MEMORANDUM OF ASSOCIATION
OF
 
Ossen Innovation Co., Ltd.
(formerly Ultra Glory International Ltd.)
 
 
NAME
 
1.
The name of the Company is Ossen Innovation Co., Ltd.
 
 
TYPE OF COMPANY
 
2.
The Company is a company limited by shares.
 
 
REGISTERED OFFICE
 
3.
The first Registered Office of the Company is the offices of [name and address of registered agent], the office of the first registered agent.
 
 
REGISTERED AGENT
 
4.
The first Registered Agent of the Company is [name and address of registered agent] .
 
 
ISSUED SHARES
 
5.
The maximum number of shares that the Company is authorized to issue is 100,000,000.
 
 
CLASSES, NUMBER AND PAR VALUE OF SHARES
 
6.
The shares issued by the Company shall be made up of one class and one series of shares, namely ordinary shares and each share may be issued with or without a par value and any share issued with a par value may be issued in any currency provided however that where the currency is not specified upon issue the currency shall be that of the United States of America.
 
 
FRACTIONAL SHARES
 
7.
The Company may issue fractions of a share and a fractional share shall have the same corresponding fractional liabilities, limitations, preferences, privileges, qualifications, restrictions, rights and other attributes of a whole share of the same class or series of shares.
 
RIGHTS, PRIVILEGES, RESTRICTIONS AND CONDITIONS ATTACHING TO SHARES
 
8.
(1)
All shares shall have;
 
 
(a)
the right to one vote at a meeting of the members of the Company or on any resolution of members;
 
 
(b)
the right to an equal share in any distribution by way of dividend paid by the Company; and
 

 
(c)
the right to an equal share in the distribution of the surplus assets of the Company on its liquidation.
 
 
(2)
The directors may at their discretion by resolution of directors redeem, purchase or otherwise acquire, for fair value, all or any of the shares in the Company subject to the Articles
 
VARIATION OF CLASS RIGHTS
 
9.
If at any time the issued shares are divided into different classes or series of shares, the rights attached to any class or series (unless otherwise provided by the terms of issue of the shares of that class or series) may, whether or not the Company is being wound up, be varied with the consent in writing of the holders of not less than three-fourths of the issued shares of that class or series and of the holders of not less than three-fourths of the issued shares of any other class or series of shares which may be affected by such variation.
 
 
RIGHTS NOT VARIED BY THE ISSUE OF SHARES PARI PASSU
 
10.
The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.
 
CAPACITY AND POWERS
 
11.
Subject to the Act, any other British Virgin Islands legislation and paragraph 12 below the Company has, irrespective of corporate benefit:
 
 
(a)
full capacity to carry on or undertake any business or activity, do any act or enter into any transaction;
 
 
(b)
for the purposes of paragraph (a), full rights, powers and privileges; and
 
 
(c)
full powers to issue shares with pre-emptive rights, subject to the Articles.
 
LIMITATIONS ON THE COMPANY’S BUSINESS
 
12.
For the purposes of section 9(4)  of the Act the Company may not;
 
 
(a)
carry on banking or trust business, unless it is licensed to do so under the Banks and Trust Companies Act, 1990;
 
 
(b)
carry on business as an insurance or reinsurance company, insurance agent or insurance broker, unless it is licensed under the Insurance Act 1994;
 
 
(c)
carry on business of company management, unless it is licensed under the Company Management Act, 1990;
 
 
(d)
carry on the business of providing the registered office or the registered agent for companies incorporated in the British Virgin Islands;
 
 
(e)
carry on the business as a mutual fund, manager of mutual funds or administrator of mutual funds unless it is recognized or licenced as the case may be under the Mutual Funds Act 1996; or
 
 
(f)
carry on any other business that gives rise to a licencing requirement under any law for the time being in force in the British Virgin Islands unless it is licenced, regulated, recognised or otherwise approved pursuant to such law.
 
 
2
 
 
 
REGISTERED SHARES AND PROHIBITION ON ISSUE OF BEARER SHARES
 
13.
Shares in the Company may only be issued as registered shares. The issue of shares to bearer is prohibited.
 
 
PROHIBITION ON EXCHANGE AND CONVERSION OF REGISTERED SHARES TO BEARER SHARES
 
14.
The exchange or conversion of registered shares to bearer shares is prohibited.
 
 
TRANSFER OF REGISTERED SHARES
 
15.
Shares in the Company may be transferred, subject to any limitations contained in the Articles.
 
15A.
In the case of uncertificated shares, and subject to the Act, a shareholder shall be entitled to transfer his shares and other securities by means of a relevant system and the operator of the relevant system shall act as agent of the shareholders for the purposes of the transfer of shares or other securities.
 
15B.
Any provision in the Memorandum or Articles in relation to the shares shall not apply to any uncertified shares to the extent that they are inconsistent with the holding of any shares in uncertificated form, the transfer of title to any shares by means of a relevant system and any provision of the Regulations.
 
 
AMENDMENT OF MEMORANDUM AND ARTICLES OF ASSOCIATION
 
16.1
No article shall be rescinded, altered or amended and no new Article shall be made until the same has been approved by a special resolution of the Members.  A special resolution shall be required to alter the provisions of the Memorandum of Association or to change the name of the Company.
 
16.2
No amendment may be made to [Regulation 76] of the Articles unless approved by an affirmative vote of the holders of 66 2 / 3 percent or more of the outstanding votes of the shares entitled to vote on the resolution or by a resolution consented to in writing by holders of 66 2 / 3 percent or more of the outstanding votes of the shares entitled to vote thereon.
 
DEFINITIONS
 
17.
The meanings of words in this Memorandum are as defined in the Articles.
 
 
We, [name and address of incorporator] for the purpose of incorporating a BVI Business Company under the laws of the British Virgin Islands hereby sign this Memorandum of Association the __ day of June, 2010.
 
Incorporator
   
     
       
[Name and address of incorporator]
   

 
3
 

TERRITORY OF THEBRITISH VIRGIN ISLANDS
 
THE BVI BUSINESS COMPANIES ACT, 2004
 
(No. 16 of 2004)
 
AMENDED AND RESTATED
ARTICLES OF ASSOCIATION
OF
 
Ossen Innovation Co., Ltd.
 
PRELIMINARY
 
1.
In these Articles, if not inconsistent with the subject or context, the words and expressions standing in the first column of the following table shall bear the meanings set opposite them respectively in the second column thereof.
 
 
Words
Meaning
     
 
Act
the BVI Business Companies Act, 2004 (No 16 of 2004.) including any modification, extension, re-enactment or renewal thereof and any regulations made thereunder.
     
 
Articles
these Articles of Association as originally framed or as from time to time amended.
     
 
Designated Stock Exchange
either the Nasdaq National Stock Market, Inc. or such other exchange or quotation bureau on which, the Company’s Securities are listed or traded; provided that until the Securities are listed on any such “Exchange” the rules of any such Designated Stock Exchange shall be inapplicable to these Articles.
     
 
Director
a director of the Company.
     
 
Distribution
in relation to a distribution by a company to a member, means
         
     
(i)
the direct or indirect transfer of an asset, other than the Company’s own shares, to or for the benefit of the member or
         
     
(ii)
the incurring of a debt to or for the benefit of a member,
     
   
in relation to shares held by a member, and whether by means of a purchase of an asset, the purchase, redemption or other acquisition of shares, a transfer of indebtedness or otherwise, and does not include a dividend unless specifically indicated herein.
     
 
Independent Director
a person who meets the then current requirements for “independence” of the applicable rules and regulations of the U.S. Securities and Exchange Commission and the Designated Stock Exchange.
 
 
 

 
member or shareholder
in relation to the Company, means a person whose name is entered in the register of members as the holder of one or more shares, or fractional shares, in the Company.
     
 
Memorandum
the Memorandum of Association of the Company as originally framed or as from time to time amended.
     
 
person
An individual, a corporation, a trust, trustee, the estate of a deceased individual, a partnership or an unincorporated association of persons.
     
 
Regulations
The Uncertificated Securities Regulations 2001.
     
 
Related Party
(a) any director, officer and employee of the Company; (b) any family member of such director, officer and employee; and (c) any entity (e.g. a corporation, partnership, or trust) controlled by or set up for the benefit of a director, officer or employee, or a family member of such director, officer or employee.
     
 
Relevant System
A facility for the electronic transfer of uncertificated securities administered by The Depository Trust Company or such other Person regulated by the SEC.
     
 
resolution of directors
(a)
A resolution approved at a duly convened and constituted meeting of directors of the Company or of a committee of directors of the Company by the affirmative vote of a simple majority of the directors present at the meeting who voted and did not abstain; or
       
   
(b)
a resolution consented to in writing by a simple majority of the directors or of all members of the committee, as the case may be;
       
     
except that where a director is given more than one vote, he shall be counted by the number of votes he casts for the purpose of establishing a majority.
     
 
resolution of members
Subject to the provisions of the Memorandum and Articles means:
       
   
(a)
A resolution approved at a duly convened and constituted meeting of the members of the Company by the affirmative vote of
       
     
(i)
a majority of in excess of 50% of the votes of the shares entitled to vote and voting on the resolution, or
       
     
(ii)
a majority of in excess of 50% of the votes of each class or series of shares entitled to vote as a class or series and voting on the resolution and a majority of in excess of 50% of the votes of the remaining shares entitled to vote and voting on the resolution; or
 
 
2
 

   
(b)
a resolution consented to in writing by
         
     
(i)
an absolute majority of the votes of shares entitled to vote thereon, or
         
     
(ii)
an absolute majority of the votes of each class or series of shares entitled to vote thereon as a class or series and of an absolute majority of the votes of the remaining shares entitled to vote thereon.
     
 
Seal
Any Seal which has been duly adopted as the common seal of the Company.
     
 
SEC
The United States Securities and Exchange Commission.
     
 
Securities
shares  and  debt  obligations  of every kind, and options, warrants and rights to acquire shares, or debt obligations.
     
 
share
a share issued or to be issued by the Company.
     
 
solvency test
a company satisfies the solvency test if;
     
 
(i)
the value of the company’s assets exceeds its liabilities, and
     
 
(ii)
the company is able to pay its debts as they fall due.
     
 
Special resolution
A resolution shall be a special resolution when it meets the definition of a “resolution of members”, except that the threshold shall be 66 2 / 3 % in place of 50%.
     
 
treasury shares
shares in the Company that were previously issued but were repurchased, redeemed or otherwise acquired by the Company and not cancelled.
 
2.
“Written” or any term of like import includes words typewritten, printed, painted, engraved, lithographed, photographed or represented or reproduced by any mode of  reproducing words in a visible form, including telex, facsimile, telegram, cable or other form of writing produced by electronic communication.
 
3.
Save as aforesaid any words or expressions defined in the Act shall bear the same meaning in these Articles.
 
4.
Whenever the singular or plural number, or the masculine, feminine or neuter gender is used in these Articles, it shall equally, where the context admits, include the others.
 
5.
A reference in these Articles to voting in relation to shares shall be construed as a reference to voting by members holding the shares except that it is the votes allocated to the shares that shall be counted and not the number of members who actually voted and a reference to shares being present at a meeting shall be given a corresponding construction.
 
6.
A reference to money in these Articles is, unless otherwise stated, a reference to the currency in which shares in the Company shall be issued according to the provisions of the Memorandum.
 
 
3
 
 
REGISTERED SHARES
 
7.
Every member holding registered shares in the Company shall be entitled to a certificate signed by a director or officer of the Company or such other person who may be authorised from time to time by resolution of directors or under the Seal, with or without the signature of any director of the Company, specifying the share or shares held by him and the signature of the director or officer or person so authorised and the Seal may be facsimiles.
 
8.
Any member receiving a share certificate for registered shares shall indemnify and hold the Company and its directors and officers harmless from any loss or liability which it or they may incur by reason of any wrongful or fraudulent use or representation made by any person by virtue of the possession thereof.  If a share certificate for registered shares is worn out or lost it may be renewed on production of the worn out certificate or on satisfactory proof of its loss together with such indemnity as may be required by a resolution of directors.
 
8A.
Subject to the Act and the rules of the Designated Stock Exchange, the Board without further consultation with the holders of any shares or securities of the Company may resolve that any class or series of shares or other securities of the Company from time to time in issue or to be issued (including shares in issue at the date of the adoption of these Articles) may be issued, held, registered, converted to, transferred or otherwise dealt with in uncertificated form in accordance with the Regulations and practices instituted by the operator of the relevant system, and no provision of these Articles will apply to any uncertificated share or other securities of the Company to the extent that they are inconsistent with the holding of such shares or other securities in uncertificated form or the transfer of title to any such shares or other securities by means of a relevant system or any provision of the Regulations.
 
8B.
Conversion of shares held in certificated form into shares held in uncertificated form, and vice versa, may be made in such manner as the Board may, in its absolute discretion, think fit (subject always to the Regulations and the requirements of the relevant system concerned).  The Company shall enter on the register of members how many shares are held by each shareholder in  uncertificated form and in certificated form and shall maintain the register of members in each case as is required by the Regulations and the relevant system concerned.  Notwithstanding any provisions of these Articles, a class or series of shares shall not be treated as two classes by virtue of that class or series comprising both certificated shares and uncertificated shares or as a result of any provision of these Articles or the Regulations which apply only in respect of certificated or uncertificated shares.
 
9.
If several persons are registered as joint holders of any shares, any one of such persons may give an effectual receipt for any distribution payable in respect of such shares.
 
10.
Nothing in these Articles shall require title to any shares or other Securities to be evidenced by a certificate if the Act and the rules of the Designated Stock Exchange permit otherwise.
 
SHARES AND ISSUED SHARES
 
11.
Subject to the provisions of these Articles and, if applicable, the rules of the Designated Stock Exchange, and any resolution of members, the directors of the Company may, without limiting or affecting any rights previously conferred on the holders of any existing shares or class or series of shares, offer, allot, grant options over or otherwise dispose of shares to such persons, at such times and upon such terms and conditions as the Company may by resolution of directors determine. The directors shall not issue more shares than the maximum number provided for in the Memorandum.
 
12.
The Company may issue fully paid, partly paid or nil paid shares as well as bonus shares.  A partly paid or nil paid share or a share issued for a promissory note or other written obligation for payment of a debt may be issued subject to forfeiture in the manner prescribed in these Articles.
 
 
4
 
 
13.
Shares in the Company may be issued for consideration in any form, including money, a promissory note or other obligation to contribute money or property, real property, personal property (including goodwill and know-how) services rendered or a contract for future services  and the amount of such consideration shall be determined by resolution of directors, except that in the case of shares with par value, the amount shall not be less than the par value, and in the absence of fraud the decision of the directors as to the value of the consideration received by the Company in respect of the issue is conclusive unless a question of law is involved.
 
14.
Before issuing shares for a consideration other than money, the directors shall pass a resolution stating;
 
 
(a)
the amount to be credited for the issue of the shares;
 
 
(b)
their determination of the reasonable present cash value of the non-money consideration for the issue; and
 
 
(c)
that, in their opinion, the present cash value of the non-money consideration for the issue is not less than the amount to be credited for the issue of the shares.
 
15.
A share issued by the Company upon conversion of, or in exchange for, another share or a debt obligation or other security in the Company, shall be treated for all purposes as having been issued for money equal to the consideration received or deemed to have been received by the Company in respect of the other share, debt obligation or security.
 
16.
Treasury shares may be disposed of by the Company on such terms and conditions (not otherwise inconsistent with these Articles) as the Company may by resolution of directors determine.
 
17.
Subject to these Articles, the Company may purchase, redeem or otherwise acquire and hold its own shares save that the Company may not purchase, redeem or otherwise acquire its own shares without the consent of the member whose shares are to be purchased, redeemed or otherwise acquired unless the Company is permitted by the Act or any other provision in the Memorandum or Articles to purchase, redeem or otherwise acquire the shares without their consent.
 
18.
No purchase, redemption or other acquisition of shares shall be made unless the directors determine by resolution of the directors that immediately after the purchase, redemption or other acquisition the value of the  Company’s assets will exceed its liabilities and the Company will be able to pay its debts as they fall due.
 
19.
Sections 60 (Process for acquisition of own shares), 61 (Offer to one or more shareholders) and 62 (Shares redeemed otherwise than at the option of company) of the Act shall not apply to the Company.
 
20.
A determination by the directors under Article 18 is not required;
 
 
(a)
the Company redeems a share or shares pursuant to  a  right  of  a member to have his shares redeemed or to have his shares exchanged for money or other property of the Company; or
 
 
(b)
by virtue of the provisions of Section 179 of the Act.
 
21.
Shares that the Company purchases, redeems or otherwise acquires pursuant to Article 17 may be cancelled or held as treasury shares except to the extent that such shares are in excess of 80 percent of the issued shares of the Company in which case they shall be cancelled but they shall be available for reissue.
 
22.
Shares in the Company shall only be held as treasury shares where the directors of the Company resolve as such and the number of shares acquired, when aggregated with shares of the same class already held by the Company as treasury shares, does not exceed 50% of the shares of that class previously issued by the Company, excluding shares that have been cancelled. All rights and obligations attaching to a treasury share are suspended and shall not be exercised by or against the Company while it holds the share as a treasury share. Treasury shares may be reissued by the Company as new shares.
 
 
5
 
 
23.
The Company shall keep a register of members containing;
 
 
(a)
the names and addresses of the persons who hold registered shares in the Company;
 
 
(b)
the number of each class and series of registered shares held by each member;
 
 
(c)
the date on which the name of each member was entered in the register of members;
 
 
(d)
the date on which any person ceased to be a member; and
 
 
(e)
such other information as may be prescribed pursuant to the Act.
 
24.
The register of members may be in any such form as the directors may approve but if it is in magnetic, electronic or other data storage form, the company must be able to produce legible evidence of its contents.
 
25.
The original or a copy of the register of members shall be kept at the registered office of the Company or at the office of the registered agent of the Company.
 
26.
A share is deemed to be issued when the name of the member is entered in the register of members.
 
27.
Subject to the Act and the rules of the Designated Stock Exchange, the board of directors without further consultation with the holders of any shares or Securities may resolve that any class or series of shares or other Securities from time to time in issue or to be issued (including shares in issue at the date of the adoption of these Articles) may be issued, held, registered and converted to uncertificated form.
 
28.
Conversion of shares held in certificated form into shares held in uncertificated form, and vice versa, may be made in such manner as the board of directors, in its absolute discretion, may think fit.  The Company or any duly authorised transfer agent (a “ Transfer Agent ”) shall enter on the register of members how many shares are held by each member in uncertificated form and in certificated form and shall maintain the register of members. Notwithstanding any provision of these Articles, a class or series of shares shall not be treated as two classes by virtue only of that class or series comprising both certificated shares and uncertificated Shares or as a result of any provision of these Articles which apply only in respect of certificated or uncertificated shares.
 
MORTGAGES AND CHARGES OF REGISTERED SHARES
 
29.
Members may mortgage or charge their registered shares in the Company with such mortgage or charge being evidenced in writing and signed by, or with the authority of the registered holder of a registered share to which the mortgage or charge relates.  The Company shall give effect to the terms of any valid mortgage or charge except insofar as it may conflict with any requirements herein contained for consent to the transfer of shares.
 
30.
In the case of the mortgage or charge of registered shares there may be entered in the share register of the Company at the request of the registered holder of such shares
 
 
(a)
a statement that the shares are mortgaged or charged;
 
 
(b)
the name of the mortgagee or chargee; and
 
 
(c)
the date on which the aforesaid particulars are entered in the share register.
 
 
6
 
 
31.
Where particulars of a mortgage or charge are entered in the register of members, such particulars shall be cancelled
 
 
(a)
with the written consent of the named mortgagee or chargee or anyone authorized to act on his behalf; or
 
 
(b)
upon evidence satisfactory to the directors of the discharge of the liability secured by the mortgage or charge and the issue of such indemnities as the directors shall consider necessary or desirable.
 
32.
Whilst particulars of a mortgage or charge over registered shares are entered in the register of members pursuant to the preceding articles no transfer of any share comprised therein shall be effected without the written consent of the named mortgagee or chargee or anyone authorized to act on his behalf.
 
FORFEITURE
 
33.
When shares not fully paid on issue or issued for a promissory note or other written obligation for payment of a debt have been issued subject to forfeiture, the following provisions shall apply.
 
34.
Written notice specifying a date for payment to be made and the shares in respect of which payment is to be made shall be served on the member who defaults in making payment pursuant to a promissory note or other written obligations to pay a debt.
 
35.
The written notice specifying a date for payment shall
 
 
(a)
name a further date not earlier than the expiration of 14 days from the date of service of the notice on or before which payment required by the notice is to be made; and
 
 
(b)
contain a statement that in the event of non-payment at or before the time named in the notice the shares, or any of them, in respect of which payment is not made will be liable to be forfeited.
 
36.
Where a written notice has been issued and the requirements of the notice have not been complied with within the prescribed time, the directors may at any time before tender of payment forfeit and cancel the shares to which the notice relates.
 
37.
The Company is under no obligation to refund any moneys to the member whose shares have been forfeited and cancelled pursuant to these provisions.  Upon forfeiture and cancellation of the shares the member is discharged from any further obligation to the Company with respect to the shares forfeited and cancelled.
 
38.
The Company shall have a first and paramount lien on every share issued for a promissory note or for any other binding obligation to contribute money or property or any combination thereof to the Company, and the Company shall also have a first and paramount lien on every share standing registered in the name of a member, whether singly or jointly with any other person or persons, for all the debts and liabilities of such member or his estate to the Company, whether the same shall have been incurred before or after notice to the Company of any interest of any person other than such member, and whether the time for the payment or discharge of the same shall have actually arrived or not, and notwithstanding  that  the  same are joint debts or liabilities of such member or his estate and any other person, whether a member of the Company or not.  The Company’s lien on a share shall extend to all distributions payable thereon.  The directors may at any time either generally, or in any particular case, waive any lien that has arisen or declare any share to be wholly or in part exempt from the provisions of this Article.
 
39.
In the absence of express provisions regarding sale in the promissory note or other binding obligation to contribute money or property, the Company may sell, in such manner as the directors may by resolution of directors determine, any share on which the Company has a  lien, but no sale shall be made unless some sum in respect of which the lien exists is presently payable nor until the expiration of twenty-one days after a notice in writing, stating and demanding payment of the sum presently payable and giving notice of the intention to sell in default of such payment, has been served on the holder for the time being of the share.
 
 
7
 
 
40.
The net proceeds of the sale by the Company of any shares on which it has a lien shall be applied in or towards payment of discharge of the promissory note or other binding obligation to contribute money or property or any combination thereof in respect of which the lien exists so far as the same is presently payable and any residue shall (subject to a like lien for debts or liabilities not presently payable as existed upon the share prior to the sale) be paid to the holder of the share immediately before such sale.  For giving effect to any such sale the directors may authorize some person to transfer the share sold to the purchaser thereof.  The purchaser shall be registered as the holder of the share and he shall not be bound to see to the application of the purchase money, nor shall his title to the share be affected by any irregularity or invalidity in the proceedings in reference to the sale.
 
TRANSFER OF SHARES
 
41.
Registered shares in the Company are transferred by a written instrument of transfer signed by the transferor and containing the name and address of the transferee. The instrument of transfer shall be signed by the transferee if registration as a holder of the share shall impose a liability to the Company on the transferee. The instrument of transfer of a registered share shall be sent to the Company for registration.
 
42.
The board of directors may resolve that interests in shares in the form of depositary receipts may be transferred or otherwise dealt with in accordance with the regulations and practices instituted by the operator of the Relevant System and any  holder of interests in shares shall be entitled to transfer such interests by means of such Relevant System and the operator of the Relevant System shall act as agent of the holders of such interests for the purposes of the transfer of those interests.
 
43.
The register of members may be closed at such times and for such periods as the board of directors may from time to time determine, upon notice being given by advertisement in such newspapers as may be required by the Act and the practice of the Designated Stock Exchange.
 
44.
The transfer of a registered share is effective when the name of the transferee is entered on the register of members.
 
45.
If the directors of the Company are satisfied that an instrument of transfer relating to shares has been signed but that the instrument has been lost or destroyed, they may resolve;
 
 
(a)
to accept such evidence of the transfer of the shares as they consider appropriate; and
 
 
(b)
that the transferee’s name should be entered in the register of members notwithstanding the absence of the instrument of transfer.
 
46.
The Company must on the receipt of an instrument of transfer from the transferor or transferee of a registered share in the Company enter the name of the transferee of the share in the register or members unless the directors, if permitted by the Memorandum or these Articles, resolve by resolution of directors to refuse or delay the registration of the transfer for reasons that shall be specified in the resolution of directors.
 
TRANSMISSION OF SHARES
 
47.
The personal representative of a deceased member may transfer a share even though the personal representative is not a member at the time of the transfer.
 
48.
The personal representative, executor or administrator of a deceased member, the guardian of an incompetent member or the trustee of a bankrupt member shall be the only person recognized by the Company as having any title to his share but they shall not be entitled to exercise any rights as a member of the Company until they have proceeded as set forth in the next following three Articles.
 
 
8
 

49.
The production to the Company of any document which is evidence of probate of the will, or letters of administration of the estate, or confirmation as executor, of a deceased member or of the appointment of a guardian of an incompetent member or the trustee of a bankrupt member shall be accepted by the Company    even if the deceased, incompetent or bankrupt member is domiciled outside the  British  Virgin Islands if the document evidencing the grant of probate or letters of administration, confirmation as executor, appointment as guardian or trustee in bankruptcy is issued by a foreign court which had competent jurisdiction in the matter.  For the purpose of establishing whether or not a foreign court had competent jurisdiction in such a matter the directors may obtain appropriate legal advice.  The directors may also require an indemnity to be given by the executor, administrator, guardian or trustee in bankruptcy.
 
50.
The Company may enter in the register of members the name of any person becoming entitled by operation of law or otherwise to a share or shares in consequence of the death, incompetence or bankruptcy upon such evidence being produced as may reasonably be required by the directors.
 
51.
Any person who has become entitled to a share or shares in consequence of the death, incompetence or bankruptcy of any member may, instead of being registered himself, request in writing that some person to be named by him be registered as the transferee of such share or shares and such request shall likewise be treated as if it were a transfer.
 
52.
What amounts to incompetence on the part of a person is a matter to be determined by the court having regard to all the relevant evidence and the circumstances of the case.
 
REDUCTION OR INCREASE IN AUTHORISED AND UNISSUED SHARES
 
53.
The Company may amend the Memorandum to increase or reduce the maximum number of shares the Company is authorised to issue and may in respect of any unissued shares increase or reduce the number of such shares, or effect any combination of the foregoing.
 
54.
The Company may
 
(1)          (a)        divide its shares, including issued shares, into a larger number of shares; or
 
(b)        combine its shares, including issued shares, into a smaller number of shares.
 
 
(2)
A division or combination of shares, including issued shares, of a class or series shall be for a larger or smaller number, as the case may be, of shares in the same class or series.
 
 
(3)
A company shall not divide its shares under subsection (1)(a) or (2) if it would cause the maximum number of shares that the Company is authorised to issue by its memorandum to be exceeded.
 
 
(4)
Where shares are divided or combined under this article, the aggregate par value of the new shares must be equal to the aggregate par value of the original shares.
 
MEETINGS AND CONSENTS OF MEMBERS
 
55.
The directors of the Company may convene meetings of the members of the Company at such times and in such manner and places within or outside the British Virgin Islands as the directors consider necessary or desirable. The Company may hold an annual general meeting, but shall not (unless required by the applicable rules of the Designated Stock Exchange for so long as the Company’s Securities are listed or traded on the Designated Stock Exchange) be obliged to hold an annual general meeting.
 

 
9
 


 
56.
Upon the written request of members holding 30 percent or more of the outstanding voting shares in the Company the directors shall convene a meeting of members.
 
57.
The directors shall give not less than 7 days notice of meetings of members to those persons whose names on the date the notice is given appear as members in the share register of the Company and are entitled to vote at the meeting.
 
58.
The directors may fix the date notice is given of a meeting of members as the record date for determining those shares that are entitled to vote at the meeting.
 
59.
A meeting of members may be called on short notice:
 
 
(a)
if members holding not less than 90 percent of the total number of shares entitled to vote on all matters to be considered at the meeting, or 90 percent of the votes of each class or series of shares where members are entitled to vote thereon as a class or series together with not less than a 90 percent majority of the remaining votes, have agreed to short notice of the meeting, or
 
 
(b)
if all members holding shares entitled to vote on all or any matters to be considered at the meeting have waived notice of the meeting and for this purpose presence at the meeting shall be deemed to constitute waiver.
 
60.
The inadvertent failure of the directors to give notice of a meeting to a member, or the fact that a member has not received notice, does not invalidate the meeting.
 
61.
A member may be represented at a meeting of members by a proxy who may speak and vote on behalf of the member.
 
62.
The instrument appointing a proxy shall be produced at the place appointed for the meeting before the time for holding the meeting at which the person named in such instrument proposes to vote.
 
63.
An instrument appointing a proxy shall be in substantially the following form or such other form as the Chairman of the meeting shall accept as properly evidencing the wishes of the member appointing the proxy.
 
(Name of Company)
 
I/We
being a member of the above
Company with
shares HEREBY APPOINT
of
or failing him
of
to be my/our proxy to vote for me/us at the meeting of members to be held on the              day
of
and at any adjournment thereof.
   
(Any restrictions on voting to be inserted here.)
 
Signed this            day of
 
 
 
Member
 

 
64.
The following shall apply in respect of joint ownership of shares:
 
 
(a)
if two or more persons hold shares jointly each of them may be present in person or by proxy at a meeting of members and may speak as a member;
 
 
(b)
if only one of the joint owners is present in person or by proxy he may vote on behalf of all joint owners, and
 
 
10
 
 
 
(c)
if two or more of the joint owners are present in person or by proxy they must vote as one.
 
65.
A member shall be deemed to be present at a meeting of members if he participates by telephone or other electronic means and all members participating in the meeting are able to hear each other.
 
66.
A meeting of members is duly constituted if, at the commencement of the meeting, there are present in person or by proxy not less than 50 percent of the votes of the shares or class or series of shares entitled to vote on resolutions of members to be considered at the meeting.  If a quorum be present, notwithstanding the fact that such quorum may be represented by only one person then such person may resolve any matter and a certificate signed by such person accompanied where such person be a proxy by a copy of the proxy form shall constitute a valid resolution of members.
 
67.
If within two hours from the time appointed for the meeting a quorum is not present, the meeting, if convened upon the requisition of members, shall be dissolved; in any other case it shall stand adjourned to the next business day at the same time and place or to such other time and place as the directors may determine, and if at the adjourned meeting there are present within one hour from the time appointed for the meeting in person or by proxy not less than one third of the votes of the  shares or each class or series of shares entitled to vote on the resolutions to be considered by the meeting, those present shall constitute a quorum but otherwise the meeting shall be dissolved.
 
68.
At every meeting of members, the Chairman of the Board of Directors shall preside as chairman of the meeting.  If there is no Chairman of the Board of Directors or if the Chairman of the Board of Directors is not present at the meeting, the members present shall choose some one of their number to be the chairman.  If the members are unable to choose a chairman for any reason, then the person representing the greatest number of voting shares present in person or by prescribed form of proxy at the meeting shall preside as chairman failing which the oldest individual member or representative of a member present shall take the chair.
 
69.
The chairman may, with the consent of the meeting, adjourn any meeting from time to time, and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place.
 
70.
At any meeting of the members the chairman shall be responsible for deciding in such manner as he shall consider appropriate whether any resolution has been carried or not and the result of his decision shall be announced to the meeting and recorded in the minutes thereof.  If the chairman shall have any doubt as to the outcome of any resolution put to the vote, he shall cause a poll to be taken of all votes cast upon such resolution, but if the chairman shall fail to take a poll then any member present in person or by proxy who disputes the announcement by the chairman of the result of any vote may immediately following such announcement demand that a poll be taken and the chairman shall thereupon cause a poll to be taken.  If a poll is taken at any meeting, the result thereof shall be duly recorded in the minutes of that meeting by the chairman.
 
71.
Any person other than an individual shall be regarded as one member and subject to the specific provisions hereinafter contained for the appointment of representatives of such persons the right of any individual to speak for or represent such member shall be determined by the law of the jurisdiction where, and by the documents by which, the person is constituted or derives its existence.  In case of doubt, the directors may in good faith seek legal advice from any qualified person and unless and until a court of competent jurisdiction shall otherwise rule, the directors may rely and act upon such advice without incurring any liability to any member.
 
72.
Any person other than an individual which is a member of the Company may by resolution of its directors or other governing body authorize such person as it thinks fit to act as its representative at any meeting of the Company or of any class of members of the Company, and the person so authorized shall be entitled to exercise the same powers on behalf of the person which he represents as that person could exercise if it were an individual member of the Company.
 
 
11
 

73.
The chairman of any meeting at which a vote is cast by proxy or on behalf of any person other than an individual may call for a notarially certified copy of such proxy or authority which shall be produced within 7 days of being so requested or the votes cast by such proxy or on behalf of such person shall be disregarded.
 
74.
Directors of the Company may attend and speak at any meeting of members of the Company and at any separate meeting of the holders of any class or series of shares in the Company.
 
75.
An action that may be taken by the members at a meeting may also be taken by a resolution of members consented to in writing or by telex, telegram, cable, facsimile or other written electronic communication, without the need for any notice, but if any resolution of members is adopted otherwise than by the unanimous written consent of all members, a copy of such resolution shall forthwith be sent to all members not consenting to such resolution.  The consent may be in the form of counterparts, each counterpart being signed by one or more members.
 
DIRECTORS
 
76.
The first directors of the Company shall be appointed by the first registered agent of the Company and thereafter the directors shall be appointed by resolution of members, subject to Article 78, for such term as the members determine.  A person shall not be appointed as a director unless he has consented in writing to be a director.
 
77.
The minimum number of directors shall be one and the maximum number shall be 20. Unless otherwise determined by the Company in a meeting of shareholders and subject to the requirements of the Memorandum, the directors may by a Resolution of Directors, amend this Regulation 77 to change the number of directors. For as long as Securities of the Company are listed or traded on the Designated Stock Exchange, the directors shall include such number of Independent Directors as applicable law, rules or regulations of the Designated Stock Exchange may require for a foreign private issuer as long as the Company is a foreign private issuer.
 
78.
Each director shall hold office for the term, if any, fixed by resolution of members or until his earlier death, resignation or removal.
 
79.
Where the Company has only one member who is an individual and that member is also the sole director of the Company, that sole member/director may, by instrument in writing, nominate a person who is not disqualified from being a director of the Company under section 111(1) of the Act as a reserve director of the Company to act in the place of the sole director in the event of his death.
 
80.
The nomination of a person as a reserve director of the Company ceases to have effect if;
 
 
(a)
before the death of the sole member/director who nominated him;
 
 
(i)
he resigns as reserve director, or
 
 
(ii)
the sole member/director revokes the nomination in writing; or
 
 
(b)
the sole member/director who nominated him ceases to be the sole member/director of the Company for any reason other than his death.
 
81.
A director may be removed from office, with or without cause, by a resolution of directors or a resolution of members. For the purposes of this Regulation 76, “cause” means the willful and continuous failure by a director to substantially perform his duties to the Company (other than any such failure resulting from incapacity due to physical or mental illness) or the willful engaging by the director in gross misconduct materially and demonstrably injurious to the Company. If a director is removed from office without cause by a resolution of the members, for the purposes of this Regulation, the resolution of members will require the affirmative vote of the holders of 66 2 / 3 percent or more of the outstanding votes of the shares entitled to vote thereon.
 
 
12
 

82.
A director may resign his office by giving written notice of his resignation to the Company and the resignation shall have effect from the date the notice is received by the Company or from such later date as may be specified in the notice. A director of the Company shall resign forthwith if he is, or becomes, disqualified to act as a director under the Act.
 
83.
The directors may at any time by resolution of directors appoint any person to be a director to fill a vacancy.  There is a vacancy if a director dies or otherwise ceases to hold office as a director prior to the expiration of his term of office, where his term of office was fixed upon his appointment. The directors may not appoint a director to fill a vacancy for a term exceeding the term that remained when the person who has ceased to be a director left or otherwise ceased to hold office.
 
84.
The Company shall keep a register of directors containing:
 
 
(a)
the names and addresses of the persons who are directors of the Company or who have been nominated as reserve directors of the Company;
 
 
(b)
the date on which each person whose name is entered in the register was appointed as a director of the Company or nominated as a reserve director of the Company;
 
 
(c)
the date on which each person named as a director ceased to be a director of the Company;
 
 
(d)
the date on which the nomination of any person nominated as a reserve director ceased to have effect; and
 
 
(e)
such other information as may be prescribed pursuant to the Act.
 
85.
The original or a copy of any register of directors shall be kept at the office of the registered agent of the Company.
 
86.
The register of directors may be in any such form as the directors may approve but if it is in magnetic, electronic or other data storage form, the company must be able to produce legible evidence of its contents.
 
87.
With the prior or subsequent approval by a resolution of members, the directors may, by a resolution of directors, fix the emoluments of directors with respect to services to be rendered in any capacity to the Company.
 
88.
A director shall not require a share qualification and may be an individual or a company.
 
POWERS OF DIRECTORS
 
89.
The business and affairs of the Company shall be managed by the directors who may pay all expenses incurred preliminary to and in connection with the formation and registration of the Company and may exercise all such powers of the Company as are not by the Act or by the Memorandum or these Articles required to be exercised by the members of the Company, subject to any delegation of such powers as may be authorized by these Articles and to such requirements as may be prescribed by a resolution of members; but no requirement made by a resolution of members shall prevail if it be inconsistent with these Articles nor shall such requirement invalidate any prior act of the directors which would have been valid if such requirement had not been made. Notwithstanding anything in Section 175 of the Act the directors shall have the power to sell, transfer, lease, exchange or otherwise dispose of more than fifty percent of the assets of the Company without submitting a proposal to or obtaining the consent of the members of the Company.
 
 
13
 

90.
If the Company is a wholly-owned subsidiary of a holding company a director may when exercising powers or performing duties as a director act in a manner which he believes is in the best interests of the holding company even though it may not be in the best interests of the Company.
 
91.
The directors may, by a resolution of directors, appoint any person, including a person who is a director, to be an officer or agent of the Company.  The resolution of directors appointing an agent may authorize the agent to appoint one or more substitutes or delegates to exercise some or all of the powers conferred on the agent by the Company.
 
92.
Every officer or agent of the Company has such powers and authority of the directors, including the power and authority to affix the Seal, as are set forth in these Articles or in the resolution of directors appointing the officer or agent, except that no agent has any power or authority with respect to the following;
 
 
(a)
to amend the memorandum or articles;
 
 
(b)
to change the registered office or agent;
 
 
(c)
to designate committees of directors;
 
 
(d)
to delegate powers to a committee of directors;
 
 
(e)
to appoint or remove directors;
 
 
(f)
to appoint or remove an agent;
 
 
(g)
to fix emoluments of directors;
 
 
(h)
to approve a plan of merger, consolidation or arrangement;
 
 
(i)
to make a declaration of solvency for the purposes of section 198(1)(a) of the Act or to approve a liquidation plan;
 
 
(j)
to make a determination under section 57(1) of the Act that the company will, immediately after a proposed distribution, satisfy the solvency test; or
 
 
(k)
to authorise the Company to continue as a company incorporated under the laws of a jurisdiction outside the British Virgin Islands.
 
93.
Any director which is a body corporate may appoint any person its duly authorized representative for the purpose of representing it at meetings of the Board of Directors or with respect to unanimous written consents.
 
94.
The continuing directors may act notwithstanding any vacancy in their body, save that if their number is reduced to their knowledge below the number fixed by or pursuant to these Articles as the necessary quorum for a meeting of directors, the continuing directors or director may act only for the purpose of appointing directors to fill any vacancy that has arisen or for summoning a meeting of members.
 
95.
The directors may by resolution of directors exercise all the powers of the Company to borrow money and to mortgage or charge its undertakings and property or any part thereof, to issue debentures, debenture stock and other securities whenever money is borrowed or as security for any debt, liability or obligation of the Company or of any third party.
 
96.
All cheques, promissory notes, drafts, bills of exchange and other negotiable instruments and all receipts for moneys paid to  the  Company, shall be signed, drawn, accepted, endorsed or otherwise executed, as the case may be, in such manner as shall from time to time be determined by resolution of directors.
 
 
14
 

97.
The Company shall keep a register of all relevant charges created by the Company showing:
 
 
(a)
if the charge is a charge created by the Company, the date of its creation or if the charge is existing on property acquired by the Company, the date on which the property was acquired;
 
 
(b)
a short description of the liability secured by the charge;
 
 
(c)
a short description of the property charged;
 
 
(d)
the name and address of the trustee for the security, or if there is no such trustee the name and address of the chargee;
 
 
(e)
unless the charge is a security to bearer, the name and address of the holder of the charge;
 
 
(f)
details of any prohibition or restriction , if any, contained in the instrument creating the charge on the power of the company to create any future charge ranking in priority to or equally with the charge; and
 
 
(g)
such other information as may be prescribed pursuant to the Act.
 
98.
The original or a copy of the register of charges shall be kept at the registered office of the Company or at the office of the registered agent of the Company.
 
98A.
A director of the Company may, when exercising his powers of performing his duties as a director in a manner in which he believes to be in the best interests of the Company or in the best interests of the shareholders appointing him, shall be in the best interests of the Company.
 
PROCEEDINGS OF DIRECTORS
 
99.
The directors of the Company or any committee thereof may meet at such times and in such manner and places within or outside the British Virgin Islands as the directors may determine to be necessary or desirable. Any one or more directors may convene a meeting of directors.
 
100.
A director shall be deemed to be present at a meeting of directors if he participates by telephone or other electronic means and all directors participating in the meeting are able to hear each other.
 
101.
A director shall be given not less than 3 days notice of meetings of directors, but a meeting of directors held without 3 days notice having been given to all directors shall be valid if all the directors entitled to vote at the meeting who do not attend, waive notice of the meeting and for this purpose, the presence of a director at a meeting shall constitute waiver on his part.  The inadvertent failure to give notice of a meeting to a director, or the fact that a director has not received the notice, does not invalidate the meeting.
 
102.
A director may by a written instrument appoint an alternate who need not be a director and an alternate is entitled to attend meetings in the absence of the director who appointed him and to vote or consent in place of the director.
 
103.
A meeting of directors is duly constituted for all purposes if at the commencement of the meeting there are present in person or by alternate not less than one half of the total number of directors, unless there are only 2 directors in which case the quorum shall be 2.
 
104.
If the Company shall have only one director the provisions herein contained for meetings of the directors shall not apply but such sole director shall have full power to represent and act for the Company in all matters as are not by the Act or the Memorandum or these Articles required to be exercised by the members of the Company and in lieu of minutes of a meeting shall record in writing and sign a note or memorandum of all matters requiring a resolution of directors.  Such a note or memorandum shall constitute sufficient evidence of such resolution for all purposes.
 
 
15
 

105.
At every meeting of the directors the Chairman of the Board of Directors shall preside as chairman of the meeting.  If there is no Chairman of the Board of Directors or if the Chairman of the Board of Directors is not present at the meeting the Vice Chairman of the Board of Directors shall preside.  If there is no Vice Chairman of the Board of Directors or if the Vice Chairman of the Board of Directors is not present at the meeting the directors present shall choose some one of their number to be chairman of the meeting.
 
106.
An action that may be taken by the directors or a committee of directors at a meeting may also be taken by a resolution of directors or a committee of directors consented to in writing or by telex, telegram, cable, facsimile or other written electronic communication by all directors or all members of the committee as the case may be, without the need for any notice.  The consent may be in the form of counterparts, each counterpart being signed by one or more directors.
 
107.
The directors shall cause the following records to be kept:
 
 
(a)
minutes of all meetings of directors, members, committees of directors and committees of members; and
 
 
(b)
copies of all resolutions consented to by directors, members, committees of directors and committees of members.
 
108.
The resolutions, records and minutes referred to in the preceding Article shall be kept at the registered office of the Company, its principal place of business or at such other place as the directors determine.
 
109.
The directors may, by resolution of directors, designate one or more committees, each consisting of one or more directors.
 
110.
Subject to the following Article, each committee of directors has such powers and authorities of the directors, including the power and authority to affix the Seal, as are set forth in the resolution of directors establishing the committee.
 
111.
The directors have no power to delegate the following powers to a committee of directors;
 
 
(a)
to amend the memorandum or articles;
 
 
(b)
to change the registered office or agent;
 
 
(c)
to designate committees of directors;
 
 
(d)
to delegate powers to a committee of directors;
 
 
(e)
to appoint or remove directors;
 
 
(f)
to appoint or remove an agent;
 
 
(g)
to fix emoluments of directors;
 
 
(h)
to approve a plan of merger, consolidation or arrangement;
 
 
(i)
to make a declaration of solvency for the purposes of section 198(1)(a) or to approve a liquidation plan;
 
 
16
 

 
(j)
to make a determination under section 57(1) that the company will, immediately after a proposed distribution, satisfy the solvency test; or
 
 
(k)
to authorise the company to continue as a company incorporated under the laws of a jurisdiction outside the British Virgin Islands.
 
Paragraphs (c) and (d) do not prevent a committee of directors, where authorised by the directors, from appointing a sub-committee and delegating powers exercisable by the committee to the sub-committee.
 
112.
The meetings and proceedings of each committee of directors consisting of 2 or more directors shall be governed mutatis mutandis by the provisions of these Articles regulating the proceedings of directors so far as the same are not superseded by any provisions in the resolution establishing the committee.
 
113.
Without prejudice to the freedom of the directors to establish any other committee, if the shares (or depositary receipts therefore) are listed or quoted on the Designated Stock Exchange, and if required by the Designated Stock Exchange, the directors shall establish and maintain an audit committee as a committee of the board of directors, the composition and responsibilities of which shall comply with the rules and regulations of the SEC and the Designated Stock Exchange.  The audit committee shall meet at least once every financial quarter, or more frequently as circumstances dictate.
 
114.
The Company shall adopt a formal written audit committee charter and review and assess the adequacy of the formal written charter on an annual basis. The charter shall specify the responsibilities of the Audit Committee which shall include responsibility for, among other things, ensuring its receipt from the outside auditors of the Company of a formal written statement delineating all relationships between the auditor and the Company, and the Audit Committee’s responsibility for actively engaging in a dialogue with the auditor with respect to any disclosed relationships or services that may impact the objectivity and independence of the auditor take appropriate action to oversee the independence of the outside auditor. In addition, the Audit Committee is responsible for reviewing potential conflict of interest situations and approving all Related Party Transactions.
 
115.
Without prejudice to the freedom of the directors to establish any other committees, the Board may establish a Stock Option Committee to administer the Company’s stock option plans, including authority to make and modify awards under such plans. For so long as the Securities of the Company are listed or traded on the Designated Stock Exchange, the Stock Option Committee shall have at least two Independent Directors. The Stock Option Committee will administer the Company’s stock option plans, including the authority to make and modify awards under such plans.
 
116.
Without prejudice to the freedom of the directors to establish any other committees, the Board may establish a Nominating Committee to assist the Board in identifying qualified individuals to become members of the Board.
 
OFFICERS
 
117.
The Company may by resolution of directors appoint officers of the Company at such times as shall be considered necessary or expedient.  Such officers may consist of a Chairman of the Board of Directors, a Vice Chairman of the Board of Directors, a President and one or more Vice Presidents, Secretaries and Treasurers and such other officers as may from time to time be deemed desirable.  Any number of offices may be held by the same person.
 
118.
The officers shall perform such duties as shall be prescribed at the time of their appointment subject to any  modification in such duties as may be prescribed thereafter by resolution of directors or resolution of members, but in the absence of any specific allocation of duties it shall be the responsibility of the Chairman of the Board of Directors to preside at meetings of directors and members, the Vice Chairman to act in the absence of the Chairman, the President to manage the day to day affairs of the Company, the Vice Presidents to act in order of seniority in the absence of the President but otherwise to perform such duties as may be delegated to them by the President, the Secretaries to maintain the share register, minute books and records (other than financial records) of the Company and to ensure compliance with all procedural requirements imposed on the Company by applicable law, and the Treasurer to be responsible for the financial affairs of the Company.
 
 
17
 

119.
Subject to the rules of the Designated Stock Exchange, the emoluments of all officers shall be fixed by resolution of directors.
 
120.
The officers of the Company shall hold office until their successors are duly elected and qualified, but any officer elected or appointed by the directors may be removed at any time, with or without cause, by resolution of directors.  Any vacancy occurring in any office of the Company may be filled by resolution of directors.
 
CONFLICT OF INTERESTS
 
121.
A director of the Company shall, forthwith after becoming aware of the fact that he is interested in a transaction entered into or to be entered into by the Company, disclose the interest to all other directors of the Company.
 
122.
A director of the Company is not required to comply with Article 121 if;
 
 
(a)
the transaction or proposed transaction is between the director and the Company; and
 
 
(b)
the transaction or proposed transaction is or is to be entered into in the ordinary course of the company’s business and on usual terms and conditions.
 
123.
For the purposes of Article 112 a disclosure to all other directors to the effect that a director is a member, director or officer of another named entity or has a fiduciary relationship with respect to the entity or a named individual and is to be regarded as interested in any transaction which may, after the date of the entry or disclosure, be entered into with that entity or individual, is a sufficient disclosure of interest in relation to that transaction.
 
124.A.
A director of the Company who is interested in a transaction entered into or to be entered into by the Company may:
 
 
(i)
vote on a matter relating to the transaction;
 
 
(ii)
attend a meeting of directors at which a matter relating to the transaction arises and be included among the directors present at the meeting for the purposes of a quorum; and
 
 
(iii)
sign a document on behalf of the Company, or do any other thing in his capacity as a director, that relates to the transaction,
 
and, subject to compliance with the Act shall not, by reason of his office be accountable to the Company for any benefit which he derives from such transaction and no such transaction shall be liable to be avoided on the grounds of any such interest or benefit.
 
124.B.
For so long the Securities of the Company are listed or traded on the Designated Stock Exchange, the Company shall conduct an appropriate review of all material Related Party Transactions on an ongoing basis and shall utilize the Audit Committee for the review and approval of potential conflicts of interest situations.
 
 
18
 

INDEMNIFICATION
 
125.
Subject to the limitations hereinafter provided the Company may indemnify against all expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred in connection with legal, administrative  or  investigative proceedings any person who;
 
 
(a)
is or was a party or is threatened to be made a party to any threatened, pending or completed proceedings, whether civil, criminal, administrative or investigative, by reason of the fact that the person is or was a director, an officer or a liquidator of the Company; or
 
 
(b)
is or was, at the request of the Company, serving as a director of, or in any other capacity is or was acting for, another body corporate or a partnership, joint venture, trust or other enterprise.
 
126.
The Company may only indemnify a person if the person acted honestly and in good faith in what he believed to be in the best interests of the Company and, in the case of criminal proceedings, the person had no reasonable cause to believe that his conduct was unlawful.
 
127.
For the purposes of the preceding Article, a director acts in the best interests of the Company if he acts in the best interests of;
 
 
(a)
the Company’s holding company; or
 
 
(b)
a shareholder or shareholders of the Company;
 
in either case, in the circumstances specified in Article 98B.
 
128.
The decision of the directors as to whether the person acted honestly and in good faith and with a view to the best interests of the Company and as to whether the person had no reasonable cause to believe that his conduct was unlawful is, in the absence of fraud, sufficient for the purposes of these Articles, unless a question of law is involved.
 
129.
The termination of any proceedings by any judgment, order, settlement, conviction or the entering of a nolle prosequi does not, by itself, create a presumption that the person did not act honestly and in good faith and with a view to the best interests of the Company or that the person had reasonable cause to believe that his conduct was unlawful.
 
130.
Expenses, including legal fees, incurred by a director in defending any legal, administrative or investigative proceedings may be paid by the Company in advance of the final disposition of such proceedings upon receipt of an undertaking by or on behalf of the director to repay the amount if it shall ultimately be determined that the director is not entitled to be indemnified by the Company in accordance with these Articles.
 
131.
Expenses, including legal fees, incurred by a former director in defending any legal, administrative or investigative proceedings may be paid by the Company in advance of the final disposition of such proceedings upon receipt of an undertaking by or on behalf of the former director to repay the amount if it shall ultimately be determined that the director is not entitled to be indemnified by the Company in accordance with these Articles.
 
132.
The indemnification and advancement of expenses provided by, or granted pursuant to, these Articles is not exclusive of any other rights to which the person seeking indemnification of advancement of expenses may be entitled under any agreement, resolution of members, resolution of disinterested directors or otherwise, both as to acting in the person’s official capacity and as to acting in another capacity while serving as a director of the Company.
 
 
19
 

133.
If a person to be indemnified has been successful in defence of any proceedings referred to above the person is entitled to be indemnified against all expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred by the person in connection with the proceedings.
 
134.
The Company may purchase and maintain insurance in relation to any person who is or was a director, an officer or a liquidator of the Company, or who at the request of the Company is or was serving as a director, an officer or a liquidator of, or in any other capacity is or was acting for, another body corporate or a  partnership, joint  venture, trust or other enterprise, against any liability  asserted against the person and incurred by the person in that capacity, whether or not the Company has or would have had the power to indemnify the person against the liability as provided in these Articles.
 
135.
The Company shall have a Seal and may have more than one Seal. References herein to the Seal shall be references to every Seal which shall have been duly adopted by resolution of directors.  The directors shall provide for the safe custody of the Seal and for an imprint thereof to be kept at the office of the registered agent of the Company.  Except as otherwise expressly provided herein, the Seal when affixed to any written instrument, shall be witnessed and attested to by the signature of a director or any other person so authorized from time to time by resolution of directors.  Such authorization may be before or after the Seal is affixed, may be general or specific and may refer to any number of sealings. The Directors may provide for a facsimile of the Seal and of the signature of any director or authorized person which may be reproduced by printing or other means on any instrument and it shall have the same force and validity as if the Seal had been affixed to such instrument and the same had been signed as hereinbefore described.
 
DISTRIBUTIONS
 
136.
The directors of the Company may  by resolution authorise a distribution by the Company at any time and of any amount and to any members they think fit if they are satisfied on reasonable grounds that immediately after the distribution;
 
 
(a)
the value of the Company’s assets will exceed its liabilities, and
 
 
(b)
the Company will be able to pay its debts as they fall due.
 
137.
A resolution of the directors passed under the preceding Article shall contain a statement that, in the opinion of the directors, immediately after the distribution the value of the Company’s assets will exceed its liabilities, and the Company will be able to pay its debts as they fall due.
 
138.
If, after a distribution is authorised and before it is made, the directors cease to be satisfied on reasonable grounds that the Company will, immediately after the distribution satisfy the solvency test, any distribution made by the Company is deemed not to have been authorised.
 
139.
If, by virtue of the preceding Article, a distribution is deemed not to have been authorised, a director who;
 
 
(a)
ceased, after authorisation but before the making of the distribution, to be satisfied on reasonable grounds for believing that the company would satisfy the solvency test immediately after the distribution is made; and
 
 
(b)
failed to take reasonable steps to prevent the distribution being made;
 
is personally liable to the company to repay to the company so much of the distribution as is not able to be recovered from members.
 
140.
A distribution made to a member at a time when the company did not, immediately after the distribution, satisfy the solvency test may be recovered by the company from the member unless;
 
 
20
 

 
(a)
the member received the distribution in good faith and without knowledge of the company’s failure to satisfy the solvency test;
 
 
(b)
the member has altered his position in reliance on the validity of the distribution; and
 
 
(c)
it would be unfair to require repayment in full or at all.
 
DISTRIBUTIONS BY WAY OF DIVIDEND
 
141.
The Company may by a resolution of directors declare a distribution by way of dividend and pay such distribution in money, shares or other property.  In the event that distributions by way of dividend are paid in specie the directors shall have responsibility for establishing and recording in the resolution of directors authorizing the distribution by way of dividend, a fair and proper value for the assets to be so distributed.
 
142.
The directors may from time to time pay to the members such interim distributions by way of dividend as appear to the directors to be justified by the profits of the Company.
 
143.
The directors may, before declaring any distribution by way of dividend, set aside out of the profits of the Company such sum as they think proper as a reserve fund, and may invest the sum so set aside as a reserve fund upon such securities as they may select.
 
144.
Notice of any distribution by way of dividend that may have been declared shall be given to each member in the manner hereinafter mentioned and all distributions by way of dividend unclaimed for 3 years after having been declared may be forfeited by resolution of directors for the benefit of the Company.
 
145.
No distribution by way of dividend shall bear interest as against the Company and no distribution by way of dividend shall be paid on treasury shares or shares held by another company of which the Company holds, directly or indirectly, shares having more than 50 percent of the vote in electing directors.
 
146.
A share issued as a distribution by way of dividend by the Company shall be treated for all purposes as having been issued for money equal to the value determined by resolution of the directors.  In the absence of fraud the decision of the directors as to the value of the share is conclusive unless a question of law is involved.
 
147.
A division of the issued and outstanding shares of a class or series of shares into a larger number of shares of the same class or series having a proportionately smaller par value does not constitute a distribution by way of dividend of shares.
 
ACCOUNTS AND AUDIT
 
148.
The Company may by resolution of members call for the directors to prepare periodically a profit and loss account and a balance sheet.  The profit and loss account and balance sheet shall be drawn up so as to give respectively a true and fair view of the profit and loss of the Company for the financial period and a true and fair view of the state of affairs of the Company as at the end of the financial period.
 
149.
The Company may by resolution of members call for the accounts to be examined by auditors.
 
150.
Subject to the rules of the Designated Stock Exchange, the first auditors shall be appointed by resolution of directors; subsequent auditors shall be appointed by the Audit Committee and shall hold office until the Audit Committee appoint another independent auditor.
 
151.
Subject to the rules of the Designated Stock Exchange, the remuneration of the auditors of the Company shall be fixed by the Audit Committee.
 
 
21
 

152.
The auditors shall examine each profit and loss account and balance sheet required to be served on every member of the Company or laid before a meeting of the members of the Company and shall state in a written report whether or not
 
 
(a)
in their opinion the profit and loss account and balance sheet give a true and fair view respectively of the profit and loss for the period covered by the accounts, and of the state of affairs of the Company at the end of that period; and
 
 
(b)
all the information and explanations required by the auditors have been obtained.
 
153.
The report of the auditors shall be annexed to the accounts and shall be read at the meeting of members at which the accounts are laid before the Company or shall be served on the members.
 
154.
Every auditor of the Company shall have a right of access at all times to the books of account and vouchers of the Company, and shall be entitled to require from the directors and officers of the Company such information and explanations as he thinks necessary for the performance of the duties of the auditors.
 
155.
The auditors of the Company shall be entitled to receive notice of, and to attend any meetings of members of the Company at which the Company’s profit and loss account and balance sheet are to be presented.
 
156.
Any notice, information or written statement to be given by the Company to members may be served in any way by which it can reasonably be expected to reach each member or by mail addressed to each member at the address shown in the share register.
 
157.
Any summons, notice, order, document, process, information or written statement to be served on the Company may be served by leaving it, or by sending it by registered mail addressed to the Company, at its registered office, or by leaving it with, or by sending it by registered mail to, the registered agent of the Company.
 
158.
Service of any summons, notice, order, document, process, information or written statement to be served on the Company may be proved by showing that the summons, notice, order, document, process, information or written statement was delivered to the registered office or the registered agent of the Company or that it was mailed in such time as to admit to its being delivered to the registered office or the registered agent of the Company in the normal course of delivery within the period prescribed for service and was correctly addressed and the postage was prepaid.
 
PENSION AND SUPERANNUATION FUNDS
 
159.
The directors may establish and maintain or procure the establishment and maintenance of any non-contributory or contributory pension or superannuation funds for the benefit of, and give or procure the giving of donations, gratuities, pensions, allowances or emoluments to, any persons who are or were at any time in the employment or service of the Company or any company which is a subsidiary of the Company or is allied to or associated with the Company or with any such subsidiary, or who are or were at any time directors or officers of the Company or of any such other company as aforesaid or who hold or held any salaried employment or office in the Company or such other company, or any persons in whose welfare the Company or any such other company as aforesaid is or has been at any time interested, and to the wives, widows, families and dependents of any such person, and may make payments for or towards the insurance of any such persons as aforesaid, and may do any of the matters aforesaid either alone or in conjunction with any such other  company as aforesaid.  Subject always to the proposal being approved by resolution of members, a director holding any such employment or office shall be entitled to participate in and retain for his own benefit any such donation, gratuity, pension allowance or emolument.
 
 
22
 

VOLUNTARY WINDING UP AND DISSOLUTION
 
160.
The Company may voluntarily commence to wind up and dissolve by a resolution of members but if the Company has never issued shares it may voluntarily commence to wind up and dissolve by resolution of directors.
 
CONTINUATION
 
161.
The Company may by resolution of members or by a resolution passed unanimously by all directors of the Company continue as a company incorporated under the laws of a jurisdiction outside the British Virgin Islands in the manner provided under those laws.
 
ARBITRATION
 
162.
Whenever any difference arises between the Company on the one hand and any of the members or their executors, administrators or assigns on the other hand, touching the true intent and construction or the incidence or consequences of these Articles or of the Act, touching anything done or executed, omitted or suffered in pursuance of the Act or touching any breach or alleged breach or otherwise relating to the premises or to these Articles, or to any Act or Ordinance affecting the Company or to any of the affairs of the Company such difference shall, unless the parties agree to refer the same to a single arbitrator, be referred to 2 arbitrators one to be chosen by each of the parties to the difference and the arbitrators shall before entering on the reference appoint an umpire.
 
163.
If either party to the reference makes default in appointing an arbitrator either originally or by way of substitution (in the event that an appointed arbitrator shall die, be incapable of acting or refuse to act) for 10 days after the other party has given him notice to appoint the same, such other party may appoint an arbitrator to act in the place of the arbitrator of the defaulting party.
 
GENERAL MEETINGS
 
164.
An annual general meeting of the Company shall be held in each year other than the year of the Company’s incorporation at such time and place as may be determined by the Board.
 
165.
Each general meeting, other than an annual general meeting, shall be called an extraordinary general meeting.  General meetings may be held at such times and in any location in the world as may be determined by the Board.
 
166.
Only a majority of the Board or the Chairman of the Board may call extraordinary general meetings, which extraordinary general meetings shall be held at such times and locations (as permitted hereby) as such person or persons shall determine.
 
NOTICE OF GENERAL MEETINGS

167.
(1)          An annual general meeting and any extraordinary general meeting may be called by not less than ten (10) clear days’ notice but a general meeting may be called by shorter notice, subject to the Act, if it is so agreed:
 
 
(a)
in the case of a meeting called as an annual general meeting, by all the members entitled to attend and vote thereat; and

 
(b)
in the case of any other meeting, by a majority in number of the members having the right to attend and vote at the meeting, being a majority together holding not less than ninety-five per cent (95%) in nominal value of the issued shares giving that right.

 
23
 

 
(2)
The notice shall specify the time and place of the meeting and, in case of special business, the general nature of the business.  The notice convening an annual general meeting shall specify the meeting as such.  Notice of every general meeting shall be given to all members other than to such members as, under the provisions of these Articles or the terms of issue of the shares they hold, are not entitled to receive such notices from the Company, to all persons entitled to a share in consequence of the death or bankruptcy or winding-up of a member and to each of the directors and the auditors.

168.
The accidental omission to give notice of a meeting or (in cases where instruments of proxy are sent out with the notice) to send such instrument of proxy to, or the non-receipt of such notice or such instrument of proxy by, any person entitled to receive such notice shall not invalidate any resolution passed or the proceedings at that meeting.
 
We, [name and address of registered agent] for the purpose of incorporating a BVI Business Company under the laws of the British Virgin Islands hereby sign these Articles of Association the __ day of June, 2010.
 
Incorporator
 
 
[Name and address of registered agent]
 
 
24
 
 
 
Exhibit 4.1
 
 
SHARE EXCHANGE AGREEMENT
 
by and among
 
ULTRA GLORY INTERNATIONAL LTD.
 
THE SHAREHOLDER OF
ULTRA GLORY INTERNATIONAL LTD.
 
OSSEN INNOVATION MATERIALS GROUP LTD. CO.
 
And
 
THE SHAREHOLDERS OF
OSSEN INNOVATION MATERIALS GROUP LTD. CO.
 
Dated as of July 7, 2010
 
 
 
 
 
 
TABLE OF CONTENTS
 
   
Page
     
ARTICLE I  Exchange of Shares
1
1.1
Share Exchange
1
1.2
Closing
2
     
ARTICLE II  Representations and Warranties of the Ossen Shareholders
2
2.1
Good Title
2
2.2
Organization
2
2.3
Power and Authority
2
2.4
No Conflicts
2
2.5
Litigation
2
2.6
No Finder’s Fee
2
2.7
Purchase Entirely for Own Account
2
2.8
Available Information
2
2.9
Non-Registration
3
2.10
Restricted Securities
3
2.11
Accredited Investor
3
2.12
Additional Legend
3
2.13
Disclosure
3
     
ARTICLE III  Representations and Warranties of Ossen
3
3.1
Organization, Standing and Power
3
3.2
Subsidiaries; Equity Interests
4
3.3
Capital Structure
4
3.4
Authority; Execution and Delivery; Enforceability
4
3.5
No Conflicts; Consents
4
3.6
Taxes
5
3.7
Benefit Plans
5
3.8
Litigation
5
3.9
Compliance with Applicable Laws
5
3.10
Contracts
5
3.11
Title to Properties
6
3.12
Intellectual Property
6
3.13
Labor Matters
6
3.14
Financial Statements; Liabilities
6
3.15
Investment Company
6
3.16
Foreign Corrupt Practices
6
3.17
Absence of Certain Changes or Events
6
3.18
Disclosure
7
     
ARTICLE IV  Representations and Warranties of Shell Company
7
4.1
Organization, Standing and Power
7
4.2
Subsidiaries; Equity Interests
8
4.3
Capital Structure
8
4.4
Authority; Execution and Delivery; Enforceability
8
4.5
No Conflicts; Consents
8
4.6
Taxes
9
4.7
Benefit Plans
9
4.8
Benefit Plans
9
4.9
Litigation
9
4.10
Compliance with Applicable Laws
9
4.11
Contracts
10
4.12
Title to Properties
10
 
 
i
 

 
4.13
Intellectual Property
10
4.14
Labor Matters
10
4.15
SEC Documents; Undisclosed Liabilities
10
4.16
Transactions With Affiliates and Employees
11
4.17
Investment Company
11
4.18
Foreign Corrupt Practices
11
4.19
Absence of Certain Changes or Events
11
4.20
Certain Registration Matters
12
4.21
Disclosure
12
4.22
No Undisclosed Events, Liabilities, Developments or Circumstances
12
4.23
No Additional Agreements
12
     
ARTICLE V  Representations and Warranties of the Shell Company Shareholder
12
5.1
Good Title
12
5.2
Power and Authority
12
5.3
No Conflicts
13
5.4
Litigation
13
5.5
No Finder’s Fee
13
5.6
Disclosure
13
     
ARTICLE VI  Conditions to Closing
13
6.1
Shell Company Conditions Precedent
13
6.2
Ossen Conditions Precedent
14
     
ARTICLE VII  Covenants
15
7.1
Amended Charter
15
7.2
Public Announcements
15
7.3
Fees and Expenses
16
7.4
Continued Efforts
16
7.5
Exclusivity
16
7.6
Filing of 20-F
16
7.7
Furnishing of Information
16
7.8
Access
16
7.9
Preservation of Business
16
     
ARTICLE VIII  Miscellaneous
16
8.1
Notices
16
8.2
Amendments; Waivers
17
8.3
Replacement of Securities
17
8.4
Remedies
18
8.5
Limitation of Liability
18
8.6
Interpretation
18
8.7
Severability
18
8.8
Counterparts; Facsimile Execution
18
8.9
Entire Agreement; Third Party Beneficiaries
18
8.10
Survival
18
8.11
Governing Law
18
8.12
Assignment
18
     
SCHEDULE A
20
ANNEX A Definitions
22
 
 
ii
 

SHARE EXCHANGE AGREEMENT
 
This SHARE EXCHANGE AGREEMENT (this “ Agreement ”), dated as of July 7, 2010, is by and among Ultra Glory International Ltd., a British Virgin Islands company (the “ Shell Company ”), the shareholder of the Shell Company set forth on Schedule A hereto (the “ Shell Company Shareholder ”), Ossen Innovation Materials Group Co., Ltd., a British Virgin Islands company (“ Ossen ”), and the shareholders of Ossen set forth on Schedule A hereto (the “ Ossen Shareholders ”). Each of the parties to this Agreement is individually referred to herein as a “ Party ” and collectively, as the “ Parties .” Capitalized terms used herein that are not otherwise defined herein shall have the meanings ascribed to them in Annex A hereto.
 
BACKGROUND
 
A.          Shell Company is a company incorporated with limited liability under the laws of the British Virgin Islands with no significant operations.
 
B.           Ossen is a company incorporated with limited liability under the laws of the British Virgin Islands.  Ossen indirectly owns 81% of the issued and outstanding capital stock of Ossen Innovation Materials Co., Ltd., (“ Ossen Materials ”), a company incorporated under the laws of the People’s Republic of China. Ossen Materials owns 75% of the issued and outstanding capital stock of Ossen (Jiujiang) Steel Wire & Cable Co., Ltd., a company incorporated under the laws of the People’s Republic of China (“Ossen Jiujiang”) and Topchina Development Group Ltd., a company incorporated with limited liability under the laws of the British Virgin Islands, which is wholly owned by Ossen, owns 25% of the issued and outstanding capital stock of Ossen Jiujiang.
 
C.           Ossen has 50,000 ordinary shares (the “ Ossen Stock ”) issued and outstanding, all of which are held by the Ossen Shareholders according to the allocation set forth on Schedule A hereto.  Each of the Ossen Shareholders has agreed to transfer each of its shares of Ossen Stock in exchange for two hundred newly issued ordinary shares of Shell Company (the “ Shell Company Stock ”).
 
D.           The Shell Company Shareholder has agreed to transfer all of the capital stock of the Shell Company issued and outstanding on the Closing Date in exchange for an aggregate of $150,000 (which is equal to $0.03 per share following the effectiveness of the Amended Charter (defined below)) in cash.
 
E.           The Shell Company Stock to be issued and transferred to the Ossen Shareholders pursuant to this Agreement constitutes all of the issued and outstanding capital stock of the Shell Company as of and immediately after the Closing (as defined in Section 1.2 below).
 
F.           The Board of Directors of each of the Shell Company and Ossen has determined that it is desirable to effect this plan of reorganization and share exchange.
 
AGREEMENT
 
NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, and intending to be legally bound hereby, the Parties agree as follows:
 
ARTICLE I
Exchange of Shares
 
1.1           Share Exchange .  At the Closing, (i) each of the Ossen Shareholders shall sell, transfer, convey, assign and deliver to the Shell Company each share of its Ossen Stock free and clear of all Liens, in exchange for two hundred newly issued shares of Shell Company Stock (referred to herein as the “ Shares ”) per share of Ossen Stock, according to the allocation set forth on Schedule B hereto and (ii) the Shell Company Shareholder shall sell, transfer, convey, assign and deliver to the Ossen Shareholders all of the capital stock of the Shell Company issued and outstanding on the Closing Date free and clear of all Liens in exchange for an aggregate of $150,000 (which is equal to $0.03 per share following the effectiveness of the Amended Charter (defined below)) in cash, according to the allocation set forth on Schedule B hereto.
 
 
 
 
 
1.2            Closing .  The closing (the “ Closing ”) of the transactions contemplated hereby (the “ Transactions ”) shall take place at the offices of Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of the Americas, New York, New York 10036, commencing at 9:00 a.m. local time on the second business day following the satisfaction or waiver of all conditions to the obligations of the Parties to consummate the Transactions (other than conditions with respect to actions that the respective parties will take at Closing) or such other date and time as the Parties may mutually determine (the “ Closing Date ”).  Subsequent to the Closing, the Ossen Shareholders shall bear responsibility for registering the Transactions with the Shell Company’s registered agent in the British Virgin Islands.
 
ARTICLE II
Representations and Warranties of the Ossen Shareholders
 
Each of the Ossen Shareholders severally (and not jointly) hereby represents and warrants to Shell Company and Shell Company Shareholder as follows.
 
2.1            Good Title .  The Ossen Shareholder is the record and beneficial owner, and has good title to its Ossen Stock, with the right and authority to sell and deliver such Ossen Stock, free and clear of all Liens, claims, charges, encumbrances, pledges, mortgages, security interests, options, rights to acquire, proxies, voting trusts or similar agreements, restrictions on transfer or adverse claims of any nature whatsoever. Upon delivery of any certificate or certificates duly assigned, representing the same as herein contemplated and/or upon registering of Shell Company as the new owner of such Ossen Stock in the share register of Ossen, Shell Company will receive good title to such Ossen Stock, free and clear of all Liens.
 
2.2            Organization .  The Ossen Shareholder is duly organized and validly existing in its jurisdiction of organization.
 
2.3            Power and Authority .  The Ossen Shareholder has the legal power and authority to execute and deliver this Agreement and to perform its obligations hereunder. All acts required to be taken by the Ossen Shareholder to enter into this Agreement and to carry out the Transactions have been properly taken. This Agreement constitutes a legal, valid and binding obligation of the Ossen Shareholder, enforceable against the Ossen Shareholders in accordance with the terms hereof.
 
2.4            No Conflicts .  The execution and delivery of this Agreement by the Ossen Shareholder and the performance by the Ossen Shareholder of its obligations hereunder in accordance with the terms hereof: (a) will not require the consent of any third party or Governmental Entity under any Laws; (b) will not violate any Laws applicable to the Ossen Shareholder; and (c) will not violate or breach any contractual obligation to which the Ossen Shareholder is a party.
 
2.5            Litigation .  There is no pending proceeding against the Ossen Shareholder that involves the Shares or that challenges, or may have the effect of preventing, delaying or making illegal, or otherwise interfering with, any of the Transactions and, to the knowledge of the Ossen Shareholder, no such proceeding has been threatened, and no event or circumstance exists that is reasonably likely to give rise to or serve as a basis for the commencement of any such proceeding.
 
2.6            No Finder’s Fee .  The Ossen Shareholder has not created any obligation for any finder’s, investment banker’s or broker’s fee in connection with the Transactions that are not payable entirely by the Ossen Shareholder.
 
2.7            Purchase Entirely for Own Account .  The Ossen Shareholder is acquiring the Shell Company Stock proposed to be acquired hereunder for investment for its own account and not with a view to the resale or distribution of any part thereof, and the Ossen Shareholder has no present intention of selling or otherwise distributing the Shell Company Stock, except in compliance with applicable securities laws.
 
2.8            Available Information .  The Ossen Shareholder has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of investment in Shell Company and has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the Shell Company Stock.
 
 
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2.9          Non-Registration .  The Ossen Shareholder understands that the Shell Company Stock has not been registered under the Securities Act and, if issued in accordance with the provisions of this Agreement, will be issued by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Ossen Shareholder’s  representations as expressed herein. The non-registration shall have no prejudice with respect to any rights, interests, benefits and entitlements attached to the Shell Company Stock in accordance with the Shell Company Constituent Instruments or the laws of its jurisdiction of incorporation.
 
2.10        Restricted Securities .  The Ossen Shareholder understands that the Shares are characterized as “restricted securities” under the Securities Act inasmuch as this Agreement contemplates that, if acquired by the Ossen Shareholder pursuant hereto, the Shares would be acquired in a transaction not involving a public offering. The issuance of the Shares hereunder is being effected in reliance upon an exemption from registration afforded under Section 4(2) of the Securities Act for transactions by an issuer not involving a public offering. The Ossen Shareholder further acknowledges that if the Shares are issued to the Ossen Shareholder in accordance with the provisions of this Agreement, such Shares may not be resold without registration under the Securities Act or the existence of an exemption therefrom. The Ossen Shareholder represents that it is familiar with Rule 144 promulgated under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.
 
2.11        Accredited Investor .  The Ossen Shareholder is an “accredited investor” within the meaning of Rule 501 under the Securities Act and the Ossen Shareholder was not organized for the specific purpose of acquiring the Shares.
 
2.12        Additional Legend .  The Ossen Shareholder consents to Shell Company making a notation on its records or giving instructions to any transfer agent of Shares in order to implement the restrictions on transfer of the Shares.
 
2.13        Disclosure .  This Agreement, the schedules hereto and any certificate attached hereto or delivered in accordance with the terms hereof by or on behalf of the Ossen Shareholder in connection with the Transactions, when taken together, do not contain any untrue statement of a material fact or omit any material fact necessary in order to make the statements contained herein and/or therein not misleading.
 
ARTICLE III
Representations and Warranties of Ossen
 
Subject to the exceptions set forth in the Ossen Disclosure Letter (regardless of whether or not the Ossen Disclosure Letter is referenced below with respect to any particular representation or warranty), Ossen represents and warrants to Shell Company, the Shell Company Shareholder and the Ossen Shareholders as follows.
 
3.1         Organization, Standing and Power .  Ossen and each of its subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized and has the corporate power and authority and possesses all governmental franchises, licenses, permits, authorizations and approvals necessary to enable it to own, lease or otherwise hold its properties and assets and to conduct its businesses as presently conducted, other than such franchises, licenses, permits, authorizations and approvals the lack of which, individually or in the aggregate, has not had and would not reasonably be expected to have a material adverse effect on Ossen and its subsidiaries taken as a whole, a material adverse effect on the ability of Ossen to perform its obligations under this Agreement or on the ability of Ossen to consummate the Transactions (a “ Ossen Material Adverse Effect ”). Ossen and each of its subsidiaries is duly qualified to do business in each jurisdiction where the nature of its business or its ownership or leasing of its properties make such qualification necessary except where the failure to so qualify would not reasonably be expected to have a Ossen Material Adverse Effect. Ossen has delivered to Shell Company true and complete copies of the Ossen Constituent Instruments, and the comparable charter, organizational documents and other constituent instruments of each of its subsidiaries, in each case as amended through the date of this Agreement.
 
 
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3.2          Subsidiaries; Equity Interests .
 
(a)           The Ossen Disclosure Letter lists each subsidiary of Ossen and its jurisdiction of organization. All the outstanding shares of capital stock or equity investments of each subsidiary have been validly issued and are fully paid and nonassessable and are as of the date of this Agreement owned by Ossen or by another subsidiary of Ossen, free and clear of all Liens.
 
(b)           Except for its interests in its subsidiaries, Ossen does not, as of the date of this Agreement, own, directly or indirectly, any capital stock, membership interest, partnership interest, joint venture interest or other equity interest in any person.
 
3.3          Capital Structure .  The authorized capital stock of Ossen consists of 50,000 ordinary shares, all of which are issued and outstanding. Except as set forth above, no shares of capital stock or other voting securities of Ossen are issued, reserved for issuance or outstanding.  Except as disclosed in the Ossen Disclosure Letter, Ossen is the sole record and beneficial owner of all of the issued and outstanding capital stock of each of its subsidiaries. All outstanding shares of the capital stock of Ossen and each of its subsidiaries are duly authorized, validly issued, fully paid and nonassessable and not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the applicable corporate laws of the jurisdiction in which such entity was organized, the organizational documents of any such entity or any Contract to which Ossen is a party or otherwise bound. There are not any bonds, debentures, notes or other indebtedness of Ossen or any of its subsidiaries having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which holders of Ossen Stock or the capital stock of any of its subsidiaries may vote (“ Voting Ossen Debt ”). As of the date of this Agreement, there are not any options, warrants, rights, convertible or exchangeable securities, “phantom” stock rights, stock appreciation rights, stock-based performance units, commitments, Contracts, arrangements or undertakings of any kind to which Ossen or any of its subsidiaries is a party or by which any of them is bound (a) obligating Ossen or any of its subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity interests in, or any security convertible or exercisable for or exchangeable into any capital stock of or other equity interest in, Ossen or any of its subsidiaries or any Voting Ossen Debt, (b) obligating Ossen or any of its subsidiaries to issue, grant, extend or enter into any such option, warrant, call, right, security, commitment, Contract, arrangement or undertaking or (c) that give any person the right to receive any economic benefit or right similar to or derived from the economic benefits and rights occurring to holders of the capital stock of Ossen or of any of its subsidiaries. As of the date of this Agreement, there are not any outstanding contractual obligations of Ossen to repurchase, redeem or otherwise acquire any shares of capital stock of Ossen.
 
3.4          Authority; Execution and Delivery; Enforceability .  Ossen has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the Transactions. The execution and delivery by Ossen of this Agreement and the consummation by Ossen of the Transactions have been duly authorized and approved by the Board of Directors of Ossen and no other corporate proceedings on the part of Ossen are necessary to authorize this Agreement and the Transactions. When executed and delivered, this Agreement will be enforceable against Ossen in accordance with its terms.
 
3.5          No Conflicts; Consents .
 
(a)           The execution and delivery by Ossen of this Agreement does not, and the consummation of the Transactions and compliance with the terms hereof will not, conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, or result in the creation of any Lien upon any of the properties or assets of Ossen or any of its subsidiaries under, any provision of (i) the Ossen Constituent Instruments or the comparable charter or organizational documents of any of its subsidiaries, (ii) any Contract to which Ossen or any of its subsidiaries is a party or to which any of their respective properties or assets is subject or (iii) subject to the filings and other matters referred to in Section 3.5(b), any material judgment, order or decree or material Law applicable to Ossen or any of its subsidiaries or their respective properties or assets, other than, in the case of clauses (ii) and (iii) above, any such items that, individually or in the aggregate, have not had and would not reasonably be expected to have a Ossen Material Adverse Effect.
 
 
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(b)           Except for required filings with the SEC, and filings in the British Virgin Islands in connection with the Amended Charter (defined below), no Consent of, or registration, declaration or filing with, or permit from, any Governmental Entity is required to be obtained or made by or with respect to Ossen or any of its subsidiaries in connection with the execution, delivery and performance of this Agreement or the consummation of the Transactions.
 
3.6          Taxes .
 
(a)           Ossen and each of its subsidiaries has timely filed, or has caused to be timely filed on its behalf, all Tax Returns required to be filed by it, and all such Tax Returns are true, complete and accurate, except to the extent any failure to file or any inaccuracies in any filed Tax Returns, individually or in the aggregate, have not had and would not reasonably be expected to have a Ossen Material Adverse Effect. All Taxes shown to be due on such Tax Returns, or otherwise owed, have been timely paid, except to the extent that any failure to pay, individually or in the aggregate, has not had and would not reasonably be expected to have a Ossen Material Adverse Effect. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of Ossen know of no basis for any such claim.
 
(b)           The Ossen Financial Statements reflect an adequate reserve for all Taxes payable by Ossen and its subsidiaries (in addition to any reserve for deferred Taxes to reflect timing differences between book and Tax items) for all taxable periods and portions thereof through the date of such financial statements. No deficiency with respect to any Taxes has been proposed, asserted or assessed against Ossen or any of its subsidiaries, and no requests for waivers of the time to assess any such Taxes are pending, except to the extent any such deficiency or request for waiver, individually or in the aggregate, has not had and would not reasonably be expected to have a Ossen Material Adverse Effect.
 
3.7          Benefit Plans .
 
(a)           Neither Ossen nor any of its subsidiaries maintains any collective bargaining agreement or any bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, medical or other plan, arrangement or understanding (whether or not legally binding) providing benefits to any current or former employee, officer or director of Ossen or any of its subsidiaries. As of the date of this Agreement there are not any severance or termination agreements or arrangements between Ossen or any of its subsidiaries and any current or former employee, officer or director of Ossen or any of its subsidiaries, nor does Ossen or any of its subsidiaries have any general severance plan or policy.
 
3.8          Litigation .  There is no Action against or affecting Ossen or any of its subsidiaries or any of their respective properties which (a) adversely affects or challenges the legality, validity or enforceability of any of this Agreement or the Shares or (b) could, if there were an unfavorable decision, individually or in the aggregate, have or reasonably be expected to result in a Ossen Material Adverse Effect. Neither Ossen nor any of its subsidiaries, nor any director or officer thereof (in his or her capacity as such), is or has been the subject of any Action involving a claim or violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty.
 
3.9          Compliance with Applicable Laws .  Except as set forth in the Ossen Disclosure Letter, Ossen and each of its subsidiaries have conducted their business and operations in compliance with all applicable Laws, including those relating to occupational health and safety and the environment, except for instances of noncompliance that, individually and in the aggregate, have not had and would not reasonably be expected to have a Ossen Material Adverse Effect. Ossen has not received any written communication during the past two years from a Governmental Entity that alleges that Ossen is not in compliance in any material respect with any applicable Law. This Section 3.9 does not relate to matters with respect to Taxes, which are the subject of Section 3.6.
 
3.10        Contracts .  Neither Ossen nor any of its subsidiaries is in violation of or in default under (nor does there exist any condition which upon the passage of time or the giving of notice would cause such a violation of or default under) any Contract to which it is a party or to which it or any of its properties or assets is subject, except for violations or defaults that would not, individually or in the aggregate, reasonably be expected to result in a Ossen Material Adverse Effect.
 
 
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3.11        Title to Properties .  Ossen and each of its subsidiaries has sufficient title to, or valid leasehold interests in, all of its properties and assets used in the conduct of its businesses. All such assets and properties, other than assets and properties in which Ossen or any of its subsidiaries has leasehold interests, are free and clear of all Liens and except for Liens that, in the aggregate, do not and will not materially interfere with the ability of Ossen and its subsidiaries to conduct business as currently conducted.
 
3.12        Intellectual Property .  Ossen and each of its subsidiaries own, or are validly licensed or otherwise have the right to use, all Intellectual Property Rights which are material to the conduct of the business of Ossen and its subsidiaries taken as a whole. There are no claims pending or, to the knowledge of Ossen, threatened that Ossen or any of its subsidiaries is infringing or otherwise adversely affecting the rights of any person with regard to any Intellectual Property Right. To the knowledge of Ossen, no person is infringing the rights of Ossen or any of its subsidiaries with respect to any Intellectual Property Right.
 
3.13        Labor Matters .  There are no collective bargaining or other labor union agreements to which Ossen or any of its subsidiaries is a party or by which any of them is bound. No material labor dispute exists or, to the knowledge of Ossen, is imminent with respect to any of the employees of Ossen.
 
3.14        Financial Statements; Liabilities .  Ossen has delivered to Shell Company its audited consolidated financial statements for the fiscal years ended December 31, 2009 and 2008 2007 (the “ Ossen Financial Statements ”). The Ossen Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated. The Ossen Financial Statements fairly present in all material respects the financial condition and operating results of Ossen, as of the dates, and for the periods, indicated therein. Ossen does not have any material liabilities or obligations, contingent or otherwise, other than (a) liabilities incurred in the ordinary course of business subsequent to December 31, 2009, and (b) obligations under contracts and commitments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in the Ossen Financial Statements, which, in both cases, individually and in the aggregate, would not be reasonably expected to result in a Ossen Material Adverse Effect.
 
3.15        Investment Company .  Ossen is not, and is not an affiliate of, and immediately following the Closing will not have become, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
 
3.16        Foreign Corrupt Practices .  Neither Ossen, nor any of its subsidiaries, nor, to Ossen’s knowledge, any director, officer, agent, employee or other person acting on behalf of Ossen or any of its subsidiaries has, in the course of its actions for, or on behalf of, Ossen (a) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (b) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; or (c) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.
 
3.17        Absence of Certain Changes or Events .  Except as disclosed in the Ossen Financial Statements, from December 31, 2009 to the date of this Agreement, Ossen has conducted its business only in the ordinary course, and during such period there has not been:
 
(a)           any change in the assets, liabilities, financial condition or operating results of Ossen or any of its subsidiaries, except changes in the ordinary course of business that have not caused, in the aggregate, a Ossen Material Adverse Effect;
 
(b)           any damage, destruction or loss, whether or not covered by insurance, that would have a Ossen Material Adverse Effect;
 
(c)           any waiver or compromise by Ossen or any of its subsidiaries of a valuable right or of a material debt owed to it;
 
 
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(d)          any satisfaction or discharge of any lien, claim, or encumbrance or payment of any obligation by Ossen or any of its subsidiaries, except in the ordinary course of business and the satisfaction or discharge of which would not have a Ossen Material Adverse Effect;
 
(e)          any material change to a material Contract by which Ossen or any of its subsidiaries or any of its respective assets is bound or subject;
 
(f)           any mortgage, pledge, transfer of a security interest in, or lien, created by Ossen or any of its subsidiaries, with respect to any of its material properties or assets, except liens for taxes not yet due or payable and liens that arise in the ordinary course of business and do not materially impair Ossen’s or its subsidiaries’ ownership or use of such property or assets;
 
(g)          any loans or guarantees made by Ossen or any of its subsidiaries to or for the benefit of its employees, officers or directors, or any members of their immediate families, or any loans or advances to any persons, corporations, business trusts, associations, companies, partnerships, limited liability companies, joint ventures and other entities, governments, agencies and political subdivision other than travel advances and other advances made in the ordinary course of its business;
 
(h)          any alteration of Ossen’s method of accounting or the identity of its auditors;
 
(i)           any declaration or payment of dividend or distribution of cash or other property to the Ossen Shareholders or any purchase, redemption or agreements to purchase or redeem any Ossen Stock;
 
(j)           any issuance, sale, disposition or encumbrance of equity securities to any officer, director or affiliate, or any change in their outstanding shares of capital stock or their capitalization, whether by reason of reclassification, recapitalization, stock split, combination, exchange or readjustment of shares, stock dividend or otherwise; or
 
(k)          any arrangement or commitment by Ossen or any of its subsidiaries to do any of the matters described in this Section 3.20.
 
3.18        Disclosure .  Ossen confirms that neither it nor any person acting on its behalf has provided Shell Company or its agents or counsel with any information that it believes constitutes material, non-public information except insofar as the existence and terms of the proposed transactions hereunder may constitute such information and except for information that will be disclosed by Shell Company under a shell company report on Form 20-F filed within four business days after the Closing. Ossen understands and confirms that Shell Company will rely on the foregoing representations and covenants in effecting transactions in securities of Ossen. All of the representations and warranties of Ossen set forth in this Agreement are true and correct and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.
 
ARTICLE IV
Representations and Warranties of Shell Company
 
Shell Company represents and warrants as follows to Ossen and the Ossen Shareholders.
 
4.1          Organization, Standing and Power .  Shell Company is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized and has full corporate power and authority and possesses all governmental franchises, licenses, permits, authorizations and approvals necessary to enable it to own, lease or otherwise hold its properties and assets and to conduct its businesses as presently conducted, other than such franchises, licenses, permits, authorizations and approvals the lack of which, individually or in the aggregate, has not had and would not reasonably be expected to have a material adverse effect on Shell Company, a material adverse effect on the ability of Shell Company to perform its obligations under this Agreement or on the ability of Shell Company to consummate the Transactions (a “ Shell Company Material Adverse Effect ”). Shell Company is duly qualified to do business in each jurisdiction where the nature of its business or its ownership or leasing of its properties makes such qualification necessary and where the failure to so qualify would reasonably be expected to have a Shell Company Material Adverse Effect. Shell Company has delivered to Ossen or its counsel true and complete copies of the Shell Company Constituent Instruments.
 
 
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4.2          Subsidiaries; Equity Interests .  Shell Company does not own, directly or indirectly, any capital stock, membership interest, partnership interest, joint venture interest or other equity interest in any person.
 
4.3          Capital Structure .  Upon the effectiveness of the Amended Charter (defined below), the authorized capital stock of Shell Company shall consist of 100,000,000 ordinary shares of $0.01 par value each. As of the date hereof, (a) 50,000 ordinary shares are issued and outstanding, (b) no preference shares are issued and outstanding, and (c) no ordinary shares or preference shares are held by Shell Company in its treasury. Upon the effectiveness of the Amended Charter (defined below), (a) 5,000,000 ordinary shares will be issued and outstanding, (b) no preference shares will be issued and outstanding, and (c) no ordinary shares or preference shares will be held by Shell Company in its treasury. Except as set forth above, no shares of capital stock or other voting securities of Shell Company were issued, reserved for issuance or outstanding. Upon the effectiveness of the Amended Charter (defined below), all outstanding shares of the capital stock of Shell Company, and all such shares that may be issued prior to date, will be duly authorized, validly issued, fully paid and nonassessable.  None of the outstanding shares of capital stock are subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the applicable corporate laws of the British Virgin Islands, the Shell Company Constituent Instruments or any Contract to which Shell Company is a party or otherwise bound. There are not any bonds, debentures, notes or other indebtedness of Shell Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which holders of Shell Company’s ordinary shares may vote (“ Voting Shell Company Debt ”). As of the date of this Agreement, there are not any options, warrants, rights, convertible or exchangeable securities, “phantom” stock rights, stock appreciation rights, stock-based performance units, commitments, Contracts, arrangements or undertakings of any kind to which Shell Company is a party or by which it is bound (a) obligating Shell Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity interests in, or any security convertible or exercisable for or exchangeable into any capital stock of or other equity interest in, Shell Company or any Voting Shell Company Debt, (b) obligating Shell Company to issue, grant, extend or enter into any such option, warrant, call, right, security, commitment, Contract, arrangement or undertaking or (c) that give any person the right to receive any economic benefit or right similar to or derived from the economic benefits and rights occurring to holders of the capital stock of Shell Company. As of the date of this Agreement, there are not any outstanding contractual obligations of Shell Company to repurchase, redeem or otherwise acquire any shares of capital stock of Shell Company. The Ossen Shareholder list provided to Ossen is a current shareholder list and accurately reflects all of the issued and outstanding shares of Shell Company’s capital stock.
 
4.4          Authority; Execution and Delivery; Enforceability .  The execution and delivery by Shell Company of this Agreement and the consummation by Shell Company of the Transactions have been duly authorized and approved by the Board of Directors of Shell Company and no other corporate proceedings on the part of Shell Company are necessary to authorize this Agreement and the Transactions. This Agreement constitutes a legal, valid and binding obligation of Shell Company, enforceable against Shell Company in accordance with the terms hereof.
 
4.5          No Conflicts; Consents .
 
(a)           The execution and delivery by Shell Company of this Agreement does not, and the consummation of Transactions and compliance with the terms hereof will not, contravene, conflict with or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, or to increased, additional, accelerated or guaranteed rights or entitlements of any person under, or result in the creation of any Lien upon any of the properties or assets of Shell Company under, any provision of (i) the Shell Company Constituent Instruments, (ii) any material Contract to which Shell Company is a party or to which any of its properties or assets is subject or (iii) subject to the filings and other matters referred to in Section 4.5(b), any material Order or material Law applicable to Shell Company or its properties or assets, other than, in the case of clauses (ii) and (iii) above, any such items that, individually or in the aggregate, have not had and would not reasonably be expected to have a Shell Company Material Adverse Effect.
 
 
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(b)           Except for required filings with the SEC, and filings in the British Virgin Islands in connection with the Amended Charter (defined below), no Consent of, or registration, declaration or filing with, or permit from, any Governmental Entity is required to be obtained or made by or with respect to Shell Company in connection with the execution, delivery and performance of this Agreement or the consummation of the Transactions.
 
4.6          Taxes .
 
(a)           Shell Company has timely filed, or has caused to be timely filed on its behalf, all Tax Returns required to be filed by it, and all such Tax Returns are true, complete and accurate, except to the extent any failure to file, any delinquency in filing or any inaccuracies in any filed Tax Returns, individually or in the aggregate, have not had and would not reasonably be expected to have a Shell Company Material Adverse Effect. All Taxes shown to be due on such Tax Returns, or otherwise owed, have been timely paid, except to the extent that any failure to pay, individually or in the aggregate, has not had and would not reasonably be expected to have a Shell Company Material Adverse Effect.
 
(b)           The most recent financial statements contained in the SEC Reports reflect an adequate reserve for all Taxes payable by Shell Company (in addition to any reserve for deferred Taxes to reflect timing differences between book and Tax items) for all taxable periods and portions thereof through the date of such financial statements. No deficiency with respect to any Taxes has been proposed, asserted or assessed against Shell Company, and no requests for waivers of the time to assess any such Taxes are pending, except to the extent any such deficiency or request for waiver, individually or in the aggregate, has not had and would not reasonably be expected to have a Shell Company Material Adverse Effect.
 
(c)           There are no Liens for Taxes (other than for current Taxes not yet due and payable) on the assets of Shell Company. Shell Company is not bound by any agreement with respect to Taxes.
 
4.7          Benefit Plans .  Shell Company does not, and since its inception never has, maintained or contributed to any bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, medical or other plan, arrangement or understanding (whether or not legally binding) providing benefits to any current or former employee, officer or director of Shell Company. As of the date of this Agreement, there are not any employment, consulting, indemnification, severance or termination agreements or arrangements between Shell Company and any current or former employee, officer or director of Shell Company, nor does Shell Company have any general severance plan or policy.
 
4.8          Benefit Plans .  Shell Company does not, and since its inception never has, maintained or contributed to any benefit plan for the benefit of any current or former employees, consultants, officers or directors of Shell Company.
 
4.9          Litigation .  There is no Action against or affecting Shell Company or any of its properties which (a) adversely affects or challenges the legality, validity or enforceability of either of this Agreement or the Shares or (b) could, if there were an unfavorable decision, individually or in the aggregate, have or reasonably be expected to result in a Shell Company Material Adverse Effect. Neither Shell Company nor any director or officer (in his or her capacity as such), is or has been the subject of any Action involving a claim or violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty.
 
4.10        Compliance with Applicable Laws .  Shell Company is in compliance with all applicable Laws, including those relating to occupational health and safety, the environment, export controls, trade sanctions and embargoes, except for instances of noncompliance that, individually and in the aggregate, have not had and would not reasonably be expected to have a Shell Company Material Adverse Effect. Shell Company has not received any written communication during the past two years from a Governmental Entity that alleges that Shell Company is not in compliance in any material respect with any applicable Law. Shell Company is in compliance with all effective requirements of the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations thereunder, that are applicable to it, except where such noncompliance could not have or reasonably be expected to result in a Shell Company Material Adverse Effect. This Section 4.10 does not relate to matters with respect to Taxes, which are the subject of Section 4.6.
 
 
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4.11        Contracts .  Except as disclosed in the SEC Reports, there are no Contracts that are material to the business, properties, assets, condition (financial or otherwise), results of operations or prospects of Shell Company taken as a whole. Shell Company is not in violation of or in default under (nor does there exist any condition which upon the passage of time or the giving of notice would cause such a violation of or default under) any Contract to which it is a party or to which it or any of its properties or assets is subject, except for violations or defaults that would not, individually or in the aggregate, reasonably be expected to result in a Shell Company Material Adverse Effect.
 
4.12        Title to Properties .  Shell Company has good title to, or valid leasehold interests in, all of its properties and assets used in the conduct of its businesses. All such assets and properties, other than assets and properties in which Shell Company has leasehold interests, are free and clear of all Liens, except for Liens that, in the aggregate, do not and will not materially interfere with the ability of Shell Company to conduct business as currently conducted. Shell Company has complied in all material respects with the terms of all material leases to which it is a party and under which it is in occupancy, and all such leases are in full force and effect. Shell Company enjoys peaceful and undisturbed possession under all such material leases.
 
4.13        Intellectual Property .  Shell Company does not own, nor is validly licensed nor otherwise has the right to use, any Intellectual Property Rights. No claims are pending or, to the knowledge of Shell Company, threatened that Shell Company is infringing or otherwise adversely affecting the rights of any person with regard to any Intellectual Property Right.
 
4.14        Labor Matters .  There are no collective bargaining or other labor union agreements to which Shell Company is a party or by which it is bound. No material labor dispute exists or, to the knowledge of Shell Company, is imminent with respect to any of the employees of Shell Company.
 
4.15        SEC Documents; Undisclosed Liabilities .
 
(a)           Shell Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC since March 23, 2010, pursuant to Sections 13(a), 14(a) and 15(d) of the Exchange Act (the “ SEC Reports ”).
 
(b)           As of its respective filing date, the SEC Reports complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Reports. Except to the extent that information contained in the SEC Reports has been revised or superseded by any report, schedule, form, statement or other document filed by Shell Company with the SEC subsequent to the filing of such revised or superseded information, none of the SEC Reports contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The consolidated financial statements of Shell Company included in the SEC Reports comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with the U.S. generally accepted accounting principles (except, in the case of unaudited statements, as permitted by the rules and regulations of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present the consolidated financial position of Shell Company and its consolidated subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods shown (subject, in the case of unaudited statements, to normal year-end audit adjustments).
 
(c)           Except as set forth in the SEC Reports, Shell Company has no liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) required by U.S. generally accepted accounting principles to be set forth on a balance sheet of Shell Company or in the notes thereto. There are no financial or contractual obligations and liabilities (including any obligations to issue capital stock or other securities) due after the date hereof. All liabilities of Shell Company shall have been paid off and shall in no event remain liabilities of Shell Company, Ossen or the Ossen Shareholders following the Closing.
 
 
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4.16        Transactions With Affiliates and Employees .  Except as disclosed in the SEC Reports, none of the officers or directors of Shell Company and, to the knowledge of Shell Company, none of the employees of Shell Company is presently a party to any transaction with Shell Company (other than for services as employees, officers and directors), including any Contract or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of Shell Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.
 
4.17        Investment Company .  Shell Company is not, and is not an affiliate of, and immediately following the Closing will not have become, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
 
4.18        Foreign Corrupt Practices .  Neither Shell Company, nor to Shell Company’s knowledge, any director, officer, agent, employee or other person acting on behalf of Shell Company has, in the course of its actions for, or on behalf of, Shell Company (a) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (b) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; or (c) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.
 
4.19        Absence of Certain Changes or Events .  Except as disclosed in the SEC Reports, from the date of the most recent financial statements contained in the SEC Reports to the date of this Agreement, Shell Company has conducted its business only in the ordinary course, and during such period there has not been:
 
(a)          any change in the assets, liabilities, financial condition or operating results of Shell Company from that reflected in the financial statements contained in the SEC Reports, except changes in the ordinary course of business that have not caused, in the aggregate, a Shell Company Material Adverse Effect;
 
(b)          any damage, destruction or loss, whether or not covered by insurance, that would have a Shell Company Material Adverse Effect;
 
(c)          any waiver or compromise by Shell Company of a valuable right or of a material debt owed to it;
 
(d)          any satisfaction or discharge of any lien, claim, or encumbrance or payment of any obligation by Shell Company, except in the ordinary course of business and the satisfaction or discharge of which would not have a Shell Company Material Adverse Effect;
 
(e)          any material change to a material Contract by which Shell Company or any of its assets is bound or subject;
 
(f)           any material change in any compensation arrangement or agreement with any employee, officer, director or shareholder;
 
(g)          any resignation or termination of employment of any officer of Shell Company;
 
(h)          any mortgage, pledge, transfer of a security interest in or lien created by Shell Company with respect to any of its material properties or assets, except liens for taxes not yet due or payable and liens that arise in the ordinary course of business and that do not materially impair Shell Company’s ownership or use of such property or assets;
 
(i)           any loans or guarantees made by Shell Company to or for the benefit of its employees, officers or directors, or any members of their immediate families, other than travel advances and other advances made in the ordinary course of its business;
 
 
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(j)          any declaration, setting aside or payment or other distribution in respect of any of Shell Company’s capital stock, or any direct or indirect redemption, purchase, or other acquisition of any of such stock by Shell Company;
 
(k)          any alteration of Shell Company’s method of accounting or the identity of its auditors;
 
(l)           any issuance of equity securities to any officer, director or affiliate, except pursuant to existing Shell Company stock option plans; or
 
(m)         any arrangement or commitment by Shell Company to do any of the matters described in this Section 4.19.
 
4.20         Certain Registration Matters .  Shell Company has not granted or agreed to grant to any person any rights (including “piggy-back” registration rights) to have any securities of Shell Company registered with the SEC or any other governmental authority that have not been satisfied.
 
4.21         Disclosure .  Shell Company confirms that neither it nor any person acting on its behalf has provided Ossen, the Ossen Shareholder or their respective agents or counsel with any information that Shell Company believes constitutes material, non-public information except insofar as the existence and terms of the proposed transactions hereunder may constitute such information and except for information that will be disclosed by Shell Company under a shell company report on Form 20-F filed within four business days after the Closing. Shell Company understands and confirms that Ossen and the Ossen Shareholders will rely on the foregoing representations and covenants in effecting transactions in securities of Shell Company. All of the representations and warranties set forth in this Agreement are true and correct and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.
 
4.22         No Undisclosed Events, Liabilities, Developments or Circumstances .  No event, liability, development or circumstance has occurred or exists, or is contemplated to occur with respect to Shell Company, or its businesses, properties, prospects, operations or financial condition, that would be required to be disclosed by Shell Company under applicable securities laws on a registration statement filed with the SEC relating to an issuance and sale by Shell Company of its ordinary shares and which has not been publicly announced or will not be publicly announced in a shell company report on Form 20-F filed within four business days after the Closing.
 
4.23         No Additional Agreements .  Shell Company does not have any agreement or understanding with Ossen or the Ossen Shareholders with respect to the Transactions other than as specified in this Agreement.
 
ARTICLE V
Representations and Warranties of the Shell Company Shareholder
 
5.1            Good Title .  Upon the effectiveness of the Amended Charter, the Shell Company Shareholder will be the record and beneficial owner, and has good title to its Shell Company Stock, with the right and authority to sell and deliver such Shell Company Stock, free and clear of all Liens, claims, charges, encumbrances, pledges, mortgages, security interests, options, rights to acquire, proxies, voting trusts or similar agreements, restrictions on transfer or adverse claims of any nature whatsoever. Upon delivery of any certificate or certificates duly assigned, representing the same as herein contemplated and/or upon registering of the Ossen Shareholders as the new owner of such Shell Company Stock in the share register of Shell Company, the Ossen Shareholders will receive good title to such Shell Company Stock, free and clear of all Liens provided that the Amended Charter is then effective.
 
5.2            Power and Authority .  The Shell Company Shareholder has the legal power and authority to execute and deliver this Agreement and to perform its obligations hereunder. All acts required to be taken by the Shell Company Shareholder to enter into this Agreement and to carry out the Transactions have been properly taken. This Agreement constitutes a legal, valid and binding obligation of the Shell Company Shareholder, enforceable against the Shell Company Shareholder in accordance with the terms hereof.

 
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5.3            No Conflicts .  The execution and delivery of this Agreement by the Shell Company Shareholder and the performance by the Shell Company Shareholder of its obligations hereunder in accordance with the terms hereof: (a) will not require the consent of any third party or Governmental Entity under any Laws; (b) will not violate any Laws applicable to the Shell Company Shareholder; and (c) will not violate or breach any contractual obligation to which the Shell Company Shareholder is a party.
 
5.4            Litigation .  There is no pending proceeding against the Shell Company Shareholder that involves the Shell Company Stock to be sold by the Shell Company Shareholder pursuant to this Agreement or that challenges, or may have the effect of preventing, delaying or making illegal, or otherwise interfering with, any of the Transactions and, to the knowledge of the Shell Company Shareholder, no such proceeding has been threatened, and no event or circumstance exists that is reasonably likely to give rise to or serve as a basis for the commencement of any such proceeding.
 
5.5            No Finder’s Fee .  The Shell Company Shareholder has not created any obligation for any finder’s, investment banker’s or broker’s fee in connection with the Transactions that are not payable entirely by the Ossen Shareholder.
 
5.6            Disclosure .  This Agreement, the schedules hereto and any certificate attached hereto or delivered in accordance with the terms hereof by or on behalf of the Shell Company Shareholder in connection with the Transactions, when taken together, do not contain any untrue statement of a material fact or omit any material fact necessary in order to make the statements contained herein and/or therein not misleading.
 
ARTICLE VI
Conditions to Closing
 
6.1            Shell Company Conditions Precedent .  The obligations of the Ossen Shareholders and Ossen to enter into and complete the Closing are subject, at the option of the Ossen Shareholders and Ossen, to the fulfillment on or prior to the Closing Date of the following conditions, any one or more of which may be waived by Ossen and the Ossen Shareholders in writing.
 
(a)            Representations and Covenants .  The representations and warranties of Shell Company and Shell Company Shareholder contained in this Agreement shall be true in all material respects on and as of the Closing Date with the same force and effect as though made on and as of the Closing Date. Shell Company and Shell Company Shareholder shall have performed and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by Shell Company or the Shell Company Shareholders, respectively, on or prior to the Closing Date. Shell Company and Shell Company Shareholder shall have delivered to the Ossen Shareholders and Ossen a certificate, dated the Closing Date, to the foregoing effect.
 
(b)            Litigation .  No action, suit or proceeding shall have been instituted before any court or governmental or regulatory body or instituted or threatened by any governmental or regulatory body to restrain, modify or prevent the carrying out of the Transactions or to seek damages or a discovery order in connection with such Transactions. No action, suit or proceeding before any court or governmental or regulatory body or instituted or threatened by any governmental or regulatory body has or may have, in the reasonable opinion of Ossen or the Ossen Shareholders, a Shell Company Material Adverse Effect.
 
(c)            Consents .  Shell Company shall have obtained all material consents, waivers, approvals, authorizations or orders required to be obtained, and made all filings required to be made, for the authorization, execution and delivery of this Agreement and the consummation of the Transactions, except where the failure to receive such consents, waivers, approvals, authorizations or orders or to make such filings would not have a Shell Company Material Adverse Effect.
 
(d)           No Material Adverse Change .  There shall not have been any occurrence, event, incident, action, failure to act, or transaction since December 31, 2009 which has had or is reasonably likely to cause a Shell Company Material Adverse Effect.

 
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(e)            Amended Charter .  Shell Company shall have filed all necessary documents and taken all other necessary actions to amend its articles and memorandum of association in the form attached hereto as Exhibit A (the “ Amended Charter ”).
 
(f)            Post-Closing Capitalization .  At, and immediately after, the Closing, the authorized capitalization, and the number of issued and outstanding shares of the capital stock of Shell Company, on a fully-diluted basis, as indicated on a schedule to be delivered by the Parties at or prior to the Closing, shall be acceptable to Ossen and the Ossen Shareholders.
 
(g)            Satisfactory Completion of Due Diligence .  Ossen and the Ossen Shareholders shall have completed their legal, accounting and business due diligence of Shell Company and the results thereof shall be satisfactory to Ossen and the Ossen Shareholders in their sole and absolute discretion.
 
(h)            SEC Reports .  Shell Company shall have filed all reports and other documents required to be filed by it under the U.S. federal securities laws through the Closing Date.
 
(i)             Secretary’s Certificate .  Shell Company shall have delivered to Ossen and the Ossen Shareholders a certificate, signed by Shell Company’s Secretary (or authorized director or officer), certifying that the attached copies of the Shell Company Constituent Instruments, as amended pursuant to the Charter Amendment,  and resolutions of its Board of Directors approving this Agreement and the Transactions are all true, complete and correct and remain in full force and effect.
 
(j)             Payoff Letters and Releases .  Shell Company shall have delivered to Ossen and the Ossen Shareholders such pay-off letters and releases relating to liabilities of Shell Company as Ossen or the Ossen Shareholders shall request, in form and substance satisfactory to Ossen and the Ossen Shareholders.
 
(k)            Issuance of Shares .  Shell Company and Shell Company Shareholder shall have issued the Shares on the Shell Company’s share registry. At or within five business days following the Closing, Shell Company and Shell Company Shareholder shall deliver to the Ossen Shareholders a certificate representing the Shares.
 
(l)             No Governmental Prohibition .  No order, statute, rule, regulation. executive order, injunction, stay, decree, judgment or restraining order shall have been enacted, entered, promulgated or enforced by any Governmental Entity which prohibits the consummation of the Transactions.
 
6.2            Ossen Conditions Precedent .  The obligations of Shell Company and Shell Company Shareholder to enter into and complete the Closing is subject, at the option of Shell Company and Shell Company Shareholder, to the fulfillment on or prior to the Closing Date of the following conditions, any one or more of which may be waived by Shell Company or Shell Company Shareholder in writing.
 
(a)            Representations and Covenants .  The representations and warranties of the Ossen Shareholders and Ossen contained in this Agreement shall be true in all material respects on and as of the Closing Date with the same force and effect as though made on and as of the Closing Date.  The Ossen Shareholders and Ossen shall have performed and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by the Ossen Shareholders and Ossen on or prior to the Closing Date. Each of Ossen and the Ossen Shareholders shall have delivered to Shell Company and Shell Company Shareholder a certificate, dated the Closing Date, to the foregoing effect.
 
(b)            Litigation .  No action, suit or proceeding shall have been instituted before any court or governmental or regulatory body or instituted or threatened by any governmental or regulatory body to restrain, modify or prevent the carrying out of the Transactions or to seek damages or a discovery order in connection with such Transactions, or which has or may have, in the reasonable opinion of Shell Company and Shell Company Shareholder, a materially adverse effect on the assets, properties, business, operations or condition (financial or otherwise) of Ossen.

 
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(c)            Consents .  All material consents, waivers, approvals, authorizations or orders required to be obtained, and all filings required to be made, by the Ossen Shareholders or Ossen for the authorization, execution and delivery of this Agreement and the consummation by them of the Transactions, shall have been obtained and made by the Ossen Shareholders or Ossen, except where the failure to receive such consents, waivers, approvals, authorizations or orders or to make such filings would not have a Ossen Material Adverse Effect.
 
(d)           No Material Adverse Change .  There shall not have been any occurrence, event, incident, action, failure to act, or transaction since the date of the Ossen Financial Statements which has had or is reasonably likely to cause a Ossen Material Adverse Effect.
 
(e)           Post-Closing Capitalization .  At, and immediately after, the Closing, the authorized capitalization, and the number of issued and outstanding shares of the capital stock of Shell Company, on a fully-diluted basis, as indicated on a schedule to be delivered by the Parties at or prior to the Closing, shall be acceptable to Shell Company.
 
(f)            Satisfactory Completion of Due Diligence .  Shell Company shall have completed its legal, accounting and business due diligence of Ossen and the results thereof shall be satisfactory to Shell Company in its sole and absolute discretion.
 
(g)           Secretary’s Certificate .  Ossen shall have delivered to Shell Company a certificate, signed by its Secretary (or authorized director or officer), certifying that the attached copies of the Ossen Constituent Instruments and resolutions of the Board of Directors of Ossen approving this Agreement and the Transactions are all true, complete and correct and remain in full force and effect.
 
(h)           Delivery of Audit Report and Financial Statements .  Ossen shall have completed the Ossen Financial Statements and shall have received an audit report from an independent audit firm that is registered with the Public Company Accounting Oversight Board.
 
(i)            Form 20-F .  Ossen shall have provided Shell Company with reasonable assurances that Shell Company will be able to comply with its obligation to file a shell company report on Form 20-F within four (4) business days following the Closing containing the requisite financial statements of Ossen and the requisite disclosure regarding Ossen and its subsidiaries.
 
(j)            Share Transfer Documents .  The Ossen Shareholders shall have delivered to Shell Company certificate(s) representing its Ossen Stock, accompanied by an executed instrument of transfer and bought and sold note for transfer by the Ossen Shareholders of its Ossen Stock to Shell Company.
 
(k)           No Governmental Prohibition .  No order, statute, rule, regulation. executive order, injunction, stay, decree, judgment or restraining order shall have been enacted, entered, promulgated or enforced by any Governmental Entity which prohibits the consummation of the Transactions.
 
(l)            Delivery of Purchase Price .  The Ossen Shareholders shall have delivered to the Shell Company Shareholder the applicable purchase price for the Shares to be purchased by each Ossen Shareholder.
 
ARTICLE VII
Covenants
 
7.1            Amended Charter .  Shell Company shall file all necessary documents and take all other necessary actions to amend its articles of association in accordance with the Amended Charter.
 
7.2            Public Announcements .  Shell Company and Ossen will consult with each other before issuing, and provide each other the opportunity to review and comment upon, any press releases or other public statements with respect to this Agreement and the Transactions and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable Law, court process or by obligations pursuant to any listing agreement with any national securities exchanges.

 
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7.3            Fees and Expenses .  All fees and expenses incurred in connection with this Agreement shall be paid by the Party incurring such fees or expenses, whether or not this Agreement is consummated.
 
7.4            Continued Efforts .  Each Party shall use commercially reasonable efforts to (a) take all action reasonably necessary to consummate the Transactions, and (b) take such steps and do such acts as may be necessary to keep all of its representations and warranties true and correct as of the Closing Date with the same effect as if the same had been made, and this Agreement had been dated, as of the Closing Date.
 
7.5            Exclusivity .  Neither Shell Company nor Ossen shall (a) solicit, initiate, or encourage the submission of any proposal or offer from any person relating to the acquisition of any capital stock or other voting securities of Shell Company or Ossen (as applicable), or any assets of Shell Company or Ossen (as applicable) (including any acquisition structured as a merger, consolidation, share exchange or other business combination), (b) participate in any discussions or negotiations regarding, furnish any information with respect to, assist or participate in, or facilitate in any other manner any effort or attempt by any person to do or seek any of the foregoing, or (c) take any other action that is inconsistent with the Transactions and that has the effect of avoiding the Closing contemplated hereby. Each shall notify the other immediately if any person makes any proposal, offer, inquiry, or contact with respect to any of the foregoing.
 
7.6            Filing of 20-F .  Shell Company shall file, within four (4) business days of the Closing Date, a shell company report on Form 20-F and attach as exhibits all relevant agreements with the SEC disclosing the terms of this Agreement and other requisite disclosure regarding the Transactions and including the requisite audited consolidated financial statements of Ossen and the requisite disclosure regarding Ossen and its subsidiaries. In addition, Shell Company shall issue a press release at a mutually agreeable time following the Closing Date.
 
7.7            Furnishing of Information .  As long as the Ossen Shareholders own the Shares, Shell Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by Shell Company after the date hereof pursuant to the Exchange Act. As long as the Ossen Shareholders own the Shares, if Shell Company is not required to file reports pursuant to such laws, it will prepare and furnish to the Ossen Shareholders and make publicly available in accordance with Rule 144(c) promulgated by the SEC pursuant to the Securities Act, such information as is required for the Ossen Shareholders to sell Shares under Rule 144. Shell Company further covenants that it will take such further action as any holder of the Shares may reasonably request, all to the extent required from time to time to enable such person to sell the Shares without registration under the Securities Act within the limitation of the exemptions provided by Rule 144.
 
7.8            Access .  Each of Shell Company and Ossen shall permit representatives of each other to have full access to all premises, properties, personnel, books, records, contracts, and documents of or pertaining to such party.
 
7.9            Preservation of Business .  From the date of this Agreement until the Closing Date, each of Ossen and Shell Company shall, except as otherwise permitted by the terms of this Agreement, operate only in the ordinary and usual course of business consistent with its past practices and shall use reasonable commercial efforts to (a) preserve intact its business organization, (b) preserve the good will and advantageous relationships with customers, suppliers, independent contractors, employees and other persons material to the operation of its business, and (c) not permit any action or omission that would cause any of its representations or warranties contained herein to become inaccurate or any of its covenants to be breached in any material respect.
 
ARTICLE VIII
Miscellaneous
 
8.1            Notices .  All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given upon receipt by the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice):

 
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If to Shell Company, to:

Wei Guo
Ultra Glory International Ltd.
35/F Central Plaza
18 Harbour Road
Wanchia, Hong Kong
 
with a copy to:
 
Robert Brantl, Esq.
52 Mulligan Lane
Irvington, NY  10533
 
If to Shell Company Shareholder, to:
 
David Mark Lindley
8/F Hollywood Plaza
610 Nathan Road
Kowloon, Hong Kong
 
If to Ossen, to:
 
518 Shangcheng Road
Floor 17
Shanghai, 200120
People’s Republic of China
 
with a copy to:
 
Kramer Levin Naftalis & Frankel LLP
1177 Avenue of the Americas
New York, New York  10036
Attention:  Bill Huo, Esq.
 
If to the Ossen Shareholders, to:
 
518 Shangcheng Road
Floor 17
Shanghai, 200120
People’s Republic of China
Attn:  Dr. Liang Tang
 
8.2            Amendments; Waivers .  No provision of this Agreement may be waived or amended except in a written instrument signed by Ossen, Shell Company, the Ossen Shareholders and the Shell Company Shareholder. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any Party to exercise any right hereunder in any manner impair the exercise of any such right.
 
8.3            Replacement of Securities .  If any certificate or instrument evidencing any Shares is mutilated, lost, stolen or destroyed, Shell Company and Shell Company Shareholder shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to Shell Company and Shell Company Shareholder of such loss, theft or destruction and customary and reasonable indemnity, if requested. The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Shares. If a replacement certificate or instrument evidencing any Shares is requested due to a mutilation thereof, Shell Company and Shell Company Shareholder may require delivery of such mutilated certificate or instrument as a condition precedent to any issuance of a replacement.
 
 
17
 
 
8.4            Remedies .  In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Ossen Shareholders, Shell Company, Ossen and Shell Company Shareholder will be entitled to specific performance under this Agreement. The Parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.
 
8.5            Limitation of Liability .  Notwithstanding anything herein to the contrary, each of Shell Company, Ossen and the Ossen Shareholders acknowledges and agrees that the liability of any Shareholder arising directly or indirectly, under any Transaction Document of any and every nature whatsoever shall be satisfied solely out of the assets of such Shareholder, and that no trustee, officer, other investment vehicle or any other affiliate of such Shareholder or any investor, shareholder or holder of shares of beneficial interest of such Shareholder shall be personally liable for any liabilities of such Shareholder.
 
8.6            Interpretation .  When a reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”.
 
8.7            Severability .  If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule or Law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions is not affected in any manner materially adverse to any Party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that the Transactions are fulfilled to the extent possible.
 
8.8            Counterparts; Facsimile Execution .  This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Parties. Facsimile execution and delivery of this Agreement is legal, valid and binding for all purposes.
 
8.9            Entire Agreement; Third Party Beneficiaries .  This Agreement, taken together with the Ossen Disclosure Letter, (a) constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the Parties with respect to the Transactions and (b) are not intended to confer upon any person other than the Parties any rights or remedies.
 
8.10          Survival .  The representations, warranties, and covenants of the respective Parties shall survive the Closing Date and the consummation of the Transactions for a period of eighteen (18) months.
 
8.11          Governing Law .  This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof, (except to the extent the laws of the British Virgin Islands are mandatorily applicable to the Transactions).
 
8.12          Assignment .  Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any of the Parties without the prior written consent of each of the other Parties. Any purported assignment without such consent shall be void. Subject to the preceding sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and assigns.
 
[ Signature Page Follows ]

 
18
 

IN WITNESS WHEREOF, the parties hereto have caused this Share Exchange Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
 
   
ULTRA GLORY INTERNATIONAL LTD.
     
 
By:
 
   
Name:   Wei Guo
   
Title:   President
     
   
SHELL COMPANY SHAREHOLDER
     
     
   
David Mark Lindley
     
   
OSSEN INNOVATION MATERIALS GROUP,  LTD.
     
 
By:
 
   
Name:
   
Title:
     
   
OSSEN SHAREHOLDERS
     
     
   
Effectual Strengh Enterprises Limited
     
     
   
Fascination Acme Development Limited
     
     
   
Gross Inspiration Development Limited
     
     
   
Century Creator Limited
     
     
   
Ocean Skill Holdings Limited
     
     
   
New Asset International Ltd.
     
     
   
Dragon Winner Investments Ltd.

 
19
 

SCHEDULE A
 
Shell Company Shareholder:
 
David Mark Lindley – 50,000 ordinary shares (5,000,000 ordinary shares following the effectiveness of the Amended Charter)
8/F Hollywood Plaza
610 Nathan Road
Kowloon, Hong Kong
 
Ossen Shareholders:
 
Effectual Strengh Enterprises Limited - 39,500 ordinary shares
Palm Grove House, P.O. Box 438
Road Town
Tortola, British Virgin Islands

Fascination Acme Development Limited - 2,000 ordinary shares
Palm Grove House, P.O. Box 438
Road Town
Tortola, British Virgin Islands

Gross Inspiration Development Limited - 2,000 ordinary shares
Palm Grove House, P.O. Box 438,
Road Town
Tortola, British Virgin Islands

Century Creator Limited - 1,172 ordinary shares
Quastisky Building, P.O. Box 4389
Road Town
Tortola, British Virgin Islands

Ocean Skill Holdings Limited - 850 ordinary shares
Akara Bldg., 24 De Castro Street, Wickhams Cay 1
Road Town
Tortola, British Virgin Islands.

New Asset International Ltd. - 2,239 ordinary shares
Akara Bldg., 24 De Castro Street, Wickhams Cay 1
Road Town
Tortola, British Virgin Islands.

Dragon Winner Investments Ltd. - 2,239 ordinary shares
Akara Bldg., 24 De Castro Street, Wickhams Cay 1
Road Town
Tortola, British Virgin Islands

 
20
 

SCHEDULE B
 
Name of Shareholder
 
Number of Shares Newly 
Issued by the Shell
   
Number of Shares 
Acquired from the Shell 
Shareholder
   
Total Number of Shell 
Shares Held Following 
the Share Exchange
 
Effectual Strengh Enterprises Limited
    7,900,000       3,950,000       11,850,000  
Fascination Acme Development Limited
    400,000       200,000       600,000  
Gross Inspiration Development Limited
    400,000       200,000       600,000  
Century Creator Limited
    234,400       117,200       351,600  
Ocean Skill Holdings Limited
    170,000       85,000       255,000  
New Asset International Ltd.
    447,800       223,900       671,700  
Dragon Winner Investments Ltd.
    447,800       223,900       671,700  
Total
    10,000,000       5,000,000       15,000,000  
 
 
21
 

ANNEX A
 
Definitions
 
“ Action ” means any action, suit, inquiry, notice of violation, proceeding (including any partial proceeding such as a deposition) or investigation pending or threatened in writing before or by any court, arbitrator, governmental or administrative agency, regulatory authority (federal, state, county, local or foreign), stock market, stock exchange or trading facility.
 
“ Agreement ” has the meaning set forth in the Preamble of this Agreement.
 
“ Amended Charter ” has the meaning set forth in Section 6.1(e) of this Agreement.
 
“ Closing ” has the meaning set forth in Section 1.2 of this Agreement.
 
“ Closing Date ” has the meaning set forth in Section 1.2 of this Agreement.
 
“ Consent ” means any material consent, approval, license, permit, order or authorization.
 
“ Contract ” means any contract, lease, license, indenture, note, bond, agreement, permit, concession, franchise or other instrument.
 
“ Exchange ” has the meaning set forth in the Background Section of this Agreement.
 
“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.
 
“ Governmental Entity ” means any federal, state, local or foreign government or any court of competent jurisdiction, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign.
 
“ Hong Kong ” means the Hong Kong Special Administrative Region of the People’s Republic of China.
 
“ Intellectual Property Right ” means any patent, patent right, trademark, trademark right, trade name, trade name right, service mark, service mark right, copyright and other proprietary intellectual property right and computer program.
 
“ Law ” means any statute, law, ordinance, rule, regulation, order, writ, injunction, judgment, or decree. “ Laws ” means the plural of any of the foregoing.
 
“ Lien ” means any lien, security interest, pledge, equity and claim of any kind, voting trust, stockholder agreement and other encumbrance. “ Liens ” means the plural of any of the foregoing.
 
“ Ossen ” has the meaning set forth in the Preamble of this Agreement.
 
“ Ossen Constituent Instruments ” means the certificate of incorporation and memorandum and articles of association of Ossen and such other constituent instruments of Ossen as may exist, each as amended to the date of this Agreement.
 
“ Ossen Disclosure Letter ” means the letter delivered from Ossen to Shell Company concurrently herewith.
 
“ Ossen Financial Statements ” has the meaning set forth in the Section 3.15 of this Agreement.
 
“ Ossen Material Adverse Effect ” has the meaning set forth in Section 3.1 of this Agreement.
 
“ Ossen Stock ” has the meaning set forth in the Background Section of this Agreement.

 
22
 
 
“ Party ” and “ Parties ” have the meanings set forth in the Preamble of this Agreement.
 
“ SEC ” means the Securities and Exchange Commission.
 
“ SEC Reports ” has the meaning set forth in Section 4.15 of this Agreement.
 
“ Securities Act ” means the Securities Act of 1933, as amended.
 
“ Shares ” has the meaning set forth in Section 1.1 of this Agreement.
 
“ Shareholder ” has the meaning set forth in the Preamble of this Agreement.
 
“ Shell Company ” has the meaning set forth in the Preamble of this Agreement.
 
“ Shell Company Constituent Instruments ” means the certificate of incorporation and memorandum and articles of association of Shell Company and such other constituent instruments of Shell Company as may exist, each as amended to the date of this Agreement.
 
“ Shell Company Material Adverse Effect ” has the meaning set forth in Section 4.1 of this Agreement.
 
“ Shell Company Stock ” has the meaning set forth in the Background Section of this Agreement.
 
“ Taxes ” means all forms of taxation, whenever created or imposed, and whether of the United States or elsewhere, and whether imposed by a local, municipal, governmental, state, foreign, federal or other Governmental Entity, or in connection with any agreement with respect to such forms of taxation, including all interest, penalties and additions imposed with respect to such amounts. “ Tax ” means the singular of any of the foregoing.
 
“ Tax Returns ” means all federal, state, local, provincial and foreign Tax returns, declarations, statements, reports, schedules, forms and information returns and any amended Tax return relating to Taxes.
 
“ Transactions ” has the meaning set forth in Section 1.2 of this Agreement.
 
“ Transaction Document ” means any of this Agreement and any other documents or agreements executed in connection with the Transactions.
 
“ Voting Ossen Debt ” has the meaning set forth in Section 3.3 of this Agreement.
 
“ Voting Shell Company Debt ” has the meaning set forth in Section 4.3 of this Agreement.

 
23
 

Exhibit 4.2

Sales Contract of Ossen Innovation Materials Co., Ltd.
 
Supplier : Ossen Innovation Materials Co., Ltd.
Contract No:
Purchaser: Shanghai Zhaoyang New Metal Material Co., Ltd.  
 Place of Execution :

I. name, specification, steel No., unit price (tax inclusive) and purchase quantity of product
Name
 
Specification (mm)
 
Steel No.
 
unit price
(RMB/ton)
 
purchase quantity
(ton)
                 

II.  Method of delivery
1.
Time and quantity of delivery: [______]
2.
Method of delivery
(1)    The purchaser takes the delivery: the purchaser must take delivery within [______] days after receiving the notice of the supplier for delivery;

III.
Reasonable loss and method of calculation
1.
the method of calculation is to be agreed upon by the parties: reasonable difference of + 0.3%
2.
the deviation from agreed quantity is + 3% as agreed by the parties through negotiations.

IV.          Method and standards of inspection and period of raising disagreements
1.
The quality standard is applied in accordance with the requirements of purchaser.
2.
Where the purchaser disagrees with the quality, the purchaser must raise the same with the supplier in writing within 30 days after the date of receiving the goods. In case of any delay, the quality is deemed to be consistent with the agreement.

V.           Method and period of settlement: in the absence of quality objection, payment shall be settled within 3 months upon receiving the goods.

VI.          Change and rescission of contract
1.
Where the purchaser requires to change the method of taking delivery, product type, type of steel, specifications or quantity of taking delivery, the purchaser must notify the supplier in writing 15 days in advance. The supplier must confirm the same in writing within three days upon its receipt of the notice. In case of failure of such confirmation, the parties must continue to perform the contract.
2.
Where either party requires to rescind the contract, the parties must negotiate with each other to reach the mutual agreement. This contract must not be terminated until all the contract documents have been terminated.
 
 
VII. Method of disputes settlement
Disputes arising in the course of the performance of the contract must be settled by the parties through negotiations. Where no agreement may be reached through negotiations, either party may pursue a legal action with the local court where the supplier is located.

VIII. Miscellaneous

Supplier : Ossen Innovation Materials Co., LTd (Seal)
Address : Zhaoming Road, Ma’anshan
Legal representative : Liang Tang
Representative of supplier : Hao Wang
 
Tel .: 0555-3503812
Fax : 0555-3506666
Zip code : 243051
Opening bank :
Account No .:

Tax No. :

Purchaser : Shanghai Zhaoyang New Metal Material Co., Ltd. (Seal)
Address : No.98 Handan Road, Yangpu District, Shanghai
Legal representative : Jiaxin Liang
Representative of supplier : Jianxin Liang
Tel .: 021-68872233
Fax :
Zip code : 200120
Opening bank :
Account No .:

Tax No. :

 
 
 




Exhibit 4.5

Sales Contract of Ossen Innovation Materials Co., Ltd.

Supplier : Ossen Innovation Materials Co., Ltd.
Contract No:
Purchaser: Zhangjiagang Ruifeng Iron and Steel Co., Ltd.  
 Place of Execution :

I. name, specification, steel No., unit price (tax inclusive) and purchase quantity of product
Name
 
Specification
(mm)
 
Steel No.
 
unit price
(RMB/ton)
 
purchase
quantity (ton)
 
  
 
  
 
  
 
  
 

II.  Method of delivery
1.
Time and quantity of delivery: [______]
2.
Method of delivery
(1)  The purchaser takes the delivery: the purchaser must take delivery within [______] days after receiving the notice of the supplier for delivery;

III.  Reasonable loss and method of calculation
1.
the method of calculation is to be agreed upon by the parties: reasonable difference of + 0.3%
2.
the deviation from agreed quantity is + 3% as agreed by the parties through negotiations.

IV.          Method and standards of inspection and period of raising disagreements
1.
The quality standard is applied in accordance with the requirements of purchaser.
2.
Where the purchaser disagrees with the quality, the purchaser must raise the same with the supplier in writing within 30 days after the date of receiving the goods. In case of any delay, the quality is deemed to be consistent with the agreement.

V.           Method and period of settlement: in the absence of quality objection, payment shall be settled within 3 months upon receiving the goods.

VI.          Change and rescission of contract
1.
Where the purchaser requires to change the method of taking delivery, product type, type of steel, specifications or quantity of taking delivery, the purchaser must notify the supplier in writing 15 days in advance. The supplier must confirm the same in writing within three days upon its receipt of the notice. In case of failure of such confirmation, the parties must continue to perform the contract.
 
 
2.
Where either party requires to rescind the contract, the parties must negotiate with each other to reach the mutual agreement. This contract must not be terminated until all the contract documents have been terminated.

VII. Method of disputes settlement
Disputes arising in the course of the performance of the contract must be settled by the parties through negotiations. Where no agreement may be reached through negotiations, either party may pursue a legal action with the local court where the supplier is located.

VIII. Miscellaneous

Supplier : Ossen Innovation Materials Co., LTd (Seal)
Address : Zhaoming Road, Ma’anshan
Legal representative : Liang Tang
Representative of supplier :

Tel .: 0555-3503812
Fax : 0555-3506666
Zip code : 243051
Opening bank :
Account No .:

Tax No. :

Purchaser : Zhangjiagang Ruifeng Iron and Steel Co., Ltd.   (Seal)
Address : Jinxiu Road, Yangzijiang Metallurgical Industry Area, Jiangsu.
Legal representative :
Representative of supplier :

Tel .:
Fax :
Zip code :
Opening bank :
Account No .:

Tax No. :
 
Exhibit 4.6

Coating Processing Agreement
 
ASMAS- [___] - [_]

Party A: Zhangjiagang Ruifeng Steel Co., Ltd.
Party B: Ossen Innovation Materials Co., Ltd.

In view of Party A authorizing Party B to carry out [_____] ton coating processing, Party A and Party B hereby agree as below through friendly negotiations:

1.
Party A provides [_____] and delivers the same to the production factory of Party B.

2.
Party B completes the stabilization processing within [___] days after receiving the raw materials provided by Party A.

3.
Party B is responsible for the quality of the products in the coating processing and shall provide Party A with conveniences at delivery of Party A.

4.
Party A takes delivery at the factory of Party B by itself.

5.
Party B issues the value-added tax invoice for Party A at the time of taking delivery. The processing fee is [___] , which shall be settled in the next month.

6.
For the purpose of maintaining the interests of Party A and Party B, the parties hereby reach the confidentiality agreement as below:

1) The parties can not disclose or promote the cooperation reached herein publicly;
2) Party A must not disclose the technology of Party B to any third party.

7.
The agreement is made in two counterparts. Each party holds one counterpart. Matters not mentioned herein must be settled by the parties through negotiations. The fax copy of the agreement is valid.

Party A: Zhangjiagang Ruifeng Steel Co., Ltd. (seal)

Party B: Ossen Innovation Materials Co., Ltd. (seal)

Dated: [_______]
 
 
 
 
 
 

Exhibit 4.7

Purchase Contract with Zhangjiagang Free Trade Zone B.M. International Trading Co., Ltd.
Time of Execution: ____________    Place of Execution: _____________   Contract No.:__________

I.
Name, Model, Quantity, Amount and Notes of Product

name
 
Specification & model
 
unit
 
quantity
 
Unit price
 
Amount
 
notes
                         
                         
In total: [__________]

 
 
 
 
II.
Quality requirements and technical standards : enterprise standards
III.
Place and method of delivery : to be determined at the time of delivery.
IV.
Mode of Transportation and destination and undertaking of expenses : to be determined at the time of delivery.
V.
Reasonable loss and method of calculation : actual pounds +- 30% reasonable difference
VI.
Package standards : packed up into one piece
VII.
Standards and method of inspection : subject to the letter of guarantee and the specification of weight of the supplier
VIII.
Settlement and period : cash term or bank acceptance
IX.
In case of any needs for guarantee, a separate guarantee contract must be concluded and constitutes an attachment to the contract .
X.
Liabilities for breaching the contract : subject to the contract law
XI.
Settlement method : subject to mutual negotiation or to the jurisdiction of the local court where the contract is executed.
XII.
Other convenants .

 
Supplier: Zhangjiagang Free Trade Zone B.M. International Trading Co., Ltd.
 
(seal)
 
Purchaser: Ossen Innovation Materials Co., Ltd. (seal)
Address: Room 615A, Jinbi Tower, Zhangjiagang Free Trade Zone
     
Address: Zhaoming Road, Ma’anshan
Zip code: 215625
     
Zip code: 243000
Phone:
     
Phone:
Opening Bank:
     
Opening Bank:
Account No.:
     
Account No.:
Tax No.:
     
Tax No.:
 
Valid period: from [ _____ ] to [ _____ ]
 
 
 
 
Exhibit 4.8
Sales Contract of Shanghai Z.F.X. Steel Co., LTd.
    
Supplier : Shanghai Z.F.X. Steel Co., Ltd.

Contract No. :
Purchaser : Ossen Innovation Materials Co., Ltd.
Place of Execution :
Time of Execution :

I.
name, specification, steel No., unit price (tax inclusive) and purchase quantity of product
Name
 
Specification (mm)
 
Steel No.
 
unit price
(RMB/ton)
 
purchase quantity
(ton)
 
                   

II. 
Method of delivery
1.
Time and quantity of delivery: [__________]
2.
Method of delivery
(1) The purchaser takes the delivery: the purchaser must take delivery at _______ within _____ days after receiving the notice of the supplier for delivery;
(2) Agent transportation: to be transported by vessel to Mahe Ferry

III. 
Reasonable loss and method of calculation
1.
the method of calculation is to be agreed upon by the parties: reasonable difference of + 0.3%
2.
the deviation from the agreed quantity is + 3% as agreed by the parties through negotiations.

IV. 
Method and standards of inspection and period of raising disagreements
1.
The supplier provides the letter of guarantee. The quality standard is subject to the agreement standards.
2.
Where the purchaser disagrees with the quality, the purchaser must raise the same with the supplier in writing within 30 days after the date of receiving the goods. In case of any delay, the quality is deemed to be consistent with the agreement.

V. 
Method and period of settlement: [______]

VI. 
Change and rescission of contract
1.
Where the purchaser requires to change the method of taking delivery, product type, type of steel, specifications or quantity of taking delivery, the purchaser must notify the supplier in writing 30 days in advance. The supplier must confirm the same in writing within three days upon its receipt of the notice. In case of failure of such confirmation, the parties must continue to perform the contract.
 
 
2.
Where either party requires to rescind the contract, the parties must negotiate with each other to reach the mutual agreement. This contract must not be terminated until all the contract documents have been terminated.

VII. Method of disputes settlement
Disputes arising in the course of the performance of the contract must be settled by the parties through negotiations. Where no agreement may be reached through negotiations, either party may pursue a legal action with the local court where the supplier is located.

VIII. Miscellaneous

Supplier : Shanghai Z.F.X. Steel Co., LTd (Seal)
Address : No.2150, North Zhongshan Road
Legal representative : Xufeng Zhou
Representative of supplier :

Tel .: 6888800
Fax : 021-68888666
Zip code : 200120
Opening bank :
Account No .:
 
Purchaser : Ossen Innovation Materials Co., Ltd. (Seal)
Address :
Legal representative :
Representative of supplier :

Tel .:
Fax :
Zip code :
Opening bank :
Account No .:
 
 
Exhibit 4.9
Purchase Contract with Zhangjiagang Free Trade Zone JinDe Trading   Co., Ltd
    
Time of Execution: __________    Place of Execution: ______________   Contract No.:_________
      
I.
Name, Model, Quantity, Amount and Notes of Product

name
 
Specification & model
 
unit
 
quantity
 
Unit price
 
Amount
 
notes
 
                           
                           
                           
                           
In total: RMB [____]
  
 
  
 
  
 
  
 
  
 
  
   
 
 
II.
Quality requirements and technical standards : enterprise standards
III.
Place and method of delivery : to be determined at the time of delivery.
IV.
Method of Transportation and destination and undertaking of expenses : to be determined at the time of delivery.
V.
Reasonable loss and method of calculation : actual pounds +- 30% reasonable difference
VI.
Package standards : packed up into one piece
VII.
Standards and method of inspection : subject to the letter of guarantee and the specification of weight of the supplier
VIII.
Settlement and period : cash term or bank acceptance
IX.
In case of any needs for guarantee, a separate guarantee contract must be concluded and constitutes an attachment to the contract .
X.
Liabilities for breaching the contract : subject to the contract law
XI.
Settlement method : subject to mutual negotiation or the jurisdiction of the local court where the contract is executed.
XII.
Other convenants .

Purchaser: Ossen Innovation Materials Co.,Ltd. (seal)
Address: Room 3034 Jinshui Suite, Zhangjiagang Free Trade Zone
Address: Zhaoming Road, Ma’anshan
Zip code: 215625
Zip code: 243000
Phone:
Phone: 0555-3563812
Opening Bank:
Opening Bank:
Account No.:
Tax No.:
Tax No.:

Valid period: from [______] to [______]
 
 
  
Exhibit 4.10

Purchase Contract with Jiangsu Shagang Group Co., Ltd
Time of Execution: __________    Place of Execution: ______________   Contract No.:_________
 
I.
Name, Model, Quantity, Amount and Notes of Product

name
 
Specification & model
 
unit
 
quantity
 
Unit price
 
Amount
 
notes
                         
                         
In total: RMB [__________]
 
 
II.
Quality requirements and technical standards : enterprise standards
III.
Place and method of delivery : to be determined at the time of delivery.
IV.
Method of Transportation and destination and undertaking of expenses : to be determined at the time of delivery.
V.
Reasonable loss and method of calculation : actual pounds +- 30% reasonable difference
VI.
Package standards : packed up into one piece
VII.
Standards and method of inspection : subject to the letter of guarantee and the specification of weight of the supplier
VIII.
Settlement and period : cash term or bank acceptance
IX.
In case of any needs for guarantee, a separate guarantee contract must be concluded and constitutes an attachment to the contract .
X.
Liabilities for breaching the contract : subject to the contract law
XI.
Settlement method : subject to mutual negotiation or the jurisdiction of the local court where the contract is executed.
XII.
Other convenants .

 
Purchaser: Ossen Innovation Materials Co.,Ltd. (seal)
Address: Yongxin Road, Zhangjiagang
 
Address: Zhaoming Road, Ma’anshan
Zip code: 215625
 
Zip code: 243000
Phone:
 
Phone: 0555-3563812
Opening Bank:
 
Opening Bank:
 
Account No.:
Tax No.:
 
Tax No.:

Valid period: from [______] to [______]
 
 

Exhibit 4. 11  

Employment Contract

Party A :        Ossen Innovation Materials Co., Ltd.

Party B :         Name: Liang Tang
Gender: Male
ID No.: 310104196803084829
Address:  No.49, Wanping Road, Xuhui District, Shanghai, P.R.C
Tel.:

In accordance with the Labor Law of the People's Republic of China, Party A and Party B hereby agree to conclude the employment contract through equivalent negotiations.

I.
Term
The valid term of the employment contract is three years, from October 7, 2008 to October 6, 2011.

II.
Position
Party B agrees to undertake the position of Chairman as per the needs of Party A. Party A may adjust the department and the position of Party B based on its production and work needs or the capability and performance of Party B. Party B must follow the arrangement of Party A unless there is any special conditions.

III.
Obligations of both Parties

 
(I)
Obligations of Party A
1.To give education and training to Party B on politics, occupational morale, technical business, safety production, laws and regulations and various policies.
2.To stipulate the scientific and reasonable technology, techniques, quality, consumption standards and the relevant work standards to appraise the performance of Party B.
3.To pay remuneration based on the relevant rules of the enterprise when Party B finishes the production tasks; and render the necessary material and spiritual awards where Party B makes significant contributions to the enterprise.

 
(II)
Obligations of Party B
1.To complete the production and work tasks and reach the stipulated targets or standards as per the regulations and requirements of Party A.
2.To have the spirit of ownership with high sense of liability, maintain the interests of the enterprise and fight against all the bad acts.

 
 
 
 
 
3.To strictly follow the state laws, regulations and policies, to implement administrative management on Party B according to the applicable state rules and enterprise policies, to accept the awards and punishment, abide by the various policies and principles of Party A, obey the management, education and allocation by Party A, to keep the matters of Party A confidential and to maintain the interests of Party A.
4.To keep and maintain all the production equipment, installation devices and production facilities provided by Party A, to care about the public welfare facilities to save the raw materials and energy.
5.To carry out production safely.
6.To cooperate with Party A and properly dispose the matters after the employment contract is rescinded or terminated.

IV.
Work conditions and labor protection
(I)       Party A must provide Party B with such sanitary working environment as may be consistent with the state rules to ensure the personal safety of Party B and to prevent the personnel of Party B from working under dangerous environment.
(II)      Party A provide the necessary labor protective materials to Party B based on the actual conditions of the position of Party B.
(III)     Party A is obligated to give education to Party B on work safety and sanitation and Party B must improve its sense of risk control and strictly follow the procedures of Party A on risk control and safety operation.

V.
Remuneration
(I)       Party A shall pay the remuneration to Party B in monetary way on a monthly basis according to the applicable state regulations and the rules of Party B on salary management. The basic salary of Party B is 8000 RMB based on the current salary rules of Party A.
(II)      Party A will distribute the salary on the 20 th day of each month, or the latest working day before the 20 th day if the 20 th day is holiday or vocation.

VI.
Change, rescission, termination and renewal of employment contract
(I)       In case of any change to the laws, administrative regulations and policies, based on which the employment contract is concluded, the employment contract must be amended accordingly.
(II)      The parties may change or rescind the contract upon the mutual agreement by the parties.
(III)     Party A may terminate the employment contract without any liabilities if Party B is involved in any of the following conditions:
1.Party B submits to Party A fraudulent identity materials, title or capability certificates or other important materials and information, or conclude the contract in the way of fraudulence.
2.Party B materially violates the principles or regulations of Party A in such a way as may materially impair the interests of Party A.
3.Party B seriously neglect its duties, seeks for personal interests in such a way as may materially impair the interests of Party A.

 
 
 
 
 
4.Party B discloses the trade secrets of Party A in such way as may materially impair the interests of Party A.
5.Party B is legally investigated for his criminal liabilities.
6.Party B is unable to undertake his work agreed in the contract or the adjusted work after training or position adjustment.
7.Party B is unable to carry out his original work or the work arranged by Party A after the expiration of the medical care period due to illness or non-work-related injury.
(IV)    Where Party B intends to terminate the employment contract, Party B must notify Party A in writing thirty days in advance and the employment contract may not be terminated unless and until Party B finishes all the existing businesses, settles the credits and credits and completes all the relevant handover formalities; provided that Party B must still undertake the corresponding liabilities for breaching the contract in this case.
(V)     Party B may terminate the employment contract by notifying Party A without liabilities if Party A is involved in any of the following conditions:
1.Party A compels Party B by violent or threatening method or by illegally restricting the personal freedom of Party B;
2.Party A fails to pay the remuneration or provide the relevant conditions as per the employment contract;
(VI)    The employment relationship between the parties is terminated upon the expiration of the employment contract. Party A and Party B may renew the employment contract upon mutual agreement.
(VII)   Where the contract is terminated or rescinded, Party B must hand over all the work he has completed or is undertaking to Party A within seven days, settle all the credits and debts , completes all the handover formalities and return to Party A all the properties, tools, technical materials and other assets of Party A, which are delivered by Party A to Party B for use or maintenance during the performance of the employment contract, and give the indemnification in case of any loss.

VII.
Miscellaneous
1.The rules and regulations of Party B have the binding force on both parties of the employment contract.
2.Matters not mentioned herein must be subject to the applicable laws and regulations of the state and the government.
3.The employment contract is made in two counterparts. Each party holds one counterpart. The employment contract takes effect from the time when it is duly executed. Both counterparts have the same legal force and effect.

Party A: (seal)
Party B: Liang Tang (signature)
   
Date of execution
Date of execution: Oct. 7, 2008

 
 
 

Exhibit 4.12

Stabilization Processing Agreement
 
ASMAS- [____] - [_]

Party A: Shanghai Zhaoyang New Metal Material Co., Ltd.
Party B: Ossen Innovation Materials Co., Ltd.

In view of Party A authorizing Party B to carry out [______] ton stabilization processing, Party A and Party B hereby agree as below through friendly negotiations:

1.
Party A provides [______] and delivers the same to the production factory of Party B.

2.
Party B completes the stabilization processing within [____] days after receiving the raw materials provided by Party A.

3.
Party B is responsible for the quality of the products in the stabilization processing. In case of any problem with respect to stabilization quality, Party B assumes all the liabilities so caused.

4.
Party B keeps the products processed safety for Party A and Party A takes delivery at the factory of Party B by itself.

5.
Party B issues the value-added tax invoice for Party A at the time of taking delivery. The processing fee is [______] , which shall be settled in the next month.

6.
For the purpose of maintaining the interests of Party A and Party B, the parties hereby reach the confidentiality agreement as below:

1) the parties can not disclose or promote the cooperation reached herein publicly;
2) Party A must not disclose the technology of Party B to any third party.

7.
The agreement is made in two counterparts. Each party holds one counterpart. Matters not mentioned herein must be settled by the parties through negotiations. The fax copy of the agreement is valid.

Party A: Shanghai Zhaoyang New Metal Material Co., Ltd. (seal)

Party B: Ossen Innovation Materials Co., Ltd. (seal)

Dated:    [______]
 
 
 
 
 
 
Exhibit    4.13            
 
Contract No.: [______]

 
Loan Contract

By and between

Borrower (Party A): Ossen Innovation Materials Co., Ltd.
Address :
Legal Representative: Liang Tang
 
And
 
Loaner (Party B)     Feicuiyuan  Branch, Huishang Bank
Address :
Person in Charge: Long Wang

 
- 1 -
 
 
 
Contents

Article 1 Types of Loan
Article 2 Usage of Loan
Article 3 Amount and term of loan
Article 4 Interest rate and interest of loan
Article 5 Source of Repayment Fund and Method of Repayment
Article 6 Guarantee
Article 7 Rights and Obligations of both Parties
Article 8 Liabilities for Breaching the Contract
Article 9 Effectiveness, change, rescission and termination of the contract
Article 10 Disputes Settlement
Article 11 Miscellaneous
Article 12 Supplementary Provisions

 
- 2 -
 
 

Due to the needs listed in Article 2.1, Party A hereby applies for RMB loan from Party B. Party B agrees to distribute the loan to Party A. For the purpose of identifying the rights and obligations of the parties, Party A and Party B agree to conclude the contract in accordance with the Contract Law, the General Rules of Loan and other applicable laws and regulations. Party A has read all the articles of the contract. Party A has fully known and understood the meanings and the legal consequences of all the articles, especially the indications with underline.

Article 1 Types of Loan
 
1.1  The loan under the contract is [______] (long-term, medium-term or short-term) loan.

Article 2 Usage of Loan
 
2.1 The loan under the contract is to be used for [___________] .

2.2 Party A must not change the usage of loan defined in the contract without the written consent by Party B.

Article 3 Amount and term of loan
 
3.1 The amount of the loan under the contract is RMB [______] (in word).

3.2 The parties agree that Party A may apply for loan with Party B from ___ to ___ based on its needs for capital due to its business development, and may withdraw the loan in a lump-sum way or as below; provided that the time of use for each installment must not exceed ___months.
Detailed plan of loan use (amount in word)
Amount of loan
 
Date of loan
 
Date of repayment
 
Other matters agreed 
by the parties
             
             
             
             
 
  
 
  
 
  
 

3.3 Party A must fill in the loan voucher as per Article 3.2 to apply with Party B to issue the loan. In case of any change to the term of loan or time of loan by some special reasons, Party A must obtain the written consent from Party B. The actual date of loan and date of replay are subject to the dates specified on the loan vouchers. The loan voucher constitutes an integral part of the contract. Except the date, the installment and the amount, in case of any difference between the matters specified on the vouchers and the contract, the contract shall prevail.

 
- 3 -
 
 
 
Article 4 Interest rate and interest of loan

4.1 The interest rate of the loan under the contract is subject to the interest rate of the loan with the same term and same level promulgated by the People’s Bank of China at the time of loan distribution. The floating rate is [____] % above or below. (where the interest rate of the short-term loan is the interest rate agreed in the contract, the interest rate will not be adjusted during the contractual term. In case of long-term and medium-term loan, the interest rate must be adjusted based on the effective date specified in the relevant documents if the interest rate of the loan with the same term and same level promulgated by the People’s Bank of China is adjusted.). The interest is accrued from the date when the loan is actually distributed to Party A on a daily basis. The method of interest settlement: method (2)

1. Settlement once ___ days. The interest must be paid off together with the principal when the loan becomes due.
2. Settlement on a [______] (monthly/quarterly/annual) basis. The interest settlement date is the 20 th day of each          (month/last month of each quarter/last month of each year). The interest must be paid off together with the principal when the loan becomes due.
3. The interest must be paid off together with the principal when the loan becomes due.
4. The principal and the interest are in the same amount. Repayment of RMB ___ in each month for both the principal and the interest.
5. The principal is in the same amount but the interest is not in the same amount. Repayment of RMB ___ in each month for the principal and the interest.
6. Other methods agreed upon by the parties:

Article 5 Source of Repayment Fund and Method of Repayment

5.1 The fund used by Party A to repay the principal and the interest of the loan under the contract comes from the following sources (including but without limitation to)
 
5.1.1 [______]
 
5.1.2

5.2 Regardless of the provisions on the sources of the repayment fund of Party A in any other contracts, to which Party A is one party, the provisions must not affect Party A’s performance of its obligations of repayment in the contract. Regardless of any conditions, Party A must not refuse to perform its obligations of repayment under the contract by the reason of Article 5.1.

5.3 Party A shall pay the interest and the principal in adequate amount and in due time as agreed herein.

5.4 Party A promises to deposit sufficient amount into the account opened in Party B before the interest settlement date of the principal payment date agreed herein to pay the payable interest or principal, and authorizes Party B to transfer the same from the account on the interest settlement date of the principal payment date agreed herein.

 
- 4 -
 
 
 
Article 6 Guarantee

6.1 The method of guarantee for the loan under the contract is: [__________]

6.2 Party A is obligated to actively assist Party B and cause Party B to conclude the guarantee contract [___________] on the detailed guarantee with the guarantor.

6.3 In case of such change to the guarantee under the contract as may be adverse to Party B’s credit, Party A must provide such other guarantee as may be satisfied to Party B by notifying Party B.

Article 7 Rights and Obligations of both Parties
7.1 Rights and Obligations of Party A

7.1.1 Party A must withdraw and use the loan as per the term and usage agreed in the contract or the loan vouchers.
7.1.2 Party A must not earlier repay the loan without the written consent from Party B.
7.1.3 Party A is liable for the accuracy, correctness and completeness of the materials provided in the course of loan examination.
7.1.4 Party A must accept the investigation, understanding and supervision by Party B on the loan under the contract.
7.1.5 Party A must actively assist Party B to investigate, understand and supervise its production, operation and finance status, and is obligated to provide Party B with various income statement, balance sheet, cash flow statement and other relevant financial statements and reports.
7.1.6 Party A must repay the principal and the interest of the loan under the contract as agreed herein.
7.1.7 Party A must undertake the expenditures under the contract, including but not limited to the expenses for public notarization, certification, appraisal and registration.
7.1.8 Party A must mail the receipt to Party B within 3 days after signing the letter of payment or the document of payment sent by mail or other methods.
7.1.9 In case of such actions as may affect the rights and the interests of Party B including but not limited to contracted lease, restructuring of shareholding structure, joint operation, merger, acquisition, joint venture, division, decrease in capital contribution, change of equity and transfer of material assets, Party A must timely notify Party B in case of being a listed company or notify Party B within three days in writing in case of not being a listed company. Where Party B disagrees, Party A must immediately repay all the debts.
7.1.10 In case of change to address, telecommunication address, business scope, legal representative or other matters recorded in industrial and commercial registration, Party A shall notify Party B in writing within 7 days upon the change.
7.1.11 In case of such other matters as may endanger the normal operation of Party A or materially and adversely affect its performance of the repayment obligations under the contract, including but not limited to material economic disputes, bankruptcy and deterioration in financial status, Party A shall notify Party B in writing immediately.

 
- 5 -
 
 
 
7.1.12 In case of business stoppage, dissolution, operation suspension for restructuring, being revoking with business license or being cancelled, Party A shall notify Party B in writing within 5 days upon the occurrence of the said matters and guarantee to refund the principal and the interest of the loan immediately.
7.1.13 The customer must always keep the various financial targets required by the bank. Without the permission from the bank, the dividends to the customer must not exceed a certain proportion of the after-tax net income and the capital expenditure must not exceed a certain amount required by the bank. The customer must not apply for credit from other creditors, not change the clauses of debts with other creditors, not repay other long-term debts earlier, not provide debt guarantee to other third party and not mortgage assets to other creditors.

7.2 Rights and Obligations of Party B
7.2.1 To require Party A to provide all the materials related to the loan;
7.2.2 To transfer the principal, interest, compound interest and other payable fees of the loan payable by Party A from the account of Party A as agreed in the contract or stipulated by the laws.
7.2.3 To carry out credit sanction, report to the competent department or unit and publish notice for payment through news and media if Party A avoids supervision by Party B, delays payment of principal and interest of the loan or otherwise materially breaches the contract.
7.2.4 To provide loan to Party A in time and in full amount as agreed in the contract where Party A submits the loan voucher as agreed (except for the delay caused by the reason attributable to Party A);
7.2.5 To keep confidential all the materials and information related to Party A’s debts, finance, production, operation or other aspects unless otherwise provided by the contract or the applicable laws and regulations.

Article 8 Liabilities for Breaching the Contract

8.1 Party A and Party B must perform their respective obligations under the contract after the contract takes effect. Where either party fails to perform such obligations in whole or in part, the party must undertake the liability for breaching the contract (including the attorney fee).

8.2 Where Party A fails to apply for and withdraw the loan as agreed in Article 3.2, Party B has the right to charge the liquidated damages at the contract interest rate on a daily basis.

8.3 Where Party B fails to apply for and withdraw the loan as agreed in Article 3.2, Party A has the right to charge the liquidated damages at the contract interest rate on a daily basis.

8.4 Where Party A pays back the loan under the contract earlier without the written consent from Party B, Party B has the right to charge the interest based on the loan term and the interest rate agreed in the contract.

8.5 Where Party A fails to repay the principal and interest under the contract in due time, Party B has the right to require Party A to pay off the same within the specified period, exercise the right of offset on all the accounts opened by Party A in Party B and charge the punishment interest on the overdue loan and the compound interest on the outstanding interest based on the standard of penalty interest. The penalty interest is 50% more than the actual loan interest loan specified on the contract.

 
- 6 -
 
 
 
8.6 Where Party A fails to use the loan for the purpose specified in the contract, Party B has the right to take back the loan in whole or in part or terminate the contract earlier, charge the penalty interest on the loan used by Party A in default based on the days of default and the compound interest on the outstanding interest based on the standard of penalty interest. The penalty interest is 100% more than the actual loan interest loan specified on the contract.

8.7 In case of the conditions specified in Article 8.5 and 8.6, Party B must select the more severe punishment other than concurrent punishment for the two conditions

8.8 Where Party A is involved in any of the following acts, Party A shall rectify its act and adopt such remedy measures as may be satisfactory to Party B within 7 days after receipt of the notice from Party B; or otherwise Party B has the right to earlier take back the loan in whole or in part; and charge the liquidated damages on a daily basis at the interest rate of the loan for the same period if the loan may not be so taken back.

8.8.1 To provide Party B with fraudulent balance sheet, income statement or other financial statements and reports or conceal material facts;
8.8.2 Not to assist or to refuse the supervision by Party B on its use of the loan and the relevant production and operation and financial activities;
8.8.3 To transfer or dispose or threaten to transfer or dispose the important part of the assets without the consent from Party B;
8.8.4 To cause the important part of its assets to be occupied by other creditors in whole or in part or received by the designated trustee, receiver or other similar personnel or detained or frozen in such a way as may cause material damage or loss to Party B;
8.8.5 To carry out contracting, lease, restructuring of shareholding structure, joint operation, merger, acquisition, joint venture, division, capital decrease, equity change, transfer and other acts without the consent from Party B in such a way as may affect the rights and interests of Party B and endanger the security of Party B’s credits.
8.8.6 To change its address, telecommunication address, business scope, legal representative or other matters recorded in industrial and commercial registration or significant investment in such a way as may materially affect or threaten the credits of Party B;
8.8.7 To be involved in significant economic disputes or deterioration of financial status in such a way as may materially affect or threaten the credits of Party B;
8.8.8 To carry out other acts as may threaten or materially affect the credits of Party B under the loan contract.

Article 9 Effectiveness, change, rescission and termination of the contract

9.1 The contract takes effective from the date when signed and stamped by Party A and Party B and terminates when the borrower under the main contract pays off all the principal, interest, compound interest, late fee, liquidated damages, indemnification, the expenses to realize the credit (including the attorney fee) and all the other payable fees.

 
- 7 -
 
 
 
9.2 In case of any of the following conditions, Party B has the right to terminate the contract and require Party B to earlier return the principal and interest of the loan and indemnify the losses and damages :

9.2.1 Party A is subject to business stoppage, dissolution, operation suspension for restructuring, is revoked with business license or is cancelled;
9.2.2 The guarantee under the contract is changed in such a way as may be adverse to the credits of Party B and Party A fails to provide the guarantee required by Party A;
9.2.3 Other acts materially breaching the contract.

9.3 Where Party A requires for extension, Party A shall apply with Party B in writing and obtain the written consent from the guarantor for subsequent guarantee within 30 days before the contract becomes due. The loan may not be extended until and unless Party B agrees to sign the extension agreement upon examination. The loan contract shall be continued to be performed before the conclusion of the extension agreement.

9.4 Neither party may change or rescind the contract without consent after the contract takes effective. In case of any need for change or rescission, the parties must agree within each other in writing through negotiations. The Contract remains in effect before the parties reach the written agreement.

Article 10 Disputes Settlement

10.1 Disputes between Party A and Party B arising out of the performance of the contract shall be settled by the parties through negotiations. In case of no agreement may be reached through negotiations, the parties adopt Article [______] to settle the disputes.
10.1.1 To submit the dispute to ____ arbitration committee for arbitration.
10.1.2 To submit to the local court in the place where Party B is located for settlement.

Article 11 Miscellaneous

 
11.1  
11.2
11.3

Article 12 Supplementary Provisions

12.1 The attachments to the contract constitute an integral part of the contract and have the same legal force and effect as the contract.

 
- 8 -
 
 
 
12.2 In the event that the actual date of loan distribution or repayment is not a business day of the bank during the performance of the contract, the date of loan distribution or repayment shall be postponed to the next business day of the bank.

12.3 The original copy of the contract is made in    counterparts. Party A, Party B and ____hold ___ counterpart(s) respectively. All the counterparts have the same legal force and effect.

Party A:  (company chop): Ossen Innovation Materials Co., Ltd. (seal)
Legal Representative:
 
Date: [______]

Party B: Feicuiyuan Branch, Huishang Bank (seal)
People in Charge:
 
Date: [______]

 
- 9 -
 
 
Exhibit 4.14  

Contract No.: [________]

Loan Guarantee Contract

By and between

Guarantor (Party A): Shanghai Ossen Investment Co., Ltd.
Address ：
Legal Representative: Fangping  Jiang

And

Creditor (Party B) ： Feicuiyuan Branch, Huishang Bank
Address ：
Person in Charge: Long  Wang

 
 
 

 

 
- 1 -
 
 
 
 
Contents
 
Article 1 Representations and Guarantees of Party A
Article 2 Types, Amount and Term of Loan of the Main Credit under the Guarantee
Article 3 Method of Guarantee
Article 4 Scope o f Guarantee
Article 5 Period of Guarantee
Article 6 Rights and Obligations of Party A
Article 7 Rights and Obligations of Party B
Article 8 Liabilities for Breaching the Contract
Article 9 Effectiveness, change, rescission and termination of the contract
Article 10 Disputes Settlement
Article 11 Miscellaneous
Article 12 Supplementary Provisions

 
- 2 -
 
 
 
For the purpose of guaranteeing the duly performance of the obligations of the borrower under the loan contract [________] concluded by and between Ossen (Maanshan) Steel Wire and Cable Co., Ltd. On [________] (hereinafter referred to as the “Main Contract”), Party A is willing to provide the guarantee to Party B. For the purpose of identifying the rights and obligations of both parties, Party A and Party B agree to conclude the contract as below in accordance with the Guarantee Law, the Real Property Law and other applicable laws and regulations.

Article 1 Representations and Guarantees of Party A

1.1
Party A has the qualification as a guarantor and may provide the guarantee to others according to the Chinese laws.

1.2
Party A has the adequate capability to undertake the liabilities of guarantee which will not be relieved or exempted due to any order, change of financial status or agreement with any unit.

1.3
Party A fully understands the usage of the loan under the Main Contract and is totally voluntary to provide the guarantee for the borrower under the Main Contract, and its meanings under the Main Contract are completely true.

1.4
Where the borrower fails to perform the obligations to pay the principal and interest of the loan and the relevant expenses, Party B may directly claim from Party A and Party A authorizes Party B to transfer the same from its account opened in Party B.

1.5
Party A has read all the articles of the contract. Party A has fully known and understood the meanings and the legal consequences of all the articles, especially the indications with underline.

1.6
Party A has completed all the legal formalities related to guarantee as per the articles of association of Party A.

Article 2 Types, Amount and Term of Loan of the Main Credit under the Guarantee

2.1 The main credit guaranteed under the contract is the loan distributed based on the main contract.
Total amount is RMB [________] (in word). The term of loan is from [________] to [________] . In case of any difference between the actual loan installments, amount, distribution date and term of use, the contract shall prevail.

Article 3 Method of Guarantee

3.1 The method of guarantee under the contract is joint and several guarantee.

 
- 3 -
 
 
 
 
Article 4 Scope of Guarantee

4.1 The scope of the guarantee under the contract include the principal, interest, compound interest, punishment interest, late fee, liquidated damages, expenses to realize the credit (including the attorney fees) and other payable fees.

Article 5 Period of Guarantee

5.1 The period of guarantee under the contract is two years from the date after the due date of the loan determined under the Main Contract.

5.2 Where the loan determined under the Main Contract becomes due by installments, the period of guarantee of each installment is two years from the date after the due date of each installment.

5.3 Where Party B withdraws the loan earlier according to the Main Contract, the period of guarantee is two years from the date after the date of repayment notified by Party B to the borrower.

Article 6 Rights and Obligations of Party A

6.1 Where Party A is involved in any of the following conditions, Party A must timely notify Party B in case of being a listed company or notify Party B within three days in writing in case of not being a listed company.

6.1.1 Change of operation scheme: e.g. contracting, lease, joint venture, merger, acquisition, division, restructuring of shareholding structure and cooperation with foreign investors.
6.1.2 Change of business scope and registered capital and change of equity
6.1.3 Deterioration of financial status or being involved in material economic disputes;
6.1.4 Bankruptcy, business stoppage, liquidation, business suspension for restructuring, being revoked with business license or being cancelled.
6.1.5 Change of address, telephone or legal representative

6.2 Where the Main Contract between Party B and the borrower changes, Party B is not required to obtain the consent from Party A except for the extension or the increase in the loan amount and Party A will undertake the joint and several liabilities of guarantee within the original scope of guarantee .

6.3 Where Party B transfers the main credit to any third party within the valid term of the contract Party A will undertake the joint and several liabilities of guarantee within the original scope of guarantee .

6.4 Where Party A is involved in division, merger, restructuring of shareholding structure or other events within the valid term of the contract Party A guarantees to properly handle all the liabilities of guarantee under the contract.

 
- 4 -
 
 
 
6.5 Within the valid term of the contract, the customer must always keep the various financial targets required by the bank. Without the permission from the bank, the dividends to the customer must not exceed a certain proportion of the after-tax net income and the capital expenditure must not exceed a certain amount required by the bank. The customer must not apply for credit from other creditors, not change the clauses of debts with other creditors, not repay other long-term debts earlier, not provide debt guarantee to other third party and not mortgage assets to other creditors.

Article 7 Rights and Obligations of Party B

7.1 Where the credits of Party B fail to be settled in whole or in part upon the expiration of the main debts, Party B has the right to directly require Party A to undertake the liabilities of guarantee as per the contract no matter whether the borrower has provided any guarantee in kind to the debts.

7.2 In case of any of the following conditions, Party B has the right to notify Party A in writing to earlier undertake the liabilities of guarantee and Party A must perform the liabilities of guarantee within 10 days after its receipt of the said notice.

7.2.1 Party B legally rescinds the main contract as agreed herein;
7.2.2 Party B earlier withdraws the loan as agreed herein.

Article 8 Liabilities for Breaching the Contract

8.1 Where Party B suffers from any loss or damage due to the fraudulent representations and statements made by Party A in Article 1 of the contract, Party A must indemnify Party B for its actual damage or loss.

8.2 Party A and Party B must fully perform their obligations under the contract after the contract takes effective. Where either party fails to perform the contract in whole or in part, the party must undertake the corresponding liabilities for breaching the contract and indemnify the other party for its losses and damages so caused.

8.3 Where the contract becomes invalid by the reasons attributable to Party A, Party A must indemnify Party B for all of its damages and losses so caused .

Article 9 Effectiveness, change, rescission and termination of the contract

9.1 The contract takes effective from the date when signed and stamped by Party A and Party B and terminates when the borrower under the main contract pays off all the principal, interest, compound interest, late fee, liquidated damages, indemnification, the expenses to realize the credit (including the attorney fee) and all the other payable fees.

 
- 5 -
 
 
 
 
9.2 Neither party may change or rescind the contract without consent after the contract takes effective. In case of any need for change or rescission, the parties must agree within each other in writing through negotiations. The Contract remains in effect before the parties reach the written agreement.

Article 10 Disputes Settlement

10.1 Disputes between Party A and Party B arising out of the performance of the contract shall be settled by the parties through negotiations. In case of no agreement may be reached through negotiations, the parties adopt Article [________] to settle the disputes.

10.1.1 To submit the dispute to ____ arbitration committee for arbitration.
10.1.2 To submit to the local court in the place where Party B is located for settlement.

Article 11 Miscellaneous

11.1
11.2
11.3

Article 12 Supplementary Provisions

12.1 The original copy of the contract is made in    counterparts. Party A, Party B and ____hold ___ counterpart(s) respectively. All the counterparts have the same legal force and effect.

Party A: Shanghai Ossen Investment Co., Ltd (seal)
Legal Representative:
Date: [________]

Party B: Feicuiyuan Branch, Huishang Bank (seal)
People in Charge:
Date: [________]

 
- 6 -
 

Exhibit 4.15
 
Contract No.: [_________]

Loan Guarantee Contract

By and between

Guarantor (Party A): Shanghai Z.F.X. Steel Co., Ltd.
 
Address ：
 
Legal Representative: Xufeng Zhou

And

Creditor (Party B) ： Feicuiyuan Branch, Huishang Bank
  
Address ：
 
Person in Charge: Long  Wang

 
- 1 -
 
 
 
Contents
     
Article 1 Representations and Guarantees of Party A
   
Article 2 Types, Amount and Term of Loan of the Main Credit under the Guarantee
   
Article 3 Method of Guarantee
   
Article 4 Scope of Guarantee
   
Article 5 Period of Guarantee
   
Article 6 Rights and Obligations of Party A
   
Article 7 Rights and Obligations of Party B
   
Article 8 Liabilities for Breaching the Contract
   
Article 9 Effectiveness, change, rescission and termination of the contract
   
Article 10 Disputes Settlement
   
Article 11 Miscellaneous
   
Article 12 Supplementary Provisions
   

 
- 2 -
 
 
 
For the purpose of guaranteeing the duly performance of the obligations of the borrower under the loan contract [_________] concluded by and between Ossen (Maanshan) Steel Wire and Cable Co., Ltd. On [_________] (hereinafter referred to as the “Main Contract”), Party A is willing to provide the guarantee to Party B. For the purpose of identifying the rights and obligations of both parties, Party A and Party B agree to conclude the contract as below in accordance with the Guarantee Law, the Real Property Law and other applicable laws and regulations.

Article 1 Representations and Guarantees of Party A

1.1
Party A has the qualification as a guarantor and may provide the guarantee to others according to the Chinese laws.

1.2
Party A has the adequate capability to undertake the liabilities of guarantee which will not be relieved or exempted due to any order, change of financial status or agreement with any unit.

1.3
Party A fully understands the usage of the loan under the Main Contract and is totally voluntary to provide the guarantee for the borrower under the Main Contract, and its meanings under the Main Contract are completely true.

1.4
Where the borrower fails to perform the obligations to pay the principal and interest of the loan and the relevant expenses, Party B may directly claim from Party A and Party A authorizes Party B to transfer the same from its account opened in Party B.

1.5
Party A has read all the articles of the contract. Party A has fully known and understood the meanings and the legal consequences of all the articles, especially the indications with underline.

1.6
Party A has completed all the legal formalities related to guarantee as per the articles of association of Party A.

Article 2 Types, Amount and Term of Loan of the Main Credit under the Guarantee

2.1 The main credit guaranteed under the contract is the loan distributed based on the main contract.
 
Total amount is RMB [_________] (in word). The term of loan is from [_________] to [_________] . In case of any difference between the actual loan installments, amount, distribution date and term of use, the contract shall prevail.

 
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Article 3 Method of Guarantee

3.1 The method of guarantee under the contract is joint and several guarantee.

Article 4 Scope of Guarantee

4.1 The scope of the guarantee under the contract include the principal, interest, compound interest, punishment interest, late fee, liquidated damages, expenses to realize the credit (including the attorney fees) and other payable fees.

Article 5 Period of Guarantee

5.1 The period of guarantee under the contract is two years from the date after the due date of the loan determined under the Main Contract.

5.2 Where the loan determined under the Main Contract becomes due by installments, the period of guarantee of each installment is two years from the date after the due date of each installment.

5.3 Where Party B withdraws the loan earlier according to the Main Contract, the period of guarantee is two years from the date after the date of repayment notified by Party B to the borrower.

Article 6 Rights and Obligations of Party A

6.1 Where Party A is involved in any of the following conditions, Party A must timely notify Party B in case of being a listed company or notify Party B within three days in writing in case of not being a listed company.

6.1.1 Change of operation scheme: e.g. contracting, lease, joint venture, merger, acquisition, division, restructuring of shareholding structure and cooperation with foreign investors.
6.1.2 Change of business scope and registered capital and change of equity
6.1.3 Deterioration of financial status or being involved in material economic disputes;
6.1.4 Bankruptcy, business stoppage, liquidation, business suspension for restructuring, being revoked with business license or being cancelled.
6.1.5 Change of address, telephone or legal representative

6.2 Where the Main Contract between Party B and the borrower changes, Party B is not required to obtain the consent from Party A except for the extension or the increase in the loan amount and Party A will undertake the joint and several liabilities of guarantee within the original scope of guarantee .

6.3 Where Party B transfers the main credit to any third party within the valid term of the contract Party A will undertake the joint and several liabilities of guarantee within the original scope of guarantee .

 
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6.4 Where Party A is involved in division, merger, restructuring of shareholding structure or other events within the valid term of the contract Party A guarantees to properly handle all the liabilities of guarantee under the contract.

6.5 Within the valid term of the contract, the customer must always keep the various financial targets required by the bank. Without the permission from the bank, the dividends to the customer must not exceed a certain proportion of the after-tax net income and the capital expenditure must not exceed a certain amount required by the bank. The customer must not apply for credit from other creditors, not change the clauses of debts with other creditors, not repay other long-term debts earlier, not provide debt guarantee to other third party and not mortgage assets to other creditors.

Article 7 Rights and Obligations of Party B

7.1 Where the credits of Party B fail to be settled in whole or in part upon the expiration of the main debts, Party B has the right to directly require Party A to undertake the liabilities of guarantee as per the contract no matter whether the borrower has provided any guarantee in kind to the debts.

7.2 In case of any of the following conditions, Party B has the right to notify Party A in writing to earlier undertake the liabilities of guarantee and Party A must perform the liabilities of guarantee within 10 days after its receipt of the said notice.

7.2.1 Party B legally rescinds the main contract as agreed herein;
7.2.2 Party B earlier withdraws the loan as agreed herein.

Article 8 Liabilities for Breaching the Contract

8.1 Where Party B suffers from any loss or damage due to the fraudulent representations and statements made by Party A in Article 1 of the contract, Party A must indemnify Party B for its actual damage or loss.

8.2 Party A and Party B must fully perform their obligations under the contract after the contract takes effective. Where either party fails to perform the contract in whole or in part, the party must undertake the corresponding liabilities for breaching the contract and indemnify the other party for its losses and damages so caused.

8.3 Where the contract becomes invalid by the reasons attributable to Party A, Party A must indemnify Party B for all of its damages and losses so caused .

Article 9 Effectiveness, change, rescission and termination of the contract

9.1 The contract takes effective from the date when signed and stamped by Party A and Party B and terminates when the borrower under the main contract pays off all the principal, interest, compound interest, late fee, liquidated damages, indemnification, the expenses to realize the credit (including the attorney fee) and all the other payable fees.

 
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9.2 Neither party may change or rescind the contract without consent after the contract takes effective. In case of any need for change or rescission, the parties must agree within each other in writing through negotiations. The Contract remains in effect before the parties reach the written agreement.

Article 10 Disputes Settlement

10.1 Disputes between Party A and Party B arising out of the performance of the contract shall be settled by the parties through negotiations. In case of no agreement may be reached through negotiations, the parties adopt Article [______] to settle the disputes.

10.1.1 To submit the dispute to ____ arbitration committee for arbitration.
10.1.2 To submit to the local court in the place where Party B is located for settlement.

Article 11 Miscellaneous

11.1
11.2
11.3

Article 12 Supplementary Provisions

12.1 The original copy of the contract is made in counterparts. Party A, Party B and ____hold ___ counterpart(s) respectively. All the counterparts have the same legal force and effect.

Party A: Shanghai Z.F.X. Steel Co., Ltd (seal)
Legal Representative:
  
Date: [_________]

Party B: Feicuiyuan Branch, Huishang Bank (seal)
People in Charge:
  
Date: [_________]

 
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Exhibit 4.16
 
Cooperation Agreement

Party A: Ossen (Jiujiang) Steel Wire & Cable Co., Ltd.

Party B: Shanghai Machinery Manufacturing Technology Research Institute

Party C: Organization Department of Jiujiang Committee of CPC and Jiujiang Bureau of Science and Technology

For the purpose of its development, Party A is in urgent need of technology for “high performance indented prestressed steel wires and galvanized steel wires” to realize industrialization as soon as possible. In order to implement the program for uniting technology and talents and project of Jiujiang City, the Organization Department of Jiujiang Committee of CPC and the Jiujiang Bureau of Science and Technology promptly contacts Shanghai Machinery Manufacturing Technology Research Institute. With the Institute’s vigorous support and assistance, the Organization Department of Jiujiang Committee of CPC and the Jiujiang Bureau of Science and Technology contributes a lot to the cooperation between Party A and Party B in R&D project. The parties hereby reach the following agreement through consultation for mutual covenants.

Article 1 Legal Basis for Signing the Agreement

1.
The Contract Law of the People’s Republic of China;

2.
State and local regulations and rules on the administration of designs.

Article 2 Basis for Design

1.
Technical conditions for product design submitted by Party A to Party B;

2.
State and local specifications and regulations for design of high performance prestressed steel wires and galvanized steel wires.

Article 3 Liabilities of the Parties

1.
Party A’s liabilities

(1)
Party A shall provide Party B with technical conditions for designing and be liable for the completeness and correctness thereof;

(2)
Party A shall make payment to Party B as design fee in accordance herewith;

 
 
 
2.
Party B’s liabilities

(1)
Party B shall design in accordance with technical conditions for designing and relevant regulations of the state, and deliver design documents (including electronic technical documents) in accordance with the time specified herein. Design documents include but not limited to all set of design drawings, operation and user’s manual, list of materials and equipment, and list of losses. Party B shall also be liable for the quality of design documents submitted.

(2)
Party B shall make revision or supplement to any error or omission in the design documents;

(3)
Where Party A raises opinions on revision to the design documents submitted by Party B, the parties shall negotiate the same carefully and Party B shall be liable for making revision free of charge;

(4)
Party B shall be responsible for technical disclosure before manufacturing, design, final assembly and commissioning, provide follow-up technical service as needed for Party A’s project. Expenses for meals, accommodation and traffic of Party B’s personnel during technical disclosure and technical service shall be borne by Party A.

3.
Party C’s liabilities

(1)
In facilitating the cooperation between Party A and Party B, Party C shall offer relevant services and supervise the performance of the Agreement.

(2)
Party C agrees to give preferential policies and support in terms of initiation and other aspects of the “high performance prestressed steel wires and galvanized steel wires” program.

Article 4 Fee

Through consultation between the parties, the total contract price is CNY one hundred thousand, subject to no adjustment in future.

Article 5 Payment Terms

1.
Party A shall pay Party B CNY ten thousand upon the effectiveness of the Agreement;

2.
Party A shall pay Party B CNY thirty thousand upon Party B’s submission of the preliminary design documents;

3.
Party A shall pay Party B CNY forty thousand upon Party B’s submission of the construction drawings;

 
 
 
4.
Party A shall pay the balance to Party B within one month after Party A completes installation, commissioning and test;

5.
Party B shall issue official invoices.

Article 6 Effectiveness and miscellaneous

1.
Party B shall provide service for the project hereunder till the completion of installation and test;

2.
Technical conditions for designing form an integral party hereof and have the same legal effect with the Agreement;

3.
Any issue uncovered hereunder shall be solved through consultation among the parties.

Party A: Ossen (Jiujiang) Steel Wire & Cable Co., Ltd.
Representative:  
  
January 2008

Party B: Shanghai Machinery Manufacturing Technology Institute
Representative:  
  
January 2008

Party C: Organization Department of Jiujiang Committee of CPC        

Jiujiang Bureau of Science and Technology    

 
 
Exhibit 8.1

List of Subsidiaries of Ossen Innovation Co. Ltd.

Name
 
Country of Incorporation
     
Ossen Innovation Materials Group Co., Ltd.
 
British Virgin Islands
Ossen Group (Asia) Co., Ltd.
 
British Virgin Islands
Topchina Development Group Ltd.
 
British Virgin Islands
Ossen Innovation Materials Co. Ltd.
 
People’s Republic of China
Ossen (Jiujiang) Steel Wire & Cable Co., Ltd.
  
People’s Republic of China

 
 
 
 
Exhibit 23.1


INDEPENDENT REGISTERED ACCOUNTING FIRM CONSENT

We consent to the use of this Shell Company Report on Form 20-F for Ossen Innovation Co., Ltd. of our report dated July 7, 2010, relating to the consolidated balance sheets of Ossen Innovation Co., Ltd. and its Subsidiaries as of December 31, 2009 and 2008 and the related consolidated statements of operations, shareholders’ equity and cash flows for the years ended December 31, 2009 and 2008. We also consent to the reference to us under the Item "Statement by Experts" in such Shell Company Report.


/s/Sherb & Co., LLP
Certified Public Accountants
New York, NY
July 9, 2010