A. Selected Financial Data

Selected Financial Data of CIS

The following selected financial data, other than selected operating data, have been derived from CIS’ audited financial statements for the year ended October 31, 2013, the period from November 28, 2011 (Inception) to October 31, 2012 and from CIS’ unaudited financial statements for the six months ended April 30, 2014. The financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Selected Financial Data of Delta

Following the Acquisition, Delta is considered to be our predecessor for accounting purposes, as further described in Item 18 of this report. The following table presents selected financial data regarding Delta’s business. It should be read in conjunction with its consolidated financial statements and related notes contained elsewhere in this report and the information under Item 5 “Operating and Financial Review and Prospects.” The selected consolidated statement of income data for the fiscal years ended June 30, 2014, 2013 and 2012, and the selected consolidated balance sheet data as of June 30, 2014, 2013 and 2012 have been derived from Delta’s audited consolidated financial statements that are included in this report in Item 18, beginning on page F-1. Selected financial data for the fiscal years ended June 30, 2011 and 2010 below is derived from unaudited financial statements of Delta for the specified periods.

Delta’s consolidated financial statements were prepared and presented in accordance with U.S. GAAP and presented in U.S. dollars. The selected financial data information is only a summary and should be read in conjunction with the historical consolidated financial statements and related notes contained elsewhere herein. The financial statements contained elsewhere fully represent our financial condition and operations; however, they are not indicative of our future performance.

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

You should carefully consider the following risk factors in addition to the other information included or incorporated by reference in this report, including matters addressed in the section entitled “Forward-Looking Statements”. We caution you not to place undue reliance on the forward-looking statements contained in this report, which speak only as of the date hereof.

The risks and uncertainties described below include all of the material risks applicable to us; however they are not the only risks and uncertainties that we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations or the Business Combination.

Risk Factors Relating to Delta

Delta is subject to the PRC's environmental protection measures.

Delta’s business activities produce certain pollutants such as waste water and waste gas, during the production process. The PRC has in recent years tightened its environmental protection measures to be more in line with steps taken by developed countries.

Under the PRC Environmental Protection Law, any enterprise which discharges pollutants is required to be registered with the relevant PRC governmental departments and to obtain a pollutant discharge permit. Any such enterprise is also required to have waste water, waste gas, solid waste and noise pollution treatment facilities that meet the relevant environmental standards and to have the pollutants treated before discharge. The provincial and municipal governments of provinces, autonomous regions and municipalities may also set their own guidelines for the discharge of pollutants within their own provinces or districts.

On October 20, 2012, Jiangsu Delta obtained the Pollutant Discharge Permit of Zhenjiang issued by the Environment Protection Agency of Dantu District, Zhenjiang City for discharge of the key production wastes, including inter alia, ammonia, nitrogen, totel phosphorus, petroleum waste, benzene, toluene, dimethylbenzene, chlorobenzene, soot, hydrochloric acid, hydrochloric acid, maleic anhydride and sulphur dioxide. Such discharges must be made in compliance with national environmental regulation. The Pollutant Discharge Permit is valid from October 20, 2012 to October 19, 2015, after which it will be due for renewal.

Additionally, its facilities may be subject to periodic and annual environmental inspections. Penalties may be imposed for the discharge of pollutants that fail to meet relevant environmental standards. The relevant governmental authorities may refuse to issue or renew a pollutant discharge permit if an enterprise fails environmental inspections and in cases of severe violation of environmental standards, are also empowered to shut down any enterprise that causes substantial environmental problems.

There is no assurance that the current PRC environmental protection laws and regulations will not be amended in the future. In June 2012, as the local environmental protection criteria were amended where more stringent standards were introduced by the relevant local authorities, Jiangsu Delta’s production activities were temporarily suspended for approximately 45 days to enhance its waste water treatment facilities in order to meet the revised standards. In July 2012, Jiangsu Delta was certified to have satisfied the new criteria and re-commenced its operations. If more stringent environmental protection laws and regulations are introduced in the future, incident as such might happen again and Delta may need to utilize significant financial and/or other resources to ensure compliance, which will result in an increase in its operating costs and have an adverse effect on its profitability and prospects.

Furthermore, if Delta is unable to comply with such stringent environmental protection standards, penalties (including fines and/or shutdown of processing facilities) may be imposed on it, which in turn may adversely affect its financial performance.

Delta depends on its key personnel for continued success.

Delta believes its success to date can largely be attributed to the contributions, expertise and experience of its key management team, which is headed by its Executive Chairman and Chief Executive Officer, Xin Chao. He is responsible for identifying business opportunities and implementing overall business strategies to achieve its corporate goals.

Delta’s key management team also includes Xin Chao, Wu Changguang, Xia Jianmin, Ming Chao and Hong Yan. The continued success its business is therefore dependent, to a large extent, on its ability to retain the services of its directors and executive officers. Each of Chao Xin, Wu Changguang and Ming Chao has more than 13 years of experience in the fine chemical and/or related industries. The loss of the services of its key personnel without a suitable and timely replacement, or the inability to attract and retain other qualified personnel, could adversely affect its operations and hence, its financial results.

Delta is subject to fluctuations in the prices of principal raw materials in its operations.

The key components and raw materials used in Delta’s production and manufacturing processes are Toluene, Chlorine, Benzene, Styrene and Phthalic Anhydride, Maleic Anhydride, Propylene glycol and Ethylene diglycol which in aggregate constituted approximately 80% of its total cost of sales. As these materials constitute key components of its manufacturing processes, any fluctuation in the prices of such raw materials which may in turn have an impact on its production costs. In line with industry practice, Delta do not have long-term supply contracts with its suppliers. A shortage of any key raw materials or components could limit its production, and is likely to increase the costs of its products, thereby depressing the margins for its products. Further, although Delta produces a number of intermediary materials such as MA, PCT and OCT in-house for the production of PCT/OCT downstream products and UPR products, there can be no assurance that Delta will be able to continue to do so in a cost-effective manner.

There is no assurance that Delta will be able to obtain an adequate supply of key raw materials at competitive prices. Market prices of such raw materials may also be volatile due to factors beyond its control, such factors include, inter alia, general economic conditions, changes in the level of global demand and the availability of supply. Any substantial increase in the prices of these raw materials is likely to have a material adverse impact on its production costs. In the event of any significant increase in the cost of such raw materials, and should Delta be unable to pass on such costs to its customers on a timely basis, its business, profitability and financial performance will be adversely affected.

Delta is vulnerable to fluctuations in the prices of its products.

Delta is subject to fluctuations in demand for its products and services due to a variety of factors, including general economic conditions, competition, product obsolescence, shifts in buying patterns, financial difficulties and budget constraints of its actual and potential customers and other factors. Some of its products may experience great price fluctuation.

While such factors may, in some periods, increase product sales, fluctuations in demand can also negatively impact its product sales. If demand for its products declines or the prices of its products decline because of general economic conditions or for other reasons, its revenues and gross margin could be adversely affected.

Delta may be affected by disruptions to its processing facilities.

Delta’s processing facilities are located at Zhenjiang City, Jiangsu Province, the PRC. The production facilities are subject to operational risks, such as industrial accidents, which could cause personal injury or loss of human life, the breakdown or failure of equipment, power supplies or processes, performance below expected levels of output or efficiency, obsolescence, labor disputes, natural disasters and the need to comply with relevant regulatory and requirements. From time to time, Delta may need to carry out planned shutdowns of its processing plants for routine maintenance, statutory inspections and testing and may need to shut down various plants for capacity expansions and equipment upgrades. In addition, due to the nature of its business, and despite compliance with requisite safety requirements and standards, the production process is still subject to operational risks, including discharges or releases of hazardous substances, exposure to contamination and leakages from other factories and operations in the vicinity. These operational risks may cause personal injury or loss of human life and could result in the imposition of civil and criminal penalties. The occurrence of any of these events could have a material adverse effect on the productivity and profitability of a particular production facility and on its business, results of operations and financial condition.

Although Delta has taken precautions to minimize the risk of any significant operational problems at its production facilities, there can be no assurance that its business, results of operations and financial condition may not be adversely affected by disruptions caused by operational hazards at its production facilities, or at other factories and facilities in the vicinity. Moreover, its production processes are continuously being modified and updated. As a result of manufacturing process updates and improvements, from time to time, Delta may experience shutdowns, and disruptions to the operations.

The occurrence of any of the above events may cause it to stop or suspend its processing operations and Delta may not be able to deliver the products to its customers on a timely basis, which would have an adverse impact on its business, financial position and profitability.

Delta’s insurance coverage may not adequately protect it against certain operating and other hazards which may have an adverse effect on its business.

Delta makes substantial investments in complex manufacturing and production facilities and transportation equipment. Many of the production processes, raw materials and certain finished products are potentially destructive and dangerous in uncontrolled or catastrophic circumstances, including operating hazards, fires and explosions, and natural disasters such as typhoons, floods, earthquakes and major equipment failures for which insurance may not be obtainable at a reasonable cost or at all. Delta maintains insurance policies covering losses due to fire and other calamities. Delta also maintains insurance policies for fixed assets, such as vehicles, machineries, facilities and buildings which cover against damage caused by certain accidents and natural disasters. Should an accident or natural disaster occur, it may cause significant property damage, disruption to operations and personal injuries and its insurance coverage may be inadequate to cover such loss. Should an uninsured loss or a loss in excess of insured limits occur, Delta could suffer from damage to its reputation or lose all or a portion of production capacity as well as future revenues anticipated to derive from the relevant facilities. While Delta maintains coverage from insurance policies for its production facilities which are in line with the industry norms, Delta cannot assure you that its insurance coverage would be sufficient to cover all its potential losses.

Delta’s profitability may be affected by a failure to compete effectively in a competitive environment.

Delta operates in a highly competitive environment and is subject to competition from both existing competitors and new market entrants. Rapid technological advances and aggressive pricing strategies by its competitors may continue to increase competition. In order to remain competitive, Delta must continue to improve its materials supply chain, foster production self-sufficiency, upgrade technology and manufacturing process and introduce new products to the market in a timely manner. Delta’s ability to do so depends on factors both within and outside of its control and may be constrained by the distinct characteristics and production requirements of individual products. There can be no assurance that Delta will be able to continue to improve production efficiency and maintain reasonable margins for all of its existing products, or that Delta will be able to successfully introduce new products that are able to command higher margins. Some of its competitors may have superior financial, marketing, manufacturing, research and development and technological resources, greater brand name recognition and larger customer bases than it.

Accordingly, these competitors may have the ability to respond more quickly to new or emerging technologies, adapt more quickly to changes in customer requirements and devote greater resources to the development, promotion and sales of their products and/or services. There is no assurance that Delta will be able to continue competing successfully against present and future competitors.

Management of Delta believes that the important factors to achieving success in its industry include maintaining customer loyalty by cultivating long-term customer relationships and maintaining the quality of its products and services. If Delta is unable to attain these, Delta may lose customers to its competitors and this will adversely affect its market share. Increased competition may also force it to lower its prices, thus reducing its profit margins and affecting its financial performance and condition. Such competition may have a material adverse effect on its business, financial position and results of operations.

Delta’s business may be adversely affected if its customers place lower than expected orders.

As is customary in its industry, Delta does not obtain firm and long-term volume purchase commitments from its customers. Although Delta may from time to time enter into sales agreements with its key customers which normally include general terms of sale, specification requirements and pricing policy, such agreements generally do not specify a minimum purchase volume or a specific purchase price. The precise terms for each shipment, such as pricing, product specifications and quantities, are normally confirmed at the time each order is placed.

Accordingly, Delta faces the risk that its customers might place lower than expected orders, if at all, or cancel existing plans for orders. Although the customers might be contractually obliged to purchase products on specific terms from it for particular orders, Delta may be unable to or, for other business reasons, choose not to enforce its contractual rights if the customers terminate their orders. Cancellations, reductions or instructions to delay production by a significant customer could materially and adversely affect its results of operations by reducing its sales volume, as well as by possibly causing a delay in the customers’ repayment of its expenditures for inventory and resulting in lower utilization of the manufacturing facilities, all of which may result in lower gross margins.

Delta’s reputation may suffer if Delta fails to manufacture products within the acceptable quality range and optimal production yields.

Product quality can be affected by a number of factors, including the level of contaminants in the manufacturing environment, the contamination of raw materials, equipment malfunction, process adjustments made to manufacture new products, interruptions in availability of utilities, deficiencies in quality control and inadequate sample testing. Many of Delta’s customers require stringent quality requirements in the procurement of their supplies.

Delta has in place stringent quality control processes as set out in the section “Quality Control” of this rep and ensure that its raw materials, manufacturing systems and processes and products meet the highest standards of quality. If Delta fails to maintain high quality production standards, its reputation may suffer and customers may cancel their orders or return their products for replacement, which will materially and adversely affects its results of operations and financial condition.

Delta may be unable to adapt to technological changes and other industry standards.

Delta operates in a technologically dependent industry and is required to quickly adapt to technological changes and industry standards as well as the changing needs of customers. In the event that Delta is unable to keep up with the technological developments and develop new products on time, or if Delta fails to anticipate and adapt to changes in its customers’ requirements, its current products and technology may face the risk of becoming obsolete and Delta would not be able to fully meet its customers’ needs. This may then result in a decrease in demand for its products and have a negative impact on its financial performance.

Delta may be exposed to risk of infringement of its intellectual property rights.

Delta relies primarily on patent, trademark, trade secret, copyright law and other contractual restrictions to protect its intellectual property. Nevertheless, these afford only limited protection and the actions Delta may take to protect its intellectual property rights may not be adequate. Third parties may infringe or misappropriate its proprietary technologies or other intellectual property rights, which could have a material adverse effect on its business, financial condition, results of operations and prospects. As of the date of this Offer to Purchase, Delta owns five patents in respect of UPR production and is in the midst of applying for seven more patents.

Although Delta’s senior management personnel would, under the relevant PRC laws relating to duties of directors or the terms of their employment contracts, have a general duty of confidentiality, there is no assurance that there will be no unauthorised disclosure of its trade secrets or other proprietary information. In the event that there is a leakage of such trade secrets or proprietary information to its competitors and other third parties, it may limit its ability to maintain its competitive edge and to grow its business.

Further, as Delta has not yet received patent protection for some of its proprietary information, there is no assurance that Delta will obtain adequate remedies in the event of an unauthorised disclosure of the proprietary information to its competitors or other third parties. Should there be a loss of proprietary information, its operations, financial position and prospects may be adversely affected.

Delta may not be able to ensure the successful implementation of its future plans and strategies.

As set out in the section entitled “Strategies and Future Plans”, Delta intends to, inter alia, expand its production capacity and product lines, as well as its distribution network. Such initiatives involve various risks including but not limited to the investment costs in establishing a distribution network within the PRC, setting up of new production facilities and offices and working capital requirements. There is no assurance that such future plans can be successfully implemented as the successful execution of such future plans will depend on several factors, some of which are not within its control, such as retaining and recruiting qualified and skilled staff, and the continued demand for its products by its customers. Failure to implement any part of its future plans or executing such plan costs effectively, may lead to a material adverse change in its operating environment or affect its ability to respond to market or industry changes, which may, in turn, adversely affect its business and financial results.

Delta is exposed to the credit risks of its customers.

Delta’s business and financial results are dependent on the credit worthiness of its customers and this risk increases with, inter alia, the customer’s proportion of purchases from it. Delta usually offers its customers credit terms of up to 120 days. Although there has not been any material collection problem for trade receivables or any other allowance for doubtful debts during the past three fiscal years, there is no assurance that Delta will not encounter bad debt problems in the future. Should Delta experience any unexpected delay or difficulty in collections from its customers, its cash flow and financial results may be adversely affected.

In addition, any deterioration in the financial position of its customers may materially affect its profits and cash flow as these customers may default on their payments to it. Delta cannot assure you that such defaults will not increase in the future or that Delta will not experience cash flow problems as a result of such defaults. Should these develop into actual events, its business and financial results will be adversely affected.

Delta may require additional funding for future growth.

Delta’s business and the nature of the industry in which Delta operates may require it to make substantial capital expenditures in terms of both plants, equipment and for research and development capabilities. In particular, Delta may expand its production capacity in certain of its production facilities to cater to the expected increase in demand. These capital expenditures will be spent in advance of any additional sales to be generated by new or upgraded production facilities as a result of these expenditures. There is a risk that Delta may in the future incur operating losses if its net operating revenue does not adequately recover its capital expenditures.

In connection with its business strategy, Delta has continued to make regular capital investments and expenditures. Delta expects to incur further capital expenditures for FY2015 in connection with the construction and the expansion of production facilities.

The additional funding and capital expenditures is expected to be funded from proceeds from existing cash balances and credit lines, cash inflow from operations and existing and future bank borrowing. However, in the event of adverse market conditions in the future or changes in its growth, manufacturing process, product technologies, prices of machinery and equipment or interest rates, its actual expenditures may exceed its planned expenditures and Delta may not have sufficient sources of liquidity to effect the current operational plan and would need to secure additional financing from external sources. Delta’s failure to obtain any required financing could impair its ability to both serve its existing clients base and develop new clients and could result in both a decrease in revenue and an increase in its loss.

To the extent that Delta requires financing, it would intend to seek funding for its capital needs through the issuance of debt, preferred stock, common equity, loan guarantees, or a combination of these types of instruments. Delta may also seek to obtain financing through a private placement or a public offering, a consequence of which could include the sale or issuance of stock to third parties. To the extent additional funding is required, Delta cannot assure you that it will be able to get additional financing on any terms acceptable to it, and, if it is able to raise funds, it may be necessary for it to sell its securities at a price which is at a significant discount from the market price and on other terms which may be disadvantageous to it. In connection with any such financing, Delta may be required to provide registration rights to the investors. The price and terms of any financing which would be available to it could result in the issuance of a significant number of shares. If Delta is required to issue a significant number of shares, stockholders could suffer substantial dilution.

Delta is dependent on its “DELTA” brand.

Delta relies on its “DELTA” brand in the marketing and distribution of its products. Delta believes that it has built significant goodwill in its brand in terms of the quality of products and services and it is widely recognized by the fine chemical industry in the PRC. Delta considers its “DELTA” brand to be vital in promoting product recognition and customer loyalty. Hence, if there are any major defects in its products or adverse publicity on its brand, the goodwill in its brand will be adversely affected and its customers may lose confidence in its products. This will adversely affect its sales of products, hence affecting its business and financial performance.

In order to protect its trademark, Delta has applied to register its “DELTA” label as a trademark in the PRC. Delta relies on PRC trademark laws but there is no assurance that this means of protecting its trademark will be effective or that its competitors will not adopt product names or trademarks that are similar to that of ours. Delta is also vulnerable to attempts by third parties to pass off their products as ours by using its trademark. Adequate protection of its intellectual property is important to its business. Although Delta may take legal action against those who infringe its intellectual property rights, it may need to incur substantial time and resources and there is no assurance that Delta will be able to stop or prevent such infringement completely. Unauthorized use of its trademarks could adversely affect its performance and business reputation. Should such counterfeit products be of inferior quality, the goodwill in its brand may be eroded. Hence, its business and financial performance will be adversely affected if Delta is unable to protect its intellectual property rights effectively.

Defective or non-compliant products may lead to negative publicity which would adversely affect Delta’s business and profits.

Delta’s products are sold mainly to manufacturers. Although Delta has not faced any adverse claims or complaints regarding its products to-date, there can be no assurance that its products will not cause personal injury or health complications on users. Further, in the event that its products are defective or non-compliant with specifications, Delta may be liable to complaints, lawsuits and claims from its customers which in turn could generate negative publicity and materially and adversely affect its business and financial condition. Any successful product liability claim against it may adversely affect its business and reputation. A product liability claim, even without merit, could result in it incurring significant expenses and expending substantial time and efforts of its management in defending such a claim. Even if Delta is able to successfully defend any such claim, there can be no assurance that its customers will not lose confidence in its products, thereby affecting its business and reputation.

Additional Risk Factors to Consider

Because Delta’s contracts are individual purchase orders and not long-term agreements, the results of its operations can vary significantly from quarter to quarter.

Delta currently does not have any long-term contracts with its customers for its products. While Delta does not depend on any single customer for a significant portion of its revenues, there is a risk that existing customers will elect not to do business with it in the future or will experience financial difficulties. There is also a risk that its customers will attempt to impose new or additional requirements on it that reduce the profitability of those customers for us. If Delta does not develop relationships with new customers, Delta may not be able to increase, or even maintain, its revenue, and its financial condition, results of operations, business and/or prospects may be materially adversely affected.

Potential claims alleging infringement of third party’s intellectual property by Delta could harm its ability to compete and result in significant expense to it and loss of significant rights.

From time to time, third parties may assert patent, copyright, trademark and other intellectual property rights to technologies that are important to Delta’s business. Any claims that its products or processes, whether in relation to the specific circumstances set out above or otherwise, infringe the intellectual property rights of others, regardless of the merit or resolution of such claims, could cause it to incur significant costs in responding to, defending, and resolving such claims, and may divert the efforts and attention of its management and technical personnel away from the business. As a result of such intellectual property infringement claims, Delta could be required or otherwise decide it is appropriate to pay third-party infringement claims; discontinue manufacturing, using, or selling particular products subject to infringement claims; discontinue using the technology or processes subject to infringement claims; develop other technology not subject to infringement claims, which could be time-consuming and costly or may not be possible; and/or license technology from the third-party claiming infringement, which license may not be available on commercially reasonable terms. The occurrence of any of the foregoing could result in unexpected expenses or require it to recognize an impairment of its assets, which would reduce the value of the assets and increase expenses. In addition, if Delta alters or discontinue the production of affected items, its revenue could be negatively impacted.

Risks Relating to Doing Business in the PRC

Delta’s subsidiaries, main operations and assets are located in the PRC. Shareholders may not be accorded the same rights and protection that would be accorded under the US law. In addition, it would be difficult to enforce a U.S. judgment against its PRC subsidiaries and its officers and directors.

Delta’s PRC subsidiaries, Jiangsu Delta, Jiangsu Zhengxin R&D, Jiangsu Logistic and Binhai Deda were established in the PRC, and their main operations and assets are located in the PRC. Delta’s PRC subsidiaries, main operations and assets are therefore subject to the relevant laws and regulations of the PRC. In addition, a majority of its officers and directors are non-residents of the U.S., and substantially all their assets are located outside the U.S. As a result, it could be more difficult for investors to effect service of process in the U.S., or to enforce a judgment obtained in the U.S. against any of its PRC subsidiaries or any of these persons.

Delta’s business is subject to certain PRC laws and regulations.

Delta’s business and operations in the PRC are subject to government rules and regulations, including environmental, working safety, road transportation and health regulations. Any changes in such government regulations may have a negative impact on its business.

Breaches or non-compliance with these PRC laws and regulations may result in the suspension, withdrawal or termination of its business licenses or permits, or the imposition of penalties, by the relevant authorities. Delta’s PRC subsidiaries’ business licences are also granted for a finite period and any extension thereof is subject to the approval of the relevant authorities. Any suspension, withdrawal, termination or refusal to extend its PRC subsidiaries’ business licenses or permits would cause the cessation of production of certain or all of its products, and this would adversely affect its PRC subsidiaries’ business, financial performance and prospects.

Uncertainty in the PRC legal system may make it difficult for Delta to predict the outcome of any disputes that it may be involved in.

The PRC legal system is based on the PRC Constitution and is made up of written laws, regulations, circulars and directives. The PRC government is still in the process of developing its legal system, so as to meet the needs of investors and to encourage foreign investment. As the PRC economy is generally developing at a faster pace than its legal system, some degree of uncertainty exists in connection with whether and how existing laws and regulations will apply to certain events or circumstances.

Some of the laws and regulations, and the interpretation, implementation and enforcement thereof, are still subject to policy changes. There is no assurance that the introduction of new laws, changes to existing laws and the interpretation or application thereof or the delays in obtaining approvals from the relevant authorities will not have an adverse impact on Delta’s PRC subsidiaries’ business, financial performance and prospects.

Further, precedents on the interpretation, implementation and enforcement of the PRC laws and regulations are limited, and unlike other common law countries such as the United States, decisions on precedent cases are not binding on lower courts. As such, the outcome of dispute resolutions may not be consistent or predictable as in the other more developed jurisdictions and it may be difficult to obtain swift or equitable enforcement of the laws in the PRC, or obtain enforcement of judgment by a court of another jurisdiction.

New rules on mergers and acquisitions of domestic enterprise by foreign investors.

In particular, on August 8, 2006, Ministry of Commerce (“MOC”), China Security and Regulatory Commission (“CSRC”), State Administration of Foreign Exchange (“SAFE”) and State Administration for Industry and Commerce of the PRC (“SAIC”), State Administration for Taxation (“SAT”) and National Development and Reform Commission (“NDRC”) promulgated the Provisions on the Mergers and Acquisitions of Domestic Enterprise by Foreign Investors (“M&A Regulations” or “Provision 10”), which came into effect on September 8, 2006 and was revised on June 22, 2009 by MOC. The Provision 10 was supplemented by the Provisions on indirect issuance of securities overseas by a domestic enterprise or overseas listing of its securities for trading issued by CSRC on by the Guidelines on Domestic Enterprises indirectly issuing securities overseas or listing and trading their securities overseas ("CSRC Guidelines") issued by the CSRC on September 21, 2006.

In the opinion of Delta’s PRC Counsel, Jingtian & Gongcheng, based on its understanding of current PRC laws and regulations, Provision 10 does not apply to each of Jiangsu Delta acquisition by Zhengxin International, Jiangsu Delta acquisition by Delta and Zhengxin R&D acquisition by Jiangsu Delta (collectively the “PRC Acquisitions”), and hence the PRC Acquisitions are not subject to the MOC’s approval.

However, there is no assurance that the relevant Chinese government agency, including the CSRC, would reach the same conclusion as the PRC Counsel. If the CSRC or any other Chinese regulatory bodies subsequently determine that Delta needs to obtain the CSRC approval for the acquisition of PRC subsidiaries of Delta, Delta may face regulatory actions or other sanctions from the CSRC or other Chinese regulatory bodies. This may have a material adverse impact on Delta’s business, financial condition, results of operations, remittance of profits as well as the trading prices of its shares.

Failure of Delta’s PRC resident shareholders to comply with regulations on foreign exchange registration of overseas investment by PRC residents could cause it to lose its ability to contribute capital to its PRC subsidiaries and remit profits out of the PRC as dividends.

The Notice on Relevant Issues Concerning Foreign Exchange Administration for Domestic Residents to Engage in Overseas Financing and Round Trip Investment via Overseas Special Purpose Vehicles (“Circular 75”), issued by the SAFE and effective on November 1, 2005, regulates the foreign exchange matters in relation to the use of a “special purpose vehicle” by PRC residents to seek offshore equity financing and conduct a “round trip investment” in China. Under Circular 75, a “special purpose vehicle” refers to an offshore entity directly established or indirectly controlled by PRC resident natural or legal persons (“PRC residents”) for the purpose of seeking offshore equity financing using assets or interests owned by such PRC residents in onshore companies, while “round trip investment” refers to the direct investment in China by such PRC residents through the “special purpose vehicles,” including, without limitation, establishing foreign-invested enterprises and using such foreign-invested enterprises to purchase or control onshore assets through contractual arrangements. Circular 75 requires that, before establishing or controlling a “special purpose vehicle”, PRC residents and PRC entities are required to complete a foreign exchange registration with the competent local branches of the SAFE for their overseas investments. After the completion of a round-trip investment or the overseas equity financing, the PRC residents are required to go through foreign exchange registration alteration formalities of overseas investment in respect of net assets of special purpose vehicles that such PRC residents hold and the variation thereof.

In addition, an amendment to the registration is required if there is a material change in the “special purpose vehicle,” such as increase or reduction of share capital and transfer of shares. Failure to comply with the registration procedures set forth in Circular 75 may result in restrictions on the foreign exchange activities of the relevant foreign-invested enterprises, including the payment of dividends and other distributions, such as proceeds from any reduction in capital, share transfer or liquidation, to its offshore parent or affiliate and the capital inflow from the offshore parent, and may also subject the relevant PRC residents to penalties under PRC foreign exchange administration regulations.

Delta has requested its current PRC resident shareholders and/or beneficial owners to disclose whether they or their shareholders or beneficial owners fall within the scope of the Circular 75 and urges PRC residents to register with the local SAFE branch as required under the Circular 75. Delta’s affiliates subject to the SAFE registration requirements, including Mr. Xin Chao, Mr. Hong Yan and Mr. Lei Shen, have informed it that they have made their initial registrations with SAFE dated June 5, 2013. The failure of its PRC resident shareholders and/or beneficial owners to timely amend their SAFE registrations pursuant to the Circular 75 or the failure of its future shareholders and/or beneficial owners who are PRC residents to comply with the registration requirement set forth in the Circular 75 may subject such shareholders, beneficial owners and/or its PRC subsidiaries to fines and legal sanctions. Any such failure may also limit its ability to contribute additional capital into its PRC subsidiaries, limit its PRC subsidiaries’ ability to distribute dividends to it or otherwise adversely affect its business.

The PRC government could restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents it from obtaining sufficient foreign currency to satisfy its currency demands, Delta may not be able to pay certain expenses as they come due or may restrict which limit the payment of dividends from the Company.

Delta’s results and financial conditions are highly susceptible to changes in the PRC’s political, economic and social conditions as its revenue is currently wholly derived from its operations in the PRC.

Since 1978, the PRC government has undertaken various reforms of its economic systems. Such reforms have resulted in economic growth for the PRC in the last three decades. However, many of the reforms are unprecedented or experimental, and are expected to be refined and modified from time to time. Other political, economic and social factors may also lead to further readjustment of the reform measures. This refinement and adjustment process may consequently have a material impact on its operations in the PRC or a material adverse impact on its financial performance. Delta’s results and financial condition may be adversely affected by changes in the PRC’s political, economic and social conditions and by changes in policies of the PRC government or changes in laws, regulations or the interpretation or implementation thereof.

Dividends payable to Delta by its PRC subsidiaries may be subject to PRC withholding taxes, dividends distributed to its non-PRC investors and gains realized by its non-PRC shareholders from the transfer of its shares may be subject to PRC withholding taxes under the EIT Law.

The EIT Law imposes a 10% withholding income tax on dividends generated on or after January 1, 2008 and distributed by a resident enterprise to its foreign investors, if such foreign investors are considered as non-resident enterprises without any establishment or place of business within China or if the received dividends have no connection with such foreign investors’ establishment or place of business within China, unless such foreign investors’ jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement. The British Virgin Islands, where Delta is incorporated, does not have such tax treaty with According to the Arrangement between Mainland of China and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income in August 2006, dividends paid by a foreign invested enterprise, or FIE, to its foreign investors in Hong Kong will be subject to withholding tax at a preferential rate of no more than 5% (if the foreign investor owns directly at least 25% of the shares of the FIE). The State Administration of Taxation further promulgated a circular, or Circular 601, on October 27, 2009, which provides that tax treaty benefits will be denied to “conduit” or shell companies without business substance and that a beneficial ownership analysis will be used based on a “substance-over-form” principle to determine whether or not to grant the tax treaty benefits. Delta’s subsidiaries in China are directly invested in and held by a Hong Kong registered entity. If Delta is regarded as a non-resident enterprise and its Hong Kong entity regarded as resident enterprise, then its Hong Kong entity may be required to pay a 10% withholding tax on any dividends payable to it. If its Hong Kong entity is regarded as non-resident enterprises, then its subsidiaries in China will be required to pay a 5% withholding tax for any dividends payable to its Hong Kong entities provided that specific conditions are met. However, it is still unclear at this stage whether Circular 601 applies to dividends from its PRC subsidiaries paid to its Hong Kong subsidiary and if its Hong Kong subsidiary were not considered as “beneficial owners” of any dividends from its PRC subsidiaries, the dividends payable to its Hong Kong subsidiary would be subject to withholding tax at a rate of 10%. In either case, the amount of funds available to it, including the payment of dividends to its shareholders, could be materially reduced. In addition, because there remains uncertainty regarding the concept of “the place of de facto management body,” if Delta is regarded as a resident enterprise, under the EIT Law, any dividends to be distributed by it to its non-PRC shareholders will be subject to PRC withholding tax. Delta also cannot guarantee that any gains realized by such non-PRC shareholders from the transfer of its shares will not be subject to PRC withholding tax. If Delta is required under the EIT Law to withhold PRC income tax on its dividends payable to its non-PRC shareholders or any gains realized by its non-PRC shareholders from transfer of its shares, their investment in its shares may be materially and adversely affected.

Delta may be subject to a significant withholding tax should equity transfers by its non-resident enterprises be determined to have been done without a reasonable business purpose.

In December 2009, the State Administration of Tax in China issued a circular on strengthening the management of proceeds from equity transfers by non-resident enterprises and requires foreign entities to report indirect sales of resident enterprises. If the existence of the overseas intermediary holding company is disregarded due to lack of reasonable business purpose or substance, gains on such sale are subject to PRC withholding tax. Due to limited guidance and implementation history of the circular, significant judgment is required in determining the existence of a reasonable business purpose by considering multiple factors, such as the form and substance of the arrangement, time of establishment of the foreign entity, relationship between each step of the arrangement, relationship between each component of the arrangement, implementation of the arrangement and the changes in the financial position of all parties involved in the transaction. Although Delta believes that its transactions during all the periods presented would be determined to have reasonable business purposes, should this not be the case, the Company would be subject to a significant withholding tax that could materially and adversely impact its financial position, results of operations and cash flows.

Uncertainty in the interpretation of PRC tax regulations may have a negative impact on Delta’s business operations, its acquisition or restructuring strategy or the value of its investment in it.

Pursuant to the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises, or SAT Circular 698, issued by the State Administration of Taxation in December 2009, with retroactive effect from January 1, 2008, where a non-resident enterprise transfers the equity interests of a PRC resident enterprise indirectly by disposition of the equity interests of an overseas non-public holding company, or an Indirect Transfer, and such overseas holding company is located in a tax jurisdiction that: (i) has an effective tax rate of less than 12.5% or (ii) does not impose income tax on foreign income of its residents, the non-resident enterprise, being the transferor, must report to the competent tax authority of the PRC resident enterprise this Indirect Transfer. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such Indirect Transfer may be subject to PRC withholding tax at a rate of up to 10%. SAT Circular 698 also provides that, where a non-PRC resident enterprise transfers its equity interests in a PRC resident enterprise to its related parties at a price lower than fair market value, the relevant tax authority has the power to make a reasonable adjustment to the taxable income of the transaction.

On March 28, 2011, the State Administration of Taxation released SAT Public Notice (2011) No. 24, or SAT Public Notice 24, to clarify several issues related to Circular 698. SAT Public Notice 24 became effective on April 1, 2011. According to SAT Public Notice 24, the term “effective tax rate” refers to the effective tax rate on the gain derived from disposition of the equity interests of an overseas holding company; and the term “does not impose income tax” refers to the cases where the gain derived from disposition of the equity interests of an overseas holding company is not subject to income tax in the country/region where the overseas holding company is a resident.

There is uncertainty as to the application of SAT Circular 698. For example, while the term “Indirect Transfer” is not clearly defined, it is understood that the relevant PRC tax authorities have jurisdiction regarding requests for information over a wide range of foreign entities having no direct contact with China. Moreover, the relevant authority has not yet promulgated any formal provisions or made any formal declaration as to the process and format for reporting an Indirect Transfer to the competent tax authority of the relevant PRC resident enterprise. In addition, there are no formal declarations with regard to how to determine whether a foreign investor has adopted an abusive arrangement in order to reduce, avoid or defer PRC tax. SAT Circular 698 may be determined by the tax authorities to be applicable to previous investments by non-resident investors in its company, if any of such transactions were determined by the tax authorities to lack reasonable commercial purpose. As a result, Delta and its existing non-resident investors may be at risk of being taxed under SAT Circular 698 and may be required to expend valuable resources to comply with SAT Circular 698 or to establish that Delta should not be taxed under SAT Circular 698, which may have a material adverse effect on its financial condition and results of operations or such non-resident investors’ investments in it. Delta have conducted and may conduct transactions involving its corporate structure. Delta cannot assure you that the PRC tax authorities will not, at their discretion, adjust any capital gains and impose tax return filing obligations on it or require it to provide assistance for the investigation of PRC tax authorities with respect thereto. Any PRC tax imposed on a transfer of its shares or any adjustment of such gains would cause it to incur additional costs and may have a negative impact on the value of your investment in it.

PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent it from using the proceeds from the offerings of any securities to make loans or additional capital contributions to its PRC operating subsidiaries.

As an offshore holding company, its ability to make loans or additional capital contributions to its PRC operating subsidiaries is subject to PRC regulations and approvals. These regulations and approvals may delay or prevent it from using the proceeds Delta received in the past or will receive in the future from the offerings of securities to make loans or additional capital contributions to its PRC operating subsidiaries, and impair its ability to fund and expand its business which may adversely affect its business, financial condition and result of operations.

For example, the SAFE promulgated the Circular on the Relevant Operating Issues concerning Administration Improvement of Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or Circular 142, on August 29, 2008. Under Circular 142, registered capital of a foreign-invested company settled in RMB converted from foreign currencies may only be used within the business scope approved by the applicable governmental authority and may not be used for equity investments in the PRC. In addition, foreign-invested companies may not change how they use such capital without the SAFE’s approval, and may not in any case use such capital to repay RMB loans if they have not used the proceeds of such loans. Furthermore, the SAFE promulgated a circular on November 9, 2010, or Circular 59, which requires the authenticity of settlement of net proceeds from offshore offerings to be closely examined and the net proceeds to be settled in the manner described in the offering documents. In addition, to strengthen Circular 142, on November 9, 2011, the SAFE promulgated the Circular on Further Clarifying and Regulating Relevant Issues Concerning the Administration of Foreign Exchange under Capital Account, or Circular 45, which prohibits a foreign invested company from converting its registered capital in foreign exchange currency into RMB for the purpose of making domestic equity investments, granting entrusted loans, repaying inter-company loans, and repaying bank loans that have been transferred to a third party. Circular 142, Circular 59 and Circular 45 may significantly limit Delta’s ability to transfer the net proceeds from offerings of its securities or any future offering to its PRC subsidiaries and convert the net proceeds into RMB, which may adversely affect its liquidity and its ability to fund and expand its business in the PRC.

Currency fluctuations and restrictions on currency exchange may adversely affect Delta’s business, including limiting its ability to convert RMB into foreign currencies and, if RMB were to decline in value, reducing its revenues and profits in U.S. dollar terms.

Delta’s reporting currency is the U.S. dollar and its operations in China use RMB as functional currencies. The majority of its revenues derived and expenses incurred are in Chinese RMB with a relatively small amount in U.S. dollars. Delta is subject to the effects of exchange rate fluctuations with respect to any of these currencies. For example, the value of the RMB depends to a large extent on Chinese government policies and China’s domestic and international economic and political developments, as well as supply and demand in the local market. Starting July 2005, the Chinese government changed its policy of pegging the value of the RMB to the U.S. dollar. Under the new policy, the RMB has fluctuated within a narrow and managed band against a basket of certain foreign currencies. It is possible that the Chinese government will adopt a more flexible currency policy, which could result in more significant fluctuations of the RMB against the U.S. dollar.

The income statements of Delta’s China operations are translated into U.S. dollars at the average exchange rates in each applicable period. To the extent the U.S. dollar strengthens against foreign currencies, the translation of these foreign currency-denominated transactions results in reduced revenues, operating expenses and net income for its non-U.S. operations. Similarly, to the extent the U.S. dollar weakens against foreign currencies, the translation of RMB denominated transactions results in increased revenues, operating expenses and net income for its non-U.S. operations. Delta is also exposed to foreign exchange rate fluctuations as Delta converts the financial statements of its non-U.S. subsidiaries into U.S. dollars in consolidation. If there is a change in foreign currency exchange rates, the conversion of the non-U.S. subsidiaries’ financial statements into U.S. dollars will lead to a translation gain or loss which is recorded as a component of other comprehensive income. Delta has not entered into agreements or purchased instruments to hedge its exchange rate risks, although Delta may do so in the future. The availability and effectiveness of any hedging transaction may be limited and Delta may not be able to successfully hedge its exchange rate risks.

Although Chinese governmental policies were introduced in 1996 to allow the convertibility of RMB into foreign currency for current account items, conversion of RMB into foreign exchange for most of the capital items, such as foreign direct investment, loans or securities, requires the approval of the State Administration of Foreign Exchange, or SAFE. These approvals, however, do not guarantee the availability of foreign currency. Delta cannot be sure that Delta will be able to obtain all required conversion approvals for its operations or that Chinese regulatory authorities will not impose greater restrictions on the convertibility of RMB in the future. Because a significant amount of its future revenues may be in the form of RMB, its inability to obtain the requisite approvals or any future restrictions on currency exchanges could limit its ability to utilize revenue generated in RMB to fund its business activities outside China, or to repay non-RMB-denominated obligations, including its debt obligations, which would have a material adverse effect on its financial condition and results of operations.

Restrictions on paying dividends or making other payments to Delta bind its subsidiaries in China.

Delta is a holding company and do not have any assets or conduct any business operations in China other than its investments in its subsidiaries in China. As a result, if its non-China operations require cash from China, Delta would depend on dividend payments from its subsidiaries in China. Delta cannot make any assurance that it can continue to receive payments from its subsidiaries in China. In addition, under Chinese law, its subsidiaries are only allowed to pay dividends to it out of their distributable earnings, if any, as determined in accordance with Chinese accounting standards and regulations. Moreover, Delta’s Chinese subsidiaries are required to set aside at least 10% of their respective after-tax profit each year, if any, to fund certain mandated reserve funds, unless these reserves have reached 50% of their registered capital. These reserve funds are not payable or distributable as cash dividends. For Chinese subsidiaries with after-tax profits for the periods presented, the difference between after-tax profits as calculated under PRC accounting standards and U.S. GAAP relates primarily to share-based compensation expenses and intangible assets amortization expenses, which are not pushed down to its subsidiaries under PRC accounting standards. In addition, under the EIT Law and its implementing Rules, dividends generated from its PRC subsidiaries after January 1, 2008 and payable to their immediate holding company incorporated in Hong Kong generally will be subject to a withholding tax rate of 10% (unless the PRC tax authorities determine that its Hong Kong subsidiary is a resident enterprise). If certain conditions and requirements under the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income entered into between Hong Kong and the PRC and other related PRC laws and regulations are met, the withholding rate could be reduced to 5%.

The Chinese government also imposes controls on the convertibility of RMB into foreign currencies and the remittance of currency out of China in certain cases. Delta has experienced and may continue to experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency. If Delta or any of its subsidiaries are unable to receive substantially all of the economic benefits from its operations through these contractual or dividend arrangements, Delta may be unable to effectively finance its operations or pay dividends on its ordinary shares.

PRC laws and regulations establish more complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for Delta to pursue growth through acquisitions in China.

A number of PRC laws and regulations, including the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors adopted by six PRC regulatory agencies in 2006, or the M&A Rules, the Antimonopoly Law, and the Rules of Ministry of Commerce on Implementation of Security Review System of Mergers and Acquisitions of Domestic Enterprises by Foreign Investors promulgated by the Ministry of Commerce in August 2011, or the Security Review Rules, have established procedures and requirements that are expected to make merger and acquisition activities in China by foreign investors more time consuming and complex. These include requirements in some instances that the Ministry of Commerce be notified in advance of any change of control transaction in which a foreign investor takes control of a PRC domestic enterprise, or that the approval from the Ministry of Commerce be obtained in circumstances where overseas companies established or controlled by PRC enterprises or residents acquire affiliated domestic companies. PRC laws and regulations also require certain merger and acquisition transactions to be subject to merger control review or security review.

The Security Review Rules were formulated to implement the Notice of the General Office of the State Council on Establishing the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, also known as Circular 6, which was promulgated in 2011. Under these rules, a security review is required for mergers and acquisitions by foreign investors having “national defense and security” concerns and mergers and acquisitions by which foreign investors may acquire the “de facto control” of domestic enterprises have “national security” concerns. In addition, when deciding whether a specific merger or acquisition of a domestic enterprise by foreign investors is subject to the security review, the Ministry of Commerce will look into the substance and actual impact of the transaction. The Security Review Rules further prohibits foreign investors from bypassing the security review requirement by structuring transactions through proxies, trusts, indirect investments, leases, loans, control through contractual arrangements or offshore transactions.

There is no requirement for foreign investors in those mergers and acquisitions transactions already completed prior to the promulgation of Circular 6 to submit such transactions to the Ministry of Commerce for security review. As Delta has already obtained the “de facto control” over its affiliated PRC entities prior to the effectiveness of these rules, Delta does not believe Delta is required to submit its existing contractual arrangements to the Ministry of Commerce for security review.

However, as these rules are relatively new and there is a lack of clear statutory interpretation on the implementation of the same, there is no assurance that the Ministry of Commerce will not apply these national security review-related rules to the acquisition of equity interest in its PRC subsidiaries. If Delta is found to be in violation of the Security Review Rules and other PRC laws and regulations with respect to the merger and acquisition activities in China, or fail to obtain any of the required approvals, the relevant regulatory authorities would have broad discretion in dealing with such violation, including levying fines, confiscating its income, revoking its PRC subsidiaries’ business or operating licenses, requiring it to restructure or unwind the relevant ownership structure or operations. Any of these actions could cause significant disruption to its business operations and may materially and adversely affect its business, financial condition and results of operations. Further, if the business of any target company that Delta plans to acquire falls into the ambit of security review, it may not be able to successfully acquire such company either by equity or asset acquisition, capital contribution or through any contractual arrangement. Delta may grow its business in part by acquiring other companies operating in its industry. Complying with the requirements of the relevant regulations to complete such transactions could be time consuming, and any required approval processes, including approval from the Ministry of Commerce, may delay or inhibit its ability to complete such transactions, which could affect its ability to expand its business or maintain its market share.

The PRC Labor Contract Law and its implementing rules may adversely affect its business and results of operations.

The PRC Labor Contract Law became effective and was implemented on January 1, 2008. The PRC Labor Contract Law has reinforced the protection for employees who, under the PRC Labor Contract Law, have the right, among others, to have written labor contracts, to enter into labor contracts with no fixed terms under certain circumstances, to receive overtime wages and to terminate or alter terms in labor contracts. Furthermore, the PRC Labor Contract Law establishes additional restrictions and increases the costs involved with dismissing employees. As the PRC Labor Contract Law is relatively new, there remains significant uncertainty as to its interpretation and application by the PRC Government. In the event that Delta decides to significantly reduce its workforce, the PRC Labor Contract Law could adversely affect its ability to do so in a timely and cost effective manner, and its results of operations could be adversely affected. In addition, for employees whose contracts include non-competition terms, the Labor Contract Law requires it to pay monthly compensation after such employment is terminated, which will increase its operating expenses.

Failure by Delta’s PRC shareholders or beneficial owners to make required foreign exchange filings and registrations may prevent Delta from distributing dividends and expose Delta to liabilities under the PRC laws.

The Circular on Relevant Issues concerning Foreign Exchange Administration of Overseas Investment and Financing and Return Investments Conducted by Domestic Residents through Overseas Special Purpose Vehicles (“SAFE Circular No. 37”), which was promulgated by SAFE and became effective on July 14, 2014, requires a PRC individual resident (“PRC Resident”) to register with the local SAFE branch before he or she contributes assets or equity interests in an overseas special purpose vehicle (“Offshore SPV”) that is directly established or controlled by the PRC Resident for the purpose of conducting investment or financing. Following the initial registration, the PRC Resident is also required to register with the local SAFE branch for any major change in respect of the Offshore SPV, including, among other things, any major change of a PRC Resident shareholder, name or term of operation of the Offshore SPV, or any increase or reduction of the Offshore SPV’s registered capital, share transfer or swap, merger or division. Failure to comply with the registration procedures of SAFE Circular No. 37 may result in penalties and sanctions, including the imposition of restrictions on the ability of the Offshore SPV’s PRC subsidiary to distribute dividends to its overseas parent.

The existing shareholders and beneficial owners of Delta currently are subject to the registration procedures under SAFE Circular No. 37. However, as SAFE Circular No. 37 was recently promulgated, it is unclear how this regulation and any future regulation concerning offshore or cross-border transactions will be interpreted, amended or implemented by the relevant government authorities. It cannot be predicted that how these regulations will affect Delta’s business operations or future strategies. Any failure by Delta’s PRC Resident shareholders or beneficial owners to make the updates with SAFE may subject the relevant PRC Resident shareholders or beneficial owners to penalties, restrict Delta’s overseas or cross-border investment activities, limit Delta PRC subsidiaries’ ability to make distributions or pay dividends, or affect its ownership structure and capital inflow from its offshore subsidiaries. As such, Delta’s business, financial condition, results of operations and liquidity as well as its ability to pay dividends or make other distributions to its shareholders may be materially and adversely affected.

There are defects in Delta’s titles of or rights to use its properties.

Delta has not received the record of completion acceptance from the relevant authority for its facilities used in its production and storage (“Properties”). Delta does not have valid title or right to the said Properties. Any dispute or claim in relation to the title to the Properties, including any litigation involving allegations of illegal or unauthorized use of the Properties, may materially and adversely affect Delta’s operations, financial condition, reputation and future growth. However, we are in the process of applying to relevant authority to obtain the completion acceptance for the Properties.

Delta is manufacturing certain products that are beyond its business scope.

Jiangsu Delta has been producing UPR, which is beyond the business scope of Jiangsu Delta. As a result, Jiangsu Delta may be imposed penalty and the business license of Jiangsu Delta may be revoked by relevant authority. However, Jiangsu Delta is applying to relevant authority to enlarge its business scope to include production of UPR. In the event that such approval is not obtained, Jiangsu Delta will have to suspend production of UPR, which might adversely affect the financial prospect and results of operation of Delta.

Delta is conducting certain business that is beyond its approved production capacity.

Jiangsu Delta is producing 30,000 tons of PCT/OCT series and downstream products per annum which are beyond the approved annual production capacity of 10,000 tons. As a result, Jiangsu Delta might be imposed penalty of RMB 500,000 to RMB 1,000,000 by relevant authority. However, Jiangsu Delta is applying to relevant authority to increase Jiangsu Delta’s annual approved production capacity to 30,000 tons. In the event that such application is denied, Jiangsu Delta will have to reduce its actual production under the approved capacity. As a result, Delta’s production might not keep up with the demand of its customers, which may adversely affect Delta’s revenue and financial conditions.

Risks Relating to CIS’ Securities

While CIS believes that it currently has adequate internal control procedures in place, CIS is still exposed to potential risks from legislation requiring companies to evaluate controls under Section 404 of the Sarbanes-Oxley Act of 2002.

Under the supervision and with the participation of its management, CIS has evaluated its internal controls systems in order to allow management to report on the system and process evaluation and testing required in an effort to comply with the management certification and auditor attestation requirements of Section 404. As a result, CIS has incurred additional expenses and a diversion of management’s time.

If CIS fails to maintain effective internal control over financial reporting in the future, a material misstatement of its financial statements may not be prevented or detected on a timely basis. In addition, CIS may not be able to conclude on an ongoing basis that CIS has effective internal control over financial reporting in accordance with Section 404. This could in turn result in the loss of investor confidence in the reliability of its financial statements and negatively impact the trading price of its shares. Furthermore, if CIS is not able to continue to meet the requirements of Section 404 in a timely manner or with adequate compliance, Delta might be subject to sanctions or investigation by regulatory authorities, such as the SEC or the NASDAQ. Any such action could adversely affect its financial results and the market price of its ordinary shares.

As a foreign private issuer, CIS has limited reporting requirements under the Securities Exchange Act of 1934, which makes it less transparent than a United States issuer.

As a foreign private issuer, the rules and regulations under the Exchange Act provide it with certain exemptions from the reporting obligations of United States issuers. CIS is exempt from the rules prescribing the furnishing and content of proxy statements, and its officers, directors and principal stockholders are exempt from the reporting and short-swing profit recovery provisions. Also, CIS is not required to publish financial statements as frequently, as promptly or containing the same information as United States companies. The result is that CIS will be less transparent than a U.S. issuer.

CIS may be classified as a passive foreign investment company for United States federal income tax purposes, which could result in adverse United States federal income tax consequences to U.S. Holders.

Based on the market price of its ordinary shares, the value of its assets, and the composition of its assets and income, CIS does not believe that it was a passive foreign investment company (a “PFIC”) for United States federal income tax purposes for its taxable year ended June 30, 2014 and CIS does not expect to be one for its taxable year ending June 30, 2015 or become one in the foreseeable future. Nevertheless, the application of the PFIC rules is subject to ambiguity in several respects and, in addition, CIS must make a separate determination each year as to whether CIS is a PFIC (after the close of each taxable year). Accordingly, CIS cannot assure you that CIS will not be a PFIC for the current or any other taxable year.

A non-United States corporation, such as its company, will be classified as a PFIC for United States federal income tax purposes for any taxable year, if either (1) 75% or more of its gross income for such year consists of certain types of “passive” income, or (2) 50% or more of its average quarterly assets as determined on the basis of fair market value during such year produce or are held for the production of passive income. Because there are uncertainties in the application of the relevant rules and PFIC status is a fact-intensive determination made on an annual basis, no assurance can be given with respect to its PFIC status for the current or any other taxable year.

If CIS is characterized as a PFIC for any year, a U.S. holder may incur significantly increased United States income tax on gain recognized on the sale or other disposition of its ordinary shares and on the receipt of distributions on its notes or ordinary shares to the extent such gain or distribution is treated as an “excess distribution” under the United States federal income tax rules.

CIS did not obtain a fairness opinion from an independent investment banking firm as to the fair market value of Delta.

The fair market value of Delta was determined by its board of directors based upon an analysis conducted by them (which may include an analysis of actual and potential sales, earnings, cash flow and/or book value), and CIS did not obtain an opinion from an unaffiliated, independent investment banking firm. CIS’s shareholders must, therefore, rely solely on the judgment of its board of directors with respect to the determination of the fair market value of its initial acquisition transaction.

CIS has outstanding exercisable securities that may dilute your holdings.

CIS’s outstanding exercisable securities may adversely affect the market price of its shares.

CIS currently has issued and outstanding securities exercisable into 9,060,000 ordinary shares (warrants for the purchase of 8,500,000 shares and a unit purchase option for 280,000 shares and warrants to purchase 280,000 shares). The sale or possibility of sale of the shares underlying these securities could have an adverse effect on the market price for its securities or its ability to obtain future financing. If and to the extent these securities are converted or exercised, you may experience dilution to your holdings.

One of CIS’s stockholders holds a significant percentage of its outstanding voting securities.

Mr. Xin Chao, who is our Chief Executive Officer and Chairman of the Board, directly or indirectly owns approximately 34.27% of our outstanding voting securities. As a result, he possesses significant influence, giving him the ability, among other things, to elect a majority of its Board of Directors and to authorize or prevent proposed significant corporate transactions. His ownership and control may also have the effect of delaying or preventing a future change in control, impeding a merger, consolidation, takeover or other business combination or discourage a potential acquirer from making a tender offer, all of which may prevent it from implementing its business strategies.

Additional Risk factors to Consider

Rights of shareholders under British Virgin Islands law differ from those under United States law, and, accordingly, CIS’s shareholders may have fewer protections.

CIS’s corporate affairs are governed by its Memorandum and Articles of Association, the BVI Business Companies Act, 2004 (as amended, the “BVI Act”) and the common law of the British Virgin Islands. The rights of shareholders to take legal action against its directors, actions by minority shareholders and the fiduciary responsibilities of its directors under British Virgin Islands law are to a large extent governed by the common law of the British Virgin Islands and by the BVI Act. The common law of the British Virgin Islands is derived in part from comparatively limited judicial precedent in the British Virgin Islands as well as from English common law, which has persuasive, but not binding, authority on a court in the British Virgin Islands. The rights of its shareholders and the fiduciary responsibilities of its directors under British Virgin Islands law are not as clearly established as they would be under statutes or judicial precedents in some jurisdictions in the United States. In particular, the British Virgin Islands has a less developed body of securities laws as compared to the United States, and some states (such as Delaware) have more fully developed and judicially interpreted bodies of corporate law. As a result of the foregoing, holders of its ordinary shares may have more difficulty in protecting their interests through actions against its management, directors or major shareholders than they would as shareholders of a U.S. company.

The laws of the British Virgin Islands provide limited protection for minority shareholders, so minority shareholders will have limited or no recourse if they are dissatisfied with the conduct of CIS’s affairs.

Under the laws of the British Virgin Islands, there is limited statutory law for the protection of minority shareholders other than the provisions of the BVI Act dealing with shareholder. The principal protection under statutory law is that shareholders may bring an action to enforce the constituent documents of a British Virgin Islands company and are entitled to have the affairs of the company conducted in accordance with the BVI Act and the memorandum and articles of association of the company. As such, if those who control the company have persistently disregarded the requirements of the BVI Act or the provisions of the company’s memorandum and articles of association, then the courts will likely grant relief. Generally, the areas in which the courts will intervene are the following: (i) an act complained of which is outside the scope of the authorized business or is illegal or not capable of ratification by the majority; (ii) acts that constitute fraud on the minority where the wrongdoers control the company; (iii) acts that infringe on the personal rights of the shareholders, such as the right to vote; and (iv) acts where the company has not complied with provisions requiring approval of a special or extraordinary majority of shareholders, which are more limited than the rights afforded to minority shareholders under the laws of many states in the United States.

It may be difficult to enforce judgments against CIS or its executive officers and directors in jurisdictions outside the United States.

Under its Memorandum and Articles of Association, CIS may indemnify and hold its directors harmless against all claims and suits brought against them, subject to limited exceptions. Furthermore, to the extent allowed by law, the rights and obligations among or between it, any of its current or former directors, officers and employees and any current or former shareholder will be governed exclusively by the laws of the British Virgin Islands and subject to the jurisdiction of the British Virgin Islands courts, unless those rights or obligations do not relate to or arise out of their capacities as such. Although there is doubt as to whether United States courts would enforce these provisions in an action brought in the United States under United States securities laws, these provisions could make judgments obtained outside of the British Virgin Islands more difficult to enforce against its assets in the British Virgin Islands or jurisdictions that would apply British Virgin Islands law.

British Virgin Islands companies may not be able to initiate shareholder derivative actions, thereby depriving shareholders of one avenue to protect their interests.

British Virgin Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States. The circumstances in which any such action may be brought, and the procedures and defenses that may be available in respect of any such action, may result in the rights of shareholders of a British Virgin Islands company being more limited than those of shareholders of a company organized in the United States. Accordingly, shareholders may have fewer alternatives available to them if they believe that corporate wrongdoing has occurred. The British Virgin Islands courts are also unlikely to recognize or enforce judgments of courts in the United States based on certain liability provisions of United States securities law or to impose liabilities, in original actions brought in the British Virgin Islands, based on certain liability provisions of the United States securities laws that are penal in nature. There is no statutory recognition in the British Virgin Islands of judgments obtained in the United States, although the courts of the British Virgin Islands will generally recognize and enforce the non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits. This means that even if shareholders were to sue CIS successfully, they may not be able to recover anything to make up for the losses suffered.