PRE 14C 1 v215552_pre14c.htm

SCHEDULE 14C

(Rule 14c-101)

INFORMATION REQUIRED IN INFORMATION STATEMENT

SCHEDULE 14C INFORMATION

Information Statement Pursuant to Section 14(c) of the Securities

Exchange Act of 1934

Check the appropriate box:

x Preliminary Information Statement	¨ Confidential, For Use of the Commission Only (as permitted by Rule 14c-5(d)(2))
¨ Definitive Information Statement

ZHONGCHAI MACHINERY, INC.

(Name of Registrant as Specified in Its Charter)

Payment of Filing Fee (Check the appropriate box):

x No fee required

¨ Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

¨ Fee paid previously with preliminary materials.

¨ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:

ZHONGCHAI MACHINERY, INC.

224 Tianmushan Road

Zhongrong Chengshi Huayuan 5-1-602

Hangzhou, P.R. China 310007

Telephone Number: 904-418-9133

NOTICE OF STOCKHOLDER ACTION BY WRITTEN CONSENT

March __, 2011

To our Stockholders:

Enclosed please find an information statement providing information to you regarding an action taken by one of our stockholders which holds a majority position in our common stock to authorize an amendment to our articles of incorporation to effect a reverse stock split of the common stock, whereby the company will effect a reverse stock split of the outstanding common stock on the basis of one new share for each 120 issued and outstanding shares of common stock, such that shareholders owning less than 120 shares of common stock will have their shares cancelled and converted into the right to receive the cash consideration set forth in the accompanying documentation. This action was approved by written consent in lieu of a meeting of stockholders by a stockholder holding 63.13% of the issued and outstanding common stock of the company entitled to vote on the record date.

Your vote is not required to approve this action, and the enclosed information statement is not a request for your vote or a proxy.

The accompanying information statement is for information purposes. Please read the accompanying information statement carefully.

	By Order of the Board of Directors,

	Peter Wang,
	President

INFORMATION STATEMENT

FOR

ZHONGCHAI MACHINERY, INC.

224 Tianmushan Road

Zhongrong Chengshi Huayuan 5-1-602

Hangzhou, P.R. China 310007

Telephone Number: 904-418-9133

WE ARE NOT ASKING YOU FOR A PROXY

AND YOU ARE REQUESTED NOT TO SEND US A PROXY.

This information statement is first being furnished on or about March __, 2011 to the holders of record as of the close of business on March 18, 2011 of the common stock, par value $0.001 per share ("Common Stock"), of Zhongchai Machinery, Inc. (referred to in this information statement as "we", "us", "our", the “Company").

This information statement is being furnished to our stockholders to inform them about a reverse stock split transaction. This information statement is being filed with the U.S. Securities and Exchange Commission pursuant to Section 14(c) of the Securities Exchange Act of 1934, as amended ("Exchange Act"), and provided to the Company's stockholders pursuant to Rule 14c-2 promulgated under the Exchange Act.

We will pay all the costs associated with the distribution of this information statement, including the costs of printing and mailing. We will reimburse brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending this information statement to the beneficial owners of our Common Stock.

The date of this information statement is March __, 2010.

AUTHORIZATION OF REVERSE STOCK SPLIT

One of our stockholders, holding an aggregate of 63.13% of the voting power of the Company's issued and outstanding Common Stock, executed a written consent in lieu of a meeting authorizing our Board of Directors to effect a reverse stock split of the Company's outstanding Common Stock at a ratio of one-for-120 (“Reverse Stock Split”), to take effect on a date that is on or after the twentieth day after the mailing of this Information Statement to the shareholders of the Company, upon the filing of the Articles of Amendment to the Certificate of Incorporation with the Secretary of State of the State of Nevada. The Reverse Stock Split will not preserve fractional shares; rather, upon the effective date of the Reverse Stock Split, shareholders entitled to a fractional share will be paid a cash consideration based on the number of shares held immediately before the effective date, and will no longer be shareholders of the Company. This Information Statement sets forth various rights of those persons who will be eliminated as shareholders.

SUMMARY OF TERMS OF REVERSE STOCK SPLIT

Reverse Stock Split.

The following summarizes the material terms of the terms of the Reverse Stock Split, which has been approved by Messrs. Rong Shi and Chris X. Chen, the two members of the Board of Directors of the Company who are independent directors (“Independent Directors”), and, upon their recommendation to the full Board of Directors, unanimously approved by the full Board of Directors. Upon the recommendation of the Board of Directors, a shareholder owning 63.13% of the issued and outstanding Common Stock the approved the Reverse Stock Split. The section of this Information Statement entitled "DISCUSSION OF THE TERMS OF THE REVERSE STOCK SPLIT" provides a more detailed discussion of the Reverse Stock Split. You are urged to carefully review the more detailed information appearing elsewhere in, and accompanying, this Information Statement.

Basic Procedures for Effecting the Reverse Stock Split.

As used throughout this Proxy Statement, the term "Reverse Stock Split" refers to a transaction consisting of the following steps:

o Distribution of this Information Statement to all the shareholders of record and beneficially held through “street name” positions.

o Waiting the required period for distribution of this Information Statement to inform the shareholders of the transaction, which period is 20 calendar days after mailing.

o Filing the Amendment to the Certificate of Incorporation with the Secretary of State of the State of Nevada.

o The Reverse Stock Split will take effect on the date, referred to as the “effective date” that the Company files the Articles of Amendment to its certificate of incorporation with the Secretary of State of the State of Nevada and effecting the Reverse Stock Split with FINRA.

o At 6:00 p.m. E.S.T. on the effective date, the Company will effect a 1-for-120 reverse stock split. Any shareholder owning less than 120 shares of Common Stock will receive cash in exchange for such shares (referred to herein as "Cashed-Out Shares") in the amount of $0.56 for each share held immediately before the effective date of the Reverse Stock Split and will no longer be a shareholder of the Company.

o Any shareholder owning 120 or more shares of Common Stock at 5:59 p.m. on the effective date (referred to herein as "Continuing Shares") will be deemed to own one one-hundred-twentieth (1/120th) of a share (referred to herein as "Reverse Split Shares") for each such Continuing Share.

o Within 10 days after the effective date of the Reverse Stock Split, the Company will mail to all the record and beneficial shareholders the required state law notice under the provisions relating to dissenters rights, and mail other information to the record holders with respect to the method by which they may present their stock certificates to, Olde Monmouth Stock Transfer Company, Inc., the Company’s transfer agent (“Transfer Agent”) for payment.

(For more detailed discussion of the basic procedures relating to dissenters rights, see “DISCUSSION OF THE TERMS OF THE REVERSE STOCK SPLIT “- Effects of the Reverse Stock Split,” and “- Additional Information Regarding the Reverse Stock Split – Appraisal Rights.”)

Material Terms of the Reverse Stock Split.

Purposes/Reasons.

o The Reverse Stock Split has been recommended by the Board of Directors, after determination by the Independent Directors, to enable the Company to terminate the registration of its Common Stock under Section 12(g) of the Securities Exchange Act of 1934 ("Exchange Act"). Deregistration will result in the suspension of the Company's duty to file periodic reports with the Securities and Exchange Commission ("SEC") and the cessation of the Company's classification as a public reporting company.

o To facilitate the goal of deregistration, the Reverse Stock Split has been designed to allow the Company to acquire, for cash, the equity positions of a sufficient number of its smaller shareholders so that, immediately after the Reverse Stock Split, the Company will have less than 300 shareholders of record. Dropping below the 300 shareholder threshold is a prerequisite to deregistration under the Exchange Act.

(For more detailed discussion of the purposes of and reasons for the Reverse Stock Split, see "DISSCUSION OF THE TERMS OF THE REVERSE STOCK SPLIT - Purposes of the Reverse Stock Split" and "- Reasons for the Reverse Stock Split.")

Cash Consideration.

o In connection with the Reverse Stock Split, the Board of Directors, upon the recommendation of the Independent Directors and supported by a fairness opinion of The Mentor Group, has set the cash consideration to be paid to cashed out shareholders at $0.56 per share of Common Stock held immediately prior to the effective date, which amount provides a premium to the Common Stock's current and historical market prices over the last twelve months, and a 24% premium over the price of a share of Common Stock on March 16, 2011. This amount also is at the median range of the value of a share of Common Stock based on data supplied by The Mentor Group, a valuation firm, engaged by the Company to provide a fairness opinion with respect to the price per share to be paid to the cashed out shareholders.

(For more detailed discussion of the cash consideration for the Reverse, see "DISCUSSION OF THE TERMS OF THE REVERSE STOCK SPLIT - Fairness of the Transaction – Cash Consideration.")

Benefits.

The principal benefits considered by the Board of Directors in determining that the consummation of the Reverse Stock Split would be in the best interests of the Company and its shareholders include the following:

o Anticipated annual cost savings of approximately $300,000 per year resulting from the suspension of the Company's periodic reporting obligations under the Exchange Act;

o Decreased expenses resulting from the Company's Transfer Agent no longer being required to service the numerous accounts of the Company's smaller shareholders;

o Time savings resulting from the Company's management no longer being required to prepare the periodic reports required of public companies under the Exchange Act and no longer being required to manage shareholder relations and communications pursuant to the mandates of the Exchange Act;

o Cost savings resulting from the Company not having to obtain and pay premiums for directors and officers insurance;

o Greater control over the dissemination of certain business information that is currently disclosed in the Company's periodic reports filed with the SEC, and which is thereby made available to the Company's competitors, vendors, customers, and other interested parties; and

o Greater operational flexibility that should allow the Company to focus on long-term growth and maximization of shareholder value without an undue emphasis on quarter-to-quarter earnings and short-term fluctuations in the market price of its Common Stock.

(For more detailed discussion of the benefits of the Reverse Stock Split, see "DISSCUSIOM OF THE TERMS OF THE REVERSE STOCK SPLIT – Fairness of the Transaction – Factors in Support of the Reverse Stock Split.")

Disadvantages

The Board of Directors also considered the disadvantages to the Company and shareholders in determining that the consummation of the Reverse Stock Split would be in the best interests of the Company and its shareholders include the following:

o There is likely to be a significantly reduced market for the Common Stock in light of the fact that the shares might not trade actively on any public market because of the reduced number of shareholders and the planned deregistration from the reporting requirements of the Exchange Act. There may be no public market at all. These factors are likely to result in a market decline in the value of the shares and limit the ability of a Continuing Shareholder to sell their Common Stock in the future.

o The Company will no longer continue to report or be subject to the compliance requirements of the Exchange Act. The provisions of the Sarbanes-Oxley Act (“SOX”) and the liability provisions of the Exchange Act will no longer be applicable to the Company or the officers. The absence of public visibility afforded by the periodic reports filed under the Exchange Act will limit the information available to shareholders and investors. Additionally, the officers, directors and 5% and greater shareholders will not be required to make disclosure under the Exchange Act with respect to their securities holdings in and transactions in securities of the Company.

o Cashed-Out Shareholders will not participate in the future growth of the Company. These shareholders will not be able to realize any value on their shares at time of their choosing.

o The Company may lose the prestige of having been a public reporting company, which may limit its ability to attract investors and other sources of capital.

(For more detailed discussion of the benefits of the Reverse Stock Split, see "DISSCUSIOM OF THE TERMS OF THE REVERSE STOCK SPLIT – Fairness of the Transaction - Factors Not in Support of the Reverse Stock Split.")

Other Considerations.

o In making its determination and recommendation to pursue the Reverse Stock Split, the Board of Directors also focused on the fact that, primarily due to the Common Stock's limited liquidity and low market price, the Company has not realized many of the benefits that typically accrue to public companies. These missed benefits/opportunities include enhanced shareholder value, enhanced corporate image, the ability to use company stock to attract, retain and motivate employees, and the ability to use company stock as currency for acquisitions.

o The Board of Directors also believes that the Company's shareholders have not benefited proportionately from the costs associated with maintaining the Company's status as a public company. Some of the relevant causes of the reduced benefits include (i) the relatively thin trading market for the Common Stock which may have resulted in depressed market prices for the Common Stock, (ii) the lack of market makers and analysts following the Company's performance, and (iii) a practical limitation of the ability of the Company's shareholders to sell relatively large blocks of Common Stock in the open market without significantly depressing the market price.

Independent Analysis of Consideration.

The Company, at the request of the Independent Directors, engaged The Mentor Group and obtained from The Mentor Group a fairness opinion addressed to the Board of Directors and analysis of the per share value of the Company to help them determine the amount to be paid to shareholders that would be cashed-out if the Reverse Stock Split was recommended and pursued.

(For more detailed discussion of other considerations in connection with the Reverse Stock Split, see "DISCUSSION OF THE TERMS OF THE REVERSE STOCK SPLIT - Fairness of the Transaction – Reports and Opinions.")

Determination of the Board of Directors.

The Independent Directors fully considered the terms, purposes, alternatives and effects of the Reverse Stock Split. Based on the Independent Directors and the Board of Directors review, they unanimously determined that the Reverse Stock Split to be in the best interests of the Company and its shareholders, and to be substantively and procedurally fair to unaffiliated shareholders of the Company, including those shareholders who will be cashed out as a result of the transaction as well as to those who will remain as shareholders after the transaction. Such decision principally is based on the amount of the cash consideration being paid in respect of fractional interests and the fact that it is at a 24.44% premium to the market price of a share of Common Stock on March 16, 2011, the day immediately prior to the determination of the Board of Directors to pursue the Reverse Stock Split. Additionally, the decision was based on the following factors:

o The anticipated cost savings due to the elimination of the disclosure, reporting and compliance requirements of the Company under the Exchange Act and the related costs associated with being a public company.

o The analysis and fairness opinion provided to the Independent Directors by The Mentor Group.

o The opportunity of the smaller shareholders being able to obtain cash for their shares in light of the very limited current public market for the Common Stock, without incurring brokerage commissions.

o The fact that the Reverse Stock Split will not treat the officers, directors and greater than 10% shareholders any differently than the other Continuing Shareholders. Moreover, there is the opportunity for shareholders that will be potentially cashed out to obtain additional shares to retain their ownership stake in the Company prior to the effective date.

o The fact that Nevada law provides to the Cashed-Out Shareholders dissenters rights to obtain an appraisal value of their Common Stock if they disagree with the determination of the Board of Directors on the amount payable to those shareholders.

(For more detailed discussion of other considerations in connection with the Reverse Stock Split, see "DISCUSSION OF THE TERMS OF THE REVERSE STOCK SPLIT - Reasons for the Reverse Stock Split," "- Fairness of the Transaction" “- Fairness of the Transaction – Reports and Opinions” and “Additional Information Regarding the Reverse Stock Split – Appraisal Rights.”)

DISCUSSION OF TERMS OF REVERSE STOCK SPLIT

Purposes of the Reverse Stock Split.

The Independent Directors and the Board of Directors have determined that the cost of being an SEC reporting company currently outweighs the benefits and, thus, it is no longer in the best interests of the Company or the shareholders, including the unaffiliated shareholders, for the Company to remain an SEC reporting company. Accordingly, the Company through the process of a consent action by a principal stockholder, is pursuing a course of action that will effect a reverse stock split of the Common Stock, with the effect of reducing the number of stockholders of the Company. Once that number is reduced below 300 holders, the Company will seek deregistration from the Exchange Act. By no longer being a reporting company under the Exchange Act, it is expected that there will be cost savings by the elimination of the many different expenses and administrative burdens related to being an SEC reporting company.

The Board of Directors believes that the public marketplace has little interest in public companies with very small market capitalizations and a limited amount of shares available for public trading. Our Common Stock experiences a limited trading volume and liquidity, and in the current conditions, the Board of Directors believes it is unlikely that the Common Stock will achieve sufficient trading volume so as to create a significantly active and liquid market. This also has an impact on the ability of the Company to find funding for its operations through securities that are equity or equity based, and limits its ability to attract employees and consultants with the prospect of stock based compensation elements. It is difficult for the Company, as a smaller company facing challenges of limited financial and managerial resources, to recruit executives from large public companies who are not accustomed to the circumstances of a small public company.

While many of the factors that were considered in the decision have existed for several years, the decision was undertaken at this time, as opposed to another time, because of the ongoing escalation in regulatory burdens and associated compliance costs for public reporting companies, as discussed in more detail below. These factors, when coupled by the fact that the Company was not obtaining offsetting benefits from being a public reporting company, in the opinion of the Independent Directors and the Board of Directors, justified the decision.

The Reverse Stock Split is designed to acquire, for cash, the equity interests in the Company of those shareholders who, as of the effective date of the Reverse Stock Split, own less than 120 shares of Common Stock. The general purposes of the transaction are as follows:

To eliminate the administrative costs of maintaining smaller shareholder accounts and being a public reporting company;

To allow smaller shareholders to receive cash for their shares of Common Stock without having to pay brokerage commissions (the Company will pay all transaction costs in connection with the Reverse Stock Split); and

To reduce the Company's number of shareholders of record to less than 300, which will permit the Company to terminate the registration of its Common Stock under Section 12(g) of the Securities Exchange Act of 1934, as amended (“Exchange Act”) and to suspend the Company's duty to file periodic reports with the SEC.

Reasons for the Reverse Stock Split.

Annual Cost Savings. The Company incurs substantial direct and in direct costs in complying with the filing, reporting and compliance requirements for public companies under the Exchange Act. These direct costs include, legal fees, accounting costs, SOX compliance costs, Edgarization expenses, including XBRL expenses, and premiums for directors and officers insurance policies, among other things. The indirect costs include the time expended by the Company's executive officers in preparing and reviewing the Company's public reports filed with the SEC, shareholder relations, and the added expense of handling smaller shareholder accounts. These indirect costs are magnified by the fact that the Company has only one senior executive officer and minimum staff to perform the necessary preparation and review functions for the SEC reports and the difficulty of finding persons sufficiently skilled in English to meet the needs of being a public company largely operating in China. Finally, many of the requirements of SOX apply equally to all public companies, regardless of their relative size. Therefore, given the Company's current size and resources, the Board of Directors believes that the foregoing costs associated with the Company being a public company are no longer justified.

The Board of Directors believes that, by deregistering the Common Stock and suspending the Company's periodic reporting obligations, the Company will experience annual cost savings of more than $300,000. The annual cost savings estimate are based on the expenses incurred during the last year, which are scheduled in detail below:

Historical Fees	Recent Dollar Costs

Legal fees:	$	66,481
Audit fees:	$	103,543
Printing, mailing and filing costs:	$	6,135
Independent director compensation:	$	5,622
Transfer agent fees:	$	5,029
SOX compliance – testing and documentation	$	5,000
Internal personnel expense	$	15,705
Directors and officers insurance	$	24,848
Other fees:	$	76,052

Total:	$	308,415

The estimated annual cost savings based on the above actual costs reflect, among other things:

A reduction in auditing and related fees;

A reduction in legal fees related to securities law compliance;

The elimination of costs associated with filing periodic reports with the SEC, which are expected to increase significantly under the requirement to provide financial statements in eXtensible Business Reporting Language (XBRL) format that is being implemented in 2011;

The savings in fees charged by the Company's Transfer Agent due to a significant reduction in the number of accounts to be handled by the Transfer Agent expected as a result of the Reverse Stock Split;

The lower printing and mailing costs attributable to the reduced reporting requirements, and the less complicated and extensive disclosures required as a result of the Company's status as a private company;

The reduction in management time spent on compliance and disclosure matters attributable to the Company's Exchange Act filings and the expected increased compliance costs associated with the Dodd-Frank Act relating to executive compensation and corporate governance requirements;

The lower risk of liability that is associated with non-reporting (as distinguished from public reporting) company status and, consequently, avoiding premiums for directors and officers liability insurance;

The cost savings resulting from the Company's not being subject to the internal control audit requirements imposed by SOX; and

The reduction in direct miscellaneous clerical and other expenses.

The annual cost savings amount set forth above is only an estimate. The actual savings the Company will realize from going private may be higher or lower than such estimate. The estimate of the annual savings to be realized if the Reverse Stock Split is consummated are based upon (i) the actual costs to the Company of the services and disbursements in each of the categories listed above that were reflected in the Company's recent financial statements and indicated above, (ii) anticipated costs of compliance in the future, and (iii) the allocation to each category of management's estimates of the portion of the expenses and disbursements in such category believed to be solely or primarily attributable to the Company's public reporting company status. In some instances, management's cost savings expectations were based on information provided or upon verifiable assumptions. The Company has been informed by its auditors, informally, that there will be a reduction in auditing fees if the Company ceases to be a public reporting company. Also, legal counsel, informally, indicated that the costs associated with compliance under the Exchange Act's reporting requirements will be eliminated if the Company no longer files reports with the SEC and is otherwise not required to comply with the disclosure requirements that apply to public reporting companies.

Finally, the Company expects the actual cost savings of being a non-reporting private company to be much greater than simply eliminating the historical out-of-pocket costs. As a result of recent corporate governance scandals over the last decade, the legislative and litigation environment resulting from those scandals, the costs of being a public reporting company in general, and the costs of remaining a public reporting company in particular, are expected to continue to increase. Moreover, legislation, such as SOX and the Dodd-Frank Act, will likely continue to have the effect of increasing the compliance burdens and potential liabilities of being a public reporting company. This and other proposed legislation and regulation will likely continue to increase audit fees and other costs of compliance such as securities counsel fees, increase outside director fees and increase potential liability faced by the Company's officers and directors, and Edgarization expense, particularly in respect of XBRL that is being implemented during 2011.

Operational Flexibility. Another reason for the Reverse Stock Split relates to operational flexibility. The Independent Directors and the Board of Directors believes that effecting the Reverse Stock Split and ceasing to be a public reporting company will enable management to concentrate its efforts on the long-term growth of the Company's businesses, free from the constraints of public ownership which often places undue emphasis on quarter-to-quarter earnings at the expense of long-term growth. The Independent Directors and the Board of Directors believes that the Company will benefit if business decisions can be made with a view toward long-term growth and with less of an emphasis on the effect of decisions upon the short-term earnings and the consequent short-term effect of such earnings on the market value of the Common Stock. It is also thought that, as a result of going private, the Company will be able to more quickly react and respond to corporate opportunities in the future.

Inability to Realize Benefits Associated with Public Company Status. A significant reason for the Reverse Stock Split relates to the Company’s inability to realize many of the benefits that typically accrue to public companies, including those listed below.

The ability to use Company stock, as opposed to cash or other consideration, to effect acquisitions. The Company has not found the occasion to acquire other businesses using its Common Stock as consideration and does not presently intend to do so.

The ability to obtain financing by issuing securities in a public offering. The Company has not accessed the capital markets in such a manner in recent years and does not presently intend to do so.

The ability to use Company stock to attract, retain and motivate employees. In recent years, due to the relatively low market price and limited liquidity of the Common Stock, the Company has found limited success in using its Common Stock in such a manner.

The ability to enhance company image by virtue of public company status. The Board of Directors has determined that, due to the Company's size and other factors, the Company has not enjoyed an appreciable enhancement in company and brand image as a result of its public company status.

The Company has generally been unable to realize the foregoing benefits due to one or a combination of the following: (i) the limited liquidity and low market price of its Common Stock, and/or (ii) the relatively small size of the Company. In addition, in many circumstances, the Company has had to seek more favorable alternatives to accomplish its objectives, such as using traditional debt financing from banks and continuing joint ventures with its business partners and concessions from government sources, rather than by the use of the Common Stock.

Competitive Disadvantages. The information disclosed in the Company’s Exchange Act filings is available to the public. As a result, such information, which includes disclosures regarding the Company's business operations and financial condition, can be readily obtained and analyzed by various interested parties including the Company's competitors, vendors and customers. These interested parties could use such information to the Company's detriment. Among other things, this puts the Company at a disadvantage to its non-public competitors because the Company does not have access to similar information regarding its non-public competitors. However, after the Company terminates the registration of its Common Stock under the Exchange Act and thereby suspends its duty to file periodic reports with the SEC, the Company will have greater control over the public dissemination of certain business information relating to the Company. The Company's non-public competitors also benefit from not being burdened by the cost and time constraints associated with being a public reporting company. This results in additional competitive disadvantages for the Company.

Given the foregoing competitive disadvantages, the Independent Directors and the Board of Directors believe that the benefits associated with maintaining the Company's status as a public reporting company and maintaining the Company's smaller shareholder accounts are substantially outweighed by the associated costs, both financial and operational. The Independent Directors and the Board of Directors believe that it is in the best interests of the Company to eliminate the administrative burden and costs associated with maintaining the Company's status as a public company and its smaller shareholder accounts.

The Independent Directors and the Board of Directors has determined that the Reverse Stock Split is the most expeditious and economical way of liquidating the holdings of smaller shareholders and changing the Company's status from that of a public reporting company to that of a more closely-held, non-reporting company. The Independent Directors and the Board of Directors further determined that the reverse stock split ratio should be 1-for-120.

Effects of the Reverse Stock Split.

As soon as practicable after the completion of the Reverse Stock Split (assuming it is consummated and assuming it results in the Company having less than 300 shareholders of record), the Company intends to apply for termination of the registration of its Common Stock under the Exchange Act. Upon termination of the Company's reporting obligations under the Exchange Act, although the Common Stock may continue to trade on one of several trading platforms that do not require compliance with the reporting requirements of the Exchange Act, such as the Pink Sheets, the Company does not believe there will be any significant trading in the Common Stock. Rather, the Company believes that the deregistration of the Common Stock under the Exchange Act will likely cause the trading market for shares of the Common Stock to be eliminated or, at a minimum, substantially reduced.

Effects on Shareholders with Less than 120 Shares of Common Stock. As a result of the Reverse Stock Split (assuming it is implemented), each shareholder that owns less than 120 shares of Common Stock immediately before the Reverse Stock Split (referred to in this Information Statement as a “Cashed-Out Shareholder"):

Will receive cash equal to $0.56 per share for each share of Common Stock held by such Cashed-Out Shareholder at 5:59 p.m. E.S.T. on the effective date of the Reverse Stock Split, in accordance with the procedures described in this Information Statement;

Interest will not accrue on these cash payments, and such payments will be subject to income taxation (for a more detailed discussion of federal income tax consequences, see "Material Federal Income Tax Consequences");

Will not receive any shares, whole or fractional, of Common Stock;

Will have no further ownership interest in the Company, and will no longer be entitled to vote as a shareholder of the Company; and

Will not have to pay any service charges or brokerage commissions in connection with the Reverse Stock Split.

If you are a shareholder who would otherwise become a Cashed-Out Shareholder as a result of the Reverse Stock Split, you may elect to continue holding Common Stock after the Reverse Stock Split and not be cashed out by the Reverse Stock Split by taking one of the actions specified below. To ensure that your holdings of Common Stock are appropriately adjusted prior to the Reverse Stock Split, the Company recommends that you take such action so that it has been completed by the close of business on the day immediately preceding the effective date. Also be aware that, given the limited trading market for the Common Stock, you may not be able to purchase, at an acceptable price, enough shares to remain a shareholder after the Reverse Stock Split.

1A.

Purchase a sufficient number of additional shares of Common Stock on the open market and have such additional shares registered in your name and consolidated with your current record account (if you are a record holder), or have such additional shares entered in your account with a nominee (if you are a beneficial owner holding shares in street name), so that you will hold at least 120 shares of Common Stock in your record account or relevant nominee account by 5:59 p.m. E.S.T. on the effective date of the Reverse Stock Split; or

1B.

If applicable, consolidate your record accounts or relevant nominee accounts so that, together, you hold at least 120 shares of Common Stock in one record account or nominee account by 5:59 p.m. E.S.T. on the effective date of the Reverse Stock Split.

If you do not hold at least 120 shares in a single account, then you will be treated as a Cashed-Out Shareholder for purposes of the Reverse Stock Split.

The Company intends to treat shareholders holding less than 120 shares of Common Stock in street name through a nominee (such as a bank or broker) in the same manner as shareholders whose shares are registered in their names. However, nominees may have different procedures and shareholders holding Common Stock in street name should contact their nominees. For example, upon receiving this Information Statement, a nominee may notify its beneficial owners of the Reverse Stock Split and instruct such beneficial owners to complete option 1A or 1B above prior to the effective date (if they desire to remain a shareholder of the Company after the Reverse Stock Split) and that otherwise they will be cashed out. The relevant shares calculation (i.e., whether a beneficial owner has 120 or more shares of Common Stock in a single account) will then take place at the street account level rather than the record account level. The nominee would then be responsible for informing the Company of the proper treatment of such nominee's beneficial owners.

Effects on Shareholders with 120 or More Shares of Common Stock. As a result of the Reverse Stock Split (assuming it is implemented), each shareholder of record holding 120 or more shares of Common Stock at 5:59 p.m. E.S.T. on the effective date of the Reverse Stock Split (referred to in this Information Statement as a "Continuing Shareholder"):

Will not receive cash for any portion of such Continuing Shareholder's shares;

Will be affected in terms of the number of shares of Common Stock held by such Continuing Shareholder before and after the Reverse Stock Split, but not by the proportional ownership interest in the Company;

Will continue to be entitled to vote as a shareholder of the Company; and

Will experience a significant reduction in liquidity with respect to the Common Stock.

If you are a shareholder who would otherwise become a Continuing Shareholder as a result of the Reverse Stock Split, you may elect to cash out your holdings of Common Stock after the Reverse Stock Split and not continue holding Common Stock after the Reverse Stock Split by taking one of the actions specified below. To ensure that your holdings of Common Stock are appropriately adjusted prior to the Reverse Stock Split, the Company recommends that you take such action so that it has been completed by the close of business on the day immediately preceding the Effective Date.

2A.

Sell a sufficient number of shares of Common Stock on the open market, so that you will hold less than 120 shares of Common Stock in your record account or your relevant nominee account by 5:59 p.m. E.S.T. on the effective date of the Reverse Stock Split; or

2B.

Divide your record accounts or nominee accounts so that you do not hold more than 120 shares of Common Stock in any one record account or nominee account by 5:59 p.m. E.S.T. on the effective date of the Reverse Stock Split.

If you hold 120 or more shares in a single account, then you will be treated as a Continuing Shareholder for purposes of the Reverse Stock Split.

The Company intends to treat shareholders holding 120 or more shares of Common Stock in street name through a nominee (such as a bank or broker) in the same manner as shareholders whose shares are registered in their names. However, nominees may have different procedures and shareholders holding Common Stock in street name should contact their nominees. For example, upon receiving this Information Statement, a nominee may notify its beneficial owners of the Reverse Stock Split and instruct such beneficial owners to complete option 2A or 2B above prior to the effective date (if they desire to be cashed out as a result of the Reverse Stock Split) and that otherwise they will remain as shareholders of the Company. The relevant shares calculation (i.e., whether a beneficial owner has less than 120 shares of Common Stock in single account) will then take place at the street account level rather than the record account level. The nominee would then be responsible for informing the Company of the proper treatment of such nominee's beneficial owners.

Effects on Shareholders with Certificated Shares.

Cashed-Out Shareholders. If you are a Cashed-Out Shareholder with a stock certificate representing your cashed out shares, you will receive a letter of transmittal from the Company as soon as practicable after the effective date of the Reverse Stock Split. The letter of transmittal will contain instructions on how to surrender your existing certificate(s) to the Transfer Agent for your cash payment. You will not receive your cash payment until you surrender your outstanding certificate(s) to the Transfer Agent, together with a completed and executed copy of the letter of transmittal. PLEASE DO NOT SEND YOUR CERTIFICATES UNTIL YOU HAVE RECEIVED YOUR LETTER OF TRANSMITTAL.

Continuing Shareholders. If you are a Continuing Shareholder with a stock certificate(s) representing your shares, your stock certificate will continue to evidence ownership of the same number of shares as is set forth on the face of the certificate(s), reduced by the Reverse Stock Split. If you wish, you may return the old certificate(s) to the Transfer Agent and request a new stock certificate representing the new number of shares. The address of the Transfer Agent is: Olde Monmouth Stock Transfer Co., Inc., 120 Memorial Parkway, Atlantic Highlands, NJ 07716

Effects on the Company.

The Reverse Stock Split (assuming it is consummated) will affect the registration of the Common Stock under the Exchange Act, as the Company intends to apply for termination of such registration as soon as practicable after the Reverse Stock Split. The completion of the Reverse Stock Split and the deregistration of the Common Stock under the Exchange Act will render the Common Stock ineligible for listing or quotation on any stock exchange and other automated quotation systems such as the OTC Bulletin Board. After the Reverse Stock Split, the Common Stock may trade on one of various trading mediums, such as the Pink Sheets; however, the Company does not intend to take any action to facilitate trading on that or any other trading medium. As a result, Continuing Shareholders should expect the public market for their shares of Common Stock to be eliminated or, at a minimum, substantially reduced.

The Company has no current plans to issue additional Common Stock after the Reverse Stock Split. However, the Company reserves the right to do so at any time, and from time to time, at such prices and on such terms as the Board of Directors determines to be in the best interests of the Company. Continuing Shareholders will not have any preemptive or other preferential rights to purchase any capital stock that the Company may issue in the future, unless such rights are otherwise specifically granted to the Continuing Shareholders.

The Company also has no current plans to repurchase shares of Common Stock pursuant to an odd-lot repurchase program, private negotiated sale, or other transaction. However, the Company reserves the right to do so at any time, and from time to time. Whether or not the Company seeks to purchase shares in the future will depend on a number of factors, including the Company's financial condition, operating results, and available capital at the time.

The Company may take action to effect a forward stock split or issue a stock dividend in the future to align the value of the Company with the number of outstanding shares of Common Stock. It has no immediate plans to change the capital structure of the Company after the Reverse Stock Split, but it reserves the right to do so at any time, and from time to time.

The par value of the Common Stock will remain $0.001 per share following the consummation of the Reverse Stock Split.

Alternatives Considered by the Board of Directors.

In making the determination to proceed with the Reverse Stock Split, the Independent Directors and the Board of Directors considered the potential feasibility of the transactions below as other alternative means to accomplish the stated purposes of the Reverse Stock Split, as described in this Information Statement. For more detailed discussion of the deliberations of the Board of Directors with respect to the potential feasibility of the transactions below, see " Fairness of the Transaction - Deliberations of the Board of Directors."

Issuer Tender Offer. The Independent Directors and the Board of Directors considered the feasibility of an issuer tender offer to repurchase shares of the Common Stock held by the Company’s unaffiliated shareholders. A principal disadvantage of this alternative is the Company's ability or willingness to incur costs in excess of $500,000, such costs estimated as being necessary to effect a tender offer in which there is sufficient participation by unaffiliated shareholders. The cost was not only the expense of buying the offered shares, but the costs related to the legal and accounting expense and compliance with the Exchange Act. In addition, due to the voluntary nature of such a transaction, the Company would have no assurance that the transaction would result in a sufficient number of shares being tendered (i.e., to reduce the Company's number of shareholders of record to less than 300). Furthermore, the going private rules regarding the treatment of shareholders in an issuer tender offer, including pro-rata acceptance of offers from shareholders, make it difficult to ensure that the Company would be able to reduce its number of shareholders of record to less than 300. As a result of these disadvantages, it was decided that it would be in the best interest of the Company to reject this alternative.

Traditional Stock Repurchase Plan. The Independent Directors and the Board of Directors considered a plan whereby the Company would periodically repurchase shares of its Common Stock on the open market at the then-current market price. A principal disadvantage of this alternative is that the Company's ability to repurchase enough shares in this manner to enable the Company to deregister under the Exchange Act would likely take an extended period of time, have no assurance of success, and be of undeterminable cost. Moreover, because of the historical trading volume, the Company was advised informally that it would not be able to purchase many shares on any given trading day under the applicable rules so that there would be no assurance of being able to purchase any shares or any appreciable amount of shares through such a program. Additionally, because of the low trading volume, the Company’s transaction costs were expected to be significantly higher than ordinary brokerage commissions to effect any such repurchases. It was determined that such time burden, uncertainty and additional cost burden did not out weigh the use of this method of acquiring shares. As a result of these disadvantages, it was decided that it would be in the best interest of the Company to reject this alternative.

Maintaining the Status Quo. The Independent Directors and the Board of Directors considered simply maintaining the status quo, meaning that the Company would continue to incur the expenses of being a public reporting company without enjoying the benefits traditionally associated with public company status. Based on the reasons specified under "Reasons for the Reverse Stock Split," the Independent Directors and the Board of Directors decided that it would be in the best interest of the Company to reject this alternative.

Other Going Private Transactions. In an effort to exhaust its alternatives, the Independent Directors and the Board of Directors also examined the mechanics used by other issuers in effecting a going private transaction, such as odd-lot repurchase programs, sales of all or substantially all of the corporate assets, and management buyouts. These options were dismissed as inconsistent with the Company’s primary objectives for this transaction. The Company does not have enough odd-lot shareholders (defined as shareholders owning less than 100 shares) for an odd-lot repurchase program to be considered a viable option for enabling the Company to deregister under the Exchange Act. The Independent Directors and Board of Directors also desires, and expects, that the Company's management and operations will not be disrupted as a result of the Company going private. Proposals involving sales of all or substantially all of the corporate assets and management buyouts would likely have the opposite effect. Moreover, the Company has not received any firm offers, from management or third parties, to acquire the Company over the past two years.

Fairness of the Transaction.

In General. For the reasons discussed below, the Independent Directors and the Board of Directors each has deemed the Reverse Stock Split to be fair to the Company's unaffiliated shareholders, both in terms of its form and the cash consideration being offered. Furthermore, the Independent Directors and the Board of Directors each unanimously concluded that the Reverse Stock Split is in the best interests of the Company and is substantively and procedurally fair to the Company's unaffiliated shareholders, regardless of whether such shareholders are classified as Cashed-Out Shareholders or Continuing Shareholders.

Potential Conflicts of Interest. Shareholders of the Company should be aware that there are approximately 25 shareholders that currently own approximately 98% of the issued and outstanding shares of the Company, each of which is expected to be a Continuing Shareholder. The one shareholder that authorized the consent action that approved the Reverse Stock Split, Ruihua International Ltd., with 17,431,104 shares holds 63.13% of the issued and outstanding Common Stock, will be a Continuing Shareholder. In addition, Mr. Peter Wang, the Company’s Chairman of the Board and President, with beneficial ownership of 1,957,470 shares has a 7.09% beneficial interest in the issued and outstanding shares of the Company through Sinoquest Management Limited, which holds 4,120,990 shares of record representing a 14.92% interest in the issued and outstanding Common Stock, in effect will be a Continuing Shareholder. Mr. Rong Shi, one of the independent directors, who holds 200,000 shares of Common Stock, representing less than 1% of the issued and outstanding shares, will be a Continuing Shareholder. Together these above persons own 79.21% of the issued and outstanding Common Stock.

Because of the above ownership of Common Stock, our officers, directors and 10% and greater stockholders may have interests in the Reverse Stock Split that are different from the interests of the Cashed-Out Shareholders and the non-affiliated Continuing Shareholders. It is expected that the maximum number of shares that will be eliminated in the Reverse Stock Split will be 100,000. If this is the case, after the Reverse Stock Split, (i) Ruihua International Ltd, will increase its ownership from 63.13% to 63.35%, (ii) Mr. Peter Wang will increase his beneficial ownership from 7.09% to 7.11% (iii) Sinoquest Management Limited will increase its ownership from 14.92% to 14.97%, and Mr. Rong Shi ownership will remain at 0.72%. These percentages may change depending on the number of shares that are purchased pursuant to the Reverse Stock Split and any exercise of dissenters’ rights.

Our officers, directors and 10% and greater stockholders will experience certain advantages, in that they will be relieved of certain SEC reporting requirements and “short-swing trading” provisions making them liable to recovery of “short-swing profits” under Section 16 of the Exchange Act, and persons acquiring more than 5% of the Common Sock will no longer be required to report their beneficial ownership under the Exchange Act. Furthermore, information regarding their compensation and stock ownership will no longer be publicly available. In addition, by deregistering the Common Stock under eh Exchange Act, the Company will no longer be subject to the SOX provisions, including personal attestation by the officers about the controls and procedures, potential criminal liability regarding the disclosure by the Company and restrictions on lending, although the Company has no intention of making any loans to its officer and directors.

Independent Directors. Messrs. Rong Shi and Chris X. Chen, the Independent Directors were asked to undertake deliberation of the proposed Reverse Stock Split transaction separately from the Board of Directors, and after consideration make a recommendation to the Board of Directors of whether the full board should approve the transaction. Messrs. Shi and Chan are two of the three directors comprising the Board of Directors. These individuals are considered “independent” as the term is defined under SEC Exchange Act rule 10A-3, and each of them also qualifies as “independent” within the meaning of Rule 5605(a)(2) of the NASDAQ Stock Market listing requirements, which while the Company is not listed on NASDAQ, is used for purposes of evaluating directors independence.

Approval of Shareholder by Consent. The Reverse Stock Split was approved by the shareholder holding a majority interest in the issued and outstanding shares of Common Stock. No further approval is required by the shareholders. The Nevada General Corporation Law does not require the approval of at least a majority of the Company’s unaffiliated shareholders for the Reverse Stock Split or the amendment to the articles of incorporation of the Company. In the opinion of the Independent Directors and the Board of Directors, conditioning the approval of the Reverse Stock Split and its related actions on the approval of the smaller shareholders would not reflect their collective judgment because, based on past experience of the Company, it would be unlikely that a large number of such shareholders would vote, in person or by proxy. Moreover, because the one shareholder who holds 63.13% of the issued and outstanding Common Stock has approved the action and because it would be expected that the management persons would vote in favor of the transaction, aggregating together 79.21% of the issued and outstanding Common Stock, the aggregate decision of the shareholders pursuant to Nevada law is a foregone conclusion.

Unaffiliated Representative. The Independent Directors and the Board of Directors carefully weighed the costs and benefits of retaining an independent third-party representative to act solely on behalf of the Company's unaffiliated shareholders for the purposes of negotiating the terms of the Reverse Stock Split and/or preparing a report concerning the fairness of the transaction (which is a common procedure for a going private transaction). It was determined that such a representative was not necessary in order to ensure the procedural fairness of the Reverse Stock Split to the unaffiliated shareholders. In reaching such decision, there was concern about the administrative time and monetary costs that would be expended in retaining an independent third-party representative. Specifically, the Independent Directors or the Board of Directors would have had to identify, contact, and engage a qualified representative and then spend considerable time educating such representative about the Company's business. Furthermore, the anticipated fee for engaging an independent third-party representative was expected to be significant. Another key consideration was the role of the Company's two Independent Directors who constitutes 66% of the Board of Directors. In the opinion of the Board of Directors, the Independent Directors were better suited to represent the interests of the Company's unaffiliated shareholders with respect to the procedural fairness of the Reverse Stock Split. The Independent Directors have knowledge and experience as to the Company's business and have been intimately involved in the Board of Directors' discussions regarding the Company's going private transaction and, more specifically, the Reverse Stock Split. In addition, the Independent Directors have not and will not receive any additional compensation for their service with respect to the Reverse Stock Split. Although one of the Independent Directors is an shareholder and is expected to be a Continuing Shareholder who will not be cashed-out in the Reverse Stock Split and, therefore, is in a different position from that of the unaffiliated shareholders who will be cashed out, the Company does not believe that this apparent conflict prevented that Independent Director from representing the interests of the Company's unaffiliated shareholders as described above along with the other Independent Director.

The cost savings to the Company of being able to rely on the Independent Directors as opposed to an independent third-party representative to ensure the procedural fairness of the Reverse Stock Split to the unaffiliated shareholders is significant. The transactional costs of the Reverse Stock Split are already expected to exceed the Company's fund outlay for the going private transaction and, given that the Company intends to use cash on hand (as opposed to alternative financing arrangements/plans) for such fund outlays, it would be in the best interest of the Company and its shareholders to control such transactional costs. In the opinion of the Board of Directors, including the Independent Directors, the foregoing factors serve as procedural safeguards ensuring that the Reverse Stock Split is procedurally fair to the Company's unaffiliated shareholders.

Approval of the Independent Directors and Board of Directors. The Independent Directors fully reviewed and considered the terms, purpose, alternatives and effects of the Reverse Stock Split, and determined that the Reverse Stock Split is in the best interests of the Company and is substantively and procedurally fair to each group of affiliate and unaffiliated shareholders of the Company, including the unaffiliated Cashed-Out Shareholders, who, individually, will receive cash in lieu of fractional shares fewer than one whole share and the unaffiliated Continuing Shareholders, individually, who will remain shareholders of the Company after the Reverse Stock Split. The Independent Directors recommended that the Board of Directors approve the Reverse Stock Split. After deliberation, the Board of Directors unanimously approved the Reverse Stock Split as in the best interests of the Company and that it is substantively and procedurally fair to the Shareholders.

The Board of Directors, including the Independent Directors, believes that it has a fiduciary responsibility to all Company shareholders, both Cashed-Out Shareholders and Continuing Shareholders. It further believes that paying excessive consideration to the Cashed-Out Shareholders in connection with the Reverse Stock Split would not be fair to the Continuing Shareholders and, conversely, that paying inadequate consideration would not be fair to the Cashed-Out Shareholders. In upholding its fiduciary responsibility to all Company shareholders, the Board of Directors reviewed and considered the terms, alternatives, and effects of the Reverse Stock Split as to each of the Cashed-Out Shareholders, the Continuing Shareholders, and the Company.

The Independent Directors and the Board of Directors also noted that this Information Statement, along with our other filings of the Company with the SEC, provide a great deal of information for unaffiliated shareholders to evaluate the Reverse Stock Split, and that no special provision for the review of our corporate files was necessary. The Independent Directors and the Board of Directors noted as well that, subject to certain conditions, Nevada law already provides shareholders with the right to review the Company’s books and records.

The Independent Directors and the Board of Directors also noted that, although the Reverse Stock Split will increase the percentage of our outstanding Common Stock held by our directors and executive officers by an immaterial amount and will increase the percentage of our outstanding Common Stock held directly or indirectly by our controlling shareholder, these changes will not affect the control of the Company.

Approval of Majority Shareholder. Ruihua International Limited did not suggest to the management or the Board of Directors of the Company, including the Independent Directors, the idea of or any reasons for the Reverse Stock Split or any other action relative to the Company going private and ceasing to be a reporting company under the United States securities laws. Additionally, Ruihua International Limited did not participate in any of the management or director deliberations with respect to the transaction prior to its being presented with the proposal. After the Independent Directors considered the Reverse Stock Split and recommended it to the Board of Directors, and the Board of Directors approved the Reverse Stock Split, Mr. Peter Wang, as a representative of the management of the Company, approached Ruihua International Limited to determine if they would consent to the Reverse Stock Split. After the procedural aspects and the consequences of the Reverse Stock Split and the potential benefits to the Company were explained to Ruihua International Limited, the shareholder independently considered the proposed transaction, and then consented to the Reverse Stock Split.

Cash Consideration. In determining the cash consideration to be paid to Cashed-Out Shareholders in connection the Reverse Stock Split, the Independent Directors and after their recommendation, the Board of Directors, considered the fair market value of the Company as determined using the analyses of the discounted cash flow method and the market approach as provided by The Mentor Group. Because the public trading market price was currently below that of the valuation determined by these two other methods and had consistently been below such price and because the trading volume has consistently been quite low relative to the number of shares outstanding, the Independent Directors and the Board of Directors did not consider the historical market prices of the Common Stock as an appropriate way to value the Common Stock. As there had been no sales of Common Stock by the Company or firm offers received by the Company for the purchase of Common Stock by independent third parties during the past two years, the Independent Directors and the Board of Directors were not able to consider such factors into their determination of the consideration to be paid to the Cashed-Out Shareholders. The Independent Directors and the Board of Directors did not make any independent analysis with respect to the valuation of the Common Stock.

The Independent Directors and the Board of Directors also considered the factors below in reaching their conclusions as to the overall substantive fairness of the Reverse Stock Split to the Company's unaffiliated shareholders. The factors discussed below do not represent an exhaustive list, but do reflect the factors that the Independent Directors and the Board of Directors considered to be material. Although the Board of Directors did not assign specific weight to any of the following factors, they did place emphasis on the opportunity for unaffiliated shareholders to accept the $0.56 cash out value which is at a premium to the current market value as of March 16, 2011, and the fact that the proposed cash out payment was determined to be fair to the Cashed-Out Shareholders by the fairness opinion of The Mentor Group. After weighing the substantive benefits and disadvantages, the Independent Directors, and afterwards, the Board of Directors, considered, on balance the Reverse Stock Split was fair to the unaffiliated shareholders.

Substantive Factors in Support of the Reverse Stock Split.

Fairness Analysis by The Mentor Group. The Mentor Group performed a due diligence review of the Company and undertook an analysis of the valuation multiples based on the discounted cash flow of the Company and of other publicly traded businesses in comparison to the Company. The range of values was approximately $0.45 to $0.67 for the discounted cash flow method and $0.49 to $0.63 for the market value method. Based on these ranges, the statistical medians were $0.56 per share in both methods, and the Independent Directors determined to approve that amount as the price to be paid to the Cashed-Out Shareholders. The Mentor Group determined that the $0.56 per share amount represented a fair value to be paid for the Common Stock that was to be cashed out. Following the recommendation of the Independent Directors and the analysis and fairness opinion of The Mentor Group, the Board of Directors concluded that $0.56 per share was fair to the shareholders that would become Cashed-Out Shareholders.

Cash-Out Consideration. Unaffiliated shareholders owning less than 120 shares of Common Stock, through the Reverse Stock Split, will have the opportunity to realize a cash amount at a premium to the current and recent historical market value of their shares, with no transaction costs. The Independent Directors and the Board of Directors set the cash out price at $0.56 because, in their collective business judgment, such price represented fair consideration at a premium to the current and historical market prices of the Common Stock to the unaffiliated Cashed-Out Shareholders and the valuation range indicated by The Mentor Group. There are no indications that, without effecting the proposed Reverse Stock Split, the market price for the Common Stock would meet or exceed such consideration at any time in the foreseeable future if there was no Reverse Stock Split. The Independent Directors and the Board of Directors determined the consideration to be paid in connection with the Reverse Stock Split to be fair to Cashed-Out Shareholders. Since the Company will be paying all transaction costs associated with the Reverse Stock Split, the transaction presents a cost-effective way for the Cashed-Out Shareholders to liquidate their holdings of Common Stock.

The Company will accrue significant cost and time savings. By reducing the Company’s number of shareholders of record to less than 300 and deregistering the Common Stock under the Exchange Act as intended, based on historical expenses, the Company expects to save (i) approximately $170,000 per year in professional fees and expenses for the preparation and filing of reports required by the Exchange Act, (ii) approximately $15,000 per year in costs related to being a publicly reporting company, such as Edgarization costs, future XBRL costs, printing and mailing costs and Transfer Agent expenses, (iii) approximately $20,000 per year in independent director fees and employee expense, (iv) approximately $25,000 in premiums for directors and officers insurance, (v) approximately $50,000 in expenses for compliance with the internal control and procedure requirements associated with SOX, the Dodd-Frank Act and other regulatory compliance issues applicable to public companies, and (vi) approximately $35,000 per year in other expenses. The termination of the Company's public reporting obligations will also alleviate a significant amount of time and effort previously required of the Company’s executive officer and accounting staff in preparing and reviewing the periodic reports and filings required of public companies under the Exchange Act and the pressure and expense of hiring English speaking staff to satisfy the regulatory reporting requirements, United States GAAP reporting requirements, and investor relations.

Additional shares may be acquired to remain shareholders. Shareholders who anticipate that they may become Cashed-Out Shareholders have the ability to remain a shareholder or to liquidate their holdings of Common Stock. The Board of Directors considers the structure of the Reverse Stock Split to be fair to unaffiliated shareholders because it gives them the option, exercisable in their sole discretion, to either remain a shareholder of the Company after the Reverse Stock Split or to receive the cash consideration offered in connection with the Reverse Stock Split. Current shareholders owning less than 120 shares of Common Stock may elect to remain shareholders of the Company by acquiring additional shares of Common Stock so that they own at least 120 shares of Common Stock immediately before the Reverse Stock Split. Conversely, shareholders owning 120 or more shares of Common Stock who desire to liquidate their shares in connection with the Reverse Stock Split at the premium price offered may reduce their holdings to less than 120 shares by selling shares prior to the Reverse Stock Split.

Notwithstanding the foregoing, the Company is aware that currently there is limited liquidity for the Common Stock. However, there is sufficient liquidity to allow current shareholders owning less than 120 shares of Common Stock to acquire additional shares of Common Stock so that they own at least 120 shares of Common Stock immediately before the Reverse Stock Split. To illustrate, as of March 16, 2011, the average daily trading volume for the Common Stock over the preceding three months was 5,161 shares. Given this average daily trading volume, there is some liquidity for a shareholder to acquire additional shares of Common Stock, especially in light of the relatively low reverse split ratio.

Percentage ownerships will not change significantly as a result of the Reverse Stock Split. There should be no material change in percentage ownership of Continuing Shareholders. An estimated 100,000 out of 27,613,019 shares of the Common Stock which are currently outstanding will be eliminated by the Reverse Stock Split. As a result, the percentage ownership of the Company by Continuing Shareholders after the Reverse Stock Split will be approximately the same as it was prior to the Reverse Stock Split. (See above, “Fairness of the Transaction – Potential Conflicts”) The Company believes that structuring the Reverse Stock Split in a manner that preserves the approximate percentage ownership of the Continuing Shareholders supports the fairness of the Reverse Stock Split to the unaffiliated shareholders.

Availability of dissenters’ rights under Nevada law. In addition to the ability to exercise control over the number of shares of Common Stock held as described above, the Independent Directors and the Board of Directors also considered fact that any Cashed-Out Shareholders who choose to do so will be entitled to dissent from the Reverse Stock Split and obtain payment for the fair value of their shares by complying with the appraisal rights procedures of the Nevada Business Corporation Law.

Long-term plan for Company operations. The Board of Directors over the past couple of years has endorsed a long-term plan for Company operations. This plan will not change once the Company ceases to be a public reporting company. This includes the following items: (i) the Company's two Independent Directors will continue to constitute 66% of the Board of Directors; (ii) the Board of Directors plans no material change in the current method of calculation of aggregate annual compensation of the Chief Executive Officer; (iii) the Company plans to continue to engage an independent accounting firm to perform annual reviews of the Company's financial statements, as appropriate and within sound business practice; (iv) the Company plans to continue to distribute to the Company's shareholders periodic statements concerning the business of the Company and periodic financials statements; and (v) the Company plans to continue operations in the same lines of business, with the same operational methods, which have proved successful and profitable in the past. The Board of Directors believes that the above actions are consistent with the Company's history of maintaining positive shareholder relations, and are important elements of the Board of Directors' long-term plan for Company operations and its long-term plan to maximize shareholder value.

Substantive Factors Not in Support of the Reverse Stock Split.

Reduced market for the Common Stock. The Independent Directors and the Board of Directors understand that there likely will be a substantial reduction or complete elimination of sale opportunities for the Common Stock in a public market. Following the Reverse Stock Split and the deregistration of the Common Stock under the Exchange Act, it is anticipated that the public market for its Common Stock will be substantially reduced or eliminated altogether, meaning that the Company’s shareholders will likely no longer have an opportunity to sell their shares of Common Stock in a public market. While such shares may be listed in the Pink Sheets, in all likelihood any current public market for the Common Stock will be highly illiquid after the suspension of the Company's periodic reporting obligations. This may have the effect of making it more difficult for unaffiliated shareholders to sell their shares of Common Stock and may also have the result of reducing the price that a potential buyer may pay for such shares. Notwithstanding the foregoing, private transactions may occur, and the Company will maintain the current or a substitute transfer agent to process stock transfer transactions.

There will be a termination of publicly available information. Upon terminating the registration of the Common Stock under the Exchange Act, the Company’s duty to file periodic reports with the SEC will be suspended, meaning that information regarding the Company's operations and financial results (which is currently available to investors and the general public) will no longer be publicly available. Thereafter, investors seeking information about the Company will have to contact the Company directly to receive such information. In such event, the Company may or may not provide investors with such requested information. In addition, certain provisions of the Exchange Act, including proxy statement disclosures in connection with shareholder meetings and related requirements of annual reports to shareholders, will no longer apply to the Company. The Independent Directors and the Board of Directors acknowledge that there are circumstances in which such termination of publicly available information may be disadvantageous to the Company's shareholders; however, they believe that the overall benefits to the Company of no longer being a public reporting company substantially outweigh such disadvantages to the Company's shareholders.

Unaffiliated shareholders will still be entitled to information regarding the Company in accordance with the Nevada corporate law. Specifically, Nevada corporate law requires the Company, upon receipt of a written request from a shareholder of at least six months holding at least 5% of the outstanding Common Stock, to permit inspection of the Company's books and records, including organizational documents, minutes of shareholder meetings, and written communications to the shareholders. Additionally, certain basic information about the officers and directors of the Company have to be filed with the Secretary of State of the State of Nevada annually, which will continue to apply. Certain actions taken by the shareholders and the requirement of an annual meeting also will continue to apply to the Company, pursuant to the provisions of Nevada law.

There may be a significant decline in the value of the Common Stock. Given the factors described under the two immediately preceding paragraphs, Continuing Shareholders may experience a significant decrease in the value of their shares of Common Stock.

No participation in future growth. Cashed-Out Shareholders will be unable to participate in any future increases in the value of the Common Stock. After the Reverse Stock Split, Cashed-Out Shareholders will have no further financial interest in the Company with respect to their cashed out shares, and thus will not have the opportunity to participate in the potential appreciation in the value of such shares. However, the Independent Directors and the Board of Directors have determined that this factor does not make the Reverse Stock Split unfair to unaffiliated shareholders given their option to remain as shareholders of the Company after the Reverse Stock Split. In addition, the cash consideration being offered for shares of the Common Stock in connection with the Reverse Stock Split includes a premium over the current market value and the historical market values of such shares.

Discontinued reporting obligations of certain insiders. Our executive officers, directors and 10% shareholders will no longer be required to file reports relating to their transactions in our Common Stock with the SEC under Section 16 of the Exchange Act, and will no longer be subject to the related prohibitions against retaining “short-swing profits” in our shares of Common Stock. Additionally, any persons acquiring more than 5% of our Common Stock will no longer be required to report their beneficial ownership under the Exchange Act.

Reduced access to equity and debt capital markets. Because the Company will no longer be registered with the SEC and will not be filing the periodic reports under the Exchange Act, it will likely be more time consuming and difficult for us to access the equity and debt markets. This is because there is propensity of investors to favor investments in public reporting companies because it facilitates their due diligence and provides for a more assured exit strategy through the public markets. Notwithstanding the foregoing, the Company has not raised capital in the public market since 2007, and it has obtained bank institutional financing instead as a better alternative. We do not expect the Reverse Stock Split to have a negative impact on the Company’s ability to meet its current financing needs.

Possible loss of prestige for the Company. Public companies are often viewed by shareholders, employees, investors, customers, vendors and others as more established, reliable and prestigious than privately held companies. Although the Company is not so followed, public companies are often followed by analysts who publish reports on their operations and prospects. Typically public companies garner more press and media coverage than companies whose securities are not available for purchase by the investing public. Companies that do not have the status as a public company may risk losing prestige in the eyes of those key constituencies.

Procedural Fairness. The Board of Directors believes that the transaction is procedurally fair to both Cashed-Out Shareholders and Continuing Shareholders, including the following:

The transaction is being effected in accordance with all applicable requirements of the Company's organizational documents and Nevada law.

The transaction has been unanimously approved by the Board of Directors, including the Independent Directors.

The transaction has been approved by a stockholder holding 63.13% of the issued and outstanding shares of the Common Stock.

Between the date of this Information Statement and the effective date of the Reverse Stock Split, all of the Company's shareholders will have an opportunity to adjust the number of shares of Common Stock they will own as of the effective date. Accordingly, shareholders who would otherwise become Cashed-Out Shareholders can become Continuing Shareholders, and shareholders who would otherwise become Continuing Shareholders can become Cashed-Out Shareholders.

The Cashed-Out Shareholders have dissenters rights under Nevada law, if they disagree with the offered consideration for the Cashed-Out shares.

Reports and Opinions. The Independent Directors considered the firm of The Mentor Group to act as its financial advisor. After discussions with The Mentor Group about the scope of the engagement and the cost, the Independent Directors caused the Company to enter into an agreement for the preparation of a valuation analysis of the Company, to assist in the evaluation of the Reverse Stock Split and the amount of consideration to be paid to the Cashed-Out Shareholders and to give a fairness opinion.

The Independent Directors received an oral business valuation analysis report on March 17, 2011, and a fairness opinion dated March 17, 2011 from The Mentor Group related to the fair value of the Company’s shares of Common Stock, the fairness of the consideration to be paid to the unaffiliated stockholders. The Mentor Group considered a number of factors in its analysis and used several methodologies in reaching its conclusions.

The full text of The Mentor Group fairness opinion is attached as an exhibit to this Information Statement as Appendix 3, which document sets forth, among other things, the assumptions made, the procedures followed, matters considered, and the limitations of the review undertaken by The Mentor Group, which are described below. You are urged to read The Mentor Group fairness opinion carefully and in its entirety.

In connection with its opinion, The Mentor Group made such reviews, analyses and inquiries as it deemed necessary or appropriate under the circumstances.

Discounted Cash Flow Method

The discounted cash flow (“DCF”) method forms the basis of determining the equity value under the income approach. The DCF method entails four basic steps, as follows:

§	The determination of the appropriate after-tax cash flows to discount based upon projected cash flow to be generated by ZMI.

§	The selection of an appropriate discount rate for ZMI based upon using the weighted-average cost of capital method with a capital structure of 50% equity and 50% debt.

§	The determination of a terminal value for the ZMI as of the end of the last period for which projections are available.

§	The determination of the equity value for ZMI based on the sum of the present value of the projected cash flows.

We have utilized Monte Carlo simulation that takes into consideration 10,000 iterations for the combinations of the valuation variables. We have utilized a range for specific uncertain valuation variables. These uncertain variables include revenue growth inputs, cost of goods sold inputs, operating expense input and the discount rate that ranges from 15.4% to 17.4%.

Determination of Discount Rate

The discount rate is intended to reflect all risks of ownership and the associated risks of realizing the stream of projected future cash flows. It can also be interpreted as the rate of return that would be required by providers of capital to the Company to compensate them for the time value of their money, as well as the risk inherent in the particular investment. Unless the capital providers could expect to earn this required rate of return, it would not be in their interest to invest. Thus, capital providers use the “opportunity cost of capital” or the return which could be earned on other investments with similar risk/return profiles as the basis from which to analyze each new investment opportunity.

It is important that the type of discount rate employed be consistent with the particular cash flow being discounted. Because the projected free cash flows contain no deduction for interest expense, any assumptions regarding the capital structure of the firm must be incorporated into the discount rate. Hence, the DCF approach uses a weighted-average cost of capital (“WACC”). The WACC calculation utilizes the following equation:

WACC = Kd (1-t)(D/EV) + Kp (P/EV) + Kc (C/EV)

Where		WACC = Weighted-average cost of capital
	Kd	=	Cost of debt capital (pre-tax)
	KP	=	Cost of preferred equity capital
	Kc	=	Cost of common equity capital
	D	=	Debt capital (market value)
	P	=	Preferred equity capital (market value)
	C	=	Common equity capital (market value)
	EV	=	Enterprise value (market value)
	T	=	Marginal corporate tax rate

The WACC is an average of the costs of all sources of capital (debt, preferred and common equity, etc.) for the Company, with each source weighted by its respective percentage share in the capital structure of the Company. The table above is a representation of the WACC that was used in the analysis of the Company.

The costs of capital used in the WACC are estimates of appropriate expected returns for the various providers of capital to the asset being valued. The best method of estimating these variables is to examine similar investment opportunities in the public market and attempt to determine the market consensus expected returns for these investments. These figures can then be used as a basis for selecting appropriate expected returns for the asset being valued. The cost of debt capital is typically defined as the yield to maturity on comparable debt instruments traded in the public market, as adjusted for specific risk factors related to the asset being valued. Similarly, the cost of preferred equity capital can be defined as the risk-adjusted yield to maturity on comparable, publicly traded, nonconvertible preferred stocks. In general, the yield to maturity represents the market consensus on what percentage return is appropriate for the particular security. It is an estimate of expected return as of a particular point in time, and is easy to compute given that the amount and timing of future payments from a fixed income security (interest or dividends) are contractually fixed.

Estimating the expected returns for similar intangible asset investments is not so straightforward. Unlike fixed income instruments, intangible assets do not provide the investor with a predictable stream of future payments. As a result, it is impossible to know exactly what returns investors expect from their investments in intangible assets. The most widely used method of estimating the cost of equity is the capital asset pricing model (“CAPM”). The CAPM is an expectational model that attempts to relate the risk inherent in an investment with the returns expected by investors. In short, the price paid for an asset must yield an expected return sufficient to compensate the investor for the risk that the expected future value of the asset is not realized. Expected return estimates generated by the CAPM will not, however, compensate the investor for elements of risk that can be easily reduced through diversification in a portfolio of investments. The following representation of the CAPM was used to estimate the customer’s cost of equity:

Kc = Rf + (B x Rp)

Where	Kc	=	Cost of common equity capital
	Rf	=	Risk-free rate of return
	B	=	Beta
	Rp	=	Equity risk premium

This application of the CAPM is built on the theory that the expected return on an equity investment can be explained by three factors: the risk-free rate of return, the equity risk premium, and beta. The risk-free rate of return represents the market consensus expected return on a security with no risk of default. Hence, it compensates the investor for the time value of his money. As a proxy for this hypothetical rate of return, we used the yield on newly issued long-term U.S. Treasury bonds, as of the valuation date.

The equity risk premium is intended to capture the additional return required by investors to compensate them for the risks inherent in equity investments. Adding the equity risk premium to the risk-free rate yields the total expected return on equity investments. In the analysis, The Mentor Group defined the equity risk premium as the historical average premium of common stock total returns over long-term Treasury bond yields, as presented in the Ibbotson annual yearbook. This equity risk premium is broken down into two components, the large company equity risk premium and the small company equity risk premium. The Mentor Group obtained both premiums from the Ibbotson annual yearbook for 2011.

Because the riskiness of equity investments will vary considerably, expected returns on different common stock investments will also vary. As a result, it is necessary to use the variable “beta” as a means of adjusting the magnitude of the risk premium to suit the specific risk profile of the equity investment. Beta is a standardized measure of non-diversifiable risk. It is defined as the covariance of the returns on the particular asset with the returns on the market portfolio, divided by the variance of the returns on the market portfolio. The beta for the market portfolio, or the “average” equity investment, is 1.0. The higher the perceived riskiness of a particular equity investment, relative to an average equity investment, the higher the beta is for that investment.

Application of the CAPM to compute a reasonable cost of equity for ZMI equity, and the selection of the additional variables used in the WACC equation were based partly on the comparative analysis of public companies in the industry, and the Ibbotson data; but, more on the Ibbotson market data. The Mentor Group factored in the specific risk associated with the Company in our analysis of WACC. Our analysis yielded a cost of equity of 24.6%. In utilizing the CAPM, we assumed that the beta would be 1.0; but, we utilized an industry risk premium of 3.2% based on a range of premiums outline in the Ibbotson market data. Included in this calculation, our selection of an appropriate discount rate also incorporated our assessment of the ability to achieve the projected operating results. Specifically, a Company specific premium of 6% was added into to the cost of equity to reflect this additional risk which brought the total required rate of return consistent with similar assets with comparable risk.

In addition to the estimated cost of equity, The Mentor Group considered that the capital structure of the entity would be 50% equity and 50% debt, based upon the assumed capital structure of similar companies. Therefore, the weighted average cost of the capital is based on the cost of the equity. In our analysis, we estimated the implied weighted average cost of capital for ZMI is 16.4%. For the valuation of the equity using the discounted cash flow method and Monte Carlo simulation, The Mentor Group utilized the weighted average cost of capital that ranged from 15.4% to 17.4%.

Market Approach – Public Guideline Company Method

This approach determines the value of a business enterprise by comparing the Company to comparable companies that are publicly traded. The first step in this approach is to select and analyze a sample of comparable companies. These publicly-traded companies are all larger than the Company. We focused our analysis on the following companies:

1.	Wonder Auto Technology, Inc.	WATG
2.	China Automotive Systems, Inc.	CAAS
3.	SORL Auto Parts, Inc.	SORL
4.	China Yuchai International Ltd.	CYD
5.	Wuhan General Group, Inc.	WUHN
6.	China Auto Logistics, Inc.	CALI
7.	China Gerui Advanced Material	CHOP

We identified three multiples that we utilized in our analysis. These multiples were:

1.		MVIC to Sales
2.		MVIC to EBITDA
3.		MVIC to EBIT

MVIC = Market Value of Invested Capital

We employed a Monte Carlo simulation model that utilized a range of the above referenced multiples. This model takes into consideration 10,000 iterations for the combinations of the valuation multiples. We applied the range of valuation multiples to the 2011 projected operating results to compute the estimated equity value. The range for the valuation multiples considered is as follows:

1.	MVIC to Sales	0.9x to 1.1x
2.	MVIC to EBITDA	6.5x to 8.5x
3.	MVIC to EBIT	7.1x to 9.1x

The opinion of The Mentor Group takes into consideration the equity per share value of the Cashed-Out Shares. In assessing the fairness of the Reverse Stock Split from a financial point of view, The Mentor Group considered the estimated equity value of the Company using the projected revenue and cash flows from the Company and the market multiples paid for similar companies.

Based on the foregoing, and in reliance thereon, it is The Mentor Group’s opinion that the Reverse Stock Split is fair to the shareholders of the Cashed-Out Shares from a financial point of view.

The Mentor Group was paid $30,000 for the fairness opinion and provided reimbursement of expenses, not to exceed $600, under the terms of an engagement agreement dated March 14, 2011.

Deliberations of the Board of Directors. The Independent Committee Board of Directors reached the conclusions above regarding the advisability of the Reverse Stock Split after an evaluation process chronologically summarized below:

On March 20, 2010, the President of the Company, Peter Wang had a meeting in the city of New York with Company’s investment banker, CapLink Financial Group, LLC (“CapLink”), represented by Mr. Tony Tsai, during which meeting CapLink suggested that going private by some means to terminate its reporting obligations under the United States securities laws may result much better situation for Company to raise capital in the future and offer more flexibility to the capitalization of the Company.

On May 25, 2010, Mr. Peter Wang had a telephone conversation with, Mr. Shi, one of the independent directors of the Company, in which they discussed whether the Company should go private as raised by CapLink. As part of the discussion, Mr. Wang and Mr. Shi focused on the capital needs of the Company going forward, the sources of capital available to the Company, whether or not there was continuing advantage to being a public reporting company in the United States, the stock trading activity of the Common Stock and the costs of being a public reporting company. After a discussion, it was agree that the Company should consider pursuing a plan to withdraw from the reporting obligations of the Company under the United States federal securities laws. It was also determined that Mr. Wang should continue to investigate the benefits and process of going private.

In June 2010, Mr. Wang had a conversation with Mr. Patrick Ko, a representative of FT Financial Global Capital, Inc. (an investment banking firm), during which they discussed whether the Company should go private. Mr. Wang raised the points that had been discussed between Mr. Shi and himself on May 25, 2010. During the conversation, Mr. Ko indicated that in his personal estimation, the Company might be better able to raise capital for its operations as a non-reporting company in the United States. Moreover, not being a public reporting company would also permit management to focus on its operations without the distractions of the demands of public reporting and responding to the demands of public shareholders.

On September 20, 2010, Mr. Peter Wang called an internal meeting of the Company managers, including the financial director of the Company, Vivian Chen, and held a discussion about the cost and other resources associated with keeping Company as a public reporting company. After discussion, management concluded that the Company should go private because the Company working capital was declining, and there is no meaningful way to raise substantial funds as a public company. Moreover, upon a review of the costs of continuing to be a public reporting company, it was seen that the annual expense was over $300,000 per year and that amount was likely to increase going forward, especially considering the effects of the Dodd-Frank legislation and the changes in Edgarization requirements.

During the period between late September 2010 and the end of December 2010, the Company’s ability to raise capital was made more clear to management. Although management considered equity forms of financing, because the market prices of the Common Stock were low and there was little trading volume to support the price or an offering of shares, such forms of financing offered were at unfavorable valuations and therefore were not practical or in the Company’s best interests. Rather, management actively sought to borrow money from one or more commercial banks for its operations, instead. The public price of the Common Stock, being so low, did not facilitate finding such debt financing either because it suggested a lower valuation of the Company and its assets.

On January 20, 2011, Mr. Peter Wang, as the chairman of the Board of Directors, called a meeting of the directors. The principal issue was to discuss the capital needs of the Company and to consider whether or not it was practical for the future of the Company to continue to be a public reporting company and continue to seek to have the common stock traded in a public market. The Board of Directors considered the informal, oral advice that management had heard from CapLink and FT Global Financial Capital, Inc., the experience of management in trying to raise capital during the later part of 2010 and the costs of being public. The board of directors concluded, after discussion, that they should establish a committee of the Board of Directors comprised of Mr. Shi and Mr. Chen, the two independent of directors, who would consider whether or not the Company should terminate the reporting obligations of the Company under the United States securities laws and in essence become a non-reporting, private company, which committee would make a recommendation to the Board of Directors.

During later January and February 2011, management, at the direction of the Independent Directors consulted by telephone with legal counsel to learn the various means by which a company could cease being obligated to prepare and publish public reports under the United States securities laws and the process and time frame needed to take such action. Management and legal counsel investigated the ability of the Company to pursue the different alternatives and assessed the merits of each. Management informally reported by telephone conference the results of these conversations and investigations to the Independent Directors.

On March 8, 2011, management also discussed with legal counsel the need for and benefits of a fairness opinion as part of the deliberative process of the Independent Directors and the information statement that would be provided to shareholders. After that discussion, management reported to the Independent Directors the conclusions of the conversation with legal counsel. On March 8, 2011, the Independent Directors held a meeting in which they determined that they would seek a fairness opinion as to the consideration to be paid to the unaffiliated shareholders that would be cashed-out in the Reverse Stock Split and obtain an analysis of the value of the Common Stock based on different valuation methodologies. Management discussed engaging a valuation firm with The Mentor Group, a specialist in valuations, appraisals and mergers and acquisitions. On March 9, 2011, the Independent Directors approached The Mentor Group to see if they would render a fairness opinion On March 9, 2011, management obtained a proposal from The Mentor Group to perform the analytic work for valuation of the Company in connection with the Reverse Stock Split and to provide a fairness option. Management reported to the Independent Directors, and after discussion the Independent Directors authorized management to negotiate and conclude an agreement to engage The Mentor Group. The Mentor Group was engaged pursuant to the terms of understanding dated March 14, 2011, under an agreement dated March 15, 2011. The fee to be paid was set at $30,000, plus expenses, not to exceed $600.

On March 10 and 11, 2011, management provided certain materials, including various estimates concerning the future business of the Company, to The Mentor Group. During the period of March 12 to 15, 2011, The Mentor Group had further discussions with management of the Company from time to time to obtain information concerning the business of the Company. On March 15, 2011, The Mentor Group had discussions with management of the Company about the range of value for a share of Common Stock of the Company. At this time, the Independent Directors set up a telephonic meeting with The Mentor Group, management of the Company and legal counsel for the Company to review the analysis for the value range for a share of Common Stock and receive the fairness opinion. The meeting was held March 17, 2011.

On March 17, 2011, at 10:00AM, the Independent Directors had a meeting at which The Mentor Group reviewed its analysis and the draft fairness opinion. Mr. Brad Cashion acted for The Mentor Group. Also attending the meeting was Mr. Peter Wang, representing management of the Company, Mr. Andrew Hudders, counsel to the Company, and Mr. Tsai of Caplink acted as translator. Mr. Cashion reviewed at length the discounted cash flow and market approach methods of valuation presented in the fairness opinion, and the underlying statistical data. After the presentation, the Independent Directors discussed the data presented and the determined that the consideration to be paid to the for the Cashed-Out Shares should be $0.56. They also reviewed the substantive factors in favor and against the Reverse Stock Split, the procedural steps to undertake the proposed transaction, and the potential conflicts of interest that the management and others may have in the transaction. The concluded that overall that the Reverse Stock Split was fair to the Company’s unaffiliated shareholders, both in terms of its form, substance and the cash consideration being offered, and that the reverse stock split is in the best interests of the Company and is substantively and procedurally fair to the Company’s unaffiliated shareholders, regardless of whether they are classified as cashed-out or continuing shareholders. Based on the foregoing, they recommended to the Board of Directors to approve the Reverse Stock Split and the amount of $0.56 to be paid for the cashed out shares.

On March 17, 2011, at 10:45AM, the Board of Directors met, to consider the recommendation of the Independent Directors with regard to the Reverse Stock Split. The Board of Directors considered the recommendation, and reviewed the draft fairness opinion of The Mentor Group as well as the various substantive factors for and against the proposed transaction. The Board of Directors also reviewed the procedural aspects of the transaction. The Board of Directors also considered the conflicts of interest that the management and others may have in the transaction. After deliberation, the Board of Directors concluded that that the Reverse Stock Split was fair to the Company’s unaffiliated shareholders, both in terms of its form, substance and the cash consideration being offered, and that the reverse stock split is in the best interests of the Company and is substantively and procedurally fair to the Company’s unaffiliated shareholders, regardless of whether they are classified as cashed-out or continuing shareholders. Based on the foregoing, the Board of Directors approved the Reverse Stock Split and the amount of $0.56 to be paid for the cashed out shares. The Board of Directors then commissioned management to seek shareholder approval, which could include seeking the consent of Ruihua International Ltd, as the holder of approximately 63% of the issued and outstanding Common Stock.

On March 18, 2011, Ruihua International Ltd., after review of certain information provided to it, including a draft of this Information Statement, provided its written consent at a shareholder to approve the Reverse Stock Split.

Recommendation of the Independent Committee and the Board of Directors. For the reasons discussed above, the Independent Directors and the Board of Directors has determined the Reverse Stock Split to be fair to the Company's unaffiliated shareholders, both in terms of its form and the cash consideration being offered. Furthermore, the Independent Directors and the Board of Directors unanimously concluded that the Reverse Stock Split is in the best interests of the Company and is substantively and procedurally fair to the Company's unaffiliated shareholders, regardless of whether such shareholders are classified as Cashed-Out Shareholders or Continuing Shareholders.

Financial Information.

The audited consolidated financial statements of the Company as of and for the periods ended June 30, 2009 and 2010 are incorporated in this information statement by reference to Item 8 of the Company’s 2010 Amended Annual Report on Form 10-K (filed with the SEC on December 13, 2010). The unaudited consolidated financial statements of the Company as of and for the period ended December 31, 2010 are incorporated in this information statement by reference to Item 1 of the Company’s Quarterly Report on Form 10-Q for the period ended December 31, 2010 (filed with the SEC on February 11, 2011). The 2010 Amended Annual Report and Quarterly Report for the period ended December 31, 2010 are collectively referred to as our Financial Reports.

The following summary of historical consolidated financial data was derived from the Company's audited consolidated financial statements as of and for the fiscal years ended June 30, 2009 and 2010, and the unaudited consolidated financial statements as of and for the fiscal quarters ended December 31, 2009 and 2010, presented in the Financial Reports. This financial information is only a summary and should be read in conjunction with the consolidated financial statements of the Company and other financial information, including notes thereto, contained in the Company's Financial Reports.

Audited Consolidated Balance Sheets for the years ended June 30, 2009 and 2010:

	June 30, 2010			June 30, 2009
Assets
Current assets:
Cash and cash equivalents	$	1,586,407		$	4,305,918
Short term investments
Net Receivables		4,081,495			1,989,057
Inventory		2,680,666			1,568,445
Other current assets		143,263			3,103,501

Total current assets		8,491,831			10,966,921

Property and equipment, net		3,017,569			2,662,924

Goodwill		3,425,868			3,407,262

Intangible Assets		451			1,522

Other assets		4,960,475			64,053

Total assets	$	19,896,194		$	17,102,682

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	4,110,232		$	1,616,509
Short/Current Long Term Debt		1,571,175			2,512,651
Other current liabilities		3,322,277			635,408
Total current liabilities		9,003,684			4,764,568

Minority Interest		295,664			2,759,845

Total liabilities		9,299,348			7,524,413

Stockholders’ equity:
Common stock,		27,613			27,613
Additional paid-in capital		16,484,097			16,484,097
Retained earnings		(7,558,542	)		(8,440,255	)
Other Stockholder Equity		1,643,678			1,506,814
Total stockholders’ equity		10,596,846			9,578,269

Total liabilities and equity		19,896,194			17,102,682

Audited Consolidated Statements of Operations and Comprehensive Income

	For the Years Ended June 30,
	2010			2009

Revenue	$	10,983,800		$	4,923,918

Cost of Revenue		8,359,486			3,839,489

Gross profit		2,624,314			1,084,429

Operating expenses
Selling, general and administrative		1,287,359			2,048,155

Operating Income or Loss		1,336,955			(963,726	)

Total Other Income/Expenses Net		345,867			(82,085	)
Earnings Before Interest And Taxes		1,682,822			(1,045,811	)
Interest Expense		(82,096	)		16,145
Income Before Tax		-1,600,726			(1,029,666	)
Income Tax Expense		( 264,418	)		(57,246	)
Minority Interest		(263,903	)		(45,278	)
Net Income From Continuing Ops		1,072,405			(1,132,190	)

Net Income		1,072,405			(1,132,190	)

Audited Consolidated Statements of Cash Flows for the years ended June 30, 2009 and 2010:

	For the Years Ended June 30,
	2010			2009

Net income (loss)	$	1,336,308		$	(1,086,912	)

Operating Activities, Cash Flows Provided By or Used In
Depreciation		323,734			215,844
Adjustments To Net Income		98,221			594,987
Changes In Accounts Receivables		(2,137,604	)		(1,249,392	)
Changes In Liabilities		2,005,482			1,325,876
Changes In Inventories		(1,098,936	)		(322,261	)
Changes In Other Operating Activities		829,842			1,961,485
Total Cash Flow From Operating Activities		1,357,047			1,439,627

Investing Activities, Cash Flows Provided By or Used In
Capital Expenditures		(666,156	)		(368,312	)
Investments		(2,253,052	)		(57,500	)
Other Cash flows from Investing Activities		(166,614	)		(178,965	)
Total Cash Flows From Investing Activities		(3,085,822	)		(604,777	)

Financing Activities, Cash Flows Provided By or Used In
Net Borrowings		(777,351	)		2,197,500
Total Cash Flows From Financing Activities		(777,351	)		2,197,500

Effect Of Exchange Rate Changes		10,956			1,444

Change in cash and cash equivalents		(2,495,170	)		3,033,794

Unaudited Consolidated Balance Sheets of the most recent quarter:

	December 31, 2010
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	5,293,194
Short term investments
Net Receivables		6,524,226
Inventory		3,676,790
Other current assets		910,403

Total current assets		16,404,613

Property and equipment, net		4,009,375

Goodwill		3,528,202

Intangible Assets

Other assets		4,103,810

Total assets	$	28,046,000

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	5,181,621
Short/Current Long Term Debt		9,207,777
Other current liabilities		1,269,054
Total current liabilities		15,658,452

Minority Interest		295,889

Total liabilities		15,954,341

Stockholders’ equity:
Common stock,		27,613
Additional paid-in capital		16,487,486
Retained earnings		(6,487,773	)
Other Stockholder Equity		2,064,333
Total stockholders’ equity		12,091,659

Total liabilities and equity		28,046,000

Unaudited Consolidated Statements of Operations and Comprehensive Income of the most recent quarter:

	For the Three Months Ended
	December 31,
	2010

Revenue	$	4,750,859

Cost of Revenue		3,497,710

Gross profit		1,253,149

Operating expenses
Selling, general and administrative		604,411

Operating Income or Loss		648,738

Total Other Income/Expenses Net		108,247
Earnings Before Interest And Taxes		756,985
Interest Expense		(186,783	)
Income Before Tax		570,202
Income Tax Expense		(10,595	)
Minority Interest		(48	)
Net Income From Continuing Ops		559,559

Net Income		559,559

Unaudited Consolidated Statements of Cash Flows of the most recent quarter:

	For the Six Months Ended December 31,
	2010

Net income (loss)	$	1,070,994

Operating Activities, Cash Flows Provided By or Used In
Depreciation		175,447
Adjustments To Net Income		(17,928	)
Changes In Accounts Receivables		(2,302,891	)
Changes In Liabilities		1,881,743
Changes In Inventories		(908,321	)
Changes In Other Operating Activities		(1,626,782	)
Total Cash Flow From Operating Activities		(1,727,738	)

Investing Activities, Cash Flows Provided By or Used In
Capital Expenditures		(1,069,057	)
Investments		627,768
Other Cash flows from Investing Activities
Total Cash Flows From Investing Activities		(441,289	)

Financing Activities, Cash Flows Provided By or Used In
Sale Purchase of Stock
Net Borrowings		4,541,176
Total Cash Flows From Financing Activities		4,541,176

Effect Of Exchange Rate Changes		61,362

Change in cash and cash equivalents		2,433,511

Stock Certificates.

The Company has appointed the Transfer Agent to act as exchange agent to carry out the exchange of certificates for cash or new certificates, as applicable. On the effective date of the Reverse Stock Split, all stock certificates evidencing ownership of Common Stock held by Cashed-Out Shareholders shall be deemed canceled without further action by such Cashed-Out Shareholders. Such certificates will no longer represent an ownership interest in the Company but will represent only the right to receive cash equal to $0.44 per share in exchange for such shares. Certificates representing shares of Common Stock held by Cashed-Out Shareholders subsequently presented for transfer will not be transferred on the Company's books and records.

The Transfer Agent will furnish shareholders with the necessary materials and instructions to effect such surrender promptly following the effective date of the Reverse Stock Split. The letter of transmittal will direct how certificates are to be surrendered for cash or new certificates, as applicable. Shareholders must complete and sign the letter of transmittal and return it with their stock certificate(s) to the Transfer Agent in accordance with the instructions set forth on the transmittal letter before they can receive cash payment for those shares or new certificates, as applicable. Do not send your stock certificates to us, and do not send them to the Transfer Agent until you have received a transmittal letter and followed the instructions therein. In connection with the Reverse Stock Split, the Common Stock will be identified by a new CUSIP number. This new CUSIP number will appear on all stock certificates representing shares of Common Stock issued after the effective date of Reverse Stock Split.

No service charges will be payable by shareholders in connection with the exchange of certificates or the payment of cash in lieu of issuing fractional shares. All expenses of the Reverse Stock Split will be borne by the Company.

ADDITIONAL INFORMATION REGARDING THE REVERSE STOCK SPLIT

Material Federal Income Tax Consequences. The following discussion is a summary of certain United States federal income tax consequences relating to the Reverse Stock Split. It does not purport to be a complete discussion or analysis of all potential tax consequences which may apply to the Company and its shareholders, and it is not intended as tax advice to any person or entity.

ACCORDINGLY, YOU ARE STRONGLY URGED TO CONSULT YOUR OWN TAX ADVISOR REGARDINGTHE TAX CONSEQUENCES OF THE PROPOSED REVERSE STOCK SPLIT, INCLUDING THEAPPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.

In reviewing this discussion of federal income tax consequences, please be advised of the following:

This disclosure only addresses the United States federal income tax consequences to shareholders who hold their shares of Common Stock as a capital asset.

This disclosure does not address all of the federal income tax consequences that may be relevant to particular shareholders based upon their individual circumstances or to shareholders who are subject to special rules, such as financial institutions, tax-exempt organizations, insurance companies, dealers in securities, foreign holders, or holders who acquired their shares pursuant to the exercise of employee stock options or otherwise as compensation.

This disclosure is based upon the United States Internal Revenue Code of 1986, as amended (the "Code"), and the laws, regulations, rulings and decisions in effect as of the date of this information statement, all of which are subject to change, possibly with retroactive effect, and to differing interpretations.

This disclosure does not address the tax consequences to the Company's shareholders under state, local, and foreign laws.

The Company has not requested or received a tax opinion from legal counsel with respect to any of the matters discussed herein.

No rulings have been or will be requested from the Internal Revenue Service with respect to any of the matters discussed herein, and there can be no assurance that future legislation, regulations, administrative rulings or court decisions would not alter the consequences set forth below.

Federal Income Tax Consequences to the Company. The Board of Directors believes that the Reverse Stock Split will be treated as a tax-free “recapitalization" under Section 368(a)(1)(E) of the Code for federal income tax purposes. Accordingly, the Company will not recognize taxable income, gain, or loss in connection with the Reverse Stock Split.

Federal Income Tax Consequences to the Continuing Shareholders. The Board of Directors believes that the Continuing Shareholders will not recognize gain or loss, or dividend income, as a result of the Reverse Stock Split and the aggregate basis and holding period of such shareholders in shares of Common Stock held immediately prior to the Reverse Stock Split will carry over as the aggregate basis and holding period of such shareholders' shares of Common Stock held immediately after the Reverse Stock Split.

Federal Income Tax Consequences to the Cashed-Out Shareholders. The Board of Directors believes that the Cashed-Out Shareholders' receipt of cash in lieu of fractional shares of Common Stock pursuant to the Reverse Stock Split will be treated as a redemption of stock and will be a taxable transaction for federal income tax purposes. The tax treatment of a redemption of stock is governed by Section 302 of the Code and, depending on a shareholder's specific circumstances, will be taxed as either: (i) a sale or exchange of the redeemed shares, in which case the shareholder will recognize gain or loss equal to the difference between the cash payment and the shareholder's adjusted tax basis for the redeemed shares; or (ii) a cash distribution which is treated: (A) first, as a taxable dividend to the extent of the Company's 2010 earnings and the Company's accumulated earnings and profits; (B) then, as a tax-free return of capital to the extent of the shareholder's adjusted tax basis in the redeemed shares; and (C) finally, as gain from the sale or exchange of the redeemed shares.

Capital Gain and Loss. For individuals, net capital gain (defined generally as total capital gains in excess of capital losses for the year) recognized upon the sale of capital assets that have been held for more than 12 months will generally be subject to tax at a rate not to exceed 15%. However, net capital gain recognized from the sale of capital assets that have been held for 12 months or less will continue to be subject to tax at ordinary income tax rates. Also, capital gain recognized by a corporate taxpayer will continue to be subject to tax at the ordinary income tax rates applicable to corporations. There are limitations on the deductibility of capital losses.

Special Rate for Certain Dividends. In general, dividends are taxed at ordinary income rates. However, "qualified dividend income" received by individual or non-corporate shareholders will be taxed at the rate that applies to net capital gain. As previously discussed, currently the maximum capital gain rate is 15%. To be eligible for the capital gain rate for "qualified dividend income," a shareholder must have held the shares of Common Stock for more than 60 days during the one 120-day period beginning 60 days before the ex-dividend period as measured under Section 246(c) of the Code and such shareholder must not be under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property. “Qualified dividend income" does not include any amount which a shareholder takes into account as investment income under Section 163(d)(4)(B) of the Code for purposes of determining such shareholder's allowed investment interest deduction.

YOU ARE URGED TO CONSULT WITH YOUR TAX ADVISOR REGARDING YOUR APPLICABILITY FOR, AND THE APPROPRIATE FEDERAL, STATE, LOCAL, FOREIGN OR OTHER TAX TREATMENT OF, ANY SUCH DIVIDEND INCOME.

Backup Withholding. Shareholders will be required to provide their social security or other taxpayer identification numbers (or, in some instances, additional information) to the Transfer Agent in connection with the Reverse Stock Split to avoid backup withholding requirements that might otherwise apply. The letter of transmittal will require each shareholder to deliver such information when the Common Stock certificates are surrendered following the effective date of the Reverse Stock Split. Failure to provide such information may result in backup withholding.

Appraisal Rights. Under Nevada law dissenting shareholders of the Company are entitled to appraisal or dissenting owners rights in connection with certain corporate actions. Such actions would include the Articles of Amendment being proposed to facilitate the Reverse Stock Split. The following summarizes a dissenting shareholder's appraisal rights, whereby a shareholder may seek to obtain a fair value for such shareholder's shares, which value may be determined to be different than the cash consideration being offered pursuant to the Reverse Stock Split through the process of dissenting shareholder appraisal rights. If you wish to exercise your dissenters' rights or preserve the right to do so, you should carefully review Appendix 1 to the Information Statement. If you fail to comply with the procedures specified in a timely manner, you may lose your dissenters' rights. A copy of Sections 92A.300 to 92.500, inclusive of the Nevada General Corporate Law, which provide the “rights of dissenting owners” has also been attached as Appendix 1 to this Information Statement. Because of the complexity of those procedures, you should seek the advice of counsel if you are considering exercising your dissenters' rights.

Pursuant to Chapter 92A (Section 300 through 500 inclusive) of the Nevada Revised Statutes ("CHAPTER 92A"), any stockholder of the Company is entitled to dissent to the Reverse Stock Split, and obtain payment of the fair value of the shares. In the context of the Reverse Stock Split, Chapter 92A provides that stockholders may elect to have the Company purchase pre-Reverse Stock Split shares that would become fractional shares as a result of the Reverse Stock Split for a cash price that is equal to the "fair value" of such shares, as determined in a judicial proceeding in accordance with the provisions of Chapter 92A. The fair value of the shares of any stockholder means the value of such shares immediately before the effectuation of the Reverse Stock Split, excluding any appreciation or depreciation in anticipation of the Reverse Stock Split, unless exclusion of any appreciation or depreciation would be inequitable, using customary and current valuation concepts, without discounting for lack of marketability or minority interests.

Stockholders who have not validly tendered their shares of Common Stock will be entitled to exercise dissenters' rights. Stockholders who perfect their dissenters' rights by complying with the procedures set forth in Chapter 92A will have the fair value of their shares determined by the Nevada state court and will be entitled to receive a cash payment equal to such fair value. Any such judicial determination of the fair value of shares could be based upon any valuation method or combination of methods the court deems appropriate. The value so determined could be more or less than the $0.56 per share to be paid in connection with the Reverse Stock Split. In addition, stockholders who invoke dissenters' rights may be entitled to receive payment of interest at a statutory rate from the effective time of the transaction on the amount determined to be the fair value of their shares.

Within 10 days after the effectuation of the Reverse Stock Split, the Company will send a written notice (a "Dissenters' Rights Notice") to all the record stockholders of the Company entitled to dissenters' rights. The Dissenters' Rights Notice will be accompanied by (i) a form for demanding payment from the Company that includes the date of the first announcement to the news media or to the stockholders of the terms of the proposed action and requires that the person asserting dissenter's rights certify whether or not they acquired beneficial ownership of the shares before that date; (ii) a copy of the provisions of Chapter 92A; and (iii) a brief description of the procedures that a stockholder must follow to exercise dissenter's rights.

In order to maintain eligibility to exercise dissenters' rights under Chapter 92A, you must take the following actions at the date specified in the Dissenters’ Rights Notice, which will be not less than 30 days after or more than 60 days after the date that the Dissenters' Rights Notice was delivered: (i) deliver a written demand for payment on the form provided in the Dissenters' Rights Notice; (ii) certify whether you acquired beneficial ownership of the shares before the date set forth in the Dissenters' Rights Notice; and (iii) deliver the certificates representing the dissenting shares to the Company.

Within 30 days after receipt of a demand for payment, the Company must pay each dissenter who complied with the provisions of Chapter 92A the amount the Company estimates to be the fair value of such shares, plus interest from the effective date of the Reverse Stock Split. The payment will be accompanied by the following: (i) financial statements for the Company for the year ended June 30, 2010 and the most recent interim financial statements; (ii) a statement of the Company's estimate of the fair value of the shares; and (iii) an explanation of how the interest was calculated. If the Company does not deliver payment within 30 days of receipt of the demand for payment, the dissenting stockholder may enforce the dissenter's rights by commencing an action in Clark County, Nevada or if the dissenting stockholder resides or has its registered office in Nevada, in the county where the dissenter resides or has its registered office.

If a dissenting stockholder disagrees with the amount of the Company's payment, the dissenting stockholder may, within 30 days of such payment, (i) notify the Company in writing of the dissenting stockholder's own estimate of the fair value of the dissenting shares and the amount of interest due, and demand payment of such estimate, less any payments made by the Company, or (ii) reject the offer by the Company if the dissenting stockholder believes that the amount offered by the Company is less than the fair value of the dissenting shares or that the interest due is incorrectly calculated. If a dissenting stockholder submits a written demand as set forth above and the Company accepts the offer to purchase the shares at the offer price, then the stockholder will be sent a check for the full purchase price of the shares within 40 days of acceptance.

If a demand for payment remains unsettled, the Company must commence a proceeding in the Clark County, Nevada district court within 60 days after receiving the demand. Each dissenter who is made a party to the proceeding shall be entitled to a judgment in the amount, if any, by which the court finds the fair value of the dissenting shares, plus interest, exceeds the amount paid by the Company. If a proceeding is commenced to determine the fair value of the common stock, the costs of such proceeding, including the reasonable compensation and expenses of any appraisers appointed by the court, shall be assessed against the Company, unless the court finds the dissenters acted arbitrarily, vexatiously or not in good faith in demanding payment. The court may also assess the fees and expenses of the counsel and experts for the respective parties, in amounts the court finds equitable against the Company if the court finds that (i) the Company did not comply with Chapter 92A or (ii) against either the Company or a dissenting stockholder, if the court finds that such party acted arbitrarily, vexatiously or not in good faith with respect to the rights provided by Chapter 92A.

A person having a beneficial interest in shares that are held of record in the name of another person, such as a broker, fiduciary, depository or other nominee, must act to cause the record holder to follow the requisite steps properly and in a timely manner to perfect dissenters' rights of appraisal. If the shares are owned of record by a person other than the beneficial owner, including a broker, fiduciary (such as a trustee, guardian or custodian), depositary or other nominee, the written demand for dissenters' rights of appraisal must be executed by or for the record owner. If shares are owned of record by more than one person, as in joint tenancy or tenancy in common, the demand must be executed by or for all joint owners. An authorized agent, including an agent for two or more joint owners, may execute a demand for appraisal for a stockholder of record, provided that the agent identifies the record owner and expressly discloses, when the demand is made, that the agent is acting as agent for the record owner. If a stockholder owns shares through a broker who in turn holds the shares through a central securities depository nominee such as CEDE & Co., a demand for appraisal of such shares must be made by or on behalf of the depository nominee and must identify the depository nominee as the record holder of such shares.

A record holder, such as a broker, fiduciary, depository or other nominee, who holds shares as a nominee for others, will be able to exercise dissenters' rights of appraisal with respect to the shares held for all or less than all of the beneficial owners of those shares as to which such person is the record owner. In such case, the written demand must set forth the number of shares covered by the demand. Where the number of shares is not expressly stated, the demand will be presumed to cover all shares outstanding in the name of such record owner.

The foregoing summary of the rights of dissenting stockholders under Chapter 92A does not purport to be a complete statement of the procedures to be followed by stockholders desiring to exercise any dissenters' rights of appraisal rights available under Chapter 92A. The preservation and exercise of dissenters' rights of appraisal require strict adherence to the applicable provisions of Chapter 92A, and the foregoing summary is qualified in its entirety by reference to Appendix 1 to this information statement.

The Company has not made any provision to obtain counsel or appraisal services for unaffiliated stockholders.

FOR A COMPLETE ANALYSIS OF THE APPRAISAL PROCESS, YOU ARE ENCOURAGED TO SEEK YOU OWN LEGAL COUNSEL.

Unclaimed Property Laws. The unclaimed property and escheat laws of each state provide that under circumstances defined in that state’s statutes, holders of unclaimed or abandoned property must surrender that property to the state. Cashed-Out Shareholders who do not return their share certificates and request payment following the Reverse Stock Split generally will have a period of time from the effective date in which to claim from the Company the cash payment to which they are entitled. States may have abandoned property laws which call for such state to obtain either (i) custodial possession of property that has been unclaimed until the owner reclaims it, or (ii) escheat of such property to the state. The “holding period” or the time period which must elapse before the property is deemed to be abandoned may vary by state. If we do not have an address for the holder of record of the shares, then unclaimed cash out payments will be turned over to the states as required.

Reservation of Rights. Although the Company is requesting shareholder approval of the proposed Articles of Amendment, the Board of Directors reserves the right to decide to abandon the Reverse Stock Split before the effective date of the Reverse Stock Split. Although the Board of Directors presently believes that the proposed Articles of Amendment are in the best interests of the Company, and thus has recommended a vote for them, the Board of Directors nonetheless believes that it is prudent to recognize that, between the date of this Information Statement and the effective date of the Reverse Stock Split, factual circumstances could possibly change such that it might not be appropriate or desirable to effect the Reverse Stock Split at that time. Such reasons include any change in the nature of the Company's shareholdings prior to the effective date of the Reverse Stock Split which would result in the Company being unable to reduce its number of shareholders of record to below 300 as a result of the Reverse Stock Split. If the Board of Directors decides to not file the proposed Articles of Amendment, the Board of Directors will notify the shareholders of such decision promptly by mail, press release or appropriate public disclosure.

Price Range of Common Stock.

Our common stock is quoted on the OTC Bulletin Board, or OTCBB, under the symbol “EQPI.OB”. There is a very limited trading market for our stock. The following table sets forth for the periods indicated the high and low prices per share traded for our common stock as reported on the OTCBB. The high and low prices per share traded for our common stock as reported on the OTCBB on March 14, 2011, the last day there were any trades prior to the approval of the transaction, were, $0.45 and $0.45, respectively, on which day there was 6,000 shares traded. On March 16, 2011 there were 27,613,019 shares of Common Stock outstanding held by approximately 413 holders of record. The quotations shown below represent prices among dealers of the Common Stock and do not include retail mark-ups, mark-downs, or commissions, and do not necessarily represent actual transactions.

Period Ended	High		Low
2008 (Quarterly)
September 30	$	0.20	$	0.05
December 31	$	0.07	$	0.01

2009 (Quarterly)
March 31	$	0.05	$	0.01
June 30	$	0.06	$	0.02
September 30	$	0.12	$	0.061
December 31	$	0.25	$	0.05

2010 (Quarterly)
March 31	$	0.35	$	0.18
June 30	$	0.35	$	0.06
September 30	$	0.50	$	0.15
December 31	$	0.72	$	0.45

2011 (Monthly)
January 31	$	0.72	$	0.50
February 28	$	0.50	$	0.29
March (through March 16 )	$	0.45	$	0.33

Prior Stock Purchases by the Company. The Company has not purchased any shares of its Common Stock during the past two years.

Dividends. The Company has not paid dividends on the Common Stock during the last two years, and has no plans to pay dividends on the Common Stock in the foreseeable future.

Interests of Certain Persons in Matters to be Acted Upon. Certain directors and officers of the Company have an interest in the equity securities of the Company (see the sections of this Information Statement entitled “Fairness of the Transaction – Potential Conflicts of Interest” and "Security Ownership of Certain Beneficial Owners and Management"). The Reverse Stock Split shall affect the shareholders of the Company only in accordance with the numbers of Common Stock held by them and will not be affected by the insider status of any shareholders. The directors and executive officers receive no extra or special benefit not shared on a pro rata basis by all the other holders of the Common Stock, except that, by deregistering the Common Stock under the Exchange Act subsequent to the consummation of the Reverse Stock Split, the Company will no longer be prohibited, pursuant to Section 402 of SOX, from making personal loans to the Company's directors or executive officers, the officers will no longer have to make personal certifications under Section 404 of SOX and the “short swing profit” rules under Section 16 of the Exchange Act will no longer apply. The Company does not have a present intention of making personal loans to its directors and officers, and the ability to make such loans was not a reason considered by the Company or the Board of Directors in evaluating the benefits of the Reverse Stock Split. If the Reverse Stock Split is implemented, neither the directors and officers of the Company nor the Continuing Shareholders will benefit by any material increase in their percentage ownership of the Common Stock or in the net book value of their holdings.

Sources of Funds and Expenses. Based on estimates of record ownership of the Common Stock, the number of shares of Common Stock outstanding, and other information as of March 16, 2011, and assuming that approximately 100,000 shares, of which approximately 37,800 are held by record shareholders, will be cashed out pursuant to the Reverse Stock Split, the Company estimates that the total funds required to consummate the Reverse Stock Split will be approximately $140,000, of which $ 56,000 will be used to pay the cash consideration to Cashed-Out Shareholders and $84,000 will be used to pay the following transactional costs:

Legal fees:	$	40,000
Transfer agent fees;	$	5,000
Printing costs:	$	3,000
Accounting fees:	$	2,500
Fairness opinion	$	30,000
Other	$	3,500
Total:	$	84,000

The Company intends to fund the foregoing costs of the Reverse Stock Split using cash on hand. The Company does not have any alternative financing arrangements or alternative financing plans; however, the Company believes that the likelihood that the Company will have sufficient cash on hand to pay the consideration to the Cashed-Out shareholders and the costs of the Reverse Stock Split.

Articles of Amendment. The form of the proposed amendment to effect the Reverse Stock Split, which will be filed with the Secretary of State for the State of Nevada is attached as Appendix 2 hereto.

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information about each of the members of the Board of Directors and each executive officer:

Name	Age	Position with Company	Director/ Officer Since
Peter Wang	56	Chairman, President and acting Chief Financial Officer	2007
Rong Shi	36	Director	2010
Chris Chen	39	Director	2010

Mr. Peter Wang has been the Chairman of the board of directors and President since the inception of Usunco in April 2006, and acting Chief Financial Officer since February 2010. He has more than 20 years of experience in technology and service area with strong background in research and development, operations and corporate management. Mr. Wang successfully co-founded a telecom venture in China, Unitech Telecom (now named UTStarcom, NASDAQ: UTSI) in 1990 and was the Executive Vice President until August 30, 1995. From August 1995 to December 2000, Mr. Wang was the Chairman and CEO of World Communication Group. From December 2000 to 2009, Mr. Wang was Chairman and CEO of China Quantum Communication Limited (later changed to Techedge, Inc. and then to China Biopharma, Inc.) Before forming his own companies, Mr. Wang worked at AT&T Bell Labs during 1987-1990 and Racal-Milgo Information System during 1983-1987. Mr. Wang was also a co-chairman of Business Advisory Council of the National Republican Congressional Committee during the period 1994-1995. In 2004, Mr. Wang received Outstanding 50 Asian Americans in Business Award. Mr. Wang earned his BS in Math & Computer Science and MS in Electrical Engineering from University of Illinois in 1983, as well as MBA in Marketing from Southeast-Nova University in 1986. We believe Mr. Wang’s qualifications to serve on our Board of Directors include his intimate knowledge of our operations as a result of his day to day leadership as our President.

Mr. Rong Shi has been Chairman and founder of Zhejiang Shengte Investment Co., Ltd. since August 2004. Mr. Shi founded and worked as General Manager of Zhejiang Bokai Auto A/C Compressor Co., Ltd. between March 2003 and October 2005. He was member of Oversight Committee of Rongda Trading Company during 2005 and 2006. Mr. Shi earned his MBA degree from Macao University of Science and Technology in 2003 and his BA degree from Shaoxin Liberal Arts College in 1997. We believe Mr. Shi’s qualifications to serve on our Board of Directors include his knowledge of compliance matters as evidenced by his Certificate for Sarbanes Oxley Training Program from Shanghai Financing University and Certificate for Compliance Officer for Public Company from China Stock Exchanges.

Mr. Chris Chen has been the General Manager of Manheim China, since February of 2007, where he manages Manheim’s overall business operation in China. From April 2005 to January of 2007, Mr. Chen worked as Principal, Director, and Marketing Manager of SAP AG for its global business operations in Germany, Singapore, and Canada, from January, 2001 to August, 2003, as a Project Manager of IBM Global Service in Canada, and from 1995 to 1999, as a Sales Industry Manager of Oracle Corporation, in China. Mr. Chen earned his MBA from INSEAD in France in 2004 and MS in Software Engineering from McMaster University in Canada in 2001, as well as his Bachelor of Engineering from Jiaotong University in China in 1992. We believe Mr. Chen’s qualifications to serve on our Board of Directors include his knowledge and expertise in the global and Chinese market for mechanical and computer engineering.

All directors are elected to annual terms by the holders of common stock. All directors hold office until the next annual meeting of shareholders and the election and qualification of their successors. Officers are elected annually by the board of directors and serve at the discretion of the Board.

There are no family relationships (whether by blood, marriage or adoption) among the Zhongchai directors or executive officers.

PRINCIPAL SHAREHOLDERS

The following table sets forth as of March 16, 2011 the beneficial ownership of our Common Stock by (a) each person or group of persons known to us to beneficially own more than 5% of the outstanding shares of our Common Stock, (b) each of our directors and executive officers, and (c) all of our directors and executive officers as a group. As of March 16, 2011, we had 27,613,019 issued and outstanding shares of Common Stock.

Name and Address of Beneficial Owner(s)	Amount and Nature of Beneficial Ownership (1)		Percentage of Ownership
Sinoquest Management Ltd. (2) 224 Tianmushan Road, Zhongrong Chengshi Huayuan 5-1-602, Hangzhou, 310007 P.R.C.		4,120,990		14.92	%

Peter Wang – Chairman & President (2) 224 Tianmushan Road, Zhongrong Chengshi Huayuan 5-1-602, Hangzhou, 310007 P.R.C.		1,957,470		7.09	%

Rong Shi - Director 224 Tianmushan Road, Zhongrong Chengshi Huayuan 5-1-602, Hangzhou, 310007 P.R.C.		200,000		*

Chris X. Chen - Director 224 Tianmushan Road, Zhongrong Chengshi Huayuan 5-1-602, Hangzhou, 310007 P.R.C.		–		–

Jason Zhongyuan Lu 10510 Hillsboro Road Santa Ana, CA 92705 U.S.A.		1,553,634		5.63	%

Ruihua International Ltd. (3) 11/F Front Block, Hang Lok Building, 130 Wing Lok Street, Sheung Wan, Hong Kong		17,431,104		63.13	%

All Directors and Executive Officers as a Group (3 persons) (4)		1,957,470,		7.09	%

* Less than one percent.

(1)

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission, which include holding voting and investment power with respect to the securities. Shares of common stock subject to options or warrants currently exercisable, or exercisable within 60 days, are deemed outstanding for computing the percentage of the total number of shares beneficially owned by the designated person, but are not deemed outstanding for computing the percentage for any other person.

(2)	Peter Wang has a 47.5% beneficial ownership in Sinoquest Management Limited.

(3)	The officer and director of Ruihua International Limited ("Ruihua") who has the right to vote and dispose of the shares is Mr. Yang Yong Hu. The foregoing information is derived from an amended 13D filed by Ruihua with the SEC on August 4, 2009.

(4)	Consists of Peter Wang, Rong Si and Chris X. Chen.

WHERE YOU CAN FIND MORE INFORMATION

The Reverse Stock Split is a “going private” transaction subject to Rule 13e-3 of the Exchange Act. We have filed a Rule 13e-3 Transaction Statement on Schedule 13E-3 under the Exchange Act with respect to the Reverse Stock Split. The Schedule 13E-3 contains additional information about us. Copies of the Schedule 13E-3 are available for inspection and copying at our principal executive offices during regular business hours by any of our interested shareholders, or a representative who has been so designated in writing, and may be inspected and copied, or obtained by mail, by written request directed to 224 Tianmushan Road Zhongrong Chengshi Huayuan 5-1-602, Hangzhou, P.R. China 310007.

We are currently subject to the information requirements of the Exchange Act and file periodic reports, proxy statements and other information with the SEC relating to our business, financial and other matters.

You may read and copy any document we file at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our SEC filings are also available to the public over the Internet at the SEC’s website at www.sec.gov.

HOUSEHOLDING

We will be “householding” this Information Statement. This means that only one copy of this Information Statement will be sent to you and the other stockholders who share your address unless we have received contrary instructions from one or more of those stockholders. Householding is designed to reduce the volume of duplicate information that stockholders receive and reduce our printing and mailing expenses.

If your household has received only one copy of this notice, and you would prefer to receive separate copies of this document, either now or in the future, please call us at 904-418-9133 or write to us at Zhongchai Machinery, Inc., 224 Tianmushan Road, Zhongrong Chengshi Huayuan 5-1-602, Hangzhou, P.R. China 310007, Attention: Corporate Secretary. We will deliver separate copies promptly. If you are now receiving multiple copies of our proxy materials and would like to have only one copy of these documents delivered to your household in the future, please contact us in the same manner.

Appendix 1

EXHIBIT A TO INFORMATION STATEMENT

NEVADA REVISED STATUTES

RIGHTS OF DISSENTING OWNERS

NRS 92A.300 DEFINITIONS. As used in NRS 92A.300 to 92A.500, inclusive, unless the context otherwise requires, the words and terms defined in NRS 92A.305 to 92A.335, inclusive, have the meanings ascribed to them in those sections.

NRS 92A.305 "BENEFICIAL STOCKHOLDER" DEFINED. "Beneficial stockholder" means a person who is a beneficial owner of shares held in a voting trust or by a nominee as the stockholder of record.

NRS 92A.310 "CORPORATE ACTION" DEFINED. "Corporate action" means the action of a domestic corporation.

NRS 92A.315 "DISSENTER" DEFINED. "Dissenter" means a stockholder who is entitled to dissent from a domestic corporation's action under NRS 92A.380 and who exercises that right when and in the manner required by NRS 92A.400 to 92A.480, inclusive.

NRS 92A.320 "FAIR VALUE" DEFINED. "Fair value," with respect to a dissenter's shares, means the value of the shares determined:

Immediately before the effectuation of the corporate action to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the corporate action unless exclusion would be inequitable;

Using customary and current valuation concepts and techniques generally employed for similar businesses in the context of the transaction requiring appraisal; and

Without discounting for lack of marketability or minority status.

NRS 92A.325 "STOCKHOLDER" DEFINED. "Stockholder" means a stockholder of record or a beneficial stockholder of a domestic corporation.

NRS 92A.330 "STOCKHOLDER OF RECORD" DEFINED. "Stockholder of record" means the person in whose name shares are registered in the records of a domestic corporation or the beneficial owner of shares to the extent of the rights granted by a nominee's certificate on file with the domestic corporation.

NRS 92A.335 "SUBJECT CORPORATION" DEFINED. "Subject corporation" means the domestic corporation which is the issuer of the shares held by a dissenter before the corporate action creating the dissenter's rights becomes effective or the surviving or acquiring entity of that issuer after the corporate action becomes effective.

Appendix 1, Page 1

NRS 92A.340 COMPUTATION OF INTEREST. Interest payable pursuant to NRS 92A.300 to 92A.500, inclusive, must be computed from the effective date of the action until the date of payment, at the rate of interest most recently established pursuant to NRS 99.040.

NRS 92A.350 RIGHTS OF DISSENTING PARTNER OF DOMESTIC LIMITED PARTNERSHIP. A partnership agreement of a domestic limited partnership or, unless otherwise provided in the partnership agreement, an agreement of merger or exchange, may provide that contractual rights with respect to the partnership interest of a dissenting general or limited partner of a domestic limited partnership are available for any class or group of partnership interests in connection with any merger or exchange in which the domestic limited partnership is a constituent entity.

NRS 92A.360 RIGHTS OF DISSENTING MEMBER OF DOMESTIC LIMITED-LIABILITY COMPANY. The articles of organization or operating agreement of a domestic limited-liability company or, unless otherwise provided in the articles of organization or operating agreement, an agreement of merger or exchange, may provide that contractual rights with respect to the interest of a dissenting member are available in connection with any merger or exchange in which the domestic limited-liability company is a constituent entity.

NRS 92A.370 RIGHTS OF DISSENTING MEMBER OF DOMESTIC NONPROFIT CORPORATION.

1. Except as otherwise provided in subsection 2, and unless otherwise provided in the articles or bylaws, any member of any constituent domestic nonprofit corporation who voted against the merger may, without prior notice, but within 30 days after the effective date of the merger, resign from membership and is thereby excused from all contractual obligations to the constituent or surviving corporations which did not occur before his resignation and is thereby entitled to those rights, if any, which would have existed if there had been no merger and the membership had been terminated or the member had been expelled.

2. Unless otherwise provided in its articles of incorporation or bylaws, no member of a domestic nonprofit corporation, including, but not limited to, a cooperative corporation, which supplies services described in chapter 704 of NRS to its members only, and no person who is a member of a domestic nonprofit corporation as a condition of or by reason of the ownership of an interest in real property, may resign and dissent pursuant to subsection 1.

NRS 92A.380 RIGHT OF STOCKHOLDER TO DISSENT FROM CERTAIN CORPORATE ACTIONS AND TO OBTAIN PAYMENT FOR SHARES.

1. Except as otherwise provided in NRS 92A.370 and 92A.390, any stockholder is entitled to dissent from, and obtain payment of the fair value of his shares in the event of any of the following corporate actions:

(a) Consummation of a conversion or plan of merger to which the domestic corporation is a constituent entity:

Appendix 1, Page 2

(1) If approval by the stockholders is required for the merger by NRS 92A.120 to 92A.160, inclusive, or the articles of incorporation, regardless of whether the stockholder is entitled to vote on the plan of merger; or

(2) If the domestic corporation is a subsidiary and is merged with its parent pursuant to NRS 92A.180.

(b) Consummation of a plan of conversion to which the domestic corporation is a constituent entity as the corporation whose subject owner’s interests will be converted.

(c) Consummation of a plan of exchange to which the domestic corporation is a constituent entity as the corporation whose subject owner's interests will be acquired, if his shares are to be acquired in the plan of exchange.

(d) Any corporate action taken pursuant to a vote of the stockholders to the extent that the articles of incorporation, bylaws or a resolution of the board of directors provides that voting or nonvoting stockholders are entitled to dissent and obtain payment for their shares.

(e) Accordance of full voting rights to control shares, as defined in NRS 78.3784, only to the extent provided for pursuant to NRS 78.3793.

(f) Any corporate action not described in this subsection that will result in the stockholder receiving money or scrip instead of fractional shares except where the stockholder would not be entitled to receive such payment pursuant to NRS 78.205, 78.2055 or 78.207.

2. A stockholder who is entitled to dissent and obtain payment pursuant to NRS 92A.300 to 92A.500, inclusive, may not challenge the corporate action creating his entitlement unless the action is unlawful or fraudulent with respect to him or the domestic corporation.

3. From and after the effective date of any corporate action described in subsection 1, no stockholder who has exercised the right to dissent pursuant to NRS 92A.300 to 92A.500, inclusive, is entitled to vote his or her shares for any purpose or to receive payment of dividends or any other distributions on shares. This subsection does to apply to dividends or other distributions payable to stockholders on a date before the effective date of any corporate action from which the stockholder has dissented

NRS 92A.390 LIMITATIONS ON RIGHT OF DISSENT: STOCKHOLDERS OF CERTAIN CLASSES OR SERIES; ACTION OF STOCKHOLDERS NOT REQUIRED FOR PLAN OF MERGER.

1. There is no right of dissent with respect to a plan of merger, conversion or exchange in favor of stockholders of any class or series which 1 is:

(a) A covered security under section 18(b)(1)(A) or (B) or the Securities Act of 1933, 15 U.S.C. Section 77r(b)(1)(A) or (B), as amended;

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(b) Traded in an organized market and has at least 2,000 stockholders and a market value of at least $20,000,000, exclusive of the value of such shares held by the corporation’s subsidiaries, senior executives, directors, and beneficial stockholders owning more than 10 percent of such shares; or

(c) Issued by an open end management investment company registered with the Securities and Exchange Commission under the Investment Company Act of 1940 and which may be redeemed at the option of the holder at net asset value, unless the articles of incorporation of the corporation issuing the class or series provide otherwise.

2. The applicability of subsection 1 must be determined as of:

(a) The record date fixed to determine the stockholders entitled to receive notice of and to vote at the meeting of stockholders to act upon the corporate action requiring dissenter’s rights; or

(b) The day before the effective date of such corporate action if there is no meeting of stockholders.

3. Subsection 1 is not applicable and dissenter’s rights are available pursuant to NRS 92A.380 for the holders of any class or series of shares who are required by the terms of the corporate action requiring dissenter’s rights to accept for such shares anything other than cash or shares of any class or any series of shares of any corporation, or any other proprietary interest of any other entity, that satisfies the standards set fourth in subsection 1 at the time the corporate action becomes effective.

4. There is no right of dissent for any holders of stock of the surviving domestic corporation if the plan of merger does not require action of the stockholders of the surviving domestic corporation under NRS 92A.130.

5. There is no right of dissent for any holders of stock of the parent domestic corporation if the plan of merger does not require action of the stockholders of the parent domestic corporation under NRS 92A.180.

NRS 92A.400 LIMITATIONS ON RIGHT OF DISSENT: ASSERTION AS TO PORTIONS ONLY TO SHARES REGISTERED TO STOCKHOLDER; ASSERTION BY BENEFICIAL STOCKHOLDER.

1. A stockholder of record may assert dissenter's rights as to fewer than all of the shares registered in his or her name only if the stockholder of record dissents with respect to all shares of the class or series beneficially owned by any one person and notifies the subject corporation in writing of the name and address of each person on whose behalf the stockholder of record asserts dissenter's rights. The rights of a partial dissenter under this subsection are determined as if the shares as to which the partial dissenter dissents and his or her other shares were registered in the names of different stockholders.

2. A beneficial stockholder may assert dissenter's rights as to shares held on his or her behalf only if the beneficial stockholder:

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(a) Submits to the subject corporation the written consent of the stockholder of record to the dissent not later than the time the beneficial stockholder asserts dissenter's rights; and

(b) Does so with respect to all shares of which he is the beneficial stockholder or over which he or she has power to direct the vote.

NRS 92A.410 NOTIFICATION OF STOCKHOLDERS REGARDING RIGHT OF DISSENT.

1. If a proposed corporate action creating dissenters' rights is submitted to a vote at a stockholders' meeting, the notice of the meeting must state that stockholders are, are not or may be entitled to assert dissenters' rights under NRS 92A.300 to 92A.500, inclusive. If the domestic corporation concludes that dissenter’s rights are or may be available, a copy of NRS 92A.300 to 92A.500, inclusive, must accompany the meeting notice sent to those record stockholders entitled to exercise dissenter’s rights.

2. If the corporate action creating dissenters' rights is taken by written consent of the stockholders or without a vote of the stockholders, the domestic corporation shall notify in writing all stockholders entitled to assert dissenters' rights that the action was taken and send them the dissenter's notice described in NRS 92A.430.

NRS 92A.420 PREREQUISITES TO DEMAND FOR PAYMENT FOR SHARES.

1. If a proposed corporate action creating dissenters' rights is submitted to a vote at a stockholders' meeting, a stockholder who wishes to assert dissenter's rights:

(a) Must deliver to the subject corporation, before the vote is taken, written notice of the stockholder intent to demand payment for his shares if the proposed action is effectuated; and

(b) Must not vote, or cause permit to be voted, any of his or her shares of such class or series in favor of the proposed action.

2. If a proposed corporate action creating dissenters' rights is taken by written consent of the stockholders, a stockholder who wishes to assert dissenters' rights with respect to any class or series of shares must not consent to or approve the proposed corporate action with respect to such class or series.

3. A stockholder who does not satisfy the requirements of subsection 1 or 2 and NRS 92A.400 is not entitled to payment for his or her shares under this chapter.

NRS 92A.430 DISSENTER'S NOTICE: DELIVERY TO STOCKHOLDERS ENTITLED TO ASSERT RIGHTS; CONTENTS.

1. The subject corporation shall deliver a written dissenter's notice to all stockholders entitled to assert dissenters' rights.

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2. The dissenter's notice must be sent no later than 10 days after the effective date of the corporate action specified in NRS 92A.380, and must:

(a) State where the demand for payment must be sent and where and when certificates, if any, for shares must be deposited;

(b) Inform the holders of shares not represented by certificates to what extent the transfer of the shares will be restricted after the demand for payment is received;

(c) Supply a form for demanding payment that includes the date of the first announcement to the news media or to the stockholders of the terms of the proposed action and requires that the person asserting dissenter's rights certify whether or not the person acquired beneficial ownership of the shares before that date;

(d) Set a date by which the subject corporation must receive the demand for payment, which may not be less than 30 nor more than 60 days after the date the notice is delivered; and

(e) Be accompanied by a copy of NRS 92A.300 to 92A.500, inclusive.

NRS 92A.440 DEMAND FOR PAYMENT AND DEPOSIT OF CERTIFICATES; RETENTION OF RIGHTS OF STOCKHOLDER.

1. A stockholder who receives a dissenter’s notice pursuant to NRS 92A.430 and who wishes to exercise dissenter’s rights must:

(a) Demand payment;

(b) Certify whether the stockholder or the beneficial owner on whose behalf he or she is dissenting, as the case may be, acquired beneficial ownership of the shares before the date required to be set forth in the dissenter's notice for this certification; and

2. If a stockholder fails to make the certification required by paragraph (b) of subsection 1, the subject corporation may elect to treat the stockholder’s shares as after-acquired shares under NRS 92A.470.

3. Once a stockholder deposits that stockholder’s certificates or, in the case of uncertified shares makes demand for payment, that stockholder loses all rights as a stockholder, unless the stockholder withdraws pursuant to subsection 4.

4. A stockholder who has complied with subsection 1 may nevertheless decline to exercise dissenter’s rights and withdraw from the appraisal process by so notifying the subject corporation in writing by the date set forth in the dissenter’s notice pursuant to NRS 92A.430. A stockholder who fails to so withdraw from the appraisal process may not thereafter withdraw without the subject corporation’s written consent.

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5. The stockholder who does not demand payment or deposit his or her certificates where required, each by the date set forth in the dissenter’s notice, is not entitled to payment for his or her shares under this chapter.

NRS 92A.450 UNCERTIFICATED SHARES: AUTHORITY TO RESTRICT TRANSFER AFTER DEMAND FOR PAYMENT; RETENTION OF RIGHTS OF STOCKHOLDER.

1. The subject corporation may restrict the transfer of shares not represented by a certificate from the date the demand for their payment is received.

NRS 92A.460 PAYMENT FOR SHARES: GENERAL REQUIREMENTS.

1. Except as otherwise provided in NRS 92A.470, within 30 days after receipt of a demand for payment, the subject corporation shall pay in cash to each dissenter who complied with NRS 92A.440 the amount the subject corporation estimates to be the fair value of the dissenter’s shares, plus accrued interest. The obligation of the subject corporation under this subsection may be enforced by the district court:

(a) Of the county where the corporation's registered office is located;

(b) If the subject corporation’s principal office is not located in this State, in the county in which the corporation’s registered office is located; or

(c) At the election of any dissenter residing or having its principal registered office this State, of the county where the dissenter resides or has its principal or registered office. The court shall dispose of the complaint promptly.

2. The payment must be accompanied by:

(a) The subject corporation's balance sheet as of the end of a fiscal year ending not more than 16 months before the date of payment, a statement of income for that year, a statement of changes in the stockholders' equity for that year or, where such financial statements are not reasonably available, then such reasonably equivalent financial information and the latest available quarterly financial statements, if any;

(b) A statement of the subject corporation’s estimate of the fair value of the shares; and

(c) A statement of the dissenter's rights to demand payment under NRS 92A.480 and that if any such stockholder does not do so within the period specified, such stockholder shall be deemed to have accepted such payment in full satisfaction of the corporation’s obligations under this chapter.

NRS 92A.470 PAYMENT FOR SHARES: SHARES ACQUIRED ON OR AFTER DATE OF DISSENTER'S NOTICE.

1. A subject corporation may elect to withhold payment from a dissenter unless the dissenter was the beneficial owner of the shares before the date set forth in the dissenter's notice as the first date of any announcement to the news media or to the stockholders of the terms of the proposed action.

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2. To the extent the subject corporation elects to withhold payment, within 30 days after receipt of a demand for payment, the subject corporation shall notify the dissenters described in subsection 1:

(a) Of the information required by paragraph (a) of subsection 2 of NRS 92A.460;

(b) Of the subject corporation’s estimate of fair value pursuant to paragraph (b) of subsection 2 of NRS 92A.460

(c) That they may accept the subject corporation’s estimate of fair value, plus interest, in full satisfaction of their demands or demand appraisal under NRS 92A.480

(d) That those stockholders who wish to accept such an offer must so notify the subject corporation of their acceptance of the offer within 30 days after receipt of such offer; and

(e) That those stockholders who do not satisfy the requirements for demanding appraisal under NRS 92A.480 shall be deemed to have accepted the subject corporation’s offer in full satisfaction of the stockholder’s demand.

3. Within 10 days after receiving the stockholder’s acceptance pursuant to subsection 2, the subject corporation shall pay in cash the amount offered under paragraph (b) of subsection 2 to each stockholder who agreed to accept the subject corporation’s offer in full satisfaction of the stockholder’s demand.

4. Within 40 days after sending the notice described in subsection 2, the subject corporation shall pay in cash the amount offered under paragraph (b) of subsection 2 to each stockholder described in paragraph (e) of subsection 2.

NRS 92A.480 DISSENTER'S ESTIMATE OF FAIR VALUE: NOTIFICATION OF SUBJECT CORPORATION; DEMAND FOR PAYMENT OF ESTIMATE.

1. A dissenter paid pursuant to NRS 92A.460 who is dissatisfied with the amount of the payment may notify the subject corporation in writing of the dissenter’s own estimate of the fair value of his or her shares and the amount of interest due, and demand payment of such estimate, less any payment pursuant to NRS 92A.460. A dissenter offered payment pursuant to NRS 92A.470 who is dissatisfied with the offer may reject the offer pursuant to NRS 92A.470 and demand payment of the fair value of his or her shares and interest due.

2. A dissenter waives the right to demand payment pursuant to this section unless the dissenter notifies the subject corporation of his or her demand to be paid the dissenter’s stated estimate of fair value plus interest under subsection 1 in writing within 30 days after receiving the subject corporation’s payment or offer of payment under NRS 92A.460 or 92A.470 and is entitled only to the payment made or offered.

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NRS 92A.490 LEGAL PROCEEDING TO DETERMINE FAIR VALUE: DUTIES OF SUBJECT CORPORATION; POWERS OF COURT; RIGHTS OF DISSENTER.

1. If a demand for payment remains unsettled, the subject corporation shall commence a proceeding within 60 days after receiving the demand and petition the court to determine the fair value of the shares and accrued interest. If the subject corporation does not commence the proceeding within the 60-day period, it shall pay each dissenter whose demand remains unsettled the amount demanded.

2. A subject corporation shall commence the proceeding in the district court of the county where its principal office is located in this Sate. If the principal office of the subject corporation is not located in the State, it shall commence the proceeding in the county where the principal office of the domestic corporation merged with or whose shares were acquired is not located in this State, the subject corporation shall commence the proceeding in the district court in the count in which the corporation’s registered office is located.

3. The subject corporation shall make all dissenters, whether or not residents of Nevada, whose demands remain unsettled, parties to the proceeding as in an action against their shares. All parties must be served with a copy of the petition. Nonresidents may be served by registered or certified mail or by publication as provided by law.

4. The jurisdiction of the court in which the proceeding is commenced under subsection 2 is plenary and exclusive. The court may appoint one or more persons as appraisers to receive evidence and recommend a decision on the question of fair value. The appraisers have the powers described in the order appointing them, or any amendment thereto. The dissenters are entitled to the same discovery rights as parties in other civil proceedings.

5. Each dissenter who is made a party to the proceeding is entitled to a judgment:

(a) For the amount, if any, by which the court finds the fair value of the dissenter’s shares, plus interest, exceeds the amount paid by the subject corporation; or

(b) For the fair value, plus accrued interest, of the dissenter’s after-acquired shares for which the subject corporation elected to withhold payment pursuant to NRS 92A.470.

NRS 92A.500 LEGAL PROCEEDING TO DETERMINE FAIR VALUE: ASSESSMENT OF COSTS AND FEES.

1. The court in a proceeding to determine fair value shall determine all of the costs of the proceeding, including the reasonable compensation and expenses of any appraisers appointed by the court. The court shall assess the costs against the subject corporation, except that the court may assess costs against all or some of the dissenters, in amounts the court finds equitable, to the extent the court finds the dissenters acted arbitrarily, vexatiously or not in good faith in demanding payment.

2. The court may also assess the fees and expenses of the counsel and experts for the respective parties, in amounts the court finds equitable:

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(a) Against the subject corporation and in favor of all dissenters if the court finds the subject corporation did not substantially comply with the requirements of NRS 92A.300 to 92A.500, inclusive; or

(b) Against either the subject corporation or a dissenter in favor of any other party, if the court finds that the party against whom the fees and expenses are assessed acted arbitrarily, vexatiously or not in good faith with respect to the rights provided by NRS 92A.300 to 92A.500, inclusive.

3. If the court finds that the services of counsel for any dissenter were of substantial benefit to other dissenters similarly situated, and that the fees for those services should not be assessed against the subject corporation, the court may award to those counsel reasonable fees to be paid out of the amounts awarded to the dissenters who were benefited.

4. In a proceeding commenced pursuant to NRS 92A.460, the court may assess the costs against the subject corporation, except that the court may assess costs against all or some of the dissenters who are parties to the proceeding, in amounts the court finds equitable, to the extent the court finds that such parties did not act in good faith in instituting the proceeding.

5. To the extent the subject corporation fails to make a required payment pursuant to NRS 92A.460, 92A.470 or 92A.480, the dissenter may bring a cause of action directly for the amount owed, and, to the extent the dissenter prevails, is entitled to recover all expenses of the suit.

6. This section does not preclude any party in a proceeding commenced pursuant to NRS 92A.60 or NRS 92A.490 from applying the provisions of N.R.C.P. 68 or NRS 17.115.

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Appendix 2

ROSS MILLER

Secretary of State

204 North Carson Street, Suite 1

Carson City, Nevada 89701-4520

(775) 684-7708

Website: www.nvsos.com

Certificate of Amendment

(PURUSANTU TO NRS 78.385 and 78.390)

USE BLANK INK ONLY – DO NOT HIGHLIGHT

ABOVE SPACE IS FOR OFFICE USE ONLY

Certificate of Amendment to Articles of Incorporation

For Nevada Profit Corporations

(Pursuant to NRS 78.385 and 78.390 – After Issuance of Stock)

1. Name of corporation: Zhongchai Machinery, Inc.

2. The articles have been amended as follows (provide article numbers, if available):

Article Fifth – Effective as of the filing date of this amendment, each 120 shares of Common Stock, issued and outstanding or held by the Corporation, automatically and without any action on the part of the respective holders thereof, shall be converted and combined into one share of Common Stock. No fractional shares shall be issued as a result thereof. In lieu of issuing fractional shares, any fractional share resulting from the combination shall be cashed out, and thereafter and that instead of issuing fractional shares to such shareholders, the Corporation shall pay an amount in cash equal to $0.56 per share of Common Stock held by such shareholders immediately before this amendment becomes effective. The number of authorized shares will not change as a result of this action.

3. The vote by which the stockholders holding shares in the corporation entitling them to exercise at least a majority of the voting power, or such greater proportion of the voting power as may be required in the case of a vote by classes or series, or as may be required by the provisions of the articles of incorporation have voted in favor of the amendment is: 17,431,104 shares of voting stock representing 63.13% of the outstanding voting power of the corporation approved this amendment by written consent in lieu of a meeting on March 18, 2011.

4. Effective date of filing (optional): ____________________________________________________.

(must not be later than 30 days after the effective date)

5. Officer Signature (required): ________________________________________________________

Peter Wang, President

* If any proposed amendment would alter or change any preference or any relative or other right given to any class or series of outstanding shares, then the amendment must be approved by the vote, in addition to the affirmative vote otherwise required, of the holders of shares representing a majority of the voting power of each class or series affected by the amendment regardless of limitations or restrictions on the voting power thereof.

IMPORTANT: Failure to include any of the above information and submit the proper fees may cause this filing to be rejected.

This form must be accompanied by appropriate fees.

Appendix 2

Appendix 3