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Summer News, 2011

MARKET MOVES

Funtalk Shareholders Vote to Go Private
Shareholders to Received $7.20 per Share

Shareholders of Beijing-based Funtalk China Holdings Ltd. (Nasdaq: FTLK) voted on August 22, 2011, in favor of the proposal by Fortress Group Ltd. to take the company private. The vote was in response to Fortress Group Ltd.’s offer in late May. Fortress Group is a newly formed entity essentially jointly owned by a web of companies owned and controlled by Funtalk management and board members. Approximately 91.90 percent of the company’s total outstanding ordinary shares voted in person or by proxy at today’s extraordinary general meeting. The proposal offered U.S. $7.20 per share for each ordinary share of the company when the transaction is completed at which time the company’s shares will cease to trade on the Nasdaq.

At the time of the original proposal in March 2011, the members of the consortium already owned, in aggregate, 46,458,314 ordinary shares, or approximately 77.13 percent of the outstanding shares of the company (excluding outstanding warrants and options of the company). At that time, the group has proposed to pay $7.10 per ordinary share for the remainder of the outstanding shares, at a cost of approximately U.S. $98 million and giving the company an approximate value of U.S. $427 million.

All parties believe the transaction will close by the end of August. At the time of the original proposal, in March, Funtalk’s shares were trading around $5.00. They have since climbed to $7.00. At the time of the announcement it appeared the company’s web site was down.

Funtalk is a retailer and distributor of wireless communications devices, accessories and content in 30 provinces in China. The company has branch offices and regional distribution centers, operates a chain of mobile phone retail stores and has an internet retailing platform.

Bank of America Merrill Lynch served as financial advisor to the Independent Committee. Skadden, Arps, Slate, Meagher & Flom LLP served as U.S. legal advisor to the Independent Committee, and Maples and Calder served as Cayman Islands legal advisor to the Independent Committee. Latham & Watkins LLP served as U.S. legal advisor to the company. Shearman & Sterling LLP served as U.S. legal advisor to Bank of America Merrill Lynch. Citigroup Global Markets Asia Ltd. served as financial advisor to the Consortium. Cleary Gottlieb Steen & Hamilton LLP served as U.S. legal advisor to the Consortium, and Conyers Dill & Pearman served as Cayman Islands legal advisor to the Consortium. Weil, Gotshal & Manges LLP served as U.S. legal advisor to Citigroup Global Markets Asia Limited. Simpson Thacher & Bartlett LLP served as U.S. legal advisor to PAGAC.

China XD Plastics Secures $100 Million from Morgan Stanley Private Equity Asia
Harbin-based China XD Plastics Ltd.  (Nasdaq: CXDC) has secured a $100 million equity investment from Morgan Stanley Private Equity Asia (“MSPEA”), for a minority stake in the company. The investment will help China XD to expand and upgrade its production capabilities. Under the terms of the transaction, MSPEA will purchase redeemable convertible preferred shares of the company at an aggregate purchase price of US$100 million. The redeemable convertible preferred shares are convertible into common stock of the company at an initial conversion price of U.S. $6.25 per share, subject to customary anti-dilution adjustments. The company also announced its second quarter, 2011, financial results on August 15, 2011. Revenue was a record $88.2 million, an increase of 42.2 percent from the second quarter of fiscal 2010, according to the release. Net income attributable to common shareholders was $14.4 million, compared to a loss of $3.1 million in the second quarter of fiscal 2010. The company also announced the engagement of KPMG as its independent auditor (see below). The company’s stock jumped from low $3’s to $5 per share upon the news.

Aquaculture HQ Delisted From AMEX
Aquaculture HQ Sustainable Maritime Industries Inc. was delisted from NYSE AMEX on July 12, 2011. The company’s shares now on the “grey market” under “OTN:HQSN.”

ReneSolar Announces Share Repurchase Program
The board of Iashan-based ReneSolar Ltd. (NYSE: SOL) has authorized a share repurchase program under which ReneSola may repurchase up to U.S. $100 million in aggregate value of the company’s outstanding ordinary shares. Per the company’s press release, under the program, the company may, from time to time, for a limited period of time, depending on market conditions, share price and other factors, make one or more purchases, on the open market or in privately negotiated transactions, of up to US$100 million in aggregate value of the Company’s outstanding common shares. Such purchases under the program will be made in accordance with the applicable laws and subject to any required regulatory approvals. Mr. Xianshou Li, ReneSola’s chief executive officer, and Mr. Henry Wang, ReneSola’s chief financial officer, are granted full discretion to act on behalf of the company to acquire shares of the company under the share repurchase program.

ONP Hosts Annual Meeting, Aug. 28
Baoding-based Orient Paper, Inc. (AMEX: ONP) will hosts its 2011 annual meeting Sunday, August 28, 2011, in Beijing. The company’s proxy and annual report are also available for download on the company’s corporate website: http://www.orientpaperinc.com/Key-Financials.html.

 

COMPLIANCE

China XD Engages KPMG
China XD Plastics (Nasdaq: CXDC) announced on August 15, 2011, it had appointed KPMG as the company’s new independent auditor, replacing Moore Stephens Hong Kong, effective immediately. The change of independent auditor has been recommended and approved by the company’s Audit Committee, and did not result from any disagreements with Moore Stephens Hong Kong on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, according to the company’s press release.

China Medicine Dismisses Frazer Frost as Auditor
Guandzhou-based China Medicine Corp. (OTC PINK: CHME) has dismissed its auditor, Frazer Frost, effective August 16, 2011, prior to the firm finishing the company’s 2010 audit. In February, Frazer Frost announced it would not continue as CHME’s auditor for 2011. The company is in a process of finalizing the search for an, international independent registered public accounting firm. The company, which formerly traded on the OTC BB, had planned a listing on the Nasdaq. However, due to the issues brought to light with its financials, it withdrew its application to list in late March 2011. In November 2010, the company appointed a new Chief Financial Officer, Mr. Henry Chi Fung Ho, who has his M.B.A. from the University of Chicago and earned his Bachelor’s degree in accounting from Loyola University, also in Chicago. He has worked for both Ernst & Young and Arthur Anderson.

Yuhe Engages Marcum; Hires Big Four Firm for Forensic Audit
Weifang-based Yuhe International Inc. (OTC PINKS: YUII) has hired Marcum Bernstein & Pinchuk LLP as its new auditor. Marcum Bernstein & Pinchuk LLP was engaged on August 10, 2011, and will commence its services for Yuhe starting with the audit of the financial statements for the company’s fiscal year ended December 31, 2010. As reported on a Form 8-K filed with the SEC, Yuhe’s previous auditor Child, Van Wagoner & Bradshaw, PLLC resigned on June 17, 2011, and withdrew its auditor’s opinion on Yuhe’s financial statements for the year ended December 31, 2010 based on management’s misrepresentation and failure to disclose material facts surrounding certain acquisition transactions and off balance sheet related party transactions. The company also announced it had hired a Big Four accounting firm as the forensic accounting firm to assist in the independent investigation with investigation in management’s misstatements of its financials. The company did not identify the name of the firm in its press release.

BDO Resigns as Shengkai ‘s Auditor;  Shengkai Hires Albert Wong
Tianjin-based Shengkai Innovations Inc. (Nasdaq: VALV) announced that is auditor BDO China Li Xin Da Hua CPR Co., Ltd. resigned on August 4, 2011. According to a company press release, the firm resigned  because the company was unable to agree to BDO’s proposed increase in their fee for conducting its 2011 audit. The Audit Committee appointed Albert Wong & Co. (“AW”) as its new independent registered public accounting firm on August 4, 2011. AW was previously engaged as the independent registered public accounting firm for the Company for the years ended June 30, 2008 and 2009, and resigned on June 28, 2010.

PEOPLE

Sino Clean Energy Appoints Audit Chair
Xi’an-based Sino Clean Energy (Nasdaq: SCEI) has appointed Paul K.S. Chiu as Chairman of its Audit Committee. Chiu currently serves as Independent Director and the Chairman of the Audit Committee at China Ritar Power Corp. (OTC PINKS: CRPT). He is also Director of Wai Chong Company (a member of the Chinese Gold & Silver Exchange, Hong Kong) and Lightscape Technologies Inc. (OTC PINKS: LTSC), where he served as a consultant responsible for SEC financial reporting and compliance for five years. His earlier experiences include President at Small Business Services Inc., General Manager at Search Asia Finance Ltd., and Senior Investment Officer at Bank of America (Asia) Ltd. Chiu earned his bachelor degree in commerce from the University of Ottawa and his MBA from the University of British Columbia, Vancouver. He is a Canadian Chartered Accountant and member of Ontario Institute of Chartered Accountants and Canadian Institute of Chartered Accountants. [Of note, China Ritar’s stock was halted on the Nasdaq in April, 2011. It now trades on the Pink OTC Markets. Lightscape also trades on the Pink OTC Markets.]

Chef Kong’s Liu Joins L&L Advisory Board
L&L Energy Inc. (Nasdaq: LLEN) has appointed Robert Liu, who has a branding and marketing background, to its advisory board. Currently, he serves as Executive Vice President of Chef Kong’s Instant Noodle. Liu graduated from Chin-Yun Technology University and attended the Program for Executive Development (“PED”) in Swiss Lausanne International Institute for Management Development. The company hopes to taps Liu’s branding expertise to further its own brand, globally.

IN BRIEF….

  • Xiniya Menswear company, Jinjiang-based China Xiniya Fashion Ltd. (NYSE: XNY), will host an analyst and investor tour during its 2012 Spring/Summer Sales Fair on Thursday, September 15, 2011, in Xiamen, China. The tour will consist of a visit to one of Xiniya’s retail stores, the company’s new fashion design, sales and marketing center, and lunch with the company’s CFO, Mr. Chee Jiong Ng. Mr. Jacky Cheung, one of China’s pop icons and Xiniya’s spokesperson, will be making an appearance at the press conference.

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(NEWS PRIOR TO AUGUST 8, 2011)

MARKET MOVES

CAAS Regains Nasdaq Compliance
China Automotive Systems, Inc. (Nasdaq: CAAS), announced on July 29, 2011, it had regained full compliance for continued listing on the Nasdaq. CAAS received a letter on July 26, 2011 from Nasdaq notifying the company that with the July 22, 2011 filing of the company’s Form 10-Q for the period ended March 31, 2011, Nasdaq has determined that the company complies with Listing Rule 5250(c)(1), which requires the timely filing of SEC periodic reports. The company manufactures power steering components.

Jiangbo Delisted from Nasdaq; Begins Trading on the OTC QB
Laiyang-based Jiangbo Pharmaceuticals (JGBO) announced on August 2, 2011, that is had received a delisting notice from Nasdaq. According to the company’s press release management has decided to focus on addressing current issues facing the company and its business and will not appeal Nasdaq’s determination.

Nasdaq cited the following in terms of criteria for making its decision: “(1) public interest concerns under Nasdaq Listing Rule 5101 regarding efforts of the Company and its Chairman to obstruct an independent internal investigation authorized by the Audit Committee and the failure to allow the Audit Committee to fulfill its responsibilities and duties; (2) the Company’s failure to comply with Listing Rule 5605(c)(3) and IM-5605-5 as well as the statutory responsibilities and authority of the Company’s Audit Committee, set forth in Section 10A(m)(2) of the Securities Exchange Act of 1934; and (3) the Company’s failure to comply with the Audit Committee composition requirements of Listing Rule 5605(c)(2)(A).”

Company CEO, Linxian Jin was promoted to CEO in July of 2010, replacing Wubo Cao who continued to serve as Chairman of the company. The company began to trade on the Nasdaq in June 2008. Its stock is now trading on the OTC QB at a price of approximately $0.50.

WSP Receives Letter of Non-compliance From Nasdaq
Wuxi-based WSP Holdings (NYSE: WH) has received a notice from Nasdaq it is not in compliance with certain NYSE listing standards, including 1) the company being required to maintain a minimum average closing price of $1.00 per share over consecutive 30-day-trading period; 2) that it is not in compliance with the continued listing standard requiring the timely filing of its annual report on Form 20-F for the year ended Dec. 31, 2010.

Kingtone Loses Directors, Out of Compliance
Two of Kingtone Wirelessinfo Solution Holding’s (Nasdaq: KONE) directors have resigned in the past few months, prompting Nasdaq into sending the company a “Staff Deficiency Letter.” Ms. Yiru Shi resigned effective July 11, 2011. She served in the pivotal role as the Chairman of the Audit Committee and as a member of the Nominating and Corporate Governance Committee, as well as on the Compensation Committee. James Fong resigned as an independent director on June 29, 2011. The company has 45 days from the receipt of the Nasdaq letter, dated July 13, 2011, to submit a plan to regain compliance or request an appeal.

Lihua Confirms Cash Balances
Danyang-based Lihua International (Nasdaq: LIWA) announced outside verification of its cash and cash equivalents of $90.6 million and $90.7 million as of Dec. 31, 2010 and March 31, 2011, respectively. The company’s audit committee hired Hong Kong-based John Lees Associates to conduct the independent review.

L & L Energy Takes a Beating From Short Seller; Fights Back
L & L Energy’s (Nasdaq: LLEN) stock dropped by half on the publication of a short sellers “research report” last week. The company fought back with a strong response to the allegations, bumping its stock a bit. But it is hard to tell now if the stocks is remaining low based on the short seller’s “report” or based on the historically significant drop in the U.S. stock market in general. Even prior to the report, in late July, LLEN was well off its $13.56 52-week-high from late 2010, trading around $6.00. For more on its response see: “L&L Energy Refutes Allegations Made by Glaucus Research.”

Tri-Tech Secures Substantial Credit Line; Files for Shelf Registration
Beijing-based Tri-Tech Holding Inc. (Nasdaq: TRIT) has secured a line of credit of approximately U.S. $9.32 million from China CITIC Bank. The line of credit with China CITIC Bank will be available for 12 months. The definitive loan agreement is expected to be signed “shortly,” according to the company’s press release. The company plans to use the credit line for working capital to finance equipment procurement and project subcontracting for several recently awarded projects.” The company also announced it has filed a shelf registration statement on Form S-3 to allow the company to issue and sell securities over the next three years. Tri-Tech provides turn-key solutions in China for water resources, water and wastewater treatment, industrial safety and pollution control markets.

Concord Declares Dividend
Beijing-based Concord Medical Services Holdings Ltd. (NYSE: CCM) has declared a special dividend of $0.06 per ordinary share (or $0.18 per American Depositary Share) on the company’s outstanding ordinary shares. The total expense for the special dividend is expected to be about U.S. $8.5 million, based on the 142,353,532 ordinary shares that were outstanding as of July 28, 2010. Each ADS represents three ordinary shares of the company. Concord operates a network of radiotherapy and diagnostic imaging centers in China.

DEALS

Simcere Scores Joint Venture with Merck
Nanjing-based Simcere Pharmaceutical Group (NYSE: SCR) announced plans to create a joint venture with New Jersey-based global giant-pharma, Merck & Co. Inc. The partnership will allow Simcere to tap the vast resources of Merck with the initial focus to brand pharmaceutical products for cardiovascular and metabolic diseases. The partnership will offer a combined portfolio of selected medicines from both companies, including ZOCOR (simvastatin), COZAAR (losartan) and RENITEC (enalapril) by Merck/MSD, and XINTA (levamlodipine) and SHUFUTAN (rosuvastatin) by Simcere. In the metabolic disease area, the partnership will work to maximize access in China to sitagliptin, a DPP-IV inhibitor for the treatment of type 2 diabetes. Type 2 diabetes is increasingly recognized as a significant public health threat in China. The partnership will further Merck’s goal of growing its business in China. Simcere’s stock got a good bump after the July 21 announcement, but has since settled back to its price pre-announcement.

PROFESSIONAL SERVICES NEWS

Rodman Finally Moving Forward With Acquisition of OTCBB
Nearly a year after announcing it would be acquiring the OTC BB from FINRA, the deal has not closed, but Rodman & Renshaw is moving forward in preparation, putting together an executive team to manage the business. Eric Hess and Carl Giangrasso will manage the operation, as CEO and COO, respectively. The OTCBB is a quotation system on which FINRA-regulated broker-dealers may post OTC quotations in unlisted equity securities. It currently competes with the recently re-branded OTC Markets. The assets of the sale include, the OTCBB.com website URL and reservation rights, certain OTCBB.com content, and the OTCBB trademark. Rodman promises more information regarding the transfer of ownership and “evolution” of the OTCBB in early 2012.

Anslow + Jaclin and Sichezia Ross Ference Friedman to Merge
Securities law firms, Anslow + Jaclin (A+J) and Sichenzia Ross Friedman Ference LLP (SRFF) announced on August 3, that the firms would be merging to form Sichenzia Ross Friedman Ference Anslow LLP (“SRFFA”), effective Sept. 1, 2011. Both have practices based in the New York Metropolitan area. Both have been pivotal in the area of bringing Chinese companies to the U.S. markets via reverse mergers and with expertises in advising on PIPEs (private investment in public equities). The combined firm will have 35 lawyers in its corporate finance group.

A+J higher profile clients from the China sector have included, China Yida Holding Inc., China Valves Technology, Inc., Lihua International, Inc., China YiBai, Kandi Technologies, Inc. and China Advanced Construction Materials Group. In 2011, the firm completed reverse mergers for Kirin International Holding, Inc. (formerly Ciglarette, Inc.), Anbailun International Holdings Ltd., Grain Wealth Limited, Hengchang-Shiny Gold Holdings Ltd., Sino-Mould International Company Ltd., and Zhidali Industrial Company, Ltd. SRFF’s higher profile clients in the China sector have included, China Educational Alliance, China Fire & Security Group, China Wind Systems, Orient Paper, Universal Travel Group, Rodman & Renshaw in public offering of Skystar Bio-Pharmaceutical, and Yongye Biotechnology International.

CBEH Appoints Sherb
Xi’an-based China Integrated Energy (OTC Pink: CBEH) has appointed Sherb & Co. LLP as its independent auditor. Sherb will re-audit the company’s annual results for the year ended Dec. 31, 2010 and will also begin the process to review the company’s quarterly financial results for 2011.

Bohai Retains Marcum Pinchuk
Yantai-based Bohai Pharmaceuticals Group Inc. (OTCBB/OTCQB: BOPH) has appointed Marcum Bernstein & Pinchuk LLP as the company’s new independent registered public accounting firm.

PEOPLE

China Intelligence Appoints CFO
Jinan-based China Intelligence Information Systems Inc. (OTC QB/OTC BB: IICN) has appointed Ms. Keyi Zhang as Chief Financial Officer. Keyi has worked in the PricewaterhouseCoopers Assurance Asset Management department and also in a Chartered Accountant firm as financial accountant. Additionally, she has worked as a business consultant. China Intelligence has a suite of offerings for high-end clients in China, with a focus on cloud computing, including server consolidation, desktop virtualization and disaster tolerance and backup systems. The company recently retained Marcum Pinchuk as its auditor.

VisionChina Taps Focus Media CFO for its Board
Beijing-based VisionChina Media (Nasdaq: VISN) has appointed Kit Leong Lowe, executive director and chief financial officer of Focus Media Holding Ltd. (Nasdaq: FMCN), to its board. Before joining Focus Media, Lowe was an executive director of the Greater China entertainment conglomerate, eSun Holdings. Prior to that, he was an executive director at the Goldman Sachs Asia-Pacific Research Media and Internet team. Before joining Goldman, Low worked as a program manager for Johnson Controls Inc., managing Toyota vehicles interior development in the U.S. He has also worked for Sybase in the U.S. He received his B. S. in Industrial Engineering and Motion Picture Production from the University of Wisconsin-Madison and an MBA from Columbia Business School .

IN BRIEF…

  • Harbin-based China Kangtai Cactus Biotech Inc. (OTCBB: CKGT) has introduced samples of its new “Tai Shan Sheng Chao” cigarette. The new cigarette was developed primarily for the Russian market. The company modified its original cactus-based cigarette, introduced in 2009, to develop a new one to accommodate the unique tastes and fragrance preference of Russian cigarette smokers.
  • China Nutrifruit Group Ltd. (NYSE Amex: CNGL) has relocated to its headquarters in Daqing, Heilongjiang, effective August 1, 2011.