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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>





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<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 9, 2010</B></DIV>
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<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>REGISTRATION STATEMENT NO. 333- </B><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>WASHINGTON, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>FORM S-1</B>
</DIV>


<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD colspan="3" align="center"><B>REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>CHINA REDSTONE GROUP, INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt">
<DIV style="width: 100%; border-bottom: 1px solid #000000; FONT-size: 1px">&nbsp;</DIV></DIV>

<DIV align="center" style="font-size: 10pt">
(Exact name of registrant as specified in its charter)</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Delaware</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 0pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; FONT-size: 1px">&nbsp;</DIV></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 0pt">(State or other jurisdiction of incorporation or organization)</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">2741</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 0pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; FONT-size: 1px">&nbsp;</DIV></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 0pt">(Primary Standard Industrial Classification Code Number)</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">20-8285559</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 0pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; FONT-size: 1px">&nbsp;</DIV></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 0pt">(I.R.S. Employer Identification Number)</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">239 Jianxin Road, Jiangbei District,<BR>
Chongqing, PRC 400000<BR>
(86)&nbsp;023-67755514</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; FONT-size: 1px">&nbsp;</DIV></DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 0pt">(Address, including zip code, and telephone number, including area code, of registrant&#146;s principal executive offices)</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Yiyou Ran, Chief Executive Officer<BR>
239 Jianxin Road, Jiangbei District,<BR>
Chongqing, PRC 400000<BR>
(86)&nbsp;023-67755514</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">COPY TO:<BR>
Kevin K. Leung, Esq.<BR>
Francis Chen, Esq.<BR>
Suzanne Fu, Esq.<BR>
Richardson &#038; Patel LLP<BR>
10900 Wilshire Blvd., Suite&nbsp;500<BR>
Los Angeles, CA 90024<BR>
(310)&nbsp;208-1182</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; FONT-size: 1px">&nbsp;</DIV></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 0pt">(Name, address, including zip code, and telephone number, including area code, of agent for service)</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">FROM TIME TO TIME AFTER THE<BR>
EFFECTIVE DATE OF THIS REGISTRATION STATEMENT</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; FONT-size: 1px">&nbsp;</DIV></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 0pt">(Approximate date of commencement of proposed sale to the public)</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If any of the securities being registered on this form are to be offered on a delayed or continuous
basis pursuant to Rule&nbsp;415 under the Securities Act of 1933, check the following box. <FONT style="font-family: Wingdings">&#254;</FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If this Form is filed to register additional securities for an offering pursuant to Rule 462(b)
under the Securities Act, please check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering. <FONT style="font-family: Wingdings">&#111;</FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act,
check the following box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. <FONT style="font-family: Wingdings">&#111;</FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act,
check the following box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. <FONT style="font-family: Wingdings">&#111;</FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of &#147;large accelerated
filer,&#148; &#147;accelerated filer,&#148; and &#147;smaller reporting company&#148; in Rule&nbsp;12b-2 of the Exchange Act.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
</TR>
<TR></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top" nowrap>Large accelerated filer <FONT style="font-family: Wingdings">&#111;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" nowrap>Accelerated filer <FONT style="font-family: Wingdings">&#111;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" nowrap>Non-accelerated filer <FONT style="font-family: Wingdings">&#111;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" nowrap>Smaller reporting company <FONT style="font-family: Wingdings">&#254;</FONT> </TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" nowrap>(Do not check if a smaller reporting company)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CALCULATION OF REGISTRATION FEE</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom" style="font-size: 1px">
    <TD width="1%">&nbsp;</TD>
    <TD width="52%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD><!-- VRule -->
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD><!-- VRule -->
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD><!-- VRule -->
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD><!-- VRule -->
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>

    <TD width="1%">&nbsp;</TD>
</TR><TR style="font-size: 1px" valign="bottom">
    <TD nowrap align="left" colspan="23" style="border-bottom: 3px double #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">    <TD width="1%">&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Proposed</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">    <TD width="1%">&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Amount to</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Proposed</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Maximum</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">    <TD width="1%">&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">be</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Maximum</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Aggregate</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Amount of</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">    <TD width="1%">&nbsp;</TD>

    <TD nowrap align="center">Title of Each Class of</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Registered</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Per Share</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Offering</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Registration</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">    <TD width="1%">&nbsp;</TD>

    <TD nowrap align="center">Securities to be Registered</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(1)</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Offering Price</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Price</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Fee</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD width="1%" style="border-top: 2px solid #000000">&nbsp;</TD>
                    <TD style="border-top: 2px solid #000000"><DIV style="margin-left:15px; text-indent:-15px">Common stock, $0.001 par value per share</DIV></TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 2px solid #000000">1,402,262</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" style="border-top: 2px solid #000000">$</TD>
    <TD align="right" style="border-top: 2px solid #000000">5.00      </TD>
    <TD nowrap style="border-top: 2px solid #000000">(2)</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 2px solid #000000">$</TD>
    <TD align="right" style="border-top: 2px solid #000000">7,011,310</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 2px solid #000000">$</TD>
    <TD align="right" style="border-top: 2px solid #000000">499.91</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD width="1%" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD width="1%" style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000"><DIV style="margin-left:15px; text-indent:-15px">Common stock, $0.001 par value per
share (issuable upon exercise of common
stock purchase warrants)</DIV></TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 2px solid #000000">771,239</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" style="border-top: 2px solid #000000">$</TD>
    <TD align="right" style="border-top: 2px solid #000000">5.00      </TD>
    <TD nowrap style="border-top: 2px solid #000000">(3)</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 2px solid #000000">$</TD>
    <TD align="right" style="border-top: 2px solid #000000">3,856,195</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 2px solid #000000">$</TD>
    <TD align="right" style="border-top: 2px solid #000000">274.95</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD width="1%" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD width="1%" style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000"><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 2px solid #000000">2,173,501</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 2px solid #000000">$</TD>
    <TD align="right" style="border-top: 2px solid #000000">774.86</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD width="1%" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 1px" valign="bottom">
    <TD nowrap align="left" colspan="23" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 6pt; width: 18%; border-top: 0px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Pursuant to Rule&nbsp;416 under the Securities Act of 1933, as amended (the
&#147;Securities Act&#148;), this registration statement shall be deemed to
cover additional securities (i)&nbsp;to be offered or issued in connection
with any provision of any securities purported to be registered hereby
to be offered pursuant to terms which provide for a change in the
amount of securities being offered or issued to prevent dilution
resulting from stock splits, stock dividends, or similar transactions
and (ii)&nbsp;of the same class as the securities covered by this
registration statement issued or issuable prior to completion of the
distribution of the securities covered by this registration statement
as a result of a split of, or a stock dividend on, the registered
securities.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(c) of the Securities Act based
upon the average of the high and low prices of the common stock of the
Registrant as reported on the Over-the-Counter Bulletin Board on April
7, 2010.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(g) under the Securities Act.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>The Registrant hereby amends this Registration Statement on such date or dates as may be necessary
to delay its effective date until the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become effective in accordance with
Section&nbsp;8(a) of the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section&nbsp;8(a), may determine.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The information in this prospectus is not complete and may be changed. These securities may not be
sold until the registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities and no offer to buy these
securities is being solicited in any state where the offer or sale is not permitted.
</DIV>


<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>







<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV style="padding: 5px; border: 3px double #000000; font-size: 10pt; color: #FF0000">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The information in this prospectus is not complete and may be changed. The selling stockholders may
not sell these securities until the registration statement filed with the Securities and Exchange
Commission is effective. This prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
</DIV>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Preliminary
Prospectus</B></DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Subject to Completion, April 9, 2010</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>CHINA REDSTONE GROUP, INC.</B>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>2,173,501 shares of Common Stock</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
prospectus covers the resale by selling security holders named on
page 20 of up to
2,173,501 shares of our common stock, $0.001 par value per share, which includes:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>1,402,262 shares of common stock issued in conjunction with our
financing completed on February&nbsp;23, 2010 (the &#147;Financing&#148;);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>701,126 shares of common stock underlying the common stock purchase
warrants issued in conjunction with the Financing; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>70,113 shares of common stock underlying the common stock purchase
warrants issued to our placement agent and its assignees in
conjunction with the Financing.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All of the shares of common stock offered by this prospectus are being sold by the selling
stockholders. It is anticipated that the selling stockholders will sell these shares of common
stock from time to time in one or more transactions, in negotiated transactions or otherwise, at
prevailing market prices or at prices otherwise negotiated (see &#147;Plan of Distribution&#148; beginning on
page&nbsp;23). We will not receive any proceeds from the sales by the selling stockholders. We may
receive proceeds from any exercise of outstanding warrants. The selling shareholders may exercise
the warrants on a cashless basis if the shares of common stock underlying the warrants are not then
registered pursuant to an effective registration statement. In the event the selling shareholders
or placement agents&#146; exercise the Warrants on a cashless basis, then we will not receive any
proceeds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock is quoted on the Over-the-Counter Bulletin Board, commonly known as the
OTCBB, under the symbol &#147;CGPI.OB.&#148; On April&nbsp;7, 2010, the last sale price of our common stock on the
OTCBB was $5.00 per share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">No underwriter or person has been engaged to facilitate the sale of shares of our common stock in
this offering. None of the proceeds from the sale of common stock by the selling stockholder will
be placed in escrow, trust or any similar account. There are no underwriting commissions involved
in this offering. We have agreed to pay all the costs of this offering other than customary
brokerage and sales commissions. The selling stockholders will pay no offering expenses other than
those expressly identified in this prospectus.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>INVESTING
IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE &#147;RISK FACTORS&#148; BEGINNING ON PAGE&nbsp;6.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>The
date of this prospectus is April <U>&nbsp;&nbsp;</U>, 2010</B>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->2<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No offers to sell are made, nor are offers sought, to buy these securities in any jurisdiction
where the offer or sale is not permitted. The reader should assume that the information contained
in this prospectus is accurate as of the date in the front of this prospectus only. Our business,
financial condition, results of operations, and prospectus may have changed since that date.
</DIV>
<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TABLE OF CONTENTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Page</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>

</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#101">Prospectus Summary</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#102">Risk Factors</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#103">Special Note Regarding Forward-Looking Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#104">Use of Proceeds</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#105">Selling Security Holders</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#106">Plan of Distribution</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#109">Business</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#110">Description of Property</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#111">Summary
Consolidated Financial Data</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#112">Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#113">Legal Proceedings</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#114">Management</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#115">Executive Compensation</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#116">Security Ownership of Certain Beneficial Holders and Management</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#117">Certain Relationships and Related Party Transactions</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#118">Description of Securities</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#119">Changes In and Disagreements with Accountants on Accounting and Financial Disclosure</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#120">Disclosure of Commission Position on Indemnification for Securities Act Liabilities</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#121">Additional Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#108">Experts</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#107">Legal Matters</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#122">Index to Consolidated Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="g22861exv5w1.htm">EX-5.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="g22861exv21w1.htm">EX-21.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="g22861exv23w2.htm">EX-23.2</A></FONT></TD></TR>
</TABLE>
</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>You should rely only on the information contained in this prospectus. We have not authorized anyone
to provide you with information different from that contained in this prospectus. The selling
stockholders are offering to sell shares of our common stock and seeking offers to buy shares of
our common stock only in jurisdictions where such offers and sales are permitted. You should assume
that the information appearing in this prospectus is accurate only as of the date on the front
cover of this prospectus. Our business, financial condition, results of operations and prospects
may have changed since that date.</B>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->3<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PROSPECTUS SUMMARY</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>This summary contains basic information about us and this offering. The reader should read the
entire prospectus carefully, especially the risks of investing in our common stock discussed under
&#147;Risk Factors.&#148; Some of the statements contained in this prospectus, including statements under
&#147;Summary&#148; and &#147;Risk Factors&#148; as well as those noted in the documents incorporated herein by
reference, are forward-looking statements and may involve a number of risks and uncertainties. We
note that our actual results and future events may differ significantly based upon a number of
factors. The reader should not put undue reliance on the forward-looking statements in this
document, which speak only as of the date on the cover of this prospectus.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>References to &#147;we,&#148; &#147;our,&#148; &#147;us,&#148; the &#147;Company,&#148; or &#147;China Redstone&#148; refer to China Redstone
Group, Inc., a Delaware corporation, and its consolidated subsidiaries and variable interest
entity.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our Business</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a private provider of cemetery products and services in Chongqing, People&#146;s Republic of
China (&#147;<U>PRC</U>&#148; or &#147;<U>China</U>&#148;). We are primarily focused on developing cemeteries and
selling cemetery plots, although we also provide park and garden development and construction
services. Our first cemetery development project is the Chongqing Guiyuan Cemetery I (&#147;<U>Guiyuan
I</U>&#148;), located in Changshou District of Chongqing on approximately 66,660 square meters of land.
The entire cemetery plots of Guiyuan I have been sold, at an average price of RMB 30,000 ($4,412)
per plot. We are currently developing the Chongqing Guiyuan Cemetery II (&#147;<U>Guiyuan II</U>&#148;), our
second cemetery project in Changshou. Guiyuan II, in development since 2002, occupies a land over
666,000 square meters, of which approximately 46,620 square meters have been developed to date. We
have also secured approximately 1,194,804 square meters of land surrounding Longqiao Lake, which
portions of Guiyuan II overlook. We are planning to develop this land as a park, with mausoleums
and temples, to complement and enhance Guiyuan II.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Both Guiyuan I and Guiyuan II are among the most highly regarded facilities in our market area
in terms of a number of factors such as tradition, heritage, reputation, physical size, volume of
business, available inventory, name recognition, aesthetics and potential for development or
expansion. In 2006 and 2007, we were ranked amongst the top 50 private-owned enterprises in
Chongqing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Our History and Corporate Structure</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We were incorporated in Delaware on July&nbsp;10, 2007, originally under the name &#147;Artistry
Publications, Inc.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;10, 2010, we entered into a share exchange agreement (the &#147;Exchange Agreement&#148;)
with Gold Industry Limited, a Cayman Island company (&#147;Gold Industry&#148;), and the holders of 100% of
Gold Industry&#146;s issued and outstanding capital stock (the &#147;Cayman Shareholder&#148;), pursuant to which
we agreed to issue an aggregate of 8,800,000 shares of our common stock, par value $0.001 per share
(the &#147;Common Stock&#148;) to the Cayman Shareholder in exchange for all of the issued and outstanding
capital stock of Gold Industry (the &#147;Share Exchange&#148;). On February&nbsp;10, 2010, the Share Exchange
closed and Gold Industry became our wholly-owned subsidiary. On April&nbsp;6, 2010, in connection with
the Share Exchange, we changed our name from to &#147;China Redstone Group, Inc.&#148; to better reflect our
business operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All of our business operations are carried out by a PRC company, Chongqing Foguang Tourism
Development (Group) Co., Ltd. (&#147;<U>Foguang</U>&#148;), which we control through contractual
arrangements between Foguang and Chongqing Ran Ji Industrial Co., Ltd. (&#147;<U>Ran Ji</U>&#148;), a
company organized in the PRC and wholly-owned by Gold Holy Industry Limited, a company incorporated
in Hong Kong Special Administrative Region (&#147;<U>Gold Holy</U>&#148;). Gold Holy is wholly-owned by
Gold Industry. Through these contractual arrangements, we have the ability to substantially
influence Foguang&#146;s daily operations and financial affairs, appoint its senior executives and
approve all matters requiring shareholder approval. As a result of these contractual arrangements,
which enable us to control Foguang, we are considered the primary beneficiary of Foguang.
Accordingly, we consolidate Foguang&#146;s results, assets and liabilities in our financial statements.
Other than our interests in the contractual arrangements, neither we, Gold Industry, Gold Holy and
Ranji own any equity interests in Foguang.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However, Chinese laws and regulations concerning the validity of the contractual arrangement
is uncertain, as many of these laws and regulations are relatively new and may be subject to
change, and their official interpretation and enforcement by the Chinese government involves
substantial uncertainty. Additionally, the contractual arrangement may not be as effective in
providing control over Foguang as direct ownership, which we are restricted from under current
Chinese law. Due to such uncertainty, we may take such additional steps in the future as may be
permitted by the then applicable laws and regulations in China to further strengthen our control
over or toward actual ownership of Foguang or its assets or business operations, which could
include direct ownership of selected assets without jeopardizing any favorable government policies
toward domestic owned
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->4<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">enterprises. Because we rely on Foguang for our revenue, any termination of or disruption to
the contractual arrangement would detrimentally affect our business and financial condition.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Financing Transaction</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In February&nbsp;2010, we completed a financing transaction with 24 institutional and/or accredited
investors (collectively the &#147;<U>Purchasers</U>&#148;) pursuant to which we sold $4,599,415 of units of
our equity securities to the Purchasers in a private placement (the &#147;<U>Transaction</U>&#148;). Each
unit is comprised of 100,000 shares of our common stock, par value $0.001 per share (the
&#147;<U>Common Stock</U>&#148;), at a per share purchase price of $3.28 per share, and warrants to purchase
up to 50,000 shares of Common Stock. At the closing of the Transaction on February&nbsp;23, 2010, we
issued 1,402,262 shares of Common Stock and four-year warrants to purchase 701,126 shares of Common
Stock (the &#147;<U>Warrants</U>&#148;). In addition, we issued warrants to purchase up to 70,113 shares of
common stock to our placement agent and its assignees for the Financing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Financial Results</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the fiscal years ended March&nbsp;31, 2009 and 2008, we had approximately $18.31&nbsp;million and
$22.21&nbsp;million in sales, respectively and approximately $5.50&nbsp;million and $5.73&nbsp;million in net
income, respectively. Our consolidated financial statements for such periods are included in this
prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have also included our unaudited condensed consolidated financial statements for the
three and nine months ended December&nbsp;31, 2009 and 2008, during which time we had approximately
$26.47&nbsp;million and $11.19&nbsp;million in sales, respectively, and approximately $10.04&nbsp;million and
$3.26&nbsp;million in net profit, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Historical results are not necessarily indicative of the results that may be expected for any
future period. When you read the included historical financial data, it is important that you read
along with it the appropriate historical consolidated financial statements and related notes and
&#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations&#148; included
elsewhere in this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>The Offering</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
</TR>
<TR></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Common stock offered by the selling
stockholders:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">2,173,501 shares (1)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Common stock outstanding:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">12,659,762 shares (2)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Use of proceeds:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">We will not receive any proceeds
from the sales by the selling
stockholders. We may receive
proceeds from any exercise of
outstanding warrants. The selling
shareholders may exercise the
warrants on a cashless basis if
the shares of common stock
underlying the warrants are not
then registered pursuant to an
effective registration statement.
In the event the selling
shareholders exercise the
Warrants on a cashless basis,
then we will not receive any
proceeds.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Risk factors:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">An investment in our common stock
involves a high degree of risk.
You should carefully consider the
information set forth in this
prospectus and, in particular,
the specific factors set forth in
the &#147;Risk Factors&#148; section
beginning on page&nbsp;6 of this
prospectus before deciding
whether or not to invest in
shares of our common stock.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">OTC Bulletin Board symbol:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">CGPI.OB</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 771,239 shares of our common stock issuable upon exercise of
outstanding common stock purchase warrants.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Represents the number of shares of our common stock outstanding as of
April&nbsp;7, 2010 and excludes 771,239 shares of our common stock issuable
upon exercise of our outstanding common stock purchase warrants.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->5<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>General Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our principal executive offices are located at 239 Jianxin Road, Jiangbei District, Chongqing,
PRC 400000 and our telephone number is (86)&nbsp;023-67755514.
</DIV>
<DIV align="left">
<A name="102"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>RISK FACTORS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>The reader should carefully consider the risks described below together with all of the other
information included in this prospectus. The statements contained in or incorporated into this
prospectus that are not historic facts are forward-looking statements that are subject to risks and
uncertainties that could cause actual results to differ materially from those set forth in or
implied by forward-looking statements. If any of the following risks actually occurs, our business,
financial condition or results of operations could be harmed. In that case, the trading price of
our common stock could decline, and an investor in our securities may lose all or part of their
investment.</I>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Risks Relating to Our Business and Industry</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Declines in the number of deaths in our markets can cause a decrease in revenues. Changes in the
number of deaths are not predictable from market to market or over the short term, and reliable
statistics on deaths in particular markets can be difficult to obtain.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Declines in the number of deaths could cause cemetery services, property and merchandise to
decline which could decrease revenues. Although the National Population and Family Planning
Commission of the P.R.C. estimates that the population of people that are 50&nbsp;years old or older are
expected to increase by approximately 3% per year, from 276.8&nbsp;million in 2000 to 298.6&nbsp;million in
2010, longer life spans could reduce the rate of deaths. Changes in the number of deaths can vary
among local markets and from quarter to quarter, and variations in the number of deaths in our
markets or from quarter to quarter are not predictable. These variations can cause revenues to
fluctuate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>The death care industry continues to be increasingly competitive.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In China, the death care industry is characterized by a large number of locally owned and
independent operations. To compete successfully, our cemeteries must be maintained in good
condition and we must maintain good reputations and high professional standards, as well as offer
attractive products and services at competitive prices. In addition, we must market the Company in
such a manner as to distinguish us from our competitors. We have historically experienced price
competition from independent cemetery operators. New market entrants tend to attempt to build
market share by offering lower cost alternatives. If we are unable to successfully compete, our
financial condition, results of operations, and cash flows could be materially adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Because the cemetery business is a high fixed-cost business, positive or negative changes in
revenue can have a disproportionately large effect on cash flow and profits.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The cemetery business must incur many of the costs of operating and maintaining facilities,
land and equipment regardless of the level of sales in any given period. For example, we must pay
salaries, utilities, property taxes and maintenance costs and maintain the grounds of cemeteries
regardless of the number of sales. Because we cannot decrease these costs significantly or rapidly
when we experience declines in sales, declines in sales can cause margins, profits and cash flow to
decline at a greater rate than the decline in revenues.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Changes or increases in, or failure to comply with, regulations applicable to our business could
increase costs or decrease cash flows.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The death care industry is subject to extensive regulation and licensing requirements under
state and local laws. Any construction of cemetery must be approved by the Administration of Civil
Affairs and the construction must be limited away from a certain areas such as cultivated land,
forest land, urban parks, scenic spots, protected areas of water resources, railways and highways.
Compliance with these regulations is burdensome, and we are always at risk of not complying with
the regulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, from time to time, governments and agencies propose to amend or add regulations,
which could increase costs or decrease cash flows. If additional legislation or regulations are
adopted by the regulatory authorities of the jurisdictions in
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">which we operate, these and other
possible proposals could have a material adverse effect on us, our financial condition, our results
of operations, our cash flows and our future prospects.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>If we are not able to respond effectively to changing consumer preferences, our market share,
revenues and profitability could decrease.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Future market shares, revenues and profits will depend in part on our ability to anticipate,
identify and respond to changing consumer preferences. In past years, we have implemented new
product and service strategies based on results of customer surveys that we conduct on a continuous
basis. However, we may not correctly anticipate or identify trends in consumer preferences, or we
may identify them later than our competitors do. In addition, any strategies we may implement to
address these trends may prove incorrect or ineffective.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our ability to generate sales depends on a number of factors, including sales incentives and local
and general economic conditions.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Declines in sales would reduce our revenues and could reduce our future market share. As we
have modified our sales strategies to local standards, we are continuing to refine the mix of
service and product offerings in our cemetery operations, including changes in our sales commission
and incentive structure. These changes could cause us to experience declines in sales in the
short-run.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, a weakening economy at the local or national level have could cause customers to
reduce discretionary spending, which could lead to a decline in our cemetery sales, and decrease
the amounts customers are willing to pay for cemetery products and services. Declines in cemetery
property sales and average revenue per event would reduce our current revenues. Declines in
cemetery products and services could also reduce our future revenues and market share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Increased or unanticipated costs, such as insurance, taxes or litigation, may have a negative
impact on our earnings and cash flow.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Costs which result from external factors, such as insurance, taxes or legal fees, are
difficult to estimate. These costs may impair our ability to achieve earnings growth in excess of
revenue growth. Our 2010 plan assumes that we will be successful in increasing earnings at a rate
that is greater than revenue growth. We can give no assurance that we will be successful in
achieving such increases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>The success of our business is typically dependent upon one or a few key employees because of the
localized and personal nature of our business.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Death care businesses have built local heritage and tradition through successive generations,
providing a foundation for ongoing business opportunities from established client family
relationships and related referrals. We believe these relationships build trust in the community
and are a key driver to market share. Our businesses, which tend to serve small local markets,
usually have one or a few key employees that drive our relationships. We can give no assurance that
we can retain these employees or that these relationships will drive market share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our limited operating history makes it difficult to evaluate our future prospects and results of
operations.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foguang, which commenced business in 2002, has a limited operating history. Accordingly, you
should consider our future prospects in light of the risks and uncertainties experienced by
early-stage companies in China. Some of these risks and uncertainties relate to our ability to:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>maintain our market position;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>attract additional customers and increase spending per customer;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>respond to competitive market conditions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>respond to changes in our regulatory environment;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>maintain effective control of our costs and expenses;</TD>
</TR>


</TABLE>
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>raise sufficient capital to sustain and expand our business; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>attract, retain and motivate qualified personnel.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we are unsuccessful in addressing any of these risks and uncertainties, our business may be
materially and adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>If we fail to implement our business strategy, our financial performance and our growth could be
materially and adversely affected.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our future financial performance and success are dependent in large part upon our ability to
implement our business strategy successfully. Our strategic plan is focused on cost management and
the continued implementation of key revenue initiatives, including strategic pricing, designed to
generate future internal growth in our core cemetery operations. We may not be able to implement
our business strategy successfully or achieve the anticipated benefits of our business plan. Many
of the factors necessary for the execution of our strategic plan, such as the number of deaths and
general economic conditions, are beyond our control. If we are unable to do so, our long-term
growth and profitability may be adversely affected. Even if we are able to implement some or all of
the initiatives of our business plan successfully, our operating results may not improve to the
extent we anticipate, or at all. Implementation of our business strategy could also be affected by
a number of factors beyond our control, such as increased competition, legal developments,
government regulation, general economic conditions or increased operating costs or expenses. In
addition, to the extent we have misjudged the nature and extent of industry trends or our
competition; we may have difficulty achieving our strategic objectives. Any failure to implement
our business strategy successfully may adversely affect our business, financial condition and
results of operations. In addition, we may decide to alter or discontinue certain aspects of our
business strategy at any time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We may be unable to sustain our past growth or manage our future growth, which may have a material
adverse effect on our future operating results.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have experienced rapid growth since our inception, and have increased our net sales from $5
million in 2002 to $18.3&nbsp;million for the fiscal year ended March&nbsp;31, 2010. We anticipate that our
future growth rate will depend upon various factors, including the strength of our brand image, the
market success of our current and future products, the success or our growth strategies,
competitive conditions and our ability to manage our future growth. Future growth may place a
significant strain on our management and operations. As we continue to grow in our operations, our
operational, administrative, financial and legal procedures and controls will need to be expanded.
As a result, we may need to train and manage an increasing number of employees, which could
distract our management team from our business. Our future success will depend substantially on the
ability of our management team to manage our anticipated growth. If we are unable to anticipate or
manage our growth effectively, our future operating results could be adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We may acquire additional complementary businesses or technologies, which may require us to incur
substantial costs for which we may never realize the anticipated benefits.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may in the future acquire complementary businesses or technologies, although we currently
have no commitments or agreements to do so. As a result of any acquisitions we pursue, management&#146;s
attention and resources may be diverted from our other businesses. An acquisition may also involve
a significant purchase price and significant transaction-related expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Achieving the benefits of any acquisition involves additional risks, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>difficulty assimilating acquired operations, technologies and personnel;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>inability to retain management and other key personnel of the acquired business;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in management or other key personnel that may harm
relationships with the acquired business&#146;s customers and employees; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>diversion of management attention as a result of the integration process.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We cannot ensure that we will realize any of the anticipated benefits of any acquisition, and
if we fail to realize these anticipated benefits, our operating performance could suffer.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Corporate insiders or their affiliates may be able to exercise significant control matters
requiring a vote of our stockholders and their interests may differ from the interests of our other
stockholders.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of the date of this prospectus, our officers, directors and their affiliates as a group
beneficially own approximately 69.75% of our then outstanding Common Stock. As a result, these
stockholders may be able to exercise significant control over matters requiring approval by our
stockholders. Matters that require the approval of our stockholders include the election of
directors and the approval of mergers or other business combination transactions. Certain
transactions are effectively not possible without the approval of these officers, directors and
their affiliates, including, proxy contests, tender offers, open market purchase programs or other
transactions that can give our stockholders the opportunity to realize a premium over the
then-prevailing market prices for their shares of our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We will be required to evaluate our internal control over financial reporting under Section&nbsp;404 of
the Sarbanes-Oxley Act.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Failure to timely comply with the requirements of Section&nbsp;404 of the Sarbanes-Oxley Act of
2002 (&#147;<U>Section&nbsp;404</U>&#148;) or any adverse results from such evaluation could result in a loss of
investor confidence in our financial reports and have an adverse effect on the trading price of our
debt and equity securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently are not an &#147;accelerated filer&#148; as defined in Rule&nbsp;12b-2 under the Securities
Exchange Act of 1934, as amended. Section&nbsp;404 of the Sarbanes-Oxley Act of 2002 requires us to
include an internal control report with our annual report on Form 10-K. That report must include
management&#146;s assessment of the effectiveness of our internal control over financial reporting as of
the end of the fiscal year. This report must also include disclosure of any material weaknesses in
internal control over financial reporting that we have identified. Additionally, for the fiscal
year ended March&nbsp;31, 2011, our independent registered public accounting firm will be required to
issue a report on management&#146;s assessment of our internal control over financial reporting and
their evaluation of the operating effectiveness of our internal control over financial reporting.
Our assessment requires us to make subjective judgments and our independent registered public
accounting firm may not agree with our assessment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Achieving compliance with Section&nbsp;404 within the prescribed period may require us to incur
significant costs and expend significant time and management resources. We cannot assure you that
we will be able to fully comply with Section&nbsp;404 or that, we and our independent registered public
accounting firm would be able to conclude that our internal reported financial information, which
could have an adverse effect on the trading price of our securities, as well as subject us to civil
or criminal investigations and penalties. In addition, our independent registered public accounting
firm may not agree with our management&#146;s assessment or conclude that our internal control over
financial reporting is operating effectively. We will continue to consistently improve our
internal control over the financial reporting with our best efforts and we plan to engage
assistance from outside experts in doing so.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Business interruptions could adversely affect our business.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operations and the operations of our suppliers and manufacturers are vulnerable to
interruption by fire, earthquake, hurricanes, power loss, telecommunications failure and other
events beyond our control. In the event of a major natural disaster, we could experience business
interruptions, destruction of facilities and loss of life. In the event that a material business
interruption occurs that affects us or our suppliers or manufacturers, deliveries could be delayed
and our business and financial results could be harmed.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Risks Related to Our Corporate Structure</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We conduct our business through Foguang by means of contractual arrangements. If the Chinese
government determines that these contractual arrangements do not comply with applicable
regulations, our business could be adversely affected. If the PRC regulatory bodies determine that
the agreements that establish the structure for operating our business in China do not comply with
PRC regulatory restrictions on foreign investment, we could be subject to severe penalties. In
addition, changes in such Chinese laws and regulations may materially and adversely affect our
business.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are uncertainties regarding the interpretation and application of PRC laws, rules and
regulations, including but not limited to the laws, rules and regulations governing the validity
and enforcement of the contractual arrangements between Ran Ji and Foguang. Although we have been
advised by our PRC counsel, that based on their understanding of the current PRC laws,
rules and regulations, the structure for operating our business in China (including our
corporate structure and contractual arrangements with Foguang and its owners) comply with all
applicable PRC laws, rules and regulations, and do not violate, breach, contravene or otherwise
conflict with any applicable PRC laws, rules or regulations, we cannot assure you that the PRC
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">regulatory authorities will not determine that our corporate structure and contractual arrangements
violate PRC laws, rules or regulations. If the PRC regulatory authorities determine that our
contractual arrangements are in violation of applicable PRC laws, rules or regulations, our
contractual arrangements will become invalid or unenforceable. In addition, new PRC laws, rules and
regulations may be introduced from time to time to impose additional requirements that may be
applicable to our contractual arrangements. For example, the PRC Property Rights Law that became
effective on October&nbsp;1, 2007 may require us to register with the relevant government authority the
security interests on the equity interests in Foguang granted to us under the equity pledge
agreements that are part of the contractual arrangements. If we are required to register such
security interests, failure to complete such registration in a timely manner may result in such
equity pledge agreements to be unenforceable against third party claims.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Chinese government has broad discretion in dealing with violations of laws and
regulations, including levying fines, revoking business and other licenses and requiring actions
necessary for compliance. In particular, licenses and permits issued or granted to us by relevant
governmental bodies may be revoked at a later time by higher regulatory bodies. We cannot predict
the effect of the interpretation of existing or new Chinese laws or regulations on our businesses.
We cannot assure you that our current ownership and operating structure would not be found in
violation of any current or future Chinese laws or regulations. As a result, we may be subject to
sanctions, including fines, and could be required to restructure our operations or cease to provide
certain services. Any of these or similar actions could significantly disrupt our business
operations or restrict us from conducting a substantial portion of our business operations, which
could materially and adversely affect our business, financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If Ran Ji or Foguang are determined to be in violation of any existing or future PRC laws,
rules or regulations or fail to obtain or maintain any of the required governmental permits or
approvals, the relevant PRC regulatory authorities would have broad discretion in dealing with such
violations, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>revoking the business and operating licenses of our PRC consolidated entities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>discontinuing or restricting the operations of our PRC consolidated entities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>imposing conditions or requirements with which we or our PRC consolidated entities may not be able to comply;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>requiring us or our PRC consolidated entities to restructure the relevant ownership structure or operations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>restricting or prohibiting our use of the proceeds from our initial
public offering to finance our business and operations in China; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>imposing fines.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The imposition of any of these penalties would severely disrupt our ability to conduct
business and have a material adverse effect on our financial condition, results of operations and
prospects.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our contractual arrangements with Foguang and its owners may not be as effective in providing
control over these entities as direct ownership.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have no equity ownership interest in Foguang, and rely on contractual arrangements to
control and operate the company and its businesses. These contractual arrangements may not be as
effective in providing control over the company as direct ownership. For example, Foguang could
fail to take actions required for our business despite its contractual obligation to do so. If
Foguang fails to perform under its agreements with us, we may have to rely on legal remedies under
Chinese law, which may not be effective. In addition, we cannot assure you that the owners of
Foguang will act in our best interests.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Because we rely on the consulting services agreement with Foguang for our revenue, the termination
of this agreement will severely and detrimentally affect our continuing business viability under
our current corporate structure.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a holding company and do not have any assets or conduct any business operations other
than the contractual arrangements between Ran Ji, our indirect wholly owned subsidiary, and
Foguang. As a result, we currently rely entirely for our revenues on dividends payments from Ran Ji
after it receives payments from Foguang pursuant to the consulting services
agreement which forms a part of the contractual arrangements. The consulting services
agreement may be terminated by written notice of Ran Ji or Foguang in the event that: (a)&nbsp;Foguang
causes a material breach of the agreement, provided that if the breach does not relate to a
financial obligation of the breaching party, that party may attempt to remedy the breach within 14
days
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">following the receipt of the written notice; (b)&nbsp;one party becomes bankrupt, insolvent, is the
subject of proceedings or arrangements for liquidation or dissolution, ceases to carry on business,
or becomes unable to pay its debts as they become due; (c)&nbsp;Ran Ji terminates its operations; or (d)
circumstances arise which would materially and adversely affect the performance or the objectives
of the agreement. Additionally, Ran Ji may terminate the consulting services agreement without
cause. Because neither we nor our direct and indirect subsidiaries own equity interests of Foguang,
the termination of the consulting services agreement would sever our ability to continue receiving
payments from Foguang under our current holding company structure. While we are currently not aware
of any event or reason that may cause the consulting services agreement to terminate, we cannot
assure you that such an event or reason will not occur in the future. In the event that the
consulting services agreement is terminated, this may have a severe and detrimental effect on our
continuing business viability under our current corporate structure, which in turn may affect the
value of your investment.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We rely principally on dividends paid by our consolidated operating entity to fund any cash and
financing requirements we may have, and any limitation on the ability of our consolidated PRC
entities to pay dividends to us could have a material adverse effect on our ability to conduct our
business.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a holding company, and rely principally on dividends paid by our consolidated PRC
operating entity for cash requirements, including the funds necessary to service any debt we may
incur. In particular, we rely on earnings generated by Foguang, which are passed on to us through
Ran Ji. If any of our consolidated operating subsidiaries incurs debt in its own name in the
future, the instruments governing the debt may restrict dividends or other distributions on its
equity interest to us. In addition, the PRC tax authorities may require us to adjust our taxable
income under the contractual arrangements Ran Ji currently have in place with Foguang, in a manner
that would materially and adversely affect our ability to pay dividends and other distributions on
our equity interest.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furthermore, applicable PRC laws, rules and regulations permit payment of dividends by our
consolidated PRC entity only out of its retained earnings, if any, determined in accordance with
PRC accounting standards. Under PRC laws, rules and regulations, our consolidated PRC entities are
required to set aside at least 10.0% of their after-tax profit based on PRC accounting standards
each year to their statutory surplus reserve fund until the accumulative amount of such reserves
reach 50.0% of their respective registered capital. As a result, our consolidated PRC entity is
restricted in its ability to transfer a portion of its net income to us whether in the form of
dividends, loans or advances. As of March&nbsp;31, 2009, we had retained earnings of $5,834,633. Our
retained earnings are not distributable as cash dividends. Any limitation on the ability of our
consolidated operating subsidiaries to pay dividends to us could materially and adversely limit our
ability to grow, make investments or acquisitions that could be beneficial to our businesses, pay
dividends or otherwise fund and conduct our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Management members of Foguang have potential conflicts of interest with us, which may adversely
affect our business and your ability for recourse.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Yiyou Ran, our Chief Executive Officer and President, is also the Chairman of the Board of
Foguang. Mr.&nbsp;Jianquan Chen, who is a member of our board of directors, is the General Manager of
Foguang. Conflicts of interests between their respective duties to our company and Foguang may
arise. As our directors and executive officer (in the case of Mr.&nbsp;Ran), they have a duty of loyalty
and care to us under U.S. and Hong Kong law when there are any potential conflicts of interests
between our company and Foguang. We cannot assure you; however, that when conflicts of interest
arise, every one of them will act completely in our interests or that conflicts of interests will
be resolved in our favor. For example, they may determine that it is in Foguang&#146;s interests to
sever the contractual arrangements with Ran Ji; irrespective of the effect such action may have on
us. In addition, any one of them could violate his or her legal duties by diverting business
opportunities from us to others, thereby affecting the amount of payment that Foguang is obligated
to remit to us under the consulting services agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event that you believe that your rights have been infringed under the securities laws
or otherwise as a result of any one of the circumstances described above, it may be difficult or
impossible for you to bring an action against Foguang or our officers or directors who are members
of Foguang&#146;s management, all of whom reside within China. Even if you are successful in bringing an
action, the laws of China may render you unable to enforce a judgment against the assets of Foguang
and its management, all of which are located in China.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Risks Related to Doing Business in China</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Foguang is subject to restrictions on making payments to us.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a holding company incorporated in Delaware and do not have any assets or conduct any
business operations other than our indirect investments in Foguang. As a result of our holding
company structure, we rely entirely on payments from that
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">company under the contractual
arrangements with our indirect wholly owned subsidiary, Ran Ji. The Chinese government also imposes
controls on the conversion of RMB into foreign currencies and the remittance of currencies out of
China. We may experience difficulties in completing the administrative procedures necessary to
obtain and remit foreign currency. See &#147;Government control of currency conversion may affect the
value of your investment.&#148; Furthermore, if our affiliated entity in China incurs debt on their own
in the future, the instruments governing the debt may restrict their ability to make payments. If
we are unable to receive all of the revenues from our operations through these contractual
arrangements, we may be unable to pay dividends on our ordinary shares.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>New labor laws in the PRC may adversely affect our results of operations.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;1, 2008, the PRC government promulgated the Labor Contract Law of the PRC, or the
New Labor Contract Law. The New Labor Contract Law imposes greater liabilities on employers and
significantly impacts the cost of an employer&#146;s decision to reduce its workforce. Further, it
requires certain terminations to be based upon seniority and not merit. In the event we decide to
significantly change or decrease our workforce, the New Labor Contract Law could adversely affect
our ability to enact such changes in a manner that is most advantageous to our business or in a
timely and cost effective manner, thus materially and adversely affecting our financial condition
and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Because our assets are located overseas, shareholders may not receive distributions that they would
otherwise be entitled to if we were declared bankrupt or insolvent.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All of our assets are located in the PRC. Because our assets are located overseas, our assets
may be outside of the jurisdiction of U.S. courts to administer if we are the subject of an
insolvency or bankruptcy proceeding. As a result, if we declared bankruptcy or insolvency, our
shareholders may not receive the distributions on liquidation that they would otherwise be entitled
to if our assets were to be located within the U.S., under U.S. Bankruptcy law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Adverse changes in economic and political policies of the PRC government could have a material
adverse effect on the overall economic growth of China, which could adversely affect our business.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All of our business operations are currently conducted in the PRC, under the jurisdiction of
the PRC government. Accordingly, our results of operations, financial condition and prospects are
subject to a significant degree to economic, political and legal developments in China. China&#146;s
economy differs from the economies of most developed countries in many respects, including with
respect to the amount of government involvement, level of development, growth rate, and control of
foreign exchange and allocation of resources. While the PRC economy has experienced significant
growth in the past 20&nbsp;years, growth has been uneven across different regions and among various
economic sectors of China. The PRC government has implemented various measures to encourage
economic development and guide the allocation of resources. Some of these measures benefit the
overall PRC economy, but may also have a negative effect on us. For example, our financial
condition and results of operations may be adversely affected by government control over capital
investments or changes in tax regulations that are applicable to us. Since early 2004, the PRC
government has implemented certain measures to control the pace of economic growth. Such measures
may cause a decrease in the level of economic activity in China, which in turn could adversely
affect our results of operations and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Unprecedented rapid economic growth in China may increase our costs of doing business, and may
negatively impact our profit margins and/or profitability.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business depends in part upon the availability of relatively low-cost labor and materials.
Rising wages in China may increase our overall costs of production. In addition, rising raw
material costs, due to strong demand and greater scarcity, may increase our overall costs of
production. If we are not able to pass these costs on to our customers in the form of higher
prices, our profit margins and/or profitability could decline.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>A downturn in the economy of the PRC may slow our growth and profitability.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A significant portion of our revenues are generated from sales in China. The growth of the
Chinese economy has been uneven across geographic regions and economic sectors. There can be no
assurance that growth of the Chinese economy will be steady or that any downturn will not have a
negative effect on our business, especially if it results in either a decreased use of our products
or in pressure on us to lower our prices.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>You may face difficulties in protecting your interests, and your ability to protect your rights
through the U.S. federal courts may be limited, because our subsidiaries are incorporated in
non-U.S. jurisdictions, we conduct substantially all of our operations in China, and all of our
officers reside outside the United States.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although we are incorporated in Delaware, all of our business operations are conducted in
China by Foguang. Most of our officers and directors reside in China and some or all of the assets
of those persons are located outside of the United States. As a result, it may be difficult or
impossible for you to bring an action against us or against these individuals in China in the event
that you believe that your rights have been infringed under the securities laws or otherwise. Even
if you are successful in bringing an action of this kind, the laws of the PRC may render you unable
to enforce a judgment against our assets or the assets of our directors and officers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of all of the above, our public shareholders may have more difficulty in
protecting their interests through actions against our management, directors or major shareholders
than would shareholders of a corporation doing business entirely within the United States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Governmental control of currency conversion may affect the value of your investment.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Chinese government imposes controls on the convertibility of RMB into foreign currencies
and, in certain cases, the remittance of currency out of China. We receive substantially all of our
revenues in RMB. Under our current structure, our income is primarily derived from payments from
Foguang. Shortages in the availability of foreign currency may restrict the ability of our Chinese
subsidiaries and our affiliated entity to remit sufficient foreign currency to pay dividends or
other payments to us, or otherwise satisfy their foreign currency denominated obligations. Under
existing Chinese foreign exchange regulations, payments of current account items, including profit
distributions, interest payments and expenditures from trade-related transactions, can be made in
foreign currencies without prior approval from China State Administration of Foreign Exchange by
complying with certain procedural requirements. However, approval from appropriate government
authorities is required where RMB is to be converted into foreign currency and remitted out of
China to pay capital expenses such as the repayment of bank loans denominated in foreign
currencies. The Chinese government may also at its discretion restrict access in the future to
foreign currencies for current account transactions. If the foreign exchange control system
prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not
be able to pay dividends in foreign currencies to our stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Fluctuation in the value of RMB may have a material adverse effect on your investment.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The value of RMB against the U.S. dollar and other currencies may fluctuate and is affected
by, among other things, changes in political and economic conditions. Our revenues and costs are
mostly denominated in RMB, while a significant portion of our financial assets are denominated in
U.S. dollars. We rely entirely on fees paid to us by our affiliated entity in China. Any
significant fluctuation in the value of RMB may materially and adversely affect our cash flows,
revenues, earnings and financial position, and the value of, and any dividends payable on, our
stock in U.S. dollars. For example, an appreciation of RMB against the U.S. dollar would make any
new RMB denominated investments or expenditures more costly to us, to the extent that we need to
convert U.S. dollars into RMB for such purposes. An appreciation of RMB against the U.S. dollar
would also result in foreign currency translation losses for financial reporting purposes when we
translate our U.S. dollar denominated financial assets into RMB, as RMB is our reporting currency.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Dividends we receive from our subsidiary located in the PRC may be subject to PRC withholding tax.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The recently enacted PRC Enterprise Income Tax Law, or the EIT Law, and the implementation
regulations for the EIT Law issued by the PRC State Council, became effective as of January&nbsp;1,
2008. The EIT Law provides that a maximum income tax rate of 20% is applicable to dividends payable
to non-PRC investors that are &#147;non-resident enterprises,&#148; to the extent such dividends are derived
from sources within the PRC, and the State Council has reduced such rate to 10% through the
implementation regulations. We are a Delaware holding company and substantially all of our income
is derived from the operations of Foguang located in the PRC, which is contractually obligated to
pay its quarterly profits to our WFOE. Therefore, dividends paid to us by our WFOE in China may be
subject to the 10% income tax if we are considered as a &#147;non-resident enterprise&#148; under the EIT
Law. If we are required under the EIT Law and its implementation regulations to pay income tax for
any dividends we receive from our WFOE, it may have a material and adverse effect on our net income
and materially reduce the amount of dividends, if any, we may pay to our shareholders.
</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We face risks related to health epidemics and other outbreaks.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business could be adversely affected by the effects of an epidemic outbreak, such as the
SARS epidemic in April&nbsp;2004. Any prolonged recurrence of such adverse public health developments in
China may have a material adverse effect on our business operations. For instance, health or other
government regulations adopted in response may require temporary closure of our stores or offices.
Such closures would severely disrupt our business operations and adversely affect our results of
operations. We have not adopted any written preventive measures or contingency plans to combat any
future outbreak of SARS or any other epidemic.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>If our land use rights are revoked, we would have no operational capabilities.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Chinese law land is owned by the state or rural collective economic organizations. The
state issues to the land users the land use right certificate. Land use rights can be revoked and
the land users forced to vacate at any time when redevelopment of the land is in the public
interest. The public interest rationale is interpreted quite broadly and the process of land
appropriation may be less than transparent. Each of our cemeteries relies on these land use rights
as the cornerstone of their operations, and the loss of such rights would have a material adverse
effect on our company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Because our funds are held in banks which do not provide insurance, the failure of any bank in
which we deposit our funds could affect our ability to continue in business.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Banks and other financial institutions in the PRC do not provide insurance for funds held on
deposit. A significant portion of our assets are in the form of cash deposited with banks in the
PRC, and in the event of a bank failure, we may not have access to our 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 in business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Failure to comply with the United States Foreign Corrupt Practices Act could subject us to
penalties and other adverse consequences.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As our ultimate holding company is a Delaware corporation, we are subject to the United States
Foreign Corrupt Practices Act, which generally prohibits United States companies from engaging in
bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining
business. Foreign companies, including some that may compete with us, are not subject to these
prohibitions. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices may
occur from time-to-time in the PRC. We can make no assurance, however, that our employees or other
agents will not engage in such conduct for which we might be held responsible. If our employees or
other agents are found to have engaged in such practices, we could suffer severe penalties and
other consequences that may have a material adverse effect on our business, financial condition and
results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>If we make equity compensation grants to persons who are PRC citizens, they may be required to
register with the State Administration of Foreign Exchange of the PRC, or SAFE. We may also face
regulatory uncertainties that could restrict our ability to adopt an equity compensation plan for
our directors and employees and other parties under PRC law.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;6, 2007, SAFE issued the &#147;Operating Procedures for Administration of Domestic
Individuals Participating in the Employee Stock Ownership Plan or Stock Option Plan of An Overseas
Listed Company, also known as &#147;Circular 78.&#148; It is not clear whether Circular 78 covers all forms
of equity compensation plans or only those which provide for the granting of stock options. For any
plans which are so covered and are adopted by a non-PRC listed company after April&nbsp;6, 2007,
Circular 78 requires all participants who are PRC citizens to register with and obtain approvals
from SAFE prior to their participation in the plan. In addition, Circular 78 also requires PRC
citizens to register with SAFE and make the necessary applications and filings if they participated
in an overseas listed company&#146;s covered equity compensation plan prior to April&nbsp;6, 2007. We have
adopted an equity compensation plan in the future and intend to make securities grants to our
officers and directors, most of who are PRC citizens. Circular 78 may require our officers and
directors who receive option grants and are PRC citizens to register with SAFE. We believe that the
registration and approval requirements contemplated in Circular 78 will be burdensome and time
consuming. If it is determined that any of our equity compensation plans are subject to Circular
78, failure to comply with such provisions may subject us and participants of our equity incentive
plan who are PRC citizens to fines and legal sanctions and prevent us from being able to grant
equity compensation to our PRC employees. In that case, our ability to compensate our employees and
directors through equity compensation would be hindered and our business operations may be
adversely affected.
</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Because our business is located in the PRC, we may have difficulty establishing adequate
management, legal and financial controls, which we are required to do in order to comply with U.S.
securities laws.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PRC companies have historically not adopted a US style of management and financial reporting
concepts and practices, which includes strong corporate governance, internal controls and,
computer, financial and other control systems. Most of our middle and top management staff are not
educated and trained in the US system, and we may have difficulty hiring new employees in the PRC
with such training. In addition, we may have difficulty in hiring and retaining a sufficient number
of qualified employees to work in the PRC. As a result of these factors, we may experience
difficulty in establishing management, legal and financial controls, collecting financial data and
preparing financial statements, books of account and corporate records and instituting business
practices that meet US standards. Therefore, we may, in turn, experience difficulties in
implementing and maintaining adequate internal controls as required under Section&nbsp;404 of the
Sarbanes-Oxley Act of 2002. This may result in significant deficiencies or material weaknesses in
our internal controls which could impact the reliability of our financial statements and prevent us
from complying with SEC rules and regulations and the requirements of the Sarbanes-Oxley Act of
2002. Any such deficiencies, weaknesses or lack of compliance could have a materially adverse
effect on our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We are subject to a variety of environmental laws and regulations related to our operations, and we
may become subject to forthcoming environmental regulations enacted in response to climate change.
Our failure to comply with environmental laws and regulations may have a material adverse effect on
our business and results of operations.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are subject to various environmental laws and regulations for our cemetery operations. We
cannot assure you that at all times we will be in compliance with environmental laws and
regulations or our environmental permits or that we will not be required to expend significant
funds to comply with, or discharge liabilities arising under, environmental laws, regulations and
permits. In addition, future environmental regulations that are enacted in response to global and
regional climate change could place additional burdens on our operations. Complying with existing
and possible future environmental laws and regulations, including laws and regulations relating to
climate change, may impose upon us the need for additional capital equipment or other process
requirements, restrict our ability to expand our operations, disrupt our operations, increase
costs, subject us to liability or cause us to curtail our operations.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Risks Related to an Investment in Our Securities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our stock is categorized as a penny stock. Trading of our stock may be restricted by the SEC&#146;s
penny stock regulations which may limit a shareholder&#146;s ability to buy and sell our stock.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our stock is categorized as a penny stock. The SEC has adopted Rule&nbsp;15g-9 which generally
defines &#147;penny stock&#148; to be any equity security that has a market price (as defined) less than
$5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions.
Our securities are covered by the penny stock rules, which impose additional sales practice
requirements on broker-dealers who sell to persons other than established customers and accredited
investors. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock
not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form
prepared by the SEC which provides information about penny stocks and the nature and level of risks
in the penny stock market. The broker-dealer also must provide the customer with current bid and
offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in
the transaction and monthly account statements showing the market value of each penny stock held in
the customer&#146;s account. The bid and offer quotations, and the broker-dealer and salesperson
compensation information, must be given to the customer orally or in writing prior to effecting the
transaction and must be given to the customer in writing before or with the customer&#146;s
confirmation. In addition, the penny stock rules require that prior to a transaction in a penny
stock not otherwise exempt from these rules; the broker-dealer must make a special written
determination that the penny stock is a suitable investment for the purchaser and receive the
purchaser&#146;s written agreement to the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market for the stock that is subject to
these penny stock rules. Consequently, these penny stock rules may affect the ability of
broker-dealers to trade our securities. We believe that the penny stock rules discourage investor
interest in and limit the marketability of our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>FINRA sales practice requirements may also limit a shareholder&#146;s ability to buy and sell our stock.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the &#147;penny stock&#148; rules described above, FINRA has adopted rules that require
that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for
believing that the investment is suitable for that customer. Prior to recommending speculative low
priced securities to their non-institutional customers, broker-dealers must make reasonable efforts
to obtain information about the customer&#146;s financial status, tax status, investment objectives and
other information. Under interpretations of these rules, FINRA believes that there is a high
probability that speculative low priced securities will not be suitable for at least some
customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their
customers buy our common stock, which may limit your ability to buy and sell our stock and have an
adverse effect on the market for our shares.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->15<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We expect to experience volatility in our stock price, which could negatively affect shareholders&#146;
investments.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The market price for shares of our common stock may be volatile and may fluctuate based upon a
number of factors, including, without limitation, business performance, news announcements or
changes in general market conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other factors, in addition to the those risks included in this section, that may have a
significant impact on the market price of our common stock include, but are not limited to:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>receipt of substantial orders or order cancellations of products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>quality deficiencies in services or products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>international developments, such as technology mandates, political
developments or changes in economic policies;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in recommendations of securities analysts;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>shortfalls in our backlog, revenues or earnings in any given period
relative to the levels expected by securities analysts or projected by us;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>government regulations, including stock option accounting and tax regulations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>energy blackouts;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>acts of terrorism and war;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>widespread illness;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>proprietary rights or product or patent litigation;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>strategic transactions, such as acquisitions and divestitures; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>rumors or allegations regarding our financial disclosures or practices.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the past, securities class action litigation has often been brought against a company
following periods of volatility in the market price of its securities. Due to changes in the
volatility of our common stock price, we may be the target of securities litigation in the future.
Securities litigation could result in substantial costs and divert management&#146;s attention and
resources.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>To date, we have not paid any cash dividends and no cash dividends will be paid in the foreseeable
future.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not anticipate paying cash dividends on our common stock in the foreseeable future and
we may not have sufficient funds legally available to pay dividends. Even if the funds are legally
available for distribution, we may nevertheless decide not to pay any dividends. We presently
intend to retain all earnings for our operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our common shares are not currently traded at high volume, and you may be unable to sell at or near
ask prices or at all if you need to sell or liquidate a substantial number of shares at one time.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We cannot predict the extent to which an active public market for its common stock will
develop or be sustained. However, we do not rule out the possibility of applying for listing on
the NYSE Alternext (fka American Stock Exchange) or Nasdaq Capital Market or other markets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common shares are currently traded, but currently with low volume, based on quotations on
the &#147;Over-the-Counter Bulletin Board&#148; under the symbol CGPI.OB, meaning that the number of persons
interested in purchasing our common shares at or near bid prices at any given time may be
relatively small or non-existent. This situation is attributable to a number of factors, including
the fact that we are a small company which is still relatively unknown to stock analysts, stock
brokers, institutional investors and others in the investment community that generate or influence
sales volume, and that even if we came to the attention of such persons, they tend to be
risk-averse and would be reluctant to follow an unproven company such as ours or
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. As a
consequence, there may be periods of several days or more when trading activity in our shares is minimal or
non-existent, as compared to a seasoned issuer which has a large and steady volume of trading
activity that will generally support continuous sales without an adverse effect on share price. We
cannot give you any assurance that a broader or more active public trading market for our common
stock will develop or be sustained, or that trading levels will be sustained.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholders should be aware that, according to SEC Release No.&nbsp;34-29093, the market for
&#147;penny stocks&#148; has suffered in recent years from patterns of fraud and abuse. Such patterns
include (1)&nbsp;control of the market for the security by one or a few broker-dealers that are often
related to the promoter or issuer; (2)&nbsp;manipulation of prices through prearranged matching of
purchases and sales and false and misleading press releases; (3)&nbsp;boiler room practices involving
high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4)
excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5)&nbsp;the
wholesale dumping of the same securities by promoters and broker-dealers after prices have been
manipulated to a desired level, along with the resulting inevitable collapse of those prices and
with consequent investor losses. Our management is aware of the abuses that have occurred
historically in the penny stock market. Although we do not expect to be in a position to dictate
the behavior of the market or of broker-dealers who participate in the market, management will
strive within the confines of practical limitations to prevent the described patterns from being
established with respect to our securities. The occurrence of these patterns or practices could
increase the future volatility of our share price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>The NASDAQ OTC Bulletin Board (&#147;OTCBB&#148;) is a quotation system, not an issuer listing service,
market or exchange. Therefore, buying and selling stock on the OTC Bulletin Board is not as
efficient as buying and selling stock through an exchange. As a result, it may be difficult for you
to sell your common stock or you may not be able to sell your common stock for an optimum trading
price.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The OTCBB is a regulated quotation service that displays real-time quotes, last sale prices
and volume limitations in over-the-counter securities. Because trades and quotations on the OTCBB
involve a manual process, the market information for such securities cannot be guaranteed. In
addition, quote information, or even firm quotes, may not be available. The manual execution
process may delay order processing and intervening price fluctuations may result in the failure of
a limit order to execute or the execution of a market order at a significantly different price.
Execution of trades, execution reporting and the delivery of legal trade confirmations may be
delayed significantly. Consequently, one may not be able to sell shares of our common stock at the
optimum trading prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When fewer shares of a security are being traded on the OTCBB, volatility of prices may
increase and price movement may outpace the ability to deliver accurate quote information. Lower
trading volumes in a security may result in a lower likelihood of an individual&#146;s orders being
executed, and current prices may differ significantly from the price one was quoted by the OTC
Bulletin Board at the time of the order entry.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Orders for OTCBB securities may be canceled or edited like orders for other securities.
All requests to change or cancel an order must be submitted to, received and processed by the
OTCBB. Due to the manual order processing involved in handling OTC Bulletin Board trades, order
processing and reporting may be delayed, and an individual may not be able to cancel or edit his
order. Consequently, one may not able to sell shares of common stock at the optimum trading prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The dealer&#146;s spread (the difference between the bid and ask prices) may be large and may
result in substantial losses to the seller of securities on the OTCBB if the common stock or other
security must be sold immediately. Further, purchasers of securities may incur an immediate &#147;paper&#148;
loss due to the price spread. Moreover, dealers trading on the OTCBB may not have a bid price for
securities bought and sold through the OTCBB. Due to the foregoing, demand for securities that are
traded through the OTCBB may be decreased or eliminated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our corporate actions are substantially controlled by our principal shareholders and affiliated
entities.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our principal shareholders, who include our officers and directors, and their affiliated
entities, own approximately 80% of our outstanding shares of common stock. These shareholders,
acting individually or as a group, could exert substantial influence over matters such as electing
directors and approving mergers or other business combination transactions. In addition, because
of the percentage of ownership and voting concentration in these principal shareholders and their
affiliated entities, elections of our board of directors will generally be within the control of
these shareholders and their affiliated entities. While all of our shareholders are entitled to
vote on matters submitted to our shareholders for approval, the concentration of shares and voting
control presently lies with these principal shareholders and their affiliated entities. As such, it
would be difficult for shareholders to propose and have approved proposals not supported by
management. There can be no assurances that matters voted upon by our officers and directors in
their capacity as shareholders will be viewed favorably by all of our shareholders.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Legislative actions, higher insurance costs and potential new accounting pronouncements may impact
our future financial position and results of operations.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There have been regulatory changes, including the Sarbanes-Oxley Act of 2002, and there may
potentially be new accounting pronouncements or additional regulatory rulings that will have an
impact on our future financial position and results of operations. The Sarbanes-Oxley Act of 2002
and other rule changes as well as proposed legislative initiatives following the Enron bankruptcy
are likely to increase general and administrative costs and expenses. In addition, insurers are
likely to increase premiums as a result of high claims rates over the past several years, which we
expect will increase our premiums for insurance policies. Further, there could be changes in
certain accounting rules. These and other potential changes could materially increase the expenses
we report under generally accepted accounting principles, and adversely affect our operating
results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Holders of our common stock may be diluted in the future.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are authorized to issue up to 100&nbsp;million shares of common stock and 20&nbsp;million shares of
preferred stock. Our Board of Directors will have the ability, without seeking stockholder
approval, to issue additional shares of common stock and/or preferred stock in the future for such
consideration as our Board of Directors may consider sufficient. The issuance of additional common
stock and/or preferred stock in the future will reduce the proportionate ownership and voting power
of our common stock held by existing stockholders. At April&nbsp;7, 2010 there were 12,659,762 shares of
common stock outstanding and warrants to purchase 771,239 shares of common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Shares eligible for future sale may adversely affect the market price of our common stock, as the
future sale of a substantial amount of outstanding stock in the public marketplace could reduce the
price of our common stock.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The market price of our common stock could decline as a result of sales of a large number of
shares of our common stock in the market or the perception that these sales could occur. These
sales, or the possibility that these sales may occur, also might make it more difficult for us to
sell equity securities in the future at a time and at a price that we deem appropriate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of April&nbsp;7, 2010, we had approximately 12,659,762 shares of common stock outstanding. Any
substantial sale of common stock pursuant to any resale prospectus or Rule&nbsp;144 may have an adverse
effect on the market price of our common stock by creating an excessive supply.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>We may not be able to achieve the benefits we expect to result from the Share Exchange.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;12, 2010, we concluded an Exchange Agreement and as a result Foguang became our
variably controlled entity, and our primary business operations became that of Foguang. We also
appointed a new Board of Directors and management consisting of persons from Gold Industry and
changed our corporate name from Artistry Publications, Inc. to China Redstone Group, Inc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may not realize the benefits that we hoped to receive as a result of the Exchange
Agreement, which include:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>access to the capital markets of the United States;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the increased market liquidity expected to result from exchanging
stock in a private company for securities of a public company that may
eventually be traded;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the ability to use registered securities to make acquisition of assets or businesses;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>increased visibility in the financial community;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>enhanced access to the capital markets;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>improved transparency of operations; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>perceived credibility and enhanced corporate image of being a publicly traded company.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There can be no assurance that any of the anticipated benefits of the Share Exchange will be
realized with respect to our new business operations. In addition, the attention and effort devoted
to achieving the benefits of the Share Exchange and
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">attending to the obligations of being a public company, such as reporting requirements and
securities regulations, could significantly divert management&#146;s attention from other important
issues, which could materially and adversely affect our operating results or stock price in the
future.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Compliance with changing regulation of corporate governance and public disclosure will result in
additional expenses.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Changing laws, regulations and standards relating to corporate governance and public
disclosure, including the Sarbanes-Oxley Act of 2002 and related SEC regulations, have created
uncertainty for public companies and significantly increased the costs and risks associated with
accessing the public markets and public reporting. For example, on January&nbsp;30, 2009, the SEC
adopted rules requiring companies to provide their financial statements in interactive data format
using the eXtensible Business Reporting Language, or XBRL. We will have to comply with these rules
by June&nbsp;15th, 2011. Our management team will need to invest significant management time and
financial resources to comply with both existing and evolving standards for public companies, which
will lead to increased general and administrative expenses and a diversion of management time and
attention from revenue generating activities to compliance activities.
</DIV>
<DIV align="left">
<A name="103"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All statements contained in this prospectus, other than statements of historical facts, that
address future activities, events or developments, are forward-looking statements, including, but
not limited to, statements containing the words &#147;believe,&#148; &#147;anticipate,&#148; &#147;expect&#148; and words of
similar import. These statements are based on certain assumptions and analyses made by us in light
of our experience and our assessment of historical trends, current conditions and expected future
developments as well as other factors we believe are appropriate under the circumstances. Whether
actual results will conform to the expectations and predictions of management, however, is subject
to a number of risks and uncertainties that may cause actual results to differ materially. Such
risks are in the section entitled &#147;Risk Factors&#148; on
page&nbsp;6, and in our previous SEC filings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consequently, all of the forward-looking statements made in this prospectus are qualified by
these cautionary statements, and there can be no assurance that the actual results anticipated by
management will be realized or, even if substantially realized, that they will have the expected
consequences to or effects on our business operations.
</DIV>
<DIV align="left">
<A name="104"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>USE OF PROCEEDS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will not receive any proceeds from the sales by the selling stockholders. We may receive
proceeds from any exercise of outstanding warrants. The selling shareholders may exercise the
warrants on a cashless basis if the shares of common stock underlying the warrants are not then
registered pursuant to an effective registration statement. In the event the selling shareholders
exercise the Warrants on a cashless basis, then we will not receive any proceeds.
</DIV>
<DIV align="left">
<A name="105"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SELLING SECURITY HOLDERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are registering the following securities:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>1,402,262 shares of Common Stock sold and issued to the Purchasers in the Financing;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>701,126 shares of Common Stock underlying the Warrants issued to the Purchasers in the
Financing; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>70,113 shares of Common Stock underlying the Warrants issued to the placement agent
and its assignees in the Financing.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are registering these securities in order to permit the selling security holders to dispose
of the shares of Common Stock from time to time. The selling security holders may sell all, some,
or none of their shares in this offering. See &#147;Plan of Distribution.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table below lists the selling security holders and other information regarding the
beneficial ownership of the shares of Common Stock by each of the selling security holders. Column
A lists the names of the selling security holders. Column B lists the number of shares of common
stock beneficially owned by each selling security holder as of April&nbsp;7, 2010 (assuming full
exercise of the Warrants held by such selling security holder, if any). Column C lists the shares
of Common Stock covered by this prospectus that may be disposed of by each of the selling security
holders. Column D lists the number of shares of Common Stock that will be beneficially owned by the
selling security holders assuming all of the shares covered by this prospectus are sold.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->19<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Column E lists the percentage of class beneficially owned by the selling security holders
assuming all of the shares covered by this prospectus are sold based on 12,402,262 shares of Common
Stock outstanding on April&nbsp;7, 2010.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We cannot provide an estimate of the number of securities that any of the selling security
holders will hold in the future. For purposes of this table, beneficial ownership is determined in
accordance with the rules of the SEC, and includes voting power and investment power with respect
to such securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The inclusion of any securities in the following table does not constitute an admission of
beneficial ownership by the persons named below. Except as indicated in the footnotes to the table,
no selling security holder has had any material relationship with us or our affiliates during the
last three years. Except as indicated below, no selling security holder is the beneficial owner of
any additional shares of common stock or other equity securities issued by us or any securities
convertible into, or exercisable or exchangeable for, our equity
securities. Except for Rodman &#38; Renshaw, LLC, no selling security
holder is a FINRA registered broker-dealer or an affiliate of a broker-dealer.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Selling Security Holder Table</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Beneficially</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Beneficially</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>% Beneficial</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Owned Prior</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Being</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Owned After</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Ownership</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>to Offering</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Offered</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Offering</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>After Offering</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000"><B>(A)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>(B)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>(C)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>(D)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>(E)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gerald Scott Klayman (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,866</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,866</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Warberg Opportunistic Trading Fund LP (2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Paul Hickey (3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kevin Denuccio (4)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Matthew Hayden (5)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,318</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,318</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ronald Nash (6)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">David W. Forti (7)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,866</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,866</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Taylor International Fund, Ltd. (8)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shira Capital LLC (9)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Barry Honig (10)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">The USX China Fund (11)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">RL Capital Partners LP (12)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Anthony G. Polak (13)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Jamie Polak (14)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Frederick B. Polak (15)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Domaco Venture Capital Fund (16)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">David Frascella (17)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Larry Frascella (18)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ronald M. Lazar, IRA, Pershing LLC as Custodian (19)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fort Ashford Funds, LLC (20)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,160</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,160</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hammerman Capital Partners, LP (21)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Jayhawk Private Equity Fund II, L.P. (22)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">548,781</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">548,781</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Jeffrey A. Grossman (23)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,732</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,732</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">HCP Opportunity Fund, LP (24)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rodman &#038; Renshaw, LLC (25)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,068</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,068</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ramnarain Jaigobind (26)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Chirag Choudhary (27)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,538</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,538</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Harry Ioannou (28)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">George Anagnostou (29)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">734</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">734</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Eric Lord (30)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,595</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,595</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kevin Mangan (31)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">782</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">782</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom" style="font-size: 1px">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="95%">&nbsp;</TD>
</TR>
<TR></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(1)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Includes 15,244 shares of Common Stock and 7,622 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing (more fully described under the section titled
&#147;History and Corporate Structure&#148; below), all of which we are
registering for resale pursuant to the securities purchase agreement
that we entered into as part of the Financing (the &#147;Securities
Purchase Agreement&#148;).</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->20<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="95%">&nbsp;</TD>
</TR>
<TR></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(2)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Includes 23,000 shares of Common Stock and 11,500 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement. Daniel Worsh and Jonathan
Blumberg have shared dispositive and voting power over these
securities held by Warberg Opportunistic Trading Fund LP.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(3)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Includes 100,000 shares of Common Stock and 50,000 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to Securities Purchase Agreement.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(4)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Includes 38,110 shares of Common Stock and 19,055 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(5)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Includes 76,212 shares of Common Stock and 38,106 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(6)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Includes 40,000 shares of Common Stock and 20,000 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(7)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Includes 15,244 shares of Common Stock and 7,622 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(8)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Includes 200,000 shares of Common Stock and 100,000 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement. Stephen Taylor and Robert
Kirkland have shared dispositive and voting power over the securities
held by Taylor International Fund, Ltd.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(9)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Includes 100,000 shares of Common Stock and 50,000 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement. Montgomery Cornell and Michael
Ryan have shared dispositive and voting power over the securities held
by Shira Capital, LLC.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(10)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Includes 60,000 shares of Common Stock and 30,000 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(11)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Includes 50,000 shares of Common Stock and 25,000 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement. Stephen L. Parr and Kim
Williams have shared dispositive and voting power over the securities
held by The USX China Fund.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(12)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Includes 50,000 shares of Common Stock and 25,000 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement. Anthony Polak and Ronald Lazar
have shared dispositive and voting power over the securities held by
RL Capital Partners LP.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(13)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Includes 10,000 shares of Common Stock and 5,000 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(14)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Includes 10,000 shares of Common Stock and 5,000 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(15)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Includes 10,000 shares of Common Stock and 5,000 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->21<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="95%">&nbsp;</TD>
</TR>
<TR></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(16)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Includes 10,000 shares of Common Stock and 5,000 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement. Jack Polak has sole dispositive
and voting power over the securities held by Domaco Venture Capital
Fund.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(17)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Includes 25,000 shares of Common Stock and 12,500 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(18)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Includes 25,000 shares of Common Stock and 12,500 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(19)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Includes 10,000 shares of Common Stock and 5,000 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement. Ronald Lazar has sole
dispositive and voting power over the securities held by Ronald M.
Lazar, IRA, Pershing LLC as Custodian.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(20)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Includes 38,110 shares of Common Stock and 19,055 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement. Frank Kavanaugh has sole
dispositive and voting power over the securities held by Fort Ashford
Funds, LLC.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(21)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Includes 50,000 shares of Common Stock and 25,000 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement. Jason Hammerman has sole
dispositive and voting power over the securities held by Hammerman
Capital Partners, LP.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(22)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Includes 365,854 shares of Common Stock and 182,927 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement. Kent McCarthy has sole
dispositive and voting power over the securities held by Jayhawk
Private Equity Fund II, L.P.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(23)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Includes 30,488 shares of Common Stock and 15,244 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(24)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Includes 50,000 shares of Common Stock and 25,000 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement. Jason Hammerman has sole
dispositive and voting power over the securities held by HCP
Opportunity Fund, LP.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(25)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Includes 42,068 shares
of Common Stock underlying the Warrants issued to this selling
security holder as placement agent in the Financing.
David Horin has sole voting
and dispositive power over the shares held by Rodman &#38; Renshaw,
LLC. </TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(26)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Includes 15,692 shares
of Common Stock underlying the Warrants issued to this selling
security holder as assignee of placement agent in the Financing.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(27)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Includes 5,538 shares of
Common Stock underlying the Warrants issued to this selling security
holder as assignee of placement agent in the Financing.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(28)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Includes 2,704 shares of
Common Stock underlying the Warrants issued to this selling security
holder as assignee of placement agent in the Financing.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->22<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="95%">&nbsp;</TD>
</TR>
<TR></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(29)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Includes 734 shares of Common Stock
underlying the Warrants issued to this selling security holder as
assignee of placement agent in the Financing.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(30)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Includes 2,595 shares of
Common Stock underlying the Warrants issued to this selling security
holder as assignee of placement agent in the Financing.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(31)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Includes 782 shares of
Common Stock underlying the Warrants issued to this selling security
holder as assignee of placement agent in the Financing.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left">
<A name="106"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PLAN OF DISTRIBUTION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each selling security holder named above and any of their pledgees, assignees, and
successors-in-interest (each a &#147;Selling Security Holder&#148; and collectively the &#147;Selling Security
Holders&#148;) may, from time to time, sell any or all of their shares of Common Stock on the NASDAQ OTC
Bulletin Board (&#147;OTCBB&#148;) or any other stock exchange, market, or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or negotiated prices. A
Selling Security Holder may use any one or more of the following methods when selling shares:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>purchases by a broker-dealer as principal and resale by the broker-dealer for its account;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an exchange distribution in accordance with the rules of the applicable exchange;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>privately negotiated transactions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>settlement of short sales entered into after the effective date of the
registration statement of which this prospectus is a part;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>broker-dealers may agree with the Selling Security Holders to sell a
specified number of such shares at a stipulated price per share;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a combination of any such methods of sale; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any other method permitted pursuant to applicable law.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Selling Security Holders may also sell shares under Rule&nbsp;144 under the Securities Act of
1933, as amended (the &#147;Securities Act&#148;), if available, rather than under this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Broker-dealers engaged by the Selling Security Holders may arrange for other brokers-dealers
to participate in sales. Broker-dealers may receive commissions or discounts from the Selling
Security Holders (or, if any broker-dealer acts as agent for the purchaser of shares, from the
purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this
prospectus, in the case of an agency transaction not in excess of a customary brokerage commission
in compliance with FINRA Rule&nbsp;2440; and in the case of a principal transaction a markup or markdown
in compliance with FINRA IM-2440.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the sale of the Common Stock or interests therein, the Selling Security
Holders may enter into hedging transactions with broker-dealers or other financial institutions,
which may in turn engage in short sales of the Common Stock in the course of hedging the positions
they assume. The Selling Security Holders may also sell shares of the Common Stock short
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->23<!-- /Folio -->
</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">and deliver these securities to close out their short positions, or loan or pledge the Common
Stock to broker-dealers that in turn may sell these securities. The Selling Security Holders may
also enter into option or other transactions with broker-dealers or other financial institutions or
the creation of one or more derivative securities which require the delivery to such broker-dealer
or other financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this prospectus (as
supplemented or amended to reflect such transaction).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Selling Security Holders and any broker-dealers or agents that are involved in selling the
shares may be deemed to be &#147;underwriters&#148; within the meaning of the Securities Act in connection
with such sales. In such event, any commissions received by such broker-dealers or agents and any
profit on the resale of the shares purchased by them may be deemed to be underwriting commissions
or discounts under the Securities Act. Each Selling Security Holder has informed the Company that
it does not have any written or oral agreement or understanding, directly or indirectly, with any
person to distribute their shares of Common Stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is required to pay certain fees and expenses incurred by the Company incident to
the registration of the shares. The Company has agreed to indemnify the Selling Stockholders
against certain losses, claims, damages and liabilities, including liabilities under the Securities
Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because Selling Security Holders may be deemed to be &#147;underwriters&#148; within the meaning of the
Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act
including Rule&nbsp;172 thereunder. In addition, any securities covered by this prospectus which qualify
for sale pursuant to Rule&nbsp;144 under the Securities Act may be sold under Rule&nbsp;144 rather than under
this prospectus. There is no underwriter or coordinating broker acting in connection with the
proposed sale of the resale shares by the Selling Security Holders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We agreed to use commercially reasonable efforts to keep this prospectus effective until the
earlier of (i)&nbsp;the date on which all of the registrable shares may be resold by the Selling
Security Holders without registration and without regard to any volume or manner-of-sale
limitations by reason of Rule&nbsp;144, or (ii)&nbsp;all of the registrable shares have been sold pursuant to
this prospectus or Rule&nbsp;144 under the Securities Act or any other rule of similar effect. The
resale shares will be sold only through registered or licensed brokers or dealers if required under
applicable state securities laws. In addition, in certain states, the resale shares may not be sold
unless they have been registered or qualified for sale in the applicable state or an exemption from
the registration or qualification requirement is available and is complied with.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under applicable rules and regulations under the Securities and Exchange Act of 1934, as
amended (the &#147;Exchange Act&#148;), any person engaged in the distribution of the resale shares may not
simultaneously engage in market making activities with respect to the Common Stock for the
applicable restricted period, as defined in Regulation&nbsp;M, prior to the commencement of the
distribution. In addition, the Selling Security Holders will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder, including Regulation&nbsp;M, which may limit
the timing of purchases and sales of shares of the Common Stock by the Selling Security Holders or
any other person. We will make copies of this prospectus available to the Selling Security Holders
and have informed them of the need to deliver a copy of this prospectus to each purchaser at or
prior to the time of the sale (including by compliance with Rule&nbsp;172 under the Securities Act).
</DIV>
<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>BUSINESS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Overview</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a private provider of cemetery products and services in Chongqing, China. We are
primarily focused on developing cemeteries and selling cemetery plots, although we also provide
park and garden development and construction services. Our first cemetery development project is
the Chongqing Guiyuan Cemetery I (&#147;<U>Guiyuan I</U>&#148;), located in Changshou District of Chongqing
on approximately 66,660 square meters of land. The entire cemetery plots of Guiyuan I have been
sold, at an average price of RMB 30,000 ($4,412) per plot. We are currently developing the
Chongqing Guiyuan Cemetery II (&#147;<U>Guiyuan II</U>&#148;), our second cemetery project in Changshou.
Guiyuan II, in development since 2002, occupies a land over 666,000 square meters, of which
approximately 46,620 square meters have been developed to date. We have also secured approximately
1,194,804 square meters of land surrounding Longqiao Lake, which portions of Guiyuan II overlook.
We are planning to develop this land as a park, with mausoleums and temples, to complement and
enhance Guiyuan II.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Both Guiyuan I and Guiyuan II are among the most highly regarded facilities in our market area
in terms of a number of factors such as tradition, heritage, reputation, physical size, volume of
business, available inventory, name recognition, aesthetics and potential for development or
expansion. In 2006 and 2007, we were ranked amongst the top 50 private-owned enterprises in
Chongqing.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->24<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>History and Corporate Structure</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We were incorporated in Delaware on July&nbsp;10, 2007, originally under the name &#147;Artistry
Publications, Inc.&#148;, with a principal business objective to enter the photography industry
specializing in historic landscape photography and produce excellent affordable artwork.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;12, 2010 (the &#147;<U>Closing</U>&#148;), we entered into a share exchange agreement (the
&#147;<U>Exchange Agreement</U>&#148;) with Gold Industry Limited, a company incorporated in Cayman Islands
(&#147;<U>Gold Industry</U>&#148;), and Holy Golden Industry Limited, a British Virgin Islands company
which, immediately prior to the closing of the transactions contemplated by the Exchange Agreement,
held 100% of Gold Industry&#146;s issued and outstanding share capital (the &#147;<U>Cayman
Shareholder</U>&#148;). Under the Exchange Agreement, the Company completed the acquisition of all of
the issued and outstanding shares of Gold Industry through the issuance of 8,800,000 restricted
shares of Common Stock to the Cayman Shareholder of Gold Industry. Immediately prior to the
Exchange Agreement transaction, the Company had 13,075,000 shares of Common Stock issued and
outstanding, of which 10,875,000 shares of Common Stock collectively owned by Helen Schwartz and
Ruth Shepley were cancelled immediately prior to the Closing pursuant to the Exchange Agreement.
Immediately after the issuance of the shares to the Cayman Shareholder, the Company had 11,000,000
shares of Common Stock issued and outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gold Industry is a holding company incorporated in Cayman Islands. Since incorporation, Gold
Industry has not conducted any substantive operations of its own except for holding 100% equity
interests of Gold Holy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gold Holy is a holding company established in Hong Kong Special Administration Region on
September&nbsp;29, 2009. Other than holding 100% equity interests of Ran Ji, Gold Holy has no other
separate operations of its own.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ran Ji is a shareholding limited company organized in the PRC on December&nbsp;15, 2009. Ran Ji
was formed by Gold Holy. Other than the activities relating to its contractual arrangements with
Foguang as described below, Ran Ji has no other business operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foguang is a shareholding limited company organized in the PRC on October&nbsp;10, 2002. Foguang
holds the government licenses and approvals necessary to operate the death care business in China.
We do not own any equity interests in Foguang, but control and receive the economic benefits of its
business operations through contractual arrangements. Through Ran Ji, we have contractual
arrangements with Foguang and its owners pursuant to which we provide consulting and other general
business operation services. Through these contractual arrangements, we also have the ability to
substantially influence their daily operations and financial affairs, since we are able to appoint
their senior executives and approve all matters requiring approval of the equity owners. As a
result of these contractual arrangements, which enable us to control Foguang and to receive,
through Ran Ji, all of its profits, we are considered the primary beneficiary of Foguang.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Contractual Arrangements with Foguang and its Owners</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;15, 2009, Ran Ji entered into the following contractual arrangements with Foguang
and its owners:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Consulting Services Agreement</U>. Pursuant to the exclusive consulting services
agreement between Ran Ji and Foguang, Ran Ji has the exclusive right to provide to Foguang general
services related to the tourism development industry as well as consulting services related to
tourism project, cemetery management, funeral ashes, planting of flowers, nursery stock and Chinese
herbal, biomass research, production and marketing of arts and crafts, and designing of landscape
(the &#147;Services&#148;). Ran Ji also sends employees to Foguang and Foguang bears the costs and expenses
for such employees. Under this agreement, Ran Ji owns the intellectual property rights developed
through the Services provided to Foguang. Foguang pays a quarterly consulting service fee in
Renminbi (&#147;RMB&#148;) to Ran Ji that is equal to all of Foguang&#146;s revenue for such quarter. The
consulting services agreement is in effect unless and until terminated by written notice of either
party in the event that: (a)&nbsp;the other party causes a material breach of this agreement, provided
that if the breach does not relate to a financial obligation of the breaching party, that party may
attempt to remedy the breach within fourteen (14)&nbsp;days following the receipt of the written notice;
(b)&nbsp;the other party becomes bankrupt, insolvent, is the subject of proceedings or arrangements for
liquidation or dissolution, ceases to carry on business, or becomes unable to pay its debts as they
become due; (c)&nbsp;Ran Ji terminates its operations; (d)&nbsp;Foguang&#146;s business license or any other
license or approval for its business operations is terminated, cancelled or revoked; or (e)
circumstances arise
which would materially and adversely affect the performance or the objectives of the
consulting services agreement. Additionally, Ran Ji may terminate the consulting services
agreement without cause.
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->25<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Operating Agreement</U>. Pursuant to the operating agreement among Ran Ji, Foguang and
the owners of Foguang who collectively hold 100% of the issued and outstanding equity interests of
Foguang (collectively the &#147;<U>Foguang Owners</U>&#148;), Ran Ji
provides guidance and instructions on
Foguang&#146;s daily operations, financial management and employment issues. The Foguang Owners must
designate the candidates recommended by Ran Ji as their representatives on Foguang&#146;s board of
directors. Ran Ji has the right to appoint senior executives of Foguang. In addition, Ran Ji
agrees to guarantee the performance of Foguang under any agreements or arrangements relating to
Foguang&#146;s business arrangements with any third party. Foguang, in return, agrees to pledge its
accounts receivable and all of its assets to Ran Ji. Moreover, Foguang agrees that without the
prior consent of Ran Ji, Foguang will not engage in any transactions that could materially affect
the assets, liabilities, rights or operations of Foguang, including, without limitation, incurrence
or assumption of any indebtedness, sale or purchase of any assets or rights, incurrence of any
encumbrance on any of its assets or intellectual property rights in favor of a third party or
transfer of any agreements relating to its business operation to any third party. The term of this
agreement is ten years from December&nbsp;15, 2009, and may be extended only upon Ran Ji&#146;s written
confirmation prior to the expiration of the agreement, with the extended term to be mutually agreed
upon by the parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Equity Pledge Agreement</U> Under the equity pledge agreement between the Foguang Owners
and Ran Ji, the Foguang Owners pledged all of their equity interests in Foguang to Ran Ji to
guarantee Foguang&#146;s performance of its obligations under the consulting services agreement. If
Foguang or the Foguang Owners breach their respective contractual obligations, Ran Ji, as pledgee,
will be entitled to certain rights, including, but not limited to, the right to sell the pledged
equity interests, the right to vote and control the pledged assets. The Foguang Owners also
agreed, that upon occurrence of any event of default, Ran Ji shall be granted an exclusive,
irrevocable power of attorney to take actions in the place and instead of the Foguang Owners to
carry out the security provisions of the equity pledge agreement and take any action and execute
any instrument that Ran Ji may deem necessary or advisable to accomplish the purposes of the equity
pledge agreement. The Foguang Owners agreed not to dispose of the pledged equity interests or take
any actions that would prejudice Ran Ji&#146;s interest. The equity pledge agreement will expire in two
years after Foguang&#146;s obligations under the exclusive consulting services agreement have been
fulfilled.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Option Agreement</U><I>. </I>Under the option agreement between the Foguang Owners and Ran Ji,
the Foguang Owners irrevocably granted Ran Ji or its designated person an exclusive option to
purchase, to the extent permitted under Chinese law, all or part of the equity interests in Foguang
for the cost of the initial contributions to the registered capital or the minimum amount of
consideration permitted by applicable Chinese law. Ran Ji or its designated person has sole
discretion to decide when to exercise the option, whether in part or in full. The term of this
agreement is ten years from December&nbsp;15, 2009, and may be extended prior to its expiration by
written agreement of the parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Proxy Agreement</U><I>. </I>Pursuant to the proxy agreement among Ran Ji, the Foguang Owners,
and Foguang, the Foguang Owners agreed to entrust all the rights to exercise their voting power to
designee(s) of Ran Ji. Such designee(s) shall have the right to exercise the Foguang Owners&#146;
voting and other rights, including the attendance at and the voting of their shares at Foguang&#146;s
shareholders meetings (or by written consent in lieu of meetings) in accordance with applicable
laws and Foguang&#146;s Article of Association. This agreement may not be terminated without the
unanimous consent of all parties, except that Ran Ji may, by giving a thirty (30)&nbsp;day prior written
notice to the Foguang Owners, terminate the proxy agreement, with or without cause.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->26<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our Current Corporate Structure</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><IMG src="g22861g2286100.gif" alt="(GRAPHIC)">
</DIV>

<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 1px">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our management includes: Yiyou Ran as Chief Executive Officer, President and
Chairman, Michael Wang as Chief Financial Officer, Treasurer, Secretary and
Director, and Jianquan Chen and Tim Hudson as members of the board of directors.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The management of Gold Industry is comprised of Yiyou Ran, Jianquan
Chen and Yang Chen as its directors. Artistry is the sole shareholder of Gold
Industry.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The management of Gold Holy is comprised of Yiyou Ran, Jianquan
Chen and Yang Chen as its directors. Gold Industry is the sole shareholder of
Gold Holy.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The management of Ran Ji is comprised of Yiyou Ran, Jianquan Chen
and Yang Chen as its directors. Holy Gold is the sole shareholder of Ran Ji</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(5)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Ran Ji controls Foguang through contractual arrangements designed
to mimic equity ownership of Foguang by Ran Ji. These contracts include a
consulting services agreement, operating agreement, equity pledge agreement,
option agreement, and proxy agreement.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(6)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The management of Foguang is comprised of Yiyou Ran, Jianquan Chen
and Yang Chen as its directors.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Financing</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;23, 2010, we entered into a securities purchase agreement (the
&#147;<U>Agreement</U>&#148;) with 24 institutional and/or accredited investors (collectively the
&#147;<U>Purchasers</U>&#148;) pursuant to which the Company sold $4,599,415 of units of its equity
securities to the Purchasers in a private placement (the &#147;<U>Transaction</U>&#148;). Each unit is
comprised of 100,000 shares of the Registrant&#146;s common stock, par value $0.001 per share (the
&#147;<U>Common Stock</U>&#148;), at a per share purchase price of $3.28 per share, and warrants to purchase
up to 50,000 shares of Common Stock. At the closing of the Transaction on February&nbsp;23, 2010, the
Company issued 1,402,262 shares of Common Stock (the &#147;<U>Shares</U>&#148;) and four-year warrants to
purchase 701,126 shares of Common Stock (the &#147;<U>Warrants</U>&#148;). At the closing of the
Transaction, the Company also issued warrants to purchase up to 70,113 shares of Common Stock to
its placement agent and its assignees.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->27<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Agreement includes customary representations and warranties by each party thereto.
Additionally:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We agree to grant to the Purchasers certain registration rights pursuant to a
registration rights agreement (the &#147;Registration Rights Agreement&#148;), which terms are
further described below; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We covenant to use our best efforts to meet the listing requirements for a senior
exchange within six months after the closing of the Transaction.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Warrants entitle each Purchaser to purchase up to 50% of the number of shares of Common
Stock acquired by such Purchaser in the Transaction, and expire on the fourth anniversary of their
issuance date (the &#147;Termination Date&#148;). The Warrants may be exercised on a &#147;cashless&#148; basis if, at
any time after the first anniversary of their issuance date, there is no registration statement in
effect registering the resale of the shares of Common Stock underlying the Warrants, provided that
all Warrants outstanding on Termination Date shall be exercised on a cashless basis. The exercise
price of the Warrants is $4.10 per share, subject to certain adjustments as described further in
&#147;Description of Securities&#148; below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the Transaction, we also entered into a registration rights agreement (the
&#147;<U>Registration Rights Agreement</U>&#148;) with the Purchasers, pursuant to which we are required to
file a registration statement registering the resale of the Shares and the Common Stock underlying
the Warrants (including any additional shares issuable resulting from the anti-dilution provisions
of the Warrants) with the Securities and Exchange Commission (the &#147;<U>SEC</U>&#148;) not later than 45
days from the closing of the Transaction, and be declared effective by the SEC not later than 180
days from the closing of the Transaction (or 210&nbsp;days in the event of a full review by the SEC).
If the registration statement is not timely filed or timely declared effective, we are liable to
each Purchaser for liquidated damages of 1% of such Purchaser&#146;s purchase price per month until the
registration statement is filed or declared effective, up to a maximum of 12% of such Purchaser&#146;s
purchase price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our Customers</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our customers are individuals or families that would purchase graves for members for their
families that are presently living or deceased. According to National Population and Family
Planning Commission of the PRC, the current annual death rate of Chongqing is 0.65% and it is
predicted to go up to approximately 0.7% in the next three years. In the meantime, the population
for the city keeps growing and the pace of urbanization has quickened. For example, in 2008, the
population of urban residents has increased 500,600 compared to 2007. This will increase the
market demand of nearly 3,000 graves in our target market annually. The cremation number of the
city is about 45,000 each year, in which 60% to 70% of the deceased&#146;s relatives will purchase
graves. Their demand also constitutes our target market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a breakdown of the grave types purchased by our current customers:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="55%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Grave Type</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Price</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3"><B>Percentage of Customer</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Double Graves
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Below $1,500
(Below RMB 10,000)
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">15</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Double Graves
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Between $1,500 and $4,500
(Between RMB 10,000 and 30,000)
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">33</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Single Graves
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Between $4,500 and $7,500
(Between RMB 30,000 and 50,000)
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">38</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Single Graves
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Between $7,500 and $15,000
(Between RMB 50,000 and 100,000)
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Single Graves
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Between $15,000 and $45,000
(Between RMB 100,000 and 300,000)
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2.5</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Single Graves
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Between $45,000 and $75,000
(Between RMB 300,000 and 500,000)
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Single Graves
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">0.5%Over $75,000
(Over RMB 500,000)
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.5</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our Suppliers and Manufacturers</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We entered into a long term contract with a local manufacturer to manufacture bluestone
memorials for our cemetery operations. We provide the manufacturer with our own design
specifications and the manufacturer produces, delivers and mounts the memorials to our burial
vaults.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->28<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also entered into various project-based construction contracts with local contractors to
build our cemetery facilities. Some of the projects include turning hillside into terraced fields,
building roads, pathways and office facilities, digging up burial vaults, and building a lake dam.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our Sales and Marketing</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of March&nbsp;31, 2010, we employed our sales and marketing force included 6 employees, who also
oversaw 12 sales and 23 agents who are independent contractors. We have made a strong commitment to
the training of our employees in order to ensure that our customers receive the highest quality
customer service. Our training program includes pre-employment training and on-employment training
of professional ethics and sales techniques. Each employee&#146;s sales performance will be evaluated by
his supervisor on a yearly basis. Based on the evaluation, the employee may be granted a year-end
bonus, pay raise or promotion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We reward our salespeople with incentives for generating new customers. Substantially all of
our sales force is compensated based on performance. Commissions are augmented with various bonus
and incentive packages to ensure a high quality, motivated sales force. We pay commissions to our
sales personnel based on a percentage of the price of the products and services, which varies from
6% to 30%, of the total contract price. In addition, our sales personnel receive an award varying
from 1,000 RMB to 10,000 RMB for yearly sales of 1&nbsp;million RMB or more by the sales agents assigned
to them. We pay our sales agent based on a percentage of sales varying from 10% to 12% and we
offer an extra 2% or 3% award to yearly sales of 1.8&nbsp;million RMB or more.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also advertise on television from time to time. From February&nbsp;4, 2009 to March&nbsp;20, 2009,
we ran commercials on the local Changshou television during prime commercial time after the news
rebroadcast on national television.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our Competition</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The operating environment in the death care industry has been highly competitive. Although we
are the largest private provider of cemetery products and services in Chongqing, we nevertheless
face intense and crude competition from numerous local funeral homes and cemetery firms. Our
primary competitors in Chongqing are:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name of Competitors</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Description of Competitors</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Comparison with Foguang</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Chongqing Long Tai
Mountain Cemetery
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">This is a cemetery found
in 1994 and consists of
over 41 acres.
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">This cemetery has more
demand than its land
could supply and it is
conveniently located
in downtown Chongqing.</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Chongqing Hua Yan Ta Yuan
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">This is a Hong Kong based
project and currently the
only pagoda cemetery
project in China.
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">This cemetery is
limited to 40,000
tombs, all of which
have been sold as of
November&nbsp;2009.</TD>
</TR>
<TR>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Chongqing Hua Xia Cemetery
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">This cemetery is
currently the most
expensive and elaborate
cemetery site in China.
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Cost per tomb starts
at 60,000 RMB
(approximately
US$10,000). The
cemetery is only 8.6
acres in size and has
no land for further
expansion.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have observed new start-up competition in certain areas of Chongqing, which in any one
market may have impacted our profitability because of the high fixed cost nature of cemeteries.
Market share for cemeteries is largely a function of reputation and heritage, although competitive
pricing, professional service and attractive, well-maintained and conveniently located facilities
are also important. Because of the importance of reputation and heritage, market share increases
are usually gained over a long period of time. The sale of cemetery property has increasingly been
used by many companies as a marketing tool to build market share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Intellectual Properties and Licenses</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Company currently does not have any intellectual properties and licenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Governmental Regulations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Compliance with Circular 106 and the 2006 M&#038;A Regulations</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;29, 2007, China&#146;s State Administration of Foreign Exchange (&#147;<U>SAFE</U>&#148;) issued an
official notice known as &#147;Circular 106&#148;, which requires the owners of any Chinese companies to
obtain SAFE&#146;s approval before establishing any offshore
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->29<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">holding company structure in so-called &#147;round-trip&#148; investment transactions for foreign
financing as well as subsequent acquisition matters in China. Likewise, the &#147;Provisions on
Acquisition of Domestic Enterprises by Foreign Investors&#148;, issued jointly by Ministry of Commerce
(&#147;<U>MOFCOM</U>&#148;), State-owned Assets Supervision and Administration Commission, State Taxation
Bureau, State Administration for Industry and Commerce (&#147;<U>SAIC</U>&#148;), China Securities
Regulatory Commission and SAFE in August&nbsp;2006, impose approval requirements from MOFCOM for
&#147;round-trip&#148; investment transactions, including acquisitions in which equity was used as
consideration.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Dividend Distribution</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The principal laws, rules and regulations governing dividends paid by our PRC operating
subsidiary include the Company Law of the PRC (1993), as amended in 1999, 2004 and 2005
respectively, Wholly Foreign Owned Enterprise Law (1986), as amended in 2000, and Wholly Foreign
Owned Enterprise Law Implementation Rules (1990), as amended in 2001. Under these laws and
regulations, our PRC subsidiary may pay dividends only out of its accumulated profits, if any,
determined in accordance with PRC accounting standards and regulations. In addition, our PRC
subsidiary is required to set aside at least 10% of its after-tax profit based on PRC accounting
standards each year to its statutory surplus reserve fund until the accumulative amount of such
reserve reaches 50% of its respective registered capital. These reserves are not distributable as
cash dividends. The board of directors of a wholly foreign-owned enterprise (&#147;<U>WFOE</U>&#148;) has
the discretion to allocate a portion of its after-tax profits to its staff welfare and bonus funds.
After the allocation of relevant welfare and funds, the equity owners can distribute the rest of
the after-tax profits provided that all the losses of the previous fiscal year have been made up.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Taxation</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The applicable income tax laws, regulations, notices and decisions (collectively referred to
as &#147;<U>Applicable Foreign Enterprises Tax Law</U>&#148;) related to foreign investment enterprises and
their investors mainly include the following:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Notice Relating to Taxes Applicable to Foreign Investment Enterprises
/ Foreign Enterprises and Foreign Nationals in Relation to Dividends
and Gains obtained from Holding and Transferring of Shares promulgated
by State Tax Bureau on July&nbsp;21, 1993;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Amendments to the Income Tax Law Applicable to Individuals of the PRC
promulgated by Standing Committee of the National People&#146;s Congress
(&#147;<U>NPC</U>&#148;) on October&nbsp;31, 1993;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Notice on Relevant Policies Concerning Individual Income Tax issued by
Ministry of Finance and the State Tax Bureau on May&nbsp;13, 1994;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Notice on Reduction of Income Tax in Relation to Interests and Gains
Derived by Foreign Enterprises from the PRC, promulgated by the State
Council on November&nbsp;18, 2000; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Enterprise Income Tax Law of the PRC (&#147;<U>New EIT Law</U>&#148;) issued by NPC on
March&nbsp;16, 2007, which came into effect on January&nbsp;1, 2008.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Income Tax on Foreign Investment Enterprises</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According to the New EIT Law, PRC domestic enterprises and foreign investment enterprises
(including sino-foreign equity joint ventures, sino-foreign co-operative joint ventures and WFOEs
established in the territory of the PRC) are required to pay a uniform income tax at a rate of 25%
of their taxable income and the former tax exemption, reduction and preferential treatments
applicable to foreign investment enterprises are revoked.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2009, Foguang Group&#146;s income tax was at a rate of 25%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Value Added Tax</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Provisional Regulations of the PRC Concerning Value Added Tax promulgated by the State
Council came into effect on January&nbsp;1, 1994 and were amended in 2008. Under these regulations and
the Implementing Rules of the Provisional Regulations of the PRC Concerning Value Added Tax, value
added tax is imposed on goods sold in or imported into the PRC and on processing, repair and
replacement services provided within the PRC.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->30<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Value added tax payable in the PRC is charged on an aggregated basis at a rate of 13% or 17%
(depending on the type of goods involved) on the full price collected for the goods sold or, in the
case of taxable services provided, at a rate of 17% on the charges for the taxable services
provided but excluding, in respect of both goods and services, any amount paid in respect of value
added tax included in the price or charges, and less any deductible value added tax already paid by
the taxpayer on purchases of goods and service in the same financial year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Business Tax</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According to the Provisional Regulations of the PRC Concerning Business Tax promulgated by the
State Council on December&nbsp;13, 1993 and came into effect on January&nbsp;1, 1994, which was revised by
the State Council on November&nbsp;10, 2008 and enforced from January&nbsp;1, 2009, business that provides
services, assigns intangible assets or sells immovable property became liable to business tax at a
rate ranging from 3 to 5% of the charges of the services provided, intangible assets assigned or
immovable property sold, as the case may be.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Tax on Dividends from PRC Enterprise with Foreign Investment</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According to the Applicable Foreign Enterprises Tax Law, income such as rental, royalty and
profits from the PRC derived by a foreign enterprise which has no establishment in the PRC or has
establishment but the income has no relationship with such establishment is subject to a 10%
withholding tax, subject to reduction as provided by any applicable double taxation treaty, unless
the relevant income is specifically exempted from tax under the Applicable Foreign Enterprises Tax
Law. The profit derived by a foreign investor from a PRC enterprise with foreign investment is
exempted from PRC withholding tax according to the Applicable Foreign Enterprises Tax Law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Wholly-Owned Foreign Enterprise (&#147;WFOE&#148;)</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WFOEs are governed by the Law of the PRC Concerning Enterprises with Sole Foreign Investments,
which was promulgated on April&nbsp;12, 1986 and amended on October&nbsp;31, 2000, and its Implementation
Regulations promulgated on December&nbsp;12, 1990 and amended on April&nbsp;12,2001 (together the
&#147;<U>Foreign Enterprises Law</U>&#148;).
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Procedures for establishment of a WFOE</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The establishment of a WFOE will have to be approved by the MOFCOM (or its
delegated authorities). If two or more foreign investors jointly apply for the
establishment of a WFOE, a copy of the contract between the parties must also
be submitted to the MOFCOM (or its delegated authorities) for its record. A
WFOE must also obtain a business license from the SAIC before it can commence
business.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Nature</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A WFOE is a limited liability company under the Foreign Enterprises Law. It is
a legal person which may independently assume civil obligations, enjoy civil
rights and has the right to own, use and dispose of property. It is required
to have a registered capital contributed by the foreign investor(s). The
liability of the foreign investor(s) is limited to the amount of registered
capital contributed. A foreign investor may make its contributions by
installments and the registered capital must be contributed within the period
as approved by the MOFCOM (or its delegated authorities) in accordance with
relevant regulations.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Profit distribution</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Foreign Enterprise Law provides that after payment of taxes, a WFOE must
make contributions to a reserve fund, an enterprise development fund and an
employee bonus and welfare fund. The allocation ratio for the employee bonus
and welfare fund may be determined by the enterprise. However, at least 10% of
the after tax profits must be allocated to the reserve fund. If the cumulative
total of allocated reserve funds reaches 50% of an enterprise&#146;s registered
capital, the enterprise will not be required to make any additional
contribution. The reserve fund may be used by a WFOE to make up its losses and
with the consent of the examination and approval authority, can also be used to
expand its production operations and to increase its capital. The enterprise is
prohibited from distributing dividends unless the losses (if any) of previous
years have been made up. The development fund is used for expanding the capital
base of the company by way of capitalization issues. The employee bonus and
welfare fund can only be used for the collective benefit and facilities of the
employees of the WFOE.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->31<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Catalogue for the Guidance of Foreign Investment Industries</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;China issued the Catalogue for the Guidance of Foreign Investment Industries (&#147;<U>Guidance
Catalogue</U>&#148;) in 1995, which was amended in 2002, 2004 and 2007 respectively. The current version
of the Guidance Catalogue was promulgated by the MOFCOM and the National Development and Reform
Commission (&#147;<U>NDRC</U>&#148;) on October&nbsp;31, 2007 and became effective as of December&nbsp;1, 2007, which
retains the classification methodology and organizational structure used in the previous versions
without significant changes. The Guidance Catalogue divides foreign investments into four
categories:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;Encouraged Category. There are various incentives and preferential treatments for
&#147;encouraged&#148; projects, mainly tax exemptions and rebates. Most foreign investment projects in the
&#147;encouraged&#148; sector are allowed to take the form of WFOE;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;Permitted Category. Sectors not listed therein belong to the &#147;permitted&#148; category and
they are determined by the rule of exception. Therefore, unless the items are transferred among the
&#147;encouraged&#148;, &#147;restricted&#148; and &#147;prohibited&#148; categories, any addition to or deletion from the
&#147;encourage&#148;, &#147;restricted&#148; and &#147;prohibited&#148; categories would consequently affect the scope of the
&#147;permitted&#148; category. Like those in the &#147;encouraged&#148; sector, foreign investment projects in the
&#147;permitted&#148; sector are allowed to take the form of WFOE. However, they are generally not eligible
for extra incentives and preferential treatments;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;Restricted Category. There are stricter approvals or filing requirements for
&#147;restricted&#148; projects. Furthermore, foreign investment projects in the &#147;restricted&#148; sectors may be
required to take the form of Joint Venture. The foreign investors may only hold a minority interest
in the investment projects; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)&nbsp;Prohibited Category. Foreign investments are not allowed in these sectors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Foreign Exchange Controls</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Major reforms have been introduced to the foreign exchange control system of the PRC since
1993.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;28, 1993, the People&#146;s Bank of China (&#147;<U>PBOC</U>&#148;), with the authorization of
the State Council issued the Notice on Further Reform of the Foreign Exchange Control System which
came into effect on January&nbsp;1, 1994. Other new regulations and implementation measures include the
Regulations on the Foreign Exchange Settlement, Sale and Payments which were promulgated on June
20, 1996 and took effect on July&nbsp;1, 1996 and which contain detailed provisions regulating the
settlement, sale and payment of foreign exchange by enterprises, individuals, foreign organizations
and visitors in the PRC and the regulations of the PRC on Foreign Exchange Control which were
promulgated on January&nbsp;1, 1996 and took effect on April&nbsp;1, 1996 and which contain detailed
provisions in relation to foreign exchange control.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The foreign exchange earnings of all PRC enterprises, other than those foreign investment
enterprises (&#147;<U>FIE</U>&#148;), who are allowed to retain a part of their regular foreign exchange
earnings or specifically exempted under the relevant regulations, are to be sold to designated
banks. Foreign exchange earnings obtained from borrowings from foreign institutions or issues of
shares or bonds denominated in foreign currency need not be sold to designated banks, but must be
kept in foreign exchange bank accounts of designated banks unless specifically approved otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At present, control of the purchase of foreign exchange is relaxed. Enterprises within the PRC
which require foreign exchange for their ordinary trading and non-trading activities, import
activities and repayment of foreign debts may purchase foreign exchange from designated banks if
the application is supported by the relevant documents. Furthermore, FIEs may distribute profit to
their foreign investors with funds in their foreign exchange bank accounts kept with designated
banks. Should such foreign exchange be insufficient, enterprises may purchase foreign exchange from
designated banks upon the presentation of the resolutions of the directors on the profit
distribution plan of the particular enterprise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although the foreign exchange control over transactions under current accounts has decreased,
enterprises shall obtain approval from SAFE before they accept foreign-currency loans, provide
foreign currency guarantees, make investments in foreign countries or carry out any other capital
account transactions involving the purchase of foreign currencies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In foreign exchange transactions, designated banks may freely determine applicable exchange
rates based on the rates publicized by PBOC and subject to certain governmental restrictions.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->32<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;21, 2005, SAFE issued the Notice of the State Administration of Foreign Exchange on
Exchange Control Issues Relating to Financing and Reverse Investment by Persons Resident in the
People&#146;s Republic of China Through Offshore
Special Purpose Vehicles (&#147;<U>SAFE Notice No.&nbsp;75</U>&#148;), which became effective as of November
1, 2005. According to the SAFE Notice No.&nbsp;75, prior registration with the local SAFE branch is
required for PRC residents to establish or to control an offshore company for the purposes of
financing that offshore company with assets or equity interests in an onshore enterprise located in
the PRC. An amendment to registration or filing with the local SAFE branch by such PRC resident is
also required for the injection of equity interests or assets of an onshore enterprise in the
offshore company or overseas funds raised by such offshore company, or any other material change
involving a change in the capital of the offshore company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Moreover, the SAFE Notice No.&nbsp;75 applies retroactively. As a result, PRC residents who have
established or acquired control of offshore companies that have made onshore investments in the PRC
in the past are required to complete the relevant registration procedures with the local SAFE
branch by March&nbsp;31, 2006. Under the relevant rules, failure to comply with the registration
procedures set forth in the SAFE Notice No.&nbsp;75 may result in restrictions being imposed on the
foreign exchange activities of the relevant onshore company, including the increase of its
registered capital, the payment of dividends and other distributions to its offshore parent or
affiliate and the capital inflow from the offshore entity, and may also subject relevant PRC
residents to penalties under PRC foreign exchange administration regulations. PRC residents who
control our Company from time to time are required to register with the SAFE in connection with
their investments in us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>PRC Funeral Regulations and Compliance with Environmental Laws</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operations are subject to regulations and supervision under state, and local laws,
ordinances, and regulations, including extensive regulations concerning cemetery construction,
sales of funeral and cemetery products and services, and various other aspects of our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are subject to the requirements of the Regulations on Funeral and Interment Control
promulgated by Decree No.&nbsp;225 of the State Council of the PRC on July&nbsp;21, 1997 and Rules of
Chongqing on Funeral and Interment Control promulgated by the local government on May&nbsp;29, 1998.
Pursuant to the laws and regulations, the type of funeral equipment we use and the size of burial
vaults we construct and sell to our customers must comply with state unified specifications and
standards. In addition, any construction of cemetery or funeral home must be approved by the
Administration of Civil Affairs and the construction must be limited away from a certain areas such
as cultivated land, forest land, urban parks, scenic spots, protected areas of water resources,
railways and highways.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that we are in substantial compliance with all such laws and regulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Seasonality</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The death care business is relatively stable and predictable. However, we generally
experience fewer sales in the summer season due to the extreme hot weather in Chongqing since less
people are willing to conduct site visits in extreme heat; even though these decreases have not
historically had any significant impact on our results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Employees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the number of our employees for each of our areas of operations
and as a percentage of our total workforce as of March&nbsp;31, 2010:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2"><B>%</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 0px solid #000000"><B>Employees</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 0px solid #000000"><B>of Employees</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Management &#038; Administration</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">25.58</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">11.62</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cemetery Administration Office</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">18.60</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales &#038; Marketing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">13.95</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Construction Projects</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">18.60</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Customer Service</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">11.62</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">TOTAL</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our employees are interviewed and hired by our management team and generally, we offer
training programs to new workers to better understand our corporate regulations and professional
ethics and improve their relevant skills during the training period. We believe that our
relationship with our employees is good. Management expects that our access to reasonably priced
and competent labor will continue into the foreseeable future.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->33<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are in full compliance with Chinese labor laws and regulations and are committed to
providing safe and comfortable working conditions and accommodations for our employees. We believe
in the importance of maintaining our social responsibilities, and we are committed to providing
employees with a safe, clean and comfortable working environment and accommodations. Our employees
are also entitled to time off during public holidays. We are in full compliance with our
obligations to provide pension benefits to our workers, as mandated by the PRC government. We
strictly comply with Chinese labor laws and regulations, and offer reasonable wages, life insurance
and medical insurance to our workers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Environmental Matters</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operations are subject to certain PRC environmental regulations. We believe that we are
in substantial compliance with all such laws and regulations. For more information on such
environmental laws and regulations, please refer to the section on &#147;PRC Funeral Regulations and
Compliance with Environmental Law.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Offices</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our principal executive office is located at 239 Jianxin Road, Jiangbei District, Chongqing,
PRC 400000. Our main telephone number is (86)&nbsp;023-67755514, and our fax number is (86)
023-67759771.
</DIV>
<DIV align="left">
<A name="110"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>DESCRIPTION OF PROPERTY</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Chongqing offices and facilities</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table below provides a general description of our offices and facilities, all of which are
located in Chongqing, China.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="18%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Location</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Principal Activities</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Area (sq. meters)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Lease Expiration Date</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="top">
    <TD><DIV style="margin-left:0px; text-indent:-0px">LongQiao Village and QianFo<br> Village, JiangNan Town, <br>
ChangShou District,
Chongqing,<br> PRC
401258</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Commercial and residential use</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>339,444.20 square meters</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>N/A (property owned <br>by the Company)</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD><DIV style="margin-left:0px; text-indent:-0px">The Agricultural Land of LongQiao <br>Lake Village Group
6, JiangNan<br> Town,
ChangShou District,<br>
Chongqing, PRC
401258</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Business operation</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">133,334 square meters</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>December 31, 2027</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="top" style="padding-top: 0em;">
    <TD><DIV style="margin-left:0px; text-indent:-0px">The Wasteland and Timberland of <br>LongQiao Lake
Village Group 6, <br>
JiangNan Town,
ChangShou <br>District,
Chongqing, PRC
401258</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Business Operation</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">213,312 square meters</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">December 31, 2055</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD><DIV>The House Sites of LongQiao Lake<br>Group 6, Jiangnan Town, <br>ChangShou District,
Chongqing, <br>PRC
401258</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Comprehensive development</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>27,997.2 square meters</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>June 9, 2029 (renewable <br>up to 100 years)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="top" style="padding-top: 0em;">
    <TD><DIV style="margin-left:0px; text-indent:-0px">239 Jianxin Road , Jiangbei <br>District,
Chongqing, PRC
400000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Office</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1,053 square meters</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">December 31, 2012</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD><DIV style="margin-left:0px; text-indent:-0px">1 Huigong Road, 4th Floor,
Room&nbsp;<br>1-1, Nan&#146;an
District,
Chongqing, <br>PRC
400000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Business Operation</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">630.36 square meters</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">January 6, 2035</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="top" style="padding-top: 0em;">
    <TD><DIV style="margin-left:0px; text-indent:-0px">1 Huigong Road, 4th Floor,
Room&nbsp;<br>1-2, Nan&#146;an
District,
Chongqing, <br>PRC
400000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Business Operation</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">876.63 square meters</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">January 6, 2035</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD><DIV style="margin-left:0px; text-indent:-0px">1 Huigong Road, 4th Floor,
Room&nbsp;<br>1-3, Nan&#146;an
District,
Chongqing, <br>PRC
400000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Business Operation</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>431.16 square meters</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">January 6, 2035</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->34<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="18%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Location</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Principal Activities</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Area (sq. meters)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Lease Expiration Date</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="top">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Fuli Bowling House, San Dong <br>Qiao, Feng
Cheng Town,<br>
ChangShou District,
Chongqing, <br>PRC
401220</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Business Operation</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">N/A</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">N/A</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We lease our offices for business operation in Chongqing under property lease agreements for
agricultural land that expires on December&nbsp;31, 2027 and non-agricultural land that expires on
December&nbsp;31, 2055. We also lease a facility for comprehensive development in Chongqing under a
property lease agreement that expires on June&nbsp;9, 2108 with an option to renew the lease for up to
one hundred years. Minimum future commitments under the lease agreements payable as of March&nbsp;31,
2009 are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Year Ended March 31</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2010
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">22,679</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2011
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">22,679</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2012
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">22,679</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2013
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">22,679</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2014
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">22,679</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SUMMARY CONSOLIDATED FINANCIAL DATA</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You should read the summary consolidated financial data set forth below in conjunction with
&#147;Management&#146;s Discussion and Analysis of Financial Condition or Plan of Operations&#148; and our
financial statements and the related notes included elsewhere in this prospectus. The financial
data for the years ended March&nbsp;31, 2009 and 2008 were derived from our audited financial
statements, and the financial data for the three months and nine months ended December&nbsp;31, 2009 and
2008 from our reviewed financial statements, included in this prospectus. The historical results
are not necessarily indicative of the results to be expected for any future period.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Amounts in USD)
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Nine Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Twelve Months</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Ended March 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income statement data:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,403,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,969,952</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,467,501</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,186,413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,313,720</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,121,639</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of Goods Sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,339,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,014,616</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,110,391</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,407,734</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,938,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,694,927</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross Profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,063,777</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">955,336</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,357,110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,778,679</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,374,867</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,426,712</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Operating Expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">643,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">194,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,397,182</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">868,277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,471,475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,685,737</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from Operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,420,579</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">760,498</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,959,928</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,910,402</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,903,392</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,740,975</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Other Income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,451</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,584</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">352,153</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">186,903</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">283,560</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">330,614</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Earnings Before Tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,571,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">800,082</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,312,081</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,097,305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,186,952</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,071,589</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income Tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,414,552</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(67,002</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,267,843</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(836,642</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,689,693</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,346,605</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,156,478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">733,080</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,044,238</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,260,663</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,497,259</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,724,984</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Footnotes</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The share exchange transaction between us and Gold Industry is deemed to be a reverse acquisition,
where we (the legal acquirer) are considered the accounting acquiree and Gold Industry (the legal
acquiree) is considered the accounting acquirer.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Balance Sheet Data</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Amounts in USD)
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>At December 31, </B></TD>

    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>At March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>At March 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Consolidated Balance Sheet Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">(Unaudited)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,608,455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,392,961</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,719,620</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Current Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,703,193</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,713,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,766,222</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Current Liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,152,734</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,777,072</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,787,182</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Shareholders&#146; Equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">29,869,475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19,774,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,765,547</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->35<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="112"></A>
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>The following discussion and analysis of the results of our operations and financial condition
for the fiscal years ended March&nbsp;31, 2009, March&nbsp;31, 2008 and for the three months ended December
31, 2009 and 2008 and nine months ended December&nbsp;31, 2009 and 2008 should be read in conjunction
with the Selected Consolidated Financial Data, our financial statements, and the notes to those
financial statements that are included elsewhere in this prospectus. Our discussion includes
forward-looking statements based upon current expectations that involve risks and uncertainties,
such as our plans, objectives, expectations and intentions. Actual results and the timing of events
could differ materially from those anticipated in these forward-looking statements as a result of a
number of factors, including those set forth under the Risk Factors, Cautionary Notice Regarding
Forward-Looking Statements and Business sections in this prospectus. We use words such as
&#147;anticipate,&#148; &#147;estimate,&#148; &#147;plan,&#148; &#147;project,&#148; &#147;continuing,&#148; &#147;ongoing,&#148; &#147;expect,&#148; &#147;believe,&#148;
&#147;intend,&#148; &#147;may,&#148; &#147;will,&#148; &#147;should,&#148; &#147;could,&#148; and similar expressions to identify forward-looking
statements.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>OVERVIEW</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;China Redstone Group, Inc. (the &#147;Company&#148;, &#147;we&#148;, &#147;our&#148;, or &#147;us&#148;) was incorporated in Delaware
originally under the name &#147;Artistry Publications, Inc.&#148; (&#147;Artistry&#148;) on July&nbsp;10, 2007. On April&nbsp;6,
2010, we changed our name to &#147;China Redstone Group, Inc.&#148; to reflect our current business
operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;12, 2010, we acquired Gold Industry Limited (&#147;Gold Industry&#148;) by way of the
exchange of 8,800,000 shares of our Common Stock for 100% of the issued and outstanding common
stock of Gold Industry. We accounted for this share exchange transaction as a reverse acquisition
and recapitalization and, as a result, our consolidated financial statements are in substance those
of Gold Industry, with the assets and liabilities, and revenues and expenses, of Artistry being
included effective from the date of the share exchange transaction. Please see &#147;History and
Corporate Structure&#148; above and Note 16 to the consolidated financial statements included in this
prospectus for further details of this share exchange transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since the share exchange transaction, we have become a private provider of cemetery products
and services in Chongqing, People&#146;s Republic of China (&#147;<U>PRC</U>&#148; or &#147;<U>China</U>&#148;). All of
our business operations are carried out by Chongqing Foguang Tourism Development (Group) Co., Ltd.
(&#147;<U>Foguang</U>&#148;), which we control through contractual arrangements between Foguang and
Chongqing Ran Ji Industrial Co., Ltd. (&#147;<U>Ran Ji</U>&#148;), a company organized in the PRC and
wholly-owned by Gold Holy Industry Limited, a company incorporated in Hong Kong Special
Administrative Region (&#147;<U>Gold Holy</U>&#148;). Gold Holy is wholly-owned by Gold Industry. Please
see &#147;Contractual Arrangements with Foguang and its Owners&#148; above and Note 1 to the consolidated
financial statements included in this prospectus for a description of these contractual
arrangements and their impact on our consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Through these contractual arrangements, we have the ability to substantially influence
Foguang&#146;s daily operations and financial affairs, appoint its senior executives and approve all
matters requiring shareholder approval. As a result of these contractual arrangements, which enable
us to control Foguang, we are considered the primary beneficiary of Foguang. Accordingly, we
consolidate Foguang&#146;s results, assets and liabilities in our financial statements. Other than our
interests in the contractual arrangements, neither we, Gold Industry, Gold Holy and Ranji own any
equity interests in Foguang.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>CRITICAL ACCOUNTING POLICIES AND ESTIMATES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our discussion and analysis of our financial condition and results of operations are based on our
financial statements, which have been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of these financial statements requires us
to make estimates and judgments that affect the reported amounts of assets, liabilities and
expenses. On an ongoing basis, we evaluate our estimates and judgments, including those related to
accrued expenses, fair valuation of stock related to stock-based compensation and income taxes. We
based our estimates on historical experience and on various other assumptions that we believe to be
reasonable under the circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or conditions.
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->36<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">REVENUE RECOGNITION
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company recognizes revenue in accordance with US GAAP, which requires that four basic criteria
must be met before revenue can be recognized: (1)&nbsp;persuasive evidence of an arrangement exists; (2)
delivery has occurred; (3)&nbsp;the selling price is fixed and determinable; and (4)&nbsp;collectability is
reasonably assured. Determination of criteria (3)&nbsp;and (4)&nbsp;are based on management&#146;s judgments
regarding the fixed nature of the selling prices of the products delivered and the collectability
of those amounts.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has two revenue sources including the following revenue recognition policies:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company recognizes revenue from the sale of cemetery plots when it is realized or realizable
and earnings process is complete. In general, the Company records revenue when the cemetery plot
successfully completed, title has passed to the customer in accordance with the terms of the sale
and consideration is given. The costs associated with cemetery products revenue are the costs to
convert the land into the actual burial plots. Additionally direct selling costs incurred in
selling the cemetery plots are recorded in cost of goods sold.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Park construction income is recognized when the Company is contracted to provides services for
third party clients. These services include the construction of sidewalks, pagodas, landscaping and
other structures for parks. These projects are not associated with the Company&#146;s sales of cemetery
plots. Revenue is recognized upon the completion of the park, and the project has been approved by
the customer and collection is assured. The costs associated with the park construction income are
raw material purchased for that specific project and services performed by the Company recorded in
cost of goods sold.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">DEFERRED REVENUE
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company recorded the deferred revenue related to land use rights that were contributed to the
Company by the People&#146;s Republic of China under ASC Topic 958 FAS 116, &#147;Accounting for
Contributions Received and Contributions Made.&#148; As the Company sells cemetery plots, a portion of
the deferred revenue is recognized as other income based on the number of cemetery plots that the
Company sells during the year.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">ACCOUNTS RECEIVABLE
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Accounts receivable are carried at original invoice amount less an estimate made for doubtful
receivables based on a review of all outstanding amounts on a monthly basis. Management&#146;s judgment
and estimates are made in connection with establishing the allowance for doubtful accounts.
Specifically, the Company analyzes the aging of accounts receivable balances, historical bad debts,
customer concentrations, customer credit-worthiness, current economic trends and changes in the
customer payment terms. Significant changes in customer concentration or payment terms,
deterioration of customer credit-worthiness or weakening in economic trends could have a
significant impact on the collectability of receivables and the Company&#146;s operating results. If the
financial condition of the Company&#146;s customers were to deteriorate, resulting in an impairment of
their ability to make payments, the Company will write off 100% as bad debt.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">INVENTORY
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Inventory consists of completed cemetery plots ready for sale. Inventory includes all direct costs
associated with land development and construction of cemetery plots, including interest, costs of
land use rights based on units of production and other carrying costs incurred. Inventory is valued
at the lower of cost or market (determined on a weighted average cost basis) or net realizable
value. Management compares the cost of inventory with the net realizable value and an allowance is
made for impairment in the value of inventory if lower than cost.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">PROPERTY AND EQUIPMENT
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Property and equipment are carried at cost. The cost of repairs and maintenance is expensed as
incurred; major replacements and improvements are capitalized. When assets are retired or disposed
of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or
losses are included in income in the year of disposition. Depreciation and amortization are
computed on the straight-line method over the following estimated useful lives of the related
assets.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">INCOME TAXES
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company accounts for income taxes in accordance with US GAAP. Deferred taxes are provided on
the liability method whereby deferred tax assets are recognized for deductible temporary
differences, and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the differences between the reported
amounts of assets and liabilities
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->37<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">and their tax bases. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than not that some
portion or all of the deferred tax assets will be realized. Deferred tax assets and liabilities
are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company is
governed by the Income Tax Law of the People&#146;s Republic of China and local income tax laws (the
&#147;<U>PRC Income Tax Law</U>&#148;). Pursuant to the PRC Income Tax Law, enterprises are subject to tax
at a statutory rate of 25%. The local government in the PRC has provided companies various
incentives to encourage economic development in the region. Such incentives include reduced tax
rates and other measures.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">LAND VALUATION
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During 2005, the Company received land use rights which were contributed by People&#146;s Republic of
China (&#147;<U>PRC</U>&#148;). The land use rights include Chongqing Gui Yuan Cemetery located in
Changshou, China. Under PRC&#146;s governmental regulations, the government owns all land. However, PRC
would not directly assign the land use rights to the Company&#146;s management rather it assigned the
land use rights to the Company as a contribution. Therefore, the Company received the land use
rights without giving the government any consideration in return for the rights. At December&nbsp;31,
2005, the Company has recorded the fair value of the land use rights under ASC Topic 958 FAS 116,
&#147;Accounting for Contributions Received and Contributions Made&#148;, and the deferred revenue.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company uses two separate methods to determine the value of the land. First, the company hired
an outside company to perform an independent valuation of the land. The company hired ChongQing
HengJi Accounting firm to perform a valuation report on August&nbsp;10, 2005. The valuation given by
ChongQing HengJi Accounting firm was approximately $13.2M. In addition, the company performed its
own valuation based on projected future sales. The company then attributed 10% of the total sales
to the land and discounted it 12%, leading to a valuation of approximately $10.3&nbsp;million.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The land use rights are expensed based upon the number of cemetery plots capitalized in inventory
using the units of production method.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">RECENT ACCOUNTING PRONOUNCEMENTS
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In February&nbsp;2008, the Financial Accounting Standards Board (&#147;<U>FASB</U>&#148;) issued an accounting
standard update that delayed the effective date of fair value measurements accounting for all
non-financial assets and non-financial liabilities, except for items that are recognized or
disclosed at fair value in the financial statements on a recurring basis (at least annually), until
the beginning of the first quarter of 2009. The Company adopted this accounting standard update
effective January&nbsp;1, 2009. The adoption of this update to non-financial assets and liabilities, as
codified in ASC 820-10, did not have any impact on the Company&#146;s consolidated financial statements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s non-financial assets, such as goodwill, intangible assets, and property, plant and
equipment, are measured at fair value when there is an indicator of impairment and recorded at fair
value only when an impairment charge is recognized. No impairment indicators were present during
the three and nine month periods ended September&nbsp;30, 2009. When impairment indicators are
present, the Company utilizes various methods to determine the fair value of its non-financial
assets. For example, to value property plant and equipment, we would use the cost method for
determining fair value; for goodwill we would use a combination of analyzing the Company&#146;s market
capitalization based on the market price of the Company&#146;s common stock and a determination of
discounted cash flows of the Company&#146;s operations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Effective January&nbsp;1, 2009, the Company adopted an accounting standard that requires unvested
share-based payments that entitle employees to receive nonrefundable dividends to also be
considered participating securities, as codified in ASC 260. The adoption of this accounting
standard had no impact on the calculation of our earnings per share because the Company has not
issued participating securities.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Effective April&nbsp;1, 2009, the Company adopted three accounting standard updates which were intended
to provide additional application guidance and enhanced disclosures regarding fair value
measurements and impairments of securities. They also provide additional guidelines for estimating
fair value in accordance with fair value accounting. The first update, as codified in ASC
820-10-65, provides additional guidelines for estimating fair value in accordance with fair value
accounting. The second accounting update, as codified in ASC 320-10-65, changes accounting
requirements for other-than-temporary-impairment for debt securities by replacing the current
requirement that a holder have the positive intent and ability to hold an impaired security to
recovery in order to conclude an impairment was temporary with a requirement that an entity
conclude it does not intend to sell an impaired security and it will not be required to sell the
security before the recovery of its amortized cost basis. The third accounting update, as codified
in ASC 825-10-65, increases the frequency of fair value disclosures. These updates were effective
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">for fiscal years and interim periods ended after June&nbsp;15, 2009. The adoption of these accounting
updates did not have any impact on the Company&#146;s consolidated financial statements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Effective April&nbsp;1, 2009, the Company adopted a new accounting standard for subsequent events, as
codified in ASC 855-10. The update modifies the names of the two types of subsequent events either
as recognized subsequent events (previously referred to in practice as Type I subsequent events) or
non-recognized subsequent events (previously referred to in practice as Type II subsequent events).
In addition, the standard modifies the definition of subsequent events to refer to events or
transactions that occur after the balance sheet date, but before the financial statements are
issued (for public entities) or available to be issued (for nonpublic entities). It also requires
the disclosure of the date through which subsequent events have been evaluated. The update did not
result in significant changes in the practice of subsequent event disclosures, and therefore the
adoption did not have any impact on the Company&#146;s consolidated financial statements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Effective July&nbsp;1, 2009, the Company adopted the &#147;FASB Accounting Standards Codification&#148; and the
Hierarchy of Generally Accepted Accounting Principles (&#147;<U>ASC 105</U>&#148;). This standard
establishes only two levels of U.S. GAAP, authoritative and non-authoritative. The FASB Accounting
Standards Codification (the &#147;<U>Codification</U>&#148;) became the source of authoritative,
nongovernmental GAAP, except for rules and interpretive releases of the SEC, which are sources of
authoritative GAAP for SEC registrants. All other non-grandfathered, non-SEC accounting literature
not included in the Codification became non-authoritative. The Company began using the new
guidelines and numbering system prescribed by the Codification when referring to GAAP in the third
quarter of 2009. As the Codification was not intended to change or alter existing GAAP, it did not
have any impact on the Company&#146;s consolidated financial statements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In October&nbsp;2009, the FASB issued Update No.&nbsp;2009-13, &#147;Multiple-Deliverable Revenue Arrangements&#151;a
consensus of the FASB Emerging Issues Task Force&#148; (&#147;<U>ASU 2009-13</U>&#148;). It updates the existing
multiple-element revenue arrangements guidance currently included under ASC 605-25, which
originated primarily from the guidance in EITF Issue No.&nbsp;00-21, &#147;Revenue Arrangements with Multiple
Deliverables&#148; (&#147;<U>EITF 00-21</U>&#148;). The revised guidance primarily provides two significant
changes: 1) eliminates the need for objective and reliable evidence of the fair value for the
undelivered element in order for a delivered item to be treated as a separate unit of accounting,
and 2) eliminates the residual method to allocate the arrangement consideration. In addition, the
guidance also expands the disclosure requirements for revenue recognition. ASU 2009-13 will be
effective for the first annual reporting period beginning on or after June&nbsp;15, 2010, with early
adoption permitted provided that the revised guidance is retroactively applied to the beginning of
the year of adoption. The Company is currently assessing the future impact of this new accounting
update to its consolidated financial statements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In October&nbsp;2009, the FASB issued Update No.&nbsp;2009-14, &#147;Certain Revenue Arrangements that Include
Software Elements&#151;a consensus of the FASB Emerging Issues Task Force&#148; (&#147;<U>ASU 2009-14</U>&#148;).
ASU 2009-14 amends the scope of pre-existing software revenue guidance by removing from the
guidance non-software components of tangible products and certain software components of tangible
products. ASU 2009-14 will be effective for the first annual reporting period beginning on or
after June&nbsp;15, 2010, with early adoption permitted provided that the revised guidance is
retroactively applied to the beginning of the year of adoption. The Company is currently assessing
the future impact of this new accounting update to its consolidated financial statements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In December&nbsp;2009, the FASB issued an accounting standard update for improvements to financial
reporting by enterprises involved with Variable Interest Entities. The subsections clarify the
application of the General Subsections to certain legal entities in which equity investors do not
have the characteristics of a controlling financial interest or do not have sufficient equity at
risk for the legal entity to finance its activities without additional subordinated financial
support &#091;FIN 46(R), paragraph 1, sequence 55.1&#093; or, as a group, the holders of the equity
investment at risk lack any one of the following three characteristics: &#091;FIN 46(R), paragraph 1,
sequence 55.2&#093;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">a. The power, through voting rights or similar rights, to direct the activities of a legal entity
that most significantly impact the entity&#146;s economic performance &#091;FIN 46(R), paragraph 1, sequence
55.2.1&#093;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">b. The obligation to absorb the expected losses of the legal entity &#091;FIN 46(R), paragraph 1,
sequence 55.2.2&#093;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">c. The right to receive the expected residual returns of the legal entity. &#091;FIN 46(R), paragraph 1,
sequence 55.2.3&#093;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The amendments in this update to the Accounting Standards Codification are the result of FASB
Statement No.&nbsp;167, Amendments to FASB Interpretation No.&nbsp;46(R). The adoption of this update to
improving the financial reporting by enterprises involved with Variable Interest Entities, as
codified in ASC 810, did not have any impact on the Company&#146;s consolidated financial statements.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In December&nbsp;2009, the FASB issued an accounting standard update, Transfers and Servicing (Topic
860) Accounting for Transfers of Financial Assets. The amendments in this update to the Accounting
Standards Codification are the result of FASB Statement No.&nbsp;166, <I>Accounting for Transfers of
Financial Assets</I>. The adoption of this update did not have any impact on the Company&#146;s consolidated
financial statements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In January&nbsp;2010, the FASB issued an accounting standard update, Fair Value Measurements and
Disclosures (Topic 820), Improving Disclosures about Fair Value Measurements. The Update would
affect all entities that are required to make disclosures about recurring and nonrecurring fair
value measurements. The Board concluded that users will benefit from improved disclosures in this
Update and that the benefits of the increased transparency in financial reporting will outweigh the
costs of complying with the new requirements. The new disclosures and clarifications of existing
disclosures are effective for interim and annual reporting periods beginning after December&nbsp;15,
2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll
forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal
years beginning after December&nbsp;30, 2010, and for interim periods within those fiscal years. The
adoption of this update for improving disclosures about fair measurements, as codified in ASC 820
did not have any impact on the Company&#146;s consolidated financial statements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In January&nbsp;2010, the FASB issued an accounting standard update to address implementation issues
related to the changes in ownership provisions in the Consolidation&#151;Overall Subtopic (Subtopic
810-10) of the <I>FASB Accounting Standards Codification&#153;</I>, originally issued as FASB Statement No.
160<I>, Noncontrolling Interests in Consolidated Financial Statements. </I>Subtopic 810-10 establishes the
accounting and reporting guidance for noncontrolling interests and changes in ownership interests
of a subsidiary. An entity is required to deconsolidate a subsidiary when the entity ceases to have
a controlling financial interest in the subsidiary. Upon deconsolidation of a subsidiary, an entity
recognizes a gain or loss on the transaction and measures any retained investment in the subsidiary
at fair value. The gain or loss includes any gain or loss associated with the difference between
the fair value of the retained investment in the subsidiary and its carrying amount at the date the
subsidiary is deconsolidated. In contrast, an entity is required to account for a decrease in its
ownership interest of a subsidiary that does not result in a change of control of the subsidiary as
an equity transaction.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">While Subtopic 810-10 provides general guidance on accounting for the decreases in ownership of a
subsidiary, including a deconsolidation, some constituents raised concerns that the guidance
appears to conflict with the gain or loss treatment or derecognition criteria of other U.S.
generally accepted accounting principles (GAAP), such as the guidance for sales of real estate,
transfers of financial assets, conveyances of oil and gas mineral rights, and transactions with
equity method investees.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Some constituents also questioned whether the Board intended for the decrease in ownership
provisions of Subtopic 810-10 to apply to all entities because a subsidiary is defined as an
entity, including an unincorporated entity such as a partnership or trust, in which another entity,
known as its parent, holds a controlling financial interest. Those constituents were concerned that
such an interpretation could result in the accounting for a transaction being driven by its form
rather than its substance. For example, different accounting might be applied to a transaction
involving the same underlying assets depending on whether those assets were transferred in asset or
entity form.&#148; The amendments in this update are effective beginning in the period that an entity
adopts Statement 160 (now included in Subtopic 810-10). If an entity has previously adopted
Statement 160 as of the date of the amendments in this update are included in the
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Accounting Standards Codification, the amendments in this update are effective beginning in the
interim or annual reporting period ending on or after December&nbsp;31, 2009. The amendments in this
update should be applied retrospectively to the first period that an entity adopted 160. The
adoption of this update for the changes in the accounting and reporting guidance for noncontrolling
interests and changes in ownership interests of a subsidiary, as codified in ASC 810-10, did not
have any impact on the Company&#146;s financial statements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other recent accounting pronouncements issued by the FASB, the American Institute of Certified
Public Accountants (&#147;<U>AICPA</U>&#148;), and the SEC did not or are not believed by management to have
a material impact on the Company&#146;s present condensed consolidated financial statements.
</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>RESULTS OF OPERATIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Comparison of Three Month Periods Ended December&nbsp;31, 2009 and December&nbsp;31, 2008.</I></B>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Total Net Revenues</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Total revenues for the three months ended December&nbsp;31, 2009 were $11,403,585 as compared to
$1,969,952 for the three months ended December&nbsp;31, 2008, an increase of $9,433,633 or 478.88%. The
substantial increase in revenues is mainly attributable to the reopening of the bridge which has
led to increased access to our cemetery site. This coupled with the increase in overall market
conditions led to the increase in sales.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cost of Sales</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cost of sales includes raw materials, conversation costs, direct labor, manufacturing costs, which
includes an allocation of overhead expenses including labor, utilities and depreciation directly
related to product production and related taxes. For the three months ended December&nbsp;31, 2009, cost
of sales amounted to $5,339,808 or 46.83% of total net revenues as compared to $1,014,616 or 51.50%
of total net revenues for the three months ended December&nbsp;31, 2008. The decrease in cost of sales
as a percentage of total net revenues was primarily due to economies of scale that were achieved
when selling a larger number of cemetery plots.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Gross Profit</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Gross profit for the three months ended December&nbsp;31, 2009 was $6,063,777 or 53.17% of total net
revenues, as compared to $955,336 or 48.50% of total net revenues for the three months ended
December&nbsp;31, 2008. The increase in gross profit was attributable to economies of scale that were
achieved when selling a larger number of actual of cemetery plots. The increase in gross profit
margin as a percentage of revenue was primarily contributed to attributable to the reopening of the
bridge which has led to increased access to our cemetery site.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Operating Expenses</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Total operating expenses for the three months ended December&nbsp;31, 2009 were $643,198, an increase of
$448,360 or 230.12% from $194,838 for the three months ended December&nbsp;31, 2008 of. This increase
includes the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the three months ended December&nbsp;31, 2009, advertising expenses amounted to $61,641 as compared
to $19,238 for the three months ended December&nbsp;31, 2008, an increase of $42,403 or 220.41%. The
increase in expenses is mainly attributable to the increase in opportunity for sales, which came
the reopening of the bridge which has led to increased access to our cemetery site, and the
increase in overall market conditions. The Company believed that increasing advertisement would
increase sales.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the three months ended December&nbsp;31, 2009, general and administrative expenses amounted to
$581,557 as compared to $175,600 for the three months ended December&nbsp;31, 2008, an increase of
$405,957 or 231.18%. The increase in expenses is mainly attributable to the reopening of the bridge
which has led to increased access to our cemetery site. This coupled with the increase in overall
market conditions led to the increase in sales and to an increase in administrative expenses to
manage attendant paperwork.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Income from Operations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We reported income from operations of $5,420,579 for the three months ended December&nbsp;31, 2009 as
compared to $760,498 for the three months ended December&nbsp;31, 2008, an increase of $4,660,081 or
approximately 612.77%. The substantial increase in income is mainly attributable to the reopening
of the bridge which has led to increased access to our cemetery site. This coupled with the
increase in overall market conditions led to the increase in sales.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Other Income</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the three months ended December&nbsp;31, 2009, total other income amounted to $150,451 as compared
to $39,584 for the three months ended December&nbsp;31, 2008, an increase of $110,867 or 280.08%. This
substantial increase is primarily attributable to the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the three months ended December&nbsp;31, 2009, other income amounted to $140,824 as compared to
$32,770 for the three months ended December&nbsp;31, 2008, an increase of $108,054 or 329.7% from the
comparable period in 2009. This change is primarily attributable to the increase in the number of
cemetery plots sold.
</DIV>





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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the three months ended December&nbsp;31, 2009, interest expense amounted to $58,759 as compared to
$58,417 for the three months ended December&nbsp;31, 2008, an increase of $342 or 0.6% from the
comparable period in 2009. This change is primarily
attributable to the change in the foreign exchange rate between the RMB and the US dollar, since
the interest is paid in RMB and then converted.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the three months ended December&nbsp;31, 2009, interest income amounted to $2,948 as compared to
$262 for the three months ended December&nbsp;31, 2008, an increase of $2,686 or 1,025.2% from the
comparable period in 2009. This change is primarily attributable to the increase in the amount of
cash held during parts of the three months by the company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the three months ended December&nbsp;31, 2009, rental income amounted to $65,438 as compared to
$64,969 for the three months ended December&nbsp;31, 2008, a decrease of $469 or 0.7% from the
comparable period in 2009. This change is primarily attributable to the change in the foreign
exchange rate between the RMB and the US dollar, since the income is paid in RMB and then
converted.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Comparisons of Nine Month Periods Ended December&nbsp;31, 2009 and December&nbsp;31, 2008</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Total Net Revenues</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Total revenues for the nine months ended December&nbsp;31, 2009 were $26,467,501 as compared to
$11,186,413 for the nine months ended December&nbsp;31, 2008, an increase of $15,281,088 or
approximately 136.60%. For the nine months ended December&nbsp;31, 2009 and 2008, net revenues
consisted of the following:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Nine Months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Nine Months</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Ended</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">December 31,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cemetery</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">26,467,501</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,529,201</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Park and Nursery Garden Services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">657,212</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total net revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">26,467,501</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,186,413</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Cemetery</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the nine months ended December&nbsp;31, 2009, cemetery revenues increased by $15,938,300 or 151.37%.
The increase in revenues is mainly attributable to the reopening of the bridge which has led to
increased access to our cemetery site. This coupled with the increase in overall market conditions
led to the increase in sales.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Park and Nursery Garden Services</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the nine months ended December&nbsp;31, 2009, there were no revenues for park and nursery garden
services compared to revenues of $657,212 for the nine months ended December&nbsp;31, 2008. The Company
is shifting its focus to the development of its cemetery business, and as a result, the Company did
not dedicate resources on its park and nursery garden business during fiscal year 2009. We do not
expect this trend to change during fiscal year 2010 as the Company will continue to focus on
developing its cemetery business.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cost of Sales</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cost of sales includes raw materials, conversation costs, direct labor, manufacturing costs, which
includes an allocation of overhead expenses including labor, utilities and depreciation directly
related to production and related taxes. For the nine months ended December&nbsp;31, 2009, cost of sales
amounted to $12,110,391or approximately 45.76% of total net revenues as compared to cost of sales
of $6,407,734 or approximately 57.28% of total net revenues for the nine months ended December&nbsp;31,
2008. The decrease in cost of sales as a percentage of total net revenues was primarily due to
economies of scale that were achieved when selling a larger number of cemetery plots as well as a
contract signed with a provider that was more favorable due to excess capacity at the supplier.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Gross Profit</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Gross profit for the nine months ended December&nbsp;31, 2009 was $14,357,110 or 54.24% of total net
revenues, as compared to $4,778,679 or 42.72% of total net revenues for the nine months ended
December&nbsp;31, 2008. The increase in gross profit margin as a percentage of revenue was primarily
attributable to the reopening of the bridge which has led to increased access to our
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">cemetery site. In addition, a contract signed with a provider was more favorable due to excess
capacity at the supplier, thereby decreasing costs.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Operating Expenses</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Total operating expenses for the nine months ended December&nbsp;31, 2009 were $1,397,182, an increase
of $528,905 or 60.91% from total operating expenses in the nine months ended December&nbsp;31, 2008 of
$868,277. This increase includes the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the nine months ended December&nbsp;31, 2009, advertising expenses amounted to $142,982 as compared
to $84,024 for the nine months ended December&nbsp;31, 2008, an increase of $58,958 or 70.17%. We spent
more on advertising expenses for the nine months ended December&nbsp;31, 2009 due to a more positive
outlook in the economic markets which led the Company to spend more on advertising in an effort to
attract more customers.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the nine months ended December&nbsp;31, 2009, general and administrative expenses amounted to
$1,254,200 as compared to $784,253 for the nine months ended December&nbsp;31, 2008, an increase of
$469,947 or 59.92%. The increase in expenses is mainly attributable to an increase in sales which
led to a higher cost for the sales.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Income from Operations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We reported income from operations of $12,959,928 for the nine months ended December&nbsp;31, 2009 as
compared to $3,910,402 for the nine months ended December&nbsp;31, 2008, an increase of $9,049,526 or
approximately 231.42%. The substantial increase in income is mainly attributable to the reopening
of the bridge which has led to increased access to our cemetery site. This coupled with the
increase in overall market conditions led to the increase in sales.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Other Income</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the nine months ended December&nbsp;31, 2009, total other income amounted to $352,153 as compared to
$186,903 for the nine months ended December&nbsp;31, 2008, an increase of $165,250 or 88.41%. This
substantial increase is primarily attributable to the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the nine months ended December&nbsp;31, 2009, other income amounted to $325,536 as compared to
$165,901 for the nine months ended December&nbsp;31, 2008, an increase of $159,635 or 96.2% from the
comparable period in 2009. This change is primarily attributable to the increase in the number of
cemetery plots sold.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the nine months ended December&nbsp;31, 2009, interest expense amounted to $177,559 as compared to
$174,533 for the nine months ended December&nbsp;31, 2008, an increase of $3,026 or 1.7% from the
comparable period in 2009. This change is primarily attributable to the change in the amount of
outstanding debt held by the company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the nine months ended December&nbsp;31, 2009, interest income amounted to $7,872 as compared to
$3,225 for the nine months ended December&nbsp;31, 2008, an increase of $4,647 or 144.1% from the
comparable period in 2009. This change is primarily attributable to the increase in the amount of
cash held during parts of the nine months by the company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the nine months ended December&nbsp;31, 2009, rental income amounted to $196,304 as compared to
$192,310 for the nine months ended December&nbsp;31, 2008, an increase of $3,994 or 2.1% from the
comparable period in 2009. This change is primarily attributable to the change in the foreign
exchange rate between the RMB and the US dollar, since the income is paid in RMB and then
converted.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Comparison of Years Ended March&nbsp;31, 2009 and March&nbsp;31, 2008</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Total Net Revenues</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Total revenues for the year ended March&nbsp;31, 2009 were $18,313,720 as compared to $22,121,639 for
the year ended March&nbsp;31, 2008, a decrease of $3,807,919 or approximately 17.20%. For the years
ended March&nbsp;31, 2009 and 2008, net revenues consisted of the following:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Year Ended</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Year Ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">March 31, 2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">March 31, 2008</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cemetery</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">17,674,785</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19,878,718</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Park and Nursery Garden Services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">665,935</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,242,921</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total net revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18,313,720</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,121,639</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->43<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Cemetery</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the year ended March&nbsp;31, 2009, cemetery revenues decreased by $2,230,933 or 11.22%. The
decrease in revenues is mainly attributable to a lack of ability to reach our cemetery site due to
the construction of a new bridge. The old bridge to the cemetery was taken out of service because
of its unsuitability after the construction of the Three Gorges Dam which caused the water level to
be too high. Construction of the new bridge was completed in May&nbsp;2009 and traffic was able to
reach the cemetery again thereafter. In addition, we expect the bridge to be directly connected to
the highway within two years, which will allow easier access to the cemetery. We do not anticipate
access issues to be a problem in the future. We expect our sales will continue hold steady for
fiscal 2010.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Park and Nursery Garden Services</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the year ended March&nbsp;31, 2009, the revenues for park and nursery garden services decreased by
$1,576,986. The decrease is attributable to the Company shifting its focus to the development of
the cemetery sector of its business. The Company did not input as much of its resources on the
park and nursery garden sector in the fiscal year of 2009. We do not expect this trend to change
in the fiscal year of 2010 as the Company still continues to focus on developing its cemetery
sector.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cost of Sales</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cost of sales includes raw materials, conversation costs, direct labor, manufacturing costs, which
includes an allocation of overhead expenses including labor, utilities and depreciation directly
related to product production and related taxes. For the year ended March&nbsp;31, 2009, cost of sales
amounted to $9,938,853 or approximately 54.3% of total net revenues as compared to $12,694,927 or
approximately 57.4% of total net revenues for the year ended March&nbsp;31, 2008. The decrease in cost
of sales as a percentage of total net revenues was primarily due to more efficient production and
control of costs.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Total cost of sales decrease of $2,756,074 or 21.7% is attributable to the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the year ended March&nbsp;31, 2009, cemetery costs amounted to $9,445,153 as compared to $10,974,241
for the year ended March&nbsp;31, 2008, a decrease of $1,529,088 or 13.93% from the comparable period in
fiscal 2008. This decrease is primarily attributable to a decrease in the construction of
cemeteries due to the inability to reach the site for a three month period. Although the current
cemetery costs as a percentage of revenue have decreased due to economies of scale and increased
efficiency gained from experience, we cannot guarantee that our cemetery expenses will continue to
decrease.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the year ended March&nbsp;31, 2009, park and nursery garden services costs amounted to $493,700 as
compared to $1,720,686 for the year ended March&nbsp;31, 2008, a decrease of $1,226,986 or 71.3%. The
decrease in costs was primarily due to a decrease in the amount of park and nursery garden service
contracts executed by the Company. We expect that the costs for the park and nursery garden
services will remain constant compared to the March&nbsp;31, 2009 figures as the Company plans to focus
on expanding its cemetery business.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Gross Profit</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Gross profit for the year ended March&nbsp;31, 2009 was $8,374,867 or 45.7% of total net revenues, as
compared to $9,426,712 or 42.6% of total net revenues for the year ended March&nbsp;31, 2008. The
decrease in gross profit was attributable to the decrease in sales as a result of external factors.
The increase in cost of sales as a percentage of gross profit margin was primarily attributable to
losing some economies of scale.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Operating Expenses</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Total operating expenses for the year ended March&nbsp;31, 2009 were $1,471,475, an increase of $214,262
or 12.71% from total operating expenses in the year ended March&nbsp;31, 2008 of $1,166,191. This
increase includes the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the year ended March&nbsp;31, 2009, advertising expenses amounted to $426,415 as compared to
$519,546 for the year ended March&nbsp;31, 2008, a decrease of $93,131 or 17.93%. We did not spend as
much on advertising expenses for the year ended March&nbsp;31, 2009 due to the access issue. We felt
that it was not necessary to advertise as much since customers would not purchase the
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->44<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">cemetery plots without first conducting a visual inspection. We expect that the Company will
increase advertising expenses relative to March&nbsp;31, 2009 figures as the Company expands its
business operations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the year ended March&nbsp;31, 2009, general and administrative expenses amounted to $1,045,060 as
compared to $1,166,191 for the year ended March&nbsp;31, 2008, a decrease of $121,131 or 10.39%. The
decrease in expenses was mainly attributable to cost cutting measures during the economic downturn,
lower government fees in hopes of stimulating the economy and a decrease in the number of
employees. We expect that the Company will increase the general and administrative expenses
relative to the March&nbsp;31, 2009 numbers as the Company expands its operations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Income from Operations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We reported income from operations of $6,903,392 for the year ended March&nbsp;31, 2009 as compared to
income from operations of $7,740,975 for the year ended March&nbsp;31, 2008, a decrease of $837,583 or
approximately 10.82%.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Other Income</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the year ended March&nbsp;31, 2009, total other income amounted to $283,560 as compared to $330,614
for the year ended March&nbsp;31, 2008, a decrease of $47,054 or 14.2% from the comparable period in
2009. This change is primarily attributable the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the year ended March&nbsp;31, 2009, other income amounted to $255,893 as compared to $296,364 for
the year ended March&nbsp;31, 2008, a decrease of $40,471 or 13.7% from the comparable period in 2009.
This change is primarily attributable to the change in the number of cemetery plots sold.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the year ended March&nbsp;31, 2009, interest expense amounted to $235,208 as compared to $204,075
for the year ended March&nbsp;31, 2008, an increase of $31,113 or 15.3% from the comparable period in
2009. This change is primarily attributable to the change in the amount of outstanding debt held by
the company. For the year ended March&nbsp;31, 2009, interest income amounted to $6,361 as compared to
$2,051 for the year ended March&nbsp;31, 2008, an increase of $4,310 or 210.1% from the comparable
period in 2009. This change is primarily attributable to the increase in the amount of cash held
during parts of the year by the company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the year ended March&nbsp;31, 2009, rental income amounted to $260,286 as compared to $239,776 for
the year ended March&nbsp;31, 2008, an increase of $20,510 or 8.6% from the comparable period in 2009.
This change is primarily attributable to the change in the foreign exchange rate between the RMB
and the US dollar, since the income is paid in RMB and then converted.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the year ended March&nbsp;31, 2009, non-operating expense amounted to $3,772 as compared to $3,502
for the year ended March&nbsp;31, 2008, a decrease of $270 or 7.7% from the comparable period in 2009.
This change is primarily attributable to a decrease in miscellaneous expenses.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Liquidity and Capital Resources</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Nine Months Ended December&nbsp;31, 2009</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the nine months ended December&nbsp;31, 2009, net cash provided by operating activities was
$3,213,593, as compared to $50,489 for the nine months ended December&nbsp;31, 2008. The large increase
was primarily attributable to the company selling its inventory of prepared burial plots. The
higher sales volume generated cash.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the nine months ended December&nbsp;31, 2009, no cash was used in or provided by investing
activities, as compared to $1,100,250 used for investing activities (capital expenditures) of for
the nine months ended December&nbsp;31, 2008.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">There was no cash used in or provided by financing activities for the nine months ended December
31, 2009 and 2008.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2009, we had cash of $4,608,455. Our total current assets were $13,703,193 and
our total current liabilities were $4,152,734.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->45<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Year Ended March&nbsp;31, 2009</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the year ended March&nbsp;31, 2009, net cash provided by operating activities was $980,826, as
compared to cash provided by operating activities of $237,063 for the year ended March&nbsp;31, 2008.
The increase was primarily attributable to an increase in accounts payable.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the year ended March&nbsp;31, 2009, net cash used by investing activities was $1,479,650, for
investment in additional land for development, as compared to no cash used in or provided by
investing activities for the year March&nbsp;31, 2008.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">There was no cash used in or provided by financing activities for the year ended March&nbsp;31, 2009 and
2008.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of March&nbsp;31, 2009, we had cash of $1,392,961. Our total current assets were $7,713,109 and our
total current liabilities were $3,777,072.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Contractual Obligations and Off-Balance Sheet Arrangements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Contractual Obligations</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have certain fixed contractual obligations and commitments that include future estimated
payments. Changes in our business needs, cancellation provisions, changing interest rates, and
other factors may result in actual payments differing from the estimates. We cannot provide
certainty regarding the timing and amounts of payments. We have presented below a summary of the
most significant assumptions used in our determination of amounts presented in the tables, in order
to assist in the review of this information within the context of our consolidated financial
position, results of operations, and cash flows.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following tables summarize our contractual obligations as of December&nbsp;31, 2009, and the effect
these obligations are expected to have on our liquidity and cash flows in future periods.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18" style="border-bottom: 1px solid #000000"><B>Payments Due by Period</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Less than 1 year</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>1-3 Years</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>3-5 Years</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>5 Years &#043;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19"><B>In Thousands</B></TD>

</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Contractual Obligations :</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Bank Indebtedness</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,471</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other Indebtedness</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">207</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Capital Obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchase Obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total Contractual Obligations:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,494</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">207</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Off-Balance Sheet Arrangements</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have not entered into any other financial guarantees or other commitments to guarantee the
payment obligations of any third parties. We have not entered into any derivative contracts that
are indexed to our shares and classified as shareholder&#146;s equity or that are not reflected in our
consolidated financial statements. Furthermore, we do not have any retained or contingent interest
in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk
support to such entity. We do not have any variable interest in any unconsolidated entity that
provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging
or research and development services with us.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Exchange Rates</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We maintain our books and records in Renminbi (&#147;RMB&#148;), the lawful currency of the PRC. In general,
for consolidation purposes, the Company translates our assets and liabilities into U.S. Dollars
using the applicable exchange rates prevailing at the balance sheet date, and the statement of
income is translated at average exchange rates during the reporting period. Adjustments resulting
from the translation of our financial statements are recorded as accumulated other comprehensive
income.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Until July&nbsp;21, 2005, RMB had been pegged to USD at the rate of RMB8.30: USD$1.00. On July&nbsp;21,
2005, the PRC government reformed the exchange rate system into a managed floating exchange rate
system based on market supply and demand with reference to a basket of currencies. In addition, the
exchange rate of RMB to USD was adjusted to RMB8.11: USD$1.00 as of July&nbsp;21, 2005. The People&#146;s
Bank of China announces the closing price of a foreign currency such as USD$ traded against RMB in
the inter-bank foreign exchange market after the closing of the market on each working day, which
will become the unified exchange rate for the trading against RMB on the following working day.
The daily trading price of USD against RMB in the
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->46<!-- /Folio -->
</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">inter-bank foreign exchange market is allowed to float within a band of &#177;0.3% around the
unified exchange rate published by the People&#146;s Bank of China. This quotation of exchange rates
does not imply free convertibility of RMB to other foreign currencies. All foreign exchange
transactions continue to take place either through the Bank of China or other banks authorized to
buy and sell foreign currencies at the exchange rates quoted by the People&#146;s Bank of China.
Approval of foreign currency payments by the Bank of China or other institutions required
submitting a payment application form together with invoices, shipping documents and signed
contracts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The exchange rates used to translate amounts in RMB into US Dollars for the purposes of preparing
the consolidated financial statements or otherwise stated in this report were as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Balance sheet items, except
for the registered and
paid-up capital, as of end
of period/year
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">USD1:RMB<br>
0.1467
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">USD1:RMB<br>
0.1465
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">USD1:RMB<br>
0.1467</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Amounts included in the
statement of operations,
statement of changes in
stockholders&#146; equity and
statement of cash flows for
the period/ year ended
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">USD1:RMB<br>
0.14664
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">USD1:RMB<br>
0.14582
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">USD1:RMB<br>
0.14559</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">No representation is made that RMB amounts have been, or would be, converted into US$ at the above
rates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Inflation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that inflation has not had a material effect on our operations to date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Related Party Transactions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For a description of our related party transactions, see the section of this prospectus
entitled &#147;Certain Relationships and Related Transactions.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Quantitative and Qualitative Disclosures About Market Risk</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not use derivative financial instruments in our investment portfolio and has no foreign
exchange contracts. Our financial instruments consist of cash and cash equivalents, trade accounts
receivable, accounts payable and long-term obligations. We consider investments in highly liquid
instruments purchased with a remaining maturity of 90&nbsp;days or less at the date of purchase to be
cash equivalents. However, in order to manage the foreign exchange risks, we may engage in hedging
activities to manage our financial exposure related to currency exchange fluctuation. In these
hedging activities, we might use fixed-price, forward, futures, financial swaps and option
contracts traded in the over-the-counter markets or on exchanges, as well as long-term structured
transactions when feasible.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Interest Rates</I>. Our exposure to market risk for changes in interest rates relates primarily to
our short-term investments and short-term obligations; thus, fluctuations in interest rates would
not have a material impact on the fair value of these securities. At March&nbsp;31, 2009, we had
approximately $1,392,961 in cash and cash equivalents. A hypothetical 5% increase or decrease in
interest rates would not have a material impact on our earnings or loss, or the fair market value
or cash flows of these instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Foreign Exchange Rates</I>. A substantial portion of our sales is denominated in Euros, Renminbi
(&#147;<U>RMB</U>&#148;) or other currencies. As a result, changes in the relative values of U.S. Dollars,
Euros, RMB and other currencies affect our reported levels of revenues and profitability as the
results are translated into U.S. Dollars for reporting purposes. In particular, fluctuations in
currency exchange rates could have a significant impact on our financial stability due to a
mismatch among various foreign currency-denominated sales and costs. Fluctuations in exchange
rates, particularly among the U.S. dollar, RMB and Euro, affect our gross and net profit margins
and could result in foreign exchange and operating losses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our exposure to foreign exchange risk primarily relates to currency gains or losses resulting
from timing differences between signing of sales contracts and settling of these contracts.
Furthermore, we translate monetary assets and liabilities denominated in other currencies into RMB,
the functional currency of our operating business. Our results of operations and cash flow are
translated at average exchange rates during the period, and assets and liabilities are translated
at the unified exchange rate as quoted by the People&#146;s Bank of China at the end of the period. Translation adjustments
resulting from this process are included in accumulated other comprehensive income in our statement
of shareholders&#146; equity. We recorded net foreign currency gains of $1,978,746 and $511,749 in
fiscal 2008 and 2009 respectively. We have not used any forward contracts, currency options or
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->47<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">borrowings to hedge our exposure to foreign currency exchange risk. We cannot predict the impact of
future exchange rate fluctuations on our results of operations and may incur net foreign currency
losses in the future. As our sales denominated in foreign currencies, such as RMB and Euros,
continue to grow, we will consider using arrangements to hedge our exposure to foreign currency
exchange risk.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our financial statements are expressed in U.S. dollars but the functional currency of our
operating subsidiary is RMB. The value of your investment in our stock will be affected by the
foreign exchange rate between U.S. dollars and RMB. To the extent we hold assets denominated in
U.S. dollars, including the net proceeds to us from this offering, any appreciation of the RMB
against the U.S. dollar could result in a change to our statement of operations and a reduction in
the value of our U.S. dollar denominated assets. On the other hand, a decline in the value of RMB
against the U.S. dollar could reduce the U.S. dollar equivalent amounts of our financial results,
the value of your investment in our company and the dividends we may pay in the future, if any, all
of which may have a material adverse effect on the price of our stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Country Risk</I>. The substantial portion of our assets and operations are located and conducted
in China. While the PRC economy has experienced significant growth in the past twenty years, growth
has been uneven, both geographically and among various sectors of the economy. The Chinese
government has implemented various measures to encourage economic growth and guide the allocation
of resources. Some of these measures benefit the overall economy of China, but may also have a
negative effect on us. For example, our operating results and financial condition may be adversely
affected by government control over capital investments or changes in tax regulations applicable to
us. If there are any changes in any policies by the Chinese government and our business is
negatively affected as a result, then our financial results, including our ability to generate
revenues and profits, will also be negatively affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Interest Rate Risk</I>. We may face some risk from potential fluctuations in interest rates,
although our debt obligations are primarily short-term in nature, but some bank loans have
different rates. If interest rates have great fluctuations, our financing cost may be significantly
affected.
</DIV>
<DIV align="left">
<A name="113"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>LEGAL PROCEEDINGS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Currently there are no legal proceedings pending or threatened against us. However, from time
to time, we may become involved in various lawsuits and legal proceedings which arise in the
ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse
result in these or other matters may arise from time to time that may harm our business.
</DIV>
<DIV align="left">
<A name="114"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>MANAGEMENT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our directors and executive officers, their ages, their respective offices and positions, and
their respective dates of election or appointment are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Age</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Position</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Officer/Director since</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yiyou Ran
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">35</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>President, Chief Executive Officer and Chairman of the Board
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">February&nbsp;12, 2010</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Michael Wang
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">31</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Financial Officer, Treasurer, Secretary and Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">February&nbsp;12, 2010</TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Jianquan Chen
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">46</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">February&nbsp;12, 2010</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Tim Hudson
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">55</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">February&nbsp;12, 2010</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Michael Rudolph
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">59</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April&nbsp;1, 2010</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Lihua Zhang
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">55</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April&nbsp;1, 2010</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Biographical Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a brief account of the education and business experience of these directors
and executive officers during at least the past five years, indicating the person&#146;s principal
occupation during the period, and the name and principal business of the organization by which he
or she was employed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Yiyou Ran </B>received a bachelor degree in Atmosphere Quality Assessment from Chengdu Institute
of Meteorology in 1983 and a master degree in Economic Management from Southwestern University of
Finance and Economics in 1997. Mr.&nbsp;Ran established Chongqing Fo Guang Tourism Development Co., Ltd.
in October&nbsp;2002 and serve as the legal representative and Chairman of the Company. Mr.&nbsp;Ran is a
member of the Association of Industry and Commerce of ChangShou and the President
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->48<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">of the Chamber of Industry and Commerce of Jiangnan Town. Mr.&nbsp;Ran was given the honor as &#147;Non-Public Ownership
System Public Figure, Excellent Socialism Constructor&#148; in 2006 by the United Front Work Department
of the CPC and the Association of Industry and Commerce of Changshou District in Chongqing.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Michael Wang </B>graduated from University of Texas in 2001 with a master degree in Accounting and
received a M.B.A from the Tuck School of Business in 2007. Licensed as a CPA in the state of Texas,
Mr.&nbsp;Wang formerly worked as an auditor at Ernst and Young and started his career as a financial
analyst at Arthur Anderson. Mr.&nbsp;Wang formerly worked as the Chief Financial Officer of Snif Labs
Inc., a RFID technology company based in Massachusetts and served as a special consultant to the
CEO of JTec Inc., a software company based in Beijing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Jianquan Chen </B>graduated from Wuhan University of Electric Engineering in 1996 with a major in
Construction Engineering. Mr.&nbsp;Chen formerly worked as the Vice President of the Chamber of Industry
and Commerce of Jiangnan Town and served as the chief engineer of Chongqing Shenglin Architectural
Engineering Co., Ltd. Currently, Mr.&nbsp;Chen serves as the Vice President, Deputy Chairman, Deputy
General Manager and the Senior Engineer of Chongqing Fo Guang Tourism Development (Group) Co., Ltd.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Tim Hudson </B>is currently President of the University of Houston, Victoria. Previously, Dr.
Hudson served as provost and founding dean of the College of International and Continuing Education
at the University of Southern Mississippi. Prior to that, he served as an analyst for the U. S.
Department of State. Dr.&nbsp;Hudson received his Ph.D. in Geography from Clark University in
Worcester, Massachusetts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Michael Rudolph </B>is currently the founder, chief financial officer and managing member of
Viking Asset Management, LLC and an investment adviser to Longview Fund, LP and Longview Fund
International, Ltd. (BVI). Previously, Mr.&nbsp;Rudolph served as the president of The Edgehill Group,
Inc. and held various senior management positions with Charles Schwab&#146;s Institutional Trading
Division, Bank of America and Wells Fargo Bank. Mr.&nbsp;Rudolph also served on several board of
directors, including ElectroSource, LLC and the Stanford University Medical Center Stroke Advisory
Board. Mr.&nbsp;Rudolph received his Bachelor&#146;s degree in Biochemistry from Purdue University in 1973
and a Master of Business Administration degree from Washington University in 1975.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Lihua Zhang </B>is currently the chairman of Songyuan Hydropower Plant, Bo Gong Ken Hydropower
Plant and Huaxi Hydropower Plant and has invested a total of RMB One Hundred Million in building
these three plants. Mr.&nbsp;Zhang also serves as vice chairman of Zhejiang Commercial Association and
is responsible for public relations between the Zhejiang Commercial Association and other
government agencies in other provinces, including Taiwan and Hong Kong. Mr.&nbsp;Zhang also has served
as a member of Political Consultant Conference in Songxi, Fujiang province. Mr.&nbsp;Zhang received his
professional degree from Hangzhou Water Resources and Hydropower Professional School in 1980.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Family Relationships</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are no family relationships between or among any of our directors and executive
officers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Involvement in Certain Legal Proceedings</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are no orders, judgments, or decrees of any governmental agency or administrator, or of
any court of competent jurisdiction, revoking or suspending for cause any license, permit or other
authority to engage in the securities business or in the sale of a particular security or
temporarily or permanently restraining any of our officers or directors from engaging in or
continuing any conduct, practice or employment in connection with the purchase or sale of
securities, or convicting such person of any felony or misdemeanor involving a security, or any
aspect of the securities business or of theft or of any felony. Nor are any of the officers or
directors of any corporation or entity affiliated with us so enjoined.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Board of Directors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors is currently composed of six members. All members of our board of
directors serve in this capacity until their terms expire or until their successors are duly
elected and qualified. Our bylaws provide that the authorized number of directors will be not less
than one.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Yiyou Ran is the Chairman of our board of directors. In this capacity Mr.&nbsp;Ran will be
responsible for meeting with our Chief Financial Officer to review financial and operating results,
reviewing agendas and minutes of board and committee meetings, and presiding at the meetings of the
board of directors.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->49<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Board Committees; Director Independence</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of this date, our board of directors has not appointed an audit committee or compensation
committee; however, we are not currently required to have such committees. The functions
ordinarily handled by these committees are currently handled by our entire board of directors. Our
board of directors intends, however, to review our governance structure and institute board
committees as necessary and advisable in the future, to facilitate the management of our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of the date of this prospectus, we have 3 independent director and 3 non-independent
directors on our board of directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Code of Ethics</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has formally adopted a written financial code of ethics to be applied to the
Company&#146;s Chief Executive Officer, Chief Financial Officer and finance department personnel. The
Chief Executive Officer, Chief Financial Officer and finance department personnel have a special
role both to adhere to the principles of integrity and also to ensure that a culture exists
throughout Artistry as a whole that ensures the fair and timely reporting of our financial results
and conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Compensation Committee Interlocks and Insider Participation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No interlocking relationship exists between our board of directors and the board of directors
or compensation committee of any other company, nor has any interlocking relationship existed in
the past.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXECUTIVE COMPENSATION</B>
</DIV>

<DIV align="left">
<A name="115"></A>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Executive Compensation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following summary compensation table indicates the cash and non-cash compensation earned
during the fiscal year ended March&nbsp;31, 2009 by our current Chief Executive Officer, Chief Financial
Officer and each of the other two highest paid executives, if any, whose total compensation
exceeded $100,000 during the fiscal year ended March&nbsp;31, 2009.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SUMMARY COMPENSATION TABLE</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="19%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Non-Equity</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Incentive Plan</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Nonqualified Deferred</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Name and</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Option</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Compen-</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>All Other</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>principal</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Salary</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Bonus</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Awards</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Awards</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>sation</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Earnings</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Total</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>position</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Year</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>($)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>($)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>($)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>($)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>($)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>($)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>($)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>($)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Yiyou Ran, CEO (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">220,558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">220,558</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Michael Wang, CFO (2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Mr.&nbsp;Ran became our Chief Executive Officer on February&nbsp;12, 2010, in
connection with our acquisition of Gold Industry (further described
above under the &#147;History and Corporate Structure&#148;). Accordingly, Mr.
Ran&#146;s compensation for the periods indicated was paid by Foguang. For
reporting purposes, the amount has been converted to U.S. dollars at
the conversion rate of RMB 6.84 to one U.S. dollar.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Mr.&nbsp;Wang became our current Chief Financial Officer on February&nbsp;12,
2010, in connection with our acquisition of Gold Industry (further
described above under the &#147;History and Corporate Structure&#148;).</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None of our executive officers received, nor do we have any arrangements to pay out, any
bonus, stock awards, option awards, non-equity incentive plan compensation, or non-qualified
deferred compensation.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->50<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Director Compensation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the year ended March&nbsp;31, 2010, none of the members of our board of directors received
compensation for his service as a director. Effective April&nbsp;1, 2010, Tim Hudson, Michael Rudolph
and Lihua Zhang have each executed and delivered a director offer letter with the Company. Under
the terms of the agreements, Mr.&nbsp;Hudson, Mr.&nbsp;Rudolph and Mr.&nbsp;Zhang shall be entitled to the annual
compensation of $12,500 shares of the Company&#146;s common stock.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Potential Payments Upon Termination or Change-in-Control</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SEC regulations state that we must disclose information regarding agreements, plans or
arrangements that provide for payments or benefits to our executive officers in connection with any
termination of employment or change in control of the company. We currently have no employment
agreements with any of our executive officers, nor any compensatory plans or arrangements resulting
from the resignation, retirement or any other termination of any of our executive officers, from a
change-in-control, or from a change in any executive officer&#146;s responsibilities following a
change-in-control. As a result, we have omitted this table.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Employment Agreements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently have no employment agreements with any of our executive officers.
</DIV>
<DIV align="left">
<A name="116"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SECURITY OWNERSHIP OF CERTAIN<BR>
BENEFICIAL OWNERS AND MANAGEMENT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information regarding the beneficial ownership of our common
stock as of April&nbsp;7, 2010, for each of the following persons:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>each of our directors and each of the named executive officers in the
&#147;Management&#151;Executive Compensation&#148; section of this prospectus;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all directors and named executive officers as a group; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>each person who is known by us to own beneficially 5% or more of our
common stock after the change of control transaction.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Beneficial ownership is determined in accordance with the rules of the SEC. Unless otherwise
indicated in the table, the persons and entities named in the table have sole voting and sole
investment power with respect to the shares set forth opposite the shareholder&#146;s name. Unless
otherwise indicated, the address of each beneficial owner listed below is 239 Jianxin Road,
Jiangbei District, Chongqing, PRC 400000. The percentage of class beneficially owned set forth
below is based on 12,659,762 shares of common stock outstanding on
April&nbsp;7, 2010.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Percentage of</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>beneficially</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>class beneficially</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Named executive officers and directors:</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>owned</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>owned</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Yiyou Ran (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">8,800,000      </TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">69.51</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Michael Wang (2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">*</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Jianquan Chen (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">8,800,000      </TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">69.51</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tim Hudson (3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">All directors and executive officers as a group (5 persons)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,830,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">69.75</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>5% Shareholders:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Holy Golden Industry Limited (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">8,800,000      </TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">69.51</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Less than 1%.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>The address of Holy Golden Industry Limited (&#147;Holy Golden&#148;) is Scotia
Centre, 4th Floor, P.O. Box 2804, George Town, Grand Cayman KY 1-1112,
Cayman Islands. The shareholders of Holy Goldenare Yiyou Ran
(24.00%), Jianquan Chen (27.9%), Chaoyang Fu (16.74%), Yang Chen
(24.36%) and Mingsheng Liu (7.00%), with Yiyou Ran,</TD>
</TR>

</TABLE>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">





<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Jianquan Chen and Yang Chen also as its directors. As such they are deemed to have or
share investment control over Holy Golden&#146;s portfolio. The number of
shares of common stock reported herein as beneficially owned by Mr.
Ran and Mr.&nbsp;Chen are held by Holy Golden, which they in turn own
indirectly through their respective ownership of Holy Golden.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Mr.&nbsp;Wang&#146;s address is: 2500 Citywest Boulevard, Suite&nbsp;304, Houston, Texas 77402.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Dr.&nbsp;Hudson&#146;s address is: 3007 North Ben Wilson, Victoria, Texas 77901.</TD>
</TR>

</TABLE>


<DIV align="left">
<A name="117"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Share Exchange Agreement</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;12, 2010 (&#147;Closing&#148; or the &#147;Closing Date&#148;), we executed the Exchange Agreement
with Gold Industry and the Cayman Shareholder. Gold Industry owns 100% of Gold Holy, which in turn
owns 100% of Ran Ji, a WFOE under the laws of the PRC. On the Closing Date of the Exchange
Agreement, we issued 8,800,000 shares of our common stock to the Cayman Shareholder in exchange for
100% of the issued and outstanding common stock of Gold Industry. Immediately after the Closing,
we had a total of 11,000,000 shares of Common Stock outstanding, with the Cayman Shareholder owning
approximately 80% of our total issued and outstanding common shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our Management</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Yiyou Ran, our Chairman and Chief Executive Officer, is also a director of Gold Industry,
Gold Holy, Ran Ji and Foguang. Mr.&nbsp;Jianquan Chen, a member of our board of directors, is also a
director of Gold Industry, Gold Holy, Ran Ji and Foguang.
</DIV>
<DIV align="left">
<A name="118"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>DESCRIPTION OF SECURITIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following information describes our capital stock and provisions of our articles of
incorporation and our bylaws, both in effect as of the date of this prospectus. This description
is only a summary. The reader should also refer to our articles of incorporation and bylaws that
have been incorporated by reference of filed with the SEC as exhibits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>General</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our authorized capital stock consists of 100,000,000 shares of common stock at a par value of
$0.001 per share and 20,000,000 shares of preferred stock at a par value of $0.001 per share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Common Stock</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders of our common stock are entitled to one vote per share on all matters submitted to a
vote of the stockholders, including the election of directors. Generally, all matters to be voted
on by stockholders must be approved by a majority of the votes entitled to be cast by all shares of
our common stock that are present in person or represented by proxy. Holders of our common stock
representing fifty percent (50%) of our capital stock issued, outstanding, and entitled to vote,
represented in person or by proxy, are necessary to constitute a quorum at any meeting of our
stockholders. A vote by the holders of a majority of our outstanding shares is required to
effectuate certain fundamental corporate changes such as liquidation, merger or an amendment to our
certificate of incorporation. Our certificate of incorporation does not provide for cumulative
voting in the election of directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The holders of shares of our common stock will be entitled to such cash dividends as may be
declared from time to time by our board of directors from funds available therefore. Upon
liquidation, dissolution, or winding up, the holders of shares of our common stock will be entitled
to receive pro rata all assets available for distribution to such holders after distribution of
assets to the holders of Series&nbsp;A Preferred. In the event of any merger or consolidation with or
into another company in connection with which shares of our common stock are converted into or
exchangeable for shares of stock, other securities, or property (including cash), all holders of
our common stock will be entitled to receive the same kind and amount of shares of stock and other
securities and property (including cash).Holders of our common stock have no pre-emptive rights and no
conversion rights, and there are no redemption provisions applicable to our common stock.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Preferred Stock</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors, without further stockholder approval, may issue preferred stock in one
or more classes or series as the board may determine from time to time. Each such class or series
shall be distinctly designated. All shares of any one class or series of the preferred stock shall
be alike in every particular, except that there may be different dates from which dividends
thereon, if any, shall be cumulative, if made cumulative. The voting powers, designations,
preferences, limitations, restrictions and relative rights thereof, if any, may differ from those
of any and all other series outstanding at any time. Our board of directors has express authority
to fix (by resolutions adopted prior to the issuance of any shares of each particular class or
series of preferred stock) the number of shares, voting powers, designations, preferences,
limitations, restrictions and relative rights of each such class or series. The rights granted to
the holders of any series of preferred stock could adversely affect the voting power of the holders
of common stock and issuance of preferred stock may delay, defer or prevent a change in our
control.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Common Stock Purchase Warrants</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Warrants entitle each Purchaser to purchase up to 50% of the number of shares of Common
Stock acquired by such Purchaser at the Initial Closing, and expire on the fourth anniversary of
their issuance date (the &#147;<U>Termination Date</U>&#148;). The Warrants may be exercised on a &#147;cashless&#148;
basis if, at any time after the first anniversary of their issuance date, there is no registration
statement in effect registering the resale of the shares of Common Stock underlying the Warrants,
provided that all Warrants outstanding on Termination Date shall be exercised on a cashless basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The exercise price of the Warrants is $4.10 per share, subject to certain adjustments:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If the Registrant issue rights to all holders of Common Stock
(but not to holders of the Warrants) to purchase shares of Common
Stock at a price per share less than the VWAP at the record date for
determination of stockholders entitled to receive such rights, the
exercise price shall be adjusted by multiplying a fraction, of which
the denominator shall be the number of Common Stock outstanding on
the issuance date of such rights plus the number of Common Stock
issuable under such rights, and of which the numerator shall be the
number of Common Stock outstanding on the issuance date of such
rights plus the number of Common Stock issuable under such rights at
the VWAP;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>If the Registrant distribute evidence of its indebtedness or
assets or rights to purchase any security other than the Common
Stock to all holders of Common Stock (but not to holders of the
Warrants), the exercise price shall be adjusted by multiplying a
fraction, of which the denominator shall be the VWAP on the record
date for determination of stockholders entitled to receive such
distribution, and of which the numerator shall be such VWAP minus
the then per share fair market value at such record date of the
portion of such evidence of indebtedness or assets so distributed to
one outstanding share of Common Stock as determined in good faith by
the Registrant&#146;s board of directors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The exercise price is subject to proportional adjustment for
stock splits, stock dividends, recapitalizations and the like; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For purposes of the Warrants, VWAP is defined as the volume
weighted average price of the Common Stock on the date a price
determination is required.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>MARKET PRICE OF AND DIVIDENDS ON COMMON EQUITY<BR>
AND RELATED SHAREHOLDER MATTERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Market Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s shares are currently listed on Over-The-Counter Bulletin Board under the symbol
&#147;CGPI.OB.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Holders</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of April&nbsp;7, 2010, there were approximately 58 shareholders of record of our common stock
based upon the shareholders&#146; listing provided by our transfer agent. Our transfer agent is
American Registrar &#038; Transfer Co. The transfer agent&#146;s address is 342 East 900 South, Salt Lake
City, UT 84111 and its phone number is (801)&nbsp;363-9065.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Dividends</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have never paid cash dividends on our common stock. We intend to keep future earnings, if
any, to finance the expansion of our business, and we do not anticipate that any cash dividends
will be paid in the foreseeable future. Our future
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">payment of dividends will depend on our earnings, capital requirements, expansion plans, financial condition and other relevant factors
that our board of directors may deem relevant. Our retained earnings deficit currently limits our
ability to pay dividends.
</DIV>

<DIV align="left">
<A name="119"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON<BR>
ACCOUNTING AND FINANCIAL DISCLOSURE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As reported in a Form 8-K Current Report filed with the SEC on April&nbsp;8, 2010, we changed our
independent accountants from Webb &#038; Company, P.A. to PMB Helin Donovan, LLP effective April&nbsp;5,
2010.
</DIV>
<DIV align="left">
<A name="120"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION<BR>
FOR SECURITIES ACT LIABILITIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Delaware Law</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;145 of the Delaware General Corporation Law authorizes a court to award, or a
corporation&#146;s board of directors to grant, indemnity to directors and officers in terms
sufficiently broad to permit indemnification for liabilities, including reimbursement for expenses
incurred, arising under the Securities Act. Pursuant to the provisions of Section&nbsp;145, a
corporation may indemnify its directors, officers, employees, and agents as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;(a) A corporation shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action by or in the right
of the corporation) by reason of the fact that the person is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys&#146; fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by the person in connection with such action, suit or
proceeding if the person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe the person&#146;s conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the
person did not act in good faith and in a manner which the person reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that the person&#146;s conduct was unlawful.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;A corporation shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by reason of the fact that the person
is or was a director, officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses (including attorneys&#146; fees)
actually and reasonably incurred by the person in connection with the defense or settlement of such
action or suit if the person acted in good faith and in a manner the person reasonably believed to
be in or not opposed to the best interests of the corporation and except that no indemnification
shall be made in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery
or the court in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or
such other court shall deem proper.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;To the extent that a present or former director or officer of a corporation has been
successful on the merits or otherwise in defense of any action, suit or proceeding referred to in
subsections (a)&nbsp;and (b)&nbsp;of this section, or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys&#146; fees) actually and reasonably
incurred by such person in connection therewith.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Any indemnification under subsections (a)&nbsp;and (b)&nbsp;of this section (unless ordered by a
court) shall be made by the corporation only as authorized in the specific case upon a
determination that indemnification of the present or former director, officer, employee or agent is
proper in the circumstances because the person has met the applicable standard of conduct set forth
in subsections (a)&nbsp;and (b)&nbsp;of this section. Such determination shall be made, with respect to a
person who is a director or officer at
the time of such determination, (1)&nbsp;by a majority vote of the directors who are not parties to
such action, suit or proceeding, even though less than a quorum, or (2)&nbsp;by a committee of such
directors designated by majority vote of such directors, even though less than a quorum, or (3)&nbsp;if
there are no such directors, or if such directors so direct, by independent legal counsel in a
written opinion, or (4)&nbsp;by the stockholders.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;Expenses (including attorneys&#146; fees) incurred by an officer or director in defending any
civil, criminal, administrative or investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit or proceeding upon receipt of
an undertaking by or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified by the corporation as
authorized in this section. Such expenses (including attorneys&#146; fees) incurred by former directors
and officers or other employees and agents may be so paid upon such terms and conditions, if any,
as the corporation deems appropriate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;The indemnification and advancement of expenses provided by, or granted pursuant to, the
other subsections of this section shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action in such person&#146;s
official capacity and as to action in another capacity while holding such office.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;A corporation shall have power to purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such person&#146;s status as
such, whether or not the corporation would have the power to indemnify such person against such
liability under this section.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;For purposes of this section, references to &#147;the corporation&#148; shall include, in addition
to the resulting corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers, and employees or agents,
so that any person who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this section with respect to the resulting or
surviving corporation as such person would have with respect to such constituent corporation if its
separate existence had continued.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;For purposes of this section, references to &#147;other enterprises&#148; shall include employee
benefit plans; references to &#147;fines&#148; shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to &#147;serving at the request of the corporation&#148;
shall include any service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee or agent with respect
to an employee benefit plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner such person reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a manner &#147;not opposed to
the best interests of the corporation&#148; as referred to in this section.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;The indemnification and advancement of expenses provided by, or granted pursuant to, this
section shall, unless otherwise provided when authorized or ratified, continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;The Court of Chancery is hereby vested with exclusive jurisdiction to hear and determine
all actions for advancement of expenses or indemnification brought under this section or under any
bylaw, agreement, vote of stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporation&#146;s obligation to advance expenses (including
attorneys&#146; fees).&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Charter Provisions and Other Arrangements of the Registrant</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently have not adopted any indemnification provisions in our certificate of
incorporation or bylaws for our officers and directors.
</DIV>
<DIV align="left">
<A name="108"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXPERTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The consolidated financial statements of Gold Industry Limited and its subsidiaries as of
March&nbsp;31, 2009 and 2008 appearing in this prospectus and registration statement have been audited
by PMB Helin Donovan, LLP, an independent
registered public accounting firm, as set forth in their report appearing herein, and are
included in reliance upon such reports given on the authority of such firm as experts in auditing
and accounting.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->55<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="107"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>LEGAL MATTERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Richardson &#038; Patel LLP has passed upon the validity of the shares of common stock to be
sold in this offering.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>WHERE YOU CAN FIND MORE INFORMATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have filed with the Securities and Exchange Commission a registration statement on Form
S-1, together with any amendments and related exhibits, under the Securities Act, with respect to
our shares of common stock offered by this prospectus. The registration statement contains
additional information about us and our shares of common stock that we are offering in this
prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We file annual, quarterly and current reports and other information with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended. Our Securities and
Exchange Commission filings are available to the public over the Internet at the Securities and
Exchange Commission&#146;s website at http://www.sec.gov. You may also read and copy any document we
file at the Securities and Exchange Commission&#146;s public reference room located at 100 F Street,
N.E., Washington, D.C. 20549. Please call the Securities and Exchange Commission at 1-800-SEC-0330
for further information on the public reference rooms and their copy charges. Access to those
electronic filings is available as soon as practicable after filing with the Securities and
Exchange Commission. You may also request a copy of those filings, excluding exhibits, from us at
no cost. Any such request should be addressed to us at: 239 Jianxin Road, Jiangbei District,
Chongqing, PRC 400000.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->56<!-- /Folio -->
</DIV>



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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOLD INDUSTRY LIMITED<BR>
Consolidated Financial Statements<BR>
March&nbsp;31, 2009 and 2008</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TABLE OF CONTENTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">PAGE</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#300">Report of Independent Registered Public Accounting Firm</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#301">Consolidated Balance Sheets</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#302">Consolidated Statements of Operations and Comprehensive Income</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#303">Consolidated Statements of Stockholders&#146; Equity</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#304">Consolidated Statements of Cash Flows</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#305">Consolidated Notes to the Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->57<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><IMG src="g22861g2286101.gif" alt="(PMB HELIN DONOVAN)">
</DIV>

<DIV align="left">
<A name="300"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>REPORT OF INDEPENDENT REGISTER PUBLIC ACCOUNTING FIRM</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To the Board of Directors and Stockholders
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have audited the accompanying consolidated balance sheets of Gold Industry Limited (the
&#147;Company&#148;) as of March&nbsp;31, 2009 and 2008, and the related consolidated statement of operations and
comprehensive income, stockholders&#146; equity, and cash flows for the years ended March&nbsp;31, 2009 and
2008. Gold Industry Limited&#146;s management is responsible for these consolidated financial
statements. Our responsibility is to express an opinion on these consolidated financial statements
based on our audits.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit 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 purpose of expressing an opinion on the effectiveness of the
Company&#146;s internal control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements, assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Gold Industry Limited as of March&nbsp;31, 2009 and 2008
and the results of its operations and its cash flows for the years ended March&nbsp;31, 2009 and 2008 in
conformity with accounting principles generally accepted in the United States of America.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">/s/ PMB Helin Donovan, LLP
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">PMB Helin Donovan, LLP<BR>
Spokane, WA<BR>
February&nbsp;11, 2010

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->58<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">GOLD INDUSTRY LIMITED
</DIV>

<DIV align="left">
<A name="301"></A>
</DIV>
<!-- xbrl,bs -->
<DIV align="center" style="font-size: 10pt">CONSOLIDATED BALANCE SHEETS</DIV>

<!-- xbrl,body -->
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">March 31,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">March 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">ASSETS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">CURRENT ASSETS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,392,961</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,719,620</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">184,212</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Inventory</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,178,182</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,094,083</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Advances to suppliers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">285,678</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Related party receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">374,744</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,435</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107,885</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">TOTAL CURRENT ASSETS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,713,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,766,222</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">PROPERTY AND EQUIPMENT, NET</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,629,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,313,200</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">OTHER NON-CURRENT ASSETS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Prepayments to suppliers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,101,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Prepayment to related party suppliers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,406,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">828,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,592</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,144</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Intangible assets , net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,319,893</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,178,052</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">TOTAL OTHER NON-CURRENT ASSETS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,672,979</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,194,196</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">TOTAL ASSETS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">34,015,430</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">30,273,618</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">LIABILITIES &#038; STOCKHOLDERS &#146; EQUITY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">CURRENT LIABILITIES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">308,637</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,858,109</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Welfare payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96,932</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94,484</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Taxes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">845,525</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">582,319</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Other accrued payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,523</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107,945</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Related party payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">735,289</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Short-term notes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,471,455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,409,036</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">TOTAL CURRENT LIABILITIES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,777,072</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,787,182</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">LONG-TERM LIABILITIES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Deferred revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,463,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,720,889</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">TOTAL LONG-TERM LIABILITIES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,463,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,720,889</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">STOCKHOLDERS&#146; EQUITY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Common stock, 100,000,000 shares authorized,
$0.121 par value; 100,000,000 shares
issued and outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,100,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Retained earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,834,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">337,374</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Accumulated other comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,839,922</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,328,173</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">TOTAL STOCKHOLDERS&#146; EQUITY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,774,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,765,547</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">TOTAL LIABILITIES AND STOCKHOLDERS&#146; EQUITY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">34,015,430</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">30,273,618</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="center" style="font-size: 10pt; margin-top: 18pt">The accompanying notes are an integral part of these consolidated financial statements.
</DIV>
<!-- /xbrl,bs -->



<P align="center" style="font-size: 10pt"><!-- Folio -->59<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">GOLD INDUSTRY LIMITED
</DIV>

<DIV align="left">
<A name="302"></A>
</DIV>
<!-- xbrl,op -->
<DIV align="center" style="font-size: 10pt">CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME</DIV>

<!-- xbrl,body -->
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">For the fiscal year ended</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">For the fiscal year ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">March 31, 2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">March 31, 2008</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">REVENUES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cemetery</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">17,647,785</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19,878,718</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Park construction services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">665,935</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,242,921</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,313,720</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,121,639</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">COST OF GOODS SOLD</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cemetery</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,445,153</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,974,241</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Park construction services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">493,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,720,686</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total cost of goods sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,938,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,694,927</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">GROSS PROFIT</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,374,867</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,426,712</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">EXPENSES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Selling expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">426,415</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">519,546</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">General &#038; administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,045,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,166,191</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">TOTAL EXPENSES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,471,475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,685,737</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">INCOME FROM OPERATIONS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,903,392</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,740,975</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">OTHER INCOME (EXPENSES)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">255,893</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">296,364</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(235,208</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(204,075</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,361</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,051</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Rental income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">260,286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">239,776</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Non-operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,772</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,502</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">TOTAL OTHER INCOME</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">283,560</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">330,614</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">INCOME BEFORE INCOME TAXES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,186,952</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,071,589</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">INCOME TAXES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,689,693</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,346,605</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">NET INCOME</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,497,259</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,724,984</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">OTHER COMPREHENSIVE INCOME</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign currency translation adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">511,749</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,978,746</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">COMPREHENSIVE INCOME</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">511,749</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,978,746</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="center" style="font-size: 10pt; margin-top: 18pt">The accompanying notes are an integral part of these consolidated financial statements.
</DIV>
<!-- /xbrl,op -->


<P align="center" style="font-size: 10pt"><!-- Folio -->60<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOLD INDUSTRY LIMITED</B>
</DIV>

<DIV align="left">
<A name="303"></A>
</DIV>
<!-- xbrl,se -->
<DIV align="center" style="font-size: 10pt"><B>CONSOLIDATED STATEMENTS OF STOCKHOLDERS&#146; EQUITY</B></DIV>
<!-- xbrl,body -->

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Common Stock</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Accumulated Other</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Accumulated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Comprehensive</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Stockholders&#146;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">of Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000">Retained Earnings</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">income (loss)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000">Equity</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, March&nbsp;31, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12,100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(5,387,610      </TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(650,573      </TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,061,817</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income for the year ended March&nbsp;31, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,724,984</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,724,984</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency translation adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,978,746</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,978,746</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, March&nbsp;31, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12,100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">337,374</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,328,173</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,765,547</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income for the year ended March&nbsp;31, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,497,259</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,497,259</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency translation adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">511,749</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">511,749</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, March&nbsp;31, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12,100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,834,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,839,922</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19,774,555</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="center" style="font-size: 10pt; margin-top: 18pt">The accompanying notes are an integral part of these consolidated financial statements.
</DIV>
<!-- /xbrl,se -->


<P align="center" style="font-size: 10pt"><!-- Folio -->61<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOLD INDUSTRY LIMITED</B>
</DIV>

<DIV align="left">
<A name="304"></A>
</DIV>
<!-- xbrl,cf -->
<DIV align="center" style="font-size: 10pt"><B>CONSOLIDATED STATEMENTS OF CASH FLOWS</B></DIV>

<!-- xbrl,body -->
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">For the fiscal</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">For the fiscal</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">year ended</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">year ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">March 31, 2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">March 31, 2008</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CASH FLOWS FROM OPERATING ACTIVITIES:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,497,259</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,724,984</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustments to reconcile net loss to
net cash used by operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">422,774</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">656,191</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Changes in assets and liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">122,828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">256,088</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventory</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,915,901</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,817,205      </TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(828,124      </TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">480,840</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Advances to suppliers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">263,703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">674,316</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Related party receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">373,572</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,461</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(136,445      </TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Prepayments to suppliers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,101,970      </TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Prepayments to related party suppliers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,406,400      </TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">448</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(16,144      </TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,549,472      </TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(547,858      </TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Welfare payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,448</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,477</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Taxes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">263,206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,711      </TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other accrued payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(53,422      </TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,017,769      </TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Related party payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(735,289      </TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">735,289</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Deferred revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(257,086      </TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(803,451      </TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net cash provided by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">980,826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">237,063</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CASH FLOWS FROM INVESTING ACTIVITIES:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Capital expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,479,650      </TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net cash used in investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,479,650      </TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CASH FLOWS FROM FINANCING ACTIVITIES:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net cash provided by financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net (decrease)&nbsp;increase in cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(498,824      </TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">237,063</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effects of foreign exchange translation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172,165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">833,782</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents, beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,719,620</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">648,775</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents, end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,392,961</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,719,620</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="center" style="font-size: 10pt; margin-top: 18pt">The accompanying notes are an integral part of these consolidated financial statements.
</DIV>
<!-- /xbrl,cf -->


<P align="center" style="font-size: 10pt"><!-- Folio -->62<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOLD INDUSTRY LIMITED</B>
</DIV>

<DIV align="left">
<A name="305"></A>
</DIV>
<!-- xbrl,ns -->


<DIV align="center" style="font-size: 10pt"><B>Notes to the Consolidated Financial Statements</B></DIV>

<DIV align="center" style="font-size: 10pt"><B>March&nbsp;31, 2009 and 2008</B></DIV>


<!-- xbrl,n -->
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 1 &#150; ORGANIZATION AND DESCRIPTION OF BUSINESS</B>
</DIV>

<!-- xbrl,body -->
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Gold Industry Limited (&#147;Gold Industry&#148; or the &#147;Company&#148;) was incorporated on September&nbsp;11, 2009,
under the laws of the Cayman Islands. The Company has no substantive operations of its own except
for its 100% holding of Gold Holy Industry Limited (&#147;Gold Holy&#148;), which was incorporated on
September&nbsp;29, 2009, under the laws of Hong Kong Special Administrative Region. In turn, Gold Holy
owns 100% of Chongqing Ran Ji Industry Co., Ltd. (&#147;Chongqing Ran Ji&#148;), a company established under
the laws of the People&#146;s Republic of China (&#147;China&#148; or the &#147;PRC&#148;). Through Chongqing Ran Ji, the
Company controls Chongqing Foguang Tourism Development (Group) Co., Ltd. (&#147;Chongqing Foguang&#148;), a
private provider of cemetery plots and related services in and around Chongqing, China.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Chongqing Ran Ji was established in the PRC on December&nbsp;15, 2009 as a wholly foreign owned
enterprise (&#147;WFOE&#148;), with registered capital of $25,000,000, with the first $3,000,000 to be
contributed by March&nbsp;20, 2010, and the balance within two years. Chongqing Ran Ji has no
substantive operations of its own except for entering into certain exclusive agreements with
Chongqing Foguang and performing its obligations thereunder.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Chongqing Foguang, a PRC limited liability company established on October&nbsp;10, 2002 with registered
capital of 100,000,000 Renminbi (&#147;RMB&#148;), is engaged in selling death care products and services,
and holds the licenses and approvals necessary to operate its business in China.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">PRC law currently has limits on foreign ownership of companies. To comply with these foreign
ownership restrictions, on December&nbsp;15, 2009, Chongqing Ran Ji entered into following exclusive
agreements with Chongqing Foguang and its owners (collectively the &#147;Contractual Arrangements&#148;):
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(1) <U>Consulting Services Agreement</U>, through which Chongqing Ran Ji has the right to advise,
consult, manage and operate Chongqing Foguang, and collect and own all of its net profits;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(2) <U>Operating Agreement</U>, through which Chongqing Ran Ji has the right to recommend director
candidates and appoint the senior executives of Chongqing Foguang, approve any transactions that
may materially affect the assets, liabilities, rights or operations of Chongqing Foguang, and
guarantee the contractual performance by Chongqing Foguang of any agreements with third parties, in
exchange for a pledge by Chongqing Foguang of its accounts receivable and assets;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(3) <U>Proxy Agreement</U>, under which the owners of Chongqing Foguang have vested their
collective voting control over Chongqing Foguang to Chongqing Ran Ji and will only transfer their
respective equity interests in Chongqing Foguang to Chongqing Ran Ji or its designee(s);
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(4) <U>Option Agreement</U>, under which the owners of Chongqing Foguang have granted Chongqing
Ran Ji the irrevocable right and option to acquire all of their equity interests in Chongqing
Foguang; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(5) <U>Equity Pledge Agreement</U>, under which the owners of Chongqing Foguang have pledged all
of their rights, titles and interests in Chongqing Foguang to Chongqing Ran Ji to guarantee the
performance of their obligations under the Consulting Services Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As a result of these Contractual Arrangements, which obligates Chongqing Ran Ji to absorb a
majority of the risk of loss from Chongqing Foguang&#146;s activities and enable Chongqing Ran Ji to
receive a majority of its expected residual returns, the Company believes that Chongqing Foguang is
a Variable Interest Entity (&#147;VIE&#148;) under FASB Interpretation No.&nbsp;46R (&#147;FIN 46R&#148;), &#147;Consolidation of
Variable Interest Entities, an Interpretation of ARB No.&nbsp;51&#148;, because the owners of Chongqing
Foguang do not have the characteristics of a controlling financial interest and the Company should
be considered the primary beneficiary of Chongqing Foguang. Accordingly, the Company consolidates
Chongqing Foguang&#146;s results, assets and liabilities in the accompanying consolidated financial
statements.
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->63<!-- /Folio -->
</DIV>




<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<!-- xbrl -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOLD INDUSTRY LIMITED<BR>
Notes to the Consolidated Financial Statements<BR>
March&nbsp;31, 2009 and 2008</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 1 &#151; ORGANIZATION AND DESCRIPTION OF BUSINESS (continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s fiscal year-end is March&nbsp;31st.
</DIV>


<!-- xbrl,n -->
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 2 &#151; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</B>
</DIV>

<!-- xbrl,body -->
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This summary of significant accounting policies is presented to assist the understanding of the
consolidated financial statements. The consolidated financial statements and notes are
presentations of the Company&#146;s management, which is responsible for their integrity and
objectivity. These accounting policies conform to the accounting principles generally accepted in
the United States of America and have been consistently applied in the preparation of the
consolidated financial statements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>The reporting entities</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s consolidated financial statements reflect the activities of the Company and the
following subsidiaries and VIE:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Subsidiaries/VIE</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Incorporated in</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Percentage of Ownership</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gold Holy Industry Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Hong Kong</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">100.00%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Chongqing Ran Ji</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PRC</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">100.00%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Chongqing Foguang</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PRC</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">VIE by Contractual Arrangements</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Basis of presentation</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying consolidated financial statements are prepared in accordance with generally
accepted accounting principles in the United States of America. The Company&#146;s functional currency
is the Chinese Renminbi (&#147;CNY&#148; or &#147;RMB&#148;), however, the accompanying consolidated financial
statements have been re-measured and presented in United States Dollars ($).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Consolidation of variable interest entities</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In accordance with FASB Interpretation No.&nbsp;46R, Consolidation of Variable Interest Entities (&#147;FIN
46R&#148;), variable interest entities (VIEs) are generally entities that lack sufficient equity to
finance their activities without additional financial support from other parties or whose equity
holders lack adequate decision making ability. All VIEs with which the Company is involved must be
evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary
beneficiary is required to consolidate the VIE for financial reporting purposes.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has concluded that Chongqing Foguang is a VIE and that the Company&#146;s indirect wholly
owned subsidiary, Chongqing Ran Ji, absorbs a majority of the risk of loss from the activities of
Chongqing Foguang, and enable the Company to receive a majority of its expected residual returns.
Accordingly, the Company accounts for Chongqing Foguang as a VIE.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Because the Company and Chongqing Foguang are under common control, the initial measurement of the
assets and liabilities of Chongqing for the purpose of consolidation by the Company is at book
value. The Company has had no other business activities except for the entering into of the
exclusive agreements with Chongqing Ran Ji and its shareholders. For the purpose of presenting the
financial statements on a consistent basis, the consolidated financial statements are prepared as
if the Company had been in existence since April&nbsp;1, 2007 and throughout each of the two-year period
ended March&nbsp;31, 2009.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The consolidated financial statements include the financial statements for the company, its
subsidiary and the variable interest entity, Chongqing Foguang. All significant inter-company
transactions and balances between the Company, its subsidiary and the variable interest entity are
eliminated upon consolidation.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->64<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<!-- xbrl -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOLD INDUSTRY LIMITED<BR>
Notes to the Consolidated Financial Statements<BR>
March&nbsp;31, 2009 and 2008</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 2 &#151; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Use of estimates</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The preparation of consolidated financial statements in conformity with generally accepted
accounting principles of the United States of America requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and accompanying notes.
Significant estimates reflected in the Company&#146;s consolidated financial statements include the fair
value of financial instruments, the useful lives of and impairment for property and equipment,
estimates of intangible assets, and accruals for taxes due. Actual results could differ from those
estimates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Fair value of financial instruments</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s fair value of financial instruments, including cash, accounts receivable, accounts
payable, accrued expenses and short term notes payable approximated carrying values because of the
short-term nature of these instruments.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Fair Value Measurements</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In September&nbsp;2006, the FASB issued SFAS No.&nbsp;157, <I>Fair Value Measurements </I>(&#147;SFAS No.&nbsp;157&#148;). SFAS No.
157 defines fair value as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date. It also
established a framework for measuring fair value in accordance with GAAP and expands disclosures
about fair value measurement. SFAS No.&nbsp;157 applies to other accounting pronouncements that require
or permit fair value measurements. SFAS No.&nbsp;157 was effective for fiscal years beginning after
November&nbsp;15, 2007. However, a FASB Staff Position issued in February&nbsp;2008, delayed the
effectiveness of SFAS No.&nbsp;157 for one year, but only as applied to nonfinancial assets and
nonfinancial liabilities. The adoption of SFAS No.&nbsp;157 on April&nbsp;1, 2008 did not have an impact on
the Company&#146;s financial position, results of operations or cash flows. The Company will adopt the
provisions of SFAS No.&nbsp;157 as it relates to nonfinancial assets and nonfinancial liabilities on
April&nbsp;1, 2009. The adoption is not expected to have any material impact on the Company&#146;s financial
position, results of operations or cash flows.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as
of the measurement date. The classification of fair value measurements within the hierarchy is
based upon the lowest level of input that is significant to the measurement. The three levels are
defined as follows:
</DIV>







<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Level 1 &#151; Valuation is based upon quoted prices (unadjusted)&nbsp;in active markets for identical assets or liabilities.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Level 2 &#151; Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other
inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full
term of the financial instrument.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Level 3 &#151; Valuation is based upon unobservable inputs that are significant to the fair value measurement.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s financial assets as of March&nbsp;31, 2009 and 2008 consist of cash and cash equivalents.
In February&nbsp;2007, the FASB issued SFAS No.&nbsp;159, <I>The Fair Value Option for Financial Assets and
Financial Liabilities (&#147;S</I>FAS No.&nbsp;159&#148;). SFAS No.&nbsp;159 permits companies to choose to measure at fair
value certain financial instruments and other items that are not currently required to be measured
at fair value. SFAS No.&nbsp;159 is effective for fiscal years beginning after November&nbsp;15, 2007. The
Company adopted SFAS No.&nbsp;159 on April&nbsp;1, 2008 and elected not to measure any additional financial
instruments or other items at fair value.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Cash and cash equivalents</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the purpose of the statement of cash flows, the Company considers all highly liquid investments
with maturities of three months or less to be cash equivalents.
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOLD INDUSTRY LIMITED<BR>
Notes to the Consolidated Financial Statements<BR>
March&nbsp;31, 2009 and 2008</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 2 &#151; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Concentrations of credit risk</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Financial instruments, which potentially subject the Company to concentrations of credit risk,
consist of cash and cash equivalents and accounts receivables. The Company extends credit based on
an evaluation of the customer&#146;s financial condition, generally without collateral. Exposure to
losses on receivables is principally dependent on each customer&#146;s financial condition. The Company
periodically reviews its trade receivables in determining its allowance for doubtful accounts. The
Company maintains the majority of its cash at PRC government owned banks and has some cash on hand.
The total cash balances in the state-owned banks are not insured by the banks within the People&#146;s
Republic of China. The Company has not experienced any losses on such accounts.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Country risk</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As the Company&#146;s principal operations are conducted in the PRC, the Company is subject to special
considerations and significant risks not typically associated with companies in the US. These risks
include, among others, risks associated with the political, economic and legal environments and
foreign currency exchange limitations encountered in the PRC. The Company&#146;s results of operations
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, among other things.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition, all of the Company&#146;s transactions undertaken in the PRC are denominated in Chinese
Yuan Renminbi (CNY), which must be converted into other currencies before remittance out of the PRC
may be considered. Both the conversion of CNY into foreign currencies and the remittance of foreign
currencies abroad require the approval of the PRC government.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Accounts receivable</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Accounts receivable are carried at original invoice amount less an estimate made for doubtful
receivables based on a review of all outstanding amounts on a monthly basis. Management&#146;s judgment
and estimates are made in connection with establishing the allowance for doubtful accounts.
Specifically, the Company analyzes the aging of accounts receivable balances, historical bad debts,
customer concentrations, customer credit-worthiness, current economic trends and changes in the
customer payment terms. Significant changes in customer concentration or payment terms,
deterioration of customer credit-worthiness or weakening in economic trends could have a
significant impact on the collectability of receivables and the Company&#146;s operating results. If the
financial condition of the Company&#146;s customers were to deteriorate, resulting in an impairment of
their ability to make payments, the Company will write off 100% as bad debt. In management&#146;s
opinion, no allowance for doubtful accounts is necessary at March&nbsp;31, 2009 and 2008.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Inventory</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Inventory consists of completed cemetery plots ready for sale. Inventory includes all direct costs
associated with land development and construction of cemetery plots, including interest, costs of
land use rights based on units of production and other carryings costs incurred. Inventory is
valued at the lower of cost or market (determined on a weighted average cost basis) or net
realizable value. Management compares the cost of inventory with the net realizable value and an
allowance is made for impairment in the value of inventory if lower than cost. As of March&nbsp;31,
2009 and 2008, no impairment was recorded.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->66<!-- /Folio -->
</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOLD INDUSTRY LIMITED<BR>
Notes to the Consolidated Financial Statements<BR>
March&nbsp;31, 2009 and 2008</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 2 &#151; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Property and equipment</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Property and equipment are carried at cost. The cost of repairs and maintenance is expensed as
incurred; major replacements and improvements are capitalized. When assets are retired or disposed
of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or
losses are included in income in the year of disposition. Depreciation and amortization are
computed on the straight-line method over the following estimated useful lives of the related
assets, which range from five to thirty years, and are as follows:
</DIV>







<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="50%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
</TR>
<TR></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Buildings and structures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">25 to 30 years</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Machinery and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5 to 10 years</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Office equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5 years</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Long-lived asset</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Long-lived assets and certain identifiable intangibles held and used by the Company are reviewed
for impairment whenever events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Events relating to recoverability may include significant unfavorable
changes in business conditions, recurring losses, or a forecasted inability to achieve break-even
operating results over an extended period. The Company&#146;s management assesses the recoverability of
its long-lived assets by determining whether the depreciation and amortization of long-lived assets
over their remaining lives can be recovered through projected undiscounted future cash flows. The
amount of long-lived asset impairment if any, is measured based on fair value and is charged to
operations in the period in which long lived assets impairment is determined by management. At
March&nbsp;31, 2009 and 2008, the Company&#146;s management believes there was no impairment of its long
lived assets. There can be no assurance however, that market conditions will not change or demand
for the Company&#146;s services will continue, which could result in impairment of long-lived assets in
the future.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Intangible assets</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company reviews annually for impairment of intangible assets in accordance with Statement of
Financial Accounting Standards No.&nbsp;144, Accounting for Impairment on Disposed of Long lived Assets.
In accordance with SFAS 144, an impairment loss will be recognized if carrying amount of the
intangible asset is not recoverable and its carrying amount exceeds its value. As of March&nbsp;31, 2009
and 2008, no impairment was recorded.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Income taxes</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company accounts for income taxes in accordance with SFAS No.&nbsp;109, &#147;Accounting for Income
Taxes.&#148; Deferred taxes are provided on the liability method whereby deferred tax assets are
recognized for deductible temporary differences, and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the differences between the reported
amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than not that some
portion or all of the deferred tax assets will be realized. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company is
governed by the Income Tax Law of the People&#146;s Republic of China and local income tax laws (the
&#147;PRC Income Tax Law&#148;). Pursuant to the PRC Income Tax Law, enterprises are subject to tax at a
statutory rate of 25% . The local government in the PRC has provided companies various incentives
to encourage economic development in the region. Such incentives include reduced tax rates and
other measures. (See NOTE 15).
</DIV>


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</DIV>

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOLD INDUSTRY LIMITED<BR>
Notes to the Consolidated Financial Statements<BR>
March&nbsp;31, 2009 and 2008</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 2 &#151; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Contributed property</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company received land use rights from the PRC for a period of xx years. The Company recorded
the fair value of the land use rights as an intangible asset and deferred revenue based upon,
Statement of Financial Accounting Standards (SFAS)&nbsp;No.&nbsp;116, &#147;Accounting for Contributions Received
and Contributions Made.&#148; This Statement establishes standards of financial accounting and
reporting for contributions received and contributions made. Accounting for contributions is an
issue primarily for not-for-profit organizations because contributions are a significant source of
revenues for many of those organizations. However, this Statement applies to all entities
(not-for-profit organizations and business enterprises) that receive or make contributions.
Contributions received are recognized as revenues or gains in the period received and as assets,
decreases of liabilities, or expenses depending on the form of the benefits received. Contributions
received are measured at their fair values. (See NOTES 7 and 9).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Revenue recognition</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company recognizes revenue in accordance with Staff Accounting Bulletin No.&nbsp;104, Revenue
Recognition (&#147;SAB104&#148;), which superseded Staff Accounting Bulletin No.&nbsp;101, Revenue Recognition in
Financial Statements (&#147;SAB101&#148;). SAB 104 requires that four basic criteria must be met before
revenue can be recognized: (1)&nbsp;persuasive evidence of an arrangement exists; (2)&nbsp;delivery has
occurred; (3)&nbsp;the selling price is fixed and determinable; and (4)&nbsp;collectability is reasonably
assured. Determination of criteria (3)&nbsp;and (4)&nbsp;are based on management&#146;s judgments regarding the
fixed nature of the selling prices of the products delivered and the collectability of those
amounts.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has two revenue sources including the following revenue recognition policies:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company recognizes revenue from the sale of cemetery plots when it is realized or realizable
and earnings process is complete. In general, the Company records revenue when the cemetery plot
successfully completed, title has passed to the customer in accordance with the terms of the sale
and consideration is given. The costs associated with cemetery products revenue are the costs to
convert the land into the actual burial plots. Additionally direct selling costs incurred in
selling the cemetery plots are recorded in cost of goods sold.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Park construction income is recognized when the Company is contracted to provides services for
third party clients. These services include the construction of sidewalks, pagodas, landscaping
and other structures for parks. These projects are not associated with the Company&#146;s sales of
cemetery plots. Revenue is recognized upon the completion of the park, and the project has been
approved by the customer and collection is assured. The costs associated with the park
construction income are raw materials purchased for that specific project and services performed by
the Company recorded in costs of goods sold.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Cost of goods sold</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cost of goods sold includes the capitalized costs of cemetery plots sold and services provided by
the Company to third parties for development and construction of parks.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Other operating costs</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other operating expenses include management and staff salaries, administrative and facilities
related expenses, and other expenses to the non-production functions of the business are expensed
as incurred.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Advertising</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Advertising is expensed as incurred. Advertising expenses were included in selling expenses and
amounted to $426,415 and $519,546 for the years ended March&nbsp;31, 2009 and 2008, respectively.
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOLD INDUSTRY LIMITED<BR>
Notes to the Consolidated Financial Statements<BR>
March&nbsp;31, 2009 and 2008</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 2 &#151; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Foreign currency translation</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of March&nbsp;31, 2009 and 2008, the accounts of the Company were maintained, and its consolidated
financial statements were expressed in the RMB. Such consolidated financial statements were
translated into U.S. Dollars in accordance with Statement of Financial Accounts Standards (&#147;SFAS&#148;)
No.&nbsp;52, &#147;Foreign Currency Translation,&#148; with the RMB as the functional currency. According to SFAS
52, all assets and liabilities were translated at the exchange rate on the consolidated balance
sheet date, stockholder&#146;s equity are translated at the historical rates and statement of operations
items are translated at the weighted average exchange rate for the year. The resulting translation
adjustments are reported under other comprehensive income in accordance with SFAS No.&nbsp;130,
&#147;Reporting Comprehensive Income.&#148; The exchange rate for the conversion of one US Dollar to RMB was
6.8256 and 7.0022 at March&nbsp;31, 2009 and 2008.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Transaction gains and losses that arise from exchange rate fluctuations on transactions
denominated in a currency other than the functional currency are included in the results of
operations as incurred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In accordance with Statement of Financial Accounting Standards No.&nbsp;95, &#147;Statement of Cash Flows,&#148;
cash flows from the Company&#146;s operations is calculated based upon the local currencies using the
average translation rate. As a result, amounts related to assets and liabilities reported on the
statement of cash flows will not necessarily agree with arithmetical changes in the corresponding
balances on the consolidated balance sheet.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Other comprehensive income</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">SFAS No.&nbsp;130, <I>Reporting Comprehensive Income</I>, established standards for the reporting and display
of comprehensive income or loss and its components in a full set of general purpose financial
statements. Comprehensive income or loss is defined as the change in equity during a period
resulting from transactions and other events and circumstances from non-owner sources. The
Company&#146;s total comprehensive income or loss consists of net unrealized income or loss from foreign
currency translation adjustments. The Company has presented comprehensive income or loss on the
Statement of Operations and Comprehensive Income.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the years ended March&nbsp;31, 2009 and 2008, unrealized foreign currency translation gain was
$511,749 and $1,978,746, respectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Segment reporting</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Operating segments are defined by SFAS No.&nbsp;131, <I>&#147;Disclosures about Segments of an Enterprise and
Related Information&#148; </I>(&#147;SFAS No.&nbsp;131&#148;), as components of an enterprise about which separate
financial information is available that is evaluated regularly by the chief operating decision
maker, or decision-making group, in deciding how to allocate resources and in assessing
performance. For the years ended March&nbsp;31, 2009 and 2009, the Company derived almost all of its
revenue from the sale of burial plots.
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<!-- xbrl -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOLD INDUSTRY LIMITED<BR>
Notes to the Consolidated Financial Statements<BR>
March&nbsp;31, 2009 and 2008</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 2 &#151; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Recent accounting pronouncements</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In December&nbsp;2007, the FASB issued SFAS No.&nbsp;141(R), <I>Business Combinations </I>(&#147;SFAS No.&nbsp;141(R)&#148;). SFAS
No.&nbsp;141(R) applies to any transaction or other event that meets the definition of a business
combination. Where applicable, SFAS No.&nbsp;141(R) establishes principles and requirements for how the
acquirer recognizes and measures identifiable assets acquired, liabilities assumed, non-controlling
interest in the acquiree and goodwill or gain from a bargain purchase. In addition, SFAS No.&nbsp;141(R)
determines what information to disclose to enable users of the consolidated financial statements to
evaluate the nature and financial effects of the business combination. In April&nbsp;2009, the FASB
issued FSP 141(R)-1, <I>Accounting for Assets Acquired and Liabilities Assumed in a Business
Combination That Arise from Contingencies</I>, (&#147;FSP 141(R)-1&#148;), which modified the guidance in SFAS
No.&nbsp;141(R) related to contingent assets and contingent liabilities. Also in December&nbsp;2007, the FASB
issued Statement No.&nbsp;160, <I>Non-controlling Interests in Consolidated Financial Statements </I>(&#147;SFAS No.
160&#148;). This Statement amends Accounting Research Bulletin No.&nbsp;51, <I>Consolidated Financial
Statements, </I>to establish accounting and reporting standards for the non-controlling interest in a
subsidiary and for the deconsolidation of a subsidiary. SFAS No.&nbsp;141(R), as modified by FSP
141(R)-1, and SFAS No.&nbsp;160 are required to be adopted simultaneously and are effective for the
first annual reporting period beginning on or after December&nbsp;15, 2008 with earlier adoption being
prohibited. The Company will adopt both SFAS No.&nbsp;141(R), as modified by FSP 141(R)-1, and SFAS No.
160 on April&nbsp;1, 2009. The Company has no non-controlling interests, therefore the adoption of SFAS
No.&nbsp;160 is not expected to have any impact. The adoption of SFAS No.&nbsp;141(R), as modified by FSP
141(R)-1, will change the Company&#146;s accounting treatment for business combinations on a prospective
basis.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In March&nbsp;2008, the FASB issued Statement of Financial Accounting Standards (&#147;SFAS&#148;) No.&nbsp;161,
Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No.
133, which requires additional disclosures about the objectives of the derivative instruments and
hedging activities, the method of accounting for such instruments under SFAS No.&nbsp;133 and its
related interpretations, and a tabular disclosure of the effects of such instruments and related
hedged items on the Company&#146;s financial position, financial performance, and cash flows. SFAS No.
161 is effective for periods beginning January&nbsp;1, 2009. The adoption of SFAS No.&nbsp;161 did not have a
material impact on the Company&#146;s consolidated financial statements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In April&nbsp;2008, the FASB issued FSP No.&nbsp;FAS 142-3, &#147;Determination of the Useful Life of Intangible
Assets.&#148; FSP No.&nbsp;FAS 142-3 amends the factors that should be considered in developing renewal or
extension assumptions used to determine the useful life of a recognized intangible asset under SFAS
No.&nbsp;142, &#147;Goodwill and Other Intangible Assets.&#148; SFAS No.&nbsp;142-3 is effective for periods beginning
January&nbsp;1, 2009. The adoption of SFAS No.&nbsp;142-3 did not have a material impact on the Company&#146;s
consolidated financial statements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In December&nbsp;2008, the FASB issued FSP No.&nbsp;FAS 132(R)-1, &#147;Employers&#146; Disclosures about
Postretirement Benefit Plan Assets&#148;. This FSP requires additional disclosures about plan assets for
sponsors of defined benefit pension and postretirement plans including expanded information
regarding investment strategies, major categories of plan assets, and concentrations of risk within
plan assets. Additionally, this FSP requires disclosures similar to those required under SFAS No.
157 with respect to the fair value of plan assets such as the inputs and valuation techniques used
to measure fair value and information with respect to classification of plan assets in terms of the
hierarchy of the source of information used to determine their value. The disclosures under this
FSP are required for annual periods ending after December&nbsp;15, 2009. The Company does not expect
that this standard would have a material impact on the consolidated financial statements since the
Company does not have Postretirement Benefit Plan Assets.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">


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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOLD INDUSTRY LIMITED<BR>
Notes to the Consolidated Financial Statements<BR>
March&nbsp;31, 2009 and 2008</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 2 &#151; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In April&nbsp;2009, the FASB issued FSP FAS 157-4, <I>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 </I>(&#147;FSP 157-4&#148;). FSP 157-4 provides guidance regarding how to determine whether there
has been a significant decrease in the volume and level of activity for the asset or liability when
compared with normal market activity for the asset or liability. In such situations, an entity may
conclude that transactions or quoted prices may not be determinative of fair value, and may adjust
the transactions or quoted prices to arrive at the fair value of the asset or liability. FSP 157-4
is effective for interim and annual reporting periods ending after June&nbsp;15, 2009, with early
adoption permitted for periods ending after March&nbsp;15, 2009, and must be applied prospectively. The
Company does not expect the adoption of FAS 157-4 on April&nbsp;1, 2009 to have any material impact on
its consolidated financial statements or required disclosures.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In May&nbsp;2009, the FASB issued Statement No.&nbsp;165, &#147;Subsequent Events&#148; (&#147;SFAS 165&#148;), which establishes
general standards of accounting for, and requires disclosure of, events that occur after the
consolidated balance sheet date but before consolidated financial statements are issued or are
available to be issued. The Company adopted the provisions of SFAS 165 for the quarter ended June
30, 2009. The adoption of this standard will not have a material impact on the Company&#146;s
consolidated financial statements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In June&nbsp;2009, the FASB issued SFAS No.&nbsp;166, &#147;Accounting for Transfers of Financial Assets&#148; (&#147;SFAS
166&#148;). SFAS 166 is a revision to SFAS No.&nbsp;140, &#147;Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities&#148;, and will require more information about transfers of
financial assets and where companies have continuing exposure to the risk related to transferred
financial assets. It eliminates the concept of a qualifying special purpose entity, changes the
requirements for derecognizing financial assets, and requires additional disclosure. This standard
is effective for interim and annual periods ending after November&nbsp;15, 2009. The Company will adopt
SFAS 166 on January&nbsp;1, 2010 and is currently evaluating the potential impact on the consolidated
financial statements when implemented.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In June&nbsp;2009, the FASB issued SFAS No.&nbsp;167, Amendments to FASB Interpretation No.&nbsp;46(R<I>) </I>(SFAS 167).
The amendments include: (1)&nbsp;the elimination of the exemption for qualifying special purpose
entities, (2)&nbsp;a new approach for determining who should consolidate a variable-interest entity, and
(3)&nbsp;changes to when it is necessary to reassess who should consolidate a variable-interest entity.
SFAS 167 is effective for the first annual reporting period beginning after November&nbsp;15, 2009 and
for interim periods within that first annual reporting period. The Company will adopt SFAS 167 in
fiscal 2010 and is evaluating the impact it will have on the results of the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In June&nbsp;2009, the Financial Accounting Standards Board (&#147;FASB&#148;) issued Statement of Financial
Accounting Standards (&#147;SFAS&#148;) No.&nbsp;168, &#147;The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles&#148; (&#147;SFAS 168&#148;). SFAS 168 establishes the FASB
Accounting Standards Codification (the &#147;Codification&#148;) as the single source of authoritative
nongovernmental U.S. GAAP. The Codification is effective for interim and annual periods ending
after September&nbsp;15, 2009. The adoption of this standard will not have a material impact on the
Company&#146;s consolidated financial statements.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->71<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOLD INDUSTRY LIMITED<BR>
Notes to the Consolidated Financial Statements<BR>
March&nbsp;31, 2009 and 2008</B>
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 3 &#151; INVENTORY</B>
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cemetery plots and other inventories at March&nbsp;31, 2009 and 2008 consisted of the following:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic plots</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,885,623</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">770,905</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Standard plots</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,818,225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,249,644</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deluxe plots</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,904,877</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,348,506</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Artist plots</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">565,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,721,621</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Small tools and supplies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,407</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,178,183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,094,083</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 4 &#151; PREPAID EXPENSES</B>
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Prepaid expenses at consist of the following as of:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="56%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 1px solid #000000">Year Ended March 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 0px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 0px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">828,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During 2009, the Company signed an agreement to pay the government of the PRC, (&#147;the Government&#148;),
$835,055, which as to be used by the Government for the purpose of building homes for the villagers
and relocation costs of the farmers in ChangShou Jiang Nan. The villagers and farmers were
originally located in LongQiao and QianFo villages. The cash received from the Company was
redistributed to the local farmers and villagers by the Government as a payment for relocating them
to ChangShou Jiang Nan. The Company also agreed to clear land for the building of these homes.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The prepaid expenses are amortized over 20&nbsp;years per the terms of the contract. For the year ended
March&nbsp;31, 2009, the Company had recorded $6,926 which was recorded as cost of goods sold.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 5 &#151; PREPAYMENTS TO SUPPLIERS</B>
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Prepayments to suppliers consist of the following as of:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="56%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 1px solid #000000">Year Ended March 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 0px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 0px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepayments on contracts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,845,870</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepayments on construction</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,662,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,508,370</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In April&nbsp;2008, the Company had recorded a prepayment for a purchase commitment in the amount of
$1,403,400 (87% of the contract) for cemetery headstones to ChongQing Kun Yu Stone Wood Company, a
related party. Under the term of the contract, ChongQing Kun Yu Stone Wood Company is to finish the
production, and deliver the products at the specified time defined by the Company. The Company is
to check and inspect the quality, if there is any quality issue with product, ChongQing Kun Yu
Stone Wood Company is to fix it and after final inspection, the Company is to keep the headstones.
The Company is to pay 5% of the total contract price upon signing the contract and upon final
inspection, and the Company is to pay in full within one month after delivery of the headstones to
the Company. As of March&nbsp;31, 2009, the Company had not taken possession of the cemetery headstones.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->72<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<!-- xbrl -->


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOLD INDUSTRY LIMITED<BR>
Notes to the Consolidated Financial Statements<BR>
March&nbsp;31, 2009 and 2008</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 5 &#151; PREPAYMENTS TO SUPPLIERS (continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In February&nbsp;2009, the Company had recorded a prepayment for a purchase commitment in the amount of
$442,470 (50% of the contract) for trees to ChongQing Chang Sheng Qiao Company, an unrelated third
party. The total price stated in the contract is $880,000 but the actual price is determined by
the actual quantity of trees delivered. ChongQing Chang Sheng Qiao Company is to organize tree
plants upon signing the contract, and deliver the tree plants to a location of the Company&#146;s choice
by January&nbsp;5, 2009. ChongQing Chang Sheng Qiao Company pays the delivery fees. The Company is to
pay 50% of the contract upon signing the contract and upon final inspection pay another 30% based
on the number of actual trees delivered and pay the balance within one (1)&nbsp;year. As of March&nbsp;31,
2009, the Company had not taken possession of the trees.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In February&nbsp;2009, the Company had recorded a prepayment related to a contract in the amount of
$3,662,500 (7% of the contract), for the construction of entertainment boats. ChongQing Bo Goa
Tourism Company, an unrelated third party and the Company to jointly develop the &#147;Liang Jiang
Yu&#147;project. This project includes development of a park near the lake as a way to attract more
tourism in the ChangShou area near the Chongqing Gui Yuan Cemetery. The current project is for
10-20 entertainment boats, a welcome center, (1)&nbsp;large sailboat and nine (9)&nbsp;docks. The
entertainment boat design and construction and docks are the responsibility of the Company and the
boats are expected to be put to use by December&nbsp;2010. The first stage constructions fees are
$77,645, which was paid by ChongQing Bo Goa Tourism Company. When the project is completed, the
Company will repay ChongQing Bo Goa Tourism the first stage construction fees of $77,645.
ChongQing Bo Goa Tourism Company is responsible for obtaining the government loans (government has
agreed) of approximately $2,930,107 with an annual interest payment of approximately $161,150. The
total price of the contract is approximately $51,275,000.
</DIV>


<!-- xbrl,n -->
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 6 &#151; PROPERTY AND EQUIPMENT</B>
</DIV>

<!-- xbrl,body -->
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Property and equipment consist of the following as of:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 1px solid #000000">Year Ended March 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 0px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 0px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Buildings and structures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,041,165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,395,797</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Machinery and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">855,542</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">833,935</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Office equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,873</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: accumulated depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,275,442</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(924,405</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,629,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,313,200</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Depreciation expenses for the years ended March&nbsp;31, 2009 and 2008 were $249,884 and $230,185,
respectively.
</DIV>


<!-- xbrl,n -->
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 7
&#151; INTANGIBLE ASSETS</B>
</DIV>

<!-- xbrl,body -->
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the PRC, land is the asset of the government. The Company maintains only use rights from local
governmental authorities. The Company has use rights on three properties consisting of
approximately 399,444 square meters of land with land usage rights with 100&nbsp;years expiration from
the date of grant. Land use rights are stated at the estimated fair value on the contribution date
less accumulated amortization and any impairment losses. The land use rights are amortized on
ratable basis based on the number of plots developed over the life of the rights.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->73<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<!-- xbrl -->


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOLD INDUSTRY LIMITED<BR>
Notes to the Consolidated Financial Statements<BR>
March&nbsp;31, 2009 and 2008</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 7
&#151; INTANGIBLE ASSETS (continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The intangible assets consist of the following as of:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 1px solid #000000">Year Ended March 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Land use rights</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,236,805</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12,922,073</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Accumulated units of production costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">916,912</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">744,021</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12,319,893</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12,178,052</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During 2005, the Company received land use rights which were contributed by the PRC. The land use
rights include Chongqing Gui Yuan Cemetery located in ChangShou, China, Under PRC&#146;s governmental
regulations, the government owns all land. However, PRC would not directly assign the land use
rights to the Company&#146;s management rather it assigned the land use rights to the Company as a
contribution. Therefore, the Company received the land use rights without giving the government any
consideration in return for the rights. At December&nbsp;31, 2005, the Company has recorded the fair
value of the land use rights under FAS 116, &#147;Accounting for Contributions Received and
Contributions Made&#148;, and the deferred revenue.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s management determined the fair market value of the land use rights based upon the
actual square meters of the useable land. The Company expects approximately 210,000 plots can be
developed and sold within the 399,444 square meters of land. The Company&#146;s average sales price per
plot ranges from $3,900 to $4,400.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At March&nbsp;31, 2009 and 2008, the Company reviewed the land use rights for impairment. The Company
determined that based upon the combined net income of $11,222,243 for the years ended March&nbsp;31,
2009 and 2008, value assigned to land use rights value is fully recoverable and no impairment to
its value.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The land use rights are expensed based upon the number of cemetery plots capitalized in inventory
using the units of production method. As of March&nbsp;31, 2009 and 2008, the Company expensed $172,890
and $432,006, respectively, which was included in the capitalized cost of inventory and expensed
through cost of goods sold.
</DIV>


<!-- xbrl,n -->
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 8 &#151; ACCRUED EXPENSES AND OTHER PAYABLES</B>
</DIV>

<!-- xbrl,body -->
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Accrued expenses and other payables consist of the following as of:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 1px solid #000000">Year Ended March 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Welfare payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">96,932</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">94,484</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Taxes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">845,525</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">582,319</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other accrued payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,523</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107,945</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">996,980</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">784,848</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">These expenses are accrued by the Company over time and paid to the People&#146;s Republic of China&#146;s
government.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->74<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<!-- xbrl -->


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOLD INDUSTRY LIMITED<BR>
Notes to the Consolidated Financial Statements<BR>
March&nbsp;31, 2009 and 2008</B>
</DIV>


<!-- xbrl,n -->
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 9 &#151; DEFERRED REVENUE</B>
</DIV>

<!-- xbrl,body -->
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2005, the Company recorded the deferred revenue related to land use rights that
were contributed to the Company by the People&#146;s Republic of China under FAS 116, &#147;Accounting for
Contributions Received and Contributions Made.&#148; As the Company sells cemetery plots, a portion of
the deferred revenue is recognized as other income based on the number of cemetery plots that the
Company sells during the year. As of March&nbsp;31, 2009 and 2008, the Company recorded $255,893 and
$296,364, respectively, as other income.
</DIV>


<!-- xbrl,n -->
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 10 &#151; SHORT-TERM NOTES PAYABLE</B>
</DIV>

<!-- xbrl,body -->
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Short term notes payable represent amounts due to a bank normally due within one year. The
principles of loans are due at maturity and the loans can be renewed each year.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Short-term &#151; Chongqing Rural Commercial Bank, secured by Chongqing bowling museum building, due on
demand, interest calculated at annual rate of 8.4% and matures March&nbsp;2010. As of March&nbsp;31, 2009
and 2008, the Company had a short-term notes payable in the amount of $439,500 and $428,400,
respectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Short-term &#151; Chongqing Rural Commercial Bank; secured by approximately 123,334 square meters for
land valued at approximately $882,353, due on demand, interest calculated at annual rate of 9.6%
and matures March&nbsp;2010. In the event of default on the short-term notes payable, the interest rate
is calculated at annual rate of 14.4%. As of March&nbsp;31, 2009 and 2008, the Company had a loan
payable of $2,031,955 and $1,980,636, respectively. The short-term notes payable contain covenants
that restrict the use of proceeds to develop the cemetery plots. If the Company fails to use the
money according to the stated purpose, the interest rate is calculated at 19.2%. As of March&nbsp;31,
2009 and 2008, the Company was in compliance with these covenants.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of March&nbsp;31, 2009 and 2008, the Company recorded interest expense in the amount of $235,208 and
$204,075 respectively, for these loans.
</DIV>


<!-- xbrl,n -->
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 11 &#151; RENTAL INCOME FROM OPERATING LEASE</B>
</DIV>

<!-- xbrl,body -->
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Rental income consists of the following as of:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 1px solid #000000">Year Ended March 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rental income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">335,969</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">309,496</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less Depreciation of building</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">-75,683</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">-69,720</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net rental income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">260,286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">239,776</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company rents its excess office space in ChangShou, China to a third party under a cancellable
operating lease that expires in December&nbsp;2009. The operating lease is automatically renewable each
year. The third party is responsible for all expenses related to occupancy of the building. As of
March&nbsp;31, 2009 and 2008, the lease called for monthly rental of approximately $28,000 and $25,800,
respectively.
</DIV>


<!-- xbrl,n -->
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 12 &#151; STOCKHOLDERS&#146; EQUITY</B>
</DIV>

<!-- xbrl,body -->
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Common Stock</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company is authorized to issue 100,000,000 shares of common stock, par value of $0.121 per
share. As of March&nbsp;31, 2009 and 2008, there were 100,000,000 share of common stock issued and
outstanding.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->75<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<!-- xbrl -->


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOLD INDUSTRY LIMITED<BR>
Notes to the Consolidated Financial Statements<BR>
March&nbsp;31, 2009 and 2008</B>
</DIV>


<!-- xbrl,n -->
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 13 &#151; CONCENTRATION RISK</B>
</DIV>

<!-- xbrl,body -->
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Suppliers</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company obtained approximately 100% and 34% of its inventory purchases from two suppliers for
the years ended March&nbsp;31, 2009 and 2008, respectively. Management believes other suppliers could
provide similar products and services on comparable terms in the area. Although alternate
suppliers may provide identical or similar products, such a change could result in delays and a
possible loss of sales. The Company did have long-term contracts with its suppliers for the years
ended March&nbsp;31, 2009 and 2008 (See Note 5).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Customers</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company did not have concentrations related to any of its customers and revenue for the years
ended March&nbsp;31, 2009 and 2008.
</DIV>


<!-- xbrl,n -->
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 14 &#151; CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS</B>
</DIV>

<!-- xbrl,body -->
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company had $0 and $372,174 in related party receivable from Gui Yuan Co. as of March&nbsp;31, 2009
and 2008, respectively. The related party receivable was unsecured, non-interest bearing and due
on demand. As of March&nbsp;31, 2009 and 2008, no interest income was recorded or received.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company had $1,406,400 and $0 in prepayments to a related party supplier as of March&nbsp;31, 2009
and 2008, respectively. See Note 5.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company had $0 and $735,289 in related party payables due to Shou-Cheng Co. as of March&nbsp;31,
2009 and 2008, respectively. The related party payables were unsecured, non-interest bearing and
due on demand. As of March&nbsp;31, 2009 and 2008, no interest expense was recorded or paid.
</DIV>


<!-- xbrl,n -->
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 15 &#151; INCOME TAXES</B>
</DIV>

<!-- xbrl,body -->
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The components of income (loss)&nbsp;before income tax consist of the following as of:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="6" style="border-bottom: 1px solid #000000">Year Ended March 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current Taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Chinese Operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,689,693</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,346,605</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,689,693</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,346,605</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Deferred tax assets and liabilities are provided for significant income and expense items
recognized in different years for tax and financial reporting purposes. The Company did not have
any temporary differences, which give rise to a net deferred tax asset for fiscal year end March
31, 2009 and 2008.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->76<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<!-- xbrl -->


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOLD INDUSTRY LIMITED<BR>
Notes to the Consolidated Financial Statements<BR>
March&nbsp;31, 2009 and 2008</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 15 &#151; INCOME TAXES (continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The reconciliation of the effective income tax rate to the statutory rate for year ended March&nbsp;31,
2009 and 2008 is as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Statutory income tax rate for funeral company</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">25</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">33</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax exemptions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.0</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4.0</TD>
    <TD nowrap>%)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effective income tax rate for funeral chains</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">24</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">29</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Beginning January&nbsp;1, 2008, the new PRC Enterprise Income Tax (&#147;EIT&#148;) law replaced the existing laws
for PRC Domestic Enterprises (&#147;DES&#148;) and PRC Foreign Invested Enterprises (&#147;FIEs&#148;).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The key changes are:
</DIV>








<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The new standard PRC EIT rate of 25% replaced the 33% rate currently
applicable to both DES and FIEs, except for High Tech companies who
pays a reduced rate of 15%; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Companies established before March&nbsp;16, 2007 will continue to enjoy tax
holiday treatment approved by local government for a grace period of
the next 5&nbsp;years or until the tax holiday term is completed, whichever
is sooner.</TD>
</TR>

</TABLE>
</DIV>

<!-- xbrl,n -->
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 16 &#151; COMMITMENTS AND CONTINGENCIES</B>
</DIV>

<!-- xbrl,body -->
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(a)&nbsp;Lease commitments
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has a lease commitment in relation to the land rights that were contributed to the
Company by People&#146;s Republic of China. The tenure of arable land is 22&nbsp;years, from January&nbsp;1, 2005
to December&nbsp;31, 2027. The tenure of non-arable land is 50&nbsp;years, from January&nbsp;1, 2005 to December
31, 2055.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company pays annual lease payment on or before October&nbsp;31st to the PRC and in turn the
PRC Government then pays the sixth villager group, Longqiaohu village according to the terms of the
contract, and the sixth villager group re-distributes the funds to each farmer household. This is
the consideration that was agreed upon by the farmers for relocating in ChangShou Jiang Nan.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The annual operating lease expense is capitalized as component of inventory and expensed through
cost of goods sold. As of March&nbsp;31, 2009 and 2008, the Company capitalized $22,679 and $22,106,
respectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Future minimum operating lease payments relating to the above lease is as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000">Years Ending March 31,</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,679</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,679</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2012</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,679</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2013</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,679</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2014</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,679</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">294,827</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">408,222</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->77<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<!-- xbrl -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOLD INDUSTRY LIMITED<BR>
Notes to the Consolidated Financial Statements<BR>
March&nbsp;31, 2009 and 2008</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 16 &#151; COMMITMENTS AND CONTINGENCIES (continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>(b)&nbsp;Litigation</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the ordinary course of business, the Company is generally subject to claims, complaints, and
legal actions. At March&nbsp;31, 2009 and 2008, management believes that the Company is not a party to
any action which would have a material impact on its financial condition, operations, or cash
flows.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(c) <U>Economic Environment</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Due to all of the Company&#146;s operations being conducted in the PRC, the Company is subject to
special considerations and significant risks not typically associated with companies operating in
the United States of America. These risks include, among others, the political, economic and legal
environments and foreign currency exchange. The Company&#146;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 and
remittance abroad, and rates and methods of taxation, among other things.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The granting of land use licenses is a common practice in China as all land is government-owned,
and, at present, no option to purchase land has ever been granted. Pursuant to the laws of China,
all land belongs to the government. However, as the Company does have very limited rights in
accordance with land use license for the cemetery plot development and corresponding sales of the
burial spaces.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(d)&nbsp;Retirement Plans
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company participates in a defined contribution retirement program organized by the relevant
local government authority in the PRC. Employees of the Company eligible to participate in the
retirement plan are entitled to retirement benefits from the plan. The local government authority
is responsible for the pension liabilities to these retired employees. The Company is required to
make monthly contributions to the retirement plan up to the time of retirement of the eligible
employees, at 20% of the local standard basic salaries. As of March&nbsp;31, 2009 and 2008, the Company
had no significant obligation apart from the contribution as stated above.
</DIV>


<!-- xbrl,n -->
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Note 17 &#151; SUBSEQUENT EVENT</B>
</DIV>

<!-- xbrl,body -->
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On February&nbsp;12, 2010, the Company and its shareholders entered into a Share Exchange Agreement with
Artistry Publications, Inc. (&#147;Artistry Publications&#148;). Pursuant to the terms of the Share Exchange
Agreement, Artistry Publications agreed to acquire all of the issued and outstanding capital stock
of the Company in exchange for 8,800,000 shares of Artistry Publications&#146; common stock. The
transactions contemplated under the Share Exchange Agreement closed on February&nbsp;12, 2010.
</DIV>

<!-- /xbrl,ns -->



<P align="center" style="font-size: 10pt"><!-- Folio -->78<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">GOLD INDUSTRY LIMITED
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 0pt">
CONSOLIDATED BALANCE SHEETS
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">December 31,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">March 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="2" style="border-bottom: 1px solid #000000">(unaudited)</TD>
    <TD>&nbsp;</TD>
    <TD style="border-bottom: 0px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ASSETS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">CURRENT ASSETS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,608,455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,392,961</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,384</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Inventory</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,014,045</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,178,182</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Advances to suppliers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,975</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Related party receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,172</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,551</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,435</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">TOTAL CURRENT ASSETS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,703,193</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,713,109</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">PROPERTY AND EQUIPMENT, NET</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,348,253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,629,342</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">OTHER NON-CURRENT ASSETS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Prepayments to suppliers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,948,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,101,970</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Prepayment to related party suppliers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,408,320</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,406,400</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">797,865</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">828,124</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,584</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,592</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Intangible assets , net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,937,561</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,319,893</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">TOTAL OTHER NON-CURRENT ASSETS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,109,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,672,979</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">TOTAL ASSETS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">44,160,476</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">34,015,430</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">LIABILITIES &#038; STOCKHOLDERS &#146; EQUITY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">CURRENT LIABILITIES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">103,947</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">308,637</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Welfare payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,064</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96,932</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Taxes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,416,638</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">845,525</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other accrued payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,523</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Short-term notes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,474,829</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,471,455</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">TOTAL CURRENT LIABILITIES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,152,734</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,777,072</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">LONG-TERM LIABILITIES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Deferred revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,138,267</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,463,803</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">TOTAL LONG-TERM LIABILITIES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,138,267</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,463,803</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">STOCKHOLDERS&#146; EQUITY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Common stock, 100,000,000 shares authorized,
$0.121 par value; 100,000,000 shares issued and
outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,100,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Retained earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,878,871</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,834,633</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accumulated other comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,890,604</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,839,922</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">TOTAL STOCKHOLDERS&#146; EQUITY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,869,475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,774,555</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">TOTAL LIABILITIES AND STOCKHOLDERS&#146; EQUITY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">44,160,476</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">34,015,430</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">The accompanying notes are an integral part of these consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->79<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">GOLD INDUSTRY LIMITED
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 0pt">
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">For three</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">For three</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">For nine months</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">For nine months</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">months ended</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">months ended</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">ended</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">ended</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Dec. 31, 2009</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Dec. 31, 2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Dec. 31, 2009</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Dec. 31, 2008</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(unaudited)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(unaudited)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(unaudited)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(unaudited)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">REVENUES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cemetery</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">11,403,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,969,952</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">26,467,501</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10,529,201</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Park construction
services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">657,212</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,403,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,969,952</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,467,501</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,186,413</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">COST OF GOODS SOLD</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cemetery</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,339,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,014,616</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,110,391</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,920,501</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Park construction
services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">487,233</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total cost of goods sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,339,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,014,616</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,110,391</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,407,734</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">GROSS PROFIT</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,063,777</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">955,336</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,357,110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,778,679</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">EXPENSES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Selling expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,641</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,238</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">142,982</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,024</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">General &#038;
administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">581,557</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">175,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,254,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">784,253</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">TOTAL EXPENSES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">643,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">194,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,397,182</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">868,277</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">INCOME FROM OPERATIONS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,420,579</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">760,498</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,959,928</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,910,402</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">OTHER INCOME (EXPENSES)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140,824</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,770</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">325,536</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">165,901</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(58,759</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(58,417</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(177,559</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(174,533</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,948</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">262</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,872</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,225</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Rental income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,969</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">196,304</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">192,310</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">TOTAL OTHER INCOME</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,451</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,584</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">352,153</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">186,903</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">INCOME BEFORE INCOME
TAXES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,571,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">800,082</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,312,081</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,097,305</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">INCOME TAXES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,414,552</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(67,002</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,267,843</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(836,642</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">NET INCOME</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,156,478</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">733,080</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10,044,238</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,260,663</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">OTHER COMPREHENSIVE
INCOME</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign currency
translation adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">402</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,072</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,682</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">511,749</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">COMPREHENSIVE INCOME</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,156,880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">750,152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10,094,920</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,772,412</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">The accompanying notes are an integral part of these consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->80<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">GOLD INDUSTRY LIMITED
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 0pt">

CONSOLIDATED STATEMENTS OF CASH FLOWS
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">For the nine</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">For the nine</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">months</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">ended</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Dec. 31,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Dec. 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">2008</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(unaudited)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">(unaudited)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CASH FLOWS FROM OPERATING ACTIVITIES:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net Income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,044,238</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,260,663</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Adjustments to reconcile net loss to
net cash used by operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">260,054</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">187,300</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Allocation of units of production</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(325,816</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(166,181</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Changes in assets and liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,468</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">127,776</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Inventory</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,355,757</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(523,587</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Advances to suppliers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">271,475</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Related party receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">382,338</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(38</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,784</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Prepayments to suppliers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,841,130</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Prepayments to related party suppliers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(674,820</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(205,111</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,526,447</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Taxes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">569,959</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(529,204</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other accrued payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,659</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(58,238</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Related party payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(755,370</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net cash used by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,213,593</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,489</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CASH FLOWS FROM INVESTING ACTIVITIES:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Capital expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,100,250</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net cash used in investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,100,250</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CASH FLOWS FROM FINANCING ACTIVITIES:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net cash provided by financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net increase (decrease)&nbsp;in cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,213,593</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,049,761</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effects of foreign exchange translation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,902</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,408</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents, beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,392,961</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,719,620</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents, end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,608,455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">672,268</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SUPPLIMENTAL CASH FLOW INFORMATION:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Interest paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">39,269</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">38,625</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Taxes Paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">817,954</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">144,075</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">The accompanying notes are an integral part of these consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->81<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOLD INDUSTRY LIMITED</B></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 0pt"><B>
Condensed Notes to the Consolidated Financial Statements<BR>
December&nbsp;31, 2009</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 1
&#151; BASIS OF PRESENTATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with U.S. generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article&nbsp;10 of Regulation&nbsp;S-X. Accordingly, they do not
include all of the information and footnotes required by U.S. generally accepted accounting
principles for complete annual financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair presentation have been
included. Operating results for the nine months ended December&nbsp;31, 2009 are not necessarily
indicative of the results that may be expected for the fiscal year ending March&nbsp;31, 2010 or for any
other future period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The condensed consolidated balance sheet at March&nbsp;31, 2009 has been derived from the audited
consolidated financial statements at that date but does not include all of the information and
footnotes required by generally accepted accounting principles for complete financial statements.
The accompanying unaudited condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes thereto for the fiscal
year ended March&nbsp;31, 2009.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 2 &#151; ORGANIZATION AND DESCRIPTION OF BUSINESS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Gold Industry Limited (&#147;Gold Industry&#148; or the &#147;Company&#148;) was incorporated on September&nbsp;11, 2009,
under the laws of the Cayman Islands. The Company has no substantive operations of its own except
for its 100% holding of Gold Holy Industry Limited (&#147;Gold Holy&#148;), which was incorporated on
September&nbsp;29, 2009, under the laws of Hong Kong Special Administrative Region. In turn, Gold Holy
owns 100% of Chongqing Ran Ji Industry Co., Ltd. (&#147;Chongqing Ran Ji&#148;), a company established under
the laws of the People&#146;s Republic of China (&#147;China&#148; or the &#147;PRC&#148;). Through Chongqing Ran Ji, the
Company controls Chongqing Foguang Tourism Development (Group) Co., Ltd. (&#147;Chongqing Foguang&#148;), a
private provider of cemetery plots and related services in and around Chongqing, China.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Chongqing Ran Ji was established in the PRC on December&nbsp;15, 2009 as a wholly foreign owned
enterprise (&#147;WFOE&#148;), with registered capital of $25,000,000, with the first $3,000,000 to be
contributed by March&nbsp;20, 2010, and the balance within two years. Chongqing Ran Ji has no
substantive operations of its own except for entering into certain exclusive agreements with
Chongqing Foguang and performing its obligations thereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Chongqing Foguang, a PRC limited liability company established on October&nbsp;10, 2002 with registered
capital of 100,000,000 Renminbi (&#147;RMB&#148;), is engaged in selling death care products and services,
and holds the licenses and approvals necessary to operate its business in China.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">PRC law currently has limits on foreign ownership of companies. To comply with these foreign
ownership restrictions, on December&nbsp;15, 2009, Chongqing Ran Ji entered into following exclusive
agreements with Chongqing Foguang and its owners (collectively the &#147;Contractual Arrangements&#148;):
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(1) <U>Consulting Services Agreement</U>, through which Chongqing Ran Ji has the right to advise,
consult, manage and operate Chongqing Foguang, and collect and own all of its net profits;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(2) <U>Operating Agreement</U>, through which Chongqing Ran Ji has the right to recommend director
candidates and appoint the senior executives of Chongqing Foguang, approve any transactions that
may materially affect the assets, liabilities, rights or operations of Chongqing Foguang, and
guarantee the contractual performance by Chongqing Foguang of any agreements with third parties, in
exchange for a pledge by Chongqing Foguang of its accounts receivable and assets;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(3) <U>Proxy Agreement</U>, under which the owners of Chongqing Foguang have vested their
collective voting control over Chongqing Foguang to Chongqing Ran Ji and will only transfer their
respective equity interests in Chongqing Foguang to Chongqing Ran Ji or its designee(s);
</DIV>




<P align="center" style="font-size: 10pt"><!-- Folio -->82<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOLD INDUSTRY LIMITED<BR>
Condensed Notes to the Consolidated Financial Statements<BR>
December&nbsp;31, 2009</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 2 &#151; ORGANIZATION AND DESCRIPTION OF BUSINESS (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(4) <U>Option Agreement</U>, under which the owners of Chongqing Foguang have granted Chongqing
Ran Ji the irrevocable right and option to acquire all of their equity interests in Chongqing
Foguang; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(5) <U>Equity Pledge Agreement</U>, under which the owners of Chongqing Foguang have pledged all
of their rights, titles and interests in Chongqing Foguang to Chongqing Ran Ji to guarantee the
performance of their obligations under the Consulting Services Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As a result of these Contractual Arrangements, which obligates Chongqing Ran Ji to absorb a
majority of the risk of loss from Chongqing Foguang&#146;s activities and enable Chongqing Ran Ji to
receive a majority of its expected residual returns, the Company believes that Chongqing Foguang is
a Variable Interest Entity (&#147;VIE&#148;) under Accounting Standards Codification 810, because the owners
of Chongqing Foguang do not have the characteristics of a controlling financial interest and the
Company should be considered the primary beneficiary of Chongqing Foguang. Accordingly, the Company
consolidates Chongqing Foguang&#146;s results, assets and liabilities in the accompanying consolidated
financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s fiscal year-end is March&nbsp;31st.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 3 &#151; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This summary of significant accounting policies is presented to assist the understanding of the
consolidated financial statements. The consolidated financial statements and notes are
presentations of the Company&#146;s management, which is responsible for their integrity and
objectivity. These accounting policies conform to the accounting principles generally accepted in
the United States of America and have been consistently applied in the preparation of the financial
statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>The reporting entities</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s consolidated financial statements of reflect the activities of the Company and the
following subsidiaries and VIE:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="27%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="23%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Percentage of</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Subsidiaries/VIE</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Incorporated in</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Ownership</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gold Holy Industry Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Hong Kong</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Chongqing Ran Ji</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PRC</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Chongqing Foguang</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PRC</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="right">VIE by Contractual Arrangements</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Basis of presentation</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying consolidated financial statements are prepared in accordance with generally
accepted accounting principles in the United States of America. The Company&#146;s functional currency
is the Chinese Renminbi (&#147;CNY&#148; or &#147;RMB&#148;), however, the accompanying consolidated financial
statements have been re-measured and presented in United States Dollars ($).
</DIV>





<P align="center" style="font-size: 10pt"><!-- Folio -->83<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOLD INDUSTRY LIMITED<BR>
Condensed Notes to the Consolidated Financial Statements<BR>
December&nbsp;31, 2009</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 3 &#151; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Consolidation of variable interest entities</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In accordance with Accounting Standards Codification (ASC)&nbsp;810 variable interest entities (VIEs)
are generally entities that lack sufficient equity to finance their activities without additional
financial support from other parties or whose equity holders lack adequate decision making ability.
All VIEs with which the Company is involved must be evaluated to determine the primary beneficiary
of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for
financial reporting purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has concluded that Chongqing Foguang is a VIE and that the Company&#146;s direct wholly
owned subsidiary, Chongqing Ran Ji, absorbs a majority of the risk of loss from the activities of
Chongqing Foguang, and enable the Company to receive a majority of its expected residual returns.
Accordingly, the Company accounts for Chongqing Foguang as a VIE.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Because the Company and Chongqing Foguang are under common control, the initial measurement of the
assets and liabilities of Chongqing for the purpose of consolidation by the Company is at book
value. The Company has had no other business activities except for the entering into of the
exclusive agreements with Chongqing Ran Ji and its shareholders. For the purpose of presenting the
financial statements on a consistent basis, the consolidated financial statements are prepared as
if the Company had been in existence since April&nbsp;1, 2007 and throughout each of the two-year
periods ended December&nbsp;31, 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The consolidated financial statements include the financial statements for the company, its
subsidiary and the variable interest entity, Chongqing Foguang. All significant inter-company
transactions and balances between the Company, its subsidiary and the variable interest entity are
eliminated upon consolidation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Use of estimates</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The preparation of consolidated financial statements in conformity with generally accepted
accounting principles of the United States of America requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial statements and
accompanying notes. Significant estimates reflected in the Company&#146;s consolidated financial
statements include the fair value of financial instruments, the useful lives of and impairment for
property and equipment, estimates of intangible assets, and accruals for taxes due. Actual results
could differ from those estimates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Fair value of financial instruments</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s fair value of financial instruments, including cash, accounts receivable, accounts
payable, accrued expenses and short term notes payable approximated carrying values because of the
short-term nature of these instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Inventory</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Inventory consists of completed cemetery plots ready for sale. Inventory includes all direct costs
associated with land development and construction of cemetery plots, including interest, costs of
land use rights based on units of production and other carryings costs incurred. Inventory is
valued at the lower of cost or market (determined on a weighted average cost basis) or net
realizable value. Management compares the cost of inventory with the net realizable value and an
allowance is made for impairment in the value of inventory if lower than cost. As of December&nbsp;31,
2009, no impairment was recorded.
</DIV>





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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOLD INDUSTRY LIMITED<BR>
Condensed Notes to the Consolidated Financial Statements<BR>
December&nbsp;31, 2009</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 3 &#151; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Contributed property</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company received land use rights from the PRC for a period of 20&nbsp;years from the initial
transaction date for the land use for a cemetery, but is renewable for 80 more years. The Company
recorded the fair value of the land use rights as an intangible asset and deferred revenue based
upon the authoritative accounting guidance for financial accounting and reporting for contributions
received and contributions made. Accounting for contributions is an issue primarily for
not-for-profit organizations because contributions are a significant source of revenues for many of
those organizations. However, the guidance applies to all entities (not-for-profit organizations
and business enterprises) that receive or make contributions. Contributions received are
recognized as revenues or gains in the period received and as assets, decreases of liabilities, or
expenses depending on the form of the benefits received. Contributions received are measured at
their fair values. (See NOTES 8 and 9).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Revenue recognition</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company recognizes revenue in accordance with U.S. GAAP which requires that four basic criteria
must be met before revenue can be recognized: (1)&nbsp;persuasive evidence of an arrangement exists; (2)
delivery has occurred; (3)&nbsp;the selling price is fixed and determinable; and (4)&nbsp;collectability is
reasonably assured. Determination of criteria (3)&nbsp;and (4)&nbsp;are based on management&#146;s judgments
regarding the fixed nature of the selling prices of the products delivered and the collectability
of those amounts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has two revenue sources including the following revenue recognition policies:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company recognizes revenue from the sale of cemetery plots when it is realized or realizable
and earnings process is complete. In general, the Company records revenue when the cemetery plot
successfully completed, title has passed to the customer in accordance with the terms of the sale
and consideration is given. The costs associated with cemetery products revenue are the costs to
convert the land into the actual burial plots. Additionally, direct selling costs incurred in
selling the cemetery plots are recorded in cost of goods sold.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Park construction income is recognized when the Company is contracted to provides services for
third party clients. These services include the construction of sidewalks, pagodas, landscaping
and other structures for parks. These projects are not associated with the Company&#146;s sales of
cemetery plots. Revenue is recognized upon the completion of the park, and the project has been
approved by the customer and collection is assured. The costs associated with the park
construction income are raw materials purchased for that specific project and services performed by
the Company recorded in costs of goods sold.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Cost of goods sold</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cost of goods sold includes the capitalized costs of cemetery plots sold and services provided by
the Company to third parties for development and construction of parks.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Other operating costs</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other operating expenses include management and staff salaries, administrative and facilities
related expenses, and other expenses to the non-production functions of the business are expensed
as incurred.
</DIV>






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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOLD INDUSTRY LIMITED<BR>
Condensed Notes to the Consolidated Financial Statements<BR>
December&nbsp;31, 2009</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 3 &#151; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Foreign currency translation</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2009, the accounts of the Company were maintained, and its consolidated
financial statements were expressed in the RMB. Such consolidated financial statements were
translated into U.S. Dollars in accordance with U.S. GAAP with the RMB as the functional currency.
In accordance with U.S. GAAP, all assets and liabilities were translated at the exchange rate on
the consolidated balance sheet date, stockholder&#146;s equity are translated at the historical rates
and statement of operations items are translated at the weighted average exchange rate for the
year. The resulting translation adjustments are reported under other comprehensive income. The
exchange rate for the conversion of one U.S. Dollar to RMB was $1.00 = 6.8172 yuan (or 1 yuan =
U.S. $0.1467), on December&nbsp;31, 2009. Transaction gains and losses that arise from exchange rate
fluctuations on transactions denominated in a currency other than the functional currency are
included in the results of operations as incurred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cash flows from the Company&#146;s operations is calculated based upon the local currencies using the
average translation rate. As a result, amounts related to assets and liabilities reported on the
statement of cash flows will not necessarily agree with arithmetical changes in the corresponding
balances on the consolidated balance sheet.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Other comprehensive income</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Current accounting guidance establishes standards for the reporting and display of comprehensive
income or loss and its components in a full set of general purpose consolidated financial
statements. Comprehensive income or loss is defined as the change in equity during a period
resulting from transactions and other events and circumstances from non-owner sources. The
Company&#146;s total comprehensive income or loss consists of net unrealized income or loss from foreign
currency translation adjustments. The Company has presented comprehensive income or loss on the
Statement of Operations and Comprehensive Income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the period ended December&nbsp;31, 2009 and the year ended March&nbsp;31, 2009, unrealized foreign
currency translation gains were $50,862 and $511,749, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Recent accounting pronouncements</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In January&nbsp;2010, the Financial Accounting Standards Board (&#147;FASB&#148;) issued an accounting standard
update, Fair Value Measurements and Disclosures (Topic 820), Improving Disclosures about Fair Value
Measurements. The Update would affect all entities that are required to make disclosures about
recurring and nonrecurring fair value measurements. The Board concluded that users will benefit
from improved disclosures in this Update and that the benefits of the increased transparency in
financial reporting will outweigh the costs of complying with the new requirements. The new
disclosures and clarifications of existing disclosures are effective for interim and annual
reporting periods beginning after December&nbsp;15, 2009, except for the disclosures about purchases,
sales, issuances, and settlements in the roll forward of activity in Level 3 fair value
measurements. Those disclosures are effective for fiscal years beginning after December&nbsp;30, 2010,
and for interim periods within those fiscal years. The adoption of this update for improving
disclosures about fair measurements, as codified in ASC 820 did not have any impact on the
Company&#146;s consolidated financial statements.
</DIV>






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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOLD INDUSTRY LIMITED<BR>
Condensed Notes to the Consolidated Financial Statements<BR>
December&nbsp;31, 2009</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 3 &#151; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In January&nbsp;2010, the Financial Accounting Standards Board (&#147;FASB&#148;) issued an accounting standard
update to address implementation issues related to the changes in ownership provisions in the
Consolidation&#151;Overall Subtopic (Subtopic 810-10) of the <I>FASB Accounting Standards Codification&#153;</I>,
originally issued as FASB Statement No.&nbsp;160<I>, Noncontrolling Interests in Consolidated Financial
Statements. </I>Subtopic 810-10 establishes the accounting and reporting guidance for noncontrolling
interests and changes in ownership interests of a subsidiary. An entity is required to
deconsolidate a subsidiary when the entity ceases to have a controlling financial interest in the
subsidiary. Upon deconsolidation of a subsidiary, an entity recognizes a gain or loss on the
transaction and measures any retained investment in the subsidiary at fair value. The gain or loss
includes any gain or loss associated with the difference between the fair value of the retained
investment in the subsidiary and its carrying amount at the date the subsidiary is deconsolidated.
In contrast, an entity is required to account for a decrease in its ownership interest of a
subsidiary that does not result in a change of control of the subsidiary as an equity transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">While Subtopic 810-10 provides general guidance on accounting for the decreases in ownership of a
subsidiary, including a deconsolidation, some constituents raised concerns that the guidance
appears to conflict with the gain or loss treatment or derecognition criteria of other U.S.
generally accepted accounting principles (GAAP), such as the guidance for sales of real estate,
transfers of financial assets, conveyances of oil and gas mineral rights, and transactions with
equity method investees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Some constituents also questioned whether the Board intended for the decrease in ownership
provisions of Subtopic 810-10 to apply to all entities because a subsidiary is defined as an
entity, including an unincorporated entity such as a partnership or trust, in which another entity,
known as its parent, holds a controlling financial interest. Those constituents were concerned that
such an interpretation could result in the accounting for a transaction being driven by its form
rather than its substance. For example, different accounting might be applied to a transaction
involving the same underlying assets depending on whether those assets were transferred in asset or
entity form.&#148; The amendments in this update are effective beginning in the period that an entity
adopts Statement 160 (now included in Subtopic 810-10). If an entity has previously adopted
Statement 160 as of the date of the amendments in this update are included in the
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Accounting Standards Codification, the amendments in this update are effective beginning in the
interim or annual reporting period ending on or after December&nbsp;31, 2009. The amendments in this
update should be applied retrospectively to the first period that an entity adopted 160. The
adoption of this update for the changes in the accounting and reporting guidance for noncontrolling
interests and changes in ownership interests of a subsidiary, as codified in ASC 810-10, did not
have any impact on the Company&#146;s financial statements.
</DIV>






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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOLD INDUSTRY LIMITED<BR>
Condensed Notes to the Consolidated Financial Statements<BR>
December&nbsp;31, 2009</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 3 &#151; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Recent accounting pronouncements (continued)</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In December&nbsp;2009, the Financial Accounting Standards Board (&#147;FASB&#148;) issued an accounting standard
update for improvements to financial reporting by enterprises involved with Variable Interest
Entities. The subsections clarify the application of the General Subsections to certain legal
entities in which equity investors do not have the characteristics of a controlling financial
interest or do not have sufficient equity at risk for the legal entity to finance its activities
without additional subordinated financial support &#091;FIN 46(R), paragraph 1, sequence 55.1&#093; or, as a
group, the holders of the equity investment at risk lack any one of the following three
characteristics: &#091;FIN 46(R), paragraph 1, sequence 55.2&#093;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">a. The power, through voting rights or similar rights, to direct the activities of a legal entity
that most significantly impact the entity&#146;s economic performance &#091;FIN 46(R), paragraph 1, sequence
55.2.1&#093;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">b. The obligation to absorb the expected losses of the legal entity &#091;FIN 46(R), paragraph 1,
sequence 55.2.2&#093;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">c. The right to receive the expected residual returns of the legal entity. &#091;FIN 46(R), paragraph 1,
sequence 55.2.3&#093;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The amendments in this update to the Accounting Standards Codification are the result of FASB
Statement No.&nbsp;167, Amendments to FASB Interpretation No.&nbsp;46(R). The adoption of this update to
improving the financial reporting by enterprises involved with Variable Interest Entities, as
codified in ASC 810, did not have any impact on the Company&#146;s consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In December&nbsp;2009, the Financial Accounting Standards Board (&#147;FASB&#148;) issued an accounting standard
update, Transfers and Servicing (Topic 860) Accounting for Transfers of Financial Assets. The
amendments in this update to the Accounting Standards Codification are the result of FASB Statement
No.&nbsp;166, <I>Accounting for Transfers of Financial Assets</I>. The adoption of this update did not have any
impact on the Company&#146;s consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other recent accounting pronouncements issued by the FASB, the American Institute of Certified
Public Accountants (&#147;AICPA&#148;), and the SEC did not or are not believed by management to have a
material impact on the Company&#146;s present condensed consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Segment reporting</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Operating segments are defined as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating decision maker, or
decision-making group, in deciding how to allocate resources and in assessing performance. For the
periods ended December&nbsp;31, 2009 and 2008, the Company derived almost all of its revenue from the
sale of burial plots.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Subsequent events</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company evaluates events that occur subsequent to the consolidated balance sheet date of
periodic reports, but before consolidated financial statements are issued for periods ending on
such consolidated balance sheet dates, for possible<u>&nbsp;</U>adjustment to such consolidated
financial statements or other disclosure. This evaluation generally occurs through the date at
which the Company&#146;s consolidated financial statements are electronically prepared for filing with
the SEC.
</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOLD INDUSTRY LIMITED<BR>
Condensed Notes to the Consolidated Financial Statements<BR>
December&nbsp;31, 2009</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 4 &#150; INVENTORY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cemetery plots and other inventories at December&nbsp;31, 2009 consisted of the following:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic plots</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,938,818</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Standard plots</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,781,171</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deluxe plots</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,563,383</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Artist plots</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">730,673</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,014,045</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 5 &#150; PREPAID EXPENSES</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepaid expenses at December&nbsp;31, 2009 consisted of the following:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">797,865</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During fiscal year ending 2009, the Company signed an agreement to pay the government of the PRC,
(&#147;the Government&#148;), $836,190, which as to be used by the Government for the purpose of building
homes for the villagers and relocation costs of the farmers in ChangShou Jiang Nan. The villagers
and farmers were originally located in LongQiao and QianFo villages. The cash received from the
Company was redistributed to the local farmers and villagers by the Government as a payment for
relocating them to ChangShou Jiang Nan. The Company also agreed to clear land for the building of
these homes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The prepaid expenses are amortized over 20&nbsp;years per the terms of the contract. For the period
ended December&nbsp;31, 2009, the Company recorded $31,390 in amortization which was recorded as cost of
goods sold.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 6 &#150; PREPAYMENTS TO SUPPLIERS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Prepayments to suppliers at December&nbsp;31, 2009 consisted of the following:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepayments on contracts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,848,420</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepayments on construction</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,508,600</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,357,020</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In April&nbsp;2008, the Company had recorded a prepayment for a purchase commitment in the amount of
$1,408,320 (87% of the contract) for cemetery headstones to ChongQing Kun Yu Stone Wood Company, a
related party. Under the term of the contract, ChongQing Kun Yu Stone Wood Company is to finish the
production, and deliver the products at the specified time defined by the Company. The Company is
to check and inspect the quality, if there is any quality issue with the product, ChongQing Kun Yu
Stone Wood Company is to fix it and after final inspection, Gold Industry Limited is to keep the
headstones. The Company is to pay 5% of the total contract price upon signing the contract and upon
final inspection, and the Company is to pay in full within one month after delivery of the
headstones to the Company. As of December&nbsp;31, 2009, the Company had not taken possession of the
cemetery headstones.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In February&nbsp;2009, the Company had recorded a prepayment for a purchase commitment in the amount of
$440,100 (50% of the contract) for trees to ChongQing Chang Sheng Qiao Company, an unrelated third
party. The total price stated in the contract is approximately $904,000 but the actual price is
determined by the actual quantity of trees delivered. ChongQing Chang Sheng Qiao Company is to
organize tree plants upon signing the contract, and deliver the tree plants to a location of the
Company&#146;s choice. ChongQing Chang Sheng Qiao Company pays the delivery fees. The Company is to pay
50% of the contract upon signing the contract and upon final inspection pay another 30% based on
the number of actual trees delivered and pay the balance within one (1)&nbsp;year. As of December&nbsp;31,
2009, the Company had not taken possession of the trees.
</DIV>





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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOLD INDUSTRY LIMITED<BR>
Condensed Notes to the Consolidated Financial Statements<BR>
December&nbsp;31, 2009</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 6 &#150; PREPAYMENTS TO SUPPLIERS (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In February&nbsp;2009, the Company had recorded a prepayment related to a contract in the amount of
$3,667,500 (7% of the contract), for the construction of entertainment boats. ChongQing Bo Goa
Tourism Company, an unrelated third party and the Company are to jointly develop the &#147;Liang Jiang
Yu&#148;project. This project includes development of a park near the lake as a way to attract more
tourism in the ChangShou area near the Chongqing Gui Yuan Cemetery. The current project is for
10-20 entertainment boats, a welcome center, (1)&nbsp;large sailboat and nine (9)&nbsp;docks. The
entertainment boat design and construction and docks are the responsibility of the Company and the
boats are expected to be put to use by December&nbsp;2010. The first stage constructions fees are
approximately $80,000, which was paid by ChongQing Bo Goa Tourism Company. When the project is
completed, the Company will repay ChongQing Bo Goa Tourism the first stage construction fees of
approximately $80,000. ChongQing Bo Goa Tourism Company is responsible for obtaining the
government loans (government has agreed) of approximately $3,000,000 with an annual interest
payment of approximately $166,000. The total price of the contract is approximately $53,000,000.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2009, the Company recorded an additional prepayment in the amount of
$4,841,100 based on an amendment made on April&nbsp;13, 2009 to the original contract. The
amendment allows the Company to regain full control over the project. The company will retain 94%
share of the project with ChongQing Bo Goa Tourism Company retaining the remaining 6% based on
their prior investments. The land, which is approximately 7,973 square yards, is acquired for
approximately $82,000, which is below market value and guaranteed by a government buy back. The
Company&#146;s expected annual investment for the Calendar years 2009-2012 is approximately $7,300,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 7 &#150; PROPERTY AND EQUIPMENT</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Property and equipment at December&nbsp;31, 2009 consisted of the following:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Buildings and structures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8,052,142</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Machinery and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">856,710</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Office equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,088</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: accumulated depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,568,687</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,348,253</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Depreciation expense for the periods December&nbsp;31, 2009 and 2008 was $228,664 and $187,300,
respectively.
</DIV>





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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOLD INDUSTRY LIMITED<BR>
Condensed Notes to the Consolidated Financial Statements<BR>
December&nbsp;31, 2009</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 8 &#150; INTANGIBLE ASSETS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the PRC, land is the asset of the government. The Company maintains only use rights from local
governmental authorities. The Company has use rights on three properties consisting of
approximately 399,444 square meters of land with land usage rights with 20&nbsp;years expiration from
the date of grant, but is renewable for 80 more years. Land use rights are stated at the estimated
fair value on the contribution date less accumulated amortization and any impairment losses. The
land use rights are amortized on ratable basis based on the number of plots developed over the life
of the rights.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The intangible assets at December&nbsp;31, 2009 consisted of the following:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Land use rights</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">13,345,299</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Accumulated units of production costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,407,738</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,937,561</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During 2005, the Company received land use rights which were contributed by the PRC. The land use
rights include Chongqing Gui Yuan Cemetery located in ChangShou, China, Under PRC&#146;s governmental
regulations, the government owns all land. However, PRC would not directly assign the land use
rights to the Company&#146;s management rather it assigned the land use rights to the Company as a
contribution. Therefore, the Company received the land use rights without giving the government any
consideration in return for the rights. At December&nbsp;31, 2005, the Company has recorded the fair
value of the land use rights, and the deferred revenue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s management determined the fair market value of the land use rights based upon the
actual square meters of the useable land. The Company expects approximately 210,000 plots can be
developed and sold within the 399,444 square meters of land. The Company&#146;s average sales price per
plot ranges from $3,900 to $4,400.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2009, the Company reviewed the land use rights for impairment. The Company
determined that based upon the net income of $10,044,238 at December&nbsp;31, 2009 and $11,222,243 for
the years ended March&nbsp;31, 2009 and 2008, value assigned to land use rights has been fully
recovered.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The land use rights are expensed based upon the number of cemetery plots capitalized and placed
into inventory using the units of production method. As of December&nbsp;31, 2009 and March&nbsp;31, 2009,
the Company expensed $398,904 and $172,890, respectively, which was included in the capitalized
cost of inventory and expensed through cost of goods sold.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 9 &#150; DEFERRED REVENUE</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2005, the Company recorded the deferred revenue related to land use rights that
were contributed to the Company by the People&#146;s Republic of China. As the Company sells cemetery
plots, a portion of the deferred revenue is recognized as other income based on the number of
cemetery plots that the Company sells during the year. As of December&nbsp;31, 2009 and 2008, the
Company recorded $325,816 and $166,181, respectively, as other income.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 10 &#150; SHORT-TERM NOTES PAYABLE</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Short term notes payable represent amounts due to a bank normally due within one year. The
principle amounts of the loans are due at maturity and the loans can be renewed each year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Short-term &#150; Chongqing Rural Commercial Bank, secured by Chongqing bowling museum building, due on
demand, interest calculated at annual rate of 8.4% and matures March&nbsp;2010. As of December&nbsp;31, 2009
and March&nbsp;31, 2009, the Company had a short-term notes payable in the amount of $440,100 and
$439,500 respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Short-term &#150; Chongqing Rural Commercial Bank; secured by approximately 123,334 square meters of
land valued at approximately $906,000, due on demand, interest calculated at annual rate of 9.6%
and matures March&nbsp;2010. In the event of default on the short-term notes payable, the interest rate
is calculated at an annual rate of 14.4%. As of December&nbsp;31, 2009 and March&nbsp;31, 2009, the Company
had a loan payable in the amount of $2,634,729 and $2,031,955 respectively. The short-term notes
</DIV>




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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">payable contain covenants that restrict the use of proceeds to develop the cemetery plots. If the
Company fails to use the money according to the stated purpose, the interest rate is calculated at
19.2%. As of December&nbsp;31, 2009 and March&nbsp;31, 2009 the Company was in compliance with these
covenants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2009 and 2008, the Company recorded interest expense in the amount of $177,559
and $174,533 respectively, for these loans.
</DIV>





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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOLD INDUSTRY LIMITED<BR>
Condensed Notes to the Consolidated Financial Statements<BR>
December&nbsp;31, 2009</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 11 &#150; RENTAL INCOME FROM OPERATING LEASE</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Rental income consists of the following as of:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Period Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rental income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">253,383</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">248,077</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less Depreciation of building</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">-57,079</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">-55,767</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net rental income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">196,304</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">192,310</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company rents its excess office space in ChangShou, China to a third party under a cancellable
operating lease that expires in December&nbsp;2009. The operating lease is automatically renewable each
year. The third party is responsible for all expenses related to occupancy of the building. As of
December&nbsp;31 2009 and 2008, the lease called for monthly rental of approximately $28,000 and
$27,600, respectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 12 &#150; STOCKHOLDERS&#146; EQUITY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Common Stock</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company is authorized to issue 100,000,000 shares of common stock, par value of $0.121 per
share. As of December&nbsp;31, 2009, there were 100,000,000 share of common stock issued and
outstanding.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 13 &#150; CONCENTRATION RISK</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Suppliers</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company obtained approximately 100% of its inventory purchases from two suppliers for the
period ended December&nbsp;31, 2009 and the year ended March&nbsp;31, 2009. Management believes other
suppliers could provide similar products and services on comparable terms in the area. Although
alternate suppliers may provide identical or similar products, such a change could result in delays
and a possible loss of sales. The Company did have long-term contracts with its suppliers for the
periods ended December&nbsp;31, 2009 and year ended March&nbsp;31, 2009 (See NOTE 6).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Customers</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company did not have concentrations related to any of its customers and revenue for the periods
ended December&nbsp;31, 2009 and 2008, as the Company&#146;s has several customers that purchase cemetery
plots.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Short-term notes payables</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has obtained 100% of its short-term notes payable from two note-holders for the period
ended December&nbsp;31, 2009 and the year ended March&nbsp;31, 2009. (See NOTE 10).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 14 &#150; CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company had approximately $1,400,000 in prepayments to a related party supplier as of December
31, 2009 and March&nbsp;31, 2009. (See NOTE 6).
</DIV>





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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GOLD INDUSTRY LIMITED<BR>
Condensed Notes to the Consolidated Financial Statements<BR>
December&nbsp;31, 2009</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 15 &#150; COMMITMENTS AND CONTINGENCIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(a)&nbsp;Lease commitments
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has a lease commitment in relation to the land rights that were contributed to the
Company by People&#146;s Republic of China. The tenure of arable land is 22&nbsp;years, from January&nbsp;1, 2005
to December&nbsp;31, 2027. The tenure of non-arable land is 50&nbsp;years, from January&nbsp;1, 2005 to December
31, 2055.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company pays annual lease payment on or before October&nbsp;31st to the PRC and in turn the
PRC Government then pays the sixth villager group, Longqiaohu village according to the terms of the
contract, and the sixth villager group re-distributes the funds to each farmer household. This is
the consideration that was agreed upon by the farmers for relocating in ChangShou Jiang Nan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The annual operating lease expense is capitalized as component of inventory and expensed through
cost of goods sold. As of December&nbsp;31, 2009 and March&nbsp;31, 2009, the Company capitalized $22,650 and
$22,679, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Future minimum operating lease payments relating to the above lease is as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Years Ending</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">22,650</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,650</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2012</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,650</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2013</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,650</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2014</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,650</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">271,806</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">385,056</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the ordinary course of business, the Company is generally subject to claims, complaints, and
legal actions. At December&nbsp;31, 2009, management believes that the Company is not a party to any
action which would have a material impact on its consolidated financial condition, operations, or
cash flows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(b)&nbsp;Economic Environment
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Due to all of the Company&#146;s operations being conducted in the PRC, the Company is subject to
special considerations and significant risks not typically associated with companies operating in
the United States of America. These risks include, among others, the political, economic and legal
environments and foreign currency exchange. The Company&#146;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 and
remittance abroad, and rates and methods of taxation, among other things.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The granting of land use licenses is a common practice in China as all land is government-owned,
and, at present, no option to purchase land has ever been granted. Pursuant to the laws of China,
all land belongs to the government. However, as the Company does have very limited rights in
accordance with land use license for the cemetery plot development and corresponding sales of the
burial spaces.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Note 16 &#150; SUBSEQUENT EVENT</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On February&nbsp;12, 2010, the Company and its shareholders entered into a Share Exchange Agreement with
Artistry Publications, Inc. (&#147;Artistry Publications&#148;). Pursuant to the terms of the Share Exchange
Agreement, Artistry Publications agreed to acquire all
of the issued and outstanding capital stock of the Company in exchange for 8,800,000 shares of
Artistry Publications&#146; common stock. The transactions contemplated under the Share Exchange
Agreement closed on February&nbsp;12, 2010.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->94<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On February&nbsp;12, 2010, the Company and its shareholders entered into a Share Exchange Agreement with
Artistry Publications, Inc. (&#147;Artistry Publications&#148;). Pursuant to the terms of the Share Exchange
Agreement, Artistry Publications agreed to acquire all of the issued and outstanding capital stock
of the Company in exchange for 8,800,000 shares of Artistry Publications&#146; common stock. The
transactions contemplated under the Share Exchange Agreement closed on February&nbsp;12, 2010.
</DIV>




<P align="center" style="font-size: 10pt"><!-- Folio -->95<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART II</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>INFORMATION NOT REQUIRED IN PROSPECTUS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the costs and expenses, payable by the registrant in connection
with the sale of common stock being registered. All amounts are estimates except the SEC
registration fee.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Securities and Exchange Commission registration fee</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">606.41</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Printing and engraving expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Blue Sky fees and expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">7,585</TD>
    <TD nowrap>*</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Legal fees and expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD nowrap>*</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounting fees and expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">20,000</TD>
    <TD nowrap>*</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Miscellaneous</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">78,191.41</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Estimated</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Delaware Law</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;145 of the Delaware General Corporation Law authorizes a court to award, or a
corporation&#146;s board of directors to grant, indemnity to directors and officers in terms
sufficiently broad to permit indemnification for liabilities, including reimbursement for expenses
incurred, arising under the Securities Act. Pursuant to the provisions of Section&nbsp;145, a
corporation may indemnify its directors, officers, employees, and agents as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;(a) A corporation shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action by or in the right
of the corporation) by reason of the fact that the person is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys&#146; fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by the person in connection with such action, suit or
proceeding if the person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe the person&#146;s conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the
person did not act in good faith and in a manner which the person reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that the person&#146;s conduct was unlawful.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;A corporation shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by reason of the fact that the person
is or was a director, officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses (including attorneys&#146; fees)
actually and reasonably incurred by the person in connection with the defense or settlement of such
action or suit if the person acted in good faith and in a manner the person reasonably believed to
be in or not opposed to the best interests of the corporation and except that no indemnification
shall be made in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery
or the court in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or
such other court shall deem proper.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;To the extent that a present or former director or officer of a corporation has been
successful on the merits or otherwise in defense of any action, suit or proceeding referred to in
subsections (a)&nbsp;and (b)&nbsp;of this section, or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys&#146; fees) actually and reasonably
incurred by such person in connection therewith.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->96<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Any indemnification under subsections (a)&nbsp;and (b)&nbsp;of this section (unless ordered by a
court) shall be made by the corporation only as authorized in the specific case upon a
determination that indemnification of the present or former director, officer, employee or agent is
proper in the circumstances because the person has met the applicable standard of conduct set forth
in subsections (a)&nbsp;and (b)&nbsp;of this section. Such determination shall be made, with respect to a
person who is a director or officer at the time of such determination, (1)&nbsp;by a majority vote of
the directors who are not parties to such action, suit or proceeding, even though less than a
quorum, or (2)&nbsp;by a committee of such directors designated by majority vote of such directors, even
though less than a quorum, or (3)&nbsp;if there are no such directors, or if such directors so direct,
by independent legal counsel in a written opinion, or (4)&nbsp;by the stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;Expenses (including attorneys&#146; fees) incurred by an officer or director in defending any
civil, criminal, administrative or investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit or proceeding upon receipt of
an undertaking by or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified by the corporation as
authorized in this section. Such expenses (including attorneys&#146; fees) incurred by former directors
and officers or other employees and agents may be so paid upon such terms and conditions, if any,
as the corporation deems appropriate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;The indemnification and advancement of expenses provided by, or granted pursuant to, the
other subsections of this section shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action in such person&#146;s
official capacity and as to action in another capacity while holding such office.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;A corporation shall have power to purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such person&#146;s status as
such, whether or not the corporation would have the power to indemnify such person against such
liability under this section.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;For purposes of this section, references to &#147;the corporation&#148; shall include, in addition
to the resulting corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers, and employees or agents,
so that any person who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this section with respect to the resulting or
surviving corporation as such person would have with respect to such constituent corporation if its
separate existence had continued.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;For purposes of this section, references to &#147;other enterprises&#148; shall include employee
benefit plans; references to &#147;fines&#148; shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to &#147;serving at the request of the corporation&#148;
shall include any service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee or agent with respect
to an employee benefit plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner such person reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a manner &#147;not opposed to
the best interests of the corporation&#148; as referred to in this section.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;The indemnification and advancement of expenses provided by, or granted pursuant to, this
section shall, unless otherwise provided when authorized or ratified, continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;The Court of Chancery is hereby vested with exclusive jurisdiction to hear and determine
all actions for advancement of expenses or indemnification brought under this section or under any
bylaw, agreement, vote of stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporation&#146;s obligation to advance expenses (including
attorneys&#146; fees).&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Charter Provisions and Other Arrangements of the Registrant</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently have not adopted any indemnification provisions in our certificate of
incorporation or bylaws for our officers and directors.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->97<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 15. Unregistered Sales of Equity Securities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a summary of our transactions during the last three years involving sales of
our securities that were not registered under the Securities Act of 1933 (the &#147;<U>Act</U>&#148;):
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;23, 2010, we sold and issued to 24 Purchasers 1,402,262 shares of Common Stock
(the &#147;<U>Shares</U>&#148;) and Warrants to purchase 701,126 shares of Common Stock. The Shares and
Warrants were issued to accredited investors in a private placement transaction exempt from
registration under the Securities Act, pursuant to Rule&nbsp;506 of Regulation&nbsp;D promulgated thereunder.
Neither the Shares nor the Warrants have been registered under the Securities Act or applicable
state securities laws and may not be offered or sold in the United States absent registration under
the Securities Act and applicable state securities laws or an applicable exemption from
registration requirements. We also issued warrants to purchase up to 70,113 shares of Common Stock
to our placement agent and its assignees for the Financing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;12, 2010, we issued 8,800,000 shares of our common stock to the Cayman Shareholder
in exchange for 100% of the capital stock of Gold Industry. The issuance of the common stock to the
Cayman Shareholder was exempt from registration pursuant to Regulation&nbsp;S under the Securities
Act. We made this determination based on the representations of the Cayman Shareholder, which
included, in pertinent part, that such shareholder was not a &#147;U.S. person&#148; as that term is defined
in Rule 902(k) of Regulation&nbsp;S under the Securities Act, and that such shareholder was acquiring
the common stock for investment purposes for its own account and not as nominee or agent, and not
with a view to the resale or distribution thereof, and that such shareholder understood that the
shares of common stock may not be sold or otherwise disposed of without registration under the
Securities Act or an applicable exemption therefrom.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(a)&nbsp;Exhibits
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See &#147;Exhibit&nbsp;Index&#148; below, which follows the signature page to this registration statement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 17. UNDERTAKINGS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(a)&nbsp;The undersigned registrant hereby undertakes:
</DIV>








<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To include any prospectus required by Section&nbsp;10(a)(3) of the
Securities Act of 1933 (the &#147;<u>Securities Act</u>&#148;);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus file with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
&#147;Calculation of Registration Fee&#148; table in the effective registration
statement; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(iii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For purposes of determining liability under the Securities Act, to
treat each post-effective amendment as a new registration statement of
the securities offered, and the offering of the securities at that
time to be the initial bona fide offering.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.</TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->98<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>That, for the purpose of determining liability under the Securities
Act to any purchaser, if the registrant is subject to Rule&nbsp;430C, each
prospectus filed pursuant to Rule 424(b) as part of a registration
statement relating to an offering, other than registration statements
relying on Rule&nbsp;430B or other than prospectuses filed in reliance on
Rule&nbsp;430A, shall be deemed to be part of and included in the
registration statement as of the date it is first used after
effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is part
of the registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify any
statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such
document immediately prior to such date of first use.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(5)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For determining liability of the undersigned registrant under the
Securities Act to any purchaser in the initial distribution of the
securities, the undersigned registrant undertakes that in a primary
offering of securities of the undersigned registrant pursuant to this
registration statement, regardless of the underwriting method used to
sell the securities to purchaser, if the securities are offered or
sold to such purchaser by means of any of the following
communications, the undersigned registrant will be a seller to the
purchaser and will be considered to offer or sell such securities to
such purchaser:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any preliminary prospectus or prospectus of the undersigned registrant
relating to the offering required to be filed pursuant to Rule&nbsp;424;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any free writing prospectus relating to the offering prepared by or
on behalf of the undersigned registrant or used or referred to by the
undersigned registrant;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(iii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>portion of any other free writing prospectus relating to the
offering containing material information about the undersigned
registrant or its securities provided by or on behalf of the
undersigned registrant; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(iv)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any other communication that is an offer in the offering made by the
undersigned registrant to the purchaser.</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 6pt; width: 18%; border-top:0px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(b)</TD>
    <TD>&nbsp;</TD>
    <TD>Insofar as indemnification for liabilities arising under the Securities Act may be permitted to
directors, officers and controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.</TD>
</TR>

</TABLE>




<P align="center" style="font-size: 10pt"><!-- Folio -->101<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SIGNATURES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this registration statement to be signed on its behalf by the
undersigned hereunto duly authorized in the Province of Chongqing, People&#146;s Republic of China, on
April&nbsp;9, 2010.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>CHINA REDSTONE, INC.</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Yiyou Ran
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Yiyou Ran&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Chief Executive Officer<br>
(Principal Executive Officer)&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Michael Wang
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Michael Wang&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Chief Financial Officer<br>
(Principal Financial and Accounting Officer)&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Act of 1933, as amended, this registration
statement has been signed by the following persons in the capacities and on the dates indicated:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Date</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Yiyou Ran
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Yiyou Ran
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman of the Board, President and <BR>Chief Executive Officer&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April&nbsp;9, 2010</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Michael Wang
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Michael Wang
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Financial Officer and Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April&nbsp;9, 2010</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Jianquan Chen
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Jianquan Chen
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April&nbsp;9, 2010</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Tim Hudson
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Tim Hudson
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April&nbsp;9, 2010</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Michael Rudolph
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Michael Rudolph
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April&nbsp;9, 2010</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Lihua Zhang
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Lihua Zhang
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April&nbsp;9, 2010</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->100<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT INDEX</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="94%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Description</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Share Exchange Agreement by and among Artistry and Your Out Doors LLC.
(&#147;YOD&#148;) and the members of YOD dated March&nbsp;12, 2009 (2)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Share Exchange Agreement by and among Artistry Publications, Inc. ,
Gold Industry Limited and the shareholders of Gold Industry dated
February&nbsp;12, 2010 (4)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Articles of Incorporation (1)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By-Laws (1)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Warrant Issued to Purchasers in the February&nbsp;2010 Financing (6)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">5.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Opinion of Richardson &#038; Patel LLP*</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consulting Service Agreement (4)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Operating Agreement (4)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Equity Pledge Agreement (4)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Option Agreement (4)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Voting Rights Proxy Agreement (4)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Rural Land Lease Agreement (4)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.7
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Jiangbei Office Lease Agreement (4)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.8
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Nan&#146;an Office Lease Agreement (4)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.9
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Bowling House Lease Agreement (4)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.10
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Securities Purchase Agreement dated February&nbsp;23, 2010 (6)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.11
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Registration Rights Agreement, dated February&nbsp;23, 2010 (7)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.12
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Board Offer and Acceptance Letter (8)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">14.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Code of Ethics (3)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">21.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">List of subsidiaries*</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Richardson &#038; Patel LLP (contained in Exhibit&nbsp;5.1)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of PMB Helin Donovan, LLP*</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Filed herewith.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed as an Exhibit to Form SB-2 filed with the SEC on October&nbsp;26, 2007.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed as an Exhibit to Form 8-K filed with the SEC on March&nbsp;20, 2009.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed as an Exhibit to Form 10-K filed with the SEC on December&nbsp;1, 2008.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed as an Exhibit to Form 8-K filed with the SEC on February&nbsp;18, 2010.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed as an Exhibit to Form 8-K filed with the SEC on February&nbsp;23, 2010.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed as an Exhibit to Form 8-K filed with the SEC on February&nbsp;24, 2010.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(7)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed as an Exhibit to Form 8-K filed with the SEC on March&nbsp;4, 2010.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(8)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed as an Exhibit to Form 8-K filed with the SEC on April&nbsp;6, 2010.</TD>
</TR>

</TABLE>




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sv1
Table of Contents
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 9, 2010
REGISTRATION STATEMENT NO. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
CHINA REDSTONE GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
2741
(Primary Standard Industrial Classification Code Number)
20-8285559
(I.R.S. Employer Identification Number)
239 Jianxin Road, Jiangbei District,
Chongqing, PRC 400000
(86) 023-67755514
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)
Yiyou Ran, Chief Executive Officer
239 Jianxin Road, Jiangbei District,
Chongqing, PRC 400000
(86) 023-67755514
COPY TO:
Kevin K. Leung, Esq.
Francis Chen, Esq.
Suzanne Fu, Esq.
Richardson & Patel LLP
10900 Wilshire Blvd., Suite 500
Los Angeles, CA 90024
(310) 208-1182
(Name, address, including zip code, and telephone number, including area code, of agent for service)
FROM TIME TO TIME AFTER THE
EFFECTIVE DATE OF THIS REGISTRATION STATEMENT
(Approximate date of commencement of proposed sale to the public)
If any of the securities being registered on this form are to be offered on a delayed or continuous
basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.
þ
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b)
under the Securities Act, please check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering.
o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act,
check the following box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
o
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act,
check the following box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated
filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
þ
(Do not check if a smaller reporting company)
CALCULATION OF REGISTRATION FEE
Proposed
Amount to
Proposed
Maximum
be
Maximum
Aggregate
Amount of
Title of Each Class of
Registered
Per Share
Offering
Registration
Securities to be Registered
(1)
Offering Price
Price
Fee
Common stock, $0.001 par value per share
1,402,262
$
5.00
(2)
$
7,011,310
$
499.91
Common stock, $0.001 par value per
share (issuable upon exercise of common
stock purchase warrants)
771,239
$
5.00
(3)
$
3,856,195
$
274.95
Total
2,173,501
$
774.86
(1)
Pursuant to Rule 416 under the Securities Act of 1933, as amended (the
"Securities Act"), this registration statement shall be deemed to
cover additional securities (i) to be offered or issued in connection
with any provision of any securities purported to be registered hereby
to be offered pursuant to terms which provide for a change in the
amount of securities being offered or issued to prevent dilution
resulting from stock splits, stock dividends, or similar transactions
and (ii) of the same class as the securities covered by this
registration statement issued or issuable prior to completion of the
distribution of the securities covered by this registration statement
as a result of a split of, or a stock dividend on, the registered
securities.
(2)
Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(c) of the Securities Act based
upon the average of the high and low prices of the common stock of the
Registrant as reported on the Over-the-Counter Bulletin Board on April
7, 2010.
(3)
Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(g) under the Securities Act.
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary
to delay its effective date until the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. These securities may not be
sold until the registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities and no offer to buy these
securities is being solicited in any state where the offer or sale is not permitted.
Table of Contents
The information in this prospectus is not complete and may be changed. The selling stockholders may
not sell these securities until the registration statement filed with the Securities and Exchange
Commission is effective. This prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Preliminary
Prospectus
Subject to Completion, April 9, 2010
CHINA REDSTONE GROUP, INC.
2,173,501 shares of Common Stock
This
prospectus covers the resale by selling security holders named on
page 20 of up to
2,173,501 shares of our common stock, $0.001 par value per share, which includes:
•
1,402,262 shares of common stock issued in conjunction with our
financing completed on February 23, 2010 (the "Financing");
•
701,126 shares of common stock underlying the common stock purchase
warrants issued in conjunction with the Financing; and
•
70,113 shares of common stock underlying the common stock purchase
warrants issued to our placement agent and its assignees in
conjunction with the Financing.
All of the shares of common stock offered by this prospectus are being sold by the selling
stockholders. It is anticipated that the selling stockholders will sell these shares of common
stock from time to time in one or more transactions, in negotiated transactions or otherwise, at
prevailing market prices or at prices otherwise negotiated (see "Plan of Distribution" beginning on
page 23). We will not receive any proceeds from the sales by the selling stockholders. We may
receive proceeds from any exercise of outstanding warrants. The selling shareholders may exercise
the warrants on a cashless basis if the shares of common stock underlying the warrants are not then
registered pursuant to an effective registration statement. In the event the selling shareholders
or placement agents' exercise the Warrants on a cashless basis, then we will not receive any
proceeds.
Our common stock is quoted on the Over-the-Counter Bulletin Board, commonly known as the
OTCBB, under the symbol "CGPI.OB." On April 7, 2010, the last sale price of our common stock on the
OTCBB was $5.00 per share.
No underwriter or person has been engaged to facilitate the sale of shares of our common stock in
this offering. None of the proceeds from the sale of common stock by the selling stockholder will
be placed in escrow, trust or any similar account. There are no underwriting commissions involved
in this offering. We have agreed to pay all the costs of this offering other than customary
brokerage and sales commissions. The selling stockholders will pay no offering expenses other than
those expressly identified in this prospectus.
INVESTING
IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The
date of this prospectus is April
, 2010
2
No offers to sell are made, nor are offers sought, to buy these securities in any jurisdiction
where the offer or sale is not permitted. The reader should assume that the information contained
in this prospectus is accurate as of the date in the front of this prospectus only. Our business,
financial condition, results of operations, and prospectus may have changed since that date.
TABLE OF CONTENTS
Page
Prospectus Summary
4
Risk Factors
6
Special Note Regarding Forward-Looking Statements
19
Use of Proceeds
19
Selling Security Holders
19
Plan of Distribution
23
Business
24
Description of Property
34
Summary
Consolidated Financial Data
35
Management's Discussion and Analysis of Financial Condition and Results of Operations
36
Legal Proceedings
48
Management
48
Executive Compensation
50
Security Ownership of Certain Beneficial Holders and Management
51
Certain Relationships and Related Party Transactions
52
Description of Securities
52
Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
54
Disclosure of Commission Position on Indemnification for Securities Act Liabilities
54
Additional Information
Experts
55
Legal Matters
56
Index to Consolidated Financial Statements
57
EX-5.1
EX-21.1
EX-23.2
You should rely only on the information contained in this prospectus. We have not authorized anyone
to provide you with information different from that contained in this prospectus. The selling
stockholders are offering to sell shares of our common stock and seeking offers to buy shares of
our common stock only in jurisdictions where such offers and sales are permitted. You should assume
that the information appearing in this prospectus is accurate only as of the date on the front
cover of this prospectus. Our business, financial condition, results of operations and prospects
may have changed since that date.
3
Table of Contents
PROSPECTUS SUMMARY
This summary contains basic information about us and this offering. The reader should read the
entire prospectus carefully, especially the risks of investing in our common stock discussed under
"Risk Factors." Some of the statements contained in this prospectus, including statements under
"Summary" and "Risk Factors" as well as those noted in the documents incorporated herein by
reference, are forward-looking statements and may involve a number of risks and uncertainties. We
note that our actual results and future events may differ significantly based upon a number of
factors. The reader should not put undue reliance on the forward-looking statements in this
document, which speak only as of the date on the cover of this prospectus.
References to "we," "our," "us," the "Company," or "China Redstone" refer to China Redstone
Group, Inc., a Delaware corporation, and its consolidated subsidiaries and variable interest
entity.
Our Business
We are a private provider of cemetery products and services in Chongqing, People's Republic of
China ("
PRC
" or "
China
"). We are primarily focused on developing cemeteries and
selling cemetery plots, although we also provide park and garden development and construction
services. Our first cemetery development project is the Chongqing Guiyuan Cemetery I ("
Guiyuan
I
"), located in Changshou District of Chongqing on approximately 66,660 square meters of land.
The entire cemetery plots of Guiyuan I have been sold, at an average price of RMB 30,000 ($4,412)
per plot. We are currently developing the Chongqing Guiyuan Cemetery II ("
Guiyuan II
"), our
second cemetery project in Changshou. Guiyuan II, in development since 2002, occupies a land over
666,000 square meters, of which approximately 46,620 square meters have been developed to date. We
have also secured approximately 1,194,804 square meters of land surrounding Longqiao Lake, which
portions of Guiyuan II overlook. We are planning to develop this land as a park, with mausoleums
and temples, to complement and enhance Guiyuan II.
Both Guiyuan I and Guiyuan II are among the most highly regarded facilities in our market area
in terms of a number of factors such as tradition, heritage, reputation, physical size, volume of
business, available inventory, name recognition, aesthetics and potential for development or
expansion. In 2006 and 2007, we were ranked amongst the top 50 private-owned enterprises in
Chongqing.
Our History and Corporate Structure
We were incorporated in Delaware on July 10, 2007, originally under the name "Artistry
Publications, Inc."
On February 10, 2010, we entered into a share exchange agreement (the "Exchange Agreement")
with Gold Industry Limited, a Cayman Island company ("Gold Industry"), and the holders of 100% of
Gold Industry's issued and outstanding capital stock (the "Cayman Shareholder"), pursuant to which
we agreed to issue an aggregate of 8,800,000 shares of our common stock, par value $0.001 per share
(the "Common Stock") to the Cayman Shareholder in exchange for all of the issued and outstanding
capital stock of Gold Industry (the "Share Exchange"). On February 10, 2010, the Share Exchange
closed and Gold Industry became our wholly-owned subsidiary. On April 6, 2010, in connection with
the Share Exchange, we changed our name from to "China Redstone Group, Inc." to better reflect our
business operations.
All of our business operations are carried out by a PRC company, Chongqing Foguang Tourism
Development (Group) Co., Ltd. ("
Foguang
"), which we control through contractual
arrangements between Foguang and Chongqing Ran Ji Industrial Co., Ltd. ("
Ran Ji
"), a
company organized in the PRC and wholly-owned by Gold Holy Industry Limited, a company incorporated
in Hong Kong Special Administrative Region ("
Gold Holy
"). Gold Holy is wholly-owned by
Gold Industry. Through these contractual arrangements, we have the ability to substantially
influence Foguang's daily operations and financial affairs, appoint its senior executives and
approve all matters requiring shareholder approval. As a result of these contractual arrangements,
which enable us to control Foguang, we are considered the primary beneficiary of Foguang.
Accordingly, we consolidate Foguang's results, assets and liabilities in our financial statements.
Other than our interests in the contractual arrangements, neither we, Gold Industry, Gold Holy and
Ranji own any equity interests in Foguang.
However, Chinese laws and regulations concerning the validity of the contractual arrangement
is uncertain, as many of these laws and regulations are relatively new and may be subject to
change, and their official interpretation and enforcement by the Chinese government involves
substantial uncertainty. Additionally, the contractual arrangement may not be as effective in
providing control over Foguang as direct ownership, which we are restricted from under current
Chinese law. Due to such uncertainty, we may take such additional steps in the future as may be
permitted by the then applicable laws and regulations in China to further strengthen our control
over or toward actual ownership of Foguang or its assets or business operations, which could
include direct ownership of selected assets without jeopardizing any favorable government policies
toward domestic owned
4
Table of Contents
enterprises. Because we rely on Foguang for our revenue, any termination of or disruption to
the contractual arrangement would detrimentally affect our business and financial condition.
Financing Transaction
In February 2010, we completed a financing transaction with 24 institutional and/or accredited
investors (collectively the "
Purchasers
") pursuant to which we sold $4,599,415 of units of
our equity securities to the Purchasers in a private placement (the "
Transaction
"). Each
unit is comprised of 100,000 shares of our common stock, par value $0.001 per share (the
"
Common Stock
"), at a per share purchase price of $3.28 per share, and warrants to purchase
up to 50,000 shares of Common Stock. At the closing of the Transaction on February 23, 2010, we
issued 1,402,262 shares of Common Stock and four-year warrants to purchase 701,126 shares of Common
Stock (the "
Warrants
"). In addition, we issued warrants to purchase up to 70,113 shares of
common stock to our placement agent and its assignees for the Financing.
Financial Results
For the fiscal years ended March 31, 2009 and 2008, we had approximately $18.31 million and
$22.21 million in sales, respectively and approximately $5.50 million and $5.73 million in net
income, respectively. Our consolidated financial statements for such periods are included in this
prospectus.
We have also included our unaudited condensed consolidated financial statements for the
three and nine months ended December 31, 2009 and 2008, during which time we had approximately
$26.47 million and $11.19 million in sales, respectively, and approximately $10.04 million and
$3.26 million in net profit, respectively.
Historical results are not necessarily indicative of the results that may be expected for any
future period. When you read the included historical financial data, it is important that you read
along with it the appropriate historical consolidated financial statements and related notes and
"Management's Discussion and Analysis of Financial Condition and Results of Operations" included
elsewhere in this prospectus.
The Offering
Common stock offered by the selling
stockholders:
2,173,501 shares (1)
Common stock outstanding:
12,659,762 shares (2)
Use of proceeds:
We will not receive any proceeds
from the sales by the selling
stockholders. We may receive
proceeds from any exercise of
outstanding warrants. The selling
shareholders may exercise the
warrants on a cashless basis if
the shares of common stock
underlying the warrants are not
then registered pursuant to an
effective registration statement.
In the event the selling
shareholders exercise the
Warrants on a cashless basis,
then we will not receive any
proceeds.
Risk factors:
An investment in our common stock
involves a high degree of risk.
You should carefully consider the
information set forth in this
prospectus and, in particular,
the specific factors set forth in
the "Risk Factors" section
beginning on page 6 of this
prospectus before deciding
whether or not to invest in
shares of our common stock.
OTC Bulletin Board symbol:
CGPI.OB
(1)
Includes 771,239 shares of our common stock issuable upon exercise of
outstanding common stock purchase warrants.
(2)
Represents the number of shares of our common stock outstanding as of
April 7, 2010 and excludes 771,239 shares of our common stock issuable
upon exercise of our outstanding common stock purchase warrants.
5
Table of Contents
General Information
Our principal executive offices are located at 239 Jianxin Road, Jiangbei District, Chongqing,
PRC 400000 and our telephone number is (86) 023-67755514.
RISK FACTORS
The reader should carefully consider the risks described below together with all of the other
information included in this prospectus. The statements contained in or incorporated into this
prospectus that are not historic facts are forward-looking statements that are subject to risks and
uncertainties that could cause actual results to differ materially from those set forth in or
implied by forward-looking statements. If any of the following risks actually occurs, our business,
financial condition or results of operations could be harmed. In that case, the trading price of
our common stock could decline, and an investor in our securities may lose all or part of their
investment.
Risks Relating to Our Business and Industry
Declines in the number of deaths in our markets can cause a decrease in revenues. Changes in the
number of deaths are not predictable from market to market or over the short term, and reliable
statistics on deaths in particular markets can be difficult to obtain.
Declines in the number of deaths could cause cemetery services, property and merchandise to
decline which could decrease revenues. Although the National Population and Family Planning
Commission of the P.R.C. estimates that the population of people that are 50 years old or older are
expected to increase by approximately 3% per year, from 276.8 million in 2000 to 298.6 million in
2010, longer life spans could reduce the rate of deaths. Changes in the number of deaths can vary
among local markets and from quarter to quarter, and variations in the number of deaths in our
markets or from quarter to quarter are not predictable. These variations can cause revenues to
fluctuate.
The death care industry continues to be increasingly competitive.
In China, the death care industry is characterized by a large number of locally owned and
independent operations. To compete successfully, our cemeteries must be maintained in good
condition and we must maintain good reputations and high professional standards, as well as offer
attractive products and services at competitive prices. In addition, we must market the Company in
such a manner as to distinguish us from our competitors. We have historically experienced price
competition from independent cemetery operators. New market entrants tend to attempt to build
market share by offering lower cost alternatives. If we are unable to successfully compete, our
financial condition, results of operations, and cash flows could be materially adversely affected.
Because the cemetery business is a high fixed-cost business, positive or negative changes in
revenue can have a disproportionately large effect on cash flow and profits.
The cemetery business must incur many of the costs of operating and maintaining facilities,
land and equipment regardless of the level of sales in any given period. For example, we must pay
salaries, utilities, property taxes and maintenance costs and maintain the grounds of cemeteries
regardless of the number of sales. Because we cannot decrease these costs significantly or rapidly
when we experience declines in sales, declines in sales can cause margins, profits and cash flow to
decline at a greater rate than the decline in revenues.
Changes or increases in, or failure to comply with, regulations applicable to our business could
increase costs or decrease cash flows.
The death care industry is subject to extensive regulation and licensing requirements under
state and local laws. Any construction of cemetery must be approved by the Administration of Civil
Affairs and the construction must be limited away from a certain areas such as cultivated land,
forest land, urban parks, scenic spots, protected areas of water resources, railways and highways.
Compliance with these regulations is burdensome, and we are always at risk of not complying with
the regulations.
In addition, from time to time, governments and agencies propose to amend or add regulations,
which could increase costs or decrease cash flows. If additional legislation or regulations are
adopted by the regulatory authorities of the jurisdictions in
6
Table of Contents
which we operate, these and other
possible proposals could have a material adverse effect on us, our financial condition, our results
of operations, our cash flows and our future prospects.
If we are not able to respond effectively to changing consumer preferences, our market share,
revenues and profitability could decrease.
Future market shares, revenues and profits will depend in part on our ability to anticipate,
identify and respond to changing consumer preferences. In past years, we have implemented new
product and service strategies based on results of customer surveys that we conduct on a continuous
basis. However, we may not correctly anticipate or identify trends in consumer preferences, or we
may identify them later than our competitors do. In addition, any strategies we may implement to
address these trends may prove incorrect or ineffective.
Our ability to generate sales depends on a number of factors, including sales incentives and local
and general economic conditions.
Declines in sales would reduce our revenues and could reduce our future market share. As we
have modified our sales strategies to local standards, we are continuing to refine the mix of
service and product offerings in our cemetery operations, including changes in our sales commission
and incentive structure. These changes could cause us to experience declines in sales in the
short-run.
In addition, a weakening economy at the local or national level have could cause customers to
reduce discretionary spending, which could lead to a decline in our cemetery sales, and decrease
the amounts customers are willing to pay for cemetery products and services. Declines in cemetery
property sales and average revenue per event would reduce our current revenues. Declines in
cemetery products and services could also reduce our future revenues and market share.
Increased or unanticipated costs, such as insurance, taxes or litigation, may have a negative
impact on our earnings and cash flow.
Costs which result from external factors, such as insurance, taxes or legal fees, are
difficult to estimate. These costs may impair our ability to achieve earnings growth in excess of
revenue growth. Our 2010 plan assumes that we will be successful in increasing earnings at a rate
that is greater than revenue growth. We can give no assurance that we will be successful in
achieving such increases.
The success of our business is typically dependent upon one or a few key employees because of the
localized and personal nature of our business.
Death care businesses have built local heritage and tradition through successive generations,
providing a foundation for ongoing business opportunities from established client family
relationships and related referrals. We believe these relationships build trust in the community
and are a key driver to market share. Our businesses, which tend to serve small local markets,
usually have one or a few key employees that drive our relationships. We can give no assurance that
we can retain these employees or that these relationships will drive market share.
Our limited operating history makes it difficult to evaluate our future prospects and results of
operations.
Foguang, which commenced business in 2002, has a limited operating history. Accordingly, you
should consider our future prospects in light of the risks and uncertainties experienced by
early-stage companies in China. Some of these risks and uncertainties relate to our ability to:
•
maintain our market position;
•
attract additional customers and increase spending per customer;
•
respond to competitive market conditions;
•
respond to changes in our regulatory environment;
•
maintain effective control of our costs and expenses;
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•
raise sufficient capital to sustain and expand our business; and
•
attract, retain and motivate qualified personnel.
If we are unsuccessful in addressing any of these risks and uncertainties, our business may be
materially and adversely affected.
If we fail to implement our business strategy, our financial performance and our growth could be
materially and adversely affected.
Our future financial performance and success are dependent in large part upon our ability to
implement our business strategy successfully. Our strategic plan is focused on cost management and
the continued implementation of key revenue initiatives, including strategic pricing, designed to
generate future internal growth in our core cemetery operations. We may not be able to implement
our business strategy successfully or achieve the anticipated benefits of our business plan. Many
of the factors necessary for the execution of our strategic plan, such as the number of deaths and
general economic conditions, are beyond our control. If we are unable to do so, our long-term
growth and profitability may be adversely affected. Even if we are able to implement some or all of
the initiatives of our business plan successfully, our operating results may not improve to the
extent we anticipate, or at all. Implementation of our business strategy could also be affected by
a number of factors beyond our control, such as increased competition, legal developments,
government regulation, general economic conditions or increased operating costs or expenses. In
addition, to the extent we have misjudged the nature and extent of industry trends or our
competition; we may have difficulty achieving our strategic objectives. Any failure to implement
our business strategy successfully may adversely affect our business, financial condition and
results of operations. In addition, we may decide to alter or discontinue certain aspects of our
business strategy at any time.
We may be unable to sustain our past growth or manage our future growth, which may have a material
adverse effect on our future operating results.
We have experienced rapid growth since our inception, and have increased our net sales from $5
million in 2002 to $18.3 million for the fiscal year ended March 31, 2010. We anticipate that our
future growth rate will depend upon various factors, including the strength of our brand image, the
market success of our current and future products, the success or our growth strategies,
competitive conditions and our ability to manage our future growth. Future growth may place a
significant strain on our management and operations. As we continue to grow in our operations, our
operational, administrative, financial and legal procedures and controls will need to be expanded.
As a result, we may need to train and manage an increasing number of employees, which could
distract our management team from our business. Our future success will depend substantially on the
ability of our management team to manage our anticipated growth. If we are unable to anticipate or
manage our growth effectively, our future operating results could be adversely affected.
We may acquire additional complementary businesses or technologies, which may require us to incur
substantial costs for which we may never realize the anticipated benefits.
We may in the future acquire complementary businesses or technologies, although we currently
have no commitments or agreements to do so. As a result of any acquisitions we pursue, management's
attention and resources may be diverted from our other businesses. An acquisition may also involve
a significant purchase price and significant transaction-related expenses.
Achieving the benefits of any acquisition involves additional risks, including:
•
difficulty assimilating acquired operations, technologies and personnel;
•
inability to retain management and other key personnel of the acquired business;
•
changes in management or other key personnel that may harm
relationships with the acquired business's customers and employees; and
•
diversion of management attention as a result of the integration process.
We cannot ensure that we will realize any of the anticipated benefits of any acquisition, and
if we fail to realize these anticipated benefits, our operating performance could suffer.
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Corporate insiders or their affiliates may be able to exercise significant control matters
requiring a vote of our stockholders and their interests may differ from the interests of our other
stockholders.
As of the date of this prospectus, our officers, directors and their affiliates as a group
beneficially own approximately 69.75% of our then outstanding Common Stock. As a result, these
stockholders may be able to exercise significant control over matters requiring approval by our
stockholders. Matters that require the approval of our stockholders include the election of
directors and the approval of mergers or other business combination transactions. Certain
transactions are effectively not possible without the approval of these officers, directors and
their affiliates, including, proxy contests, tender offers, open market purchase programs or other
transactions that can give our stockholders the opportunity to realize a premium over the
then-prevailing market prices for their shares of our common stock.
We will be required to evaluate our internal control over financial reporting under Section 404 of
the Sarbanes-Oxley Act.
Failure to timely comply with the requirements of Section 404 of the Sarbanes-Oxley Act of
2002 ("
Section 404
") or any adverse results from such evaluation could result in a loss of
investor confidence in our financial reports and have an adverse effect on the trading price of our
debt and equity securities.
We currently are not an "accelerated filer" as defined in Rule 12b-2 under the Securities
Exchange Act of 1934, as amended. Section 404 of the Sarbanes-Oxley Act of 2002 requires us to
include an internal control report with our annual report on Form 10-K. That report must include
management's assessment of the effectiveness of our internal control over financial reporting as of
the end of the fiscal year. This report must also include disclosure of any material weaknesses in
internal control over financial reporting that we have identified. Additionally, for the fiscal
year ended March 31, 2011, our independent registered public accounting firm will be required to
issue a report on management's assessment of our internal control over financial reporting and
their evaluation of the operating effectiveness of our internal control over financial reporting.
Our assessment requires us to make subjective judgments and our independent registered public
accounting firm may not agree with our assessment.
Achieving compliance with Section 404 within the prescribed period may require us to incur
significant costs and expend significant time and management resources. We cannot assure you that
we will be able to fully comply with Section 404 or that, we and our independent registered public
accounting firm would be able to conclude that our internal reported financial information, which
could have an adverse effect on the trading price of our securities, as well as subject us to civil
or criminal investigations and penalties. In addition, our independent registered public accounting
firm may not agree with our management's assessment or conclude that our internal control over
financial reporting is operating effectively. We will continue to consistently improve our
internal control over the financial reporting with our best efforts and we plan to engage
assistance from outside experts in doing so.
Business interruptions could adversely affect our business.
Our operations and the operations of our suppliers and manufacturers are vulnerable to
interruption by fire, earthquake, hurricanes, power loss, telecommunications failure and other
events beyond our control. In the event of a major natural disaster, we could experience business
interruptions, destruction of facilities and loss of life. In the event that a material business
interruption occurs that affects us or our suppliers or manufacturers, deliveries could be delayed
and our business and financial results could be harmed.
Risks Related to Our Corporate Structure
We conduct our business through Foguang by means of contractual arrangements. If the Chinese
government determines that these contractual arrangements do not comply with applicable
regulations, our business could be adversely affected. If the PRC regulatory bodies determine that
the agreements that establish the structure for operating our business in China do not comply with
PRC regulatory restrictions on foreign investment, we could be subject to severe penalties. In
addition, changes in such Chinese laws and regulations may materially and adversely affect our
business.
There are uncertainties regarding the interpretation and application of PRC laws, rules and
regulations, including but not limited to the laws, rules and regulations governing the validity
and enforcement of the contractual arrangements between Ran Ji and Foguang. Although we have been
advised by our PRC counsel, that based on their understanding of the current PRC laws,
rules and regulations, the structure for operating our business in China (including our
corporate structure and contractual arrangements with Foguang and its owners) comply with all
applicable PRC laws, rules and regulations, and do not violate, breach, contravene or otherwise
conflict with any applicable PRC laws, rules or regulations, we cannot assure you that the PRC
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regulatory authorities will not determine that our corporate structure and contractual arrangements
violate PRC laws, rules or regulations. If the PRC regulatory authorities determine that our
contractual arrangements are in violation of applicable PRC laws, rules or regulations, our
contractual arrangements will become invalid or unenforceable. In addition, new PRC laws, rules and
regulations may be introduced from time to time to impose additional requirements that may be
applicable to our contractual arrangements. For example, the PRC Property Rights Law that became
effective on October 1, 2007 may require us to register with the relevant government authority the
security interests on the equity interests in Foguang granted to us under the equity pledge
agreements that are part of the contractual arrangements. If we are required to register such
security interests, failure to complete such registration in a timely manner may result in such
equity pledge agreements to be unenforceable against third party claims.
The Chinese government has broad discretion in dealing with violations of laws and
regulations, including levying fines, revoking business and other licenses and requiring actions
necessary for compliance. In particular, licenses and permits issued or granted to us by relevant
governmental bodies may be revoked at a later time by higher regulatory bodies. We cannot predict
the effect of the interpretation of existing or new Chinese laws or regulations on our businesses.
We cannot assure you that our current ownership and operating structure would not be found in
violation of any current or future Chinese laws or regulations. As a result, we may be subject to
sanctions, including fines, and could be required to restructure our operations or cease to provide
certain services. Any of these or similar actions could significantly disrupt our business
operations or restrict us from conducting a substantial portion of our business operations, which
could materially and adversely affect our business, financial condition and results of operations.
If Ran Ji or Foguang are determined to be in violation of any existing or future PRC laws,
rules or regulations or fail to obtain or maintain any of the required governmental permits or
approvals, the relevant PRC regulatory authorities would have broad discretion in dealing with such
violations, including:
•
revoking the business and operating licenses of our PRC consolidated entities;
•
discontinuing or restricting the operations of our PRC consolidated entities;
•
imposing conditions or requirements with which we or our PRC consolidated entities may not be able to comply;
•
requiring us or our PRC consolidated entities to restructure the relevant ownership structure or operations;
•
restricting or prohibiting our use of the proceeds from our initial
public offering to finance our business and operations in China; or
•
imposing fines.
The imposition of any of these penalties would severely disrupt our ability to conduct
business and have a material adverse effect on our financial condition, results of operations and
prospects.
Our contractual arrangements with Foguang and its owners may not be as effective in providing
control over these entities as direct ownership.
We have no equity ownership interest in Foguang, and rely on contractual arrangements to
control and operate the company and its businesses. These contractual arrangements may not be as
effective in providing control over the company as direct ownership. For example, Foguang could
fail to take actions required for our business despite its contractual obligation to do so. If
Foguang fails to perform under its agreements with us, we may have to rely on legal remedies under
Chinese law, which may not be effective. In addition, we cannot assure you that the owners of
Foguang will act in our best interests.
Because we rely on the consulting services agreement with Foguang for our revenue, the termination
of this agreement will severely and detrimentally affect our continuing business viability under
our current corporate structure.
We are a holding company and do not have any assets or conduct any business operations other
than the contractual arrangements between Ran Ji, our indirect wholly owned subsidiary, and
Foguang. As a result, we currently rely entirely for our revenues on dividends payments from Ran Ji
after it receives payments from Foguang pursuant to the consulting services
agreement which forms a part of the contractual arrangements. The consulting services
agreement may be terminated by written notice of Ran Ji or Foguang in the event that: (a) Foguang
causes a material breach of the agreement, provided that if the breach does not relate to a
financial obligation of the breaching party, that party may attempt to remedy the breach within 14
days
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following the receipt of the written notice; (b) one party becomes bankrupt, insolvent, is the
subject of proceedings or arrangements for liquidation or dissolution, ceases to carry on business,
or becomes unable to pay its debts as they become due; (c) Ran Ji terminates its operations; or (d)
circumstances arise which would materially and adversely affect the performance or the objectives
of the agreement. Additionally, Ran Ji may terminate the consulting services agreement without
cause. Because neither we nor our direct and indirect subsidiaries own equity interests of Foguang,
the termination of the consulting services agreement would sever our ability to continue receiving
payments from Foguang under our current holding company structure. While we are currently not aware
of any event or reason that may cause the consulting services agreement to terminate, we cannot
assure you that such an event or reason will not occur in the future. In the event that the
consulting services agreement is terminated, this may have a severe and detrimental effect on our
continuing business viability under our current corporate structure, which in turn may affect the
value of your investment.
We rely principally on dividends paid by our consolidated operating entity to fund any cash and
financing requirements we may have, and any limitation on the ability of our consolidated PRC
entities to pay dividends to us could have a material adverse effect on our ability to conduct our
business.
We are a holding company, and rely principally on dividends paid by our consolidated PRC
operating entity for cash requirements, including the funds necessary to service any debt we may
incur. In particular, we rely on earnings generated by Foguang, which are passed on to us through
Ran Ji. If any of our consolidated operating subsidiaries incurs debt in its own name in the
future, the instruments governing the debt may restrict dividends or other distributions on its
equity interest to us. In addition, the PRC tax authorities may require us to adjust our taxable
income under the contractual arrangements Ran Ji currently have in place with Foguang, in a manner
that would materially and adversely affect our ability to pay dividends and other distributions on
our equity interest.
Furthermore, applicable PRC laws, rules and regulations permit payment of dividends by our
consolidated PRC entity only out of its retained earnings, if any, determined in accordance with
PRC accounting standards. Under PRC laws, rules and regulations, our consolidated PRC entities are
required to set aside at least 10.0% of their after-tax profit based on PRC accounting standards
each year to their statutory surplus reserve fund until the accumulative amount of such reserves
reach 50.0% of their respective registered capital. As a result, our consolidated PRC entity is
restricted in its ability to transfer a portion of its net income to us whether in the form of
dividends, loans or advances. As of March 31, 2009, we had retained earnings of $5,834,633. Our
retained earnings are not distributable as cash dividends. Any limitation on the ability of our
consolidated operating subsidiaries to pay dividends to us could materially and adversely limit our
ability to grow, make investments or acquisitions that could be beneficial to our businesses, pay
dividends or otherwise fund and conduct our business.
Management members of Foguang have potential conflicts of interest with us, which may adversely
affect our business and your ability for recourse.
Mr. Yiyou Ran, our Chief Executive Officer and President, is also the Chairman of the Board of
Foguang. Mr. Jianquan Chen, who is a member of our board of directors, is the General Manager of
Foguang. Conflicts of interests between their respective duties to our company and Foguang may
arise. As our directors and executive officer (in the case of Mr. Ran), they have a duty of loyalty
and care to us under U.S. and Hong Kong law when there are any potential conflicts of interests
between our company and Foguang. We cannot assure you; however, that when conflicts of interest
arise, every one of them will act completely in our interests or that conflicts of interests will
be resolved in our favor. For example, they may determine that it is in Foguang's interests to
sever the contractual arrangements with Ran Ji; irrespective of the effect such action may have on
us. In addition, any one of them could violate his or her legal duties by diverting business
opportunities from us to others, thereby affecting the amount of payment that Foguang is obligated
to remit to us under the consulting services agreement.
In the event that you believe that your rights have been infringed under the securities laws
or otherwise as a result of any one of the circumstances described above, it may be difficult or
impossible for you to bring an action against Foguang or our officers or directors who are members
of Foguang's management, all of whom reside within China. Even if you are successful in bringing an
action, the laws of China may render you unable to enforce a judgment against the assets of Foguang
and its management, all of which are located in China.
Risks Related to Doing Business in China
Foguang is subject to restrictions on making payments to us.
We are a holding company incorporated in Delaware and do not have any assets or conduct any
business operations other than our indirect investments in Foguang. As a result of our holding
company structure, we rely entirely on payments from that
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company under the contractual
arrangements with our indirect wholly owned subsidiary, Ran Ji. The Chinese government also imposes
controls on the conversion of RMB into foreign currencies and the remittance of currencies out of
China. We may experience difficulties in completing the administrative procedures necessary to
obtain and remit foreign currency. See "Government control of currency conversion may affect the
value of your investment." Furthermore, if our affiliated entity in China incurs debt on their own
in the future, the instruments governing the debt may restrict their ability to make payments. If
we are unable to receive all of the revenues from our operations through these contractual
arrangements, we may be unable to pay dividends on our ordinary shares.
New labor laws in the PRC may adversely affect our results of operations.
On January 1, 2008, the PRC government promulgated the Labor Contract Law of the PRC, or the
New Labor Contract Law. The New Labor Contract Law imposes greater liabilities on employers and
significantly impacts the cost of an employer's decision to reduce its workforce. Further, it
requires certain terminations to be based upon seniority and not merit. In the event we decide to
significantly change or decrease our workforce, the New Labor Contract Law could adversely affect
our ability to enact such changes in a manner that is most advantageous to our business or in a
timely and cost effective manner, thus materially and adversely affecting our financial condition
and results of operations.
Because our assets are located overseas, shareholders may not receive distributions that they would
otherwise be entitled to if we were declared bankrupt or insolvent.
All of our assets are located in the PRC. Because our assets are located overseas, our assets
may be outside of the jurisdiction of U.S. courts to administer if we are the subject of an
insolvency or bankruptcy proceeding. As a result, if we declared bankruptcy or insolvency, our
shareholders may not receive the distributions on liquidation that they would otherwise be entitled
to if our assets were to be located within the U.S., under U.S. Bankruptcy law.
Adverse changes in economic and political policies of the PRC government could have a material
adverse effect on the overall economic growth of China, which could adversely affect our business.
All of our business operations are currently conducted in the PRC, under the jurisdiction of
the PRC government. Accordingly, our results of operations, financial condition and prospects are
subject to a significant degree to economic, political and legal developments in China. China's
economy differs from the economies of most developed countries in many respects, including with
respect to the amount of government involvement, level of development, growth rate, and control of
foreign exchange and allocation of resources. While the PRC economy has experienced significant
growth in the past 20 years, growth has been uneven across different regions and among various
economic sectors of China. The PRC government has implemented various measures to encourage
economic development and guide the allocation of resources. Some of these measures benefit the
overall PRC economy, but may also have a negative effect on us. For example, our financial
condition and results of operations may be adversely affected by government control over capital
investments or changes in tax regulations that are applicable to us. Since early 2004, the PRC
government has implemented certain measures to control the pace of economic growth. Such measures
may cause a decrease in the level of economic activity in China, which in turn could adversely
affect our results of operations and financial condition.
Unprecedented rapid economic growth in China may increase our costs of doing business, and may
negatively impact our profit margins and/or profitability.
Our business depends in part upon the availability of relatively low-cost labor and materials.
Rising wages in China may increase our overall costs of production. In addition, rising raw
material costs, due to strong demand and greater scarcity, may increase our overall costs of
production. If we are not able to pass these costs on to our customers in the form of higher
prices, our profit margins and/or profitability could decline.
A downturn in the economy of the PRC may slow our growth and profitability.
A significant portion of our revenues are generated from sales in China. The growth of the
Chinese economy has been uneven across geographic regions and economic sectors. There can be no
assurance that growth of the Chinese economy will be steady or that any downturn will not have a
negative effect on our business, especially if it results in either a decreased use of our products
or in pressure on us to lower our prices.
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You may face difficulties in protecting your interests, and your ability to protect your rights
through the U.S. federal courts may be limited, because our subsidiaries are incorporated in
non-U.S. jurisdictions, we conduct substantially all of our operations in China, and all of our
officers reside outside the United States.
Although we are incorporated in Delaware, all of our business operations are conducted in
China by Foguang. Most of our officers and directors reside in China and some or all of the assets
of those persons are located outside of the United States. As a result, it may be difficult or
impossible for you to bring an action against us or against these individuals in China in the event
that you believe that your rights have been infringed under the securities laws or otherwise. Even
if you are successful in bringing an action of this kind, the laws of the PRC may render you unable
to enforce a judgment against our assets or the assets of our directors and officers.
As a result of all of the above, our public shareholders may have more difficulty in
protecting their interests through actions against our management, directors or major shareholders
than would shareholders of a corporation doing business entirely within the United States.
Governmental control of currency conversion may affect the value of your investment.
The Chinese government imposes controls on the convertibility of RMB into foreign currencies
and, in certain cases, the remittance of currency out of China. We receive substantially all of our
revenues in RMB. Under our current structure, our income is primarily derived from payments from
Foguang. Shortages in the availability of foreign currency may restrict the ability of our Chinese
subsidiaries and our affiliated entity to remit sufficient foreign currency to pay dividends or
other payments to us, or otherwise satisfy their foreign currency denominated obligations. Under
existing Chinese foreign exchange regulations, payments of current account items, including profit
distributions, interest payments and expenditures from trade-related transactions, can be made in
foreign currencies without prior approval from China State Administration of Foreign Exchange by
complying with certain procedural requirements. However, approval from appropriate government
authorities is required where RMB is to be converted into foreign currency and remitted out of
China to pay capital expenses such as the repayment of bank loans denominated in foreign
currencies. The Chinese government may also at its discretion restrict access in the future to
foreign currencies for current account transactions. If the foreign exchange control system
prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not
be able to pay dividends in foreign currencies to our stockholders.
Fluctuation in the value of RMB may have a material adverse effect on your investment.
The value of RMB against the U.S. dollar and other currencies may fluctuate and is affected
by, among other things, changes in political and economic conditions. Our revenues and costs are
mostly denominated in RMB, while a significant portion of our financial assets are denominated in
U.S. dollars. We rely entirely on fees paid to us by our affiliated entity in China. Any
significant fluctuation in the value of RMB may materially and adversely affect our cash flows,
revenues, earnings and financial position, and the value of, and any dividends payable on, our
stock in U.S. dollars. For example, an appreciation of RMB against the U.S. dollar would make any
new RMB denominated investments or expenditures more costly to us, to the extent that we need to
convert U.S. dollars into RMB for such purposes. An appreciation of RMB against the U.S. dollar
would also result in foreign currency translation losses for financial reporting purposes when we
translate our U.S. dollar denominated financial assets into RMB, as RMB is our reporting currency.
Dividends we receive from our subsidiary located in the PRC may be subject to PRC withholding tax.
The recently enacted PRC Enterprise Income Tax Law, or the EIT Law, and the implementation
regulations for the EIT Law issued by the PRC State Council, became effective as of January 1,
2008. The EIT Law provides that a maximum income tax rate of 20% is applicable to dividends payable
to non-PRC investors that are "non-resident enterprises," to the extent such dividends are derived
from sources within the PRC, and the State Council has reduced such rate to 10% through the
implementation regulations. We are a Delaware holding company and substantially all of our income
is derived from the operations of Foguang located in the PRC, which is contractually obligated to
pay its quarterly profits to our WFOE. Therefore, dividends paid to us by our WFOE in China may be
subject to the 10% income tax if we are considered as a "non-resident enterprise" under the EIT
Law. If we are required under the EIT Law and its implementation regulations to pay income tax for
any dividends we receive from our WFOE, it may have a material and adverse effect on our net income
and materially reduce the amount of dividends, if any, we may pay to our shareholders.
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We face risks related to health epidemics and other outbreaks.
Our business could be adversely affected by the effects of an epidemic outbreak, such as the
SARS epidemic in April 2004. Any prolonged recurrence of such adverse public health developments in
China may have a material adverse effect on our business operations. For instance, health or other
government regulations adopted in response may require temporary closure of our stores or offices.
Such closures would severely disrupt our business operations and adversely affect our results of
operations. We have not adopted any written preventive measures or contingency plans to combat any
future outbreak of SARS or any other epidemic.
If our land use rights are revoked, we would have no operational capabilities.
Under Chinese law land is owned by the state or rural collective economic organizations. The
state issues to the land users the land use right certificate. Land use rights can be revoked and
the land users forced to vacate at any time when redevelopment of the land is in the public
interest. The public interest rationale is interpreted quite broadly and the process of land
appropriation may be less than transparent. Each of our cemeteries relies on these land use rights
as the cornerstone of their operations, and the loss of such rights would have a material adverse
effect on our company.
Because our funds are held in banks which do not provide insurance, the failure of any bank in
which we deposit our funds could affect our ability to continue in business.
Banks and other financial institutions in the PRC do not provide insurance for funds held on
deposit. A significant portion of our assets are in the form of cash deposited with banks in the
PRC, and in the event of a bank failure, we may not have access to our 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 in business.
Failure to comply with the United States Foreign Corrupt Practices Act could subject us to
penalties and other adverse consequences.
As our ultimate holding company is a Delaware corporation, we are subject to the United States
Foreign Corrupt Practices Act, which generally prohibits United States companies from engaging in
bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining
business. Foreign companies, including some that may compete with us, are not subject to these
prohibitions. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices may
occur from time-to-time in the PRC. We can make no assurance, however, that our employees or other
agents will not engage in such conduct for which we might be held responsible. If our employees or
other agents are found to have engaged in such practices, we could suffer severe penalties and
other consequences that may have a material adverse effect on our business, financial condition and
results of operations.
If we make equity compensation grants to persons who are PRC citizens, they may be required to
register with the State Administration of Foreign Exchange of the PRC, or SAFE. We may also face
regulatory uncertainties that could restrict our ability to adopt an equity compensation plan for
our directors and employees and other parties under PRC law.
On April 6, 2007, SAFE issued the "Operating Procedures for Administration of Domestic
Individuals Participating in the Employee Stock Ownership Plan or Stock Option Plan of An Overseas
Listed Company, also known as "Circular 78." It is not clear whether Circular 78 covers all forms
of equity compensation plans or only those which provide for the granting of stock options. For any
plans which are so covered and are adopted by a non-PRC listed company after April 6, 2007,
Circular 78 requires all participants who are PRC citizens to register with and obtain approvals
from SAFE prior to their participation in the plan. In addition, Circular 78 also requires PRC
citizens to register with SAFE and make the necessary applications and filings if they participated
in an overseas listed company's covered equity compensation plan prior to April 6, 2007. We have
adopted an equity compensation plan in the future and intend to make securities grants to our
officers and directors, most of who are PRC citizens. Circular 78 may require our officers and
directors who receive option grants and are PRC citizens to register with SAFE. We believe that the
registration and approval requirements contemplated in Circular 78 will be burdensome and time
consuming. If it is determined that any of our equity compensation plans are subject to Circular
78, failure to comply with such provisions may subject us and participants of our equity incentive
plan who are PRC citizens to fines and legal sanctions and prevent us from being able to grant
equity compensation to our PRC employees. In that case, our ability to compensate our employees and
directors through equity compensation would be hindered and our business operations may be
adversely affected.
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Because our business is located in the PRC, we may have difficulty establishing adequate
management, legal and financial controls, which we are required to do in order to comply with U.S.
securities laws.
PRC companies have historically not adopted a US style of management and financial reporting
concepts and practices, which includes strong corporate governance, internal controls and,
computer, financial and other control systems. Most of our middle and top management staff are not
educated and trained in the US system, and we may have difficulty hiring new employees in the PRC
with such training. In addition, we may have difficulty in hiring and retaining a sufficient number
of qualified employees to work in the PRC. As a result of these factors, we may experience
difficulty in establishing management, legal and financial controls, collecting financial data and
preparing financial statements, books of account and corporate records and instituting business
practices that meet US standards. Therefore, we may, in turn, experience difficulties in
implementing and maintaining adequate internal controls as required under Section 404 of the
Sarbanes-Oxley Act of 2002. This may result in significant deficiencies or material weaknesses in
our internal controls which could impact the reliability of our financial statements and prevent us
from complying with SEC rules and regulations and the requirements of the Sarbanes-Oxley Act of
2002. Any such deficiencies, weaknesses or lack of compliance could have a materially adverse
effect on our business.
We are subject to a variety of environmental laws and regulations related to our operations, and we
may become subject to forthcoming environmental regulations enacted in response to climate change.
Our failure to comply with environmental laws and regulations may have a material adverse effect on
our business and results of operations.
We are subject to various environmental laws and regulations for our cemetery operations. We
cannot assure you that at all times we will be in compliance with environmental laws and
regulations or our environmental permits or that we will not be required to expend significant
funds to comply with, or discharge liabilities arising under, environmental laws, regulations and
permits. In addition, future environmental regulations that are enacted in response to global and
regional climate change could place additional burdens on our operations. Complying with existing
and possible future environmental laws and regulations, including laws and regulations relating to
climate change, may impose upon us the need for additional capital equipment or other process
requirements, restrict our ability to expand our operations, disrupt our operations, increase
costs, subject us to liability or cause us to curtail our operations.
Risks Related to an Investment in Our Securities
Our stock is categorized as a penny stock. Trading of our stock may be restricted by the SEC's
penny stock regulations which may limit a shareholder's ability to buy and sell our stock.
Our stock is categorized as a penny stock. The SEC has adopted Rule 15g-9 which generally
defines "penny stock" to be any equity security that has a market price (as defined) less than
$5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions.
Our securities are covered by the penny stock rules, which impose additional sales practice
requirements on broker-dealers who sell to persons other than established customers and accredited
investors. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock
not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form
prepared by the SEC which provides information about penny stocks and the nature and level of risks
in the penny stock market. The broker-dealer also must provide the customer with current bid and
offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in
the transaction and monthly account statements showing the market value of each penny stock held in
the customer's account. The bid and offer quotations, and the broker-dealer and salesperson
compensation information, must be given to the customer orally or in writing prior to effecting the
transaction and must be given to the customer in writing before or with the customer's
confirmation. In addition, the penny stock rules require that prior to a transaction in a penny
stock not otherwise exempt from these rules; the broker-dealer must make a special written
determination that the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market for the stock that is subject to
these penny stock rules. Consequently, these penny stock rules may affect the ability of
broker-dealers to trade our securities. We believe that the penny stock rules discourage investor
interest in and limit the marketability of our common stock.
FINRA sales practice requirements may also limit a shareholder's ability to buy and sell our stock.
In addition to the "penny stock" rules described above, FINRA has adopted rules that require
that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for
believing that the investment is suitable for that customer. Prior to recommending speculative low
priced securities to their non-institutional customers, broker-dealers must make reasonable efforts
to obtain information about the customer's financial status, tax status, investment objectives and
other information. Under interpretations of these rules, FINRA believes that there is a high
probability that speculative low priced securities will not be suitable for at least some
customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their
customers buy our common stock, which may limit your ability to buy and sell our stock and have an
adverse effect on the market for our shares.
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We expect to experience volatility in our stock price, which could negatively affect shareholders'
investments.
The market price for shares of our common stock may be volatile and may fluctuate based upon a
number of factors, including, without limitation, business performance, news announcements or
changes in general market conditions.
Other factors, in addition to the those risks included in this section, that may have a
significant impact on the market price of our common stock include, but are not limited to:
•
receipt of substantial orders or order cancellations of products;
•
quality deficiencies in services or products;
•
international developments, such as technology mandates, political
developments or changes in economic policies;
•
changes in recommendations of securities analysts;
•
shortfalls in our backlog, revenues or earnings in any given period
relative to the levels expected by securities analysts or projected by us;
•
government regulations, including stock option accounting and tax regulations;
•
energy blackouts;
•
acts of terrorism and war;
•
widespread illness;
•
proprietary rights or product or patent litigation;
•
strategic transactions, such as acquisitions and divestitures; or
•
rumors or allegations regarding our financial disclosures or practices.
In the past, securities class action litigation has often been brought against a company
following periods of volatility in the market price of its securities. Due to changes in the
volatility of our common stock price, we may be the target of securities litigation in the future.
Securities litigation could result in substantial costs and divert management's attention and
resources.
To date, we have not paid any cash dividends and no cash dividends will be paid in the foreseeable
future.
We do not anticipate paying cash dividends on our common stock in the foreseeable future and
we may not have sufficient funds legally available to pay dividends. Even if the funds are legally
available for distribution, we may nevertheless decide not to pay any dividends. We presently
intend to retain all earnings for our operations.
Our common shares are not currently traded at high volume, and you may be unable to sell at or near
ask prices or at all if you need to sell or liquidate a substantial number of shares at one time.
We cannot predict the extent to which an active public market for its common stock will
develop or be sustained. However, we do not rule out the possibility of applying for listing on
the NYSE Alternext (fka American Stock Exchange) or Nasdaq Capital Market or other markets.
Our common shares are currently traded, but currently with low volume, based on quotations on
the "Over-the-Counter Bulletin Board" under the symbol CGPI.OB, meaning that the number of persons
interested in purchasing our common shares at or near bid prices at any given time may be
relatively small or non-existent. This situation is attributable to a number of factors, including
the fact that we are a small company which is still relatively unknown to stock analysts, stock
brokers, institutional investors and others in the investment community that generate or influence
sales volume, and that even if we came to the attention of such persons, they tend to be
risk-averse and would be reluctant to follow an unproven company such as ours or
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purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. As a
consequence, there may be periods of several days or more when trading activity in our shares is minimal or
non-existent, as compared to a seasoned issuer which has a large and steady volume of trading
activity that will generally support continuous sales without an adverse effect on share price. We
cannot give you any assurance that a broader or more active public trading market for our common
stock will develop or be sustained, or that trading levels will be sustained.
Shareholders should be aware that, according to SEC Release No. 34-29093, the market for
"penny stocks" has suffered in recent years from patterns of fraud and abuse. Such patterns
include (1) control of the market for the security by one or a few broker-dealers that are often
related to the promoter or issuer; (2) manipulation of prices through prearranged matching of
purchases and sales and false and misleading press releases; (3) boiler room practices involving
high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4)
excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the
wholesale dumping of the same securities by promoters and broker-dealers after prices have been
manipulated to a desired level, along with the resulting inevitable collapse of those prices and
with consequent investor losses. Our management is aware of the abuses that have occurred
historically in the penny stock market. Although we do not expect to be in a position to dictate
the behavior of the market or of broker-dealers who participate in the market, management will
strive within the confines of practical limitations to prevent the described patterns from being
established with respect to our securities. The occurrence of these patterns or practices could
increase the future volatility of our share price.
The NASDAQ OTC Bulletin Board ("OTCBB") is a quotation system, not an issuer listing service,
market or exchange. Therefore, buying and selling stock on the OTC Bulletin Board is not as
efficient as buying and selling stock through an exchange. As a result, it may be difficult for you
to sell your common stock or you may not be able to sell your common stock for an optimum trading
price.
The OTCBB is a regulated quotation service that displays real-time quotes, last sale prices
and volume limitations in over-the-counter securities. Because trades and quotations on the OTCBB
involve a manual process, the market information for such securities cannot be guaranteed. In
addition, quote information, or even firm quotes, may not be available. The manual execution
process may delay order processing and intervening price fluctuations may result in the failure of
a limit order to execute or the execution of a market order at a significantly different price.
Execution of trades, execution reporting and the delivery of legal trade confirmations may be
delayed significantly. Consequently, one may not be able to sell shares of our common stock at the
optimum trading prices.
When fewer shares of a security are being traded on the OTCBB, volatility of prices may
increase and price movement may outpace the ability to deliver accurate quote information. Lower
trading volumes in a security may result in a lower likelihood of an individual's orders being
executed, and current prices may differ significantly from the price one was quoted by the OTC
Bulletin Board at the time of the order entry.
Orders for OTCBB securities may be canceled or edited like orders for other securities.
All requests to change or cancel an order must be submitted to, received and processed by the
OTCBB. Due to the manual order processing involved in handling OTC Bulletin Board trades, order
processing and reporting may be delayed, and an individual may not be able to cancel or edit his
order. Consequently, one may not able to sell shares of common stock at the optimum trading prices.
The dealer's spread (the difference between the bid and ask prices) may be large and may
result in substantial losses to the seller of securities on the OTCBB if the common stock or other
security must be sold immediately. Further, purchasers of securities may incur an immediate "paper"
loss due to the price spread. Moreover, dealers trading on the OTCBB may not have a bid price for
securities bought and sold through the OTCBB. Due to the foregoing, demand for securities that are
traded through the OTCBB may be decreased or eliminated.
Our corporate actions are substantially controlled by our principal shareholders and affiliated
entities.
Our principal shareholders, who include our officers and directors, and their affiliated
entities, own approximately 80% of our outstanding shares of common stock. These shareholders,
acting individually or as a group, could exert substantial influence over matters such as electing
directors and approving mergers or other business combination transactions. In addition, because
of the percentage of ownership and voting concentration in these principal shareholders and their
affiliated entities, elections of our board of directors will generally be within the control of
these shareholders and their affiliated entities. While all of our shareholders are entitled to
vote on matters submitted to our shareholders for approval, the concentration of shares and voting
control presently lies with these principal shareholders and their affiliated entities. As such, it
would be difficult for shareholders to propose and have approved proposals not supported by
management. There can be no assurances that matters voted upon by our officers and directors in
their capacity as shareholders will be viewed favorably by all of our shareholders.
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Legislative actions, higher insurance costs and potential new accounting pronouncements may impact
our future financial position and results of operations.
There have been regulatory changes, including the Sarbanes-Oxley Act of 2002, and there may
potentially be new accounting pronouncements or additional regulatory rulings that will have an
impact on our future financial position and results of operations. The Sarbanes-Oxley Act of 2002
and other rule changes as well as proposed legislative initiatives following the Enron bankruptcy
are likely to increase general and administrative costs and expenses. In addition, insurers are
likely to increase premiums as a result of high claims rates over the past several years, which we
expect will increase our premiums for insurance policies. Further, there could be changes in
certain accounting rules. These and other potential changes could materially increase the expenses
we report under generally accepted accounting principles, and adversely affect our operating
results.
Holders of our common stock may be diluted in the future.
We are authorized to issue up to 100 million shares of common stock and 20 million shares of
preferred stock. Our Board of Directors will have the ability, without seeking stockholder
approval, to issue additional shares of common stock and/or preferred stock in the future for such
consideration as our Board of Directors may consider sufficient. The issuance of additional common
stock and/or preferred stock in the future will reduce the proportionate ownership and voting power
of our common stock held by existing stockholders. At April 7, 2010 there were 12,659,762 shares of
common stock outstanding and warrants to purchase 771,239 shares of common stock.
Shares eligible for future sale may adversely affect the market price of our common stock, as the
future sale of a substantial amount of outstanding stock in the public marketplace could reduce the
price of our common stock.
The market price of our common stock could decline as a result of sales of a large number of
shares of our common stock in the market or the perception that these sales could occur. These
sales, or the possibility that these sales may occur, also might make it more difficult for us to
sell equity securities in the future at a time and at a price that we deem appropriate.
As of April 7, 2010, we had approximately 12,659,762 shares of common stock outstanding. Any
substantial sale of common stock pursuant to any resale prospectus or Rule 144 may have an adverse
effect on the market price of our common stock by creating an excessive supply.
We may not be able to achieve the benefits we expect to result from the Share Exchange.
On February 12, 2010, we concluded an Exchange Agreement and as a result Foguang became our
variably controlled entity, and our primary business operations became that of Foguang. We also
appointed a new Board of Directors and management consisting of persons from Gold Industry and
changed our corporate name from Artistry Publications, Inc. to China Redstone Group, Inc.
We may not realize the benefits that we hoped to receive as a result of the Exchange
Agreement, which include:
•
access to the capital markets of the United States;
•
the increased market liquidity expected to result from exchanging
stock in a private company for securities of a public company that may
eventually be traded;
•
the ability to use registered securities to make acquisition of assets or businesses;
•
increased visibility in the financial community;
•
enhanced access to the capital markets;
•
improved transparency of operations; and
•
perceived credibility and enhanced corporate image of being a publicly traded company.
There can be no assurance that any of the anticipated benefits of the Share Exchange will be
realized with respect to our new business operations. In addition, the attention and effort devoted
to achieving the benefits of the Share Exchange and
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attending to the obligations of being a public company, such as reporting requirements and
securities regulations, could significantly divert management's attention from other important
issues, which could materially and adversely affect our operating results or stock price in the
future.
Compliance with changing regulation of corporate governance and public disclosure will result in
additional expenses.
Changing laws, regulations and standards relating to corporate governance and public
disclosure, including the Sarbanes-Oxley Act of 2002 and related SEC regulations, have created
uncertainty for public companies and significantly increased the costs and risks associated with
accessing the public markets and public reporting. For example, on January 30, 2009, the SEC
adopted rules requiring companies to provide their financial statements in interactive data format
using the eXtensible Business Reporting Language, or XBRL. We will have to comply with these rules
by June 15th, 2011. Our management team will need to invest significant management time and
financial resources to comply with both existing and evolving standards for public companies, which
will lead to increased general and administrative expenses and a diversion of management time and
attention from revenue generating activities to compliance activities.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
All statements contained in this prospectus, other than statements of historical facts, that
address future activities, events or developments, are forward-looking statements, including, but
not limited to, statements containing the words "believe," "anticipate," "expect" and words of
similar import. These statements are based on certain assumptions and analyses made by us in light
of our experience and our assessment of historical trends, current conditions and expected future
developments as well as other factors we believe are appropriate under the circumstances. Whether
actual results will conform to the expectations and predictions of management, however, is subject
to a number of risks and uncertainties that may cause actual results to differ materially. Such
risks are in the section entitled "Risk Factors" on
page 6, and in our previous SEC filings.
Consequently, all of the forward-looking statements made in this prospectus are qualified by
these cautionary statements, and there can be no assurance that the actual results anticipated by
management will be realized or, even if substantially realized, that they will have the expected
consequences to or effects on our business operations.
USE OF PROCEEDS
We will not receive any proceeds from the sales by the selling stockholders. We may receive
proceeds from any exercise of outstanding warrants. The selling shareholders may exercise the
warrants on a cashless basis if the shares of common stock underlying the warrants are not then
registered pursuant to an effective registration statement. In the event the selling shareholders
exercise the Warrants on a cashless basis, then we will not receive any proceeds.
SELLING SECURITY HOLDERS
We are registering the following securities:
•
1,402,262 shares of Common Stock sold and issued to the Purchasers in the Financing;
•
701,126 shares of Common Stock underlying the Warrants issued to the Purchasers in the
Financing; and
•
70,113 shares of Common Stock underlying the Warrants issued to the placement agent
and its assignees in the Financing.
We are registering these securities in order to permit the selling security holders to dispose
of the shares of Common Stock from time to time. The selling security holders may sell all, some,
or none of their shares in this offering. See "Plan of Distribution."
The table below lists the selling security holders and other information regarding the
beneficial ownership of the shares of Common Stock by each of the selling security holders. Column
A lists the names of the selling security holders. Column B lists the number of shares of common
stock beneficially owned by each selling security holder as of April 7, 2010 (assuming full
exercise of the Warrants held by such selling security holder, if any). Column C lists the shares
of Common Stock covered by this prospectus that may be disposed of by each of the selling security
holders. Column D lists the number of shares of Common Stock that will be beneficially owned by the
selling security holders assuming all of the shares covered by this prospectus are sold.
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Table of Contents
Column E lists the percentage of class beneficially owned by the selling security holders
assuming all of the shares covered by this prospectus are sold based on 12,402,262 shares of Common
Stock outstanding on April 7, 2010.
We cannot provide an estimate of the number of securities that any of the selling security
holders will hold in the future. For purposes of this table, beneficial ownership is determined in
accordance with the rules of the SEC, and includes voting power and investment power with respect
to such securities.
The inclusion of any securities in the following table does not constitute an admission of
beneficial ownership by the persons named below. Except as indicated in the footnotes to the table,
no selling security holder has had any material relationship with us or our affiliates during the
last three years. Except as indicated below, no selling security holder is the beneficial owner of
any additional shares of common stock or other equity securities issued by us or any securities
convertible into, or exercisable or exchangeable for, our equity
securities. Except for Rodman & Renshaw, LLC, no selling security
holder is a FINRA registered broker-dealer or an affiliate of a broker-dealer.
Selling Security Holder Table
Securities
Securities
Beneficially
Securities
Beneficially
% Beneficial
Owned Prior
Being
Owned After
Ownership
Name
to Offering
Offered
Offering
After Offering
(A)
(B)
(C)
(D)
(E)
Gerald Scott Klayman (1)
22,866
22,866
0
0
%
Warberg Opportunistic Trading Fund LP (2)
34,500
34,500
0
0
%
Paul Hickey (3)
150,000
150,000
0
0
%
Kevin Denuccio (4)
57,155
57,155
0
0
%
Matthew Hayden (5)
114,318
114,318
0
0
%
Ronald Nash (6)
60,000
60,000
0
0
%
David W. Forti (7)
22,866
22,866
0
0
%
Taylor International Fund, Ltd. (8)
300,000
300,000
0
0
%
Shira Capital LLC (9)
150,000
150,000
0
0
%
Barry Honig (10)
90,000
90,000
0
0
%
The USX China Fund (11)
75,000
75,000
0
0
%
RL Capital Partners LP (12)
75,000
75,000
0
0
%
Anthony G. Polak (13)
15,000
15,000
0
0
%
Jamie Polak (14)
15,000
15,000
0
0
%
Frederick B. Polak (15)
15,000
15,000
0
0
%
Domaco Venture Capital Fund (16)
15,000
15,000
0
0
%
David Frascella (17)
37,500
37,500
0
0
%
Larry Frascella (18)
37,500
37,500
0
0
%
Ronald M. Lazar, IRA, Pershing LLC as Custodian (19)
15,000
15,000
0
0
%
Fort Ashford Funds, LLC (20)
57,160
57,160
0
0
%
Hammerman Capital Partners, LP (21)
75,000
75,000
0
0
%
Jayhawk Private Equity Fund II, L.P. (22)
548,781
548,781
0
0
%
Jeffrey A. Grossman (23)
45,732
45,732
0
0
%
HCP Opportunity Fund, LP (24)
75,000
75,000
0
0
%
Rodman & Renshaw, LLC (25)
42,068
42,068
0
0
%
Ramnarain Jaigobind (26)
15,692
15,692
0
0
%
Chirag Choudhary (27)
5,538
5,538
0
0
%
Harry Ioannou (28)
2,704
2,704
0
0
%
George Anagnostou (29)
734
734
0
0
%
Eric Lord (30)
2,595
2,595
0
0
%
Kevin Mangan (31)
782
782
0
0
%
(1)
Includes 15,244 shares of Common Stock and 7,622 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing (more fully described under the section titled
"History and Corporate Structure" below), all of which we are
registering for resale pursuant to the securities purchase agreement
that we entered into as part of the Financing (the "Securities
Purchase Agreement").
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Table of Contents
(2)
Includes 23,000 shares of Common Stock and 11,500 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement. Daniel Worsh and Jonathan
Blumberg have shared dispositive and voting power over these
securities held by Warberg Opportunistic Trading Fund LP.
(3)
Includes 100,000 shares of Common Stock and 50,000 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to Securities Purchase Agreement.
(4)
Includes 38,110 shares of Common Stock and 19,055 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement.
(5)
Includes 76,212 shares of Common Stock and 38,106 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement.
(6)
Includes 40,000 shares of Common Stock and 20,000 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement.
(7)
Includes 15,244 shares of Common Stock and 7,622 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement.
(8)
Includes 200,000 shares of Common Stock and 100,000 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement. Stephen Taylor and Robert
Kirkland have shared dispositive and voting power over the securities
held by Taylor International Fund, Ltd.
(9)
Includes 100,000 shares of Common Stock and 50,000 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement. Montgomery Cornell and Michael
Ryan have shared dispositive and voting power over the securities held
by Shira Capital, LLC.
(10)
Includes 60,000 shares of Common Stock and 30,000 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement.
(11)
Includes 50,000 shares of Common Stock and 25,000 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement. Stephen L. Parr and Kim
Williams have shared dispositive and voting power over the securities
held by The USX China Fund.
(12)
Includes 50,000 shares of Common Stock and 25,000 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement. Anthony Polak and Ronald Lazar
have shared dispositive and voting power over the securities held by
RL Capital Partners LP.
(13)
Includes 10,000 shares of Common Stock and 5,000 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement.
(14)
Includes 10,000 shares of Common Stock and 5,000 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement.
(15)
Includes 10,000 shares of Common Stock and 5,000 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement.
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Table of Contents
(16)
Includes 10,000 shares of Common Stock and 5,000 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement. Jack Polak has sole dispositive
and voting power over the securities held by Domaco Venture Capital
Fund.
(17)
Includes 25,000 shares of Common Stock and 12,500 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement.
(18)
Includes 25,000 shares of Common Stock and 12,500 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement.
(19)
Includes 10,000 shares of Common Stock and 5,000 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement. Ronald Lazar has sole
dispositive and voting power over the securities held by Ronald M.
Lazar, IRA, Pershing LLC as Custodian.
(20)
Includes 38,110 shares of Common Stock and 19,055 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement. Frank Kavanaugh has sole
dispositive and voting power over the securities held by Fort Ashford
Funds, LLC.
(21)
Includes 50,000 shares of Common Stock and 25,000 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement. Jason Hammerman has sole
dispositive and voting power over the securities held by Hammerman
Capital Partners, LP.
(22)
Includes 365,854 shares of Common Stock and 182,927 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement. Kent McCarthy has sole
dispositive and voting power over the securities held by Jayhawk
Private Equity Fund II, L.P.
(23)
Includes 30,488 shares of Common Stock and 15,244 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement.
(24)
Includes 50,000 shares of Common Stock and 25,000 shares of Common
Stock underlying the Warrants issued to this selling security holder
in the Financing, all of which we are registering for resale pursuant
to the Securities Purchase Agreement. Jason Hammerman has sole
dispositive and voting power over the securities held by HCP
Opportunity Fund, LP.
(25)
Includes 42,068 shares
of Common Stock underlying the Warrants issued to this selling
security holder as placement agent in the Financing.
David Horin has sole voting
and dispositive power over the shares held by Rodman & Renshaw,
LLC.
(26)
Includes 15,692 shares
of Common Stock underlying the Warrants issued to this selling
security holder as assignee of placement agent in the Financing.
(27)
Includes 5,538 shares of
Common Stock underlying the Warrants issued to this selling security
holder as assignee of placement agent in the Financing.
(28)
Includes 2,704 shares of
Common Stock underlying the Warrants issued to this selling security
holder as assignee of placement agent in the Financing.
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Table of Contents
(29)
Includes 734 shares of Common Stock
underlying the Warrants issued to this selling security holder as
assignee of placement agent in the Financing.
(30)
Includes 2,595 shares of
Common Stock underlying the Warrants issued to this selling security
holder as assignee of placement agent in the Financing.
(31)
Includes 782 shares of
Common Stock underlying the Warrants issued to this selling security
holder as assignee of placement agent in the Financing.
PLAN OF DISTRIBUTION
Each selling security holder named above and any of their pledgees, assignees, and
successors-in-interest (each a "Selling Security Holder" and collectively the "Selling Security
Holders") may, from time to time, sell any or all of their shares of Common Stock on the NASDAQ OTC
Bulletin Board ("OTCBB") or any other stock exchange, market, or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or negotiated prices. A
Selling Security Holder may use any one or more of the following methods when selling shares:
•
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
•
block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
•
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
•
an exchange distribution in accordance with the rules of the applicable exchange;
•
privately negotiated transactions;
•
settlement of short sales entered into after the effective date of the
registration statement of which this prospectus is a part;
•
broker-dealers may agree with the Selling Security Holders to sell a
specified number of such shares at a stipulated price per share;
•
through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;
•
a combination of any such methods of sale; or
•
any other method permitted pursuant to applicable law.
The Selling Security Holders may also sell shares under Rule 144 under the Securities Act of
1933, as amended (the "Securities Act"), if available, rather than under this prospectus.
Broker-dealers engaged by the Selling Security Holders may arrange for other brokers-dealers
to participate in sales. Broker-dealers may receive commissions or discounts from the Selling
Security Holders (or, if any broker-dealer acts as agent for the purchaser of shares, from the
purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this
prospectus, in the case of an agency transaction not in excess of a customary brokerage commission
in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown
in compliance with FINRA IM-2440.
In connection with the sale of the Common Stock or interests therein, the Selling Security
Holders may enter into hedging transactions with broker-dealers or other financial institutions,
which may in turn engage in short sales of the Common Stock in the course of hedging the positions
they assume. The Selling Security Holders may also sell shares of the Common Stock short
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Table of Contents
and deliver these securities to close out their short positions, or loan or pledge the Common
Stock to broker-dealers that in turn may sell these securities. The Selling Security Holders may
also enter into option or other transactions with broker-dealers or other financial institutions or
the creation of one or more derivative securities which require the delivery to such broker-dealer
or other financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this prospectus (as
supplemented or amended to reflect such transaction).
The Selling Security Holders and any broker-dealers or agents that are involved in selling the
shares may be deemed to be "underwriters" within the meaning of the Securities Act in connection
with such sales. In such event, any commissions received by such broker-dealers or agents and any
profit on the resale of the shares purchased by them may be deemed to be underwriting commissions
or discounts under the Securities Act. Each Selling Security Holder has informed the Company that
it does not have any written or oral agreement or understanding, directly or indirectly, with any
person to distribute their shares of Common Stock.
The Company is required to pay certain fees and expenses incurred by the Company incident to
the registration of the shares. The Company has agreed to indemnify the Selling Stockholders
against certain losses, claims, damages and liabilities, including liabilities under the Securities
Act.
Because Selling Security Holders may be deemed to be "underwriters" within the meaning of the
Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act
including Rule 172 thereunder. In addition, any securities covered by this prospectus which qualify
for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under
this prospectus. There is no underwriter or coordinating broker acting in connection with the
proposed sale of the resale shares by the Selling Security Holders.
We agreed to use commercially reasonable efforts to keep this prospectus effective until the
earlier of (i) the date on which all of the registrable shares may be resold by the Selling
Security Holders without registration and without regard to any volume or manner-of-sale
limitations by reason of Rule 144, or (ii) all of the registrable shares have been sold pursuant to
this prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The
resale shares will be sold only through registered or licensed brokers or dealers if required under
applicable state securities laws. In addition, in certain states, the resale shares may not be sold
unless they have been registered or qualified for sale in the applicable state or an exemption from
the registration or qualification requirement is available and is complied with.
Under applicable rules and regulations under the Securities and Exchange Act of 1934, as
amended (the "Exchange Act"), any person engaged in the distribution of the resale shares may not
simultaneously engage in market making activities with respect to the Common Stock for the
applicable restricted period, as defined in Regulation M, prior to the commencement of the
distribution. In addition, the Selling Security Holders will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit
the timing of purchases and sales of shares of the Common Stock by the Selling Security Holders or
any other person. We will make copies of this prospectus available to the Selling Security Holders
and have informed them of the need to deliver a copy of this prospectus to each purchaser at or
prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).
BUSINESS
Overview
We are a private provider of cemetery products and services in Chongqing, China. We are
primarily focused on developing cemeteries and selling cemetery plots, although we also provide
park and garden development and construction services. Our first cemetery development project is
the Chongqing Guiyuan Cemetery I ("
Guiyuan I
"), located in Changshou District of Chongqing
on approximately 66,660 square meters of land. The entire cemetery plots of Guiyuan I have been
sold, at an average price of RMB 30,000 ($4,412) per plot. We are currently developing the
Chongqing Guiyuan Cemetery II ("
Guiyuan II
"), our second cemetery project in Changshou.
Guiyuan II, in development since 2002, occupies a land over 666,000 square meters, of which
approximately 46,620 square meters have been developed to date. We have also secured approximately
1,194,804 square meters of land surrounding Longqiao Lake, which portions of Guiyuan II overlook.
We are planning to develop this land as a park, with mausoleums and temples, to complement and
enhance Guiyuan II.
Both Guiyuan I and Guiyuan II are among the most highly regarded facilities in our market area
in terms of a number of factors such as tradition, heritage, reputation, physical size, volume of
business, available inventory, name recognition, aesthetics and potential for development or
expansion. In 2006 and 2007, we were ranked amongst the top 50 private-owned enterprises in
Chongqing.
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Table of Contents
History and Corporate Structure
We were incorporated in Delaware on July 10, 2007, originally under the name "Artistry
Publications, Inc.", with a principal business objective to enter the photography industry
specializing in historic landscape photography and produce excellent affordable artwork.
On February 12, 2010 (the "
Closing
"), we entered into a share exchange agreement (the
"
Exchange Agreement
") with Gold Industry Limited, a company incorporated in Cayman Islands
("
Gold Industry
"), and Holy Golden Industry Limited, a British Virgin Islands company
which, immediately prior to the closing of the transactions contemplated by the Exchange Agreement,
held 100% of Gold Industry's issued and outstanding share capital (the "
Cayman
Shareholder
"). Under the Exchange Agreement, the Company completed the acquisition of all of
the issued and outstanding shares of Gold Industry through the issuance of 8,800,000 restricted
shares of Common Stock to the Cayman Shareholder of Gold Industry. Immediately prior to the
Exchange Agreement transaction, the Company had 13,075,000 shares of Common Stock issued and
outstanding, of which 10,875,000 shares of Common Stock collectively owned by Helen Schwartz and
Ruth Shepley were cancelled immediately prior to the Closing pursuant to the Exchange Agreement.
Immediately after the issuance of the shares to the Cayman Shareholder, the Company had 11,000,000
shares of Common Stock issued and outstanding.
Gold Industry is a holding company incorporated in Cayman Islands. Since incorporation, Gold
Industry has not conducted any substantive operations of its own except for holding 100% equity
interests of Gold Holy.
Gold Holy is a holding company established in Hong Kong Special Administration Region on
September 29, 2009. Other than holding 100% equity interests of Ran Ji, Gold Holy has no other
separate operations of its own.
Ran Ji is a shareholding limited company organized in the PRC on December 15, 2009. Ran Ji
was formed by Gold Holy. Other than the activities relating to its contractual arrangements with
Foguang as described below, Ran Ji has no other business operations.
Foguang is a shareholding limited company organized in the PRC on October 10, 2002. Foguang
holds the government licenses and approvals necessary to operate the death care business in China.
We do not own any equity interests in Foguang, but control and receive the economic benefits of its
business operations through contractual arrangements. Through Ran Ji, we have contractual
arrangements with Foguang and its owners pursuant to which we provide consulting and other general
business operation services. Through these contractual arrangements, we also have the ability to
substantially influence their daily operations and financial affairs, since we are able to appoint
their senior executives and approve all matters requiring approval of the equity owners. As a
result of these contractual arrangements, which enable us to control Foguang and to receive,
through Ran Ji, all of its profits, we are considered the primary beneficiary of Foguang.
Contractual Arrangements with Foguang and its Owners
On December 15, 2009, Ran Ji entered into the following contractual arrangements with Foguang
and its owners:
Consulting Services Agreement
. Pursuant to the exclusive consulting services
agreement between Ran Ji and Foguang, Ran Ji has the exclusive right to provide to Foguang general
services related to the tourism development industry as well as consulting services related to
tourism project, cemetery management, funeral ashes, planting of flowers, nursery stock and Chinese
herbal, biomass research, production and marketing of arts and crafts, and designing of landscape
(the "Services"). Ran Ji also sends employees to Foguang and Foguang bears the costs and expenses
for such employees. Under this agreement, Ran Ji owns the intellectual property rights developed
through the Services provided to Foguang. Foguang pays a quarterly consulting service fee in
Renminbi ("RMB") to Ran Ji that is equal to all of Foguang's revenue for such quarter. The
consulting services agreement is in effect unless and until terminated by written notice of either
party in the event that: (a) the other party causes a material breach of this agreement, provided
that if the breach does not relate to a financial obligation of the breaching party, that party may
attempt to remedy the breach within fourteen (14) days following the receipt of the written notice;
(b) the other party becomes bankrupt, insolvent, is the subject of proceedings or arrangements for
liquidation or dissolution, ceases to carry on business, or becomes unable to pay its debts as they
become due; (c) Ran Ji terminates its operations; (d) Foguang's business license or any other
license or approval for its business operations is terminated, cancelled or revoked; or (e)
circumstances arise
which would materially and adversely affect the performance or the objectives of the
consulting services agreement. Additionally, Ran Ji may terminate the consulting services
agreement without cause.
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Table of Contents
Operating Agreement
. Pursuant to the operating agreement among Ran Ji, Foguang and
the owners of Foguang who collectively hold 100% of the issued and outstanding equity interests of
Foguang (collectively the "
Foguang Owners
"), Ran Ji
provides guidance and instructions on
Foguang's daily operations, financial management and employment issues. The Foguang Owners must
designate the candidates recommended by Ran Ji as their representatives on Foguang's board of
directors. Ran Ji has the right to appoint senior executives of Foguang. In addition, Ran Ji
agrees to guarantee the performance of Foguang under any agreements or arrangements relating to
Foguang's business arrangements with any third party. Foguang, in return, agrees to pledge its
accounts receivable and all of its assets to Ran Ji. Moreover, Foguang agrees that without the
prior consent of Ran Ji, Foguang will not engage in any transactions that could materially affect
the assets, liabilities, rights or operations of Foguang, including, without limitation, incurrence
or assumption of any indebtedness, sale or purchase of any assets or rights, incurrence of any
encumbrance on any of its assets or intellectual property rights in favor of a third party or
transfer of any agreements relating to its business operation to any third party. The term of this
agreement is ten years from December 15, 2009, and may be extended only upon Ran Ji's written
confirmation prior to the expiration of the agreement, with the extended term to be mutually agreed
upon by the parties.
Equity Pledge Agreement
Under the equity pledge agreement between the Foguang Owners
and Ran Ji, the Foguang Owners pledged all of their equity interests in Foguang to Ran Ji to
guarantee Foguang's performance of its obligations under the consulting services agreement. If
Foguang or the Foguang Owners breach their respective contractual obligations, Ran Ji, as pledgee,
will be entitled to certain rights, including, but not limited to, the right to sell the pledged
equity interests, the right to vote and control the pledged assets. The Foguang Owners also
agreed, that upon occurrence of any event of default, Ran Ji shall be granted an exclusive,
irrevocable power of attorney to take actions in the place and instead of the Foguang Owners to
carry out the security provisions of the equity pledge agreement and take any action and execute
any instrument that Ran Ji may deem necessary or advisable to accomplish the purposes of the equity
pledge agreement. The Foguang Owners agreed not to dispose of the pledged equity interests or take
any actions that would prejudice Ran Ji's interest. The equity pledge agreement will expire in two
years after Foguang's obligations under the exclusive consulting services agreement have been
fulfilled.
Option Agreement
.
Under the option agreement between the Foguang Owners and Ran Ji,
the Foguang Owners irrevocably granted Ran Ji or its designated person an exclusive option to
purchase, to the extent permitted under Chinese law, all or part of the equity interests in Foguang
for the cost of the initial contributions to the registered capital or the minimum amount of
consideration permitted by applicable Chinese law. Ran Ji or its designated person has sole
discretion to decide when to exercise the option, whether in part or in full. The term of this
agreement is ten years from December 15, 2009, and may be extended prior to its expiration by
written agreement of the parties.
Proxy Agreement
.
Pursuant to the proxy agreement among Ran Ji, the Foguang Owners,
and Foguang, the Foguang Owners agreed to entrust all the rights to exercise their voting power to
designee(s) of Ran Ji. Such designee(s) shall have the right to exercise the Foguang Owners'
voting and other rights, including the attendance at and the voting of their shares at Foguang's
shareholders meetings (or by written consent in lieu of meetings) in accordance with applicable
laws and Foguang's Article of Association. This agreement may not be terminated without the
unanimous consent of all parties, except that Ran Ji may, by giving a thirty (30) day prior written
notice to the Foguang Owners, terminate the proxy agreement, with or without cause.
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Table of Contents
Our Current Corporate Structure
(1)
Our management includes: Yiyou Ran as Chief Executive Officer, President and
Chairman, Michael Wang as Chief Financial Officer, Treasurer, Secretary and
Director, and Jianquan Chen and Tim Hudson as members of the board of directors.
(2)
The management of Gold Industry is comprised of Yiyou Ran, Jianquan
Chen and Yang Chen as its directors. Artistry is the sole shareholder of Gold
Industry.
(3)
The management of Gold Holy is comprised of Yiyou Ran, Jianquan
Chen and Yang Chen as its directors. Gold Industry is the sole shareholder of
Gold Holy.
(4)
The management of Ran Ji is comprised of Yiyou Ran, Jianquan Chen
and Yang Chen as its directors. Holy Gold is the sole shareholder of Ran Ji
(5)
Ran Ji controls Foguang through contractual arrangements designed
to mimic equity ownership of Foguang by Ran Ji. These contracts include a
consulting services agreement, operating agreement, equity pledge agreement,
option agreement, and proxy agreement.
(6)
The management of Foguang is comprised of Yiyou Ran, Jianquan Chen
and Yang Chen as its directors.
Financing
On February 23, 2010, we entered into a securities purchase agreement (the
"
Agreement
") with 24 institutional and/or accredited investors (collectively the
"
Purchasers
") pursuant to which the Company sold $4,599,415 of units of its equity
securities to the Purchasers in a private placement (the "
Transaction
"). Each unit is
comprised of 100,000 shares of the Registrant's common stock, par value $0.001 per share (the
"
Common Stock
"), at a per share purchase price of $3.28 per share, and warrants to purchase
up to 50,000 shares of Common Stock. At the closing of the Transaction on February 23, 2010, the
Company issued 1,402,262 shares of Common Stock (the "
Shares
") and four-year warrants to
purchase 701,126 shares of Common Stock (the "
Warrants
"). At the closing of the
Transaction, the Company also issued warrants to purchase up to 70,113 shares of Common Stock to
its placement agent and its assignees.
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Table of Contents
The Agreement includes customary representations and warranties by each party thereto.
Additionally:
•
We agree to grant to the Purchasers certain registration rights pursuant to a
registration rights agreement (the "Registration Rights Agreement"), which terms are
further described below; and
•
We covenant to use our best efforts to meet the listing requirements for a senior
exchange within six months after the closing of the Transaction.
The Warrants entitle each Purchaser to purchase up to 50% of the number of shares of Common
Stock acquired by such Purchaser in the Transaction, and expire on the fourth anniversary of their
issuance date (the "Termination Date"). The Warrants may be exercised on a "cashless" basis if, at
any time after the first anniversary of their issuance date, there is no registration statement in
effect registering the resale of the shares of Common Stock underlying the Warrants, provided that
all Warrants outstanding on Termination Date shall be exercised on a cashless basis. The exercise
price of the Warrants is $4.10 per share, subject to certain adjustments as described further in
"Description of Securities" below.
In connection with the Transaction, we also entered into a registration rights agreement (the
"
Registration Rights Agreement
") with the Purchasers, pursuant to which we are required to
file a registration statement registering the resale of the Shares and the Common Stock underlying
the Warrants (including any additional shares issuable resulting from the anti-dilution provisions
of the Warrants) with the Securities and Exchange Commission (the "
SEC
") not later than 45
days from the closing of the Transaction, and be declared effective by the SEC not later than 180
days from the closing of the Transaction (or 210 days in the event of a full review by the SEC).
If the registration statement is not timely filed or timely declared effective, we are liable to
each Purchaser for liquidated damages of 1% of such Purchaser's purchase price per month until the
registration statement is filed or declared effective, up to a maximum of 12% of such Purchaser's
purchase price.
Our Customers
Our customers are individuals or families that would purchase graves for members for their
families that are presently living or deceased. According to National Population and Family
Planning Commission of the PRC, the current annual death rate of Chongqing is 0.65% and it is
predicted to go up to approximately 0.7% in the next three years. In the meantime, the population
for the city keeps growing and the pace of urbanization has quickened. For example, in 2008, the
population of urban residents has increased 500,600 compared to 2007. This will increase the
market demand of nearly 3,000 graves in our target market annually. The cremation number of the
city is about 45,000 each year, in which 60% to 70% of the deceased's relatives will purchase
graves. Their demand also constitutes our target market.
The following is a breakdown of the grave types purchased by our current customers:
Grave Type
Price
Percentage of Customer
Double Graves
Below $1,500
(Below RMB 10,000)
15
%
Double Graves
Between $1,500 and $4,500
(Between RMB 10,000 and 30,000)
33
%
Single Graves
Between $4,500 and $7,500
(Between RMB 30,000 and 50,000)
38
%
Single Graves
Between $7,500 and $15,000
(Between RMB 50,000 and 100,000)
10
%
Single Graves
Between $15,000 and $45,000
(Between RMB 100,000 and 300,000)
2.5
%
Single Graves
Between $45,000 and $75,000
(Between RMB 300,000 and 500,000)
1
%
Single Graves
0.5%Over $75,000
(Over RMB 500,000)
0.5
%
Our Suppliers and Manufacturers
We entered into a long term contract with a local manufacturer to manufacture bluestone
memorials for our cemetery operations. We provide the manufacturer with our own design
specifications and the manufacturer produces, delivers and mounts the memorials to our burial
vaults.
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We also entered into various project-based construction contracts with local contractors to
build our cemetery facilities. Some of the projects include turning hillside into terraced fields,
building roads, pathways and office facilities, digging up burial vaults, and building a lake dam.
Our Sales and Marketing
As of March 31, 2010, we employed our sales and marketing force included 6 employees, who also
oversaw 12 sales and 23 agents who are independent contractors. We have made a strong commitment to
the training of our employees in order to ensure that our customers receive the highest quality
customer service. Our training program includes pre-employment training and on-employment training
of professional ethics and sales techniques. Each employee's sales performance will be evaluated by
his supervisor on a yearly basis. Based on the evaluation, the employee may be granted a year-end
bonus, pay raise or promotion.
We reward our salespeople with incentives for generating new customers. Substantially all of
our sales force is compensated based on performance. Commissions are augmented with various bonus
and incentive packages to ensure a high quality, motivated sales force. We pay commissions to our
sales personnel based on a percentage of the price of the products and services, which varies from
6% to 30%, of the total contract price. In addition, our sales personnel receive an award varying
from 1,000 RMB to 10,000 RMB for yearly sales of 1 million RMB or more by the sales agents assigned
to them. We pay our sales agent based on a percentage of sales varying from 10% to 12% and we
offer an extra 2% or 3% award to yearly sales of 1.8 million RMB or more.
We also advertise on television from time to time. From February 4, 2009 to March 20, 2009,
we ran commercials on the local Changshou television during prime commercial time after the news
rebroadcast on national television.
Our Competition
The operating environment in the death care industry has been highly competitive. Although we
are the largest private provider of cemetery products and services in Chongqing, we nevertheless
face intense and crude competition from numerous local funeral homes and cemetery firms. Our
primary competitors in Chongqing are:
Name of Competitors
Description of Competitors
Comparison with Foguang
Chongqing Long Tai
Mountain Cemetery
This is a cemetery found
in 1994 and consists of
over 41 acres.
This cemetery has more
demand than its land
could supply and it is
conveniently located
in downtown Chongqing.
Chongqing Hua Yan Ta Yuan
This is a Hong Kong based
project and currently the
only pagoda cemetery
project in China.
This cemetery is
limited to 40,000
tombs, all of which
have been sold as of
November 2009.
Chongqing Hua Xia Cemetery
This cemetery is
currently the most
expensive and elaborate
cemetery site in China.
Cost per tomb starts
at 60,000 RMB
(approximately
US$10,000). The
cemetery is only 8.6
acres in size and has
no land for further
expansion.
We have observed new start-up competition in certain areas of Chongqing, which in any one
market may have impacted our profitability because of the high fixed cost nature of cemeteries.
Market share for cemeteries is largely a function of reputation and heritage, although competitive
pricing, professional service and attractive, well-maintained and conveniently located facilities
are also important. Because of the importance of reputation and heritage, market share increases
are usually gained over a long period of time. The sale of cemetery property has increasingly been
used by many companies as a marketing tool to build market share.
Intellectual Properties and Licenses
Our Company currently does not have any intellectual properties and licenses.
Governmental Regulations
Compliance with Circular 106 and the 2006 M&A Regulations
On May 29, 2007, China's State Administration of Foreign Exchange ("
SAFE
") issued an
official notice known as "Circular 106", which requires the owners of any Chinese companies to
obtain SAFE's approval before establishing any offshore
29
Table of Contents
holding company structure in so-called "round-trip" investment transactions for foreign
financing as well as subsequent acquisition matters in China. Likewise, the "Provisions on
Acquisition of Domestic Enterprises by Foreign Investors", issued jointly by Ministry of Commerce
("
MOFCOM
"), State-owned Assets Supervision and Administration Commission, State Taxation
Bureau, State Administration for Industry and Commerce ("
SAIC
"), China Securities
Regulatory Commission and SAFE in August 2006, impose approval requirements from MOFCOM for
"round-trip" investment transactions, including acquisitions in which equity was used as
consideration.
Dividend Distribution
The principal laws, rules and regulations governing dividends paid by our PRC operating
subsidiary include the Company Law of the PRC (1993), as amended in 1999, 2004 and 2005
respectively, Wholly Foreign Owned Enterprise Law (1986), as amended in 2000, and Wholly Foreign
Owned Enterprise Law Implementation Rules (1990), as amended in 2001. Under these laws and
regulations, our PRC subsidiary may pay dividends only out of its accumulated profits, if any,
determined in accordance with PRC accounting standards and regulations. In addition, our PRC
subsidiary is required to set aside at least 10% of its after-tax profit based on PRC accounting
standards each year to its statutory surplus reserve fund until the accumulative amount of such
reserve reaches 50% of its respective registered capital. These reserves are not distributable as
cash dividends. The board of directors of a wholly foreign-owned enterprise ("
WFOE
") has
the discretion to allocate a portion of its after-tax profits to its staff welfare and bonus funds.
After the allocation of relevant welfare and funds, the equity owners can distribute the rest of
the after-tax profits provided that all the losses of the previous fiscal year have been made up.
Taxation
The applicable income tax laws, regulations, notices and decisions (collectively referred to
as "
Applicable Foreign Enterprises Tax Law
") related to foreign investment enterprises and
their investors mainly include the following:
•
Notice Relating to Taxes Applicable to Foreign Investment Enterprises
/ Foreign Enterprises and Foreign Nationals in Relation to Dividends
and Gains obtained from Holding and Transferring of Shares promulgated
by State Tax Bureau on July 21, 1993;
•
Amendments to the Income Tax Law Applicable to Individuals of the PRC
promulgated by Standing Committee of the National People's Congress
("
NPC
") on October 31, 1993;
•
Notice on Relevant Policies Concerning Individual Income Tax issued by
Ministry of Finance and the State Tax Bureau on May 13, 1994;
•
Notice on Reduction of Income Tax in Relation to Interests and Gains
Derived by Foreign Enterprises from the PRC, promulgated by the State
Council on November 18, 2000; and
•
Enterprise Income Tax Law of the PRC ("
New EIT Law
") issued by NPC on
March 16, 2007, which came into effect on January 1, 2008.
Income Tax on Foreign Investment Enterprises
According to the New EIT Law, PRC domestic enterprises and foreign investment enterprises
(including sino-foreign equity joint ventures, sino-foreign co-operative joint ventures and WFOEs
established in the territory of the PRC) are required to pay a uniform income tax at a rate of 25%
of their taxable income and the former tax exemption, reduction and preferential treatments
applicable to foreign investment enterprises are revoked.
In 2009, Foguang Group's income tax was at a rate of 25%.
Value Added Tax
The Provisional Regulations of the PRC Concerning Value Added Tax promulgated by the State
Council came into effect on January 1, 1994 and were amended in 2008. Under these regulations and
the Implementing Rules of the Provisional Regulations of the PRC Concerning Value Added Tax, value
added tax is imposed on goods sold in or imported into the PRC and on processing, repair and
replacement services provided within the PRC.
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Table of Contents
Value added tax payable in the PRC is charged on an aggregated basis at a rate of 13% or 17%
(depending on the type of goods involved) on the full price collected for the goods sold or, in the
case of taxable services provided, at a rate of 17% on the charges for the taxable services
provided but excluding, in respect of both goods and services, any amount paid in respect of value
added tax included in the price or charges, and less any deductible value added tax already paid by
the taxpayer on purchases of goods and service in the same financial year.
Business Tax
According to the Provisional Regulations of the PRC Concerning Business Tax promulgated by the
State Council on December 13, 1993 and came into effect on January 1, 1994, which was revised by
the State Council on November 10, 2008 and enforced from January 1, 2009, business that provides
services, assigns intangible assets or sells immovable property became liable to business tax at a
rate ranging from 3 to 5% of the charges of the services provided, intangible assets assigned or
immovable property sold, as the case may be.
Tax on Dividends from PRC Enterprise with Foreign Investment
According to the Applicable Foreign Enterprises Tax Law, income such as rental, royalty and
profits from the PRC derived by a foreign enterprise which has no establishment in the PRC or has
establishment but the income has no relationship with such establishment is subject to a 10%
withholding tax, subject to reduction as provided by any applicable double taxation treaty, unless
the relevant income is specifically exempted from tax under the Applicable Foreign Enterprises Tax
Law. The profit derived by a foreign investor from a PRC enterprise with foreign investment is
exempted from PRC withholding tax according to the Applicable Foreign Enterprises Tax Law.
Wholly-Owned Foreign Enterprise ("WFOE")
WFOEs are governed by the Law of the PRC Concerning Enterprises with Sole Foreign Investments,
which was promulgated on April 12, 1986 and amended on October 31, 2000, and its Implementation
Regulations promulgated on December 12, 1990 and amended on April 12,2001 (together the
"
Foreign Enterprises Law
").
(a)
Procedures for establishment of a WFOE
The establishment of a WFOE will have to be approved by the MOFCOM (or its
delegated authorities). If two or more foreign investors jointly apply for the
establishment of a WFOE, a copy of the contract between the parties must also
be submitted to the MOFCOM (or its delegated authorities) for its record. A
WFOE must also obtain a business license from the SAIC before it can commence
business.
(b)
Nature
A WFOE is a limited liability company under the Foreign Enterprises Law. It is
a legal person which may independently assume civil obligations, enjoy civil
rights and has the right to own, use and dispose of property. It is required
to have a registered capital contributed by the foreign investor(s). The
liability of the foreign investor(s) is limited to the amount of registered
capital contributed. A foreign investor may make its contributions by
installments and the registered capital must be contributed within the period
as approved by the MOFCOM (or its delegated authorities) in accordance with
relevant regulations.
(c)
Profit distribution
The Foreign Enterprise Law provides that after payment of taxes, a WFOE must
make contributions to a reserve fund, an enterprise development fund and an
employee bonus and welfare fund. The allocation ratio for the employee bonus
and welfare fund may be determined by the enterprise. However, at least 10% of
the after tax profits must be allocated to the reserve fund. If the cumulative
total of allocated reserve funds reaches 50% of an enterprise's registered
capital, the enterprise will not be required to make any additional
contribution. The reserve fund may be used by a WFOE to make up its losses and
with the consent of the examination and approval authority, can also be used to
expand its production operations and to increase its capital. The enterprise is
prohibited from distributing dividends unless the losses (if any) of previous
years have been made up. The development fund is used for expanding the capital
base of the company by way of capitalization issues. The employee bonus and
welfare fund can only be used for the collective benefit and facilities of the
employees of the WFOE.
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Catalogue for the Guidance of Foreign Investment Industries
China issued the Catalogue for the Guidance of Foreign Investment Industries ("
Guidance
Catalogue
") in 1995, which was amended in 2002, 2004 and 2007 respectively. The current version
of the Guidance Catalogue was promulgated by the MOFCOM and the National Development and Reform
Commission ("
NDRC
") on October 31, 2007 and became effective as of December 1, 2007, which
retains the classification methodology and organizational structure used in the previous versions
without significant changes. The Guidance Catalogue divides foreign investments into four
categories:
(i) Encouraged Category. There are various incentives and preferential treatments for
"encouraged" projects, mainly tax exemptions and rebates. Most foreign investment projects in the
"encouraged" sector are allowed to take the form of WFOE;
(ii) Permitted Category. Sectors not listed therein belong to the "permitted" category and
they are determined by the rule of exception. Therefore, unless the items are transferred among the
"encouraged", "restricted" and "prohibited" categories, any addition to or deletion from the
"encourage", "restricted" and "prohibited" categories would consequently affect the scope of the
"permitted" category. Like those in the "encouraged" sector, foreign investment projects in the
"permitted" sector are allowed to take the form of WFOE. However, they are generally not eligible
for extra incentives and preferential treatments;
(iii) Restricted Category. There are stricter approvals or filing requirements for
"restricted" projects. Furthermore, foreign investment projects in the "restricted" sectors may be
required to take the form of Joint Venture. The foreign investors may only hold a minority interest
in the investment projects; and
(iv) Prohibited Category. Foreign investments are not allowed in these sectors.
Foreign Exchange Controls
Major reforms have been introduced to the foreign exchange control system of the PRC since
1993.
On December 28, 1993, the People's Bank of China ("
PBOC
"), with the authorization of
the State Council issued the Notice on Further Reform of the Foreign Exchange Control System which
came into effect on January 1, 1994. Other new regulations and implementation measures include the
Regulations on the Foreign Exchange Settlement, Sale and Payments which were promulgated on June
20, 1996 and took effect on July 1, 1996 and which contain detailed provisions regulating the
settlement, sale and payment of foreign exchange by enterprises, individuals, foreign organizations
and visitors in the PRC and the regulations of the PRC on Foreign Exchange Control which were
promulgated on January 1, 1996 and took effect on April 1, 1996 and which contain detailed
provisions in relation to foreign exchange control.
The foreign exchange earnings of all PRC enterprises, other than those foreign investment
enterprises ("
FIE
"), who are allowed to retain a part of their regular foreign exchange
earnings or specifically exempted under the relevant regulations, are to be sold to designated
banks. Foreign exchange earnings obtained from borrowings from foreign institutions or issues of
shares or bonds denominated in foreign currency need not be sold to designated banks, but must be
kept in foreign exchange bank accounts of designated banks unless specifically approved otherwise.
At present, control of the purchase of foreign exchange is relaxed. Enterprises within the PRC
which require foreign exchange for their ordinary trading and non-trading activities, import
activities and repayment of foreign debts may purchase foreign exchange from designated banks if
the application is supported by the relevant documents. Furthermore, FIEs may distribute profit to
their foreign investors with funds in their foreign exchange bank accounts kept with designated
banks. Should such foreign exchange be insufficient, enterprises may purchase foreign exchange from
designated banks upon the presentation of the resolutions of the directors on the profit
distribution plan of the particular enterprise.
Although the foreign exchange control over transactions under current accounts has decreased,
enterprises shall obtain approval from SAFE before they accept foreign-currency loans, provide
foreign currency guarantees, make investments in foreign countries or carry out any other capital
account transactions involving the purchase of foreign currencies.
In foreign exchange transactions, designated banks may freely determine applicable exchange
rates based on the rates publicized by PBOC and subject to certain governmental restrictions.
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Table of Contents
On October 21, 2005, SAFE issued the Notice of the State Administration of Foreign Exchange on
Exchange Control Issues Relating to Financing and Reverse Investment by Persons Resident in the
People's Republic of China Through Offshore
Special Purpose Vehicles ("
SAFE Notice No. 75
"), which became effective as of November
1, 2005. According to the SAFE Notice No. 75, prior registration with the local SAFE branch is
required for PRC residents to establish or to control an offshore company for the purposes of
financing that offshore company with assets or equity interests in an onshore enterprise located in
the PRC. An amendment to registration or filing with the local SAFE branch by such PRC resident is
also required for the injection of equity interests or assets of an onshore enterprise in the
offshore company or overseas funds raised by such offshore company, or any other material change
involving a change in the capital of the offshore company.
Moreover, the SAFE Notice No. 75 applies retroactively. As a result, PRC residents who have
established or acquired control of offshore companies that have made onshore investments in the PRC
in the past are required to complete the relevant registration procedures with the local SAFE
branch by March 31, 2006. Under the relevant rules, failure to comply with the registration
procedures set forth in the SAFE Notice No. 75 may result in restrictions being imposed on the
foreign exchange activities of the relevant onshore company, including the increase of its
registered capital, the payment of dividends and other distributions to its offshore parent or
affiliate and the capital inflow from the offshore entity, and may also subject relevant PRC
residents to penalties under PRC foreign exchange administration regulations. PRC residents who
control our Company from time to time are required to register with the SAFE in connection with
their investments in us.
PRC Funeral Regulations and Compliance with Environmental Laws
Our operations are subject to regulations and supervision under state, and local laws,
ordinances, and regulations, including extensive regulations concerning cemetery construction,
sales of funeral and cemetery products and services, and various other aspects of our business.
We are subject to the requirements of the Regulations on Funeral and Interment Control
promulgated by Decree No. 225 of the State Council of the PRC on July 21, 1997 and Rules of
Chongqing on Funeral and Interment Control promulgated by the local government on May 29, 1998.
Pursuant to the laws and regulations, the type of funeral equipment we use and the size of burial
vaults we construct and sell to our customers must comply with state unified specifications and
standards. In addition, any construction of cemetery or funeral home must be approved by the
Administration of Civil Affairs and the construction must be limited away from a certain areas such
as cultivated land, forest land, urban parks, scenic spots, protected areas of water resources,
railways and highways.
We believe that we are in substantial compliance with all such laws and regulations.
Seasonality
The death care business is relatively stable and predictable. However, we generally
experience fewer sales in the summer season due to the extreme hot weather in Chongqing since less
people are willing to conduct site visits in extreme heat; even though these decreases have not
historically had any significant impact on our results of operations.
Employees
The following table sets forth the number of our employees for each of our areas of operations
and as a percentage of our total workforce as of March 31, 2010:
Number of
%
Employees
of Employees
Management & Administration
11
25.58
%
Finance
5
11.62
%
Cemetery Administration Office
8
18.60
%
Sales & Marketing
6
13.95
%
Construction Projects
8
18.60
%
Customer Service
5
11.62
%
TOTAL
43
100.0
%
Our employees are interviewed and hired by our management team and generally, we offer
training programs to new workers to better understand our corporate regulations and professional
ethics and improve their relevant skills during the training period. We believe that our
relationship with our employees is good. Management expects that our access to reasonably priced
and competent labor will continue into the foreseeable future.
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Table of Contents
We are in full compliance with Chinese labor laws and regulations and are committed to
providing safe and comfortable working conditions and accommodations for our employees. We believe
in the importance of maintaining our social responsibilities, and we are committed to providing
employees with a safe, clean and comfortable working environment and accommodations. Our employees
are also entitled to time off during public holidays. We are in full compliance with our
obligations to provide pension benefits to our workers, as mandated by the PRC government. We
strictly comply with Chinese labor laws and regulations, and offer reasonable wages, life insurance
and medical insurance to our workers.
Environmental Matters
Our operations are subject to certain PRC environmental regulations. We believe that we are
in substantial compliance with all such laws and regulations. For more information on such
environmental laws and regulations, please refer to the section on "PRC Funeral Regulations and
Compliance with Environmental Law."
Offices
Our principal executive office is located at 239 Jianxin Road, Jiangbei District, Chongqing,
PRC 400000. Our main telephone number is (86) 023-67755514, and our fax number is (86)
023-67759771.
DESCRIPTION OF PROPERTY
Chongqing offices and facilities
The table below provides a general description of our offices and facilities, all of which are
located in Chongqing, China.
Location
Principal Activities
Area (sq. meters)
Lease Expiration Date
LongQiao Village and QianFo
Village, JiangNan Town,
ChangShou District,
Chongqing,
PRC
401258
Commercial and residential use
339,444.20 square meters
N/A (property owned
by the Company)
The Agricultural Land of LongQiao
Lake Village Group
6, JiangNan
Town,
ChangShou District,
Chongqing, PRC
401258
Business operation
133,334 square meters
December 31, 2027
The Wasteland and Timberland of
LongQiao Lake
Village Group 6,
JiangNan Town,
ChangShou
District,
Chongqing, PRC
401258
Business Operation
213,312 square meters
December 31, 2055
The House Sites of LongQiao Lake
Group 6, Jiangnan Town,
ChangShou District,
Chongqing,
PRC
401258
Comprehensive development
27,997.2 square meters
June 9, 2029 (renewable
up to 100 years)
239 Jianxin Road , Jiangbei
District,
Chongqing, PRC
400000
Office
1,053 square meters
December 31, 2012
1 Huigong Road, 4th Floor,
Room
1-1, Nan'an
District,
Chongqing,
PRC
400000
Business Operation
630.36 square meters
January 6, 2035
1 Huigong Road, 4th Floor,
Room
1-2, Nan'an
District,
Chongqing,
PRC
400000
Business Operation
876.63 square meters
January 6, 2035
1 Huigong Road, 4th Floor,
Room
1-3, Nan'an
District,
Chongqing,
PRC
400000
Business Operation
431.16 square meters
January 6, 2035
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Location
Principal Activities
Area (sq. meters)
Lease Expiration Date
Fuli Bowling House, San Dong
Qiao, Feng
Cheng Town,
ChangShou District,
Chongqing,
PRC
401220
Business Operation
N/A
N/A
We lease our offices for business operation in Chongqing under property lease agreements for
agricultural land that expires on December 31, 2027 and non-agricultural land that expires on
December 31, 2055. We also lease a facility for comprehensive development in Chongqing under a
property lease agreement that expires on June 9, 2108 with an option to renew the lease for up to
one hundred years. Minimum future commitments under the lease agreements payable as of March 31,
2009 are as follows:
Year Ended March 31
Amount
2010
$
22,679
2011
$
22,679
2012
$
22,679
2013
$
22,679
2014
$
22,679
SUMMARY CONSOLIDATED FINANCIAL DATA
You should read the summary consolidated financial data set forth below in conjunction with
"Management's Discussion and Analysis of Financial Condition or Plan of Operations" and our
financial statements and the related notes included elsewhere in this prospectus. The financial
data for the years ended March 31, 2009 and 2008 were derived from our audited financial
statements, and the financial data for the three months and nine months ended December 31, 2009 and
2008 from our reviewed financial statements, included in this prospectus. The historical results
are not necessarily indicative of the results to be expected for any future period.
(Amounts in USD)
Three Months Ended
Nine Months Ended
Twelve Months
December 31,
December 31,
Ended March 31,
2009
2008
2009
2008
2009
2008
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Income statement data:
Revenues
11,403,585
1,969,952
26,467,501
11,186,413
18,313,720
22,121,639
Cost of Goods Sold
5,339,808
1,014,616
12,110,391
6,407,734
9,938,853
12,694,927
Gross Profit
6,063,777
955,336
14,357,110
4,778,679
8,374,867
9,426,712
Total Operating Expenses
643,198
194,838
1,397,182
868,277
1,471,475
1,685,737
Income from Operations
5,420,579
760,498
12,959,928
3,910,402
6,903,392
7,740,975
Total Other Income
150,451
39,584
352,153
186,903
283,560
330,614
Earnings Before Tax
5,571,030
800,082
13,312,081
4,097,305
7,186,952
8,071,589
Income Tax
(1,414,552
)
(67,002
)
(3,267,843
)
(836,642
)
(1,689,693
)
(2,346,605
)
Net Income
4,156,478
733,080
10,044,238
3,260,663
5,497,259
5,724,984
Footnotes
The share exchange transaction between us and Gold Industry is deemed to be a reverse acquisition,
where we (the legal acquirer) are considered the accounting acquiree and Gold Industry (the legal
acquiree) is considered the accounting acquirer.
Balance Sheet Data
(Amounts in USD)
At December 31,
At March 31,
At March 31,
2009
2009
2008
Consolidated Balance Sheet Data:
(Unaudited)
Cash
$
4,608,455
$
1,392,961
$
1,719,620
Total Current Assets
$
13,703,193
$
7,713,109
$
11,766,222
Total Current Liabilities
$
4,152,734
$
3,777,072
$
5,787,182
Total Shareholders' Equity
$
29,869,475
$
19,774,555
$
13,765,547
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MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following discussion and analysis of the results of our operations and financial condition
for the fiscal years ended March 31, 2009, March 31, 2008 and for the three months ended December
31, 2009 and 2008 and nine months ended December 31, 2009 and 2008 should be read in conjunction
with the Selected Consolidated Financial Data, our financial statements, and the notes to those
financial statements that are included elsewhere in this prospectus. Our discussion includes
forward-looking statements based upon current expectations that involve risks and uncertainties,
such as our plans, objectives, expectations and intentions. Actual results and the timing of events
could differ materially from those anticipated in these forward-looking statements as a result of a
number of factors, including those set forth under the Risk Factors, Cautionary Notice Regarding
Forward-Looking Statements and Business sections in this prospectus. We use words such as
"anticipate," "estimate," "plan," "project," "continuing," "ongoing," "expect," "believe,"
"intend," "may," "will," "should," "could," and similar expressions to identify forward-looking
statements.
OVERVIEW
China Redstone Group, Inc. (the "Company", "we", "our", or "us") was incorporated in Delaware
originally under the name "Artistry Publications, Inc." ("Artistry") on July 10, 2007. On April 6,
2010, we changed our name to "China Redstone Group, Inc." to reflect our current business
operations.
On February 12, 2010, we acquired Gold Industry Limited ("Gold Industry") by way of the
exchange of 8,800,000 shares of our Common Stock for 100% of the issued and outstanding common
stock of Gold Industry. We accounted for this share exchange transaction as a reverse acquisition
and recapitalization and, as a result, our consolidated financial statements are in substance those
of Gold Industry, with the assets and liabilities, and revenues and expenses, of Artistry being
included effective from the date of the share exchange transaction. Please see "History and
Corporate Structure" above and Note 16 to the consolidated financial statements included in this
prospectus for further details of this share exchange transaction.
Since the share exchange transaction, we have become a private provider of cemetery products
and services in Chongqing, People's Republic of China ("
PRC
" or "
China
"). All of
our business operations are carried out by Chongqing Foguang Tourism Development (Group) Co., Ltd.
("
Foguang
"), which we control through contractual arrangements between Foguang and
Chongqing Ran Ji Industrial Co., Ltd. ("
Ran Ji
"), a company organized in the PRC and
wholly-owned by Gold Holy Industry Limited, a company incorporated in Hong Kong Special
Administrative Region ("
Gold Holy
"). Gold Holy is wholly-owned by Gold Industry. Please
see "Contractual Arrangements with Foguang and its Owners" above and Note 1 to the consolidated
financial statements included in this prospectus for a description of these contractual
arrangements and their impact on our consolidated financial statements.
Through these contractual arrangements, we have the ability to substantially influence
Foguang's daily operations and financial affairs, appoint its senior executives and approve all
matters requiring shareholder approval. As a result of these contractual arrangements, which enable
us to control Foguang, we are considered the primary beneficiary of Foguang. Accordingly, we
consolidate Foguang's results, assets and liabilities in our financial statements. Other than our
interests in the contractual arrangements, neither we, Gold Industry, Gold Holy and Ranji own any
equity interests in Foguang.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of our financial condition and results of operations are based on our
financial statements, which have been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of these financial statements requires us
to make estimates and judgments that affect the reported amounts of assets, liabilities and
expenses. On an ongoing basis, we evaluate our estimates and judgments, including those related to
accrued expenses, fair valuation of stock related to stock-based compensation and income taxes. We
based our estimates on historical experience and on various other assumptions that we believe to be
reasonable under the circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or conditions.
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Table of Contents
REVENUE RECOGNITION
The Company recognizes revenue in accordance with US GAAP, which requires that four basic criteria
must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2)
delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is
reasonably assured. Determination of criteria (3) and (4) are based on management's judgments
regarding the fixed nature of the selling prices of the products delivered and the collectability
of those amounts.
The Company has two revenue sources including the following revenue recognition policies:
The Company recognizes revenue from the sale of cemetery plots when it is realized or realizable
and earnings process is complete. In general, the Company records revenue when the cemetery plot
successfully completed, title has passed to the customer in accordance with the terms of the sale
and consideration is given. The costs associated with cemetery products revenue are the costs to
convert the land into the actual burial plots. Additionally direct selling costs incurred in
selling the cemetery plots are recorded in cost of goods sold.
Park construction income is recognized when the Company is contracted to provides services for
third party clients. These services include the construction of sidewalks, pagodas, landscaping and
other structures for parks. These projects are not associated with the Company's sales of cemetery
plots. Revenue is recognized upon the completion of the park, and the project has been approved by
the customer and collection is assured. The costs associated with the park construction income are
raw material purchased for that specific project and services performed by the Company recorded in
cost of goods sold.
DEFERRED REVENUE
The Company recorded the deferred revenue related to land use rights that were contributed to the
Company by the People's Republic of China under ASC Topic 958 FAS 116, "Accounting for
Contributions Received and Contributions Made." As the Company sells cemetery plots, a portion of
the deferred revenue is recognized as other income based on the number of cemetery plots that the
Company sells during the year.
ACCOUNTS RECEIVABLE
Accounts receivable are carried at original invoice amount less an estimate made for doubtful
receivables based on a review of all outstanding amounts on a monthly basis. Management's judgment
and estimates are made in connection with establishing the allowance for doubtful accounts.
Specifically, the Company analyzes the aging of accounts receivable balances, historical bad debts,
customer concentrations, customer credit-worthiness, current economic trends and changes in the
customer payment terms. Significant changes in customer concentration or payment terms,
deterioration of customer credit-worthiness or weakening in economic trends could have a
significant impact on the collectability of receivables and the Company's operating results. If the
financial condition of the Company's customers were to deteriorate, resulting in an impairment of
their ability to make payments, the Company will write off 100% as bad debt.
INVENTORY
Inventory consists of completed cemetery plots ready for sale. Inventory includes all direct costs
associated with land development and construction of cemetery plots, including interest, costs of
land use rights based on units of production and other carrying costs incurred. Inventory is valued
at the lower of cost or market (determined on a weighted average cost basis) or net realizable
value. Management compares the cost of inventory with the net realizable value and an allowance is
made for impairment in the value of inventory if lower than cost.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. The cost of repairs and maintenance is expensed as
incurred; major replacements and improvements are capitalized. When assets are retired or disposed
of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or
losses are included in income in the year of disposition. Depreciation and amortization are
computed on the straight-line method over the following estimated useful lives of the related
assets.
INCOME TAXES
The Company accounts for income taxes in accordance with US GAAP. Deferred taxes are provided on
the liability method whereby deferred tax assets are recognized for deductible temporary
differences, and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the differences between the reported
amounts of assets and liabilities
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and their tax bases. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than not that some
portion or all of the deferred tax assets will be realized. Deferred tax assets and liabilities
are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company is
governed by the Income Tax Law of the People's Republic of China and local income tax laws (the
"
PRC Income Tax Law
"). Pursuant to the PRC Income Tax Law, enterprises are subject to tax
at a statutory rate of 25%. The local government in the PRC has provided companies various
incentives to encourage economic development in the region. Such incentives include reduced tax
rates and other measures.
LAND VALUATION
During 2005, the Company received land use rights which were contributed by People's Republic of
China ("
PRC
"). The land use rights include Chongqing Gui Yuan Cemetery located in
Changshou, China. Under PRC's governmental regulations, the government owns all land. However, PRC
would not directly assign the land use rights to the Company's management rather it assigned the
land use rights to the Company as a contribution. Therefore, the Company received the land use
rights without giving the government any consideration in return for the rights. At December 31,
2005, the Company has recorded the fair value of the land use rights under ASC Topic 958 FAS 116,
"Accounting for Contributions Received and Contributions Made", and the deferred revenue.
The Company uses two separate methods to determine the value of the land. First, the company hired
an outside company to perform an independent valuation of the land. The company hired ChongQing
HengJi Accounting firm to perform a valuation report on August 10, 2005. The valuation given by
ChongQing HengJi Accounting firm was approximately $13.2M. In addition, the company performed its
own valuation based on projected future sales. The company then attributed 10% of the total sales
to the land and discounted it 12%, leading to a valuation of approximately $10.3 million.
The land use rights are expensed based upon the number of cemetery plots capitalized in inventory
using the units of production method.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 2008, the Financial Accounting Standards Board ("
FASB
") issued an accounting
standard update that delayed the effective date of fair value measurements accounting for all
non-financial assets and non-financial liabilities, except for items that are recognized or
disclosed at fair value in the financial statements on a recurring basis (at least annually), until
the beginning of the first quarter of 2009. The Company adopted this accounting standard update
effective January 1, 2009. The adoption of this update to non-financial assets and liabilities, as
codified in ASC 820-10, did not have any impact on the Company's consolidated financial statements.
The Company's non-financial assets, such as goodwill, intangible assets, and property, plant and
equipment, are measured at fair value when there is an indicator of impairment and recorded at fair
value only when an impairment charge is recognized. No impairment indicators were present during
the three and nine month periods ended September 30, 2009. When impairment indicators are
present, the Company utilizes various methods to determine the fair value of its non-financial
assets. For example, to value property plant and equipment, we would use the cost method for
determining fair value; for goodwill we would use a combination of analyzing the Company's market
capitalization based on the market price of the Company's common stock and a determination of
discounted cash flows of the Company's operations.
Effective January 1, 2009, the Company adopted an accounting standard that requires unvested
share-based payments that entitle employees to receive nonrefundable dividends to also be
considered participating securities, as codified in ASC 260. The adoption of this accounting
standard had no impact on the calculation of our earnings per share because the Company has not
issued participating securities.
Effective April 1, 2009, the Company adopted three accounting standard updates which were intended
to provide additional application guidance and enhanced disclosures regarding fair value
measurements and impairments of securities. They also provide additional guidelines for estimating
fair value in accordance with fair value accounting. The first update, as codified in ASC
820-10-65, provides additional guidelines for estimating fair value in accordance with fair value
accounting. The second accounting update, as codified in ASC 320-10-65, changes accounting
requirements for other-than-temporary-impairment for debt securities by replacing the current
requirement that a holder have the positive intent and ability to hold an impaired security to
recovery in order to conclude an impairment was temporary with a requirement that an entity
conclude it does not intend to sell an impaired security and it will not be required to sell the
security before the recovery of its amortized cost basis. The third accounting update, as codified
in ASC 825-10-65, increases the frequency of fair value disclosures. These updates were effective
38
Table of Contents
for fiscal years and interim periods ended after June 15, 2009. The adoption of these accounting
updates did not have any impact on the Company's consolidated financial statements.
Effective April 1, 2009, the Company adopted a new accounting standard for subsequent events, as
codified in ASC 855-10. The update modifies the names of the two types of subsequent events either
as recognized subsequent events (previously referred to in practice as Type I subsequent events) or
non-recognized subsequent events (previously referred to in practice as Type II subsequent events).
In addition, the standard modifies the definition of subsequent events to refer to events or
transactions that occur after the balance sheet date, but before the financial statements are
issued (for public entities) or available to be issued (for nonpublic entities). It also requires
the disclosure of the date through which subsequent events have been evaluated. The update did not
result in significant changes in the practice of subsequent event disclosures, and therefore the
adoption did not have any impact on the Company's consolidated financial statements.
Effective July 1, 2009, the Company adopted the "FASB Accounting Standards Codification" and the
Hierarchy of Generally Accepted Accounting Principles ("
ASC 105
"). This standard
establishes only two levels of U.S. GAAP, authoritative and non-authoritative. The FASB Accounting
Standards Codification (the "
Codification
") became the source of authoritative,
nongovernmental GAAP, except for rules and interpretive releases of the SEC, which are sources of
authoritative GAAP for SEC registrants. All other non-grandfathered, non-SEC accounting literature
not included in the Codification became non-authoritative. The Company began using the new
guidelines and numbering system prescribed by the Codification when referring to GAAP in the third
quarter of 2009. As the Codification was not intended to change or alter existing GAAP, it did not
have any impact on the Company's consolidated financial statements.
In October 2009, the FASB issued Update No. 2009-13, "Multiple-Deliverable Revenue Arrangements—a
consensus of the FASB Emerging Issues Task Force" ("
ASU 2009-13
"). It updates the existing
multiple-element revenue arrangements guidance currently included under ASC 605-25, which
originated primarily from the guidance in EITF Issue No. 00-21, "Revenue Arrangements with Multiple
Deliverables" ("
EITF 00-21
"). The revised guidance primarily provides two significant
changes: 1) eliminates the need for objective and reliable evidence of the fair value for the
undelivered element in order for a delivered item to be treated as a separate unit of accounting,
and 2) eliminates the residual method to allocate the arrangement consideration. In addition, the
guidance also expands the disclosure requirements for revenue recognition. ASU 2009-13 will be
effective for the first annual reporting period beginning on or after June 15, 2010, with early
adoption permitted provided that the revised guidance is retroactively applied to the beginning of
the year of adoption. The Company is currently assessing the future impact of this new accounting
update to its consolidated financial statements.
In October 2009, the FASB issued Update No. 2009-14, "Certain Revenue Arrangements that Include
Software Elements—a consensus of the FASB Emerging Issues Task Force" ("
ASU 2009-14
").
ASU 2009-14 amends the scope of pre-existing software revenue guidance by removing from the
guidance non-software components of tangible products and certain software components of tangible
products. ASU 2009-14 will be effective for the first annual reporting period beginning on or
after June 15, 2010, with early adoption permitted provided that the revised guidance is
retroactively applied to the beginning of the year of adoption. The Company is currently assessing
the future impact of this new accounting update to its consolidated financial statements.
In December 2009, the FASB issued an accounting standard update for improvements to financial
reporting by enterprises involved with Variable Interest Entities. The subsections clarify the
application of the General Subsections to certain legal entities in which equity investors do not
have the characteristics of a controlling financial interest or do not have sufficient equity at
risk for the legal entity to finance its activities without additional subordinated financial
support [FIN 46(R), paragraph 1, sequence 55.1] or, as a group, the holders of the equity
investment at risk lack any one of the following three characteristics: [FIN 46(R), paragraph 1,
sequence 55.2]
a. The power, through voting rights or similar rights, to direct the activities of a legal entity
that most significantly impact the entity's economic performance [FIN 46(R), paragraph 1, sequence
55.2.1]
b. The obligation to absorb the expected losses of the legal entity [FIN 46(R), paragraph 1,
sequence 55.2.2]
c. The right to receive the expected residual returns of the legal entity. [FIN 46(R), paragraph 1,
sequence 55.2.3]
The amendments in this update to the Accounting Standards Codification are the result of FASB
Statement No. 167, Amendments to FASB Interpretation No. 46(R). The adoption of this update to
improving the financial reporting by enterprises involved with Variable Interest Entities, as
codified in ASC 810, did not have any impact on the Company's consolidated financial statements.
39
Table of Contents
In December 2009, the FASB issued an accounting standard update, Transfers and Servicing (Topic
860) Accounting for Transfers of Financial Assets. The amendments in this update to the Accounting
Standards Codification are the result of FASB Statement No. 166,
Accounting for Transfers of
Financial Assets
. The adoption of this update did not have any impact on the Company's consolidated
financial statements.
In January 2010, the FASB issued an accounting standard update, Fair Value Measurements and
Disclosures (Topic 820), Improving Disclosures about Fair Value Measurements. The Update would
affect all entities that are required to make disclosures about recurring and nonrecurring fair
value measurements. The Board concluded that users will benefit from improved disclosures in this
Update and that the benefits of the increased transparency in financial reporting will outweigh the
costs of complying with the new requirements. The new disclosures and clarifications of existing
disclosures are effective for interim and annual reporting periods beginning after December 15,
2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll
forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal
years beginning after December 30, 2010, and for interim periods within those fiscal years. The
adoption of this update for improving disclosures about fair measurements, as codified in ASC 820
did not have any impact on the Company's consolidated financial statements.
In January 2010, the FASB issued an accounting standard update to address implementation issues
related to the changes in ownership provisions in the Consolidation—Overall Subtopic (Subtopic
810-10) of the
FASB Accounting Standards Codification™
, originally issued as FASB Statement No.
160
, Noncontrolling Interests in Consolidated Financial Statements.
Subtopic 810-10 establishes the
accounting and reporting guidance for noncontrolling interests and changes in ownership interests
of a subsidiary. An entity is required to deconsolidate a subsidiary when the entity ceases to have
a controlling financial interest in the subsidiary. Upon deconsolidation of a subsidiary, an entity
recognizes a gain or loss on the transaction and measures any retained investment in the subsidiary
at fair value. The gain or loss includes any gain or loss associated with the difference between
the fair value of the retained investment in the subsidiary and its carrying amount at the date the
subsidiary is deconsolidated. In contrast, an entity is required to account for a decrease in its
ownership interest of a subsidiary that does not result in a change of control of the subsidiary as
an equity transaction.
While Subtopic 810-10 provides general guidance on accounting for the decreases in ownership of a
subsidiary, including a deconsolidation, some constituents raised concerns that the guidance
appears to conflict with the gain or loss treatment or derecognition criteria of other U.S.
generally accepted accounting principles (GAAP), such as the guidance for sales of real estate,
transfers of financial assets, conveyances of oil and gas mineral rights, and transactions with
equity method investees.
Some constituents also questioned whether the Board intended for the decrease in ownership
provisions of Subtopic 810-10 to apply to all entities because a subsidiary is defined as an
entity, including an unincorporated entity such as a partnership or trust, in which another entity,
known as its parent, holds a controlling financial interest. Those constituents were concerned that
such an interpretation could result in the accounting for a transaction being driven by its form
rather than its substance. For example, different accounting might be applied to a transaction
involving the same underlying assets depending on whether those assets were transferred in asset or
entity form." The amendments in this update are effective beginning in the period that an entity
adopts Statement 160 (now included in Subtopic 810-10). If an entity has previously adopted
Statement 160 as of the date of the amendments in this update are included in the
Accounting Standards Codification, the amendments in this update are effective beginning in the
interim or annual reporting period ending on or after December 31, 2009. The amendments in this
update should be applied retrospectively to the first period that an entity adopted 160. The
adoption of this update for the changes in the accounting and reporting guidance for noncontrolling
interests and changes in ownership interests of a subsidiary, as codified in ASC 810-10, did not
have any impact on the Company's financial statements.
Other recent accounting pronouncements issued by the FASB, the American Institute of Certified
Public Accountants ("
AICPA
"), and the SEC did not or are not believed by management to have
a material impact on the Company's present condensed consolidated financial statements.
40
Table of Contents
RESULTS OF OPERATIONS
Comparison of Three Month Periods Ended December 31, 2009 and December 31, 2008.
Total Net Revenues
Total revenues for the three months ended December 31, 2009 were $11,403,585 as compared to
$1,969,952 for the three months ended December 31, 2008, an increase of $9,433,633 or 478.88%. The
substantial increase in revenues is mainly attributable to the reopening of the bridge which has
led to increased access to our cemetery site. This coupled with the increase in overall market
conditions led to the increase in sales.
Cost of Sales
Cost of sales includes raw materials, conversation costs, direct labor, manufacturing costs, which
includes an allocation of overhead expenses including labor, utilities and depreciation directly
related to product production and related taxes. For the three months ended December 31, 2009, cost
of sales amounted to $5,339,808 or 46.83% of total net revenues as compared to $1,014,616 or 51.50%
of total net revenues for the three months ended December 31, 2008. The decrease in cost of sales
as a percentage of total net revenues was primarily due to economies of scale that were achieved
when selling a larger number of cemetery plots.
Gross Profit
Gross profit for the three months ended December 31, 2009 was $6,063,777 or 53.17% of total net
revenues, as compared to $955,336 or 48.50% of total net revenues for the three months ended
December 31, 2008. The increase in gross profit was attributable to economies of scale that were
achieved when selling a larger number of actual of cemetery plots. The increase in gross profit
margin as a percentage of revenue was primarily contributed to attributable to the reopening of the
bridge which has led to increased access to our cemetery site.
Operating Expenses
Total operating expenses for the three months ended December 31, 2009 were $643,198, an increase of
$448,360 or 230.12% from $194,838 for the three months ended December 31, 2008 of. This increase
includes the following:
For the three months ended December 31, 2009, advertising expenses amounted to $61,641 as compared
to $19,238 for the three months ended December 31, 2008, an increase of $42,403 or 220.41%. The
increase in expenses is mainly attributable to the increase in opportunity for sales, which came
the reopening of the bridge which has led to increased access to our cemetery site, and the
increase in overall market conditions. The Company believed that increasing advertisement would
increase sales.
For the three months ended December 31, 2009, general and administrative expenses amounted to
$581,557 as compared to $175,600 for the three months ended December 31, 2008, an increase of
$405,957 or 231.18%. The increase in expenses is mainly attributable to the reopening of the bridge
which has led to increased access to our cemetery site. This coupled with the increase in overall
market conditions led to the increase in sales and to an increase in administrative expenses to
manage attendant paperwork.
Income from Operations
We reported income from operations of $5,420,579 for the three months ended December 31, 2009 as
compared to $760,498 for the three months ended December 31, 2008, an increase of $4,660,081 or
approximately 612.77%. The substantial increase in income is mainly attributable to the reopening
of the bridge which has led to increased access to our cemetery site. This coupled with the
increase in overall market conditions led to the increase in sales.
Other Income
For the three months ended December 31, 2009, total other income amounted to $150,451 as compared
to $39,584 for the three months ended December 31, 2008, an increase of $110,867 or 280.08%. This
substantial increase is primarily attributable to the following:
For the three months ended December 31, 2009, other income amounted to $140,824 as compared to
$32,770 for the three months ended December 31, 2008, an increase of $108,054 or 329.7% from the
comparable period in 2009. This change is primarily attributable to the increase in the number of
cemetery plots sold.
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Table of Contents
For the three months ended December 31, 2009, interest expense amounted to $58,759 as compared to
$58,417 for the three months ended December 31, 2008, an increase of $342 or 0.6% from the
comparable period in 2009. This change is primarily
attributable to the change in the foreign exchange rate between the RMB and the US dollar, since
the interest is paid in RMB and then converted.
For the three months ended December 31, 2009, interest income amounted to $2,948 as compared to
$262 for the three months ended December 31, 2008, an increase of $2,686 or 1,025.2% from the
comparable period in 2009. This change is primarily attributable to the increase in the amount of
cash held during parts of the three months by the company.
For the three months ended December 31, 2009, rental income amounted to $65,438 as compared to
$64,969 for the three months ended December 31, 2008, a decrease of $469 or 0.7% from the
comparable period in 2009. This change is primarily attributable to the change in the foreign
exchange rate between the RMB and the US dollar, since the income is paid in RMB and then
converted.
Comparisons of Nine Month Periods Ended December 31, 2009 and December 31, 2008
Total Net Revenues
Total revenues for the nine months ended December 31, 2009 were $26,467,501 as compared to
$11,186,413 for the nine months ended December 31, 2008, an increase of $15,281,088 or
approximately 136.60%. For the nine months ended December 31, 2009 and 2008, net revenues
consisted of the following:
Nine Months
Nine Months
Ended
Ended
December 31,
December 31,
2009
2008
Cemetery
$
26,467,501
$
10,529,201
Park and Nursery Garden Services
—
657,212
Total net revenues
$
26,467,501
$
11,186,413
Cemetery
For the nine months ended December 31, 2009, cemetery revenues increased by $15,938,300 or 151.37%.
The increase in revenues is mainly attributable to the reopening of the bridge which has led to
increased access to our cemetery site. This coupled with the increase in overall market conditions
led to the increase in sales.
Park and Nursery Garden Services
For the nine months ended December 31, 2009, there were no revenues for park and nursery garden
services compared to revenues of $657,212 for the nine months ended December 31, 2008. The Company
is shifting its focus to the development of its cemetery business, and as a result, the Company did
not dedicate resources on its park and nursery garden business during fiscal year 2009. We do not
expect this trend to change during fiscal year 2010 as the Company will continue to focus on
developing its cemetery business.
Cost of Sales
Cost of sales includes raw materials, conversation costs, direct labor, manufacturing costs, which
includes an allocation of overhead expenses including labor, utilities and depreciation directly
related to production and related taxes. For the nine months ended December 31, 2009, cost of sales
amounted to $12,110,391or approximately 45.76% of total net revenues as compared to cost of sales
of $6,407,734 or approximately 57.28% of total net revenues for the nine months ended December 31,
2008. The decrease in cost of sales as a percentage of total net revenues was primarily due to
economies of scale that were achieved when selling a larger number of cemetery plots as well as a
contract signed with a provider that was more favorable due to excess capacity at the supplier.
Gross Profit
Gross profit for the nine months ended December 31, 2009 was $14,357,110 or 54.24% of total net
revenues, as compared to $4,778,679 or 42.72% of total net revenues for the nine months ended
December 31, 2008. The increase in gross profit margin as a percentage of revenue was primarily
attributable to the reopening of the bridge which has led to increased access to our
42
Table of Contents
cemetery site. In addition, a contract signed with a provider was more favorable due to excess
capacity at the supplier, thereby decreasing costs.
Operating Expenses
Total operating expenses for the nine months ended December 31, 2009 were $1,397,182, an increase
of $528,905 or 60.91% from total operating expenses in the nine months ended December 31, 2008 of
$868,277. This increase includes the following:
For the nine months ended December 31, 2009, advertising expenses amounted to $142,982 as compared
to $84,024 for the nine months ended December 31, 2008, an increase of $58,958 or 70.17%. We spent
more on advertising expenses for the nine months ended December 31, 2009 due to a more positive
outlook in the economic markets which led the Company to spend more on advertising in an effort to
attract more customers.
For the nine months ended December 31, 2009, general and administrative expenses amounted to
$1,254,200 as compared to $784,253 for the nine months ended December 31, 2008, an increase of
$469,947 or 59.92%. The increase in expenses is mainly attributable to an increase in sales which
led to a higher cost for the sales.
Income from Operations
We reported income from operations of $12,959,928 for the nine months ended December 31, 2009 as
compared to $3,910,402 for the nine months ended December 31, 2008, an increase of $9,049,526 or
approximately 231.42%. The substantial increase in income is mainly attributable to the reopening
of the bridge which has led to increased access to our cemetery site. This coupled with the
increase in overall market conditions led to the increase in sales.
Other Income
For the nine months ended December 31, 2009, total other income amounted to $352,153 as compared to
$186,903 for the nine months ended December 31, 2008, an increase of $165,250 or 88.41%. This
substantial increase is primarily attributable to the following:
For the nine months ended December 31, 2009, other income amounted to $325,536 as compared to
$165,901 for the nine months ended December 31, 2008, an increase of $159,635 or 96.2% from the
comparable period in 2009. This change is primarily attributable to the increase in the number of
cemetery plots sold.
For the nine months ended December 31, 2009, interest expense amounted to $177,559 as compared to
$174,533 for the nine months ended December 31, 2008, an increase of $3,026 or 1.7% from the
comparable period in 2009. This change is primarily attributable to the change in the amount of
outstanding debt held by the company.
For the nine months ended December 31, 2009, interest income amounted to $7,872 as compared to
$3,225 for the nine months ended December 31, 2008, an increase of $4,647 or 144.1% from the
comparable period in 2009. This change is primarily attributable to the increase in the amount of
cash held during parts of the nine months by the company.
For the nine months ended December 31, 2009, rental income amounted to $196,304 as compared to
$192,310 for the nine months ended December 31, 2008, an increase of $3,994 or 2.1% from the
comparable period in 2009. This change is primarily attributable to the change in the foreign
exchange rate between the RMB and the US dollar, since the income is paid in RMB and then
converted.
Comparison of Years Ended March 31, 2009 and March 31, 2008
Total Net Revenues
Total revenues for the year ended March 31, 2009 were $18,313,720 as compared to $22,121,639 for
the year ended March 31, 2008, a decrease of $3,807,919 or approximately 17.20%. For the years
ended March 31, 2009 and 2008, net revenues consisted of the following:
Year Ended
Year Ended
March 31, 2009
March 31, 2008
Cemetery
$
17,674,785
$
19,878,718
Park and Nursery Garden Services
665,935
2,242,921
Total net revenues
$
18,313,720
$
22,121,639
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Table of Contents
Cemetery
For the year ended March 31, 2009, cemetery revenues decreased by $2,230,933 or 11.22%. The
decrease in revenues is mainly attributable to a lack of ability to reach our cemetery site due to
the construction of a new bridge. The old bridge to the cemetery was taken out of service because
of its unsuitability after the construction of the Three Gorges Dam which caused the water level to
be too high. Construction of the new bridge was completed in May 2009 and traffic was able to
reach the cemetery again thereafter. In addition, we expect the bridge to be directly connected to
the highway within two years, which will allow easier access to the cemetery. We do not anticipate
access issues to be a problem in the future. We expect our sales will continue hold steady for
fiscal 2010.
Park and Nursery Garden Services
For the year ended March 31, 2009, the revenues for park and nursery garden services decreased by
$1,576,986. The decrease is attributable to the Company shifting its focus to the development of
the cemetery sector of its business. The Company did not input as much of its resources on the
park and nursery garden sector in the fiscal year of 2009. We do not expect this trend to change
in the fiscal year of 2010 as the Company still continues to focus on developing its cemetery
sector.
Cost of Sales
Cost of sales includes raw materials, conversation costs, direct labor, manufacturing costs, which
includes an allocation of overhead expenses including labor, utilities and depreciation directly
related to product production and related taxes. For the year ended March 31, 2009, cost of sales
amounted to $9,938,853 or approximately 54.3% of total net revenues as compared to $12,694,927 or
approximately 57.4% of total net revenues for the year ended March 31, 2008. The decrease in cost
of sales as a percentage of total net revenues was primarily due to more efficient production and
control of costs.
Total cost of sales decrease of $2,756,074 or 21.7% is attributable to the following:
For the year ended March 31, 2009, cemetery costs amounted to $9,445,153 as compared to $10,974,241
for the year ended March 31, 2008, a decrease of $1,529,088 or 13.93% from the comparable period in
fiscal 2008. This decrease is primarily attributable to a decrease in the construction of
cemeteries due to the inability to reach the site for a three month period. Although the current
cemetery costs as a percentage of revenue have decreased due to economies of scale and increased
efficiency gained from experience, we cannot guarantee that our cemetery expenses will continue to
decrease.
For the year ended March 31, 2009, park and nursery garden services costs amounted to $493,700 as
compared to $1,720,686 for the year ended March 31, 2008, a decrease of $1,226,986 or 71.3%. The
decrease in costs was primarily due to a decrease in the amount of park and nursery garden service
contracts executed by the Company. We expect that the costs for the park and nursery garden
services will remain constant compared to the March 31, 2009 figures as the Company plans to focus
on expanding its cemetery business.
Gross Profit
Gross profit for the year ended March 31, 2009 was $8,374,867 or 45.7% of total net revenues, as
compared to $9,426,712 or 42.6% of total net revenues for the year ended March 31, 2008. The
decrease in gross profit was attributable to the decrease in sales as a result of external factors.
The increase in cost of sales as a percentage of gross profit margin was primarily attributable to
losing some economies of scale.
Operating Expenses
Total operating expenses for the year ended March 31, 2009 were $1,471,475, an increase of $214,262
or 12.71% from total operating expenses in the year ended March 31, 2008 of $1,166,191. This
increase includes the following:
For the year ended March 31, 2009, advertising expenses amounted to $426,415 as compared to
$519,546 for the year ended March 31, 2008, a decrease of $93,131 or 17.93%. We did not spend as
much on advertising expenses for the year ended March 31, 2009 due to the access issue. We felt
that it was not necessary to advertise as much since customers would not purchase the
44
Table of Contents
cemetery plots without first conducting a visual inspection. We expect that the Company will
increase advertising expenses relative to March 31, 2009 figures as the Company expands its
business operations.
For the year ended March 31, 2009, general and administrative expenses amounted to $1,045,060 as
compared to $1,166,191 for the year ended March 31, 2008, a decrease of $121,131 or 10.39%. The
decrease in expenses was mainly attributable to cost cutting measures during the economic downturn,
lower government fees in hopes of stimulating the economy and a decrease in the number of
employees. We expect that the Company will increase the general and administrative expenses
relative to the March 31, 2009 numbers as the Company expands its operations.
Income from Operations
We reported income from operations of $6,903,392 for the year ended March 31, 2009 as compared to
income from operations of $7,740,975 for the year ended March 31, 2008, a decrease of $837,583 or
approximately 10.82%.
Other Income
For the year ended March 31, 2009, total other income amounted to $283,560 as compared to $330,614
for the year ended March 31, 2008, a decrease of $47,054 or 14.2% from the comparable period in
2009. This change is primarily attributable the following:
For the year ended March 31, 2009, other income amounted to $255,893 as compared to $296,364 for
the year ended March 31, 2008, a decrease of $40,471 or 13.7% from the comparable period in 2009.
This change is primarily attributable to the change in the number of cemetery plots sold.
For the year ended March 31, 2009, interest expense amounted to $235,208 as compared to $204,075
for the year ended March 31, 2008, an increase of $31,113 or 15.3% from the comparable period in
2009. This change is primarily attributable to the change in the amount of outstanding debt held by
the company. For the year ended March 31, 2009, interest income amounted to $6,361 as compared to
$2,051 for the year ended March 31, 2008, an increase of $4,310 or 210.1% from the comparable
period in 2009. This change is primarily attributable to the increase in the amount of cash held
during parts of the year by the company.
For the year ended March 31, 2009, rental income amounted to $260,286 as compared to $239,776 for
the year ended March 31, 2008, an increase of $20,510 or 8.6% from the comparable period in 2009.
This change is primarily attributable to the change in the foreign exchange rate between the RMB
and the US dollar, since the income is paid in RMB and then converted.
For the year ended March 31, 2009, non-operating expense amounted to $3,772 as compared to $3,502
for the year ended March 31, 2008, a decrease of $270 or 7.7% from the comparable period in 2009.
This change is primarily attributable to a decrease in miscellaneous expenses.
Liquidity and Capital Resources
Nine Months Ended December 31, 2009
For the nine months ended December 31, 2009, net cash provided by operating activities was
$3,213,593, as compared to $50,489 for the nine months ended December 31, 2008. The large increase
was primarily attributable to the company selling its inventory of prepared burial plots. The
higher sales volume generated cash.
For the nine months ended December 31, 2009, no cash was used in or provided by investing
activities, as compared to $1,100,250 used for investing activities (capital expenditures) of for
the nine months ended December 31, 2008.
There was no cash used in or provided by financing activities for the nine months ended December
31, 2009 and 2008.
As of December 31, 2009, we had cash of $4,608,455. Our total current assets were $13,703,193 and
our total current liabilities were $4,152,734.
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Table of Contents
Year Ended March 31, 2009
For the year ended March 31, 2009, net cash provided by operating activities was $980,826, as
compared to cash provided by operating activities of $237,063 for the year ended March 31, 2008.
The increase was primarily attributable to an increase in accounts payable.
For the year ended March 31, 2009, net cash used by investing activities was $1,479,650, for
investment in additional land for development, as compared to no cash used in or provided by
investing activities for the year March 31, 2008.
There was no cash used in or provided by financing activities for the year ended March 31, 2009 and
2008.
As of March 31, 2009, we had cash of $1,392,961. Our total current assets were $7,713,109 and our
total current liabilities were $3,777,072.
Contractual Obligations and Off-Balance Sheet Arrangements
Contractual Obligations
We have certain fixed contractual obligations and commitments that include future estimated
payments. Changes in our business needs, cancellation provisions, changing interest rates, and
other factors may result in actual payments differing from the estimates. We cannot provide
certainty regarding the timing and amounts of payments. We have presented below a summary of the
most significant assumptions used in our determination of amounts presented in the tables, in order
to assist in the review of this information within the context of our consolidated financial
position, results of operations, and cash flows.
The following tables summarize our contractual obligations as of December 31, 2009, and the effect
these obligations are expected to have on our liquidity and cash flows in future periods.
Payments Due by Period
Total
Less than 1 year
1-3 Years
3-5 Years
5 Years +
In Thousands
Contractual Obligations :
Bank Indebtedness
$
—
$
2,471
$
—
$
—
$
—
Other Indebtedness
$
—
$
23
$
89
$
89
$
207
Capital Obligations
$
—
$
—
$
—
$
—
$
—
Purchase Obligations
$
—
$
—
$
—
$
—
$
—
Total Contractual Obligations:
$
—
$
2,494
$
89
$
89
$
207
Off-Balance Sheet Arrangements
We have not entered into any other financial guarantees or other commitments to guarantee the
payment obligations of any third parties. We have not entered into any derivative contracts that
are indexed to our shares and classified as shareholder's equity or that are not reflected in our
consolidated financial statements. Furthermore, we do not have any retained or contingent interest
in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk
support to such entity. We do not have any variable interest in any unconsolidated entity that
provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging
or research and development services with us.
Exchange Rates
We maintain our books and records in Renminbi ("RMB"), the lawful currency of the PRC. In general,
for consolidation purposes, the Company translates our assets and liabilities into U.S. Dollars
using the applicable exchange rates prevailing at the balance sheet date, and the statement of
income is translated at average exchange rates during the reporting period. Adjustments resulting
from the translation of our financial statements are recorded as accumulated other comprehensive
income.
Until July 21, 2005, RMB had been pegged to USD at the rate of RMB8.30: USD$1.00. On July 21,
2005, the PRC government reformed the exchange rate system into a managed floating exchange rate
system based on market supply and demand with reference to a basket of currencies. In addition, the
exchange rate of RMB to USD was adjusted to RMB8.11: USD$1.00 as of July 21, 2005. The People's
Bank of China announces the closing price of a foreign currency such as USD$ traded against RMB in
the inter-bank foreign exchange market after the closing of the market on each working day, which
will become the unified exchange rate for the trading against RMB on the following working day.
The daily trading price of USD against RMB in the
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inter-bank foreign exchange market is allowed to float within a band of ±0.3% around the
unified exchange rate published by the People's Bank of China. This quotation of exchange rates
does not imply free convertibility of RMB to other foreign currencies. All foreign exchange
transactions continue to take place either through the Bank of China or other banks authorized to
buy and sell foreign currencies at the exchange rates quoted by the People's Bank of China.
Approval of foreign currency payments by the Bank of China or other institutions required
submitting a payment application form together with invoices, shipping documents and signed
contracts.
The exchange rates used to translate amounts in RMB into US Dollars for the purposes of preparing
the consolidated financial statements or otherwise stated in this report were as follows:
December 31,
March 31,
December 31,
2009
2009
2008
Balance sheet items, except
for the registered and
paid-up capital, as of end
of period/year
USD1:RMB
0.1467
USD1:RMB
0.1465
USD1:RMB
0.1467
Amounts included in the
statement of operations,
statement of changes in
stockholders' equity and
statement of cash flows for
the period/ year ended
USD1:RMB
0.14664
USD1:RMB
0.14582
USD1:RMB
0.14559
No representation is made that RMB amounts have been, or would be, converted into US$ at the above
rates.
Inflation
We believe that inflation has not had a material effect on our operations to date.
Related Party Transactions
For a description of our related party transactions, see the section of this prospectus
entitled "Certain Relationships and Related Transactions."
Quantitative and Qualitative Disclosures About Market Risk
We do not use derivative financial instruments in our investment portfolio and has no foreign
exchange contracts. Our financial instruments consist of cash and cash equivalents, trade accounts
receivable, accounts payable and long-term obligations. We consider investments in highly liquid
instruments purchased with a remaining maturity of 90 days or less at the date of purchase to be
cash equivalents. However, in order to manage the foreign exchange risks, we may engage in hedging
activities to manage our financial exposure related to currency exchange fluctuation. In these
hedging activities, we might use fixed-price, forward, futures, financial swaps and option
contracts traded in the over-the-counter markets or on exchanges, as well as long-term structured
transactions when feasible.
Interest Rates
. Our exposure to market risk for changes in interest rates relates primarily to
our short-term investments and short-term obligations; thus, fluctuations in interest rates would
not have a material impact on the fair value of these securities. At March 31, 2009, we had
approximately $1,392,961 in cash and cash equivalents. A hypothetical 5% increase or decrease in
interest rates would not have a material impact on our earnings or loss, or the fair market value
or cash flows of these instruments.
Foreign Exchange Rates
. A substantial portion of our sales is denominated in Euros, Renminbi
("
RMB
") or other currencies. As a result, changes in the relative values of U.S. Dollars,
Euros, RMB and other currencies affect our reported levels of revenues and profitability as the
results are translated into U.S. Dollars for reporting purposes. In particular, fluctuations in
currency exchange rates could have a significant impact on our financial stability due to a
mismatch among various foreign currency-denominated sales and costs. Fluctuations in exchange
rates, particularly among the U.S. dollar, RMB and Euro, affect our gross and net profit margins
and could result in foreign exchange and operating losses.
Our exposure to foreign exchange risk primarily relates to currency gains or losses resulting
from timing differences between signing of sales contracts and settling of these contracts.
Furthermore, we translate monetary assets and liabilities denominated in other currencies into RMB,
the functional currency of our operating business. Our results of operations and cash flow are
translated at average exchange rates during the period, and assets and liabilities are translated
at the unified exchange rate as quoted by the People's Bank of China at the end of the period. Translation adjustments
resulting from this process are included in accumulated other comprehensive income in our statement
of shareholders' equity. We recorded net foreign currency gains of $1,978,746 and $511,749 in
fiscal 2008 and 2009 respectively. We have not used any forward contracts, currency options or
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borrowings to hedge our exposure to foreign currency exchange risk. We cannot predict the impact of
future exchange rate fluctuations on our results of operations and may incur net foreign currency
losses in the future. As our sales denominated in foreign currencies, such as RMB and Euros,
continue to grow, we will consider using arrangements to hedge our exposure to foreign currency
exchange risk.
Our financial statements are expressed in U.S. dollars but the functional currency of our
operating subsidiary is RMB. The value of your investment in our stock will be affected by the
foreign exchange rate between U.S. dollars and RMB. To the extent we hold assets denominated in
U.S. dollars, including the net proceeds to us from this offering, any appreciation of the RMB
against the U.S. dollar could result in a change to our statement of operations and a reduction in
the value of our U.S. dollar denominated assets. On the other hand, a decline in the value of RMB
against the U.S. dollar could reduce the U.S. dollar equivalent amounts of our financial results,
the value of your investment in our company and the dividends we may pay in the future, if any, all
of which may have a material adverse effect on the price of our stock.
Country Risk
. The substantial portion of our assets and operations are located and conducted
in China. While the PRC economy has experienced significant growth in the past twenty years, growth
has been uneven, both geographically and among various sectors of the economy. The Chinese
government has implemented various measures to encourage economic growth and guide the allocation
of resources. Some of these measures benefit the overall economy of China, but may also have a
negative effect on us. For example, our operating results and financial condition may be adversely
affected by government control over capital investments or changes in tax regulations applicable to
us. If there are any changes in any policies by the Chinese government and our business is
negatively affected as a result, then our financial results, including our ability to generate
revenues and profits, will also be negatively affected.
Interest Rate Risk
. We may face some risk from potential fluctuations in interest rates,
although our debt obligations are primarily short-term in nature, but some bank loans have
different rates. If interest rates have great fluctuations, our financing cost may be significantly
affected.
LEGAL PROCEEDINGS
Currently there are no legal proceedings pending or threatened against us. However, from time
to time, we may become involved in various lawsuits and legal proceedings which arise in the
ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse
result in these or other matters may arise from time to time that may harm our business.
MANAGEMENT
Our directors and executive officers, their ages, their respective offices and positions, and
their respective dates of election or appointment are as follows:
Name
Age
Position
Officer/Director since
Yiyou Ran
35
President, Chief Executive Officer and Chairman of the Board
February 12, 2010
Michael Wang
31
Chief Financial Officer, Treasurer, Secretary and Director
February 12, 2010
Jianquan Chen
46
Director
February 12, 2010
Tim Hudson
55
Director
February 12, 2010
Michael Rudolph
59
Director
April 1, 2010
Lihua Zhang
55
Director
April 1, 2010
Biographical Information
The following is a brief account of the education and business experience of these directors
and executive officers during at least the past five years, indicating the person's principal
occupation during the period, and the name and principal business of the organization by which he
or she was employed.
Yiyou Ran
received a bachelor degree in Atmosphere Quality Assessment from Chengdu Institute
of Meteorology in 1983 and a master degree in Economic Management from Southwestern University of
Finance and Economics in 1997. Mr. Ran established Chongqing Fo Guang Tourism Development Co., Ltd.
in October 2002 and serve as the legal representative and Chairman of the Company. Mr. Ran is a
member of the Association of Industry and Commerce of ChangShou and the President
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of the Chamber of Industry and Commerce of Jiangnan Town. Mr. Ran was given the honor as "Non-Public Ownership
System Public Figure, Excellent Socialism Constructor" in 2006 by the United Front Work Department
of the CPC and the Association of Industry and Commerce of Changshou District in Chongqing.
Michael Wang
graduated from University of Texas in 2001 with a master degree in Accounting and
received a M.B.A from the Tuck School of Business in 2007. Licensed as a CPA in the state of Texas,
Mr. Wang formerly worked as an auditor at Ernst and Young and started his career as a financial
analyst at Arthur Anderson. Mr. Wang formerly worked as the Chief Financial Officer of Snif Labs
Inc., a RFID technology company based in Massachusetts and served as a special consultant to the
CEO of JTec Inc., a software company based in Beijing.
Jianquan Chen
graduated from Wuhan University of Electric Engineering in 1996 with a major in
Construction Engineering. Mr. Chen formerly worked as the Vice President of the Chamber of Industry
and Commerce of Jiangnan Town and served as the chief engineer of Chongqing Shenglin Architectural
Engineering Co., Ltd. Currently, Mr. Chen serves as the Vice President, Deputy Chairman, Deputy
General Manager and the Senior Engineer of Chongqing Fo Guang Tourism Development (Group) Co., Ltd.
Tim Hudson
is currently President of the University of Houston, Victoria. Previously, Dr.
Hudson served as provost and founding dean of the College of International and Continuing Education
at the University of Southern Mississippi. Prior to that, he served as an analyst for the U. S.
Department of State. Dr. Hudson received his Ph.D. in Geography from Clark University in
Worcester, Massachusetts.
Michael Rudolph
is currently the founder, chief financial officer and managing member of
Viking Asset Management, LLC and an investment adviser to Longview Fund, LP and Longview Fund
International, Ltd. (BVI). Previously, Mr. Rudolph served as the president of The Edgehill Group,
Inc. and held various senior management positions with Charles Schwab's Institutional Trading
Division, Bank of America and Wells Fargo Bank. Mr. Rudolph also served on several board of
directors, including ElectroSource, LLC and the Stanford University Medical Center Stroke Advisory
Board. Mr. Rudolph received his Bachelor's degree in Biochemistry from Purdue University in 1973
and a Master of Business Administration degree from Washington University in 1975.
Lihua Zhang
is currently the chairman of Songyuan Hydropower Plant, Bo Gong Ken Hydropower
Plant and Huaxi Hydropower Plant and has invested a total of RMB One Hundred Million in building
these three plants. Mr. Zhang also serves as vice chairman of Zhejiang Commercial Association and
is responsible for public relations between the Zhejiang Commercial Association and other
government agencies in other provinces, including Taiwan and Hong Kong. Mr. Zhang also has served
as a member of Political Consultant Conference in Songxi, Fujiang province. Mr. Zhang received his
professional degree from Hangzhou Water Resources and Hydropower Professional School in 1980.
Family Relationships
There are no family relationships between or among any of our directors and executive
officers.
Involvement in Certain Legal Proceedings
There are no orders, judgments, or decrees of any governmental agency or administrator, or of
any court of competent jurisdiction, revoking or suspending for cause any license, permit or other
authority to engage in the securities business or in the sale of a particular security or
temporarily or permanently restraining any of our officers or directors from engaging in or
continuing any conduct, practice or employment in connection with the purchase or sale of
securities, or convicting such person of any felony or misdemeanor involving a security, or any
aspect of the securities business or of theft or of any felony. Nor are any of the officers or
directors of any corporation or entity affiliated with us so enjoined.
Board of Directors
Our board of directors is currently composed of six members. All members of our board of
directors serve in this capacity until their terms expire or until their successors are duly
elected and qualified. Our bylaws provide that the authorized number of directors will be not less
than one.
Mr. Yiyou Ran is the Chairman of our board of directors. In this capacity Mr. Ran will be
responsible for meeting with our Chief Financial Officer to review financial and operating results,
reviewing agendas and minutes of board and committee meetings, and presiding at the meetings of the
board of directors.
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Board Committees; Director Independence
As of this date, our board of directors has not appointed an audit committee or compensation
committee; however, we are not currently required to have such committees. The functions
ordinarily handled by these committees are currently handled by our entire board of directors. Our
board of directors intends, however, to review our governance structure and institute board
committees as necessary and advisable in the future, to facilitate the management of our business.
As of the date of this prospectus, we have 3 independent director and 3 non-independent
directors on our board of directors.
Code of Ethics
The Company has formally adopted a written financial code of ethics to be applied to the
Company's Chief Executive Officer, Chief Financial Officer and finance department personnel. The
Chief Executive Officer, Chief Financial Officer and finance department personnel have a special
role both to adhere to the principles of integrity and also to ensure that a culture exists
throughout Artistry as a whole that ensures the fair and timely reporting of our financial results
and conditions.
Compensation Committee Interlocks and Insider Participation
No interlocking relationship exists between our board of directors and the board of directors
or compensation committee of any other company, nor has any interlocking relationship existed in
the past.
EXECUTIVE COMPENSATION
Executive Compensation
The following summary compensation table indicates the cash and non-cash compensation earned
during the fiscal year ended March 31, 2009 by our current Chief Executive Officer, Chief Financial
Officer and each of the other two highest paid executives, if any, whose total compensation
exceeded $100,000 during the fiscal year ended March 31, 2009.
SUMMARY COMPENSATION TABLE
Non-Equity
Incentive Plan
Nonqualified Deferred
Name and
Stock
Option
Compen-
Compensation
All Other
principal
Salary
Bonus
Awards
Awards
sation
Earnings
Compensation
Total
position
Year
($)
($)
($)
($)
($)
($)
($)
($)
Yiyou Ran, CEO (1)
2009
220,558
0
0
0
0
0
0
220,558
Michael Wang, CFO (2)
2009
0
0
0
0
0
0
0
0
(1)
Mr. Ran became our Chief Executive Officer on February 12, 2010, in
connection with our acquisition of Gold Industry (further described
above under the "History and Corporate Structure"). Accordingly, Mr.
Ran's compensation for the periods indicated was paid by Foguang. For
reporting purposes, the amount has been converted to U.S. dollars at
the conversion rate of RMB 6.84 to one U.S. dollar.
(2)
Mr. Wang became our current Chief Financial Officer on February 12,
2010, in connection with our acquisition of Gold Industry (further
described above under the "History and Corporate Structure").
None of our executive officers received, nor do we have any arrangements to pay out, any
bonus, stock awards, option awards, non-equity incentive plan compensation, or non-qualified
deferred compensation.
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Director Compensation
For the year ended March 31, 2010, none of the members of our board of directors received
compensation for his service as a director. Effective April 1, 2010, Tim Hudson, Michael Rudolph
and Lihua Zhang have each executed and delivered a director offer letter with the Company. Under
the terms of the agreements, Mr. Hudson, Mr. Rudolph and Mr. Zhang shall be entitled to the annual
compensation of $12,500 shares of the Company's common stock.
Potential Payments Upon Termination or Change-in-Control
SEC regulations state that we must disclose information regarding agreements, plans or
arrangements that provide for payments or benefits to our executive officers in connection with any
termination of employment or change in control of the company. We currently have no employment
agreements with any of our executive officers, nor any compensatory plans or arrangements resulting
from the resignation, retirement or any other termination of any of our executive officers, from a
change-in-control, or from a change in any executive officer's responsibilities following a
change-in-control. As a result, we have omitted this table.
Employment Agreements
We currently have no employment agreements with any of our executive officers.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial ownership of our common
stock as of April 7, 2010, for each of the following persons:
•
each of our directors and each of the named executive officers in the
"Management—Executive Compensation" section of this prospectus;
•
all directors and named executive officers as a group; and
•
each person who is known by us to own beneficially 5% or more of our
common stock after the change of control transaction.
Beneficial ownership is determined in accordance with the rules of the SEC. Unless otherwise
indicated in the table, the persons and entities named in the table have sole voting and sole
investment power with respect to the shares set forth opposite the shareholder's name. Unless
otherwise indicated, the address of each beneficial owner listed below is 239 Jianxin Road,
Jiangbei District, Chongqing, PRC 400000. The percentage of class beneficially owned set forth
below is based on 12,659,762 shares of common stock outstanding on
April 7, 2010.
Number of
Shares
Percentage of
beneficially
class beneficially
Named executive officers and directors:
owned
owned
Yiyou Ran (1)
8,800,000
(1)
69.51
%
Michael Wang (2)
30,000
*
%
Jianquan Chen (1)
8,800,000
(1)
69.51
%
Tim Hudson (3)
0
0
%
All directors and executive officers as a group (5 persons)
8,830,000
69.75
%
5% Shareholders:
Holy Golden Industry Limited (1)
8,800,000
(1)
69.51
%
*
Less than 1%.
(1)
The address of Holy Golden Industry Limited ("Holy Golden") is Scotia
Centre, 4th Floor, P.O. Box 2804, George Town, Grand Cayman KY 1-1112,
Cayman Islands. The shareholders of Holy Goldenare Yiyou Ran
(24.00%), Jianquan Chen (27.9%), Chaoyang Fu (16.74%), Yang Chen
(24.36%) and Mingsheng Liu (7.00%), with Yiyou Ran,
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Jianquan Chen and Yang Chen also as its directors. As such they are deemed to have or
share investment control over Holy Golden's portfolio. The number of
shares of common stock reported herein as beneficially owned by Mr.
Ran and Mr. Chen are held by Holy Golden, which they in turn own
indirectly through their respective ownership of Holy Golden.
(2)
Mr. Wang's address is: 2500 Citywest Boulevard, Suite 304, Houston, Texas 77402.
(3)
Dr. Hudson's address is: 3007 North Ben Wilson, Victoria, Texas 77901.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Share Exchange Agreement
On February 12, 2010 ("Closing" or the "Closing Date"), we executed the Exchange Agreement
with Gold Industry and the Cayman Shareholder. Gold Industry owns 100% of Gold Holy, which in turn
owns 100% of Ran Ji, a WFOE under the laws of the PRC. On the Closing Date of the Exchange
Agreement, we issued 8,800,000 shares of our common stock to the Cayman Shareholder in exchange for
100% of the issued and outstanding common stock of Gold Industry. Immediately after the Closing,
we had a total of 11,000,000 shares of Common Stock outstanding, with the Cayman Shareholder owning
approximately 80% of our total issued and outstanding common shares.
Our Management
Mr. Yiyou Ran, our Chairman and Chief Executive Officer, is also a director of Gold Industry,
Gold Holy, Ran Ji and Foguang. Mr. Jianquan Chen, a member of our board of directors, is also a
director of Gold Industry, Gold Holy, Ran Ji and Foguang.
DESCRIPTION OF SECURITIES
The following information describes our capital stock and provisions of our articles of
incorporation and our bylaws, both in effect as of the date of this prospectus. This description
is only a summary. The reader should also refer to our articles of incorporation and bylaws that
have been incorporated by reference of filed with the SEC as exhibits.
General
Our authorized capital stock consists of 100,000,000 shares of common stock at a par value of
$0.001 per share and 20,000,000 shares of preferred stock at a par value of $0.001 per share.
Common Stock
Holders of our common stock are entitled to one vote per share on all matters submitted to a
vote of the stockholders, including the election of directors. Generally, all matters to be voted
on by stockholders must be approved by a majority of the votes entitled to be cast by all shares of
our common stock that are present in person or represented by proxy. Holders of our common stock
representing fifty percent (50%) of our capital stock issued, outstanding, and entitled to vote,
represented in person or by proxy, are necessary to constitute a quorum at any meeting of our
stockholders. A vote by the holders of a majority of our outstanding shares is required to
effectuate certain fundamental corporate changes such as liquidation, merger or an amendment to our
certificate of incorporation. Our certificate of incorporation does not provide for cumulative
voting in the election of directors.
The holders of shares of our common stock will be entitled to such cash dividends as may be
declared from time to time by our board of directors from funds available therefore. Upon
liquidation, dissolution, or winding up, the holders of shares of our common stock will be entitled
to receive pro rata all assets available for distribution to such holders after distribution of
assets to the holders of Series A Preferred. In the event of any merger or consolidation with or
into another company in connection with which shares of our common stock are converted into or
exchangeable for shares of stock, other securities, or property (including cash), all holders of
our common stock will be entitled to receive the same kind and amount of shares of stock and other
securities and property (including cash).Holders of our common stock have no pre-emptive rights and no
conversion rights, and there are no redemption provisions applicable to our common stock.
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Preferred Stock
Our board of directors, without further stockholder approval, may issue preferred stock in one
or more classes or series as the board may determine from time to time. Each such class or series
shall be distinctly designated. All shares of any one class or series of the preferred stock shall
be alike in every particular, except that there may be different dates from which dividends
thereon, if any, shall be cumulative, if made cumulative. The voting powers, designations,
preferences, limitations, restrictions and relative rights thereof, if any, may differ from those
of any and all other series outstanding at any time. Our board of directors has express authority
to fix (by resolutions adopted prior to the issuance of any shares of each particular class or
series of preferred stock) the number of shares, voting powers, designations, preferences,
limitations, restrictions and relative rights of each such class or series. The rights granted to
the holders of any series of preferred stock could adversely affect the voting power of the holders
of common stock and issuance of preferred stock may delay, defer or prevent a change in our
control.
Common Stock Purchase Warrants
The Warrants entitle each Purchaser to purchase up to 50% of the number of shares of Common
Stock acquired by such Purchaser at the Initial Closing, and expire on the fourth anniversary of
their issuance date (the "
Termination Date
"). The Warrants may be exercised on a "cashless"
basis if, at any time after the first anniversary of their issuance date, there is no registration
statement in effect registering the resale of the shares of Common Stock underlying the Warrants,
provided that all Warrants outstanding on Termination Date shall be exercised on a cashless basis.
The exercise price of the Warrants is $4.10 per share, subject to certain adjustments:
•
If the Registrant issue rights to all holders of Common Stock
(but not to holders of the Warrants) to purchase shares of Common
Stock at a price per share less than the VWAP at the record date for
determination of stockholders entitled to receive such rights, the
exercise price shall be adjusted by multiplying a fraction, of which
the denominator shall be the number of Common Stock outstanding on
the issuance date of such rights plus the number of Common Stock
issuable under such rights, and of which the numerator shall be the
number of Common Stock outstanding on the issuance date of such
rights plus the number of Common Stock issuable under such rights at
the VWAP;
•
If the Registrant distribute evidence of its indebtedness or
assets or rights to purchase any security other than the Common
Stock to all holders of Common Stock (but not to holders of the
Warrants), the exercise price shall be adjusted by multiplying a
fraction, of which the denominator shall be the VWAP on the record
date for determination of stockholders entitled to receive such
distribution, and of which the numerator shall be such VWAP minus
the then per share fair market value at such record date of the
portion of such evidence of indebtedness or assets so distributed to
one outstanding share of Common Stock as determined in good faith by
the Registrant's board of directors;
•
The exercise price is subject to proportional adjustment for
stock splits, stock dividends, recapitalizations and the like; and
•
For purposes of the Warrants, VWAP is defined as the volume
weighted average price of the Common Stock on the date a price
determination is required.
MARKET PRICE OF AND DIVIDENDS ON COMMON EQUITY
AND RELATED SHAREHOLDER MATTERS
Market Information
The Company's shares are currently listed on Over-The-Counter Bulletin Board under the symbol
"CGPI.OB."
Holders
As of April 7, 2010, there were approximately 58 shareholders of record of our common stock
based upon the shareholders' listing provided by our transfer agent. Our transfer agent is
American Registrar & Transfer Co. The transfer agent's address is 342 East 900 South, Salt Lake
City, UT 84111 and its phone number is (801) 363-9065.
Dividends
We have never paid cash dividends on our common stock. We intend to keep future earnings, if
any, to finance the expansion of our business, and we do not anticipate that any cash dividends
will be paid in the foreseeable future. Our future
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payment of dividends will depend on our earnings, capital requirements, expansion plans, financial condition and other relevant factors
that our board of directors may deem relevant. Our retained earnings deficit currently limits our
ability to pay dividends.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
As reported in a Form 8-K Current Report filed with the SEC on April 8, 2010, we changed our
independent accountants from Webb & Company, P.A. to PMB Helin Donovan, LLP effective April 5,
2010.
DISCLOSURE OF COMMISSION POSITION OF INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Delaware Law
Section 145 of the Delaware General Corporation Law authorizes a court to award, or a
corporation's board of directors to grant, indemnity to directors and officers in terms
sufficiently broad to permit indemnification for liabilities, including reimbursement for expenses
incurred, arising under the Securities Act. Pursuant to the provisions of Section 145, a
corporation may indemnify its directors, officers, employees, and agents as follows:
"(a) A corporation shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action by or in the right
of the corporation) by reason of the fact that the person is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by the person in connection with such action, suit or
proceeding if the person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe the person's conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the
person did not act in good faith and in a manner which the person reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that the person's conduct was unlawful.
(b) A corporation shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by reason of the fact that the person
is or was a director, officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by the person in connection with the defense or settlement of such
action or suit if the person acted in good faith and in a manner the person reasonably believed to
be in or not opposed to the best interests of the corporation and except that no indemnification
shall be made in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery
or the court in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or
such other court shall deem proper.
(c) To the extent that a present or former director or officer of a corporation has been
successful on the merits or otherwise in defense of any action, suit or proceeding referred to in
subsections (a) and (b) of this section, or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section (unless ordered by a
court) shall be made by the corporation only as authorized in the specific case upon a
determination that indemnification of the present or former director, officer, employee or agent is
proper in the circumstances because the person has met the applicable standard of conduct set forth
in subsections (a) and (b) of this section. Such determination shall be made, with respect to a
person who is a director or officer at
the time of such determination, (1) by a majority vote of the directors who are not parties to
such action, suit or proceeding, even though less than a quorum, or (2) by a committee of such
directors designated by majority vote of such directors, even though less than a quorum, or (3) if
there are no such directors, or if such directors so direct, by independent legal counsel in a
written opinion, or (4) by the stockholders.
54
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(e) Expenses (including attorneys' fees) incurred by an officer or director in defending any
civil, criminal, administrative or investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit or proceeding upon receipt of
an undertaking by or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified by the corporation as
authorized in this section. Such expenses (including attorneys' fees) incurred by former directors
and officers or other employees and agents may be so paid upon such terms and conditions, if any,
as the corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by, or granted pursuant to, the
other subsections of this section shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such person's status as
such, whether or not the corporation would have the power to indemnify such person against such
liability under this section.
(h) For purposes of this section, references to "the corporation" shall include, in addition
to the resulting corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers, and employees or agents,
so that any person who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this section with respect to the resulting or
surviving corporation as such person would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this section, references to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving at the request of the corporation"
shall include any service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee or agent with respect
to an employee benefit plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner such person reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to
the best interests of the corporation" as referred to in this section.
(j) The indemnification and advancement of expenses provided by, or granted pursuant to, this
section shall, unless otherwise provided when authorized or ratified, continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction to hear and determine
all actions for advancement of expenses or indemnification brought under this section or under any
bylaw, agreement, vote of stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporation's obligation to advance expenses (including
attorneys' fees)."
Charter Provisions and Other Arrangements of the Registrant
We currently have not adopted any indemnification provisions in our certificate of
incorporation or bylaws for our officers and directors.
EXPERTS
The consolidated financial statements of Gold Industry Limited and its subsidiaries as of
March 31, 2009 and 2008 appearing in this prospectus and registration statement have been audited
by PMB Helin Donovan, LLP, an independent
registered public accounting firm, as set forth in their report appearing herein, and are
included in reliance upon such reports given on the authority of such firm as experts in auditing
and accounting.
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LEGAL MATTERS
Richardson & Patel LLP has passed upon the validity of the shares of common stock to be
sold in this offering.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration statement on Form
S-1, together with any amendments and related exhibits, under the Securities Act, with respect to
our shares of common stock offered by this prospectus. The registration statement contains
additional information about us and our shares of common stock that we are offering in this
prospectus.
We file annual, quarterly and current reports and other information with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended. Our Securities and
Exchange Commission filings are available to the public over the Internet at the Securities and
Exchange Commission's website at http://www.sec.gov. You may also read and copy any document we
file at the Securities and Exchange Commission's public reference room located at 100 F Street,
N.E., Washington, D.C. 20549. Please call the Securities and Exchange Commission at 1-800-SEC-0330
for further information on the public reference rooms and their copy charges. Access to those
electronic filings is available as soon as practicable after filing with the Securities and
Exchange Commission. You may also request a copy of those filings, excluding exhibits, from us at
no cost. Any such request should be addressed to us at: 239 Jianxin Road, Jiangbei District,
Chongqing, PRC 400000.
56
GOLD INDUSTRY LIMITED
Consolidated Financial Statements
March 31, 2009 and 2008
TABLE OF CONTENTS
PAGE
Report of Independent Registered Public Accounting Firm
58
Consolidated Balance Sheets
59
Consolidated Statements of Operations and Comprehensive Income
60
Consolidated Statements of Stockholders' Equity
61
Consolidated Statements of Cash Flows
62
Consolidated Notes to the Financial Statements
63
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REPORT OF INDEPENDENT REGISTER PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
We have audited the accompanying consolidated balance sheets of Gold Industry Limited (the
"Company") as of March 31, 2009 and 2008, and the related consolidated statement of operations and
comprehensive income, stockholders' equity, and cash flows for the years ended March 31, 2009 and
2008. Gold Industry Limited's management is responsible for these consolidated financial
statements. Our responsibility is to express an opinion on these consolidated financial statements
based on our audits.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit 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 purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements, assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides 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 Gold Industry Limited as of March 31, 2009 and 2008
and the results of its operations and its cash flows for the years ended March 31, 2009 and 2008 in
conformity with accounting principles generally accepted in the United States of America.
/s/ PMB Helin Donovan, LLP
PMB Helin Donovan, LLP
Spokane, WA
February 11, 2010
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GOLD INDUSTRY LIMITED
CONSOLIDATED BALANCE SHEETS
March 31,
March 31,
2009
2008
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
1,392,961
$
1,719,620
Accounts receivable
61,384
184,212
Inventory
6,178,182
9,094,083
Advances to suppliers
21,975
285,678
Related party receivable
1,172
374,744
Other current assets
57,435
107,885
TOTAL CURRENT ASSETS
7,713,109
11,766,222
PROPERTY AND EQUIPMENT, NET
7,629,342
6,313,200
OTHER NON-CURRENT ASSETS
Prepayments to suppliers
4,101,970
—
Prepayment to related party suppliers
1,406,400
—
Prepaid expenses
828,124
—
Other assets
16,592
16,144
Intangible assets , net
12,319,893
12,178,052
TOTAL OTHER NON-CURRENT ASSETS
18,672,979
12,194,196
TOTAL ASSETS
$
34,015,430
$
30,273,618
LIABILITIES & STOCKHOLDERS ' EQUITY
CURRENT LIABILITIES
Accounts payable
$
308,637
$
1,858,109
Welfare payable
96,932
94,484
Taxes payable
845,525
582,319
Other accrued payables
54,523
107,945
Related party payables
—
735,289
Short-term notes payable
2,471,455
2,409,036
TOTAL CURRENT LIABILITIES
3,777,072
5,787,182
LONG-TERM LIABILITIES
Deferred revenue
10,463,803
10,720,889
TOTAL LONG-TERM LIABILITIES
10,463,803
10,720,889
STOCKHOLDERS' EQUITY
Common stock, 100,000,000 shares authorized,
$0.121 par value; 100,000,000 shares
issued and outstanding
12,100,000
12,100,000
Retained earnings
5,834,633
337,374
Accumulated other comprehensive income
1,839,922
1,328,173
TOTAL STOCKHOLDERS' EQUITY
19,774,555
13,765,547
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
34,015,430
$
30,273,618
The accompanying notes are an integral part of these consolidated financial statements.
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GOLD INDUSTRY LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
For the fiscal year ended
For the fiscal year ended
March 31, 2009
March 31, 2008
REVENUES
Cemetery
$
17,647,785
$
19,878,718
Park construction services
665,935
2,242,921
Total revenue
18,313,720
22,121,639
COST OF GOODS SOLD
Cemetery
9,445,153
10,974,241
Park construction services
493,700
1,720,686
Total cost of goods sold
9,938,853
12,694,927
GROSS PROFIT
8,374,867
9,426,712
EXPENSES
Selling expenses
426,415
519,546
General & administrative expenses
1,045,060
1,166,191
TOTAL EXPENSES
1,471,475
1,685,737
INCOME FROM OPERATIONS
6,903,392
7,740,975
OTHER INCOME (EXPENSES)
Other income
255,893
296,364
Interest expenses
(235,208
)
(204,075
)
Interest income
6,361
2,051
Rental income
260,286
239,776
Non-operating expenses
(3,772
)
(3,502
)
TOTAL OTHER INCOME
283,560
330,614
INCOME BEFORE INCOME TAXES
7,186,952
8,071,589
INCOME TAXES
(1,689,693
)
(2,346,605
)
NET INCOME
$
5,497,259
$
5,724,984
OTHER COMPREHENSIVE INCOME
Foreign currency translation adjustment
511,749
1,978,746
COMPREHENSIVE INCOME
$
511,749
$
1,978,746
The accompanying notes are an integral part of these consolidated financial statements.
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GOLD INDUSTRY LIMITED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock
Accumulated Other
Number
Accumulated
Comprehensive
Stockholders'
of Shares
Amount
Retained Earnings
income (loss)
Equity
Balance, March 31, 2007
100,000,000
$
12,100,000
$
(5,387,610
)
$
(650,573
)
$
6,061,817
Net income for the year ended March 31, 2008
—
—
5,724,984
—
5,724,984
Foreign currency translation adjustment
—
—
—
1,978,746
1,978,746
Balance, March 31, 2008
100,000,000
$
12,100,000
$
337,374
$
1,328,173
$
13,765,547
Net income for the year ended March 31, 2009
—
—
5,497,259
—
5,497,259
Foreign currency translation adjustment
—
—
—
511,749
511,749
Balance, March 31, 2009
100,000,000
$
12,100,000
$
5,834,633
$
1,839,922
$
19,774,555
The accompanying notes are an integral part of these consolidated financial statements.
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GOLD INDUSTRY LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the fiscal
For the fiscal
year ended
year ended
March 31, 2009
March 31, 2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income
$
5,497,259
$
5,724,984
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization
422,774
656,191
Changes in assets and liabilities:
Accounts receivable
122,828
256,088
Inventory
2,915,901
(5,817,205
)
Prepaid expenses
(828,124
)
480,840
Advances to suppliers
263,703
674,316
Related party receivable
373,572
12,461
Other current assets
50,450
(136,445
)
Prepayments to suppliers
(4,101,970
)
—
Prepayments to related party suppliers
(1,406,400
)
—
Other assets
448
(16,144
)
Accounts payable
(1,549,472
)
(547,858
)
Welfare payable
2,448
42,477
Taxes payable
263,206
(6,711
)
Other accrued payables
(53,422
)
(1,017,769
)
Related party payables
(735,289
)
735,289
Deferred revenue
(257,086
)
(803,451
)
Net cash provided by operating activities
980,826
237,063
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures
(1,479,650
)
—
Net cash used in investing activities
(1,479,650
)
—
CASH FLOWS FROM FINANCING ACTIVITIES:
Net cash provided by financing activities
—
—
Net (decrease) increase in cash
(498,824
)
237,063
Effects of foreign exchange translation
172,165
833,782
Cash and cash equivalents, beginning of period
1,719,620
648,775
Cash and cash equivalents, end of period
$
1,392,961
$
1,719,620
The accompanying notes are an integral part of these consolidated financial statements.
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GOLD INDUSTRY LIMITED
Notes to the Consolidated Financial Statements
March 31, 2009 and 2008
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Gold Industry Limited ("Gold Industry" or the "Company") was incorporated on September 11, 2009,
under the laws of the Cayman Islands. The Company has no substantive operations of its own except
for its 100% holding of Gold Holy Industry Limited ("Gold Holy"), which was incorporated on
September 29, 2009, under the laws of Hong Kong Special Administrative Region. In turn, Gold Holy
owns 100% of Chongqing Ran Ji Industry Co., Ltd. ("Chongqing Ran Ji"), a company established under
the laws of the People's Republic of China ("China" or the "PRC"). Through Chongqing Ran Ji, the
Company controls Chongqing Foguang Tourism Development (Group) Co., Ltd. ("Chongqing Foguang"), a
private provider of cemetery plots and related services in and around Chongqing, China.
Chongqing Ran Ji was established in the PRC on December 15, 2009 as a wholly foreign owned
enterprise ("WFOE"), with registered capital of $25,000,000, with the first $3,000,000 to be
contributed by March 20, 2010, and the balance within two years. Chongqing Ran Ji has no
substantive operations of its own except for entering into certain exclusive agreements with
Chongqing Foguang and performing its obligations thereunder.
Chongqing Foguang, a PRC limited liability company established on October 10, 2002 with registered
capital of 100,000,000 Renminbi ("RMB"), is engaged in selling death care products and services,
and holds the licenses and approvals necessary to operate its business in China.
PRC law currently has limits on foreign ownership of companies. To comply with these foreign
ownership restrictions, on December 15, 2009, Chongqing Ran Ji entered into following exclusive
agreements with Chongqing Foguang and its owners (collectively the "Contractual Arrangements"):
(1)
Consulting Services Agreement
, through which Chongqing Ran Ji has the right to advise,
consult, manage and operate Chongqing Foguang, and collect and own all of its net profits;
(2)
Operating Agreement
, through which Chongqing Ran Ji has the right to recommend director
candidates and appoint the senior executives of Chongqing Foguang, approve any transactions that
may materially affect the assets, liabilities, rights or operations of Chongqing Foguang, and
guarantee the contractual performance by Chongqing Foguang of any agreements with third parties, in
exchange for a pledge by Chongqing Foguang of its accounts receivable and assets;
(3)
Proxy Agreement
, under which the owners of Chongqing Foguang have vested their
collective voting control over Chongqing Foguang to Chongqing Ran Ji and will only transfer their
respective equity interests in Chongqing Foguang to Chongqing Ran Ji or its designee(s);
(4)
Option Agreement
, under which the owners of Chongqing Foguang have granted Chongqing
Ran Ji the irrevocable right and option to acquire all of their equity interests in Chongqing
Foguang; and
(5)
Equity Pledge Agreement
, under which the owners of Chongqing Foguang have pledged all
of their rights, titles and interests in Chongqing Foguang to Chongqing Ran Ji to guarantee the
performance of their obligations under the Consulting Services Agreement.
As a result of these Contractual Arrangements, which obligates Chongqing Ran Ji to absorb a
majority of the risk of loss from Chongqing Foguang's activities and enable Chongqing Ran Ji to
receive a majority of its expected residual returns, the Company believes that Chongqing Foguang is
a Variable Interest Entity ("VIE") under FASB Interpretation No. 46R ("FIN 46R"), "Consolidation of
Variable Interest Entities, an Interpretation of ARB No. 51", because the owners of Chongqing
Foguang do not have the characteristics of a controlling financial interest and the Company should
be considered the primary beneficiary of Chongqing Foguang. Accordingly, the Company consolidates
Chongqing Foguang's results, assets and liabilities in the accompanying consolidated financial
statements.
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GOLD INDUSTRY LIMITED
Notes to the Consolidated Financial Statements
March 31, 2009 and 2008
NOTE 1 — ORGANIZATION AND DESCRIPTION OF BUSINESS (continued)
The Company's fiscal year-end is March 31st.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies is presented to assist the understanding of the
consolidated financial statements. The consolidated financial statements and notes are
presentations of the Company's management, which is responsible for their integrity and
objectivity. These accounting policies conform to the accounting principles generally accepted in
the United States of America and have been consistently applied in the preparation of the
consolidated financial statements.
The reporting entities
The Company's consolidated financial statements reflect the activities of the Company and the
following subsidiaries and VIE:
Subsidiaries/VIE
Incorporated in
Percentage of Ownership
Gold Holy Industry Limited
Hong Kong
100.00%
Chongqing Ran Ji
PRC
100.00%
Chongqing Foguang
PRC
VIE by Contractual Arrangements
Basis of presentation
The accompanying consolidated financial statements are prepared in accordance with generally
accepted accounting principles in the United States of America. The Company's functional currency
is the Chinese Renminbi ("CNY" or "RMB"), however, the accompanying consolidated financial
statements have been re-measured and presented in United States Dollars ($).
Consolidation of variable interest entities
In accordance with FASB Interpretation No. 46R, Consolidation of Variable Interest Entities ("FIN
46R"), variable interest entities (VIEs) are generally entities that lack sufficient equity to
finance their activities without additional financial support from other parties or whose equity
holders lack adequate decision making ability. All VIEs with which the Company is involved must be
evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary
beneficiary is required to consolidate the VIE for financial reporting purposes.
The Company has concluded that Chongqing Foguang is a VIE and that the Company's indirect wholly
owned subsidiary, Chongqing Ran Ji, absorbs a majority of the risk of loss from the activities of
Chongqing Foguang, and enable the Company to receive a majority of its expected residual returns.
Accordingly, the Company accounts for Chongqing Foguang as a VIE.
Because the Company and Chongqing Foguang are under common control, the initial measurement of the
assets and liabilities of Chongqing for the purpose of consolidation by the Company is at book
value. The Company has had no other business activities except for the entering into of the
exclusive agreements with Chongqing Ran Ji and its shareholders. For the purpose of presenting the
financial statements on a consistent basis, the consolidated financial statements are prepared as
if the Company had been in existence since April 1, 2007 and throughout each of the two-year period
ended March 31, 2009.
The consolidated financial statements include the financial statements for the company, its
subsidiary and the variable interest entity, Chongqing Foguang. All significant inter-company
transactions and balances between the Company, its subsidiary and the variable interest entity are
eliminated upon consolidation.
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GOLD INDUSTRY LIMITED
Notes to the Consolidated Financial Statements
March 31, 2009 and 2008
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Use of estimates
The preparation of consolidated financial statements in conformity with generally accepted
accounting principles of the United States of America requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and accompanying notes.
Significant estimates reflected in the Company's consolidated financial statements include the fair
value of financial instruments, the useful lives of and impairment for property and equipment,
estimates of intangible assets, and accruals for taxes due. Actual results could differ from those
estimates.
Fair value of financial instruments
The Company's fair value of financial instruments, including cash, accounts receivable, accounts
payable, accrued expenses and short term notes payable approximated carrying values because of the
short-term nature of these instruments.
Fair Value Measurements
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements
("SFAS No. 157"). SFAS No.
157 defines fair value as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date. It also
established a framework for measuring fair value in accordance with GAAP and expands disclosures
about fair value measurement. SFAS No. 157 applies to other accounting pronouncements that require
or permit fair value measurements. SFAS No. 157 was effective for fiscal years beginning after
November 15, 2007. However, a FASB Staff Position issued in February 2008, delayed the
effectiveness of SFAS No. 157 for one year, but only as applied to nonfinancial assets and
nonfinancial liabilities. The adoption of SFAS No. 157 on April 1, 2008 did not have an impact on
the Company's financial position, results of operations or cash flows. The Company will adopt the
provisions of SFAS No. 157 as it relates to nonfinancial assets and nonfinancial liabilities on
April 1, 2009. The adoption is not expected to have any material impact on the Company's financial
position, results of operations or cash flows.
The hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as
of the measurement date. The classification of fair value measurements within the hierarchy is
based upon the lowest level of input that is significant to the measurement. The three levels are
defined as follows:
•
Level 1 — Valuation is based upon quoted prices (unadjusted) in active markets for identical assets or liabilities.
•
Level 2 — Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other
inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full
term of the financial instrument.
•
Level 3 — Valuation is based upon unobservable inputs that are significant to the fair value measurement.
The Company's financial assets as of March 31, 2009 and 2008 consist of cash and cash equivalents.
In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and
Financial Liabilities ("S
FAS No. 159"). SFAS No. 159 permits companies to choose to measure at fair
value certain financial instruments and other items that are not currently required to be measured
at fair value. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The
Company adopted SFAS No. 159 on April 1, 2008 and elected not to measure any additional financial
instruments or other items at fair value.
Cash and cash equivalents
For the purpose of the statement of cash flows, the Company considers all highly liquid investments
with maturities of three months or less to be cash equivalents.
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GOLD INDUSTRY LIMITED
Notes to the Consolidated Financial Statements
March 31, 2009 and 2008
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Concentrations of credit risk
Financial instruments, which potentially subject the Company to concentrations of credit risk,
consist of cash and cash equivalents and accounts receivables. The Company extends credit based on
an evaluation of the customer's financial condition, generally without collateral. Exposure to
losses on receivables is principally dependent on each customer's financial condition. The Company
periodically reviews its trade receivables in determining its allowance for doubtful accounts. The
Company maintains the majority of its cash at PRC government owned banks and has some cash on hand.
The total cash balances in the state-owned banks are not insured by the banks within the People's
Republic of China. The Company has not experienced any losses on such accounts.
Country risk
As the Company's principal operations are conducted in the PRC, the Company is subject to special
considerations and significant risks not typically associated with companies in the US. These risks
include, among others, risks associated with the political, economic and legal environments and
foreign currency exchange limitations encountered in the PRC. The Company's results of operations
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, among other things.
In addition, all of the Company's transactions undertaken in the PRC are denominated in Chinese
Yuan Renminbi (CNY), which must be converted into other currencies before remittance out of the PRC
may be considered. Both the conversion of CNY into foreign currencies and the remittance of foreign
currencies abroad require the approval of the PRC government.
Accounts receivable
Accounts receivable are carried at original invoice amount less an estimate made for doubtful
receivables based on a review of all outstanding amounts on a monthly basis. Management's judgment
and estimates are made in connection with establishing the allowance for doubtful accounts.
Specifically, the Company analyzes the aging of accounts receivable balances, historical bad debts,
customer concentrations, customer credit-worthiness, current economic trends and changes in the
customer payment terms. Significant changes in customer concentration or payment terms,
deterioration of customer credit-worthiness or weakening in economic trends could have a
significant impact on the collectability of receivables and the Company's operating results. If the
financial condition of the Company's customers were to deteriorate, resulting in an impairment of
their ability to make payments, the Company will write off 100% as bad debt. In management's
opinion, no allowance for doubtful accounts is necessary at March 31, 2009 and 2008.
Inventory
Inventory consists of completed cemetery plots ready for sale. Inventory includes all direct costs
associated with land development and construction of cemetery plots, including interest, costs of
land use rights based on units of production and other carryings costs incurred. Inventory is
valued at the lower of cost or market (determined on a weighted average cost basis) or net
realizable value. Management compares the cost of inventory with the net realizable value and an
allowance is made for impairment in the value of inventory if lower than cost. As of March 31,
2009 and 2008, no impairment was recorded.
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GOLD INDUSTRY LIMITED
Notes to the Consolidated Financial Statements
March 31, 2009 and 2008
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Property and equipment
Property and equipment are carried at cost. The cost of repairs and maintenance is expensed as
incurred; major replacements and improvements are capitalized. When assets are retired or disposed
of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or
losses are included in income in the year of disposition. Depreciation and amortization are
computed on the straight-line method over the following estimated useful lives of the related
assets, which range from five to thirty years, and are as follows:
Buildings and structures
25 to 30 years
Machinery and equipment
5 to 10 years
Office equipment
5 years
Long-lived asset
Long-lived assets and certain identifiable intangibles held and used by the Company are reviewed
for impairment whenever events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Events relating to recoverability may include significant unfavorable
changes in business conditions, recurring losses, or a forecasted inability to achieve break-even
operating results over an extended period. The Company's management assesses the recoverability of
its long-lived assets by determining whether the depreciation and amortization of long-lived assets
over their remaining lives can be recovered through projected undiscounted future cash flows. The
amount of long-lived asset impairment if any, is measured based on fair value and is charged to
operations in the period in which long lived assets impairment is determined by management. At
March 31, 2009 and 2008, the Company's management believes there was no impairment of its long
lived assets. There can be no assurance however, that market conditions will not change or demand
for the Company's services will continue, which could result in impairment of long-lived assets in
the future.
Intangible assets
The Company reviews annually for impairment of intangible assets in accordance with Statement of
Financial Accounting Standards No. 144, Accounting for Impairment on Disposed of Long lived Assets.
In accordance with SFAS 144, an impairment loss will be recognized if carrying amount of the
intangible asset is not recoverable and its carrying amount exceeds its value. As of March 31, 2009
and 2008, no impairment was recorded.
Income taxes
The Company accounts for income taxes in accordance with SFAS No. 109, "Accounting for Income
Taxes." Deferred taxes are provided on the liability method whereby deferred tax assets are
recognized for deductible temporary differences, and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the differences between the reported
amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than not that some
portion or all of the deferred tax assets will be realized. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company is
governed by the Income Tax Law of the People's Republic of China and local income tax laws (the
"PRC Income Tax Law"). Pursuant to the PRC Income Tax Law, enterprises are subject to tax at a
statutory rate of 25% . The local government in the PRC has provided companies various incentives
to encourage economic development in the region. Such incentives include reduced tax rates and
other measures. (See NOTE 15).
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GOLD INDUSTRY LIMITED
Notes to the Consolidated Financial Statements
March 31, 2009 and 2008
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Contributed property
The Company received land use rights from the PRC for a period of xx years. The Company recorded
the fair value of the land use rights as an intangible asset and deferred revenue based upon,
Statement of Financial Accounting Standards (SFAS) No. 116, "Accounting for Contributions Received
and Contributions Made." This Statement establishes standards of financial accounting and
reporting for contributions received and contributions made. Accounting for contributions is an
issue primarily for not-for-profit organizations because contributions are a significant source of
revenues for many of those organizations. However, this Statement applies to all entities
(not-for-profit organizations and business enterprises) that receive or make contributions.
Contributions received are recognized as revenues or gains in the period received and as assets,
decreases of liabilities, or expenses depending on the form of the benefits received. Contributions
received are measured at their fair values. (See NOTES 7 and 9).
Revenue recognition
The Company recognizes revenue in accordance with Staff Accounting Bulletin No. 104, Revenue
Recognition ("SAB104"), which superseded Staff Accounting Bulletin No. 101, Revenue Recognition in
Financial Statements ("SAB101"). SAB 104 requires that four basic criteria must be met before
revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has
occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably
assured. Determination of criteria (3) and (4) are based on management's judgments regarding the
fixed nature of the selling prices of the products delivered and the collectability of those
amounts.
The Company has two revenue sources including the following revenue recognition policies:
The Company recognizes revenue from the sale of cemetery plots when it is realized or realizable
and earnings process is complete. In general, the Company records revenue when the cemetery plot
successfully completed, title has passed to the customer in accordance with the terms of the sale
and consideration is given. The costs associated with cemetery products revenue are the costs to
convert the land into the actual burial plots. Additionally direct selling costs incurred in
selling the cemetery plots are recorded in cost of goods sold.
Park construction income is recognized when the Company is contracted to provides services for
third party clients. These services include the construction of sidewalks, pagodas, landscaping
and other structures for parks. These projects are not associated with the Company's sales of
cemetery plots. Revenue is recognized upon the completion of the park, and the project has been
approved by the customer and collection is assured. The costs associated with the park
construction income are raw materials purchased for that specific project and services performed by
the Company recorded in costs of goods sold.
Cost of goods sold
Cost of goods sold includes the capitalized costs of cemetery plots sold and services provided by
the Company to third parties for development and construction of parks.
Other operating costs
Other operating expenses include management and staff salaries, administrative and facilities
related expenses, and other expenses to the non-production functions of the business are expensed
as incurred.
Advertising
Advertising is expensed as incurred. Advertising expenses were included in selling expenses and
amounted to $426,415 and $519,546 for the years ended March 31, 2009 and 2008, respectively.
68
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GOLD INDUSTRY LIMITED
Notes to the Consolidated Financial Statements
March 31, 2009 and 2008
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Foreign currency translation
As of March 31, 2009 and 2008, the accounts of the Company were maintained, and its consolidated
financial statements were expressed in the RMB. Such consolidated financial statements were
translated into U.S. Dollars in accordance with Statement of Financial Accounts Standards ("SFAS")
No. 52, "Foreign Currency Translation," with the RMB as the functional currency. According to SFAS
52, all assets and liabilities were translated at the exchange rate on the consolidated balance
sheet date, stockholder's equity are translated at the historical rates and statement of operations
items are translated at the weighted average exchange rate for the year. The resulting translation
adjustments are reported under other comprehensive income in accordance with SFAS No. 130,
"Reporting Comprehensive Income." The exchange rate for the conversion of one US Dollar to RMB was
6.8256 and 7.0022 at March 31, 2009 and 2008.
Transaction gains and losses that arise from exchange rate fluctuations on transactions
denominated in a currency other than the functional currency are included in the results of
operations as incurred.
In accordance with Statement of Financial Accounting Standards No. 95, "Statement of Cash Flows,"
cash flows from the Company's operations is calculated based upon the local currencies using the
average translation rate. As a result, amounts related to assets and liabilities reported on the
statement of cash flows will not necessarily agree with arithmetical changes in the corresponding
balances on the consolidated balance sheet.
Other comprehensive income
SFAS No. 130,
Reporting Comprehensive Income
, established standards for the reporting and display
of comprehensive income or loss and its components in a full set of general purpose financial
statements. Comprehensive income or loss is defined as the change in equity during a period
resulting from transactions and other events and circumstances from non-owner sources. The
Company's total comprehensive income or loss consists of net unrealized income or loss from foreign
currency translation adjustments. The Company has presented comprehensive income or loss on the
Statement of Operations and Comprehensive Income.
For the years ended March 31, 2009 and 2008, unrealized foreign currency translation gain was
$511,749 and $1,978,746, respectively.
Segment reporting
Operating segments are defined by SFAS No. 131,
"Disclosures about Segments of an Enterprise and
Related Information"
("SFAS No. 131"), as components of an enterprise about which separate
financial information is available that is evaluated regularly by the chief operating decision
maker, or decision-making group, in deciding how to allocate resources and in assessing
performance. For the years ended March 31, 2009 and 2009, the Company derived almost all of its
revenue from the sale of burial plots.
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GOLD INDUSTRY LIMITED
Notes to the Consolidated Financial Statements
March 31, 2009 and 2008
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent accounting pronouncements
In December 2007, the FASB issued SFAS No. 141(R),
Business Combinations
("SFAS No. 141(R)"). SFAS
No. 141(R) applies to any transaction or other event that meets the definition of a business
combination. Where applicable, SFAS No. 141(R) establishes principles and requirements for how the
acquirer recognizes and measures identifiable assets acquired, liabilities assumed, non-controlling
interest in the acquiree and goodwill or gain from a bargain purchase. In addition, SFAS No. 141(R)
determines what information to disclose to enable users of the consolidated financial statements to
evaluate the nature and financial effects of the business combination. In April 2009, the FASB
issued FSP 141(R)-1,
Accounting for Assets Acquired and Liabilities Assumed in a Business
Combination That Arise from Contingencies
, ("FSP 141(R)-1"), which modified the guidance in SFAS
No. 141(R) related to contingent assets and contingent liabilities. Also in December 2007, the FASB
issued Statement No. 160,
Non-controlling Interests in Consolidated Financial Statements
("SFAS No.
160"). This Statement amends Accounting Research Bulletin No. 51,
Consolidated Financial
Statements,
to establish accounting and reporting standards for the non-controlling interest in a
subsidiary and for the deconsolidation of a subsidiary. SFAS No. 141(R), as modified by FSP
141(R)-1, and SFAS No. 160 are required to be adopted simultaneously and are effective for the
first annual reporting period beginning on or after December 15, 2008 with earlier adoption being
prohibited. The Company will adopt both SFAS No. 141(R), as modified by FSP 141(R)-1, and SFAS No.
160 on April 1, 2009. The Company has no non-controlling interests, therefore the adoption of SFAS
No. 160 is not expected to have any impact. The adoption of SFAS No. 141(R), as modified by FSP
141(R)-1, will change the Company's accounting treatment for business combinations on a prospective
basis.
In March 2008, the FASB issued Statement of Financial Accounting Standards ("SFAS") No. 161,
Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No.
133, which requires additional disclosures about the objectives of the derivative instruments and
hedging activities, the method of accounting for such instruments under SFAS No. 133 and its
related interpretations, and a tabular disclosure of the effects of such instruments and related
hedged items on the Company's financial position, financial performance, and cash flows. SFAS No.
161 is effective for periods beginning January 1, 2009. The adoption of SFAS No. 161 did not have a
material impact on the Company's consolidated financial statements.
In April 2008, the FASB issued FSP No. FAS 142-3, "Determination of the Useful Life of Intangible
Assets." FSP No. FAS 142-3 amends the factors that should be considered in developing renewal or
extension assumptions used to determine the useful life of a recognized intangible asset under SFAS
No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142-3 is effective for periods beginning
January 1, 2009. The adoption of SFAS No. 142-3 did not have a material impact on the Company's
consolidated financial statements.
In December 2008, the FASB issued FSP No. FAS 132(R)-1, "Employers' Disclosures about
Postretirement Benefit Plan Assets". This FSP requires additional disclosures about plan assets for
sponsors of defined benefit pension and postretirement plans including expanded information
regarding investment strategies, major categories of plan assets, and concentrations of risk within
plan assets. Additionally, this FSP requires disclosures similar to those required under SFAS No.
157 with respect to the fair value of plan assets such as the inputs and valuation techniques used
to measure fair value and information with respect to classification of plan assets in terms of the
hierarchy of the source of information used to determine their value. The disclosures under this
FSP are required for annual periods ending after December 15, 2009. The Company does not expect
that this standard would have a material impact on the consolidated financial statements since the
Company does not have Postretirement Benefit Plan Assets.
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GOLD INDUSTRY LIMITED
Notes to the Consolidated Financial Statements
March 31, 2009 and 2008
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
In April 2009, the FASB issued FSP 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
("FSP 157-4"). FSP 157-4 provides guidance regarding how to determine whether there
has been a significant decrease in the volume and level of activity for the asset or liability when
compared with normal market activity for the asset or liability. In such situations, an entity may
conclude that transactions or quoted prices may not be determinative of fair value, and may adjust
the transactions or quoted prices to arrive at the fair value of the asset or liability. FSP 157-4
is effective for interim and annual reporting periods ending after June 15, 2009, with early
adoption permitted for periods ending after March 15, 2009, and must be applied prospectively. The
Company does not expect the adoption of FAS 157-4 on April 1, 2009 to have any material impact on
its consolidated financial statements or required disclosures.
In May 2009, the FASB issued Statement No. 165, "Subsequent Events" ("SFAS 165"), which establishes
general standards of accounting for, and requires disclosure of, events that occur after the
consolidated balance sheet date but before consolidated financial statements are issued or are
available to be issued. The Company adopted the provisions of SFAS 165 for the quarter ended June
30, 2009. The adoption of this standard will not have a material impact on the Company's
consolidated financial statements.
In June 2009, the FASB issued SFAS No. 166, "Accounting for Transfers of Financial Assets" ("SFAS
166"). SFAS 166 is a revision to SFAS No. 140, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities", and will require more information about transfers of
financial assets and where companies have continuing exposure to the risk related to transferred
financial assets. It eliminates the concept of a qualifying special purpose entity, changes the
requirements for derecognizing financial assets, and requires additional disclosure. This standard
is effective for interim and annual periods ending after November 15, 2009. The Company will adopt
SFAS 166 on January 1, 2010 and is currently evaluating the potential impact on the consolidated
financial statements when implemented.
In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R
)
(SFAS 167).
The amendments include: (1) the elimination of the exemption for qualifying special purpose
entities, (2) a new approach for determining who should consolidate a variable-interest entity, and
(3) changes to when it is necessary to reassess who should consolidate a variable-interest entity.
SFAS 167 is effective for the first annual reporting period beginning after November 15, 2009 and
for interim periods within that first annual reporting period. The Company will adopt SFAS 167 in
fiscal 2010 and is evaluating the impact it will have on the results of the Company.
In June 2009, the Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards ("SFAS") No. 168, "The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles" ("SFAS 168"). SFAS 168 establishes the FASB
Accounting Standards Codification (the "Codification") as the single source of authoritative
nongovernmental U.S. GAAP. The Codification is effective for interim and annual periods ending
after September 15, 2009. The adoption of this standard will not have a material impact on the
Company's consolidated financial statements.
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GOLD INDUSTRY LIMITED
Notes to the Consolidated Financial Statements
March 31, 2009 and 2008
NOTE 3 — INVENTORY
Cemetery plots and other inventories at March 31, 2009 and 2008 consisted of the following:
2009
2008
Basic plots
$
1,885,623
770,905
Standard plots
1,818,225
3,249,644
Deluxe plots
1,904,877
2,348,506
Artist plots
565,963
2,721,621
Small tools and supplies
3,495
3,407
Total
$
6,178,183
$
9,094,083
NOTE 4 — PREPAID EXPENSES
Prepaid expenses at consist of the following as of:
Year Ended March 31,
2009
2008
Prepaid expenses
$
828,124
$
—
During 2009, the Company signed an agreement to pay the government of the PRC, ("the Government"),
$835,055, which as to be used by the Government for the purpose of building homes for the villagers
and relocation costs of the farmers in ChangShou Jiang Nan. The villagers and farmers were
originally located in LongQiao and QianFo villages. The cash received from the Company was
redistributed to the local farmers and villagers by the Government as a payment for relocating them
to ChangShou Jiang Nan. The Company also agreed to clear land for the building of these homes.
The prepaid expenses are amortized over 20 years per the terms of the contract. For the year ended
March 31, 2009, the Company had recorded $6,926 which was recorded as cost of goods sold.
NOTE 5 — PREPAYMENTS TO SUPPLIERS
Prepayments to suppliers consist of the following as of:
Year Ended March 31,
2009
2008
Prepayments on contracts
$
1,845,870
$
—
Prepayments on construction
3,662,500
—
Total
$
5,508,370
$
—
In April 2008, the Company had recorded a prepayment for a purchase commitment in the amount of
$1,403,400 (87% of the contract) for cemetery headstones to ChongQing Kun Yu Stone Wood Company, a
related party. Under the term of the contract, ChongQing Kun Yu Stone Wood Company is to finish the
production, and deliver the products at the specified time defined by the Company. The Company is
to check and inspect the quality, if there is any quality issue with product, ChongQing Kun Yu
Stone Wood Company is to fix it and after final inspection, the Company is to keep the headstones.
The Company is to pay 5% of the total contract price upon signing the contract and upon final
inspection, and the Company is to pay in full within one month after delivery of the headstones to
the Company. As of March 31, 2009, the Company had not taken possession of the cemetery headstones.
72
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GOLD INDUSTRY LIMITED
Notes to the Consolidated Financial Statements
March 31, 2009 and 2008
NOTE 5 — PREPAYMENTS TO SUPPLIERS (continued)
In February 2009, the Company had recorded a prepayment for a purchase commitment in the amount of
$442,470 (50% of the contract) for trees to ChongQing Chang Sheng Qiao Company, an unrelated third
party. The total price stated in the contract is $880,000 but the actual price is determined by
the actual quantity of trees delivered. ChongQing Chang Sheng Qiao Company is to organize tree
plants upon signing the contract, and deliver the tree plants to a location of the Company's choice
by January 5, 2009. ChongQing Chang Sheng Qiao Company pays the delivery fees. The Company is to
pay 50% of the contract upon signing the contract and upon final inspection pay another 30% based
on the number of actual trees delivered and pay the balance within one (1) year. As of March 31,
2009, the Company had not taken possession of the trees.
In February 2009, the Company had recorded a prepayment related to a contract in the amount of
$3,662,500 (7% of the contract), for the construction of entertainment boats. ChongQing Bo Goa
Tourism Company, an unrelated third party and the Company to jointly develop the "Liang Jiang
Yu"project. This project includes development of a park near the lake as a way to attract more
tourism in the ChangShou area near the Chongqing Gui Yuan Cemetery. The current project is for
10-20 entertainment boats, a welcome center, (1) large sailboat and nine (9) docks. The
entertainment boat design and construction and docks are the responsibility of the Company and the
boats are expected to be put to use by December 2010. The first stage constructions fees are
$77,645, which was paid by ChongQing Bo Goa Tourism Company. When the project is completed, the
Company will repay ChongQing Bo Goa Tourism the first stage construction fees of $77,645.
ChongQing Bo Goa Tourism Company is responsible for obtaining the government loans (government has
agreed) of approximately $2,930,107 with an annual interest payment of approximately $161,150. The
total price of the contract is approximately $51,275,000.
NOTE 6 — PROPERTY AND EQUIPMENT
Property and equipment consist of the following as of:
Year Ended March 31,
2009
2008
Buildings and structures
$
8,041,165
$
6,395,797
Machinery and equipment
855,542
833,935
Office equipment
8,077
7,873
Less: accumulated depreciation
(1,275,442
)
(924,405
)
Total Property and equipment
$
7,629,342
$
6,313,200
Depreciation expenses for the years ended March 31, 2009 and 2008 were $249,884 and $230,185,
respectively.
NOTE 7
— INTANGIBLE ASSETS
In the PRC, land is the asset of the government. The Company maintains only use rights from local
governmental authorities. The Company has use rights on three properties consisting of
approximately 399,444 square meters of land with land usage rights with 100 years expiration from
the date of grant. Land use rights are stated at the estimated fair value on the contribution date
less accumulated amortization and any impairment losses. The land use rights are amortized on
ratable basis based on the number of plots developed over the life of the rights.
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GOLD INDUSTRY LIMITED
Notes to the Consolidated Financial Statements
March 31, 2009 and 2008
NOTE 7
— INTANGIBLE ASSETS (continued)
The intangible assets consist of the following as of:
Year Ended March 31,
2009
2008
Land use rights
$
13,236,805
$
12,922,073
Less: Accumulated units of production costs
916,912
744,021
Total
$
12,319,893
$
12,178,052
During 2005, the Company received land use rights which were contributed by the PRC. The land use
rights include Chongqing Gui Yuan Cemetery located in ChangShou, China, Under PRC's governmental
regulations, the government owns all land. However, PRC would not directly assign the land use
rights to the Company's management rather it assigned the land use rights to the Company as a
contribution. Therefore, the Company received the land use rights without giving the government any
consideration in return for the rights. At December 31, 2005, the Company has recorded the fair
value of the land use rights under FAS 116, "Accounting for Contributions Received and
Contributions Made", and the deferred revenue.
The Company's management determined the fair market value of the land use rights based upon the
actual square meters of the useable land. The Company expects approximately 210,000 plots can be
developed and sold within the 399,444 square meters of land. The Company's average sales price per
plot ranges from $3,900 to $4,400.
At March 31, 2009 and 2008, the Company reviewed the land use rights for impairment. The Company
determined that based upon the combined net income of $11,222,243 for the years ended March 31,
2009 and 2008, value assigned to land use rights value is fully recoverable and no impairment to
its value.
The land use rights are expensed based upon the number of cemetery plots capitalized in inventory
using the units of production method. As of March 31, 2009 and 2008, the Company expensed $172,890
and $432,006, respectively, which was included in the capitalized cost of inventory and expensed
through cost of goods sold.
NOTE 8 — ACCRUED EXPENSES AND OTHER PAYABLES
Accrued expenses and other payables consist of the following as of:
Year Ended March 31,
2009
2008
Welfare payable
$
96,932
$
94,484
Taxes payable
845,525
582,319
Other accrued payables
54,523
107,945
Total
$
996,980
$
784,848
These expenses are accrued by the Company over time and paid to the People's Republic of China's
government.
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GOLD INDUSTRY LIMITED
Notes to the Consolidated Financial Statements
March 31, 2009 and 2008
NOTE 9 — DEFERRED REVENUE
At December 31, 2005, the Company recorded the deferred revenue related to land use rights that
were contributed to the Company by the People's Republic of China under FAS 116, "Accounting for
Contributions Received and Contributions Made." As the Company sells cemetery plots, a portion of
the deferred revenue is recognized as other income based on the number of cemetery plots that the
Company sells during the year. As of March 31, 2009 and 2008, the Company recorded $255,893 and
$296,364, respectively, as other income.
NOTE 10 — SHORT-TERM NOTES PAYABLE
Short term notes payable represent amounts due to a bank normally due within one year. The
principles of loans are due at maturity and the loans can be renewed each year.
Short-term — Chongqing Rural Commercial Bank, secured by Chongqing bowling museum building, due on
demand, interest calculated at annual rate of 8.4% and matures March 2010. As of March 31, 2009
and 2008, the Company had a short-term notes payable in the amount of $439,500 and $428,400,
respectively.
Short-term — Chongqing Rural Commercial Bank; secured by approximately 123,334 square meters for
land valued at approximately $882,353, due on demand, interest calculated at annual rate of 9.6%
and matures March 2010. In the event of default on the short-term notes payable, the interest rate
is calculated at annual rate of 14.4%. As of March 31, 2009 and 2008, the Company had a loan
payable of $2,031,955 and $1,980,636, respectively. The short-term notes payable contain covenants
that restrict the use of proceeds to develop the cemetery plots. If the Company fails to use the
money according to the stated purpose, the interest rate is calculated at 19.2%. As of March 31,
2009 and 2008, the Company was in compliance with these covenants.
As of March 31, 2009 and 2008, the Company recorded interest expense in the amount of $235,208 and
$204,075 respectively, for these loans.
NOTE 11 — RENTAL INCOME FROM OPERATING LEASE
Rental income consists of the following as of:
Year Ended March 31,
2009
2008
Rental income
$
335,969
$
309,496
Less Depreciation of building
-75,683
-69,720
Net rental income
$
260,286
$
239,776
The Company rents its excess office space in ChangShou, China to a third party under a cancellable
operating lease that expires in December 2009. The operating lease is automatically renewable each
year. The third party is responsible for all expenses related to occupancy of the building. As of
March 31, 2009 and 2008, the lease called for monthly rental of approximately $28,000 and $25,800,
respectively.
NOTE 12 — STOCKHOLDERS' EQUITY
Common Stock
The Company is authorized to issue 100,000,000 shares of common stock, par value of $0.121 per
share. As of March 31, 2009 and 2008, there were 100,000,000 share of common stock issued and
outstanding.
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GOLD INDUSTRY LIMITED
Notes to the Consolidated Financial Statements
March 31, 2009 and 2008
NOTE 13 — CONCENTRATION RISK
Suppliers
The Company obtained approximately 100% and 34% of its inventory purchases from two suppliers for
the years ended March 31, 2009 and 2008, respectively. Management believes other suppliers could
provide similar products and services on comparable terms in the area. Although alternate
suppliers may provide identical or similar products, such a change could result in delays and a
possible loss of sales. The Company did have long-term contracts with its suppliers for the years
ended March 31, 2009 and 2008 (See Note 5).
Customers
The Company did not have concentrations related to any of its customers and revenue for the years
ended March 31, 2009 and 2008.
NOTE 14 — CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The Company had $0 and $372,174 in related party receivable from Gui Yuan Co. as of March 31, 2009
and 2008, respectively. The related party receivable was unsecured, non-interest bearing and due
on demand. As of March 31, 2009 and 2008, no interest income was recorded or received.
The Company had $1,406,400 and $0 in prepayments to a related party supplier as of March 31, 2009
and 2008, respectively. See Note 5.
The Company had $0 and $735,289 in related party payables due to Shou-Cheng Co. as of March 31,
2009 and 2008, respectively. The related party payables were unsecured, non-interest bearing and
due on demand. As of March 31, 2009 and 2008, no interest expense was recorded or paid.
NOTE 15 — INCOME TAXES
The components of income (loss) before income tax consist of the following as of:
Year Ended March 31,
2009
2008
Current Taxes
Chinese Operations
1,689,693
2,346,605
Total
$
1,689,693
$
2,346,605
Deferred tax assets and liabilities are provided for significant income and expense items
recognized in different years for tax and financial reporting purposes. The Company did not have
any temporary differences, which give rise to a net deferred tax asset for fiscal year end March
31, 2009 and 2008.
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GOLD INDUSTRY LIMITED
Notes to the Consolidated Financial Statements
March 31, 2009 and 2008
NOTE 15 — INCOME TAXES (continued)
The reconciliation of the effective income tax rate to the statutory rate for year ended March 31,
2009 and 2008 is as follows:
2009
2008
Statutory income tax rate for funeral company
25
%
33
%
Tax exemptions
(1.0
%)
(4.0
%)
Effective income tax rate for funeral chains
24
%
29
%
Beginning January 1, 2008, the new PRC Enterprise Income Tax ("EIT") law replaced the existing laws
for PRC Domestic Enterprises ("DES") and PRC Foreign Invested Enterprises ("FIEs").
The key changes are:
•
The new standard PRC EIT rate of 25% replaced the 33% rate currently
applicable to both DES and FIEs, except for High Tech companies who
pays a reduced rate of 15%; and
•
Companies established before March 16, 2007 will continue to enjoy tax
holiday treatment approved by local government for a grace period of
the next 5 years or until the tax holiday term is completed, whichever
is sooner.
NOTE 16 — COMMITMENTS AND CONTINGENCIES
(a) Lease commitments
The Company has a lease commitment in relation to the land rights that were contributed to the
Company by People's Republic of China. The tenure of arable land is 22 years, from January 1, 2005
to December 31, 2027. The tenure of non-arable land is 50 years, from January 1, 2005 to December
31, 2055.
The Company pays annual lease payment on or before October 31st to the PRC and in turn the
PRC Government then pays the sixth villager group, Longqiaohu village according to the terms of the
contract, and the sixth villager group re-distributes the funds to each farmer household. This is
the consideration that was agreed upon by the farmers for relocating in ChangShou Jiang Nan.
The annual operating lease expense is capitalized as component of inventory and expensed through
cost of goods sold. As of March 31, 2009 and 2008, the Company capitalized $22,679 and $22,106,
respectively.
Future minimum operating lease payments relating to the above lease is as follows:
Years Ending March 31,
2010
$
22,679
2011
22,679
2012
22,679
2013
22,679
2014
22,679
Thereafter
294,827
Total
$
408,222
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GOLD INDUSTRY LIMITED
Notes to the Consolidated Financial Statements
March 31, 2009 and 2008
NOTE 16 — COMMITMENTS AND CONTINGENCIES (continued)
(b) Litigation
In the ordinary course of business, the Company is generally subject to claims, complaints, and
legal actions. At March 31, 2009 and 2008, management believes that the Company is not a party to
any action which would have a material impact on its financial condition, operations, or cash
flows.
(c)
Economic Environment
Due to all of the Company's operations being conducted in the PRC, the Company is subject to
special considerations and significant risks not typically associated with companies operating in
the United States of America. These risks include, among others, the political, economic and legal
environments 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 and
remittance abroad, and rates and methods of taxation, among other things.
The granting of land use licenses is a common practice in China as all land is government-owned,
and, at present, no option to purchase land has ever been granted. Pursuant to the laws of China,
all land belongs to the government. However, as the Company does have very limited rights in
accordance with land use license for the cemetery plot development and corresponding sales of the
burial spaces.
(d) Retirement Plans
The Company participates in a defined contribution retirement program organized by the relevant
local government authority in the PRC. Employees of the Company eligible to participate in the
retirement plan are entitled to retirement benefits from the plan. The local government authority
is responsible for the pension liabilities to these retired employees. The Company is required to
make monthly contributions to the retirement plan up to the time of retirement of the eligible
employees, at 20% of the local standard basic salaries. As of March 31, 2009 and 2008, the Company
had no significant obligation apart from the contribution as stated above.
Note 17 — SUBSEQUENT EVENT
On February 12, 2010, the Company and its shareholders entered into a Share Exchange Agreement with
Artistry Publications, Inc. ("Artistry Publications"). Pursuant to the terms of the Share Exchange
Agreement, Artistry Publications agreed to acquire all of the issued and outstanding capital stock
of the Company in exchange for 8,800,000 shares of Artistry Publications' common stock. The
transactions contemplated under the Share Exchange Agreement closed on February 12, 2010.
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GOLD INDUSTRY LIMITED
CONSOLIDATED BALANCE SHEETS
December 31,
March 31,
2009
2009
(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
4,608,455
$
1,392,961
Accounts receivable
—
61,384
Inventory
9,014,045
6,178,182
Advances to suppliers
21,968
21,975
Related party receivable
1,174
1,172
Other current assets
57,551
57,435
TOTAL CURRENT ASSETS
13,703,193
7,713,109
PROPERTY AND EQUIPMENT, NET
7,348,253
7,629,342
OTHER NON-CURRENT ASSETS
Prepayments to suppliers
8,948,700
4,101,970
Prepayment to related party suppliers
1,408,320
1,406,400
Prepaid expenses
797,865
828,124
Other assets
16,584
16,592
Intangible assets , net
11,937,561
12,319,893
TOTAL OTHER NON-CURRENT ASSETS
23,109,030
18,672,979
TOTAL ASSETS
$
44,160,476
$
34,015,430
LIABILITIES & STOCKHOLDERS ' EQUITY
CURRENT LIABILITIES
Accounts payable
$
103,947
$
308,637
Welfare payable
97,064
96,932
Taxes payable
1,416,638
845,525
Other accrued payables
60,256
54,523
Short-term notes payable
2,474,829
2,471,455
TOTAL CURRENT LIABILITIES
4,152,734
3,777,072
LONG-TERM LIABILITIES
Deferred revenue
10,138,267
10,463,803
TOTAL LONG-TERM LIABILITIES
10,138,267
10,463,803
STOCKHOLDERS' EQUITY
Common stock, 100,000,000 shares authorized,
$0.121 par value; 100,000,000 shares issued and
outstanding
12,100,000
12,100,000
Retained earnings
15,878,871
5,834,633
Accumulated other comprehensive income
1,890,604
1,839,922
TOTAL STOCKHOLDERS' EQUITY
29,869,475
19,774,555
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
44,160,476
$
34,015,430
The accompanying notes are an integral part of these consolidated financial statements.
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GOLD INDUSTRY LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
For three
For three
For nine months
For nine months
months ended
months ended
ended
ended
Dec. 31, 2009
Dec. 31, 2008
Dec. 31, 2009
Dec. 31, 2008
(unaudited)
(unaudited)
(unaudited)
(unaudited)
REVENUES
Cemetery
$
11,403,585
$
1,969,952
$
26,467,501
$
10,529,201
Park construction
services
—
—
—
657,212
Total revenue
11,403,585
1,969,952
26,467,501
11,186,413
COST OF GOODS SOLD
Cemetery
5,339,808
1,014,616
12,110,391
5,920,501
Park construction
services
—
—
—
487,233
Total cost of goods sold
5,339,808
1,014,616
12,110,391
6,407,734
GROSS PROFIT
6,063,777
955,336
14,357,110
4,778,679
EXPENSES
Selling expenses
61,641
19,238
142,982
84,024
General &
administrative expenses
581,557
175,600
1,254,200
784,253
TOTAL EXPENSES
643,198
194,838
1,397,182
868,277
INCOME FROM OPERATIONS
5,420,579
760,498
12,959,928
3,910,402
OTHER INCOME (EXPENSES)
Other income
140,824
32,770
325,536
165,901
Interest expenses
(58,759
)
(58,417
)
(177,559
)
(174,533
)
Interest income
2,948
262
7,872
3,225
Rental income
65,438
64,969
196,304
192,310
TOTAL OTHER INCOME
150,451
39,584
352,153
186,903
INCOME BEFORE INCOME
TAXES
5,571,030
800,082
13,312,081
4,097,305
INCOME TAXES
(1,414,552
)
(67,002
)
(3,267,843
)
(836,642
)
NET INCOME
$
4,156,478
$
733,080
$
10,044,238
$
3,260,663
OTHER COMPREHENSIVE
INCOME
Foreign currency
translation adjustment
402
17,072
50,682
511,749
COMPREHENSIVE INCOME
$
4,156,880
$
750,152
$
10,094,920
$
3,772,412
The accompanying notes are an integral part of these consolidated financial statements.
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GOLD INDUSTRY LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine
For the nine
months
months
ended
ended
Dec. 31,
Dec. 31,
2009
2008
(unaudited)
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income
$
10,044,238
$
3,260,663
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization
260,054
187,300
Allocation of units of production
(325,816
)
(166,181
)
Changes in assets and liabilities:
Accounts receivable
61,468
127,776
Inventory
(2,355,757
)
(523,587
)
Advances to suppliers
37
271,475
Related party receivable
—
382,338
Other current assets
(38
)
54,784
Prepayments to suppliers
(4,841,130
)
—
Prepayments to related party suppliers
—
(674,820
)
Other assets
31
—
Accounts payable
(205,111
)
(1,526,447
)
Taxes payable
569,959
(529,204
)
Other accrued payables
5,659
(58,238
)
Related party payables
—
(755,370
)
Net cash used by operating activities
3,213,593
50,489
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures
—
(1,100,250
)
Net cash used in investing activities
—
(1,100,250
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net cash provided by financing activities
—
—
Net increase (decrease) in cash
3,213,593
(1,049,761
)
Effects of foreign exchange translation
1,902
2,408
Cash and cash equivalents, beginning of period
1,392,961
1,719,620
Cash and cash equivalents, end of period
$
4,608,455
$
672,268
SUPPLIMENTAL CASH FLOW INFORMATION:
Interest paid
$
39,269
$
38,625
Taxes Paid
$
817,954
$
144,075
The accompanying notes are an integral part of these consolidated financial statements.
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GOLD INDUSTRY LIMITED
Condensed Notes to the Consolidated Financial Statements
December 31, 2009
NOTE 1
— BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with U.S. generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by U.S. generally accepted accounting
principles for complete annual financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair presentation have been
included. Operating results for the nine months ended December 31, 2009 are not necessarily
indicative of the results that may be expected for the fiscal year ending March 31, 2010 or for any
other future period.
The condensed consolidated balance sheet at March 31, 2009 has been derived from the audited
consolidated financial statements at that date but does not include all of the information and
footnotes required by generally accepted accounting principles for complete financial statements.
The accompanying unaudited condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes thereto for the fiscal
year ended March 31, 2009.
NOTE 2 — ORGANIZATION AND DESCRIPTION OF BUSINESS
Gold Industry Limited ("Gold Industry" or the "Company") was incorporated on September 11, 2009,
under the laws of the Cayman Islands. The Company has no substantive operations of its own except
for its 100% holding of Gold Holy Industry Limited ("Gold Holy"), which was incorporated on
September 29, 2009, under the laws of Hong Kong Special Administrative Region. In turn, Gold Holy
owns 100% of Chongqing Ran Ji Industry Co., Ltd. ("Chongqing Ran Ji"), a company established under
the laws of the People's Republic of China ("China" or the "PRC"). Through Chongqing Ran Ji, the
Company controls Chongqing Foguang Tourism Development (Group) Co., Ltd. ("Chongqing Foguang"), a
private provider of cemetery plots and related services in and around Chongqing, China.
Chongqing Ran Ji was established in the PRC on December 15, 2009 as a wholly foreign owned
enterprise ("WFOE"), with registered capital of $25,000,000, with the first $3,000,000 to be
contributed by March 20, 2010, and the balance within two years. Chongqing Ran Ji has no
substantive operations of its own except for entering into certain exclusive agreements with
Chongqing Foguang and performing its obligations thereunder.
Chongqing Foguang, a PRC limited liability company established on October 10, 2002 with registered
capital of 100,000,000 Renminbi ("RMB"), is engaged in selling death care products and services,
and holds the licenses and approvals necessary to operate its business in China.
PRC law currently has limits on foreign ownership of companies. To comply with these foreign
ownership restrictions, on December 15, 2009, Chongqing Ran Ji entered into following exclusive
agreements with Chongqing Foguang and its owners (collectively the "Contractual Arrangements"):
(1)
Consulting Services Agreement
, through which Chongqing Ran Ji has the right to advise,
consult, manage and operate Chongqing Foguang, and collect and own all of its net profits;
(2)
Operating Agreement
, through which Chongqing Ran Ji has the right to recommend director
candidates and appoint the senior executives of Chongqing Foguang, approve any transactions that
may materially affect the assets, liabilities, rights or operations of Chongqing Foguang, and
guarantee the contractual performance by Chongqing Foguang of any agreements with third parties, in
exchange for a pledge by Chongqing Foguang of its accounts receivable and assets;
(3)
Proxy Agreement
, under which the owners of Chongqing Foguang have vested their
collective voting control over Chongqing Foguang to Chongqing Ran Ji and will only transfer their
respective equity interests in Chongqing Foguang to Chongqing Ran Ji or its designee(s);
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GOLD INDUSTRY LIMITED
Condensed Notes to the Consolidated Financial Statements
December 31, 2009
NOTE 2 — ORGANIZATION AND DESCRIPTION OF BUSINESS (continued)
(4)
Option Agreement
, under which the owners of Chongqing Foguang have granted Chongqing
Ran Ji the irrevocable right and option to acquire all of their equity interests in Chongqing
Foguang; and
(5)
Equity Pledge Agreement
, under which the owners of Chongqing Foguang have pledged all
of their rights, titles and interests in Chongqing Foguang to Chongqing Ran Ji to guarantee the
performance of their obligations under the Consulting Services Agreement.
As a result of these Contractual Arrangements, which obligates Chongqing Ran Ji to absorb a
majority of the risk of loss from Chongqing Foguang's activities and enable Chongqing Ran Ji to
receive a majority of its expected residual returns, the Company believes that Chongqing Foguang is
a Variable Interest Entity ("VIE") under Accounting Standards Codification 810, because the owners
of Chongqing Foguang do not have the characteristics of a controlling financial interest and the
Company should be considered the primary beneficiary of Chongqing Foguang. Accordingly, the Company
consolidates Chongqing Foguang's results, assets and liabilities in the accompanying consolidated
financial statements.
The Company's fiscal year-end is March 31st.
NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies is presented to assist the understanding of the
consolidated financial statements. The consolidated financial statements and notes are
presentations of the Company's management, which is responsible for their integrity and
objectivity. These accounting policies conform to the accounting principles generally accepted in
the United States of America and have been consistently applied in the preparation of the financial
statements.
The reporting entities
The Company's consolidated financial statements of reflect the activities of the Company and the
following subsidiaries and VIE:
Percentage of
Subsidiaries/VIE
Incorporated in
Ownership
Gold Holy Industry Limited
Hong Kong
100.00
%
Chongqing Ran Ji
PRC
100.00
%
Chongqing Foguang
PRC
VIE by Contractual Arrangements
Basis of presentation
The accompanying consolidated financial statements are prepared in accordance with generally
accepted accounting principles in the United States of America. The Company's functional currency
is the Chinese Renminbi ("CNY" or "RMB"), however, the accompanying consolidated financial
statements have been re-measured and presented in United States Dollars ($).
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GOLD INDUSTRY LIMITED
Condensed Notes to the Consolidated Financial Statements
December 31, 2009
NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Consolidation of variable interest entities
In accordance with Accounting Standards Codification (ASC) 810 variable interest entities (VIEs)
are generally entities that lack sufficient equity to finance their activities without additional
financial support from other parties or whose equity holders lack adequate decision making ability.
All VIEs with which the Company is involved must be evaluated to determine the primary beneficiary
of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for
financial reporting purposes.
The Company has concluded that Chongqing Foguang is a VIE and that the Company's direct wholly
owned subsidiary, Chongqing Ran Ji, absorbs a majority of the risk of loss from the activities of
Chongqing Foguang, and enable the Company to receive a majority of its expected residual returns.
Accordingly, the Company accounts for Chongqing Foguang as a VIE.
Because the Company and Chongqing Foguang are under common control, the initial measurement of the
assets and liabilities of Chongqing for the purpose of consolidation by the Company is at book
value. The Company has had no other business activities except for the entering into of the
exclusive agreements with Chongqing Ran Ji and its shareholders. For the purpose of presenting the
financial statements on a consistent basis, the consolidated financial statements are prepared as
if the Company had been in existence since April 1, 2007 and throughout each of the two-year
periods ended December 31, 2009.
The consolidated financial statements include the financial statements for the company, its
subsidiary and the variable interest entity, Chongqing Foguang. All significant inter-company
transactions and balances between the Company, its subsidiary and the variable interest entity are
eliminated upon consolidation.
Use of estimates
The preparation of consolidated financial statements in conformity with generally accepted
accounting principles of the United States of America requires management to make estimates and
assumptions that affect the amounts reported in the consolidated financial statements and
accompanying notes. Significant estimates reflected in the Company's consolidated financial
statements include the fair value of financial instruments, the useful lives of and impairment for
property and equipment, estimates of intangible assets, and accruals for taxes due. Actual results
could differ from those estimates.
Fair value of financial instruments
The Company's fair value of financial instruments, including cash, accounts receivable, accounts
payable, accrued expenses and short term notes payable approximated carrying values because of the
short-term nature of these instruments.
Inventory
Inventory consists of completed cemetery plots ready for sale. Inventory includes all direct costs
associated with land development and construction of cemetery plots, including interest, costs of
land use rights based on units of production and other carryings costs incurred. Inventory is
valued at the lower of cost or market (determined on a weighted average cost basis) or net
realizable value. Management compares the cost of inventory with the net realizable value and an
allowance is made for impairment in the value of inventory if lower than cost. As of December 31,
2009, no impairment was recorded.
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GOLD INDUSTRY LIMITED
Condensed Notes to the Consolidated Financial Statements
December 31, 2009
NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Contributed property
The Company received land use rights from the PRC for a period of 20 years from the initial
transaction date for the land use for a cemetery, but is renewable for 80 more years. The Company
recorded the fair value of the land use rights as an intangible asset and deferred revenue based
upon the authoritative accounting guidance for financial accounting and reporting for contributions
received and contributions made. Accounting for contributions is an issue primarily for
not-for-profit organizations because contributions are a significant source of revenues for many of
those organizations. However, the guidance applies to all entities (not-for-profit organizations
and business enterprises) that receive or make contributions. Contributions received are
recognized as revenues or gains in the period received and as assets, decreases of liabilities, or
expenses depending on the form of the benefits received. Contributions received are measured at
their fair values. (See NOTES 8 and 9).
Revenue recognition
The Company recognizes revenue in accordance with U.S. GAAP which requires that four basic criteria
must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2)
delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is
reasonably assured. Determination of criteria (3) and (4) are based on management's judgments
regarding the fixed nature of the selling prices of the products delivered and the collectability
of those amounts.
The Company has two revenue sources including the following revenue recognition policies:
The Company recognizes revenue from the sale of cemetery plots when it is realized or realizable
and earnings process is complete. In general, the Company records revenue when the cemetery plot
successfully completed, title has passed to the customer in accordance with the terms of the sale
and consideration is given. The costs associated with cemetery products revenue are the costs to
convert the land into the actual burial plots. Additionally, direct selling costs incurred in
selling the cemetery plots are recorded in cost of goods sold.
Park construction income is recognized when the Company is contracted to provides services for
third party clients. These services include the construction of sidewalks, pagodas, landscaping
and other structures for parks. These projects are not associated with the Company's sales of
cemetery plots. Revenue is recognized upon the completion of the park, and the project has been
approved by the customer and collection is assured. The costs associated with the park
construction income are raw materials purchased for that specific project and services performed by
the Company recorded in costs of goods sold.
Cost of goods sold
Cost of goods sold includes the capitalized costs of cemetery plots sold and services provided by
the Company to third parties for development and construction of parks.
Other operating costs
Other operating expenses include management and staff salaries, administrative and facilities
related expenses, and other expenses to the non-production functions of the business are expensed
as incurred.
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GOLD INDUSTRY LIMITED
Condensed Notes to the Consolidated Financial Statements
December 31, 2009
NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Foreign currency translation
As of December 31, 2009, the accounts of the Company were maintained, and its consolidated
financial statements were expressed in the RMB. Such consolidated financial statements were
translated into U.S. Dollars in accordance with U.S. GAAP with the RMB as the functional currency.
In accordance with U.S. GAAP, all assets and liabilities were translated at the exchange rate on
the consolidated balance sheet date, stockholder's equity are translated at the historical rates
and statement of operations items are translated at the weighted average exchange rate for the
year. The resulting translation adjustments are reported under other comprehensive income. The
exchange rate for the conversion of one U.S. Dollar to RMB was $1.00 = 6.8172 yuan (or 1 yuan =
U.S. $0.1467), on December 31, 2009. Transaction gains and losses that arise from exchange rate
fluctuations on transactions denominated in a currency other than the functional currency are
included in the results of operations as incurred.
Cash flows from the Company's operations is calculated based upon the local currencies using the
average translation rate. As a result, amounts related to assets and liabilities reported on the
statement of cash flows will not necessarily agree with arithmetical changes in the corresponding
balances on the consolidated balance sheet.
Other comprehensive income
Current accounting guidance establishes standards for the reporting and display of comprehensive
income or loss and its components in a full set of general purpose consolidated financial
statements. Comprehensive income or loss is defined as the change in equity during a period
resulting from transactions and other events and circumstances from non-owner sources. The
Company's total comprehensive income or loss consists of net unrealized income or loss from foreign
currency translation adjustments. The Company has presented comprehensive income or loss on the
Statement of Operations and Comprehensive Income.
For the period ended December 31, 2009 and the year ended March 31, 2009, unrealized foreign
currency translation gains were $50,862 and $511,749, respectively.
Recent accounting pronouncements
In January 2010, the Financial Accounting Standards Board ("FASB") issued an accounting standard
update, Fair Value Measurements and Disclosures (Topic 820), Improving Disclosures about Fair Value
Measurements. The Update would affect all entities that are required to make disclosures about
recurring and nonrecurring fair value measurements. The Board concluded that users will benefit
from improved disclosures in this Update and that the benefits of the increased transparency in
financial reporting will outweigh the costs of complying with the new requirements. The new
disclosures and clarifications of existing disclosures are effective for interim and annual
reporting periods beginning after December 15, 2009, except for the disclosures about purchases,
sales, issuances, and settlements in the roll forward of activity in Level 3 fair value
measurements. Those disclosures are effective for fiscal years beginning after December 30, 2010,
and for interim periods within those fiscal years. The adoption of this update for improving
disclosures about fair measurements, as codified in ASC 820 did not have any impact on the
Company's consolidated financial statements.
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GOLD INDUSTRY LIMITED
Condensed Notes to the Consolidated Financial Statements
December 31, 2009
NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In January 2010, the Financial Accounting Standards Board ("FASB") issued an accounting standard
update to address implementation issues related to the changes in ownership provisions in the
Consolidation—Overall Subtopic (Subtopic 810-10) of the
FASB Accounting Standards Codification™
,
originally issued as FASB Statement No. 160
, Noncontrolling Interests in Consolidated Financial
Statements.
Subtopic 810-10 establishes the accounting and reporting guidance for noncontrolling
interests and changes in ownership interests of a subsidiary. An entity is required to
deconsolidate a subsidiary when the entity ceases to have a controlling financial interest in the
subsidiary. Upon deconsolidation of a subsidiary, an entity recognizes a gain or loss on the
transaction and measures any retained investment in the subsidiary at fair value. The gain or loss
includes any gain or loss associated with the difference between the fair value of the retained
investment in the subsidiary and its carrying amount at the date the subsidiary is deconsolidated.
In contrast, an entity is required to account for a decrease in its ownership interest of a
subsidiary that does not result in a change of control of the subsidiary as an equity transaction.
While Subtopic 810-10 provides general guidance on accounting for the decreases in ownership of a
subsidiary, including a deconsolidation, some constituents raised concerns that the guidance
appears to conflict with the gain or loss treatment or derecognition criteria of other U.S.
generally accepted accounting principles (GAAP), such as the guidance for sales of real estate,
transfers of financial assets, conveyances of oil and gas mineral rights, and transactions with
equity method investees.
Some constituents also questioned whether the Board intended for the decrease in ownership
provisions of Subtopic 810-10 to apply to all entities because a subsidiary is defined as an
entity, including an unincorporated entity such as a partnership or trust, in which another entity,
known as its parent, holds a controlling financial interest. Those constituents were concerned that
such an interpretation could result in the accounting for a transaction being driven by its form
rather than its substance. For example, different accounting might be applied to a transaction
involving the same underlying assets depending on whether those assets were transferred in asset or
entity form." The amendments in this update are effective beginning in the period that an entity
adopts Statement 160 (now included in Subtopic 810-10). If an entity has previously adopted
Statement 160 as of the date of the amendments in this update are included in the
Accounting Standards Codification, the amendments in this update are effective beginning in the
interim or annual reporting period ending on or after December 31, 2009. The amendments in this
update should be applied retrospectively to the first period that an entity adopted 160. The
adoption of this update for the changes in the accounting and reporting guidance for noncontrolling
interests and changes in ownership interests of a subsidiary, as codified in ASC 810-10, did not
have any impact on the Company's financial statements.
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GOLD INDUSTRY LIMITED
Condensed Notes to the Consolidated Financial Statements
December 31, 2009
NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent accounting pronouncements (continued)
In December 2009, the Financial Accounting Standards Board ("FASB") issued an accounting standard
update for improvements to financial reporting by enterprises involved with Variable Interest
Entities. The subsections clarify the application of the General Subsections to certain legal
entities in which equity investors do not have the characteristics of a controlling financial
interest or do not have sufficient equity at risk for the legal entity to finance its activities
without additional subordinated financial support [FIN 46(R), paragraph 1, sequence 55.1] or, as a
group, the holders of the equity investment at risk lack any one of the following three
characteristics: [FIN 46(R), paragraph 1, sequence 55.2]
a. The power, through voting rights or similar rights, to direct the activities of a legal entity
that most significantly impact the entity's economic performance [FIN 46(R), paragraph 1, sequence
55.2.1]
b. The obligation to absorb the expected losses of the legal entity [FIN 46(R), paragraph 1,
sequence 55.2.2]
c. The right to receive the expected residual returns of the legal entity. [FIN 46(R), paragraph 1,
sequence 55.2.3]
The amendments in this update to the Accounting Standards Codification are the result of FASB
Statement No. 167, Amendments to FASB Interpretation No. 46(R). The adoption of this update to
improving the financial reporting by enterprises involved with Variable Interest Entities, as
codified in ASC 810, did not have any impact on the Company's consolidated financial statements.
In December 2009, the Financial Accounting Standards Board ("FASB") issued an accounting standard
update, Transfers and Servicing (Topic 860) Accounting for Transfers of Financial Assets. The
amendments in this update to the Accounting Standards Codification are the result of FASB Statement
No. 166,
Accounting for Transfers of Financial Assets
. The adoption of this update did not have any
impact on the Company's consolidated financial statements.
Other recent accounting pronouncements issued by the FASB, the American Institute of Certified
Public Accountants ("AICPA"), and the SEC did not or are not believed by management to have a
material impact on the Company's present condensed consolidated financial statements.
Segment reporting
Operating segments are defined as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating decision maker, or
decision-making group, in deciding how to allocate resources and in assessing performance. For the
periods ended December 31, 2009 and 2008, the Company derived almost all of its revenue from the
sale of burial plots.
Subsequent events
The Company evaluates events that occur subsequent to the consolidated balance sheet date of
periodic reports, but before consolidated financial statements are issued for periods ending on
such consolidated balance sheet dates, for possible
adjustment to such consolidated
financial statements or other disclosure. This evaluation generally occurs through the date at
which the Company's consolidated financial statements are electronically prepared for filing with
the SEC.
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GOLD INDUSTRY LIMITED
Condensed Notes to the Consolidated Financial Statements
December 31, 2009
NOTE 4 – INVENTORY
Cemetery plots and other inventories at December 31, 2009 consisted of the following:
Basic plots
$
1,938,818
Standard plots
3,781,171
Deluxe plots
2,563,383
Artist plots
730,673
Total
$
9,014,045
NOTE 5 – PREPAID EXPENSES
Prepaid expenses at December 31, 2009 consisted of the following:
Prepaid expenses
$
797,865
During fiscal year ending 2009, the Company signed an agreement to pay the government of the PRC,
("the Government"), $836,190, which as to be used by the Government for the purpose of building
homes for the villagers and relocation costs of the farmers in ChangShou Jiang Nan. The villagers
and farmers were originally located in LongQiao and QianFo villages. The cash received from the
Company was redistributed to the local farmers and villagers by the Government as a payment for
relocating them to ChangShou Jiang Nan. The Company also agreed to clear land for the building of
these homes.
The prepaid expenses are amortized over 20 years per the terms of the contract. For the period
ended December 31, 2009, the Company recorded $31,390 in amortization which was recorded as cost of
goods sold.
NOTE 6 – PREPAYMENTS TO SUPPLIERS
Prepayments to suppliers at December 31, 2009 consisted of the following:
Prepayments on contracts
$
1,848,420
Prepayments on construction
8,508,600
Total
$
10,357,020
In April 2008, the Company had recorded a prepayment for a purchase commitment in the amount of
$1,408,320 (87% of the contract) for cemetery headstones to ChongQing Kun Yu Stone Wood Company, a
related party. Under the term of the contract, ChongQing Kun Yu Stone Wood Company is to finish the
production, and deliver the products at the specified time defined by the Company. The Company is
to check and inspect the quality, if there is any quality issue with the product, ChongQing Kun Yu
Stone Wood Company is to fix it and after final inspection, Gold Industry Limited is to keep the
headstones. The Company is to pay 5% of the total contract price upon signing the contract and upon
final inspection, and the Company is to pay in full within one month after delivery of the
headstones to the Company. As of December 31, 2009, the Company had not taken possession of the
cemetery headstones.
In February 2009, the Company had recorded a prepayment for a purchase commitment in the amount of
$440,100 (50% of the contract) for trees to ChongQing Chang Sheng Qiao Company, an unrelated third
party. The total price stated in the contract is approximately $904,000 but the actual price is
determined by the actual quantity of trees delivered. ChongQing Chang Sheng Qiao Company is to
organize tree plants upon signing the contract, and deliver the tree plants to a location of the
Company's choice. ChongQing Chang Sheng Qiao Company pays the delivery fees. The Company is to pay
50% of the contract upon signing the contract and upon final inspection pay another 30% based on
the number of actual trees delivered and pay the balance within one (1) year. As of December 31,
2009, the Company had not taken possession of the trees.
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GOLD INDUSTRY LIMITED
Condensed Notes to the Consolidated Financial Statements
December 31, 2009
NOTE 6 – PREPAYMENTS TO SUPPLIERS (continued)
In February 2009, the Company had recorded a prepayment related to a contract in the amount of
$3,667,500 (7% of the contract), for the construction of entertainment boats. ChongQing Bo Goa
Tourism Company, an unrelated third party and the Company are to jointly develop the "Liang Jiang
Yu"project. This project includes development of a park near the lake as a way to attract more
tourism in the ChangShou area near the Chongqing Gui Yuan Cemetery. The current project is for
10-20 entertainment boats, a welcome center, (1) large sailboat and nine (9) docks. The
entertainment boat design and construction and docks are the responsibility of the Company and the
boats are expected to be put to use by December 2010. The first stage constructions fees are
approximately $80,000, which was paid by ChongQing Bo Goa Tourism Company. When the project is
completed, the Company will repay ChongQing Bo Goa Tourism the first stage construction fees of
approximately $80,000. ChongQing Bo Goa Tourism Company is responsible for obtaining the
government loans (government has agreed) of approximately $3,000,000 with an annual interest
payment of approximately $166,000. The total price of the contract is approximately $53,000,000.
As of December 31, 2009, the Company recorded an additional prepayment in the amount of
$4,841,100 based on an amendment made on April 13, 2009 to the original contract. The
amendment allows the Company to regain full control over the project. The company will retain 94%
share of the project with ChongQing Bo Goa Tourism Company retaining the remaining 6% based on
their prior investments. The land, which is approximately 7,973 square yards, is acquired for
approximately $82,000, which is below market value and guaranteed by a government buy back. The
Company's expected annual investment for the Calendar years 2009-2012 is approximately $7,300,000.
NOTE 7 – PROPERTY AND EQUIPMENT
Property and equipment at December 31, 2009 consisted of the following:
Buildings and structures
$
8,052,142
Machinery and equipment
856,710
Office equipment
8,088
Less: accumulated depreciation
(1,568,687
)
Total Property and equipment
$
7,348,253
Depreciation expense for the periods December 31, 2009 and 2008 was $228,664 and $187,300,
respectively.
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GOLD INDUSTRY LIMITED
Condensed Notes to the Consolidated Financial Statements
December 31, 2009
NOTE 8 – INTANGIBLE ASSETS
In the PRC, land is the asset of the government. The Company maintains only use rights from local
governmental authorities. The Company has use rights on three properties consisting of
approximately 399,444 square meters of land with land usage rights with 20 years expiration from
the date of grant, but is renewable for 80 more years. Land use rights are stated at the estimated
fair value on the contribution date less accumulated amortization and any impairment losses. The
land use rights are amortized on ratable basis based on the number of plots developed over the life
of the rights.
The intangible assets at December 31, 2009 consisted of the following:
Land use rights
$
13,345,299
Less: Accumulated units of production costs
1,407,738
Total
$
11,937,561
During 2005, the Company received land use rights which were contributed by the PRC. The land use
rights include Chongqing Gui Yuan Cemetery located in ChangShou, China, Under PRC's governmental
regulations, the government owns all land. However, PRC would not directly assign the land use
rights to the Company's management rather it assigned the land use rights to the Company as a
contribution. Therefore, the Company received the land use rights without giving the government any
consideration in return for the rights. At December 31, 2005, the Company has recorded the fair
value of the land use rights, and the deferred revenue.
The Company's management determined the fair market value of the land use rights based upon the
actual square meters of the useable land. The Company expects approximately 210,000 plots can be
developed and sold within the 399,444 square meters of land. The Company's average sales price per
plot ranges from $3,900 to $4,400.
At December 31, 2009, the Company reviewed the land use rights for impairment. The Company
determined that based upon the net income of $10,044,238 at December 31, 2009 and $11,222,243 for
the years ended March 31, 2009 and 2008, value assigned to land use rights has been fully
recovered.
The land use rights are expensed based upon the number of cemetery plots capitalized and placed
into inventory using the units of production method. As of December 31, 2009 and March 31, 2009,
the Company expensed $398,904 and $172,890, respectively, which was included in the capitalized
cost of inventory and expensed through cost of goods sold.
NOTE 9 – DEFERRED REVENUE
At December 31, 2005, the Company recorded the deferred revenue related to land use rights that
were contributed to the Company by the People's Republic of China. As the Company sells cemetery
plots, a portion of the deferred revenue is recognized as other income based on the number of
cemetery plots that the Company sells during the year. As of December 31, 2009 and 2008, the
Company recorded $325,816 and $166,181, respectively, as other income.
NOTE 10 – SHORT-TERM NOTES PAYABLE
Short term notes payable represent amounts due to a bank normally due within one year. The
principle amounts of the loans are due at maturity and the loans can be renewed each year.
Short-term – Chongqing Rural Commercial Bank, secured by Chongqing bowling museum building, due on
demand, interest calculated at annual rate of 8.4% and matures March 2010. As of December 31, 2009
and March 31, 2009, the Company had a short-term notes payable in the amount of $440,100 and
$439,500 respectively.
Short-term – Chongqing Rural Commercial Bank; secured by approximately 123,334 square meters of
land valued at approximately $906,000, due on demand, interest calculated at annual rate of 9.6%
and matures March 2010. In the event of default on the short-term notes payable, the interest rate
is calculated at an annual rate of 14.4%. As of December 31, 2009 and March 31, 2009, the Company
had a loan payable in the amount of $2,634,729 and $2,031,955 respectively. The short-term notes
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payable contain covenants that restrict the use of proceeds to develop the cemetery plots. If the
Company fails to use the money according to the stated purpose, the interest rate is calculated at
19.2%. As of December 31, 2009 and March 31, 2009 the Company was in compliance with these
covenants.
As of December 31, 2009 and 2008, the Company recorded interest expense in the amount of $177,559
and $174,533 respectively, for these loans.
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GOLD INDUSTRY LIMITED
Condensed Notes to the Consolidated Financial Statements
December 31, 2009
NOTE 11 – RENTAL INCOME FROM OPERATING LEASE
Rental income consists of the following as of:
Period Ended December 31,
2009
2008
Rental income
$
253,383
$
248,077
Less Depreciation of building
-57,079
-55,767
Net rental income
$
196,304
$
192,310
The Company rents its excess office space in ChangShou, China to a third party under a cancellable
operating lease that expires in December 2009. The operating lease is automatically renewable each
year. The third party is responsible for all expenses related to occupancy of the building. As of
December 31 2009 and 2008, the lease called for monthly rental of approximately $28,000 and
$27,600, respectively.
NOTE 12 – STOCKHOLDERS' EQUITY
Common Stock
The Company is authorized to issue 100,000,000 shares of common stock, par value of $0.121 per
share. As of December 31, 2009, there were 100,000,000 share of common stock issued and
outstanding.
NOTE 13 – CONCENTRATION RISK
Suppliers
The Company obtained approximately 100% of its inventory purchases from two suppliers for the
period ended December 31, 2009 and the year ended March 31, 2009. Management believes other
suppliers could provide similar products and services on comparable terms in the area. Although
alternate suppliers may provide identical or similar products, such a change could result in delays
and a possible loss of sales. The Company did have long-term contracts with its suppliers for the
periods ended December 31, 2009 and year ended March 31, 2009 (See NOTE 6).
Customers
The Company did not have concentrations related to any of its customers and revenue for the periods
ended December 31, 2009 and 2008, as the Company's has several customers that purchase cemetery
plots.
Short-term notes payables
The Company has obtained 100% of its short-term notes payable from two note-holders for the period
ended December 31, 2009 and the year ended March 31, 2009. (See NOTE 10).
NOTE 14 – CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The Company had approximately $1,400,000 in prepayments to a related party supplier as of December
31, 2009 and March 31, 2009. (See NOTE 6).
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GOLD INDUSTRY LIMITED
Condensed Notes to the Consolidated Financial Statements
December 31, 2009
NOTE 15 – COMMITMENTS AND CONTINGENCIES
(a) Lease commitments
The Company has a lease commitment in relation to the land rights that were contributed to the
Company by People's Republic of China. The tenure of arable land is 22 years, from January 1, 2005
to December 31, 2027. The tenure of non-arable land is 50 years, from January 1, 2005 to December
31, 2055.
The Company pays annual lease payment on or before October 31st to the PRC and in turn the
PRC Government then pays the sixth villager group, Longqiaohu village according to the terms of the
contract, and the sixth villager group re-distributes the funds to each farmer household. This is
the consideration that was agreed upon by the farmers for relocating in ChangShou Jiang Nan.
The annual operating lease expense is capitalized as component of inventory and expensed through
cost of goods sold. As of December 31, 2009 and March 31, 2009, the Company capitalized $22,650 and
$22,679, respectively.
Future minimum operating lease payments relating to the above lease is as follows:
Years Ending
March 31,
2010
$
22,650
2011
22,650
2012
22,650
2013
22,650
2014
22,650
Thereafter
271,806
Total
$
385,056
In the ordinary course of business, the Company is generally subject to claims, complaints, and
legal actions. At December 31, 2009, management believes that the Company is not a party to any
action which would have a material impact on its consolidated financial condition, operations, or
cash flows.
(b) Economic Environment
Due to all of the Company's operations being conducted in the PRC, the Company is subject to
special considerations and significant risks not typically associated with companies operating in
the United States of America. These risks include, among others, the political, economic and legal
environments 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 and
remittance abroad, and rates and methods of taxation, among other things.
The granting of land use licenses is a common practice in China as all land is government-owned,
and, at present, no option to purchase land has ever been granted. Pursuant to the laws of China,
all land belongs to the government. However, as the Company does have very limited rights in
accordance with land use license for the cemetery plot development and corresponding sales of the
burial spaces.
Note 16 – SUBSEQUENT EVENT
On February 12, 2010, the Company and its shareholders entered into a Share Exchange Agreement with
Artistry Publications, Inc. ("Artistry Publications"). Pursuant to the terms of the Share Exchange
Agreement, Artistry Publications agreed to acquire all
of the issued and outstanding capital stock of the Company in exchange for 8,800,000 shares of
Artistry Publications' common stock. The transactions contemplated under the Share Exchange
Agreement closed on February 12, 2010.
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On February 12, 2010, the Company and its shareholders entered into a Share Exchange Agreement with
Artistry Publications, Inc. ("Artistry Publications"). Pursuant to the terms of the Share Exchange
Agreement, Artistry Publications agreed to acquire all of the issued and outstanding capital stock
of the Company in exchange for 8,800,000 shares of Artistry Publications' common stock. The
transactions contemplated under the Share Exchange Agreement closed on February 12, 2010.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, payable by the registrant in connection
with the sale of common stock being registered. All amounts are estimates except the SEC
registration fee.
Securities and Exchange Commission registration fee
$
606.41
Printing and engraving expenses
0
Blue Sky fees and expenses
7,585
*
Legal fees and expenses
50,000
*
Accounting fees and expenses
20,000
*
Miscellaneous
0
Total
$
78,191.41
*
Estimated
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Delaware Law
Section 145 of the Delaware General Corporation Law authorizes a court to award, or a
corporation's board of directors to grant, indemnity to directors and officers in terms
sufficiently broad to permit indemnification for liabilities, including reimbursement for expenses
incurred, arising under the Securities Act. Pursuant to the provisions of Section 145, a
corporation may indemnify its directors, officers, employees, and agents as follows:
"(a) A corporation shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action by or in the right
of the corporation) by reason of the fact that the person is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by the person in connection with such action, suit or
proceeding if the person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe the person's conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the
person did not act in good faith and in a manner which the person reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that the person's conduct was unlawful.
(b) A corporation shall have power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by reason of the fact that the person
is or was a director, officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by the person in connection with the defense or settlement of such
action or suit if the person acted in good faith and in a manner the person reasonably believed to
be in or not opposed to the best interests of the corporation and except that no indemnification
shall be made in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery
or the court in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or
such other court shall deem proper.
(c) To the extent that a present or former director or officer of a corporation has been
successful on the merits or otherwise in defense of any action, suit or proceeding referred to in
subsections (a) and (b) of this section, or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection therewith.
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(d) Any indemnification under subsections (a) and (b) of this section (unless ordered by a
court) shall be made by the corporation only as authorized in the specific case upon a
determination that indemnification of the present or former director, officer, employee or agent is
proper in the circumstances because the person has met the applicable standard of conduct set forth
in subsections (a) and (b) of this section. Such determination shall be made, with respect to a
person who is a director or officer at the time of such determination, (1) by a majority vote of
the directors who are not parties to such action, suit or proceeding, even though less than a
quorum, or (2) by a committee of such directors designated by majority vote of such directors, even
though less than a quorum, or (3) if there are no such directors, or if such directors so direct,
by independent legal counsel in a written opinion, or (4) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or director in defending any
civil, criminal, administrative or investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit or proceeding upon receipt of
an undertaking by or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified by the corporation as
authorized in this section. Such expenses (including attorneys' fees) incurred by former directors
and officers or other employees and agents may be so paid upon such terms and conditions, if any,
as the corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by, or granted pursuant to, the
other subsections of this section shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such person's status as
such, whether or not the corporation would have the power to indemnify such person against such
liability under this section.
(h) For purposes of this section, references to "the corporation" shall include, in addition
to the resulting corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers, and employees or agents,
so that any person who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this section with respect to the resulting or
surviving corporation as such person would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this section, references to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving at the request of the corporation"
shall include any service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee or agent with respect
to an employee benefit plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner such person reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to
the best interests of the corporation" as referred to in this section.
(j) The indemnification and advancement of expenses provided by, or granted pursuant to, this
section shall, unless otherwise provided when authorized or ratified, continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction to hear and determine
all actions for advancement of expenses or indemnification brought under this section or under any
bylaw, agreement, vote of stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporation's obligation to advance expenses (including
attorneys' fees)."
Charter Provisions and Other Arrangements of the Registrant
We currently have not adopted any indemnification provisions in our certificate of
incorporation or bylaws for our officers and directors.
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ITEM 15. Unregistered Sales of Equity Securities
The following is a summary of our transactions during the last three years involving sales of
our securities that were not registered under the Securities Act of 1933 (the "
Act
"):
On February 23, 2010, we sold and issued to 24 Purchasers 1,402,262 shares of Common Stock
(the "
Shares
") and Warrants to purchase 701,126 shares of Common Stock. The Shares and
Warrants were issued to accredited investors in a private placement transaction exempt from
registration under the Securities Act, pursuant to Rule 506 of Regulation D promulgated thereunder.
Neither the Shares nor the Warrants have been registered under the Securities Act or applicable
state securities laws and may not be offered or sold in the United States absent registration under
the Securities Act and applicable state securities laws or an applicable exemption from
registration requirements. We also issued warrants to purchase up to 70,113 shares of Common Stock
to our placement agent and its assignees for the Financing.
On February 12, 2010, we issued 8,800,000 shares of our common stock to the Cayman Shareholder
in exchange for 100% of the capital stock of Gold Industry. The issuance of the common stock to the
Cayman Shareholder was exempt from registration pursuant to Regulation S under the Securities
Act. We made this determination based on the representations of the Cayman Shareholder, which
included, in pertinent part, that such shareholder was not a "U.S. person" as that term is defined
in Rule 902(k) of Regulation S under the Securities Act, and that such shareholder was acquiring
the common stock for investment purposes for its own account and not as nominee or agent, and not
with a view to the resale or distribution thereof, and that such shareholder understood that the
shares of common stock may not be sold or otherwise disposed of without registration under the
Securities Act or an applicable exemption therefrom.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
See "Exhibit Index" below, which follows the signature page to this registration statement.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1)
To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i)
To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933 (the "
Securities Act
");
(ii)
To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus file with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii)
Include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2)
For purposes of determining liability under the Securities Act, to
treat each post-effective amendment as a new registration statement of
the securities offered, and the offering of the securities at that
time to be the initial bona fide offering.
(3)
To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
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(4)
That, for the purpose of determining liability under the Securities
Act to any purchaser, if the registrant is subject to Rule 430C, each
prospectus filed pursuant to Rule 424(b) as part of a registration
statement relating to an offering, other than registration statements
relying on Rule 430B or other than prospectuses filed in reliance on
Rule 430A, shall be deemed to be part of and included in the
registration statement as of the date it is first used after
effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is part
of the registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify any
statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such
document immediately prior to such date of first use.
(5)
For determining liability of the undersigned registrant under the
Securities Act to any purchaser in the initial distribution of the
securities, the undersigned registrant undertakes that in a primary
offering of securities of the undersigned registrant pursuant to this
registration statement, regardless of the underwriting method used to
sell the securities to purchaser, if the securities are offered or
sold to such purchaser by means of any of the following
communications, the undersigned registrant will be a seller to the
purchaser and will be considered to offer or sell such securities to
such purchaser:
(i)
any preliminary prospectus or prospectus of the undersigned registrant
relating to the offering required to be filed pursuant to Rule 424;
(ii)
any free writing prospectus relating to the offering prepared by or
on behalf of the undersigned registrant or used or referred to by the
undersigned registrant;
(iii)
portion of any other free writing prospectus relating to the
offering containing material information about the undersigned
registrant or its securities provided by or on behalf of the
undersigned registrant; and
(iv)
any other communication that is an offer in the offering made by the
undersigned registrant to the purchaser.
(b)
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to
directors, officers and controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this registration statement to be signed on its behalf by the
undersigned hereunto duly authorized in the Province of Chongqing, People's Republic of China, on
April 9, 2010.
CHINA REDSTONE, INC.
By:
/s/ Yiyou Ran
Yiyou Ran
Chief Executive Officer
(Principal Executive Officer)
By:
/s/ Michael Wang
Michael Wang
Chief Financial Officer
(Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration
statement has been signed by the following persons in the capacities and on the dates indicated:
Signature
Title
Date
/s/ Yiyou Ran
Yiyou Ran
Chairman of the Board, President and
Chief Executive Officer
April 9, 2010
/s/ Michael Wang
Michael Wang
Chief Financial Officer and Director
April 9, 2010
/s/ Jianquan Chen
Jianquan Chen
Director
April 9, 2010
/s/ Tim Hudson
Tim Hudson
Director
April 9, 2010
/s/ Michael Rudolph
Michael Rudolph
Director
April 9, 2010
/s/ Lihua Zhang
Lihua Zhang
Director
April 9, 2010
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EXHIBIT INDEX
Exhibit
Description
2.1
Share Exchange Agreement by and among Artistry and Your Out Doors LLC.
("YOD") and the members of YOD dated March 12, 2009 (2)
2.2
Share Exchange Agreement by and among Artistry Publications, Inc. ,
Gold Industry Limited and the shareholders of Gold Industry dated
February 12, 2010 (4)
3.1
Articles of Incorporation (1)
3.2
By-Laws (1)
4.1
Form of Warrant Issued to Purchasers in the February 2010 Financing (6)
5.1
Opinion of Richardson & Patel LLP*
10.1
Consulting Service Agreement (4)
10.2
Operating Agreement (4)
10.3
Equity Pledge Agreement (4)
10.4
Option Agreement (4)
10.5
Voting Rights Proxy Agreement (4)
10.6
Rural Land Lease Agreement (4)
10.7
Jiangbei Office Lease Agreement (4)
10.8
Nan'an Office Lease Agreement (4)
10.9
Bowling House Lease Agreement (4)
10.10
Form of Securities Purchase Agreement dated February 23, 2010 (6)
10.11
Form of Registration Rights Agreement, dated February 23, 2010 (7)
10.12
Form of Board Offer and Acceptance Letter (8)
14.1
Code of Ethics (3)
21.1
List of subsidiaries*
23.1
Consent of Richardson & Patel LLP (contained in Exhibit 5.1)
23.2
Consent of PMB Helin Donovan, LLP*
*
Filed herewith.
(1)
Filed as an Exhibit to Form SB-2 filed with the SEC on October 26, 2007.
(2)
Filed as an Exhibit to Form 8-K filed with the SEC on March 20, 2009.
(3)
Filed as an Exhibit to Form 10-K filed with the SEC on December 1, 2008.
(4)
Filed as an Exhibit to Form 8-K filed with the SEC on February 18, 2010.
(5)
Filed as an Exhibit to Form 8-K filed with the SEC on February 23, 2010.
(6)
Filed as an Exhibit to Form 8-K filed with the SEC on February 24, 2010.
(7)
Filed as an Exhibit to Form 8-K filed with the SEC on March 4, 2010.
(8)
Filed as an Exhibit to Form 8-K filed with the SEC on April 6, 2010.
101