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TABLE OF CONTENTS
CATHAY INDUSTRIAL BIOTECH LIMITED INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

As filed with the Securities and Exchange Commission on July 19, 2011

Registration No. 333-            

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



Cathay Industrial Biotech Ltd.
(Exact name of registrant as specified in its charter)

Not Applicable
(Translation of registrant's name into English)

Cayman Islands   2860   Not Applicable
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

3F, Building 5, 1690 Cailun Road
Zhangjiang High-tech Park,
Shanghai 201203
People's Republic of China
(86)-21-5080-1916
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)



Law Debenture Corporate Services Inc.
400 Madison Avenue, 4th Floor
New York, New York 10017
(212) 750-6474

(Name, address, including zip code, and telephone number, including area code, of agent for service)



Copies to:

Shuang Zhao, Esq.
Shearman & Sterling LLP
c/o 12th Floor, Gloucester Tower
15 Queen's Road
Central, Hong Kong
(852) 2978-8000
  Steven D. Winegar, Esq.
Paul, Hastings, Janofsky & Walker LLP
c/o 21-22/F, Bank of China Tower
1 Garden Road
Central, Hong Kong
(852) 2867-1288



          Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

          If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

          If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o                                   

          If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o                                   

          If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earliest effective registration statement for the same offering. o                                   



CALCULATION OF REGISTRATION FEE

       
 
Title of each class of
securities to be registered(1)(2)

  Proposed maximum aggregate
offering price(3)

  Amount of
registration fee

 

Ordinary shares, par value US$0.001 per ordinary share

  US$200,000,000   US$23,220

 

(1)
Includes (i) ordinary shares initially offered and sold outside the United States that may be resold from time to time in the United States either as part of their distribution or within 40 days after the later of the effective date of this registration statement and the date the shares are first bona fide offered to the public and (ii) ordinary shares that may be purchased by the underwriters pursuant to an over-allotment option. These ordinary shares are not being registered for the purposes of sales outside of the United States.
(2)
American depositary shares issuable upon deposit of the ordinary shares registered hereby have been registered under a separate registration statement on Form F-6 (Registration No. 333-            ). Each American depositary share represents                        ordinary shares.
(3)
Estimated solely for the purpose of determining the amount of registration fee in accordance with Rule 457(o) under the Securities Act of 1933.



          The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to such Section 8(a), may determine.


PROSPECTUS (Subject to Completion)
Issued              , 2011

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

American Depositary Shares

LOGO

Cathay Industrial Biotech Ltd.

Representing                   Ordinary Shares



Cathay Industrial Biotech Ltd. is offering                             American depositary shares, or ADSs. Each ADS represents                             ordinary shares. This is our initial public offering and no public market currently exists for our ADSs or ordinary shares. We anticipate the initial public offering price will be between US$                             and US$                             per ADS.



We have applied for the listing of the ADSs on the NASDAQ Global Select Market under the symbol "CBIO."



Investing in the ADSs involves risks. See "Risk Factors" beginning on page 11.



PRICE US$               AN ADS



 
 
Price to Public
 
Underwriting
Discounts and
Commissions
 
Proceeds to
Company

Per ADS

  US$        US$            US$         

Total

  US$        US$            US$         

Cathay Industrial Biotech Ltd. has granted the underwriters an option to purchase up to an additional                            ADSs to cover over-allotments.

The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the ADSs to purchasers on or about                           , 2011.



MORGAN STANLEY   DEUTSCHE BANK SECURITIES   JEFFERIES

                       , 2011


    

GRAPHIC


Table of Contents


TABLE OF CONTENTS

 
  Page

Prospectus Summary

  1

Risk Factors

  11

Special Note Regarding Forward-Looking Statements

  48

Use of Proceeds

  50

Dividend Policy

  51

Capitalization

  52

Dilution

  53

Exchange Rate Information

  55

Enforceability of Civil Liabilities

  56

Our History and Corporate Structure

  58

Selected Consolidated Financial Data

  63

Management's Discussion and Analysis of Financial Condition and Results of Operations

  66

Industry

  97

Business

  107

Regulation

  136

Management

  145

Principal Shareholders

  153

Related Party Transactions

  156

Description of Share Capital

  157

Description of American Depositary Shares

  167

Shares Eligible for Future Sale

  177

Taxation

  179

Underwriting

  185

Expenses Related to This Offering

  193

Legal Matters

  194

Experts

  194

Where You Can Find Additional Information

  195

Index to Consolidated Financial Statements

  F-1



        You should rely only on the information contained in this prospectus and in any free writing prospectus we may authorize to be delivered or made available to you. We have not authorized anyone to provide you with information that is different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, the ADSs only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is current only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the ADSs.

        We have not taken any action to permit a public offering of the ADSs outside the United States or to permit the possession or distribution of this prospectus or any filed free writing prospectus outside the United States. Persons outside the United States who come into possession of this prospectus or any filed free writing prospectus must inform themselves about and observe any restrictions relating to the offering of the ADSs and the distribution of this prospectus or any filed free writing prospectus outside the United States.

        Until                        , 2011 (the 25th day after the date of this prospectus), all dealers that buy, sell, or trade ADSs, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

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PROSPECTUS SUMMARY

        The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements appearing elsewhere in this prospectus. In addition to this summary, we urge you to read the entire prospectus carefully, especially the risks of investing in the ADSs discussed under "Risk Factors," before deciding whether to buy our ADSs. In addition, we commissioned Chemical Market Associates, Inc., or CMAI, Nexant and Technomic Asia, all being independent market research firms, to prepare reports for the purpose of providing various industry information and illustrating our position in the industrial biotechnology industry. We have taken such care as we consider reasonable in the reproduction and extraction of information from the reports prepared by CMAI, Nexant, Technomic Asia and other third-party sources.


Our Business

        We are a leading global industrial biotechnology company as measured by production capacity in key biochemical products and a pioneer in the commercialization of bioprocess technologies, according to CMAI. Our products address the specialty chemicals and biofuels markets. We apply our proprietary technologies to commercialize cost disruptive, environmentally sustainable, drop-in alternatives to products typically produced through petrochemical processes.

        We are the world's largest producer of biobutanol based on active production capacity in 2011, according to CMAI. Our biobutanol is currently used as an industrial solvent and as a chemical intermediate for the production of paints, resins, coatings, plasticizers, herbicides, pharmaceuticals and food grade extractants. Based on production capacity in 2010, we are also a leading global producer of bioprocess-based long-chain dicarboxylic acids, or LCDAs, which are used as chemical intermediates primarily for the production of nylon, plastics, adhesives, fragrances, lubricant and powder coatings. Our products are sold to a broad base of customers that includes both leading international companies, such as E.I. du Pont de Nemours and Company, or DuPont, Evonik Industries AG, International Flavors & Fragrances Inc., or IFF, Arkema SA, or Arkema, Novo Nordisk A/S, or Novo, and major China-based companies.

        We are developing two key pipeline product candidates, Disodium Inosine-5'-monophosphate and Disodium Guanosine-5'-monophosphate, or I+G, and biobutanol using biomass as a feedstock. I+G is a food flavor enhancer that complements monosodium glutamate, or MSG. We expect to commence commercial sales of I+G by the end of the first half of 2012. We have developed bioprocess technologies to produce biobutanol from cellulosic biomass feedstock. We believe that using cellulosic biomass feedstock will significantly lower our production cost for biobutanol.

        We currently operate two commercial scale production facilities in China. Our biobutanol production facility in Jilin Province has an annual production capacity of 100,000 metric tons of biobutanol and co-products, including 65,000 metric tons, or 21 million gallons, of biobutanol and utilizes multiple continuous fermentation bioreactors, designed and constructed by our team in-house, at a scale of 1.8 million liters, or 475,000 gallons, per bioreactor. Our LCDA production facility in Shandong Province had an annual production capacity of approximately 12,000 metric tons at the beginning of 2011, approximately 13,500 metric tons as of March 31, 2011 and we are currently optimizing our production process to increase production capacity to 15,000 metric tons by the end of 2011. Our production facilities are strategically located in regions with access to feedstock and other key inputs, established logistics and energy infrastructure and local labor pool with a history of fermentation expertise. We believe our biobutanol production facility gives us an advantage over our competitors as it allows us to implement and test our cellulosic biomass feedstock technologies at commercial scale and conditions. We believe our planned commercialization of our biobutanol from cellulosic biomass will enable us to reduce our production costs, enabling us to enter the biofuels

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market and expand into different segments of the larger specialty chemicals market with lower price points.

        At our biobutanol production facility in Jilin Province, we expect to begin pilot stage testing of our proprietary bioprocess technology for producing biobutanol from cellulosic biomass feedstock by the end of 2011. We also plan to begin construction of a cellulosic biomass processing facility adjacent to our current biobutanol production facility to commercialize biobutanol from cellulosic biomass. We plan to expand the annual production capacity at our biobutanol production facility to 200,000 metric tons of biobutanol and co-products, including 130,000 metric tons, or 42 million gallons, of biobutanol, in the future. In addition, we plan to complete construction of our I+G production facility in Jilin Province with an annual production capacity of 5,000 metric tons by the end of the first half of 2012.

        We plan to expand the annual capacity at our LCDA production facility to 20,000 metric tons by the end of 2012. We have also developed a proprietary bioprocess technology to manufacture LCDAs from renewable feedstock, or renewable LCDAs.

        We have grown significantly since we first began commercial sales of our bioprocess-based products in 2003. Our total revenues amounted to RMB378.7 million, RMB296.8 million and RMB816.0 million (US$124.6 million) in 2008, 2009 and 2010, respectively. We incurred net losses of RMB10.9 million, RMB12.2 million and RMB13.6 million (US$2.1 million) in 2008, 2009 and 2010, respectively. In the three months ended March 31, 2010 and 2011, our total revenues amounted to RMB147.2 million and RMB271.2 million (US$41.4 million), respectively. Our net income for the three months ended March 31, 2010 was RMB7.0 million and our net loss for the three months ended March 31, 2011 was RMB6.0 million (US$0.9 million).


Our Strengths

        We believe the following strengths will enable us to further build our leadership position in the global industrial biotechnology sector, continue to develop innovative process technologies and rapidly commercialize products to capitalize on attractive growth opportunities:

    Successful commercialization of bioprocess technologies;

    Proprietary bioprocess technologies;

    Value maximization through our biorefinery model;

    Pipeline of attractive near-term opportunities;

    Significant advantages from operating in China;

    Advanced cellulosic biomass and other renewable feedstock technologies; and

    Highly experienced management team.


Our Strategies

        In order to further strengthen our leadership position in commercializing bioprocess-based products and enter the biofuel market, we plan to implement the following strategies:

    Commercialize cellulosic biomass feedstock technologies;

    Rapidly penetrate the I+G market;

    Continuously improve production processes;

    Continue to collaborate with selected customers; and

    Pursue strategic alliances to facilitate the expansion of our business.

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Our Challenges

        We believe that the following are some of the major risks and uncertainties that may materially affect us:

    We incurred net losses in 2008, 2009 and 2010 and may continue to incur significant losses in the future;

    In the event that we are unable to obtain raw materials in a timely manner or at reasonable prices, our business, financial condition and results of operations would be harmed;

    If the price of petroleum decreases, prices of our competitors' products, which are mostly produced from petroleum-based feedstock, will also decrease, which may materially and adversely affect the competitiveness of our biobutanol and LCDAs;

    Increases in utility prices or shortages of utility supplies may adversely affect our operations;

    We may not achieve market acceptance for our pipeline products or successfully develop new applications for our existing products;

    We are subject to third-party claims of intellectual property right infringement; and

    Our patents may not afford us sufficient protection.

        See "Risk Factors" and other information included in this prospectus for a discussion of these risks and other uncertainties.


Our Corporate Structure

        Our predecessor, Beijing Cathay Biotechnology Co., Ltd., or Beijing Cathay Biotech, commenced operations in April 1997. Beijing Cathay Biotech subsequently changed its name to Shanghai Cathay Biotechnology Co., Ltd. in December 2000 after relocating to Shanghai. In 2003, Shanghai Cathay Biotechnology Co., Ltd. changed its name to Shanghai Cathay Holdings Co., Ltd. In August 2007, Shanghai Cathay Holdings Co., Ltd. changed its name to Shanghai Cathay Industrial Biotech Co., Ltd., or Cathay Shanghai, to satisfy the requirements of certain PRC regulations.

        On April 19, 2006, to facilitate investments by foreign financial investors, Cathay Industrial Biotech Ltd., or Cathay Biotech, was incorporated in the Cayman Islands. On May 18, 2006, Cathay Biotech entered into a series of agreements with certain of our shareholders and as a result of these agreements, Cathay Biotech acquired 65.45% of Cathay Shanghai and Shanghai Cathay Biotechnology R&D Co., Ltd., or Cathay R&D, and became our ultimate holding company. In June 2006, Cathay Biotech acquired the remaining minority equity interests in Cathay Shanghai and Cathay R&D.

        We then engaged in a series of reorganization activities, including the acquisition of the remaining minority interests in certain of our subsidiaries. See "Our History and Corporate Structure." We currently conduct substantially all of our operations through the following operating subsidiaries:

    Cathay Shanghai is our wholly owned subsidiary incorporated in China and serves as a holding company for our other wholly owned subsidiaries and our affiliate;

    Cathay R&D is our wholly owned subsidiary incorporated in China and engages in research and development activities;

    Shandong Cathay Biotechnology Co., Ltd., or Cathay Shandong, is our wholly owned subsidiary incorporated in China and engages in the production of LCDAs;

    Shandong Cathay Industrial Biotech Co., Ltd., or Cathay Shandong Industrial, is our wholly owned subsidiary incorporated in China and engages in the production of LCDAs;

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    Jilin Cathay Industrial Biotech Co., Ltd., or Cathay Jilin, is our wholly owned subsidiary incorporated in China and engages in the production of biobutanol, its co- and by-products and certain other products produced through bioprocesses;

    Yili Cathay Biotechnology Co., Ltd., or Cathay Yili, is our wholly owned subsidiary incorporated in China and conducts investments in agricultural processing, chemical processing of coal, bio-energy and biotechnology industries;

    Cathay Industrial Biotech (Hong Kong) Limited, or Cathay Hong Kong, is our wholly owned subsidiary incorporated in Hong Kong and engages in the sale of our products; and

    Cathay Industrial Biotech (UK) Limited, or Cathay UK, is our wholly owned subsidiary incorporated in the United Kingdom and handles regulatory requirements for the import of bioprocess-based products into Europe.

        The following diagram illustrates our corporate structure and the place of organization of each of our subsidiaries as of the date of this prospectus.

GRAPHIC


*
Indicates the place of incorporation.

(1)
In June 2011, Degussa (China) Co., Ltd. agreed to transfer its 51% equity interest in Degussa Cathay Biotechnology to Cathay Biotech, subject to the fulfillment of certain government administrative and approval requirements.


Corporate Information

        Our principal executive offices are located at 3F, Building 5, 1690 Cailun Road, Zhangjiang Hi-tech Park, Shanghai 201203, People's Republic of China. Our telephone number at this address is (86) 21 5080-1916 and our fax number is (86) 21 5080-1386. Our registered office in the Cayman Islands is located at the offices of Maples Corporate Services Limited, P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. The address of Maples and Calder, our Cayman Islands counsel, is 53rd Floor, The Center, 99 Queen's Road Central, Hong Kong.

        Investor inquiries should be directed to us at the address and telephone number of our principal executive offices set forth above. Our website is www.cathaybiotech.com. The information contained on our website is not part of this prospectus. Our agent for service of process in the United States is Law Debenture Corporate Services Inc., located at 400 Madison Avenue, New York, New York 10017.

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Conventions That Apply to This Prospectus

        Unless otherwise indicated, references in this prospectus to:

    "ADRs" are to the American depositary receipts, which, if issued, evidence our ADSs;

    "ADSs" are to our American depositary shares, each of which represents                        ordinary shares;

    "China" and the "PRC" are to the People's Republic of China, excluding, for the purposes of this prospectus only, Taiwan and the special administrative regions of Hong Kong and Macau;

    "Euro" is to the legal currency of the Economic and Monetary Union of the European Union;

    "I+G" is to a combination of Disodium Inosine-5'-monophosphate, and Disodium Guanosine-5'-monophosphate, which serves as a flavor enhancer;

    "LCDA" and "DC" are to long-chain dicarboxylic acid unless otherwise specified. LCDAs are named in accordance with the number of carbon atoms, such as DC-12 for LCDAs with 12 carbon atoms;

    "ordinary shares" are to our ordinary shares, par value US$0.001 per share;

    "RMB" and "Renminbi" are to the legal currency of China;

    "US$" and "U.S. dollars" are to the legal currency of the United States; and

    "we," "us," "our company" and "our" are to Cathay Industrial Biotech Ltd., its predecessor entities and its consolidated subsidiaries.

        Unless otherwise indicated, information in this prospectus assumes that the underwriters do not exercise their option to purchase additional ADSs.

        Our reporting currency is the Renminbi. Unless otherwise stated, all translations of RMB into U.S. dollars have been made at the noon buying rate as set forth on March 31, 2011 in the H.10 statistical release of the Federal Reserve Board, which was RMB6.5483 to US$1.00. We make no representation that the RMB or U.S. dollar amounts referred to in this prospectus could have been or could be converted into U.S. dollars or RMB, as the case may be, at any particular rate or at all. On July 8, 2011, the noon buying rate as set forth in the H.10 statistical release of the Federal Reserve Board was RMB6.4645 to US$1.00.

        This prospectus contains references to metric tons, gallons and liters. The following are the conversion rates for these three units of measure:

Metric Tons*

1
  =   Gallons

290.33
  =   Liters

1,098.901

*
Based on oil density of 0.91 g/cm3.

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The Offering

Price per ADS   We currently estimate that the initial public offering price will be between US$        and US$        per ADS.

ADS offered by us

 

                ADSs

Total offered ADSs

 

                ADSs

Options to purchase additional ADSs

 

We have granted the underwriters an option, exercisable within 30 days from the date of this prospectus, to purchase up to an aggregate of additional                ADSs.

ADSs outstanding immediately after the offering

 

                ADSs (or                ADSs if the underwriters exercise the option to purchase additional ADSs in full).

Ordinary shares outstanding immediately after the offering

 

                ordinary shares (or                ordinary shares if the underwriters exercise the option to purchase additional ADSs in full), excluding ordinary shares issuable upon the exercise of outstanding share options and ordinary shares reserved for issuance under our Amended and Restated 2007 Share Incentive Plan, or our 2007 share incentive plan.

NASDAQ symbol

 

CBIO

The ADSs

 

Each ADS represents                ordinary shares, par value US$0.001 per share. The ADSs may be evidenced by American depositary receipts, or ADRs.

 

 

The depositary will be the holder of the ordinary shares underlying the ADSs and you will have the rights of an ADS holder as provided in the deposit agreement among us, the depositary and owners and beneficial owners of ADSs from time to time.

 

 

You may surrender your ADSs to the depositary to withdraw the ordinary shares underlying your ADSs. The depositary will charge you a fee for such an exchange.

 

 

We may amend or terminate the deposit agreement for any reason without your consent. If an amendment becomes effective, you will be bound by the deposit agreement as amended if you continue to hold your ADSs.

 

 

To better understand the terms of the ADSs, you should carefully read the section in this prospectus entitled "Description of American Depositary Shares." We also encourage you to read the deposit agreement, which is an exhibit to the registration statement that includes this prospectus.

Depositary

 

Citibank, N.A.

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Use of proceeds   We estimate that we will receive net proceeds of approximately US$         million (or US$         million if the underwriters exercise the overallotment option in full) from this offering, assuming an initial public offering price of US$        per ADS, the midpoint of the estimated range of the initial public offering price as set forth on the cover page of this prospectus, and after deducting the underwriter discounts, commissions and estimated aggregate offering expenses payable by us. We intend to use the net proceeds we receive from this offering for the following purposes:

 

•       approximately US$         million to further develop and commercialize biobutanol and expand our production capacity for biobutanol;

 

•       approximately US$         million to construct our production facility for I+G and commercialize I+G;

 

•       approximately US$         million to expand our production capacity for LCDAs; and

 

•       approximately US$         million to expand and strengthen our research and development infrastructure and activities.


 

 

We will use any remaining portion of the net proceeds we receive from this offering for working capital and other general corporate purposes. See "Use of Proceeds" for additional information.

Risk factors

 

See "Risk Factors" and other information included in this prospectus for a discussion of the risks you should carefully consider before deciding to invest in our ADSs.

Reserved ADSs

 

At our request, the underwriters have reserved for sale, at the initial public offering price, up to an aggregate of                         ADSs offered in this offering to some of our directors, officers, employees, business associates and related persons through a directed share program.

Lock-up

 

We, our directors, executive officers, existing shareholders and certain option holders have agreed with the underwriters, subject to certain exceptions, not to sell, transfer or dispose of any of our ADSs, ordinary shares or similar securities for a period of 180 days after the date of this prospectus. See "Underwriting."

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Summary Consolidated Financial Data

        The following summary consolidated statement of operations data and summary consolidated cash flow data for the years ended December 31, 2008, 2009 and 2010 (other than US$ amounts), and the summary consolidated balance sheet data as of December 31, 2009 and 2010 (other than US$ amounts) have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The following summary consolidated statement of operations data and summary consolidated cash flow data for the three-month periods ended March 31, 2010 and 2011 (other than US$ amounts), and the summary consolidated balance sheet data as of March 31, 2011 (other than US$ amounts) have been derived from our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus. We have prepared the unaudited interim condensed consolidated financial statements on the same basis as our audited consolidated financial statements. The unaudited financial information includes all adjustments, consisting only of normal and recurring adjustments, that we consider necessary for a fair presentation of our financial position and operating results for the periods presented. You should read the summary consolidated financial data in conjunction with those financial statements and the related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus. Our consolidated financial statements are prepared and presented in accordance with United States generally accepted accounting principles, or U.S. GAAP. Our historical results do not necessarily indicate our results expected for any future periods.

 
  Year Ended December 31,   Three Months Ended March 31,  
 
  2008   2009   2010   2010   2011  
 
  RMB
  RMB
  RMB
  US$
  RMB
  RMB
  US$
 
 
  (in thousands, except share and per share data)
 

Summary Consolidated Statement of Operations Data

                                           

Revenues, net

    378,675     296,782     816,045     124,619     147,191     271,166     41,410  

Gross profit

    73,482     63,643     58,009     8,859     26,365     17,285     2,640  

Operating income (loss)

    (2,718 )   (508 )   (13,836 )   (2,113 )   9,311     (3,891 )   (593 )

Net income (loss)

    (10,884 )   (12,243 )   (13,557 )   (2,070 )   7,047     (6,007 )   (917 )

Basic earnings (loss) per ordinary share(1)

    (0.28 )   (0.31 )   (0.35 )   (0.05 )   0.06     (0.15 )   (0.02 )

Diluted earnings (loss) per ordinary share

    (0.28 )   (0.31 )   (0.35 )   (0.05 )   0.06     (0.15 )   (0.02 )

Ordinary shares used in computation:

                                           
 

Basic

    38,915,973     38,915,973     38,915,973     38,915,973     38,915,973     38,915,973     38,915,973  
 

Diluted

    38,915,973     38,915,973     38,915,973     38,915,973     40,482,187     38,915,973     38,915,973  

(1)
Basic earnings (loss) per ordinary share is calculated by allocating income (loss) between participating convertible preferred shareholders and the ordinary shareholders using the two-class method.

 
  As of December 31,   As of March 31,  
 
  2009   2010   2011  
 
  RMB
  RMB
  US$
  RMB
  US$
 
 
  (in thousands)
 

Summary Consolidated Balance Sheet Data

                               

Total current assets

    392,203     490,006     74,829     550,574     84,079  

Property, plant and equipment, net

    1,355,130     1,427,800     218,041     1,432,248     218,721  

Total assets

    1,976,543     2,131,502     325,505     2,192,541     334,826  

Total current liabilities

    370,909     449,327     68,617     518,785     79,224  

Total liabilities

    622,568     792,877     121,081     860,246     131,369  

Total shareholders' equity

    1,353,975     1,338,625     204,424     1,332,295     203,457  

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  Year Ended December 31,   Three Months Ended March 31,  
 
  2008   2009   2010   2010   2011  
 
  RMB
  RMB
  RMB
  US$
  RMB
  RMB
  US$
 
 
  (in thousands)
 

Summary Consolidated Cash Flow Data

                                           

Net cash provided by (used in) operating activities

    (36,971 )   45,135     7,695     1,175     (6,020 )   (47,887 )   (7,313 )

Net cash used in investing activities

    (602,605 )   (118,108 )   (171,394 )   (26,174 )   (61,899 )   (21,579 )   (3,295 )

Net cash provided by (used in) financing activities

    (155,445 )   144,654     190,000     29,015     200,000          

Net increase (decrease) in cash and cash equivalents

    (831,709 )   71,611     19,465     2,973     131,833     (69,938 )   (10,680 )

        The table below sets forth our EBITDA for the periods indicated:

 
  Year Ended December 31,   Three Months Ended March 31,  
 
  2008   2009   2010   2010   2010   2011  
 
  RMB
  RMB
  RMB
  US$
  RMB
  RMB
  US$
 
 
  (in thousands)
 

EBITDA(1)

    6,159     33,201     55,855     8,530     22,701     26,674     4,074  

(1)
We believe that earnings before interest expense (income), income tax expense (benefit), depreciation and amortization, and land use rights expense, or EBITDA, is a useful financial metric to assess our operating and financial performance. In addition, we believe that EBITDA is widely used by other companies in our industry and may be used by investors as a measure of our financial performance. We believe that EBITDA will provide investors with a useful tool for comparability between periods because it eliminates depreciation and amortization expense attributable to capital expenditures. The presentation of EBITDA should not be construed as an indication that our future results will be unaffected by other charges and gains we consider to be outside the ordinary course of our business.

The use of EBITDA has certain limitations. Depreciation and amortization expenses for various long-term assets, land use rights expense, interest expense (income) and income tax expense have been and will be incurred and are not reflected in the presentation of EBITDA. Each of these items should also be considered in the overall evaluation of our results. Additionally, EBITDA does not consider capital expenditures and other investing activities and should not be considered as a measure of our liquidity. We compensate for these limitations by providing the relevant disclosure of our depreciation and amortization, land use rights expense, interest expense (income) and income tax expense in our reconciliations to the financial measures under accounting principles generally accepted in the United States, or U.S. GAAP, or in our consolidated financial statements, all of which should be considered when evaluating our performance.

The term EBITDA is not defined under U.S. GAAP, and EBITDA is not a measure of net income, operating income, operating performance or liquidity presented in accordance with U.S. GAAP. When assessing our operating and financial performance, you should not consider this data in isolation or as a substitute for our net income, operating income or any other operating performance measure that is calculated in accordance with U.S. GAAP. In addition, our EBITDA may not be comparable to EBITDA or similarly titled measures utilized by other companies since such other companies may not calculate EBITDA in the same manner as we do.

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    A reconciliation of net income (loss), which is the most directly comparable U.S. GAAP measure, to EBITDA is provided below:

   
  As of December 31,   As of March 31,  
   
  2008   2009   2010   2010   2010   2011  
   
  RMB
  RMB
  RMB
  US$
  RMB
  RMB
  US$
 
   
  (in thousands)
 
 

Net income (loss) (GAAP)

    (10,884 )   (12,243 )   (13,557 )   (2,070 )   7,047     (6,007 )   (917 )
 

Interest expense

    1,528     2,021                 6,873     1,050  
 

Interest income

    (11,855 )   (1,083 )   (929 )   (142 )   (185 )   (226 )   (35 )
 

Income tax expense (benefit)

    (6,762 )   4,211     9,129     1,394     2,401     2,670     408  
 

Depreciation and amortization

    34,132     40,295     61,212     9,348     13,438     23,364     3,568  
                                 
 

EBITDA (Non-GAAP)

    6,159     33,201     55,855     8,530     22,701     26,674     4,074  

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RISK FACTORS

        An investment in our ADSs involves significant risks. You should carefully consider the risks described below and the other information in this prospectus, including our consolidated financial statements and related notes, before you decide to buy our ADSs. If any of the following risks actually occur, our business, prospects, financial condition and results of operations could be materially harmed, the trading price of our ADSs could decline and you could lose all or part of your investment.

Risks Related to Our Company and Our Industry

We incurred net losses in 2008, 2009 and 2010 and may continue to incur significant losses in the future.

        We incurred a net loss in the amount of RMB10.9 million in 2008, primarily due to losses on derivatives, foreign currency transactions and reduced demand in the fourth quarter of 2008. We incurred a net loss in the amount of RMB12.2 million in 2009, primarily due to reduced consumer spending and lower industry demand resulting from the global financial crisis. We incurred a segment loss from sales of biobutanol products in the amount of RMB51.1 million (US$7.8 million) in 2010 and RMB21.4 million (US$3.3 million) in the three months ended March 31, 2011, primarily due to the significant increase in corn prices and expenses incurred in connection with the ramp-up of our biobutanol production. Our segment gross loss from sales of biobutanol amounted to RMB35.6 million (US$5.4 million) in 2010 and RMB9.9 million (US$1.5 million) in the three months ended March 31, 2011. We expect the segment loss and segment gross loss from sales of biobutanol products to increase significantly in the three months ended June 30, 2011 compared to the three months ended March 31, 2011, and in the full year 2011 compared to 2010, primarily due to the increased sales of our biobutanol products and partially due to the increase in corn prices and the decrease in biobutanol prices. We sold approximately 43.0% more biobutanol, as measured by volume, in the three months ended June 30, 2011 as compared to the three months ended March 31, 2011. Our future profitability may be negatively affected by the volumes of biobutanol we sell, rising raw material costs, such as price increases for corn or petroleum-based oil, rising operating expenses as well as potential decreases in product prices. There can be no assurance that we can reduce our net losses or ever achieve or sustain profitability on a quarterly or annual basis. We may also continue to incur significant net losses in the future due to changes in the macroeconomic and regulatory environment, competitive dynamics and our inability to respond to these changes in a timely and effective manner.

In the event that we are unable to obtain raw materials in a timely manner or at reasonable prices, our business, financial condition and results of operations would be harmed.

        Our results of operations are dependent on the availability, quality and price of corn, petroleum-based oil and other raw materials. Raw material costs accounted for 69.3%, 57.5%, 68.8% and 72.0% of our production costs in 2008, 2009, 2010 and the three months ended March 31, 2011, respectively. The factors affecting the prices of our raw materials are difficult to predict and changes in the prices of raw materials have a significant impact on our cost of revenues. In recent years, the prices of our key raw materials and resources used in our production processes have increased significantly and we expect such trends to continue.

        For example, petroleum-based oil, the key raw material used in the production of our LCDAs, is refined from petroleum and its price correlates to a high degree with petroleum prices, and the increase in petroleum prices in the past has led to increasing prices in petroleum-based oil. In addition, corn is the key raw material we use in producing biobutanol. Corn prices have increased significantly in the past few years, primarily due to increased demand from industrial usages. Weather conditions, crop diseases, farmer planting decisions and agricultural policies and subsidies promulgated by government authorities may also affect corn prices. PRC government regulations may hinder our ability to use corn

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in our production of biobutanol. According to the Jilin Corn Commodity Exchange, corn prices in Jilin Province have increased by approximately 6.0% from approximately RMB1,510.0 per metric ton at year end 2008 to approximately RMB1,600.0 per metric ton at year end 2009 and increased by approximately 20.0% from year end 2009 to approximately RMB1,920.0 (US$293.2) per metric ton at year end 2010. According to the Jilin Corn Commodity Exchange, corn prices in Jilin Province have further increased by approximately 5.2% from year end 2010 to approximately RMB2,020.0 (US$308.5) per metric ton at the end of the first quarter of 2011.

        A decrease in the availability or quality or an increase in the price of raw materials may have a material adverse effect on our business and results of operations. We may not be able to offset the effects of higher raw material costs or to obtain raw materials that meet our quality requirements. At certain levels, increased raw material prices may make our products uneconomical to produce and use, which will have a material adverse effect on our financial condition and results of operations.

If the price of petroleum decreases, prices of our competitors' products, which are mostly produced from petroleum-based feedstock, will also decrease, which may materially and adversely affect the competitiveness of our biobutanol and LCDAs.

        The key raw material used in our biobutanol production is corn, rather than the petroleum-based feedstock that is currently used in the production of butanol through chemical processes. Therefore, if petroleum prices increase, our biobutanol may become a more economical alternative compared to competing petrochemical products. However, petroleum prices are highly volatile and difficult to forecast due to the frequent changes in global politics and the world economy. Any decrease in petroleum prices may result in the decrease in prices of competing butanol produced through chemical processes. These price decreases may render our biobutanol less cost competitive and may adversely affect our sales volume and/or prices, which could cause our revenues to decline and adversely affect our financial condition and results of operations. In addition, a decrease in petroleum prices may also make our LCDAs less cost competitive.

Increases in utility prices or shortages of utility supplies may adversely affect our operations.

        We use a significant amount of utilities such as electricity, steam and water during our production processes. Our production facilities in Shandong Province and Jilin Province are supported by onsite electricity and steam cogeneration plants. The cogeneration plant at our biobutanol production facility in Jilin Province is operated by us, and we purchase coal to operate this plant, whereas the cogeneration plant at our LCDA production facility in Shandong Province is owned and operated by a local utility company. We cannot assure you, however, that we will not experience supply disruptions for electricity, steam or water. We may also require increased supplies of electricity, steam and water due to increasing production activities and may not be able to obtain such increased supplies. In addition, we cannot assure you that the local utility company will not request an increase in price. We have experienced rising prices of electricity and steam, primarily due to economic development in China and the increase in demand for utilities to support expanding production activities. Coal prices have also increased significantly in recent years. Continued increases in utility prices or shortages of utility supplies will increase our costs of production and may materially and adversely affect our results of operations.

We may not achieve market acceptance for our pipeline products or successfully develop new applications for our existing products.

        We plan to commence commercial sales of our I+G by the end of the first half of 2012 and continue to develop renewable LCDAs. Our sales and marketing efforts are focused on a small number

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of target customers and we will need to convince these target customers that our I+G will be comparable to or better than those provided by our competitors in terms of price, quality and performance. We also continue to work on identifying and developing new applications for our LCDAs. We cannot assure you that we will be able to develop successful relationships with potential customers for new applications of our existing products or pipeline products. Market acceptance of new applications of our existing products or our pipeline products will depend on numerous factors, many of which are outside our control, including, among others:

    the extent to which potential customers use our products for use in their products;

    our ability to produce products that are functionally superior, or at least comparable, to existing products produced by our competitors and their competitors;

    our ability to produce products that meet our customers' requirements;

    our customers' ability to obtain any regulatory approvals required to use our products in their products;

    our customers' ability to develop, produce and sell products that use our products;

    risks perceived by potential customers in adopting new materials for use in their products;

    prices of competing products compared to our products, and to the extent our products are more expensive than competing products produced through chemical processes, the market's willingness to support premium prices associated with our products; and

    general market conditions.

        Failure to achieve market acceptance due to any factors, including those described above, may limit our ability to broaden our customer base, and may materially and adversely affect our financial conditions, results of operations and growth prospects.

We may not be able to cost effectively produce biobutanol from cellulosic biomass in a timely manner.

        We plan to use cellulosic biomass, such as corncobs and corn stover, as feedstock for our biobutanol production. However, we cannot assure you that we will be able to successfully scale-up and produce our biobutanol using these cellulosic biomass feedstocks in a commercially viable manner. Transportation constraints may also limit our ability to engage in large-scale production of biobutanol from cellulosic biomass. If we are unable to use cellulosic biomass to produce our products in a timely manner, we may face increasing costs or shortages in the supply of raw materials and our results of operations and profit margins may be adversely affected.

Our plan to utilize renewable feedstocks to produce LCDAs may not be successful or economically viable.

        We also plan to use vegetable oil and bio-based oil to produce our LCDAs in order to help reduce our exposure to fluctuating petroleum prices. However, the price of vegetable oil may be influenced by general economic, market and regulatory factors, and we may not be able to produce LCDAs using vegetable oil in a commercially viable manner. In addition, there are currently only a limited number of suppliers who have the capability to produce bio-based oil and such suppliers may not be able to supply bio-based oil that meets our quality, quantity and cost requirements. The significance and relative impact of these factors are difficult to predict and we cannot assure you that the renewable feedstocks we plan to use will not be subject to increasing prices in the future.

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Our future growth substantially depends on our ability to expand our production capacities.

        Our current expansion strategy depends on our ability to significantly increase our existing production capacities and outputs to address growing demand for our products. We plan to build a production facility for I+G and to expand our annual production capacities for biobutanol and LCDAs. See "Business—Production Facilities." We will incur significant capital expenditures, which may be higher than we anticipate, as well as continued costs of maintenance and operations for these production facilities, even if we are unable to utilize the increased capacity due to decreases in demand for our products, reduced sales volumes or otherwise. In addition, these planned expansions will require a significant amount of management time and may disrupt our operations.

        Additional risks associated with the increase of our existing production capacities include:

    our ability to timely obtain required permits, licenses or approvals from the relevant government authorities with respect to our I+G production;

    our ability to build a production facility for I+G and resolve any problems that may arise on a timely basis;

    our limited experience in large commercial-scale production of I+G;

    our ability to successfully design, establish and scale-up the bioprocesses necessary for commercially viable production of biobutanol from cellulosic biomass;

    our ability to achieve target yields or quality control from our production processes and to economically operate our expanded production facilities;

    the amount of additional funding we need to purchase raw materials, to build additional production facilities or to expand our existing production capacities, which we may be unable to obtain on commercially reasonable terms, or at all, and which could be dilutive to our existing shareholders; and

    significant delays and cost overruns as a result of a number of factors, many of which may be beyond our control, such as increases in raw material and utility prices, shortage of workers and managerial personnel, transportation constraints, problems with contractors, engineering firms, construction firms and equipment vendors and equipment malfunctions and breakdowns.

        If we are unable to establish or successfully operate additional production capacity or if we encounter any of the risks described above, we may not be able to expand our business as planned, take advantage of market opportunities, execute our business strategies, respond effectively to competitive pressures or improve our profitability, which could materially and adversely affect our business, financial condition, results of operations and prospects.

We are subject to third-party claims of intellectual property right infringement.

        As of the date of this prospectus, we are involved in a litigation proceeding filed by Hilead Biotechnology Co., Ltd., or Shandong Hilead, and the Institute of Microbiology, the Chinese Academy of Science, or the Chinese Academy, alleging that we have infringed on Patent ZL95117436.3, a patent held by the Chinese Academy that was licensed to Shandong Hilead. While no judgment has yet been rendered in this proceeding, on May 30, 2011, the court issued a preliminary injunction requiring us to cease the production and sale of any DC-12 products that infringe on Patent ZL95117436.3. We received this preliminary injunction on June 8, 2011 and have applied for a review of the court's decision. See "Business—Legal and Arbitration Proceedings."

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        Although we believe we will ultimately prevail in this litigation proceeding, the process is costly and time-consuming, and may divert technical and management personnel from their normal responsibilities. In the event that we do not prevail in this litigation proceeding, we may be ordered to pay monetary damages to Shandong Hilead and the Chinese Academy for infringement of Patent ZL95117436.3. Shandong Hilead and the Chinese Academy are seeking monetary damages in the amount of RMB49.9 million. In addition, in the event we are found to have violated the preliminary injunction due to our continued production and sale of DC-12 products, we may be required to remit to Shandong Hilead and the Chinese Academy all profits generated from sales of our DC-12 products since June 8, 2011, as well as other fines and penalties. An adverse outcome from this litigation proceeding may materially and adversely affect our business, financial condition, results of operations and prospects, including requiring us to cease the production and sale of DC-12 products.

        We may encounter future litigation by third parties based on claims that our technologies, processes or products infringe the intellectual property rights of others or that we have misappropriated the trade secrets of others. It is difficult, if not impossible, to predict how such disputes may be resolved. A determination that we have infringed on the intellectual property rights of another may require us to do one or more of the following:

    pay monetary damages to the other parties to compensate for their loss, which could adversely affect our financial condition and results of operations;

    cease selling any of our infringing products, which could adversely affect our revenues;

    obtain a license from the holder of the infringed intellectual property right, which might be costly or might not be available on reasonable terms, or at all, and such license may be non-exclusive and our competitors may have access to the same technology as that licensed to us;

    indemnify our customers for any damages and costs incurred by them in connection with defending any claims filed against them by the holder of the infringed patent; or

    redesign our technologies, processes or products to make them non-infringing, which would be costly and time-consuming, or may not be possible at all.

        We cannot assure you that other claims will not be asserted. If a claim is asserted, we cannot assure you that we will prevail or that any resolution of the claim would permit us to continue to use the technologies or processes or produce the product in question on commercially reasonable terms. Patent litigation may involve patent holding companies or other adverse patent holders who may have no relevant product revenues and against whom our patents may therefore provide little or no deterrence. Any adverse outcome from such litigation, or the time and cost of the proceedings themselves, could materially and adversely affect our business, financial condition and results of operations as well as our reputation and customer relationships.

        In addition, there is a risk that some of our confidential information could be compromised by disclosure during intellectual property litigation. Furthermore, there could be public announcements throughout the course of intellectual property litigation or proceedings, which could be perceived negatively and, therefore, have a negative effect on the trading price of our ADSs, irrespective of the merits of the claims.

Our patents may not afford us sufficient protection.

        We hold seven invention patents in China relating to our LCDAs and biobutanol, four of which will expire in 2024, two of which will expire in 2026 and one of which will expire in 2027. In addition,

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we have eight pending patent applications in China and two pending patent applications filed under the Patent Cooperation Treaty that cover our general bioprocesses and a new strain for producing LDCAs, respectively.

        Competitors may successfully challenge our patents. In July 2010, Shandong Hilead filed an application to the State Intellectual Property Office to invalidate one of our patents relating to a process technology for LCDAs, alleging lack of creativity and lack of novelty. In March 2011, the State Intellectual Property Office issued an order determining that our patent is invalid. We filed a lawsuit in the Beijing No. 1 Intermediate Court on June 10, 2011 to overrule this administrative decision. As of the date of this prospectus, this case is still pending. If the final judgment is unfavorable to us, all parties, including our competitors, will be allowed to use the technology covered by this patent without any restriction, which could significantly hurt our competitive position and decrease our revenues. Our other patents may also be challenged, invalidated or held unenforceable, which could materially and adversely harm our business and results of operations. Our pending patent applications may not be approved or the scope of claims may be restricted in the final approvals, which may provide insufficient protection for our technologies, processes or products.

        In addition, it is possible that competitors could, under PRC patent law, apply for and obtain a compulsory license to our patents should we refuse to grant a license for those patents on reasonable terms. Furthermore, the existence of a patent does not provide assurance that the production, sale or use of our products does not infringe the patent rights of another. Third parties may also have blocking patents that could be used to prevent us from marketing products utilizing our patented technologies or processes.

        Furthermore, it is possible that our technologies, processes or products may infringe on patents that have not yet been issued. Specifically, in China and many other jurisdictions, patent protection starts from the date the application is first filed. Therefore our attempt to enforce any PRC patents may be defeated by third-party patents issued on a later date if the applications for those patents were filed before ours and the technologies or processes underlying such patents are the same or substantially similar to ours. In such a case, a third party with an earlier application could force us to pay to license its patented technology, sue us for patent infringement and challenge the validity of our patents.

We cannot assure you that we will be able to benefit from intellectual property rights that we plan to license from third parties.

        Our ability to use licensed technologies is important to our business. We are in the process of negotiating with certain third parties and plan to enter into license agreements to use their key technologies relating to our production processes. If we are unable to obtain our licenses, if our licensors are unable to maintain the ownership, validity and/or enforceability of their intellectual property rights that we plan to license, or if disputes arise between our licensors and us, we may be unable to use the licensed technologies, based on which we plan to further develop our proprietary technologies, processes and products, and we may be required to spend significant time and resources to develop or license replacement technologies. If we are unable to do so, we may not be able to continue to develop the affected products or develop or commercialize affected pipeline products, which could materially and adversely affect our business, financial condition, results of operations and prospects. In addition, even if we obtain an exclusive license, the licensors may still license to third parties in breach of their exclusive license agreement with us. In 2000, we purchased from a third party the strains underlying the production of certain of our LCDAs for a one-time payment, and for which we have obtained certain non-exclusive rights in China and certain exclusive rights outside of China. However, we believe the seller licensed similar strains and its process technology to another China-based producer that competes with us. In addition, the seller may have chosen to license such strains to

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other competitors. Such competitors may develop their own proprietary technologies, processes and products that may be superior to ours and may undermine our competitive position, thereby adversely affecting our business and results of operations.

We may not have sufficient legal protection for some of our key technologies, production methods or processes.

        As most of our technologies, production methods and processes involve unpatented, proprietary technology, processes, know-how or data, we primarily rely on trade secret protection and non-compete agreements to safeguard our interests. However, trade secrets are difficult to protect. While we believe we use reasonable efforts to protect our trade secrets, including requiring employees, consultants, contractors or scientific and other advisors to enter into confidentiality agreements with us, such persons may unintentionally or willfully disclose our information to competitors. In addition, confidentiality agreements and non-compete agreements may not be enforceable or provide an adequate remedy in the event of unauthorized use or disclosure. It may be difficult to prove or enforce a claim that another party has illegally obtained and used our trade secrets. Our enforcement efforts would be expensive and time-consuming and the outcome would be unpredictable. In addition, our competitors may independently develop technologies that are equivalent to our trade secrets, in which case, we would not be entitled to enforce our proprietary rights and our business could be harmed.

        We have sold, and expect to continue to sell, a portion of our products outside of China, where we currently have no patent protection. In these jurisdictions, others may independently develop substantially equivalent technologies or processes or otherwise gain access to our proprietary technologies or processes, and obtain patents for such intellectual properties, including in countries where we sell our products. Furthermore, due to the restrictions under the patent laws of jurisdictions outside of China, our patents and patent applications in China may also prevent us from obtaining related patents in such jurisdictions, including in the United States, that cover the same or similar subject matter. As we currently have no patent protection outside of China, if any third party is successful in obtaining patents covering technologies or processes that are substantially similar to the technologies or processes we use in any of our markets outside of China and enforces their patents against us, we may be prevented from selling products produced from the allegedly infringing intellectual property in those markets, which may materially and adversely affect our business, results of operations and prospects.

If our customers switch to alternative products and/or change their production specifications, demand for our products could decline, and our business, financial condition and results of operations could be harmed.

        Our products are used in a range of applications. Changes in the production processes used by our customers or the purchasers of their products could reduce or eliminate demand for our products or make our products obsolete. Companies that use our products, or their customers, may also decide to produce or purchase similar alternative materials. If such a change were to occur, whether due to price, performance or other considerations, demand for our products could decline. For example, the markets for polyamide, hot melt adhesives and corrosion inhibitors, where many of our products have been used in recent years, are price sensitive and as a result, demand for our products that are used in these markets could change quickly if the price of alternative products were to decrease. Our business, results of operations and financial condition could be materially and adversely affected if we are unable to successfully adapt to such changes in a timely or cost-effective manner.

If the end-markets for our products decline or do not grow as quickly as we anticipate, our business prospects and results of operations could be harmed.

        Demand for our products is dependent on demand for the end-products that incorporate our products. Most of our customers are in the chemical industry, supplying the automobile, textile and

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consumer product industries. Our future success depends on the continued growth of these markets as well as the growth, viability and financial stability of our customers and the end-market demand for our customers' products. If the end-markets for our products decline or do not grow as quickly as we anticipate, or if our customers do not succeed in increasing their market share, our business prospects, financial condition and results of operations could be harmed.

        In addition, certain of our products are used in end-products that are still in the development stage or at an early stage of marketing, some of which are subject to regulatory review and approval. Whether these end-products receive regulatory approval and ultimately pass through the test stage and reach a level of commercial production will significantly affect our future sales. For example, we supply Novo with pilot quantities of our longer-chain diacids for use in their research for commercial production and clinical development. If the pharmaceutical product fails to receive regulatory approval or fails to achieve commercial success, we will not be able to increase the sales of our longer-chain diacids. If the end-products or applications incorporating our products experience regulatory or commercial setbacks, related expenditures and development activities may fall short of our expectations and our business, financial condition and results of operations may be harmed.

Our current dependence on a limited number of customers may cause significant fluctuations or declines in our revenues.

        We derive a substantial portion of our revenues from LCDAs, which we sell to a limited number of customers. In 2008, 2009, 2010 and the three months ended March 31, 2011, customers individually accounting for 5% or more of our total revenues collectively represented approximately 59.2%, 62.2%, 25.4% and 29.0% of our total revenues, respectively. Sales to our largest customer represented approximately 22.7%, 28.8%, 10.3% and 7.5% of our total revenues in 2008, 2009, 2010 and the three months ended March 31, 2011, respectively. Consequently, any one of the following events may cause material declines in our revenues and have a material adverse effect on our results of operations:

    reduction, delay or cancellation of orders from one or more of our significant customers due to a reduction in our customers' product sales;

    selection by one or more of our significant customers of our competitors' products;

    decision by one or more of our significant customers to self-produce products that are currently provided by us;

    loss of one or more of our significant customers and our failure to obtain additional or replacement customers to replace the lost sales volume;

    any adverse change in the bilateral or multilateral trade relationships among China, the United States and European countries; and

    failure of any of our significant customers to make timely payment for our products.

        We anticipate that our dependence on a limited number of customers will continue. We cannot be certain whether these customer relationships will continue to develop or if these customers will continue to generate significant revenue for us in the future.

Our future liquidity needs are uncertain and we may need to raise additional funds in the future.

        We estimate that our capital expenditure in 2011 will be approximately RMB450.0 million, which we plan to use primarily for the construction of our I+G production facility and expansion of our production capacity for LCDAs. Based on our current operating plans, we expect our existing

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resources, together with proceeds from this initial public offering, as well as anticipated cash flows from operations, to be sufficient to fund our operations and planned expansions, including expanding production capacities, strengthening our research and development capability, expanding our sales and marketing efforts and general working capital needs, for at least the next 12 months. We may, however, need to raise additional funds within the next 12 months if our expenditures exceed our current expectations. This could occur for a number of reasons, such as cost overruns in connection with the construction of our I+G production facility and our capacity expansion projects. Our ability to raise additional funds in the future is subject to a variety of uncertainties, including:

    our future financial condition, results of operations and cash flows;

    general market conditions for capital-raising activities by China-based companies; and

    economic, political and other conditions in China and elsewhere.

        We cannot assure you that our cash flows will be sufficient to meet our operational needs and capital requirements. If we need to obtain additional financing, we cannot assure you that financing will be available in amounts or on terms acceptable to us, or at all. We have experienced difficulties in obtaining bank financing to support our expansion plans in the second quarter of 2011 due to the following recent developments, among others, in China's commercial lending environment:

    The People's Bank of China, or PBOC, China's central bank, adjusted the bank reserve requirement ratio upward by 50 basis points from June 20, 2011, which was the sixth time the PBOC increased this ratio since January 2011, each by 50 basis points. The cumulative effect of consecutive bank reserve ratio increases in 2011 has substantially tightened the supply of credit in the second quarter of 2011.

    On July 6, 2011, the PBOC raised its one-year benchmark deposit and lending rates by 25 basis points, the second rate increase since April 2011 and the latest attempt by China's central bank to tighten the liquidity market.

    Starting from the second quarter of 2011, the market sentiment towards China-based U.S.-listed companies has become increasingly unfavorable, which we believe has also made obtaining additional bank financing more difficult because local banks are of the view that private companies seeking initial public offerings in the U.S. are now exposed to greater risks.

        Our two applications for capital expenditure-related loans from the local branches of the Bank of Communications and the Agricultural Bank of China, which we intended to use to fund our capacity expansion in the second half of 2011, were rejected on June 21, 2011 and June 23, 2011, respectively, despite acknowledgement by each bank that we have a good credit history with such bank. The unavailability of bank financing or a prolonged delay in obtaining bank financing, if not compensated by a capital injection, may have an adverse impact on our ability to execute our overall expansion plans.

        Our future expansion plans, liquidity needs and other business reasons could require us to sell additional equity or debt securities or obtain bank loans. The sale of additional equity or equity-linked securities could result in additional dilution to our shareholders. The incurrence of additional debt would result in increased debt service obligations and could result in operating and financing covenants that restrict our operations.

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Our long-term growth depends on our ability to successfully identify market opportunities for new products and develop and scale-up bioprocesses for commercial production.

        Our long-term growth depends on our ability to successfully identify products with significant market opportunities that can be produced through bioprocesses, enhance licensed technologies, develop new technologies and develop and scale-up bioprocesses for commercial production. As biotechnology is characterized by rapid technological advances, the technologies, processes and products that we have developed may become uncompetitive or obsolete if our competitors adapt more quickly than we do or if customer demands or requirements change. If we are unable to successfully develop new products or bioprocesses or if the benefits from developing them prove to be less than anticipated, our growth may slow or stall and we may incur costs that are not offset by sales from the new products. Furthermore, we may be required to recognize a charge for the impairment of assets to the extent our technologies, processes or products become uncompetitive or obsolete, or if any new technologies, processes or products fail to achieve commercial viability or acceptance. Any such charge may have a material adverse effect on our financial condition and results of operations.

We may be subject to potential liabilities with respect to our acquisition of assets of Ji Fa Biotech.

        In 2008, we acquired the assets of Ji Fa Biotech Medical Food Co., Ltd., or Ji Fa Biotech, a bankrupt company, from the Jilin Municipal Government, to utilize its assets in the construction of our biobutanol production facility in Jilin Province. We acquired Ji Fa Biotech for a total consideration of RMB130.0 million, of which RMB100.0 million was paid in 2007 and RMB30.0 million was withheld to cover our infrastructure costs in the event that the Jilin Municipal Government fails to invest in the local infrastructure for our benefit. The Jilin Municipal Government has agreed that we can delay the payment of RMB30.0 million pending further discussion. In connection with this acquisition, we obtained land-use rights for 14 parcels of land with a total area of 1,225,521.51 square meters, for which we paid a land grant fee of RMB69.1 million. This land grant fee is substantially lower than the minimum standard prescribed by the Ministry of Land and Resources. As a result, we may be required to pay the difference and pay related costs. In addition, pursuant to the Provisions Regarding Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, this acquisition should have been approved by the Ministry of Commerce or its provincial counterpart, although the foregoing regulations do not provide for any specific penalty for the failure to obtain such approval. We are in the process of obtaining such approval.

Certain non-compliance with PRC laws and regulations may result in potentially significant monetary damages and fines or other penalties.

        During our operating history, we and certain of our subsidiaries did not fully comply with certain PRC laws and regulations that may result in potentially significant monetary damages and fines or other penalties. We have not officially obtained the required construction permits prior to construction of and commencement of operations at our LCDA production facility in Shandong Province and thus have not undergone the required inspections prior to the commencement of operations at this production facility. As a result, we have not yet obtained the title certificates for our LCDA production facility in Shandong Province. We also have not yet obtained the building ownership certificate for our biobutanol production facility in Jilin Province. Although we are currently in the process of obtaining the required construction permits and relevant certificates, the failure to do so in the past may subject us to fines and penalties imposed by the relevant government authorities. For example, we may be subject to fines ranging from RMB5,000 to 10% of the construction cost for lack of construction permits, and we may also be required to suspend use of our LCDA or biobutanol production facilities or vacate the premises. The government authorities may also confiscate the illegal property or income. In addition, we may also need to pay compensation if any damage has been caused to a third party.

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        We have identified and cured all of the historical deficiencies relating to one of our subsidiaries, Cathay Shanghai, which had previously held equity interests in certain of our non-PRC subsidiaries without obtaining the necessary approvals and did not register such equity ownership with the relevant PRC government authorities as required under PRC regulations. Cathay Shanghai also operated under the name of Shanghai Cathay Holdings Co., Ltd. with the registered business scope of "investment company" before August 2007, but it did not meet the statutory requirements to operate as an investment company. In addition, Cathay Shanghai did not obtain the necessary approval from the Ministry of Commerce to operate as an investment company as required under applicable PRC regulations and only has an approval from the local authority in Shanghai. Although all of the deficiencies relating to Cathay Shanghai have been cured, we cannot assure you that we will not be subject to any government action for our past non-compliance.

We may be subject to fines and other penalties for failure to obtain or maintain required permits, licenses and registrations.

        The production and sale of certain of our products or pipeline products are subject to regulation in China. For example, the production of I+G and co- and by-products of biobutanol requires special licenses and registrations with the relevant government authorities in China. We are also required to establish a special business account with respect to grain procurement and report relevant information in connection with the purchase, sale and storage of grain to the State Administration of Grain or its local counterparts. Our biobutanol and its co- and by-products may also require specific regulatory approvals, licenses and permits for their production, operation, storage and transportation, such as a precursor chemicals production license and a dangerous chemicals license. In addition, we are required to obtain a production permit issued by the Ministry of Agriculture or its local counterparts to produce lysine feed.

        In three instances, certain of our subsidiaries did not obtain the relevant approvals for total investment and registered capital increases from the National Development and Reform Commission, or the NDRC, or its local counterparts. The NDRC or its relevant local counterparts may require these subsidiaries to cease the construction of production facilities or to cease current production if we cannot become compliant with the applicable regulations to the satisfaction of the NDRC or its relevant local counterparts. See "Regulation—Regulatory Approvals for Industrial Products and Production." Failure to obtain or maintain any of these permits, licenses and registrations could have a material adverse effect on our business and prospects. With respect to the two cogeneration facilities operated by Cathay Jilin, we have not obtained project and environmental approvals from the local NDRC and environmental protection bureau or electricity business permits from local government agencies. We may be ordered to demolish our cogeneration facilities, or to stop generating electricity at these facilities, and may be imposed fines in an amount up to RMB100,000. See "Regulation—Regulatory Approvals for Industrial Products and Production."

        We have not undergone a facility safety inspection or fire control inspection in relation to a portion of our biobutanol production facility and a portion of our LCDA production facility, which may subject us to aggregate fines ranging from RMB30,000 to RMB350,000 in each case. Although we expect to obtain most of these permits in the next few months, we may still be subject to fines and other penalties imposed by the relevant government authorities for non-compliance, including a suspension of production or an order to vacate the premises.

        The process for obtaining regulatory approvals or registrations can be lengthy and expensive and the results are often unpredictable. In addition, relevant regulatory authorities may introduce additional requirements or procedures that have the effect of delaying or prolonging the regulatory approval process. If we are unable to obtain permits, approvals, licenses or registrations needed to produce, market and sell our products or pipeline products or to operate our production facilities in a timely

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fashion, or at all, our business would be disrupted, and our sales and profitability could be materially and adversely affected.

Non-compliance with environmental regulations has resulted and may continue to result in fines or other penalties as well as adverse publicity.

        Because our production processes generate noise, waste water, gaseous and other industrial waste, we are required to comply with national and local environmental regulations applicable to us. Our biobutanol production facility, due to its type and scale, needs to be approved by the PRC Ministry of Environmental Protection prior to construction. As of the date of this prospectus, we have only obtained an approval from Jilin Province Environmental Protection Bureau and this approval alone may be deemed insufficient and may be revoked by the PRC Ministry of Environmental Protection. We may be subject to fines of up to RMB100,000 and ordered to suspend construction or to demolish our biobutanol production facility within a specified period. In addition, we also need to obtain a formal environmental inspection approval for our biobutanol production facility. We obtained a trial production permit from the environmental bureau, which expired on April 21, 2011, and we are now in the process of applying for the formal environmental inspection approval. As of the date of this prospectus, the environmental inspection agency has completed its environmental inspection of our biobutanol production facility in Jilin Province and issued its inspection report. The government authorities are currently reviewing the inspection report and may grant us the formal approval if our biotuanol production facility in Jilin Province passes the environmental inspection. If we fail to obtain such approval or we are deemed not in compliance with laws and regulations in connection with environmental trial production, we may be ordered to suspend our biobutanol production and may be subject to fines up to RMB100,000 for non-compliance. In 2008, the local authorities issued a notice to Cathay Jilin to attend a hearing regarding a potential penalty in the amount of RMB100,000 for commencing operations prior to the completion of the applicable environmental protection inspection, and required Cathay Jilin to rectify its activities. We attended the hearing and the local environmental protection bureau has not yet imposed any other penalty on us. We have also received three circulars from the Jilin environmental protection authority stating that Cathay Jilin exceeded the prescribed discharge quotas for chemical oxygen demand and requesting Cathay Jilin to rectify this and other non-compliances. We have been in contact with the relevant environmental protection bureau with respect to these circulars and to date no penalty has been imposed on us.

        Except as disclosed above, we believe we are currently in compliance with applicable environmental regulations in all material aspects. However, future developments, including our commencement of commercial manufacturing of one or more of our products, more stringent environmental regulations, policies and enforcement, the implementation of new laws and regulations or the discovery of unknown environmental conditions, may require substantial compliance costs. If we fail to comply with present or future environmental regulations, we may be required to pay substantial fines, suspend production or cease operations and we may be subject to adverse publicity.

        In addition, as our production facilities and waste treatment systems are periodically inspected by the local government and our major customers to ensure that we meet the necessary environmental regulations, failure by us to continue to pass future inspections may result in the cancellation or reduction of orders. Furthermore, even though we believe our bioprocesses are more environmentally friendly as compared to chemical processes, our operating activities continue to involve the use of hazardous materials and chemicals as well as the controlled use of potentially harmful biological materials. Any failure by us to control the use of or to restrict the discharge of hazardous substances could subject us to fines or other penalties or result in suspension of our business operations and may result in adverse publicity that damages our reputation. We currently do not carry any insurance for potential liabilities relating to the release of hazardous materials. If we are held liable for damages in

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the event of contamination or injury, it could have a material and adverse effect on our financial condition and results of operations.

Damages and disruptions at our production facilities and adverse local government regulations and actions in these concentrated locations could materially and adversely affect our business, financial condition and results of operations, especially since we do not have any business interruption insurance.

        We have two production facilities. Our LCDA production facility is located in Shandong Province and our biobutanol production facility is located in Jilin Province. We plan to build an I+G production facility adjacent to our biobutanol production facility in Jilin Province. Operating hazards, natural disasters or other unanticipated catastrophic events, including utility interruptions, water shortages, storms, fires, explosions, earthquakes, terrorist attacks, wars, labor disputes, strikes, protests or adverse local government regulations and actions could significantly impair our ability to produce products and operate our business, as well as delay our pilot testing and bioprocess scale-up activities. Our production facilities and certain equipment located in our production facilities are difficult to replace and could require substantial replacement lead-time. Catastrophic events may also destroy inventory located in our production facilities. In addition, we do not carry any business interruption insurance.

        Adverse government regulations could require us to shut down or relocate our production facilities to designated industrial zones. We could be forced to relocate our LCDA production facility in Shandong Province due to changes in local zoning regulations. The occurrence of any such event could result in substantial costs and diversion of resources, and our business, financial condition and results of operations could be materially and adversely affected.

We face competition in several different markets.

        For our LCDAs, we primarily compete with U.S.-based Invista, which produces LCDAs from a multi-step chemical process for sale to external customers. We also compete with Germany-based Evonik Industries AG and Japan-based Ube Industries, or Ube, both of which produce LCDAs through a multi-step chemical process, primarily for captive use in their polyamide manufacturing businesses. We also compete with China-based LCDA producers who use bioprocesses similar to ours.

        For biobutanol, we compete with chemical suppliers and importers in China, many of whom have long-term relationships with our potential customers. The current major producers of butanol in China include CNPC Jilin Petrochemical Corporation, BASF-YPC Co., Ltd., Sinopec Qilu Petrochemical Corporation, CNPC Daqing Petrochemical Corporation and Beijing Dongfang Petrochemical Corporation. We are also competing with overseas producers who export their butanol to China such as The Dow Chemical Company. There are several companies that are working on the production of biobutanol such as METabolic EXplorer S.A., TetraVitae Bioscience, Inc., Cobalt Technologies, Inc., Green Biologics Ltd. and Jilin Jian New Energy Group. In addition, the resulting co- and by-products from our biobutanol production process will compete against products offered by other chemical producers and importers.

        Many of our competitors have longer operating histories, greater name recognition, larger customer bases and significantly more financial, sales and marketing, production, distribution, technical and other resources and experience than we do. Our competitors' greater size in some cases provides them with a competitive advantage with respect to production costs due to economies of scale and their ability to purchase raw materials and utilities at lower prices. In addition, our competitors may be able to devote greater resources to the research and development of technologies, processes and products that are more effective than ours and render our technologies, processes or products obsolete or uneconomical. They may also adapt more quickly to new or emerging technologies and changes in customer demand and requirements. Current and potential competitors have established or may

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establish financial or strategic relationships among themselves or with existing or potential customers or other third parties. Accordingly, new competitors or alliances among competitors could emerge and rapidly acquire significant market share. Our failure to maintain a competitive position with respect to technological advances, adapt to changing market conditions or otherwise compete successfully with existing or new competitors may have a material and adverse effect on our business, financial condition and results of operations.

        Certain of our competitors may temporarily adopt low-margin or negative-margin sales strategies and compete against us based on lower prices. Despite the environmentally friendly nature of our products and the unique characteristics of certain of our products, we still compete primarily on price for our products, such as DC-12, which historically accounted for a substantial majority of our revenues, and our biobutanol. Our competitors' decision to temporarily incur losses or reduce profit margins may prevent us from competing effectively. As a result, our existing customers may decide to switch to our competitors' products and our competitors' customers may be reluctant to switch to our products. If our competitors decide to adopt such strategies, we may be prevented from entering into or be forced to exit certain markets, which will materially and adversely affect our business, financial condition, results of operations and prospects.

Changes in our product mix may negatively affect our margins in the future.

        We derive a significant portion of our revenues from a limited number of products. Prior to 2010, we derived substantially all of our revenues from LCDAs, particularly DC-12. LCDA revenue accounted for 86.6%, 91.6%, 51.5% and 39.0% of our total revenues in 2008, 2009, 2010 and the three months ended March 31, 2011, respectively. We commenced commercial sales of biobutanol in 2010 and incurred a gross loss of RMB35.6 million (US$5.4 million) and RMB9.9 million (US$1.5 million) in 2010 and the three months ended March 31, 2011, respectively, due to the significant increase in corn prices and expenses incurred in connection with the ramp-up of our biobutanol production. As a result, we incurred a segment loss from sales of biobutanol products in the amount of RMB51.1 million (US$7.8 million) and RMB21.4 million (US$3.3 million) in 2010 and the three months ended March 31, 2011, respectively. Our profitability depends on our ability to successfully control costs during the production processes by continuing to increase efficiency, reduce raw material consumption and increase production yields. We must also continuously transition our product range to newer and more advanced products to maintain our selling prices and offset rising raw material costs. If we fail to increase the efficiency of our production processes, reduce our raw material consumption, increase production yields or shift to higher value-added products, our business, financial condition and operating results may be adversely affected.

Our dependence on a limited number of suppliers for petroleum-based oil could limit and prevent us from delivering our LCDAs in a timely manner to our customers in the required quantities, which could result in order cancellations, decreased revenue and loss of market share.

        Petroleum-based oil is the key raw material in the production of our LCDAs. We purchase oil from a limited number of suppliers and will continue to rely on the limited number of oil suppliers and bio-based oil suppliers for our future needs. If our suppliers fail to supply petroleum-based oil that meets our quality, quantity and cost requirements and we are unable to obtain these materials from alternative sources in a timely manner or on commercially reasonable terms, we may be unable to produce LCDAs. For example, our current primary supplier of petroleum-based oil, JX Energy Corporation in Japan, had its supply chain disrupted due to the earthquake and tsunami in Japan in March 2011. In addition, there are currently only a limited number of suppliers who have the capability to produce bio-based oil and such suppliers may not be able to supply bio-based oil that meets our quality, quantity and cost requirements. As a result, we may be prevented from delivering our LCDAs to our customers in the required quantities, at competitive prices and on acceptable terms of delivery, which could result in order cancellations, decreased revenue and loss of market share and otherwise harm our reputation.

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        We do not have any long-term arrangements with our suppliers of petroleum-based oil. If we fail to maintain our relationships with our current suppliers or develop relationships with other oil or bio-based oil suppliers, our business, financial condition and results of operations may be adversely affected.

We face risks associated with the marketing and sales of our products internationally, and the failure to effectively manage these risks could impair our ability to expand our business abroad.

        In 2008, 2009, 2010 and the three months ended March 31, 2011, revenues derived from sales outside of China represented approximately 58.2%, 47.8%, 24.8% and 17.2% of our total revenues, respectively. Substantially all of our export revenues is derived from the sale of LCDAs. Although we plan to expand our sales of biobutanol in the China market and commence commercial sales of I+G in China by the end of the first half of 2012, revenues derived internationally may continue to be significant to our total revenues in the short-term. The marketing and sales of our products in the international market expose us to a number of risks, including:

    fluctuations in currency exchange rates;

    increased costs associated with maintaining marketing and selling efforts in various countries;

    increased shipping costs;

    difficulties and costs related to compliance with the different commercial and legal requirements in the various overseas markets in which we sell our products; and

    trade barriers such as export requirements, tariffs, taxes and other restrictions and expenses, which could increase the prices of our products and make us less competitive in some countries.

        If we are unable to effectively manage these risks, we may not be able to successfully expand our business abroad or grow our business as we have planned.

We may not be able to manage our growth or expansion effectively.

        To manage the potential growth of our business, we will be required to improve our existing, or implement additional, operational and financial systems, procedures and controls, and expand, train and manage our rapidly growing employee base. Furthermore, we need to maintain and expand our relationships with our customers, suppliers and other third parties. We cannot assure you that our current and planned operational and financial systems procedures and controls will be adequate to support our future growth. In addition, the success of our growth strategy depends on a number of internal and external factors, such as market acceptance of our products and raw material costs. If we are unable to manage our growth effectively, we may not be able to take advantage of market opportunities, execute our business strategies or respond to competitive pressures.

Our limited operating history may not serve as an adequate basis to judge our future prospects and results of operations.

        We have a limited operating history upon which you can evaluate the viability and sustainability of our business. We did not begin commercial sale of our first product until 2003 and have experienced rapid growth since then. Our revenues decreased from RMB378.7 million in 2008 to RMB296.8 million in 2009 due to the global financial crisis, and then grew to RMB816.0 million (US$124.6 million) in 2010. Our revenues increased from RMB147.2 million in the three months ended March 31, 2010 to RMB271.2 million (US$41.4 million) in the three months ended March 31, 2011. However, as our business continues to expand, we may not be able to achieve a growth rate similar to the growth rate we experienced in 2010 even if we can continue to expand our business and grow our revenues. As

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such, our historical operating results may not provide a meaningful basis for evaluating our business, financial performance and prospects.

Our business depends substantially on the continuing efforts of our executive officers and our ability to maintain a skilled labor force.

        Our future success depends substantially on the continued services of our executive officers. In particular, we depend on the services of Dr. Xiucai Liu, our founder, chairman of our board of directors and chief executive officer, Mr. Qixian Zhang, our co-founder, director and senior vice president, Mr. Paul J. Caswell, our director and executive vice president of international business development and Mr. Sam Dajani, our director and chief operating officer. We do not currently maintain key employee insurance on any of our executive officers. If one or more of our executive officers are unable or unwilling to continue serving in their present positions, we may not be able to replace them easily, or at all. As a result, our business may be severely disrupted, and we may incur additional expenses to recruit and retain new officers. As we are still a relatively new company and our business has grown rapidly, we may not be able to train and integrate new officers into our operations in a timely manner to meet the growing demands of our business. In addition, if any of our executives joins a competitor or forms a competing business, we may lose some of our customers and more importantly, our trade secrets and technologies. For example, certain former employees of ours are currently working with Shandong Hilead, a competitor of ours and with whom we are currently involved in various litigation and administrative proceedings. See "Business—Legal and Arbitration Proceedings." We protect our trade secrets by entering into confidentiality and non-competition agreements with each of our executive officers. However, we cannot assure you that, if any disputes arise between our executive officers and us and in light of uncertainties associated with the PRC legal system, these agreements could be enforced in China, where our executive officers reside and hold some of their assets. See "—Risks Related to Doing Business in China—Uncertainties with respect to the PRC legal system could have a material adverse effect on us."

Failure to make strategic acquisitions and to establish and maintain strategic relationships, could have a material adverse effect on our revenue growth and prospects.

        We may make strategic acquisitions and establish and maintain strategic relationships with third parties. In addition, we may enter into strategic relationships with third parties to gain access to capital or funding for research and development programs, process development programs and commercialization activities, or to reduce the risk of developing and scaling-up for commercial production of pipeline products.

        We cannot assure you, however, that we will be able to successfully make such strategic acquisitions or establish strategic relationships with third parties that will prove to be beneficial for our business. Our inability in this regard could have a material adverse effect on our revenue growth and prospects. In addition, strategic acquisitions and relationships with third parties could subject us to a number of risks, including:

    our inability to integrate new operations, products, personnel, services or technologies;

    unforeseen or hidden liabilities;

    disagreement with our strategic relationship partners;

    our inability to generate sufficient revenues to offset the costs and expenses of strategic acquisitions or other strategic relationships; and

    potential loss of, or harm to, employees or customer relationships.

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        Any of these events could impair our ability to manage our business, which in turn could have a material adverse effect on our financial condition and results of operations. Such risks could also result in our failure to derive the intended benefits of the strategic acquisitions or strategic relationships and we may be unable to recover our investment in such initiatives.

Labor activism and unrest, failure to maintain satisfactory labor relations and failure to obtain social security registration certificates and public housing accumulation fund registration certificates may adversely affect our business and result in adverse publicity.

        Labor related legal proceedings are costly and time-consuming and divert management personnel from their normal responsibilities. Although we believe we generally have good relations with our employees, we cannot assure you that litigation proceedings relating to our employees, or labor unrest, activism, disputes or any other type of labor dispute will not take place in the future. It is difficult to predict how such disputes would be resolved. In addition, we may be subject to fines or other penalties and we may have to pay unpaid premiums to relevant authorities. Shandong Degussa has not yet obtained social security registration certificates and certificates for public housing accumulation funds registration.

Fluctuations in exchange rates could adversely affect our business and your investment.

        Our sales are currently denominated in U.S. dollars, Euros or Renminbi, and our costs and expenses are denominated in Renminbi or U.S. dollars. Fluctuations in currency exchange rates could have a significant effect on our financial stability due to a mismatch among various foreign currency-denominated assets and liabilities. Fluctuations in exchange rates, particularly among the U.S. dollar, the Euro and the Renminbi, affect our net profit or loss and result in foreign currency exchange gains and losses on our foreign currency denominated assets and liabilities. We cannot predict the impact of exchange rate fluctuations on our results of operations and may incur net foreign currency losses in the future. We currently engage in limited hedging arrangements to reduce the effect of such exposure, such as hedging the Renminbi against the Euro, but we do not apply hedge accounting and we cannot assure you that such hedging activities will be effective in managing our exposure to foreign exchange risk.

        The value of the Renminbi against the U.S. dollar and other currencies is affected by, among other things, changes in China's political and economic conditions and China's foreign exchange policies. The conversion of Renminbi into foreign currencies, including U.S. dollars, has been based on exchange rates set by the People's Bank of China. On July 21, 2005, the PRC government changed its decade-old policy of pegging the value of the Renminbi solely to the U.S. dollar. Under this revised policy, the Renminbi is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. Following the removal of the U.S. dollar peg, the Renminbi appreciated more than 20% against the U.S. dollar over the following three years. Since July 2008, the Renminbi has traded within a narrow range against the U.S. dollar. As a consequence, the Renminbi has fluctuated significantly since July 2008 against other freely traded currencies, in tandem with the U.S. dollar. On June 20, 2010, the People's Bank of China announced that the PRC government would further reform the Renminbi exchange rate regime and increase the flexibility of the exchange rate. It is difficult to predict how this new policy may impact the Renminbi exchange rate.

        As we rely on dividends paid to us by our operating subsidiaries, any significant revaluation of the Renminbi may have a material adverse effect on the value of, and any dividends payable on, our ADSs in foreign currency terms. For example, to the extent that we need to convert U.S. dollars we received from our initial public offering into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive from the conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of

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making payments for dividends on our ordinary shares or ADSs or for other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount available to us. Consequently, appreciation or depreciation in the value of the Renminbi relative to the U.S. dollar would affect our financial results reported in U.S. dollar terms without giving effect to any underlying change in our business or results of operations.

        In addition, an appreciation in the value of the Renminbi against foreign currencies could make our products more expensive for our international customers, which could adversely affect our international sales. Appreciation of the Renminbi could also reduce the competitiveness of the products of our PRC customers in the international market, which may potentially lead to a reduction in their orders from us and negatively affect our sales and profitability. Furthermore, many of our competitors are foreign companies that could benefit from such currency appreciation, making it more difficult for us to compete against these companies. On the other hand, depreciation in the value of the Renminbi against foreign currencies could increase our raw material costs such as petroleum-based oil, the key raw material in the production of our LCDAs, which is primarily sourced from overseas suppliers.

We may be sued for product liability or experience problems with product quality or performance which could result in adverse publicity or subject us to unexpected costs and expenses, including potentially significant monetary damages.

        While we have not experienced any material product defects, we may be subject to product quality and product liability claims in the future. Future product failures could also cause us to incur substantial costs to replace defective products, provide refunds or resolve disputes with our customers through litigation, arbitration or other means. Because I+G is a food additive, the production of I+G requires a food production license and compliance with relevant food-safety standards. Accordingly, we may also be subject to liabilities in connection with food-safety issues once we introduce our I+G to the market. Any increase in the defect rate of our products would increase the amount of our replacement costs and we may not have adequate provision to cover such costs, which could have a material adverse effect on our results of operations. In addition, we are subject to claims from our customers where end-products sold by our customers failed or caused injury, death or damage due to problems with our products. Any successful assertion of product liability claims against us could result in potentially significant monetary damages and require us to make significant payments and incur substantial legal expenses. Even if a product liability claim is not successfully pursued to judgment by a claimant, we may still incur substantial legal expenses defending such a claim. We currently do not carry product liability insurance covering such claims. If we attempt to obtain product liability insurance coverage, such insurance may be prohibitively expensive or not available at all and may not be sufficient to cover our potential liabilities. We have not made provisions for potential product liability claims and we may not have adequate resources to satisfy a judgment if a successful claim is brought against us. At this time we cannot predict whether product liability claims will be brought against us in the future or the effect of any resulting negative publicity on our business. In addition, product failures and the assertion of product liability claims against us, even if unsuccessful, could also result in adverse publicity that may damage our reputation and customer relationships and cause our revenues to decline.

Our production involves handling of hazardous materials.

        Certain co- and by-products generated in our biobutanol production, including methane, are flammable, explosive and hazardous and pose a threat to the health and safety of our employees and residents around our facilities. If an accident occurs during the production process or in the transportation of these co- and by-products, we may be liable for damages, which could materially and adversely affect our business, reputation and results of operations.

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We have limited business insurance coverage in China, which could harm our business.

        We do not have adequate property or casualty insurance covering all of our production facilities, equipment, offices or inventory. Furthermore, if any of our products are faulty, then we may become subject to product liability claims. We do not carry business interruption insurance or product liability insurance and, as a result, we may be required to pay for financial and other losses, damages and liabilities, including those caused by natural disasters and other events beyond our control, out of our own funds, which could have a material adverse effect on our business, financial condition and results of operations.

Our operating results may fluctuate considerably from period to period and on a quarterly basis. These fluctuations could have an adverse effect on the price of our shares and ADSs.

        Our results of operations have fluctuated in the past and may continue to fluctuate significantly on a quarterly basis as a result of a number of factors, many of which are beyond our control. Although many companies may encounter fluctuations in their results of operations, these fluctuations are particularly relevant to us as a result of our current reliance on a limited number of customers, our reliance on purchase orders rather than long-term contracts with our customers, our relatively small size, our limited operating history and the dynamics of operating a business in China. In addition, our results are affected by cyclicality in the various industries we serve, either directly or indirectly, including, but not limited to, the consumer, automotive and textile industries. These industries are highly competitive and to a large extent driven by end-user markets. Fluctuations in price and demand within these industries could lead to reduced sales and declining prices for our products as well as lower profit margins.

        Factors that could cause our results of operations to fluctuate include, among others:

    the timing of purchases made by our customers, which are tied to the needs of such customers and subject to any seasonal or periodic fluctuation in their businesses;

    fluctuating raw material prices;

    the average selling prices of our products;

    delivery delays, price fluctuations and shortages with respect to raw materials that we acquire from suppliers;

    timing and changes by our customers in the commercialization of their products;

    the loss of one or more key customers or the significant reduction or postponement of orders from these customers;

    unplanned expenses incurred to address contingencies such as production failures, defects or downtime;

    geopolitical turmoil within any of the countries or regions in which we sell products;

    foreign currency fluctuations, particularly fluctuations in the exchange rates of the Euro, U.S. dollar and Renminbi;

    changes in our production costs;

    changes in the relative sales mix of our products;

    timing and ability to obtain required permits, licenses and registrations;

    our ability to successfully develop, introduce and sell new or enhanced products in a timely manner, and the amount and timing of related research and development costs;

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    the timing of new product or technology announcements or introductions by our competitors and other developments in our competitive environment;

    litigation involving intellectual property; and

    international or China-specific economic downturns.

        Any of the foregoing factors could cause fluctuations in our sales prices, sales volumes and profit margins, and further cause us to fail to meet the expectations of securities analysts or investors, which could cause the trading price of our ADSs to decline. We base our planned operating expenses in part on our expectations of future revenue, and as a result, a significant portion of our expenses will be fixed in the short term. If revenues for a particular quarter are lower than what we expected, we may be unable to proportionately reduce our operating expenses for that quarter, which would have a material adverse effect on our operating results for that quarter. You should not rely on our results from any quarter as an indication of future performance. Quarterly variations in our operations could result in significant volatility in the market for our ADSs, and the market price for our ADSs might fall below the initial public offering price.

We engage in limited hedging or derivative transactions which involve risks that could have an adverse effect on our financial condition and results of operations.

        We engage in hedging activities from time to time to manage our exposure to foreign exchange risk, such as hedging the Renminbi against the Euro. In addition, in order to minimize the effects of the volatility of our raw material prices on our operating income, we may in the future take hedging positions in certain of our raw materials. Hedging arrangements, however, expose us to the risk of financial loss in situations where the other party to the hedging contract defaults on its contract or where there is a change in the expected differential between the underlying price in the hedging agreement and the actual price of the commodities hedged. Although our hedging activities and the amounts hedged have been immaterial to date, and we attempt to link our hedging activities to our sales and pricing plans, we cannot assure you that our hedging activities will not result in material losses in the future. In addition, we do not apply hedge accounting.

Dr. Xiucai Liu, our founder, chairman of our board of directors and chief executive officer, has substantial influence over our company and his interests may not be aligned with the interests of our other shareholders.

        Dr. Xiucai Liu, our founder, chairman of our board of directors and chief executive officer, currently beneficially owns approximately 35.6% of our outstanding ordinary shares and preferred shares and will beneficially own approximately                % of our outstanding ordinary shares upon completion of this offering. As such, Dr. Liu has substantial influence over our business, including decisions regarding mergers, consolidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions. This concentration of ownership may discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and might negatively impact the price of our ADSs. These actions may be taken even if they are opposed by our other shareholders, including those who purchase ADSs in this offering.

If we grant additional employee share options, restricted shares or other share-based compensation in the future, our net income and earnings per share or per ADS could be adversely affected.

        On June 30, 2007, we adopted our 2007 share incentive plan, which amended and restated the 2006 share incentive plan adopted in June 2006. As of the date of this prospectus, options to purchase 6,978,250 ordinary shares are outstanding and we are able to issue options to purchase an additional 2,284,804 of our ordinary shares, including 500,000 ordinary shares as restricted stocks, under our 2007

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share incentive plan. We are required to account for share-based compensation in accordance with the provisions of Accounting Standards Codification Topic 718, Stock Compensation, which requires a company to recognize, as an expense, the fair value of share options and other share-based compensation to employees based on the fair value of equity awards on the date of the grant, with the compensation expense recognized over the period in which the recipient is required to provide service in exchange for the equity award. We are also required to account for share-based compensation issued for services, and the value of the options will be adjusted based on their fair value at the end of each financial reporting period over the service period. If we grant additional options, restricted shares and other equity incentives in the future, we could incur significant compensation charges and our net income and earnings per share or per ADS could be adversely affected.

In auditing our consolidated financial statements, our independent registered public accounting firm has identified material weaknesses and other control deficiencies in our internal control over financial reporting. If we fail to develop an effective system of internal control over financial reporting, we may be unable to accurately report our financial results or prevent fraud, and investor confidence in our company and the market price of our ADSs may be adversely affected.

        We will be subject to reporting obligations under the U.S. securities laws. Our reporting obligations as a public company will place a significant strain on our management, operational and financial resources and systems for the foreseeable future. Prior to this offering, we have been a private company and have had limited accounting personnel and other resources with which to address our internal control over financial reporting. In conjunction with our independent registered public accounting firm's audit of our consolidated financial statements as of December 31, 2009 and 2010 and for the years ended December 31, 2008, 2009 and 2010, our independent registered public accounting firm identified certain material weaknesses and other control deficiencies, each as defined in the standards established by the U.S. Public Company Accounting Oversight Board, involving our internal control over financial reporting. As defined in the standards established by the U.S. Public Company Accounting Oversight Board, a "material weakness" is a significant deficiency, or combination of significant deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

        The material weaknesses identified consist of (i) a lack of knowledge and inappropriate analysis of our income tax exposures for overseas businesses, and related internal controls to identify potential tax exposures and determine income tax liabilities; (ii) lack of controls of the use of desktop computing on certain accounting-related activities; and (iii) a lack of general U.S. GAAP resources and expertise resulting in material audit adjustments related to share-based compensation arrangements, deferred tax, revenue recognition in respect of multiple element arrangements, hybrid financial instruments, income taxes and the preparation of financial statement disclosures in accordance with U.S. GAAP and SEC reporting requirements. Such material weaknesses could result in significant misstatements of our financial statements, significant delays in the financial reporting process and non-compliance with SEC rules and regulation. Neither we nor our independent registered public accounting firm undertook a comprehensive assessment of our internal control for purposes of identifying and reporting material weaknesses and other control deficiencies in our internal control over financial reporting as we and they may be required to do once we become a public company. In light of the number of control deficiencies that were identified as a result of the limited procedures performed, we believe it is possible that, had we performed a formal assessment of our internal control over financial reporting or had our independent registered public accounting firm performed an audit of our internal control over financial reporting, additional control deficiencies may have been identified.

        Following the identification of the material weaknesses and other control deficiencies, we have taken measures and plan to continue to take measures to remedy these deficiencies. However, the

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implementation of these measures may not fully address these deficiencies in our internal control over financial reporting, and we cannot conclude that they have been fully remedied. Our failure to correct these control deficiencies or our failure to discover and address any other control deficiencies could result in inaccuracies in our financial statements and could also impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. As a result, our business, financial condition, results of operations and prospects, as well as the trading price of our ADSs, may be materially and adversely affected. Moreover, ineffective internal control over financial reporting significantly hinders our ability to prevent fraud.

        Upon completion of this offering, we will become subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act, or Section 404, will require that we include a report from management on the effectiveness of our internal control over financial reporting in our annual report on Form 20-F beginning with our annual report for the fiscal year ending December 31, 2012. In addition, beginning at the same time, our independent registered public accounting firm must report on the effectiveness of our internal control over financial reporting. If we fail to remedy the material weaknesses identified above, our management and our independent registered public accounting firm may conclude that our internal control over financial reporting is not effective. This could adversely impact the market price of our ADSs due to loss of investor confidence in the reliability of our reporting processes. We may need to incur costs and use management and other resources in order to comply with Section 404.

We may be or become a passive foreign investment company for U.S. federal income tax purposes, which could result in adverse U.S. federal income tax consequences to U.S. investors in our ADSs or ordinary shares.

        A non-U.S. corporation will be a passive foreign investment company, or PFIC, for any taxable year in which (1) at least 75% of its gross income is passive income or (2) at least 50% of the value (based on an average of quarterly values) of its assets is attributable to assets that produce or are held for the production of passive income. Based on the projected composition of our income and assets and the value of our assets, including goodwill, we do not expect to be a PFIC for our current taxable year ending December 31, 2011 or in the foreseeable future. However, a separate determination must be made at the close of each taxable year as to whether we are a PFIC for such year. In addition, our PFIC status will depend upon the composition of our income and assets and the value of our assets from time to time, which may be based in part on the value of our ADSs at any such time. Our PFIC status will also depend, in part, on how, and how quickly, we spend the cash we raise in this offering. Accordingly, there can be no assurance that we will not be a PFIC for our current taxable year or any future taxable year. If we are treated as a PFIC for any taxable year during which a U.S. investor holds our ADSs or ordinary shares, certain adverse U.S. federal income tax consequences could apply to that U.S. investor. For example, if we are a PFIC, a U.S. investor could be subject to additional U.S. federal income taxes on certain distributions and on gain recognized with respect to the ADSs or ordinary shares and may be subject to certain reporting requirements. See "Taxation—United States Federal Income Taxation—Passive Foreign Investment Company."

We face risks of health epidemics and other disasters, which could severely disrupt our business operations.

        Our business could be materially and adversely affected by the outbreak of H1N1, or swine influenza, avian influenza, severe acute respiratory syndrome, or SARS, or another epidemic. In 2009 and early 2010, there were outbreaks of swine influenza in certain regions of the world, including China. In 2006 and 2007, there were reports on the occurrences of avian influenza in various parts of China, including a few confirmed human cases and deaths. Any adverse public health development in China could require the temporary closure of our offices and facilities. Such closures could severely disrupt our business operations and adversely affect our results of operations.

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        Our operations are vulnerable to interruption and damage from man-made or natural disasters, including war, acts of terrorism, earthquakes, fire, floods, environmental accidents, power loss, communications failures and similar events, all of which may disrupt access to utilities, raw materials or our production facilities. If any significant man-made or natural disaster were to occur in the future, our ability to operate our business could be seriously impaired.

Risks Related to Doing Business in China

Uncertainties with respect to the PRC legal system could have a material adverse effect on our business, financial condition and results of operation.

        We conduct our business primarily through our PRC subsidiaries. Our operations in China are governed by PRC laws and regulations. Our PRC subsidiaries are foreign-invested enterprises and are subject to laws and regulations applicable to foreign investment in China and, in particular, laws applicable to foreign-invested enterprises. The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions may be cited for reference but have limited precedential value.

        In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past three decades has significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has not developed a fully integrated legal system, and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, the interpretation and enforcement of these laws and regulations involve uncertainties. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy. These uncertainties may affect our judgment on the relevance of legal requirements and our ability to enforce our contractual or tort rights. In addition, regulatory uncertainties may be exploited through unmerited or frivolous legal actions or threats in attempts to extract payments or benefits from us.

        Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all and may have a retroactive effect. As a result, we may not be aware of our violation of any of these policies and rules until some time after the violation. In addition, any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention.

        We believe that the technologies, processes, trade secrets, know-how, data and other intellectual property we use are important to our business. We rely on a combination of intellectual and trade secret protection laws in China and other jurisdictions, as well as confidentiality procedures and contractual provisions to protect our intellectual property and our brand. However, protection of intellectual property rights in China may not be as effective as in the United States or other jurisdictions, and as a result, we may not be able to adequately protect our intellectual property rights, which could adversely affect our revenues and competitive position.

Adverse changes in political and economic policies of the PRC government could have a material adverse effect on the overall economic growth of China, which could reduce the demand for our products and materially and adversely affect our competitive position.

        All of our business operations are conducted in China with some of our sales made in China. Accordingly, our business, financial condition, results of operations and prospects are affected significantly by economic, political and legal developments in China.

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        The Chinese economy differs from the economies of most developed countries in many respects, including the level of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. The Chinese government also exercises significant control over China's economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies.

        While the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy, but may have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations. In addition, in the past, the Chinese government has implemented certain measures, including interest rate increases, to control the pace of economic growth. These measures may cause decreased economic activity in China, which may adversely affect our business and operating results.

Restrictions under PRC law on our PRC subsidiaries' ability to pay dividends and other distributions could materially and adversely affect our ability to grow, make investments or acquisitions that could benefit our business, pay dividends to you and otherwise fund and conduct our businesses.

        We conduct substantially all of our business through our subsidiaries established in China. PRC regulations restrict the ability of our PRC subsidiaries to make dividends and other payments to their offshore parent company. PRC legal restrictions permit payments of dividends by our PRC subsidiaries only out of their accumulated after-tax profits, if any, determined in accordance with PRC accounting standards and regulations. Each of our PRC subsidiaries is also required under PRC laws and regulations to allocate at least 10% of its annual after-tax profits determined in accordance with PRC accounting standards to a statutory general reserve fund until the cumulative amount in such fund reaches 50% of the company's registered capital. Each of our PRC subsidiaries is also required to set aside a certain amount of its after-tax profits each year, if any, to contribute to a public welfare fund. Also, each of our PRC subsidiaries that is a Chinese-foreign equity joint venture is required to set aside a certain amount of its after-tax profits each year, if any, to contribute to an enterprise expansion fund. However, the specific amounts of the public welfare fund or enterprise expansion fund are subject to the discretion of the board of directors of the relevant subsidiary. Allocations to these statutory reserve funds can only be used for specific purposes and are not transferable to us in the form of loans, advances or dividends. As of December 31, 2010 and March 31, 2011, our PRC subsidiaries had statutory reserve fund balances of RMB21.3 million (US$3.2 million) and RMB30.9 million (US$4.7 million), respectively. The total amount of our restricted net assets was RMB34.2 million (US$5.2 million), or 2.6% of consolidated net assets, as of December 31, 2010, and RMB45.2 million (US$6.9 million), or 3.4% of consolidated net assets, as of March 31, 2011. Any limitations on the ability of our PRC subsidiaries to transfer funds to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends and otherwise fund and conduct our business.

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PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds we receive from this offering to make loans or additional capital contributions to our PRC operating subsidiaries and affiliated entities, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

        In utilizing the proceeds we receive from this offering in the manner described in "Use of Proceeds," as an offshore holding company of our PRC subsidiaries, we may make loans to our PRC subsidiaries, or we may make additional capital contributions to our PRC subsidiaries. Any loans to our PRC subsidiaries are subject to PRC regulations and approvals. For example, loans by us to our wholly owned subsidiaries in China, each of which is a foreign-invested enterprise, to finance their activities cannot exceed statutory limits and must be registered with the State Administration of Foreign Exchange in China, or the SAFE, or its local branch.

        We may also decide to finance our wholly owned subsidiaries by means of capital contributions. These capital contributions must be approved by the Ministry of Commerce in China or its local counterpart and must be approved by the NDRC or its local counterpart. We cannot assure you that we will be able to obtain these government registrations or approvals on a timely basis, if at all, with respect to future loans or capital contributions by us to our subsidiaries or any of their respective subsidiaries. If we fail to receive such registrations or approvals, our ability to use the proceeds we receive from this offering and to capitalize our PRC operations may be negatively affected, which could adversely and materially affect our liquidity and our ability to fund and expand our business.

If the China Securities Regulatory Commission, or CSRC, or another PRC regulatory agency, determines that CSRC approval is required in connection with this offering, this offering may be delayed or cancelled, or we may become subject to penalties.

        On August 8, 2006, six PRC regulatory agencies, including the CSRC, promulgated the Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, which became effective on September 8, 2006 and were amended on June 22, 2009. Under these regulations, the prior approval of the CSRC is required for the overseas listing of offshore special purpose vehicles that are directly or indirectly controlled by PRC companies or individuals and used for the purpose of listing PRC onshore interests on an overseas stock exchange. We believe, based on the opinion of our PRC legal counsel, AllBright Law Offices, that we are not required to obtain CSRC approval for the listing and trading of our ADSs on the NASDAQ. However, there remains some uncertainty as to how these regulations will be interpreted or implemented. If the CSRC or another PRC regulatory agency subsequently determines that the CSRC's approval is required for this offering, we may face sanctions by the CSRC or another PRC regulatory agency. If this happens, these regulatory agencies may impose fines and penalties on our operations in China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds from this offering into China, restrict or prohibit payment or remittance of dividends by our PRC subsidiaries to us, or take other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our ADSs. The CSRC or another PRC regulatory agency may also take actions requiring us, or making it advisable for us, to delay or cancel this offering before settlement and delivery of the ADSs being offered by us.

Recent PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident shareholders or our PRC subsidiaries to penalties, limit our ability to inject capital into our PRC subsidiaries, limit our PRC subsidiaries' ability to distribute profits to us, or otherwise adversely affect our business, financial condition or results of operation.

        SAFE issued a public notice in October 2005, or the SAFE Circular No. 75, requiring PRC residents to register with the local SAFE branch before establishing or controlling any company outside of China for the purpose of capital financing with assets or equities of PRC companies, referred to in

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the SAFE Circular No. 75 as SPVs. PRC residents who are shareholders of SPVs established before November 1, 2005 were required to register with the local SAFE branch before March 31, 2006. Further, PRC residents are required to file amendments to their registrations with the local SAFE branch if their SPVs undergoes a material event involving changes in capital, such as changes in share capital, mergers and acquisitions, share transfers or exchanges, spin-off transactions or long-term equity or debt investments. On May 29, 2007, SAFE issued guidance to its local branches for the implementation of the SAFE Circular No. 75. In 2009, this guidance was replaced by a new guidance issued by SAFE which standardizes more specific and stringent supervision on the registration requirement relating to the SAFE Circular No. 75 and further requests PRC residents holding any equity interests or options in SPVs, directly or indirectly, controlling or nominal, to carry out overseas investment foreign exchange registration with SAFE. Despite various interpretations issued by SAFE, some of the terms and provisions in the SAFE regulations remain unclear and implementation by central SAFE and local SAFE branches of the SAFE regulations has been inconsistent since its adoption in 2005. In 2006, our PRC resident shareholder, Mr. Qixian Zhang, voluntarily inquired about and attempted to comply with the relevant SAFE regulations. However, the local SAFE branch was not certain about whether the registration requirements applied to our shareholders, inhibiting his ability to make registration applications. During the process of preparing for this offering, we and our PRC resident shareholder, Mr. Qixian Zhang, have consulted with relevant SAFE officials about how to comply with the SAFE registration requirements and have submitted the registration application to the competent local SAFE.

        Because of uncertainty over how the SAFE regulations will be interpreted and implemented, and how the SAFE regulations will apply to us, we cannot predict how these regulations will affect our business operations or future strategies. While our relevant beneficial owners are continuing to attempt to register with the local branches of the SAFE, we can not assure you that such registrations can be successfully made. If SAFE determines that any of our beneficial owners is subject to such registration requirements, the failure of these beneficial owners to timely register or amend their SAFE registrations pursuant to the SAFE Circular No. 75 or the failure of future beneficial owners of our company who are PRC residents to comply with the registration procedures set forth in the SAFE Circular No. 75 may subject such beneficial owners and our PRC subsidiaries to fines and legal sanctions and may also limit our ability to contribute additional capital into, or to provide loans, to our PRC subsidiaries, limit our PRC subsidiaries' ability to distribute dividends to us or otherwise adversely affect our business. See "Regulation of Our Industry—Foreign Exchange Regulation."

Failure to comply with PRC regulations regarding the registration requirements for employee stock ownership plans or share option plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.

        In January 2007, SAFE issued implementation rules for the Administrative Measures of Foreign Exchange Matters for Individual, which, among other things, specified approval requirements for certain capital account transactions, such as a PRC citizen's participation in the employee stock ownership plans or stock option plans of an overseas publicly-listed company. In March 2007, SAFE promulgated the Application Procedures of Foreign Exchange Administration for Domestic Individuals Participating in Employee Stock Ownership Plan or Stock Option Plan of Overseas-Listed Company, or Circular 78.

        Under Circular 78, PRC citizens who participate in an employee stock ownership plan or a stock option plan in an overseas publicly-listed company are required to register with SAFE and complete certain other procedures. The PRC participants should engage a PRC agent, which could be the PRC subsidiary of such overseas publicly-listed company, to handle the registration. For participants of an employee stock ownership plan, an overseas custodian bank should be retained by the PRC agent to hold on trust all overseas assets held by such participants under the employee share ownership plan. In

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the case of a stock option plan, the PRC agent is required to retain a financial institution with stock brokerage qualification at the place where the overseas publicly-listed company is listed or a qualified institution designated by the overseas publicly-listed company to handle matters in connection with the exercise or sale of stock options for the stock option plan participants. The PRC agents or employers must, on behalf of the domestic individuals who have the right to exercise the employee stock options, apply annually to the SAFE or its local branches for a quota for the conversion and/or payment of foreign currency in connection with the domestic individual's exercise of the employee stock options. We and our employees who are PRC citizens who participate in an employee stock ownership plan or a stock option plan will be subject to these regulations when our company becomes a publicly-listed company in the United States. If we or our PRC optionees fail to comply with these regulations, we or our PRC optionees may be subject to fines and other legal or administrative sanctions. See "Regulation—Regulations relating to Employee Share Options."

Changes in the PRC tax regime including preferential tax treatment and other government incentives currently enjoyed by us could result in a decrease in our net income and materially and adversely affect our results of operations as well as the value of your investment in us.

        China passed a new PRC Enterprise Income Tax Law, or the New EIT Law, and its implementation rules, both of which became effective on January 1, 2008. The New EIT Law significantly curtailed tax incentives granted to foreign-invested enterprises under the PRC Enterprise Income Tax Law concerning Foreign-Invested Enterprises and Foreign Enterprises, or the Old EIT Law, which was effective prior to January 1, 2008. The New EIT Law, however, (i) reduced the statutory rate of the enterprise income tax from 33% to 25%, (ii) permitted companies established before March 16, 2007 to continue to enjoy their existing tax incentives, adjusted by certain transitional phase-out rules promulgated by the State Council on December 26, 2007 and (iii) introduced new tax incentives, subject to various qualification criteria.

        The New EIT Law and its implementation rules permit certain "high and new technology enterprises strongly supported by the state," or HNTE, which hold independent ownership of core intellectual property to enjoy a preferential enterprise income tax rate of 15%, subject to certain qualification criteria. Cathay Shandong is qualified as an HNTE and therefore, it was entitled to the preferential enterprise income tax rate of 12.5% in each of 2008 and 2009 and 15% in 2010.

        In addition, each of Cathay Shandong, Cathay Shandong Industrial and Cathay Jilin is a foreign-invested manufacturing enterprise with an approved term of more than ten years, which is entitled to a two-year exemption from enterprise income tax from the first profitable year of operation, and a 50% relief from enterprise income tax for the succeeding three years under the Old EIT Law. As a result of the transitional phase-out rules under the New EIT Law, the applicable statutory income tax rate for Cathay Shandong was 12.5% in each of 2008 and 2009 and 15% in 2010, while Cathay Shandong Industrial and Cathay Jilin were exempted from income tax in each of 2008 and 2009. Both Cathay Shandong Industrial and Cathay Jilin were subject to a statutory income tax rate of 12.5% in 2010 due to the transitional phase-out rules under the New EIT Law.

        Preferential tax treatment granted to our subsidiaries by the local governmental authorities is subject to review and may be adjusted or revoked at any time. The discontinuation of any preferential tax treatments currently available to us and our wholly-owned PRC subsidiaries will cause our effective tax rate to increase, which could have a material adverse effect on our financial condition and results of operations. We cannot assure you that we will be able to maintain our current effective tax rate in the future.

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Our global income and the dividends that we may receive from our PRC subsidiaries may be subject to PRC taxes under the New EIT Law, which would have a material adverse effect on our results of operations.

        Under the New EIT Law and its implementation rules, which both became effective on January 1, 2008, an enterprise established outside of the PRC with "de facto management body" within the PRC is considered a PRC resident enterprise and will be subject to the enterprise income tax at the rate of 25% on its global income. The implementation rules define the term "de facto management body" as "an establishment that carries out substantial and overall management and control over the manufacturing and business operations, personnel, accounting, properties of an enterprise." The State Administration of Taxation, or SAT, issued the Notice Regarding the Determination of Chinese-Controlled Offshore Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies, or SAT Circular 82, on April 22, 2009 with retroactive effect from January 1, 2008. SAT Circular 82 provides certain specific criteria for determining whether the "de facto management body" of a Chinese-controlled offshore-incorporated enterprise is located in China. Although SAT Circular 82 only applies to offshore enterprises controlled by PRC enterprises, rather than those controlled by PRC individuals, the determining criteria set forth in SAT Circular 82 may reflect the State Administration of Taxation's general position on how the "de facto management body" test may be applied in determining the tax resident status of offshore enterprises.

        According to SAT Circular 82, a Chinese-controlled offshore incorporated enterprise will be regarded as a PRC tax resident by virtue of having "de facto management body" in China and will be subject to PRC enterprise income tax on its worldwide income only if all of the following conditions set forth in SAT Circular 82 are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise's financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise's primary assets, accounting books and records, company seals, and board and shareholder resolutions are located or maintained in the PRC and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC.

        We believe that SAT Circular 82 does not apply to us because we are incorporated and mainly controlled by foreign individuals and entities instead of PRC enterprises or PRC enterprise groups. We believe that we will not be deemed a PRC resident enterprise by the PRC tax authorities. However, although SAT Circular 82 only applies to offshore enterprises controlled by PRC enterprises, not those controlled by foreign individuals or enterprises, the determining criteria set forth in SAT Circular 82 may reflect the State Administration of Taxation's general position on how the "de facto management body" test may be applied in determining the tax resident status of offshore enterprises. In addition, as the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term "de facto management body" as applicable to our offshore entities, we may be considered a PRC resident enterprise and may therefore be subject to enterprise income tax at 25% of our global income. If we are considered a PRC resident enterprise and earn income other than dividends from our PRC subsidiaries, a 25% enterprise income tax on our global income could significantly increase our tax burden and materially and adversely affect our cash flow and profitability.

        Pursuant to the New EIT Law, dividends generated after January 1, 2008 and payable by a foreign-invested enterprise in China to its foreign investors will be subject to a 10% withholding tax, unless any such foreign investor's jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement. We are a Cayman Islands holding company and substantially all of our income comes from dividends from our PRC subsidiaries. To the extent these dividends are subject to withholding tax, the amount of funds available to us to meet our cash requirements, including the payment of dividends to our shareholders and ADS holders, will be reduced.

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        In addition, because there remains uncertainty regarding the interpretation and implementation of the New EIT Law and its implementation rules, it is uncertain whether, if we are regarded as a PRC resident enterprise, any dividends to be distributed by us to our non-PRC shareholders and ADS holders would be subject to any PRC withholding tax. If we are required under the New EIT Law to withhold PRC income tax on dividends payable to our non-PRC corporate shareholders and ADS holders, your investment in our ADSs or ordinary shares may be materially and adversely affected.

        Furthermore, SAT promulgated the Notice on How to Understand and Determine the Beneficial Owners in Tax Agreement in October 2009, or SAT Circular 601, which provides guidance for determining whether a resident of a contracting state is the "beneficial owner" of an item of income under China's tax treaties and tax arrangements. According to SAT Circular 601, a beneficial owner must generally be engaged in substantive business activities. An agent or conduit company will not be regarded as a beneficial owner and, therefore, will not qualify for treaty benefits. The conduit company normally refers to a company that is set up for the purpose of avoiding or reducing tax liability or transferring or accumulating profits. If we are treated as a PRC resident enterprise and any dividends that we distribute are subject to PRC withholding tax, we cannot assure you that any dividends to be distributed by us to any non-PRC shareholder or ADS holder whose jurisdiction of incorporation has a tax treaty with China providing for a different withholding arrangement will be entitled to the benefits under the relevant withholding arrangement.

We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.

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

        There is uncertainty as to the application of SAT Circular 698. For example, while the term "Indirect Transfer" is not clearly defined, it is understood that the relevant PRC tax authorities have jurisdiction regarding requests for information over a wide range of foreign entities having no direct contact with China. Moreover, the relevant authority has not yet promulgated any formal provisions or formally declared or stated how to calculate the effective tax rates in foreign tax jurisdictions, and the process and format of the reporting of an Indirect Transfer to the competent tax authority of the relevant PRC resident enterprise remain unclear. In addition, there are no formal declarations with regard to how to determine whether a foreign investor has adopted an abusive arrangement in order to reduce, avoid or defer PRC tax. SAT Circular 698 may be determined by the tax authorities to be applicable to our private equity financing transactions where non-resident investors were involved, if any of such transactions were determined by the tax authorities to lack reasonable commercial purpose. As a result, we and our non-resident investors may be at risk of being taxed under SAT Circular 698 and may be required to expend valuable resources to comply with SAT Circular 698 or to establish that

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we should not be taxed under SAT Circular 698, which may have a material adverse effect on our financial condition and results of operations or such non-resident investors' investments in us.

PRC government restrictions on the convertibility of Renminbi may limit our ability to effectively utilize our revenues and funds.

        Certain portions of revenues and expenses are denominated in Renminbi. In order for us to effectively utilize our revenues and the funds raised in this offering, we need to conduct currency exchanges between Renminbi and other currencies. Under PRC regulations as of the date of this prospectus, Renminbi is convertible for "current account transactions," which include, among other things, dividend payments and payments for the import of goods and services. Our PRC subsidiaries may also retain foreign exchange in their respective current bank accounts for use in payment of international current account transactions. Although the Renminbi has been fully convertible for current account transactions since 1996, we cannot assure you that the relevant PRC government authorities will not limit or eliminate our ability to purchase and retain foreign currency for current account transactions in the future. Conversion of Renminbi into foreign currencies, and of foreign currencies into Renminbi, for payments relating to "capital account transactions," which principally include investments and loans, generally requires the approval of SAFE and other relevant PRC governmental authorities.

        On August 29, 2008, SAFE promulgated the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign Invested Enterprises, or SAFE Circular 142, a notice regulating the conversion by a foreign-invested company of foreign currency into Renminbi by restricting how the converted Renminbi may be used. SAFE Circular 142 requires that Renminbi converted from the foreign currency-denominated registered capital of a foreign-invested company may only be used for purposes within the company's business scope approved by the applicable governmental authority and may not be used for equity investments within the PRC unless otherwise specifically provided for in its business scope. In addition, SAFE strengthened its oversight of the flow and use of Renminbi funds converted from foreign currency-denominated registered capital of a foreign-invested company. The use of such Renminbi may not be changed without approval from SAFE, and may not in any case be used to repay Renminbi loans if the proceeds of such loans have not yet been used. Violations of SAFE Circular 142 may result in severe penalties, including substantial fines as set forth in the Foreign Exchange Administration Regulations. As a result, SAFE Circular 142 may significantly limit our ability to transfer the net proceeds from this offering to our PRC subsidiaries in the PRC, which may adversely affect our liquidity and our ability to fund and expand our business in the PRC, and we may not be able to convert the net proceeds from this offering into Renminbi to invest in or acquire any other PRC companies.

The enforcement of the Labor Contract Law and other labor-related regulations in China may adversely affect our business and our results of operations.

        On June 29, 2007, the National People's Congress of China enacted the Labor Contract Law, which became effective on January 1, 2008. The Labor Contract Law establishes more restrictions and increases costs for employers to dismiss employees under certain circumstances, including specific provisions related to fixed-term employment contracts, non-fixed-term employment contracts, task-based employment, part-time employment, probation, consultation with the labor union and employee representative's council, employment without a contract, dismissal of employees, compensation upon termination and for overtime work and collective bargaining. According to the Labor Contract Law, unless otherwise provided by law, an employer is obliged to sign a labor contract with an open term with an employee if the employer continues to hire the employee after the expiration of two consecutive fixed-term labor contracts or if the employee has worked for the employer for ten

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consecutive years. Severance pay is required if a labor contract expires without renewal because the employer refuses to renew the labor contract or provides less favorable terms for renewal. In addition, under the Regulations on Paid Annual Leave for Employees, which became effective on January 1, 2008, employees who have served more than one year for an employer are entitled to a paid vacation ranging from five to 15 days, depending on the number of the employee's working years with the employer. Employees who waive such vacation time at the request of employers are entitled to compensation equal to three times their regular daily salary for each waived vacation day. As a result of these new measures designed to enhance labor protection, our labor costs are expected to increase, which may adversely affect our business and our results of operations. In addition, the PRC government in the future may enact further labor-related legislation that increases our labor costs and restricts our operations.

The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors could make it more difficult for us to make future acquisitions or dispose of our business operations or assets in China.

        The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors also established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex, including a requirement that the Ministry of Commerce be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise or a foreign company with substantial PRC operations, if any threshold under the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings issued by the State Council on August 3, 2008 is triggered. Complying with the requirements of the new regulation in order to complete any future transactions could be time-consuming, and any required approval processes, including approval from the Ministry of Commerce and approval from the NDRC, may delay or inhibit our ability to complete any future change-of-control transactions, which could affect our ability to expand our business or maintain our market share. In addition, such additional procedures and requirements could make it more difficult or time-consuming for us to dispose of any of our business operations or assets in China.

Risks Related to This Offering

An active trading market for our ordinary shares or our ADSs may not develop and the trading price for our ADSs may fluctuate significantly.

        Prior to this initial public offering, there has been no public market for our ADSs or our ordinary shares underlying the ADSs. We have applied to list our ADSs on the NASDAQ. Our ordinary shares will not be listed on any exchange or quoted for trading on any over-the-counter trading system. If an active public market for our ADSs does not develop after this offering, the market price and liquidity of our ADSs may be adversely affected.

        The initial public offering price for our ADSs will be determined by negotiation between us and the underwriters based upon several factors, including prevailing market conditions, our historical performance, estimates of our business potential and earnings prospects, and the market valuations of similar companies. The price at which the ADSs are traded after this initial public offering may decline below the initial public offering price, meaning that you may experience a decrease in the value of your ADSs regardless of our operating performance or prospects. We cannot assure you that an active trading market for our ADSs will develop or that the market price of our ADSs will not decline below the initial public offering price.

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The market price for our ADSs may be volatile, which could result in substantial losses to investors.

        The market price for our ADSs is likely to be highly volatile and subject to wide fluctuations in response to factors including the following:

    announcements of technological or competitive developments;

    regulatory developments in China affecting us, our customers or our competitors;

    announcements regarding patent litigation or the issuance of patents to us or our competitors;

    actual or anticipated fluctuations in our quarterly operating results and changes of our expected results;

    changes in financial estimates by securities research analysts;

    changes in the economic performance or market valuations of other industrial biotechnology companies;

    addition or departure of our executive officers and key research personnel;

    announcements by us or our competitors of new products, acquisitions, strategic relationships, joint ventures or capital commitments;

    release or expiry of lock-up or other transfer restrictions on our outstanding ordinary shares or ADSs; and

    sales or perceived sales of additional ordinary shares or ADSs.

        In addition, the securities market has from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies.

Because the initial public offering price is substantially higher than our net tangible book value per share, you will incur immediate and substantial dilution.

        If you purchase ADSs in this offering, you will pay more for your ADSs than the amount paid by our existing shareholders for their ordinary shares on a per ADS basis. As a result, you will experience immediate and substantial dilution of approximately US$                per ADS (assuming no exercise by the underwriters of options to acquire additional ADSs), representing the difference between our net tangible book value per ADS as of March 31, 2011, after giving effect to this offering and an assumed initial public offering price of US$                per ADS, the midpoint of the range shown on the front cover page of this prospectus. In addition, you may experience further dilution to the extent that our ordinary shares are issued upon the exercise of share options. See "Dilution" for a more complete description of how the value of your investment in our ADSs will be diluted upon completion of this offering.

Substantial future sales or perceived sales of our ADSs in the public market could cause the price of our ADSs to decline.

        Sales of our ADSs or ordinary shares in the public market after this offering, or the perception that these sales could occur, could cause the market price of our ADSs to decline. Upon completion of this offering, we will have                ordinary shares outstanding, including                ordinary shares represented by                 ADSs. In addition, as of the date of this prospectus, options to purchase a total of 6,978,250 ordinary shares are outstanding. All ADSs sold in this offering will be freely transferable without restriction or additional registration under the Securities Act of 1933, as amended, or the Securities Act. The remaining ordinary shares outstanding after this offering will be available for sale, upon the expiration of the 180-day lock-up period beginning from the date of this prospectus and, in the case of the ordinary shares that certain option holders will receive when they exercise their share

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options, until the later of (i) the first anniversary of the grant date and (ii) the expiration of the aforementioned 180-day lock-up period, subject to volume and other restrictions as applicable under Rule 144 and Rule 701 under the Securities Act. Any or all of these shares (other than those held by certain option holders) may be released prior to expiration of the lock-up period at the discretion of the lead underwriter. To the extent shares are released before the expiration of the lock-up period and these shares are sold into the market, the market price of our ADSs could decline.

        In addition, certain holders of our ordinary shares or their transferees and assignees will have the right to cause us to register the sale of their shares under the Securities Act upon the occurrence of certain events. See "Description of Share Capital." Registration of these shares under the Securities Act would result in these shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of the registration. Sales of these registered shares in the public market could cause the price of our ADSs to decline.

Our articles of association will contain anti-takeover provisions that could discourage a third party from acquiring us, which could limit our shareholders' opportunity to sell their shares, including ordinary shares represented by our ADSs, at a premium.

        We have adopted our fourth amended and restated articles of association, which will become effective immediately upon completion of this offering. Our new articles of association limit the ability of others to acquire control of our company or cause us to engage in change-of-control transactions. These provisions could have the effect of depriving our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction. For example, our board of directors has the authority, without further action by our shareholders, to issue preferred shares. These preferred shares may have better voting rights than our ordinary shares, in the form of ADSs or otherwise, and could be issued quickly with terms calculated to delay or prevent a change in control of our company or make removal of management more difficult. If our board of directors decides to issue preferred shares, the price of our ADSs may fall and the voting rights of the holders of our ordinary shares and ADSs may be diluted. See "Description of Share Capital—Issuance of Additional Preferred Shares."

        Certain actions require the approval of a supermajority of at least two-thirds of our board of directors which, among other things, would allow our non-independent directors to block a variety of actions or transactions, such as a merger, asset sale or other change of control, even if all of our independent directors unanimously voted in favor of such action, thereby further depriving our shareholders of an opportunity to sell their shares at a premium. See "Description of Share Capital—Actions Requiring the Approval of a Supermajority of our Board of Directors."

Holders of ADSs have fewer rights than shareholders and must act through the depositary to exercise those rights.

        Holders of ADSs do not have the same rights as our shareholders and may only exercise the voting rights with respect to the underlying ordinary shares in accordance with the provisions of the deposit agreement. Under our fourth amended and restated memorandum and articles of association, which will become effective upon completion of this offering, the minimum notice period required to convene a general meeting is seven days. When a general meeting is convened, you may not receive sufficient notice of a shareholders' meeting to permit you to withdraw your ordinary shares to allow you to cast your vote with respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to you or carry out your voting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to you in a timely manner, but we cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your ADSs. Furthermore, the depositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is

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cast or for the effect of any such vote. As a result, you may not be able to exercise your right to vote and you may lack recourse if your ADSs are not voted as you requested. In addition, in your capacity as an ADS holder, you will not be able to call a shareholders' meeting.

You may be subject to limitations on transfers of your ADSs.

        Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deem it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.

Your right to participate in any future rights offerings may be limited, which may cause dilution to your holdings and you may not receive cash dividends if it is impractical to make them available to you.

        We may from time to time distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make rights available to you in the United States unless we register the rights and the securities to which the rights relate under the Securities Act or an exemption from the registration requirements is available. Also, under the deposit agreement, the depositary bank will not make rights available to you unless the distribution to ADS holders of both the rights and any related securities are either registered under the Securities Act or exempted from registration under the Securities Act. We are under no obligation to file a registration statement with respect to any such rights or securities or to cause such a registration statement to be declared effective. Moreover, we may not be able to establish an exemption from registration under the Securities Act. Accordingly, you may be unable to participate in our rights offerings and may experience dilution in your holdings.

        In addition, the depositary of our ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on our ordinary shares or other deposited securities after deducting its fees and expenses. You will receive these distributions in proportion to the number of ordinary shares your ADSs represent. However, the depositary may, at its discretion, decide that it is inequitable or impractical to make a distribution available to any holders of ADSs. For example, the depositary may determine that it is not practicable to distribute certain property through the mail, or that the value of certain distributions may be less than the cost of mailing them. In these cases, the depositary may decide not to distribute such property and you will not receive such distribution.

We are a Cayman Islands company and because judicial precedent regarding the rights of shareholders is more limited under Cayman Islands law than under U.S. law, you may have less protection of your shareholder rights than you would under U.S. law.

        Our corporate affairs are governed by our amended and restated memorandum and articles of association, the Cayman Islands Companies Law (2010 Revision) and the common law of the Cayman Islands. The rights of shareholders to take legal action against the directors, actions by non-controlling shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, which has persuasive, but not binding, authority on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. In addition, some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands.

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        There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the Cayman Islands will generally recognize such a judgment, without any re-examination of the merits of the underlying dispute, by an action commenced on the foreign judgment debt in the Grand Court of the Cayman Islands, provided such judgment (a) is given by a court of competent jurisdiction; (b) imposes on the judgment debtor a liability to pay a liquidated sum for which the judgment has been given; (c) is final; (d) is not in respect of taxes, a fine or a penalty and (e) was not obtained in a manner and is not of a kind the enforcement of which is contrary to natural justice or the public policy of the Cayman Islands. You should also read "Description of Share Capital—Differences in Corporate Law" for some of the differences between the corporate and securities laws in the Cayman Islands and the United States.

You will have limited ability to bring an action against us or against our directors and officers, or to enforce a judgment against us or them, because we are incorporated in the Cayman Islands, because we conduct a majority of our operations in China and because the majority of our directors and officers reside outside the United States.

        We are incorporated in the Cayman Islands and conduct our operations primarily in China. A substantial majority of our assets are located outside the United States and most of our directors and officers reside outside the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the Cayman Islands or in China in the event that you believe that your rights have been infringed under the applicable securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of China may render you unable to enforce a judgment against our assets or the assets of our directors and officers. For more information regarding the relevant laws of the Cayman Islands and China, see "Enforceability of Civil Liabilities."

        Unlike many jurisdictions in the United States, Cayman Islands law does not specifically provide for shareholder appraisal rights on a merger or consolidation of a company. This may make it more difficult for you to assess the value of any consideration you may receive in a merger or consolidation or to require that the offeror give you additional consideration if you believe the consideration offered is insufficient.

        Shareholders of Cayman Islands exempted companies such as ourselves have no general rights under Cayman Islands law to inspect corporate records and accounts or to obtain copies of lists of shareholders of these companies. Our directors will have discretion under our fourth amended and restated articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest. As a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a U.S. company.

Your ability to protect your rights as shareholders through the U.S. federal courts may be limited because we are incorporated under Cayman Islands law.

        Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States. As a result, your ability to protect your interests if you are harmed in a manner that would otherwise enable you to sue in a United States federal court may be limited to direct shareholder lawsuits.

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The depositary of our ADSs will, except in limited circumstances, grant to us a discretionary proxy to vote the ordinary shares underlying your ADSs if you do not vote at shareholders' meetings, which could adversely affect your interests and the ability of our shareholders as a group to influence the management of our company.

        Under the deposit agreement for the ADSs, the depositary will give us a discretionary proxy to vote our ordinary shares underlying your ADSs at shareholders' meetings if you do not vote, unless:

    we have failed to timely provide the depositary with our notice of meeting and related voting materials;

    we have instructed the depositary that we do not wish a discretionary proxy to be given;

    we have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting;

    a matter to be voted on at the meeting would have a material adverse impact on shareholders; or

    voting at the meeting is made on a show of hands.

        The effect of this discretionary proxy is that you cannot prevent our ordinary shares underlying your ADSs from being voted, absent the situations described above, and it may make it more difficult for holders of ADSs to influence the management of our company. Holders of our ordinary shares are not subject to this discretionary proxy.

You may not receive distributions on our ordinary shares or any value for them if it is unlawful or impractical for us to make them available to you.

        The depositary of our ADSs has agreed to pay you the cash dividends or other distributions it or the custodian for our ADSs receives on our ordinary shares or other deposited securities after deducting its fees and expenses. You will receive these distributions in proportion to the number of our ordinary shares your ADSs represent. However, the depositary is not responsible if it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act but that are not properly registered or distributed pursuant to an applicable exemption from registration. The depositary is not responsible for making a distribution available to any holders of ADSs if any government approval or registration is required for such distribution. We have no obligation to take any other action to permit the distribution of our ADSs, ordinary shares, rights or anything else to holders of our ADSs. This means that you may not receive the distributions we make on our ordinary shares or any value for them if it is unlawful or impractical for us to make them available to you. These restrictions may have a material and adverse effect on the value of your ADSs.

We have not determined any specific use for a portion of the net proceeds to us from this offering and we may use such portion of the net proceeds in ways with which you may not agree.

        A portion of the net proceeds to us from this offering will be used for general corporate purposes and for potential acquisitions of, or investments in, other businesses, products or technologies that we believe will complement our current operations and expansion strategies and has not been allocated to any specific use. Rather, our management will have considerable discretion in the application of such portion of the net proceeds received by us. See "Use of Proceeds." You will not have the opportunity, as part of your investment decision, to assess whether such proceeds are being used appropriately and must rely on the judgment of our management regarding their application. The proceeds we receive may be used for corporate purposes that do not improve our profitability or increase our ADS price.

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Moreover, the proceeds we receive from this offering may also be placed in investments that do not produce income or that may lose value.

As a foreign private issuer, we are not required to provide you with the same information as an issuer organized in the United States, therefore, you may not be afforded the same protections or information you would have if you invested in United States domestic issuers.

        Because we qualify as a foreign private issuer under the Securities Exchange Act of 1934, as amended, or the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including:

    the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K;

    the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;

    the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and

    the selective disclosure rules by issuers of material non-public information under Regulation FD.

        We will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our results on a quarterly basis as press releases, distributed pursuant to the rules and regulations of the stock exchanges on which our ADSs are listed. Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by United States domestic issuers. As a result, you may not be afforded the same protections or information which would be made available to you if you were investing in a United States domestic issuer.

We will incur increased costs as a result of being a public company.

        As a public company, we will incur a significantly higher level of legal, accounting and other expenses than we do as a private company. In addition, the Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and the NASDAQ, have required changes in the corporate governance practices of public companies.

        When we become a public company, we will establish additional board committees and will adopt and implement additional policies regarding internal controls over financial reporting and disclosure controls and procedures. In particular, compliance with Section 404 of the Sarbanes-Oxley Act, which requires public companies to include a report of management on the effectiveness of their internal control over financial reporting, will increase our costs. In addition, we will incur costs associated with public company reporting requirements, such as the requirements to file an annual report and other reports with the SEC.

        We are currently evaluating and monitoring developments with respect to these rules. We expect these rules and regulations will increase our legal and financial compliance costs, but we cannot predict or estimate the additional costs or the timing of additional costs we may incur.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus contains forward-looking statements that relate to our current expectations and views of future events. The forward-looking statements are contained principally in the sections entitled "Prospectus Summary," "Risk Factors," "Use of Proceeds," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Our Industry" and "Business." These statements relate to events that involve known and unknown risks, uncertainties and other factors, including those listed under "Risk Factors," which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

        In some cases, these forward-looking statements can be identified by words or phrases such as "may," "will," "expect," "anticipate," "aim," "estimate," "intend," "plan," "believe," "potential," "continue," "is/are likely to" or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, among other things, statements relating to:

    the significant risks and uncertainties in the industrial biotechnology industry, including our beliefs regarding the cost advantages and scalability provided by bioprocesses, future advances in our biotechnology and the benefits of utilizing a biorefinery model at our biobutanol production facility;

    our current expansion strategy and our ability to expand production capacity for biobutanol, LCDAs and I+G;

    our beliefs regarding the advantages of our industrial biotechnology platform;

    our expectations regarding our ability to economically produce biobutanol from cellulosic biomass and successfully capture and commercialize its co-and by-products;

    our ability to maintain strong relationships with suppliers and customers;

    our beliefs as to the regulatory environment in China and in other jurisdictions in which we sell our products;

    our ability to use new feedstocks to produce our products;

    our beliefs regarding the competitiveness of our products or pipeline products;

    our beliefs regarding the price trends and availability of our major raw materials;

    market acceptance of our products and pipeline products and our ability to attract new customers;

    our ability to effectively protect our intellectual property and trade secrets and not infringe on the intellectual property and trade secrets of others;

    our planned use of proceeds;

    our beliefs in the importance of the environmentally friendly nature of bioprocesses;

    competition from traditional chemical process producers and other bioprocess producers;

    our ability to obtain and maintain permits, licenses and registrations necessary for our business and operations; and

    our future business development, results of operations and financial condition.

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        The forward-looking statements made in this prospectus relate only to events or information as of the date on which the statements are made in this prospectus. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect.

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USE OF PROCEEDS

        We estimate that we will receive net proceeds from this offering of approximately US$                 million, after deducting the underwriting discounts and commissions and estimated offering expenses of US$                payable by us. These estimates are based upon an assumed initial offering price of US$                 per ADS, the midpoint of the range shown on the front cover page of this prospectus. A US$1.00 increase (decrease) in the assumed initial public offering price of US$                per ADS would increase (decrease) the net proceeds to us from this offering by US$                 million, after deducting the estimated underwriting discounts and commissions and estimated offering expenses of US$                payable by us and assuming no exercise of the underwriters' option to purchase additional ADSs and no other change to the number of ADSs offered by us as set forth on the cover page of this prospectus.

        We intend to use the net proceeds we receive from this offering for the following purposes:

    approximately US$        million to further develop and commercialize biobutanol and expand our production capacity for biobutanol;

    approximately US$         million to construct our production facility for I+G and commercialize I+G;

    approximately US$         million to expand our production capacity for LCDAs; and

    approximately US$         million to expand and strengthen our research and development infrastructure and activities.

        We will use any remaining portion of the net proceeds we receive from this offering for general corporate purposes and for potential acquisitions of, or investments in, other businesses, products or technologies that we believe will complement our current operations and expansion strategies. We do not currently have any agreements or understandings to make any material acquisitions of, or investments in, other businesses, products or technologies.

        The foregoing use of our net proceeds from this offering represents our current intentions based upon our present plans and business condition. The amounts and timing of any expenditure will vary depending on the amount of cash generated by our operations, competitive and technological developments and the rate of growth, if any, of our business. Accordingly, our management will have significant discretion in the allocation of the net proceeds we will receive from this offering. Depending on future events and other changes in the business climate, we may determine at a later time to use the net proceeds for different purposes. Pending their use, we intend to place our net proceeds in short-term bank deposits.

        In utilizing the proceeds of this offering, we, as an offshore holding company, are permitted under PRC laws and regulations to provide funding to our PRC subsidiaries only through loans or capital contributions and to other entities only through loans. Subject to the satisfaction of applicable government registration and approval requirements, we may extend inter-company loans to our PRC subsidiaries or make additional capital contributions to our PRC subsidiaries to fund their capital expenditures or working capital. We cannot assure you that we will be able to obtain these government registrations or approvals on a timely basis, or at all. See "Risk Factors—Risks Related to Doing Business in China—PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from using the proceeds we receive from this offering to make loans or additional capital contributions to our PRC operating subsidiaries and affiliated entities, which could materially and adversely affect our liquidity and our ability to fund and expand our business."

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DIVIDEND POLICY

        We have not paid any dividends in the past and do not anticipate paying dividends on our ordinary shares in the foreseeable future. We currently intend to retain future earnings, if any, to operate our business and finance future growth strategies. Any determination to pay dividends in the future will be made at the discretion of our board of directors and will depend on our results of operations, financial conditions, contractual restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant.

        Our board of directors has complete discretion on whether to pay dividends. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant. If we pay any dividends, we will pay our ADS holders to the same extent as holders of our ordinary shares, subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. See "Description of American Depositary Shares." Cash dividends on our ordinary shares, if any, will be paid in U.S. dollars.

        We are a holding company, and we rely on dividends paid by our operating subsidiaries in China for our cash needs, including the funds necessary to pay dividends and other cash distributions to our shareholders, service any debt we may incur and pay our operating expenses. The payment of dividends in China is subject to limitations. Regulations in the PRC currently permit payment of dividends by our PRC subsidiary only out of accumulated profits as determined in accordance with accounting standards and regulations in China. Our PRC subsidiaries are required to set aside at least 10% of each of their respective after-tax profits each year to contribute to each of their respective reserve fund until the accumulated balance of the reserve fund reaches 50% of its registered capital. Each PRC subsidiary is also required to reserve a portion of its after-tax profits to its employee welfare and bonus fund, the amount of which is determined by its respective board of directors. These funds are not distributable in cash dividends. None of our PRC subsidiaries distributed any dividends from its undistributed earnings for the years or periods prior to March 31, 2011. We have determined that it is probable that dividends will not be distributed in the foreseeable future from the undistributed profits of our PRC subsidiaries accumulated up to March 31, 2011.

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CAPITALIZATION

        The following table sets forth our capitalization as of March 31, 2011:

    on an actual basis; and

    on a pro forma basis to reflect (i) the automatic conversion of all our outstanding convertible preferred shares into 70,012,053 of our ordinary shares immediately upon the completion of this offering and (ii) net proceeds of US$            from the issuance and sale of ordinary shares in the form of ADSs by us in this offering, assuming an initial public offering price of US$            per ADS, the midpoint of the estimated range of the initial public offering price, after deducting estimated underwriting discounts and commissions and estimated aggregate offering expenses of US$            payable by us and assuming no exercise of the underwriters' option to purchase additional ADSs and no other change to the number of ADSs sold by us as set forth on the cover page of this prospectus.

        The pro forma information below is illustrative only and our capitalization following the completion of this offering is subject to adjustment based on the actual initial public offering price of our ADSs and other terms of this offering determined at pricing. You should read this table together with our consolidated financial statements and the related notes included elsewhere in this prospectus and the information under "Management's Discussion and Analysis of Financial Condition and Results of Operations."

 
  As of March 31, 2011  
 
  Actual   Pro forma  
 
  RMB
  US$
  US$
 
 
  (in thousands)
 

Long-term bank borrowings

    300,000     45,813     45,813  

Series A convertible preferred shares:
US$0.001 par value; 26,000,000 shares authorized; 26,000,000 shares issued and outstanding on an actual basis; and            shares issued and outstanding on a pro forma basis

    207     32      

Series B convertible preferred shares:
US$0.001 par value; 25,615,764 shares authorized; 25,615,764 shares issued and outstanding on an actual basis; and            shares issued and outstanding on a pro forma basis

    203     31      

Series C convertible preferred shares:
US$0.001 par value; 28,676,663 shares authorized; 18,396,289 shares issued and outstanding on an actual basis; and            shares issued and outstanding on a pro forma basis

    143     22      

Ordinary shares: US$0.001 (RMB0.0066) par value, 128,471,454 shares authorized; 38,915,973 shares issued and outstanding on an actual basis; and                 shares issued and outstanding on a pro forma basis(1)

    314     48        

Additional paid-in capital(2)

    1,382,789     211,168        

Retained earnings

    39,581     6,044        

Accumulated other comprehensive loss

    (90,942 )   (13,888 )      
               

Total shareholders' equity(2)

    1,332,295     203,457        
               

Total capitalization

    1,632,295     249,270        
               

(1)
Excludes 6,978,250 ordinary shares issuable upon the exercise of options outstanding as of March 31, 2011. As of the date of this prospectus, options to purchase a total of            ordinary shares to our directors, officers, employees and external consultants are outstanding.

(2)
Assuming the number of ADSs offered by us as set forth on the cover page of this prospectus remains the same, and after deduction of underwriting discounts and commissions and the estimated offering expenses of US$            payable by us, a US$1.00 increase (decrease) in the assumed initial public offering price of US$            per ADS would increase net proceeds by US$            and increase (decrease) each of additional paid-in capital, total shareholders' equity and total capitalization by US$             million.

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DILUTION

        If you invest in our ADSs, your interest will be diluted to the extent of the difference between the initial public offering price per ADS and our net tangible book value per ADS after this offering. Dilution results from the fact that the initial public offering price per ordinary share is substantially in excess of the book value per ordinary share attributable to the existing shareholders for our presently outstanding ordinary shares.

        Our net tangible book value as of March 31, 2011 was approximately RMB 1,264.2 million (US$193.1 million), or RMB 32.5 (US$5.0) per ordinary share and US$            per ADS. Net tangible book value represents the amount of our total consolidated assets of RMB 2,192.5 million (US$334.8 million), minus the amount of our total consolidated liabilities of RMB 860.2 million (US$131.4 million), goodwill of RMB 40.2 million (US$6.1 million) and intangible assets of RMB 28.0 million (US$4.3 million) as of March 31, 2011. Without taking into account any other changes in such net tangible book value after March 31, 2011, other than to give effect to (i) the conversion of all of our outstanding convertible preferred shares into ordinary shares, which will occur upon the completion of this offering, and (ii) net proceeds of US$             million from our sale of the ADSs offered in this offering at the assumed initial public offering price of US$            per ADS, the midpoint of the estimated range of the initial public offering price, and after deduction of underwriting discounts and commissions and estimated offering expenses of this offering payable by us, our adjusted net tangible book value as of March 31, 2011 would have increased US$             million to US$             million or US$            per ordinary share and US$            per ADS. This represents an immediate increase in net tangible book value of US$            per ordinary share and US$            per ADS, to the existing shareholder and an immediate dilution in net tangible book value of US$            per ordinary share and US$            per ADS, to investors purchasing ADSs in this offering. The following table illustrates such per share dilution:

Estimated initial public offering price per ordinary share

  US$    

Net tangible book value per ordinary share as of March 31, 2011

  US$ 5.0  

Pro forma net tangible book value, assuming the conversion of all of our outstanding convertible preferred shares

  US$    

Pro forma as adjusted net tangible book value after giving effect to this offering

  US$    

Amount of dilution in net tangible book value per ordinary share to new investors in this offering

  US$    

Amount of dilution in net tangible book value per ADS to new investors in this offering

  US$    

        A US$1.00 increase (decrease) in the assumed initial public offering price of US$            per ADS would increase (decrease) our pro forma net tangible book value after giving effect to the offering by US$             million, or by US$            per ordinary share and by US$            per ADS, assuming no change to the number of ADSs offered by us as set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and other expenses of the offering. The pro forma information discussed above is illustrative only. Our net tangible book value following the completion of this offering is subject to adjustment based on the actual initial public offering price of our ADSs and other terms of this offering determined at pricing.

        The following table summarizes, on a pro forma basis as of March 31, 2011, the differences between existing shareholders and the new investors with respect to the number of ordinary shares (in the form of ADSs or shares) purchased from us, the total consideration paid and the average price per ordinary share and per ADS. In the case of ADS purchased by new investors, the consideration and price amounts are paid before deducting estimated underwriting discounts and commissions and estimated offering expenses, assuming an initial public offering price of US$            per ADS, the

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midpoint of the estimated range of the initial public offering price. The total number of ordinary shares in the following table does not include ordinary shares underlying the ADSs issuable upon the exercise of the option to purchase additional ADSs granted to the underwriters. The information in the following table is illustrative only and the total consideration paid and the average price per ordinary share and per ADS for new investors is subject to adjustment based on the actual initial public offering price of our ADSs and other terms of this offering determined at pricing.

 
  Ordinary Shares
Purchased
   
   
   
   
 
 
  Total Consideration   Average
Price Per
Ordinary
Share
   
 
 
  Average
Price Per
ADSs
 
 
  Number   Percent   Amount   Percent  

Existing shareholders

            %           % US$     US$    

New investors

            %           % US$     US$    
                               

Total

            % US$         %            
                               

        A US$1.00 increase (decrease) in the assumed initial public offering price of US$            per ADS would increase (decrease) total consideration paid by new investors, total consideration paid by all shareholders and the average price per ADS paid by all shareholders by US$             million, US$             million and US$            , respectively, assuming no change in the number of ADSs sold by us as set forth on the cover page of this prospectus and without deducting underwriting discounts and commissions and other expenses of the offering.

        The dilution to new investors will be US$            per ordinary share and US$            per ADS, if the underwriters exercise in full their option to purchase additional ADSs.

        The discussion and tables above also assume no exercise of any outstanding share options. As of the date of this prospectus, there are 6,978,250 ordinary shares issuable upon the exercise of outstanding share options at a weighted average exercise price of US$2.78 per share, and there are 2,284,804 additional ordinary shares available for future issuance under our 2007 share incentive plan. To the extent that any of these options are exercised, there will be further dilution to new investors.

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EXCHANGE RATE INFORMATION

        The following table sets forth information concerning exchange rates between Renminbi and U.S. dollar for the periods indicated:

 
  Certified Exchange Rate(1)  
Period
  Period End   Average(2)   Low   High  
 
  (RMB per US$1.00)
 

2006

    7.8041     7.9723     8.0702     7.8041  

2007

    7.2946     7.5806     7.8127     7.2946  

2008

    6.8225     6.9477     7.2946     6.7800  

2009

    6.8259     6.8307     6.8470     6.8176  

2010

    6.6000     6.7611     6.8330     6.6000  

2011

                         
 

January

    6.6017     6.5964     6.6364     6.5809  
 

February

    6.5713     6.5761     6.5965     6.5520  
 

March

    6.5483     6.5645     6.5743     6.5483  
 

April

    6.4900     6.5267     6.5477     6.4900  
 

May

    6.4786     6.4957     6.5073     6.4786  
 

June

    6.4635     6.4746     6.4830     6.4628  
 

July (through July 15, 2011)

    6.4610     6.4654     6.4720     6.4610  

(1)
For periods prior to January 1, 2009, the exchange rates reflect the noon buying rates certified for customs purposes by the Federal Reserve Bank of New York. For periods after January 1, 2009, the exchange rates reflect the noon buying rates as set forth in the H.10 statistical release of the Federal Reserve Board.

(2)
The average rate for a year means the average of the exchange rates on the last day of each month during a year. The average rate for a month means the average of the daily exchange rates during that month.

        We publish our financial statements in Renminbi. This prospectus contains translations of Renminbi amounts into U.S. dollars at specified rates solely for the convenience of the reader. Unless otherwise noted, all translations from Renminbi to U.S. dollars were made at the rate as certified by the Federal Reserve Board of the United States, on March 31, 2011, which was RMB6.5483 to US$1.00. No representation is made that the Renminbi amounts referred to in this prospectus could have been or could be converted into U.S. dollars at any particular rate or at all. See "Risk Factors—Risks Related to Our Company and Our Industry—Fluctuations in exchange rates could adversely affect our business and your investment." The certified exchange rate for RMB published by the Federal Reserve Board of the United States was RMB6.4610 to US$1.00 on July 15, 2011.

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ENFORCEABILITY OF CIVIL LIABILITIES

        We are incorporated in the Cayman Islands to take advantage of certain benefits associated with being a Cayman Islands exempted company, such as:

    political and economic stability;

    an effective judicial system;

    a favorable tax system;

    the absence of exchange control or currency restrictions; and

    the availability of professional and support services.

        However, certain disadvantages accompany incorporation in the Cayman Islands. These disadvantages include:

    the Cayman Islands has a less developed body of securities laws as compared to the United States and provides significantly less protection to investors; and

    Cayman Islands companies do not have standing to sue before the federal courts of the United States.

        Our constituent documents do not contain provisions requiring that disputes, including those arising under the securities laws of the United States, between us, our officers, directors and shareholders, be arbitrated.

        Substantially all of our current operations are conducted in China, and substantially all of our assets are located in China. A majority of our directors and officers are nationals or residents of jurisdictions other than the United States and a substantial portion of their assets are located outside the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States upon us or such persons, or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States.

        We have appointed Law Debenture Corporate Services Inc. as our agent to receive service of process with respect to any action brought against us in the United States District Court for the Southern District of New York under the federal securities laws of the United States or of any state in the United States or any action brought against us in the Supreme Court of the State of New York in the County of New York under the securities laws of the State of New York.

        Maples and Calder, our counsel as to Cayman Islands law, and AllBright Law Offices, our counsel as to PRC law, have advised us, respectively, that there is uncertainty as to whether the courts of the Cayman Islands and the PRC, respectively, would:

    recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States; or

    entertain original actions brought in each respective jurisdiction against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.

        Maples and Calder has further advised us that a final and conclusive judgment in the federal or state courts of the United States under which a sum of money is payable, other than a sum payable in respect of taxes, fines, penalties or similar fiscal or revenue obligations and which was neither obtained in a manner nor is of a kind where enforcement is contrary to natural justice or the public policy of the

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Cayman Islands, may be subject to enforcement proceedings as a debt in the courts of the Cayman Islands under the common law.

        AllBright Law Offices has advised us further that the recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between the PRC and the country where the judgment is made or on reciprocity between jurisdictions, provided that the foreign judgments do not violate the basic principles of laws of the PRC or its sovereignty, security or social and public interests. As there is currently no treaty or other form of reciprocity between the PRC and the United States governing the recognition of judgments, there is uncertainty on whether and/or upon what basis a PRC court would enforce judgments rendered by courts in the United States.

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OUR HISTORY AND CORPORATE STRUCTURE

        We are a holding company incorporated in the Cayman Islands in April 2006 as part of our restructuring conducted in 2006. Our current operations are conducted through our subsidiaries located in the PRC. We have also recently established a subsidiary outside the PRC to carry out our business.

Our Corporate Structure Prior to Restructuring in 2006

        The following diagram illustrates our corporate structure immediately before our restructuring in 2006:

GRAPHIC


*
Indicates the place of incorporation.

        Cathay Shanghai.    Cathay Shanghai, formally known as Beijing Cathay Biotech, was established in April 1997 with a registered capital of US$150,000 by Medy Limited, or Medy, a British Virgin Islands company currently controlled by Dr. Xiucai Liu, our chairman and chief executive officer. In November 2000, Medy, Pharmtech Ltd., or Pharmtech, a Bahamas company wholly owned by Medy and Gujing Group Co., Ltd., or Gujing Group, a state-owned enterprise, entered into a joint venture agreement to increase the capital of Beijing Cathay Biotech to US$29.8 million, where Gujing Group, Medy and Pharmtech agreed to contribute 45.0%, 35.0% and 20.0% of the registered capital of Beijing Cathay Biotech, respectively. Beijing Cathay Biotech subsequently relocated to Shanghai and changed its name to Shanghai Cathay Biotechnology Co., Ltd. in December 2000. In 2003, Shanghai Cathay Biotechnology Co., Ltd. changed its name to Shanghai Cathay Holdings Co., Ltd. and also its business scope to become an "investment company." In 2004, based on mutual agreements and the actual capital contribution made by Gujing Group, Medy and Pharmtech, the registered capital of Cathay Shanghai was reduced to approximately US$25.0 million, and Gujing Group, Medy and Pharmtech each owned 34.55%, 41.65% and 23.8% of Cathay Shanghai, respectively.

        Cathay R&D.    Cathay R&D was established in the PRC in November 2000 with registered capital of US$23.5 million, where Gujing Group, Medy and Pharmtech contributed 45.0%, 35.0% and 20.0%

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of the registered capital, respectively. In 2004, based on mutual agreements and the actual capital contribution, the registered capital of Cathay R&D was reduced to approximately US$19.8 million, and as a result Gujing Group, Medy and Pharmtech owned 34.55%, 41.65% and 23.8%, respectively.

        Cathay Shandong.    Cathay Shandong was established in July 2001 with a registered capital of RMB240.0 million. Cathay Shanghai directly owned a 35.75% equity interest in Cathay Shandong, and Cathay BioMaterials, which is a British Virgin Islands Company in which Cathay Shanghai owned a 55.0% equity interest, owned an additional 35.0% equity interest in Cathay Shandong. As a result, Cathay Shanghai beneficially owned, directly and indirectly through Cathay BioMaterials, a 55.0% equity interest in Cathay Shandong. The remaining equity interests were owned directly and indirectly by Jining High-Tech Zone Construction & Investment Co., Ltd., or JN Investment, and Shandong Liyan Energy Group, both of which are state-owned enterprises in Shandong. Cathay Shandong engages in the production of LCDAs. The registered capital of Cathay Shandong was increased to RMB300.0 million in September 2001 without any change in the shareholding structure. In July 2002, Shandong Liyan Energy Group transferred its 19.5% equity interest in Cathay Shandong to Jining Huijiafeng Investment Co., Ltd., or Huijiafeng.

        Cathay BioMaterials.    Cathay BioMaterials was established in July 2000 in the British Virgin Islands as a wholly owned subsidiary of Shanghai Cathay Biotechnology Co. Ltd. In June 2001, in connection with the establishment of Shandong Cathay, Shanghai Cathay Biotechnology Co. Ltd. transferred 15.0% of its interest in Cathay BioMaterials to JN Investment for RMB15.75 million and 30.0% of its interest in Cathay BioMaterials to Shandong Liyan Energy Group for RMB31.5 million. Cathay BioMaterials' only asset was its 35% ownership interest in Cathay Shandong. Shandong Liyan Energy Group later transferred its 30.0% interest in Cathay BioMaterials to Huijiafeng.

        Cathay Amino Acid.    Cathay Amino Acid was established in September 2003 with registered capital of RMB100.0 million to engage in the production and sale of amino acids. Cathay Shandong and Cathay BioMaterials owned 75.0% and 25.0%, respectively, of the equity interests in Cathay Amino Acid.

        Cathay BioSight.    Cathay BioSight was established in July 2003 with registered capital of US$1.2 million. It is wholly owned by Cathay Shanghai and provides design and consulting services to our other subsidiaries and the biological, chemical and pharmaceutical industries and oversees the construction activities of our facilities. In 2008, Cathay BioSight was dissolved.

        Cathay BVI.    Cathay BVI was incorporated in the British Virgin Islands in July 2001. It was wholly owned by Cathay Shanghai.

        Degussa Cathay Biotech.    Degussa Cathay Biotech was established with registered capital of US$11.6 million pursuant to a joint venture agreement Cathay Shandong entered into with Degussa China, a wholly owned subsidiary of Degussa GmbH, in January 2005. Cathay Shandong contributed US$5.7 million in cash and land-use rights with respect to a parcel of land with a fair value estimated at approximately RMB30.0 million and owned 49.0% equity interest, while Degussa China contributed US$5.9 million in cash and owned 51.0% equity interest in Degussa Cathay Biotech. Degussa Cathay Biotech was established to engage in the development and production of lysine, an amino acid used as animal feed. We were involved in a number of legal and arbitration proceedings with Degussa China and Degussa GmbH relating to Degussa Cathay Biotech, which we agreed to settle in June 2011. See "Business—Legal and Arbitration Proceedings."

Restructuring and Financing Activities in 2006

        On April 19, 2006, to facilitate investments by foreign financial investors, Cathay Biotech was incorporated in the Cayman Islands with one ordinary share issued to Dr. Xiucai Liu.

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        On May 18, 2006, as part of our reorganization activities, we and certain of our shareholders entered into a series of agreements. As a result of these agreements, (i) Cathay Shanghai and Cathay R&D were 65.45% owned by Medy and 34.55% owned by Gujing Group, (ii) 1,431,818, 2,288,779 and 38,279,403 of our ordinary shares were held by Mr. Qixian Zhang, Mr. Paul Caswell and Medy, respectively and (iii) China Biochem Limited owned 26,000,000 of our Series A convertible preferred shares.

        On June 3, 2006, we entered into a series of share transfer agreements with Gujing Group to purchase the remaining 34.55% equity interests in Cathay Shanghai and Cathay R&D for an aggregate of US$13.76 million and US$2.5 million, respectively. The sale of such equity interests were subsequently approved by the relevant PRC authorities on June 20, 2006, at which time Cathay Shanghai and Cathay R&D became our wholly owned subsidiaries.

        In November 2006, Cathay Shanghai, Cathay BioMaterials, JN Investment and Huijiafeng entered into a series of restructuring agreements. Prior to the restructuring, JN Investment owned 9.75% of Cathay Shandong and 15.0% of Cathay BioMaterials, Huijiafeng owned 19.5% Cathay Shandong and 30.0% Cathay BioMaterials. As Cathay BioMaterials' only asset was its 35.0% ownership interest in Cathay Shandong, JN Investment's indirect interest in Cathay Shandong is 5.25%, and its total interest in Cathay Shandong is 15.0%. Under the restructuring agreements, JN Investment transferred its 15.0% ownership interest in Cathay BioMaterials to Cathay Shanghai while Cathay BioMaterials transferred its 5.25% ownership interest in Cathay Shandong for the same price. As a result, JN Investment became a 15.0% direct owner of Cathay Shandong, and Cathay BioMaterials' ownership interest in Cathay Shandong was reduced to 29.75%. In addition, under the restructuring agreements, Huijiafeng transferred its 19.5% interest in Cathay Shandong and 30.0% interest in Cathay BioMaterials (representing an indirect 10.5% interest in Cathay Shandong) to Cathay Shanghai for a consideration of RMB70.2 million and RMB37.8 million, respectively. Upon approval by relevant PRC authorities on December 27, 2006, Cathay Shanghai, Cathay BioMaterials and JN Investment owned 55.25%, 29.75% and 15.0%, respectively, of Cathay Shandong, and Cathay BioMaterials became our wholly owned subsidiary.

        On November 20, 2006, in order to expand our LCDA production facility in Shandong Province and to fund our research and development and commercialization effort for biobutanol, we issued a total of 25,615,764 Series B convertible preferred shares in a private placement at the price of US$2.03 per share for an aggregate of US$52.0 million. The investors in our Series B convertible preferred share private placement consisted of GSPS Asia Limited, which purchased 9,852,217 shares, Gramineae Holdings Company Limited, which purchased 9,852,217 shares, GM Investment Company Limited, which purchased 3,448,276 shares, New Horizon Evergreen Investment Co., Ltd., which purchased 1,970,443 shares and China Biochem Limited, which purchased 492,611 shares.

        Cathay Shandong Industrial.    On December 12, 2006, we established a wholly owned subsidiary, Cathay Shandong Industrial, in the PRC, with a registered capital of US$29.9 million, which was subsequently increased to US$44.9 million on December 12, 2007. Cathay Shandong Industrial will engage in the production of LCDAs and other LCDAs downstream products.

Further Consolidation and Establishment of Additional Subsidiaries

        On February 9, 2007, we entered into an agreement to purchase the remaining 15.0% equity interest of Cathay Shandong from JN Investment at a consideration of RMB54.0 million. The transfer of such equity interest was subsequently approved by the relevant PRC authorities on May 14, 2007, at which time Cathay Shandong became our wholly owned subsidiary.

        Cathay Jilin.    On March 1, 2007, we established a wholly owned subsidiary, Cathay Jilin, in the PRC, with a registered capital of US$29.8 million, which was subsequently increased to US$49.8 million

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on January 28, 2008 and further increased to US$66.4 million on May 28, 2008. Cathay Jilin will engage in the development and production of biobutanol and other products.

        Cathay Amino Acid.    Cathay Amino Acid was dissolved in April 2007.

        Cathay BioMaterials.    In July 2007, Cathay Shanghai transferred its equity interest in Cathay BioMaterials to Cathay Biotech. In 2008, Cathay BioMaterials was dissolved.

        Cathay BVI.    In July 2007, Cathay Shanghai transferred its equity interest in Cathay BVI to Cathay Biotech. In 2008, Cathay BVI was dissolved.

        Cathay Hong Kong.    On July 27, 2007, we established Cathay Hong Kong for the purpose of engaging in sales of our products.

        Cathay R&D.    On August 9, 2007, Cathay R&D increased its registered capital to approximately US$25.8 million.

        In addition, we changed the name of Cathay Shanghai from Shanghai Cathay Holdings Co., Ltd. to Shanghai Cathay Industrial Biotech Co., Ltd. and also changed its business scope so it is no longer an "investment company." We undertook this corporate action because Cathay Shanghai did not meet the statutory requirements for operating as an "investment company," and therefore was required to remove "holdings" from its name and revise its business scope.

        On October 19, 2007, in order to fund our capital expenditures, strategic acquisitions, general working capital and for purposes of repurchasing ordinary shares from certain shareholders, we issued a total of 25,312,175 Series C convertible preferred shares in a private placement at the price of US$5.35 per share for an aggregate of US$135.4 million. The investors in our Series C convertible preferred share private placement consisted of Capital International Private Equity Fund V, L.P., which purchased 9,883,253 shares, CGPE V, L.P., which purchased 397,121 shares, HBM BioVentures (Cayman) Ltd., which purchased 747,664 shares, HBM BioMed China, which purchased 934,580 shares, Stone Group Holdings Limited, which purchased 934,580 shares, Verbier International Inc., which purchased 747,664 shares, BioVeda China Fund II, L.P., which purchased 1,869,159 shares, Northern Light Venture Fund, L.P., which purchased 843,554 shares, Northern Light Strategic Fund, L.P., which purchased 185,295 shares, Northern Light Partners Fund, L.P., which purchased 92,647 shares, New Enterprise Associates 12, Limited Partnership, which purchased 373,832 shares, MS China 8 Limited, which purchased 1,869,159 shares, GSPS Asia Limited, which purchased 1,869,159 shares, Gramineae Holdings Company Limited, which purchased 1,869,159 shares, New Horizon Dairy Industry Investment Limited, which purchased 1,869,159 shares and GM Investment Company Limited, which purchased 826,190 shares.

        In October 2007, we also repurchased 2,584,027 ordinary shares from Medy at a price of US$5.00 per share for a total cash consideration of approximately US$12.9 million and repurchased 500,000 ordinary shares from Mr. Qixian Zhang and Mr. Paul Caswell, our directors, at a price of US$5.00 per share with a total cash consideration of US$2.5 million.

        On October 10, 2008, we issued 1,495,328 Series C convertible preferred shares to Medy, 934,580 Series C convertible preferred shares to HBM BioMed China and 934,580 shares to GSPS Asia Limited at US$5.35 per share for a total consideration of US$18.0 million.

        On October 14, 2008, we repurchased 9,883,253 Series C convertible preferred shares from Capital Internal Private Equity Fund V, L.P. and 397,121 Series C convertible preferred shares from CGPE V, L.P. at a price of US$5.35 per share with a total consideration of US$55.0 million.

        Under our current articles of association and shareholders agreement, in the event that our initial public offering price is lower than the purchase price of US$5.35 per share, or Series C Price, our Series C convertible preferred shareholders are entitled to receive an adjustment payment from us

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equal to the difference between the Series C Price and the initial public offering price, multiplied by the number of Series C convertible preferred shares. In July 2011, all of our Series C convertible preferred shareholders agreed to use this adjustment payment to subscribe for additional ordinary shares of our company at the initial public offering price, if our initial public offering is consummated prior to September 2011 and the initial public offering price is lower than the Series C Price. Our issuance and sale of these additional ordinary shares to our Series C convertible preferred shareholders will be made through private placements pursuant to an exemption from registration with the U.S. Securities and Exchange Commission under Regulation S and/or Section 4(2) of the Securities Act. All of our Series C convertible preferred shareholders also agreed with the underwriters not to sell, transfer or dispose of any of the additional ordinary shares so subscribed for a period of 180 days after the date of this prospectus.

        Degussa Cathay Biotech.    In June 2011, as part of a series of transactions to resolve and settle all legal disputes between us and Degussa China and Degussa GmbH in relation to Degussa Cathay Biotech, we entered into an equity transfer agreement with Degussa China, pursuant to which Degussa China agreed to transfer to us its 51% equity interest in Degussa Cathay Biotech. The equity transfer will become effective upon the fulfillment of certain government administrative and approval requirements. Once the transfer is effective, Degussa Cathay Biotech will become 49% owned by Cathay Shandong and 51% owned by Cathay Biotech. See "Business—Legal and Arbitration Proceedings."

        The following diagram illustrates our corporate structure and the place of organization of each of our subsidiaries as of the date of this prospectus:

GRAPHIC


*
Indicates the place of incorporation.

(1)
In June 2011, Degussa (China) Co., Ltd. agreed to transfer its 51% equity interest in Degussa Cathay Biotechnology to Cathay Biotech, subject to the fulfillment of certain government administrative and approval requirements.

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SELECTED CONSOLIDATED FINANCIAL DATA

        The following tables set forth selected consolidated statement of operations data and consolidated statements of cash flow data for the years ended December 31, 2006, 2007, 2008, 2009 and 2010 and for the three-month periods ended March 31, 2010 and 2011, and selected consolidated balance sheet data as of December 31, 2006, 2007, 2008, 2009 and 2010 and March 31, 2011. The selected consolidated statement of operations data and selected consolidated cash flow data for the years ended December 31, 2008, 2009 and 2010 (other than US$ amounts) and the selected consolidated balance sheet data as of December 31, 2009 and 2010 (other than US$ amounts) have been derived from our audited consolidated financial statements, which are included elsewhere in this prospectus. The selected consolidated balance sheet data as of December 31, 2008 have been derived from our audited consolidated financial statements, which are not included in this prospectus. The selected consolidated statement of operations data and selected consolidated cash flow data for the year ended December 31, 2006 and 2007 and the selected consolidated balance sheet data as of December 31, 2006 and 2007 have been derived from our unaudited consolidated financial statements, which are not included in this prospectus. The selected consolidated statement of operations data and selected consolidated cash flow data for the three-month periods ended March 31, 2010 and 2011 (other than US$ amounts), and the selected consolidated balance sheet data as of March 31, 2011 (other than US$ amounts) have been derived from our unaudited interim condensed consolidated financial statements included elsewhere in this prospectus. We have prepared the unaudited interim condensed consolidated financial statements on the same basis as our audited consolidated financial statements. The unaudited financial information includes all adjustments, consisting only of normal and recurring adjustments, that we consider necessary for a fair presentation of our financial position and operating results for the periods presented.

        You should read the selected consolidated financial data in conjunction with those financial statements and the related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus. Our consolidated financial

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statements are prepared and presented in accordance with U.S. GAAP. Our historical results do not necessarily indicate our results expected for any future periods.

 
  Year Ended December 31,   Three Months Ended March 31,  
 
  2006   2007   2008   2009   2010   2010   2011  
 
  RMB
  RMB
  RMB
  RMB
  RMB
  US$
  RMB
  RMB
  US$
 
 
  (in thousands, except share and per share data)
 

Selected Consolidated Statement of Operations Data

                                                       

Revenues, net

    223,226     339,856     378,675     296,782     816,045     124,619     147,191     271,166     41,410  

Gross profit

    99,687     135,147     73,482     63,643     58,009     8,859     26,365     17,285     2,640  

Research and development expenses

    (9,585 )   (9,043 )   (12,124 )   (9,312 )   (10,856 )   (1,658 )   (2,362 )   (2,664 )   (407 )

Sales and marketing expenses

    (21,217 )   (27,486 )   (23,175 )   (13,974 )   (15,914 )   (2,430 )   (4,493 )   (6,547 )   (1,000 )

General and administrative expenses

    (12,794 )   (49,500 )   (50,925 )   (45,246 )   (50,635 )   (7,733 )   (11,907 )   (13,455 )   (2,054 )

Government grant income

    2,708     5,791     10,024     4,381     5,560     849     1,708     1,490     228  

Operating income (loss)

    58,799     54,909     (2,718 )   (508 )   (13,836 )   (2,113 )   9,311     (3,891 )   (593 )

Interest income

    9,820     18,676     11,855     1,083     929     142     185     226     35  

Interest expenses

    (6,581 )   (212 )   (1,528 )   (2,021 )               (6,873 )   (1,050 )

Equity in losses of an equity investee affiliate

    (7,794 )   (1,357 )                            

Impairment of investment in an equity investee/affiliate

    (15,808 )   (9,804 )                            

Recovery of amounts due from Aijian Securities

    15,381                                  

Foreign currency exchange gain (loss)

    (1,938 )   (9,703 )   (9,710 )   (4,981 )   4,112     628     (1,283 )   2,745     419  

Gain (loss) on derivatives

        (581 )   (15,545 )   (1,605 )   4,367     667     1,235     4,456     680  

Income (loss) before income taxes and non-controlling interests

    51,879     51,928     (17,646 )   (8,032 )   (4,428 )   (676 )   9,448     (3,337 )   (509 )

Income tax benefit (expense)

    (2,163 )   (970 )   6,762     (4,211 )   (9,129 )   (1,394 )   (2,401 )   (2,670 )   (408 )

Non-controlling interests

    (20,464 )   (6,244 )                            

Net income (loss)

    29,252     44,714     (10,884 )   (12,243 )   (13,557 )   (2,070 )   7,047     (6,007 )   (917 )

Basic earnings (loss) per ordinary share(1)

    0.48     0.46     (0.28 )   (0.31 )   (0.35 )   (0.05 )   0.06     (0.15 )   (0.02 )

Diluted earnings (loss) per ordinary share

    0.48     0.43     (0.28 )   (0.31 )   (0.35 )   (0.05 )   0.06     (0.15 )   (0.02 )

Ordinary shares used in computation:

                                                       
 

Basic(1)

    42,000,000     41,374,745     38,915,973     38,915,973     38,915,973     38,915,973     38,915,973     38,915,973     38,915,973  
 

Diluted

    42,226,933     43,454,388     38,915,973     38,915,973     38,915,973     38,915,973     40,482,187     38,915,973     38,915,973  

(1)
Basic earnings (loss) per ordinary share are calculated by allocating income (loss) between participating convertible preferred shareholders and the ordinary shareholders using the two-class method.

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  As of December 31,   As of March 31,  
 
  2006   2007   2008   2009   2010   2011  
 
  RMB
  RMB
  RMB
  RMB
  RMB
  US$
  RMB
  US$
 
 
  (in thousands)
 

Selected Consolidated Balance Sheet Data

                                                 

Cash and cash equivalents

    394,511     899,445     67,736     139,347     158,812     24,252     88,874     13,572  

Total current assets

    560,907     1,048,877     379,998     392,203     490,006     74,829     550,574     84,079  

Property, plant and equipment, net

    214,623     550,655     1,145,502     1,355,130     1,427,800     218,041     1,432,248     218,721  

Total assets

    927,826     1,847,631     1,803,112     1,976,543     2,131,502     325,505     2,192,541     334,826  

Total current liabilities

    79,457     134,365     393,939     370,909     449,327     68,617     518,785     79,224  

Long-term bank borrowings

                200,000     300,000     45,813     300,000     45,813  

Total liabilities

    135,454     186,250     441,713     622,568     792,877     121,081     860,246     131,369  

Total shareholders' equity

    792,372     1,661,381     1,361,399     1,353,975     1,338,625     204,424     1,332,295     203,457  

 

 
  Year Ended December 31,   Three Months Ended March 31,  
 
  2006   2007   2008   2009   2010   2010   2011  
 
  RMB
  RMB
  RMB
  RMB
  RMB
  US$
  RMB
  RMB
  US$
 
 
  (in thousands)
 

Selected Consolidated Cash Flow Data

                                                       

Net cash provided by (used in) operating activities

    80,949     118,080     (36,971 )   45,135     7,695     1,175     (6,020 )   (47,887 )   (7,313 )

Net cash used in investing activities

    (207,901 )   (481,666 )   (602,605 )   (118,108 )   (171,394 )   (26,174 )   (61,899 )   (21,579 )   (3,295 )

Net cash provided by (used in) financing activities

    471,538     899,292     (155,445 )   144,654     190,000     29,015     200,000          

Net increase (decrease) in cash and cash equivalents

    337,449     504,934     (831,709 )   71,611     19,465     2,973     131,833     (69,938 )   (10,680 )

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

        You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the section entitled "Selected Consolidated Financial Data" and our consolidated financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Risk Factors" and elsewhere in this prospectus.

Overview

        We are a leading global industrial biotechnology company as measured by production capacity in key biochemical products and a pioneer in the commercialization of bioprocess technologies, according to CMAI. Our products address the specialty chemicals and biofuels markets. We apply our proprietary technologies to commercialize cost disruptive, environmentally sustainable, drop-in alternatives to products typically produced through petrochemical processes.

        We are the world's largest producer of biobutanol based on active production capacity in 2011, according to CMAI. Our biobutanol is used as an industrial solvent and as a chemical intermediate for the production of polymers, paints, resins, coatings, plasticizers, herbicides, pharmaceuticals and food grade extractants. Based on production capacity in 2010, we are also a leading global producer of LCDAs, which are used as chemical intermediates primarily for the production of nylon, plastics, adhesives, fragrances, lubricants and powder coatings. Our products are sold to a broad base of customers that includes both leading international companies, such as DuPont, Evonik Industries AG, IFF, Arkema, Novo and major China-based customers. In addition, we are developing our I+G, which complements MSG as a food flavor enhancer, and we expect to commence commercial sales of I+G by the end of the first half of 2012.

        Capacity expansion has enabled us to grow our revenue and market share. Our annual production capacity for biobutanol and its co-products is 100,000 metric tons, including 65,000 metric tons, or 21 million gallons, of biobutanol. We plan to expand the annual production capacity at our biobutanol production facility to 200,000 metric tons of biobutanol and co-products, including 130,000 metric tons, or 42 million gallons, of biobutanol, in the future. Our LCDA production facility in Shandong Province had an annual production capacity of approximately 12,000 metric tons at the beginning of 2011, approximately 13,500 metric tons as of March 31, 2011 and we are currently optimizing our production process to increase production capacity to 15,000 metric tons by the end of 2011. To meet the growing demand for our LCDA products, we plan to expand the annual capacity at our LCDA production facility to 20,000 metric tons by the end of 2012. We plan to complete construction of our I+G production facility in Jilin Province with an annual production capacity of 5,000 metric tons by the end of the first half of 2012.

        We have grown significantly since we first began commercial sales of our products in 2003. Our total revenues amounted to RMB378.7 million, RMB296.8 million and RMB816.0 million (US$124.6 million) in 2008, 2009 and 2010, respectively. We incurred net losses of RMB10.9 million, RMB12.2 million and RMB13.6 million (US$2.1 million) in 2008, 2009 and 2010, respectively. In the three months ended March 31, 2010 and 2011, our total revenues amounted to RMB147.2 million and RMB271.2 million (US$41.4 million), respectively. Our net income for the three months ended March 31, 2010 was RMB7.0 million and our net loss for the three months ended March 31, 2011 was RMB6.0 million (US$0.9 million), respectively.

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Factors Affecting Our Results of Operations

        We believe that the most significant factors affecting our financial performance and results of operations are:

    demand for our products;

    raw material and utility costs;

    government regulations;

    product mix and timely commercialization of pipeline products;

    production capacity; and

    process efficiency.

Demand for Our Products

        We produce bioprocess-based drop-in alternatives to products typically produced through chemical processes. Demand for our biobutanol and LCDAs is substantially driven by the demand for our customers' products, which incorporate butanol and LCDAs as raw materials. In particular, general demand for biobutanol is affected by the demand for chemical intermediates used in the construction, textile and automobile industries. The global demand for LCDAs is driven by the growth of the industries such as the automobile, textile and consumer product industries.

        Demand for our products is also affected by our ability to price our products competitively. We believe we are able to price our products competitively because of the cost efficiencies in our bioprocesses, our strategic location in China and favorable energy prices obtained through onsite cogeneration plants. However, the cost competitiveness of our products may be affected by changes in petroleum prices. For example, for LCDAs, decreases in petroleum prices may allow competitors that use chemical processes and petroleum-based feedstock to lower the price of their products, and, at the same time, may result in decreases in prices for petroleum-based oil which may increase our ability to price our LCDAs competitively. Conversely, increases in petroleum prices may result in increased prices for petroleum-based oil, which may reduce our ability to price our LCDAs competitively, but may also result in increases in costs for our competitors who use chemical processes from petroleum-based feedstock. Similarly, decreases in petroleum prices may allow competitors who use chemical processes from petroleum-based feedstock to lower the cost of producing butanol, which impacts our ability to price our biobutanol competitively.

        In addition, demand for our products also depends on the willingness and ability of potential customers to qualify our products, which are more environmentally friendly. During the last few decades, consumers have become increasingly concerned about carbon dioxide emission and sustainable development. As a result, the industrial biotechnology industry has experienced rapid growth in recent years. Although demand for our products temporarily slowed in 2009 due to unfavorable economic conditions, demand has progressively recovered throughout 2010. Moreover, as we rely on a limited number of significant customers, demand for our products may fluctuate from period to period as a result of the reduction, delay or cancellation of orders from one or more of our significant customers in any given period. In the long run, we believe that demand for industrial biotechnology products will continue to grow as a result of technological developments, rising energy prices and growth in the agricultural sector.

Raw Material and Utility Costs

        Our cost of revenues is primarily affected by raw material costs. In 2008, 2009, 2010 and the three months ended March 31, 2011, raw material costs represented 69.3%, 57.5%, 68.8% and 72.0%, respectively, of our production costs.

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        The primary raw material for our production of biobutanol is corn. Our production facility for biobutanol is located in Jilin Province, a key corn producing region in China. Corn prices in China have increased significantly over the past few years. As a result, the average prices we paid for corn increased 22.1% from the three months ended March 31, 2010 to the three months ended March 31, 2011, 23.2% from 2009 to 2010 and 6.9% from 2008 to 2009. Corn prices continued to increase in the three months ended June 30, 2011, which we expect to contribute to a significant increase in our net loss for the period. To reduce our exposure to volatility in corn prices and reduce raw material costs, we plan to use cellulosic biomass, such as corncobs and corn stover, as feedstock to produce biobutanol.

        The primary raw material used for the production of our LCDAs is petroleum-based oil. Because petroleum-based oil is refined from petroleum, its price correlates to a high degree with the price of petroleum. To mitigate rising prices and price volatility of petroleum-based oil and to capitalize on growing demand for renewable raw materials, we plan to use vegetable oil and bio-based oil for the production of our LCDAs. However, the price and availability of vegetable oil and bio-based oil may be influenced by general economic, market and regulatory factors, which in turn may affect our production costs and profit margins. See "Risk Factors—Risks Related to Our Company and Our Industry—In the event that we are unable to obtain raw materials in a timely manner or at reasonable prices, our business, financial condition and results of operations would be harmed." To secure a reliable supply of renewable raw materials, we signed a non-binding memorandum of understanding with a supplier of bio-based oil, under which the supplier agreed to supply us with renewable raw materials subject to negotiation and execution of definitive agreements.

        Our cost of revenues is also significantly affected by utility prices. In 2010 and the three months ended March 31, 2011, utility costs represented approximately 18.5% and 16.4%, respectively, of our production costs. We have experienced, and expect to continue to experience, increasing costs for electricity, steam and coal as a result of increasing energy prices in China. For our LCDA production facility in Shandong Province, we entered into service agreements with a subsidiary of a national utility company which provide us with priority supply of electricity and steam at a rate that is equal to or below the local market rate. In addition, we use an existing onsite cogeneration plant at our biobutanol production facility in Jilin Province. Despite these arrangements, we expect to continue to experience rising prices in the costs of electricity and steam due to the economic growth in China. Continued increases in utility prices will increase our cost of revenues and adversely affect our results of operations. See "Risk Factors—Risks Related to Our Company and Industry—Increases in utilities costs or shortage of utilities supply may adversely affect our operations."

Government Regulations

        Changes in government regulations in China may have an impact on our financial performance. Our ability to anticipate and respond to changes in government regulations and their competitive implications will have a significant effect on our future performance. Our future growth may be affected by the following government regulations:

    PRC government regulations may hinder our ability to use corn as feedstock in our biobutanol production.

    The PRC government may impose tax on carbon dioxide emission which could increase the production cost of butanol, thereby increasing demand for our biobutanol.

    More stringent environmental laws and regulations, in particular in relation to waste water treatment, may increase our production costs.

    The PRC government may further reduce the value-added tax, or VAT, refund rate for LCDAs, which will increase our cost of revenues for LCDAs that we sell overseas.

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        Change in tariff policies may cause the pricing of our products to be less competitive than those that are produced locally. In addition, the PRC government exercises significant control over China's economic growth through the allocation of resources, the control of payment of foreign currency-denominated obligations, the setting monetary policy and the preferential treatment of particular industries and/or companies. Government regulations in any jurisdiction outside China in which we sell our products, such as the United States and Europe, may also have an impact on our financial performance.

Product Mix and Timely Commercialization of Pipeline Products

        Our product mix has changed significantly over the last two years. We believe our product mix will continue to change going forward as we continue to expand our biobutanol business and commercialize I+G. Currently we derive revenues from the sale of biobutanol products and LCDAs. We believe we enjoy cost efficiencies in the production of our LCDAs due to our proprietary bioprocess technologies and our China-based operations, which enabled us to achieve a gross profit margin for LCDAs of 19.8% in 2010 and 23.3% in the three months ended March 31, 2011. We commenced demonstration operation of our biobutanol production facility in the beginning of 2010 and generated revenue of RMB385.5 million (US$58.9 million) in 2010 and RMB162.9 million (US$24.9 million) in the three months ended March 31, 2011. However, due to the significant increase in corn prices and expenses incurred in connection with the ramp-up of our biobutanol production, we incurred a segment gross loss of RMB35.6 million (US$5.4 million) and RMB9.9 million (US$1.5 million) from the sale of biobutanol products in 2010 and the three months ended March 31, 2011, respectively. As a result, our overall gross margin decreased to 7.1% in 2010 from 21.4% in 2009 and to 6.4% in the first quarter of 2011 from 17.9% in the first quarter of 2010. We expect our gross margins to increase as we commercialize biobutanol from cellulosic biomass and I+G and increase sales of our renewable LCDAs.

        We have a number of pipeline products with near-term commercialization potential. We expect to complete construction of our I+G production facility and commence commercial sales of our I+G by the end of the first half of 2012. We have developed a biobutanol production process using cellulosic biomass as the primary feedstock, which could significantly lower the production costs of biobutanol and improve our gross margins. We plan to commence the commercial production of biobutanol from cellulosic biomass. We have also developed a proprietary bioprocess to produce LCDAs from renewable feedstock and believe we can increase the sales of our renewable LCDAs. We are currently conducting research on products that we believe have significant market potential. We believe the successful and timely development of these products and the commercialization of such pipeline products will allow us to address additional market demand and increase our revenues.

Production Capacity

Biobutanol

        Capacity expansion has enabled us to increase our revenue from biobutanol products. Our annual production capacity for biobutanol and co-products increased from 30,000 metric tons as of the end of 2009 to 100,000 metric tons as of the end of 2010, including 65,000 metric tons, or 21 million gallons, of biobutanol. As a result, our revenue from sales of biobutanol products increased significantly from RMB23.4 million in 2009 to RMB385.5 million (US$58.9 million) in 2010 and from RMB77.9 million in the first quarter of 2010 to RMB162.9 million (US$24.9 million) in the first quarter of 2011. We sold approximately 43.0% more biobutanol, as measured by volume, in the three months ended June 30, 2011 as compared to the three months ended March 31, 2011. We plan to expand the annual production capacity at our biobutanol production facility. We plan to expand the annual production capacity at our biobutanol production facility to 200,000 metric tons of biobutanol and co-products, including 130,000 metric tons, or 42 million gallons, of biobutanol, in the future. Our annual production capacity affects our sales volume in any given period. As sales of our biobutanol products increase, we

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expect our segment loss and segment gross loss from sales of biobutanol products to increase. Therefore, we expect our net losses to increase significantly in the three months ended June 30, 2011 and the full year 2011 and we may continue to incur significant losses in the future. See "Risk Factors—Risks Related to Our Company and Our Industry—We incurred net losses in 2008, 2009 and 2010 and may continue to incur significant losses in the future."

LCDAs

        We produced approximately 9,171, 7,119 and 11,506 of LCDAs in 2008, 2009 and 2010 and the three months ended March 31, 2011, respectively, representing a utilization rate of 76.4%, 59.3% and 95.9% in 2008, 2009 and 2010, respectively, based on an annual production capacity of 12,000 metric tons. We produced approximately 3,405 metric tons of LCDAs in the three months ended March 31, 2011, representing a utilization rate of 90.8% for the same period based on an annual production capacity of 15,000 metric tons, which we expect to reach by the end of 2011. Our total revenue from sales of LCDAs amounted to RMB328.0 million, RMB271.9 million, RMB420.1 million and RMB105.6 million (US$16.1 million) for the same periods. To meet the growing demand for our LCDA products, we plan to expand our annual production capacity for LCDAs to 20,000 metric tons by the end of 2012. Our utilization rate decreased in 2009 due to the unfavorable global economic conditions which led to a reduction in demand. Our utilization rate gradually recovered and reached 95.9% in 2010 and 90.8% in the three months ended March 31, 2011.

I+G

        We plan to commence commercial sales of our I+G products by the end of the first half of 2012 and enter the food additives market. For details of the construction plans for our I+G production facility, see "Business—Our Product Portfolio—I+G—Our I+G Bioprocess Advantage."

        Our ability to increase the production capacity at our production facilities depends on our future cash flow from operations as well as our ability to raise sufficient funds either through bank financing or through capital markets. Our ability to obtain bank financing to fund our capacity expansion plans depends largely on the commercial lending environment in China and general market conditions for China-based companies. Recent measures taken by the PBOC to tighten the supply of credit has made it more difficult for us to obtain bank financing for our expansion plans. See "Risk Factors—Risks Related to Our Company and Our Industry—Our future liquidity needs are uncertain and we may need to raise additional funds in the future."

Process Efficiency

        Our future success depends on our ability to continue improving the efficiency of our integrated production processes and to reduce our process costs. We have developed proprietary fermentation techniques and strains which allow us to improve fermentation yield, optimize medium cost and reduce energy usage. Our proprietary separation technology allows us to simultaneously demulsify and remove residual raw material and cell mass during our LCDA production process, enabling us to achieve a demulsification yield of over 98.0%. We believe our second generation LCDA separation technology will significantly reduce the amount of industrial solvent required during the purification step, which is expected to significantly reduce energy use and labor costs. For biobutanol, we have developed a commercial strain that enables fermentation using corn starch instead of dry milled whole corn, which allows us to efficiently capture all co- and by-products produced during the bioprocess including co-products bioacetone and bioethanol, and corn and biogas by-products, thereby maximizing the value we are able to extract from our inputs and increase overall revenue. We plan to further improve production efficiency by increasing production yields and decreasing the requirements for raw materials, labor and energy in our production.

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Recent Developments

        The general operating conditions prevailing in the three months ended June 30, 2011 were largely consistent with those from the three months ended March 31, 2011. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" for information regarding additional trends and other factors that may influence our results of operations. We expect our net loss to significantly increase in the three months ended June 30, 2011 as well as in the full year 2011, primarily due to the increased sales of our biobutanol products and partially due to the increase in raw material costs as the prices for corn and petroleum-based oil continue to increase, as well as the decrease of butanol prices. We sold approximately 43.0% more biobutanol, as measured by volume, in the three months ended June 30, 2011 as compared to the three months ended March 31, 2011. We also had the following developments in the second quarter of 2011:

    our LCDA production capacity continued to expand and we are on schedule to increase our annual LCDA production capacity to 15,000 metric tons by the end of 2011;

    in May 2011, we successfully completed the testing of biogas for taxi fuel and also received a patent (Patent 200610147876.4) for a biological production method for butanol;

    in June 2011, our research and development team successfully conducted a pilot production of our LCDA products using a new purification process, which we expect will further reduce our production costs when the purification process is implemented in our LCDA production facility in Shandong Province; and

    in June 2011, we entered into a technology license and exclusive consultancy contract with Elcriton, Inc., or Elcriton. This licensed technology is expected to improve biobutanol yields from starch or glucose using Elcriton's genetically engineered Clostridia strain.

        Corn prices in China have continued to increase in the second quarter of 2011. Since corn is the primary raw material for our production of biobutanol, we expect our raw material costs to continue to increase in the foreseeable future. To reduce our exposure to volatility in corn prices and reduce raw material costs, we plan to use cellulosic biomass, such as corncobs and corn stover, as feedstock to produce biobutanol.

        We expect our capital expenditures to increase in the future as we begin the construction of our I+G production facility and expand our LCDA production facility. Recent developments in China's commercial lending environment have made it more difficult for us to obtain bank financing for our expansion plans. See "Risk Factors—Risks Related to Our Company and Our Industry—Our future liquidity needs are uncertain and we may need to raise additional funds in the future."

        Given the ongoing developments in China's commercial lending environment and the potential negative impact on our business expansion, we are carefully reconsidering various capital raising options. The completion of this offering is expected to provide us with additional capital, enhance our ability to access the capital markets when needed and raise our overall business profile. We expect our existing resources, including anticipated cash flows from operations, together with the proceeds from this offering, to be sufficient to support our expansion plans in the foreseeable future.

Revenues

        We currently derive revenues primarily from two segments:

    Sales of LCDAs, which accounted for 86.6%, 91.6%, 51.5% and 39.0% of our total revenues in 2008, 2009, 2010 and the three months ended March 31, 2011, respectively. Our LCDAs are used in various industrial applications such as the production of nylon, plastics, adhesives, fragrances, lubricants and powder coatings.

    Sales of biobutanol products, including biobutanol and its co- and by-products, which accounted for 13.3%, 7.9%, 47.2% and 60.0% of our total revenues in 2008, 2009, 2010 and the

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      three months ended March 31, 2011, respectively. In 2010, we commenced commercial sales of our biobutanol to address the growing demand for butanol in China, to diversify our sources of revenues and to reduce our reliance on LCDAs. Our biobutanol products are primarily used as an industrial solvent and as a chemical intermediate for the production of polymers, paints, resins, coatings, plasticizers, herbicides, pharmaceuticals and food grade extractants.

        The following table sets forth the breakdown of our total revenues by product type for the periods indicated:

 
  Year Ended December 31,   Three Months Ended March 31,  
 
  2008   2009   2010   2010   2011  
 
  RMB   % of
Total
Revenues
  RMB   % of
Total
Revenues
  RMB   US$   % of
Total
Revenues
  RMB   % of
Total
Revenues
  RMB   US$   % of
Total
Revenues
 
 
  (in thousands, except for percentages)
 

LCDAs

    328,005     86.6     271,854     91.6     420,083     64,151     51.5     66,638     45.3     105,644     16,133     39.0  
                                                   

Biobutanol products

                                                                         
 

Biobutanol products

    22,222     5.9     10,580     3.6     193,019     29,476     23.7     42,507     28.9     79,720     12,174     29.3  
 

Co- and by-products

    28,202     7.4     12,841     4.3     192,471     29,393     23.5     35,365     24.0     83,182     12,703     30.7  
                                                   
 

Subtotal

    50,424     13.3     23,421     7.9     385,490     58,869     47.2     77,872     52.9     162,902     24,877     60.0  
                                                   

Other revenues

    246     0.1     1,507     0.5     10,472     1,599     1.3     2,681     1.8     2,620     400     1.0  
                                                   

Total revenues

    378,675     100.0     296,782     100.0     816,045     124,619     100.0     147,191     100.0     271,166     41,410     100.0  
                                                   

        We currently sell our products on a global basis. We sell our LCDAs primarily in China, the United States and Europe. All of our biobutanol and its co- and by-products are sold in China. We expect to commence commercial sales of I+G in China by the end of the first half of 2012 to diversify our customer base by entering the food additives market and reduce the impact of currency fluctuations on our results of operations. The following table sets forth the breakdown of our total revenues by geography for the periods indicated:

 
  Year Ended December 31,   Three Months Ended March 31,  
 
  2008   2009   2010   2010   2011  
 
  Total
Revenues
RMB
  % of
Total
Revenues
  Total
Revenues
RMB
  % of
Total
Revenues
  Total
Revenues
RMB
  US$   % of
Total
Revenues
  Total
Revenues
RMB
  % of
Total
Revenues
  Total
Revenues
RMB
  US$   % of
Total
Revenues
 
 
  (in thousands, except for percentages)
 

China

    158,466     41.8     154,894     52.2     613,751     93,727     75.2     113,657     77.2     224,598     34,299     82.8  

United States

    87,831     23.2     97,648     32.9     113,268     17,297     13.9     13,939     9.5     14,878     2,272     5.5  

Europe

    108,270     28.6     36,270     12.2     65,871     10,059     8.1     18,042     12.3     29,405     4,490     10.9  

Other Asia countries

    12,129     3.2     3,520     1.2     3,840     586     0.5     1,553     1.0     2,285     349     0.8  

Other overseas countries

    11,979     3.2     4,450     1.5     19,315     2,950     2.3                     0.0  
                                                   

Total revenues

    378,675     100.0     296,782     100.0     816,045     124,619     100.0     147,191     100.0     271,166     41,410     100.0  
                                                   

Cost of Revenues and Gross Profit (Loss)

        Our cost of revenues primarily consists of:

    raw material costs, such as corn and petroleum-based oil, the key raw materials in the production of biobutanol and LCDAs, respectively;

    utility costs, including electricity, steam, coal, water and costs associated with waste treatment;

    salaries and benefits, including share-based compensation, for personnel directly involved in production activities; and

    production costs, including depreciation of property, plant and equipment used for production purposes and maintenance of production equipment.

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        The following table sets forth the breakdown of cost of revenues by product type for the periods indicated:

 
  Year Ended December 31,   Three Months Ended March 31,  
 
  2008   2009   2010   2010   2011  
 
  RMB   Gross
Profit
Margin
  RMB   Gross
Profit
Margin
  RMB   US$   Gross
Profit
Margin
  RMB   Gross
Profit
Margin
  RMB   US$   Gross
Profit
Margin
 
 
  (in thousands, except for margins)
 

LCDAs

    253,324     22.8 %   210,341     22.6 %   336,753     51,426     19.8 %   45,775     31.3 %   81,047     12,377     23.3 %

Biobutanol products

    51,719     (2.6 )%   22,647     3.3 %   421,133     64,312     (9.2 )%   74,976     3.7 %   172,812     26,390     (6.1 )%

Other revenues

    150     39.0 %   151     90.0 %   150     23     98.6 %   75     97.2 %   22     4     99.2 %
                                                   

Total cost of revenues

    305,193     19.4 %   233,139     21.4 %   758,036     115,761     7.1 %   120,826     17.9 %   253,881     38,771     6.4 %
                                                   

        Our cost of revenues is mainly driven by the production volume and the cost of raw materials used in the production of LCDAs and biobutanol, which affects our gross profit margin. One of the key raw materials, paraffin, is produced from petroleum-based oil. Therefore, the unit cost of our LCDA products depends largely on the cost of petroleum-based oil, which in turn correlates closely to the price of petroleum, and the unit cost of our biobutanol is driven by the price of corn. Since 2009, the price of petroleum-based oil has been increasing, which drove down our gross profit margin for LCDA sales. We expect this trend to continue in the foreseeable future. We conducted trial production of biobutanol in 2008 and 2009. Since 2010, due to the significant increase in corn prices, we have incurred a gross loss and negative gross margin for biobutanol sales. Corn prices continued to increase in the three months ended June 30, 2011, which we expect to contribute to a significant increase in our net loss for the period. We expect the trend of rising corn prices to continue in the foreseeable future and as sales of our biobutanol products increase, we expect our segment loss and segment gross loss from sales of biobutanol products to increase. Therefore, we expect our net losses to increase significantly in the three months ended June 30, 2011 and the full year 2011. We expect to reduce our production costs as we improve our production processes, recover and commercialize co- and by-products of the biobutanol production process and benefit from economies of scale. In addition, we have developed a process to produce butanol from cellulosic biomass, such as corncobs and corn stover, which could significantly lower the production costs and improve our gross margins. We expect our cost of revenues to continue to increase in absolute terms as our production volume continues to increase. In addition, changes in raw material prices and additional depreciation expenses resulting from expansion of our production capacities will also affect our cost of revenues as a percentage of total revenues.

Operating Expenses

        The following table sets forth our operating expenses and as percentage of our total revenues for the periods indicated:

 
  Year Ended December 31,   Three Months Ended March 31,  
 
  2008   2009   2010   2010   2011  
 
  RMB   % of
Total
Revenues
  RMB   % of
Total
Revenues
  RMB   US$   % of
Total
Revenues
  RMB   % of
Total
Revenues
  RMB   US$   % of
Total
Revenues
 
 
  (in thousands, except for percentages)
 

Research and development

    12,124     3.2     9,312     3.1     10,856     1,658     1.3     2,362     1.6     2,664     407     1.0  

Sales and marketing

    23,175     6.1     13,974     4.7     15,914     2,430     2.0     4,493     3.0     6,547     1,000     2.4  

General and administrative

    50,925     13.4     45,246     15.2     50,635     7,733     6.2     11,907     8.1     13,455     2,054     5.0  
                                                   

Total operating expenses

    86,224     22.7     68,532     23.0     77,405     11,821     9.5     18,762     12.7     22,666     3,461     8.4  
                                                   

Research and Development Expenses

        Research and development expenses consist primarily of:

    salaries and employee benefits for our research and development personnel;

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    depreciation expenses associated with equipment used in our research and development activities;

    cost of materials used in our research and development activities; and

    other costs related to the design, development, testing and enhancement of our products and processes, including the costs related to pilot plant testing.

        We expense research and development costs as incurred. We expect our research and development expenses to increase in the near future in absolute terms as we continue to engage in research and development relating to the production of biobutanol from cellulosic biomass. In addition, we will continue our research and development efforts to improve the efficiency of our bioprocesses and to continue to develop pipeline products. We plan to hire additional research and development personnel to enhance our research and development activities.

Sales and Marketing Expenses

        Sales and marketing expenses consist primarily of:

    shipping expenses;

    salaries and employee benefits for our sales and marketing personnel;

    sales-related travel expenses;

    warehousing expenses;

    packaging expense;

    duties; and

    other selling and marketing expenses.

        In the near term, we expect our total sales and marketing expenses to increase as our business continues to grow. We plan to increase sales and marketing efforts by hiring additional sales personnel to expand our market share and rapidly penetrate the I+G market. We also plan to hire additional business development personnel to focus on diversifying the applications of our products.

General and Administrative Expenses

        General and administrative expenses consist primarily of:

    salaries and employee benefits for our administrative personnel;

    depreciation of equipment and facilities used for administrative purposes;

    fees for professional services and insurance expenses;

    travel expenses; and

    other corporate expenses.

        We expect general and administrative expenses to increase in absolute terms as we recruit additional professionals and incur additional costs related to the growth of our business and our becoming a listed company in the United States upon completion of this offering.

Share-Based Compensation Expenses

        We adopted our 2007 share incentive plan on June 30, 2007, which amended and restated the 2006 share incentive plan that was previously adopted in June 2006. Share-based compensation expenses are allocated among cost of revenues, research and development expenses, sales and marketing expenses and general and administrative expenses based on the nature of the work our employees were assigned

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to perform. We account for share-based compensation expenses to employees based on the fair value of the share options on the date of the grant and recognize the amount over the requisite service period. We account for share-based compensation expenses to non-employees based on the fair value of the share options on the measurement date. The equity instruments are measured at their then-current fair values at each of the reporting dates over the non-employee's service period. The following table sets forth our allocation of share-based compensation expenses for the periods indicated:

 
  Year Ended December 31,   Three Months Ended March 31,  
 
  2008   2009   2010   2010   2010   2011  
 
  RMB
  RMB
  RMB
  US$
  RMB
  RMB
  US$
 
 
  (in thousands)
 

Cost of revenues

    554     423     620     95     113     177     27  

Research and development expenses

    561     416     515     79     113     95     15  

Sales and marketing expenses

    669     796     839     128     187     250     38  

General and administrative expenses

    4,300     3,396     3,161     483     743     1,438     220  

        We will incur additional share-based compensation expenses in 2011 and future periods due to the amortization of the unrecognized cost as of March 31, 2011, as well as additional share option grants after March 31, 2011. As of March 31, 2011, we had unrecognized compensation cost in the aggregate of RMB13.5 million (US$2.1 million), relating to non-vested share options. We will recognize these and other share-based compensation expenses related to future share option grants over the vesting periods of the related options granted to employees. See "—Critical Accounting Policies—Share-Based Compensation" for additional information regarding the assumptions and methodologies used in determining share-based compensation expenses.

Taxation

        Under the current laws of the Cayman Islands, we are not subject to income or capital gains tax. Additionally, dividend payments made by us are not subject to withholding tax in the Cayman Islands.

        Cathay Hong Kong is subject to a profit tax at the rate of 16.5% on assessable profit determined under relevant Hong Kong tax regulations. Cathay Hong Kong has not been required to pay profit tax as it had no assessable profit.

        Effective January 1, 2008, the PRC's statutory income tax rate is 25%. Cathay Shandong was entitled to a two-year full exemption followed by a three-year 50% reduction in income tax rate or 2+3 tax holiday, starting from 2005 and was granted HNTE status from 2008 to 2010, which entitled it to a reduced tax rate of 15%. Accordingly, Cathay Shandong was subject to an income tax rate of 12.5% for 2008 and 2009, 15% for 2010 and will be subject to an income tax rate of 25% from 2011 onwards. Cathay Shandong Industrial and Cathay Jilin are each entitled to a 2+3 tax holiday starting from 2008. Accordingly, they were exempt from income tax for 2008 and 2009, and are subject to income tax at 12.5% from 2010 to 2012, and a tax rate of 25% from 2013 onwards.

        We may also be considered a PRC resident enterprise under the New EIT Law and be subject to 25% enterprise income tax rate on our global income, including income we receive from our subsidiaries. A PRC resident enterprise is an enterprise established outside of China whose "de facto management body" is located in China. The term "de facto management body" refers to "an establishment that carries out substantial and overall management and control over the manufacturing and business operations, personnel, accounting, properties of an enterprise." As substantially all of our management is currently based in the PRC, it is possible that we could be considered a PRC resident enterprise, although we believe we are not a "resident enterprise." Although the New EIT Law provides that dividend income between qualified "resident enterprises" will be exempted from enterprise income tax, practically how such exemption works for a qualified "resident enterprise" outside mainland China is currently unclear. Furthermore, even if we are not considered a "resident

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enterprise," the New EIT Law and its implementation rules provide that a withholding income tax rate of 10% will normally be applicable to dividends payable to non-PRC investors who are "non-resident enterprises," to the extent such dividends are derived from sources within the PRC. We are a Cayman Islands holding company and substantially all of our income may be derived from dividends we receive from our operating subsidiaries located in the PRC. To the extent these dividends are subject to withholding tax, the amount of funds available to us to meet our cash requirements, including the payment of dividends to our shareholders and ADS holders, will be reduced. The New EIT Law applies to all of our PRC operating subsidiaries and possibly us if we are deemed a PRC resident enterprise. See "Risk Factors—Risks Related to Doing Business in China—Our global income and the dividends that we may receive from our PRC subsidiaries may be subject to PRC taxes under the New EIT Law, which would have a material adverse effect on our results of operations."

        In addition, our export of LCDAs is currently eligible for a VAT refund, which lowers our cost of revenues for our LCDAs sold overseas. The current VAT refund rate is 9%. We are also subject to a PRC business tax at a rate of 5% on our other revenue from our leases and research and development services.

Internal Control over Financial Reporting

        We will be subject to reporting obligations under the U.S. securities laws. Our reporting obligations as a public company will place a significant strain on our management, operational and financial resources and systems for the foreseeable future. Prior to this offering, we were a private company and have had limited accounting personnel and other resources with which to address our internal control over financial reporting. In conjunction with our independent registered public accounting firm's audit of our consolidated financial statements as of December 31, 2009 and 2010 and for the years ended December 31, 2008, 2009 and 2010, our independent registered public accounting firm identified certain material weaknesses and other control deficiencies, each as defined in the standards established by the U.S. Public Company Accounting Oversight Board, involving our internal control over financial reporting. As defined in the standards established by the U.S. Public Company Accounting Oversight Board, a "material weakness" is a significant deficiency, or combination of significant deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

        The material weaknesses identified consist of (i) a lack of knowledge and inappropriate analysis of our income tax exposures for overseas businesses, and related internal controls to identify potential tax exposures and determine income tax liabilities; (ii) lack of controls of the use of desktop computing on certain accounting-related activities; and (iii) a lack of general U.S. GAAP resources and expertise resulting in material audit adjustments related to share-based compensation arrangements, deferred tax, revenue recognition in respect of multiple elements arrangements, hybrid financial instruments, income taxes and the preparation of financial statement disclosures in accordance with U.S. GAAP and SEC reporting requirements. Such material weaknesses could result in significant misstatements of our financial statements, significant delays in the financial reporting process and non-compliance with SEC rules and regulation. Neither we nor our independent registered public accounting firm undertook a comprehensive assessment of our internal control for purposes of identifying and reporting material weaknesses and other control deficiencies in our internal control over financial reporting, as we and they may be required to do once we become a public company. In light of the number of control deficiencies that were identified as a result of the limited procedures performed, we believe it is possible that, had we performed a formal assessment of our internal control over financial reporting or had our independent registered public accounting firm performed an audit of our internal control over financial reporting, additional control deficiencies may have been identified.

        Following the identification of the material weaknesses and other control deficiencies, we have taken measures and plan to continue to take measures to remedy these deficiencies. In February 2011,

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we appointed our chief financial officer who has U.S. GAAP work experience in the financial reporting function of a public company. We have started to provide, and intend to continue to provide, on-going training to our existing financial reporting personnel on the accounting and financial reporting requirements under U.S. GAAP, SEC regulations and Section 404. We are in the process of, among other things, (i) actively recruiting candidates for additional financial and accounting personnel, including a U.S. financial reporting manager and additional associates to support our chief financial officer in financial reporting activities; (ii) establishing processes and oversight measures with the assistance of an independent third-party consultant we plan to engage in 2011 in an effort to comply with the requirements under U.S. GAAP, SEC regulations and Section 404; (iii) developing and implementing control procedures with respect to the use of our accounting-related computer system; (iv) providing training to our financial reporting personnel on taxation and exposure analysis for overseas businesses; and (v) establishing effective monitoring and oversight controls to ensure the accuracy and completeness of our financial statements and related disclosures. We expect to complete the measures above as soon as practicable upon the completion of this offering and will continue to implement measures to remedy our internal control deficiencies in order to meet the requirement imposed by Section 404.

        However, the implementation of these measures may not fully address the deficiencies in our internal control over financial reporting, and we cannot conclude that they have been fully remedied. We are not able to estimate with reasonable certainty the costs that we may need to incur to implement these and other measures designed to improve our internal control over financial reporting. See "Risk Factors—Risks Related to Our Business and Industry—In auditing our consolidated financial statements, our independent registered public accounting firm has identified material weaknesses and other control deficiencies in our internal control over financial reporting. If we fail to develop an effective system of internal control over financial reporting, we may be unable to accurately report our financial results or prevent fraud, and investor confidence in our company and the market price of our ADSs may be adversely affected."

Critical Accounting Policies

        We prepare our consolidated financial statements in accordance with U.S. GAAP, which requires us to make judgments, estimates and assumptions that affect (i) the reported amounts of our assets and liabilities, (ii) the disclosure of our contingent assets and liabilities at the end of each reporting period and (iii) the reported amounts of revenues and expenses during each reporting period. We continually evaluate these estimates based on our own historical experience, knowledge and assessment of current business and other conditions and our expectations regarding the future based on available information and reasonable assumptions, which together form our basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. Some of our accounting policies require a higher degree of judgment than others in their application.

        When reading our financial statements, you should consider (i) our selection of critical accounting policies, (ii) the judgment and other uncertainties affecting the application of such policies and (iii) the sensitivity of reported results to changes in conditions and assumptions. We believe the following accounting policies involve the most significant judgment and estimates used in the preparation of our financial statements.

Long-Lived Assets

        As of March 31, 2011, our intangible assets primarily consisted of completed technology, trade name and customer relationships that were acquired in connection with our acquisitions of equity interests in Cathay Shanghai, Cathay R&D and Cathay Shandong. Intangible assets also consisted of a corn processing certificate that was acquired in connection with certain assets in Jilin Province. We

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allocate the purchase price to the assets acquired and liabilities assumed based on their estimated fair value on the date of acquisition, which we refer to as the purchase price allocation.

        Our determination of the fair values of the intangible assets acquired involves certain judgments and estimates, which include the estimate of cash flows that a particular asset is expected to generate in the future and the determination of an appropriate discount rate for such cash flows. The discount rates, of between 22% to 25%, were calculated based on the estimated cost of equity of the acquired businesses plus a premium to reflect a market participant's required rate of return for the relative risk of investing in the intangible assets.

        For customer relationships, we determine fair value based on the incremental cash flows method, which captures the value of customer relationships by calculating the present value of the cost savings that a business expects to generate as a result of owning such customer relationships. To compute the cost saving from existing customers, we considered the relationship between marketing expenses and revenue attributable to existing customers. The estimated incremental cash flows from cost saving as a result from owning the customer relationship is calculated as cost saving per dollar of revenue multiplied by the revenue attributable to existing customers during its remaining useful life.

        For technologies, backlog contracts and corn processing certificates, we determine fair value based on the excess earning method, which takes into consideration the projected cash flows to be generated from the technologies, backlog contracts and corn processing certificates. The most significant estimates and assumptions inherent in this approach were the estimated revenue attributable to these intangible assets, profit margin derived from these intangible assets and the discount rate.

        For trademarks, we determine fair value based on the relief from royalty method, which takes into consideration the projected after tax cost savings from royalty payments. The most significant estimates and assumptions inherent in this approach were the growth rate of revenue from the businesses that use the subject trademark, the net royalty saving rate and the discount rate.

        We depreciate or amortize our property, plant and equipment and intangible assets using the straightline method over the estimated useful lives of the assets with zero salvage value. We estimate the useful lives at the time we acquire the assets based on our management's knowledge on the useful lives of similar assets and replacement costs of similar assets having been used for the same useful lives respectively in the market, and taking into account anticipated technological or other changes. On this basis, we have estimated the useful lives of our long-lived assets as follows:

Type of Long-lived Asset
  Useful Life

Plant and buildings

  20 to 50 years

Manufacturing and power equipment

  10 to 30 years

Electronic equipment

  5 to 15 years

Computers, office equipment and motor vehicles

  5 to 10 years

Complete technology and customer relationships

  7 to 10 years

Corn processing certificate

  10 years

        We believe that our trade name will be used as long as our business exists, and therefore the economic life of our trade name is indefinite. We review the estimated useful life for each of our long-lived assets on a regular basis. If technological changes occur more rapidly than anticipated, we may shorten the useful lives of these assets, which will result in the recognition of increased depreciation and amortization expenses in future periods. There has been no change to the estimated useful lives of these assets in 2008, 2009, 2010 and the three months ended March 31, 2011.

        We evaluate long-lived assets, including property, plant and equipment and intangible assets, which are subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. We assess recoverability by comparing the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by

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the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, we recognize an impairment charge based on the amount by which the carrying amount of the asset exceeds the fair value of the asset. We estimate the fair value of the asset based on the best information we believe to be available, including prices for similar assets and in the absence of an observable market price, the results of using a present value technique to estimate the fair value of the asset. For our trade name, which is not subject to amortization, we will recognize an impairment loss to the extent that the carrying amount exceeds the fair value of the asset. We have allocated goodwill to our LCDA reporting unit and performed the first step impairment test, which has determined that the implied fair value of goodwill exceeded its carrying amount. We did not record any impairment on our long-lived assets in 2008, 2009, 2010 and the three months ended March 31, 2011.

Investment in Degussa Cathay Biotech

        We acquired a 49% equity interest in Degussa Cathay Biotech in 2005, which was initially accounted for by the equity method. Under the equity method of accounting, we included our share of Degussa Cathay Biotech's results of operations in our consolidated statements of operations.

        We have considered whether the value of our investment in Degussa Cathay Biotech declined below its carrying value whenever adverse events or changes in circumstances indicate that the recorded value may not be recoverable. When we considered any such decline to be other than temporary based on various factors, we recorded a write-down to its estimated fair value. In addition, we discontinued accruing our share of income (loss) of Degussa Cathay Biotech when the investment no longer qualified for the equity method.

        Degussa Cathay Biotech was unable to repay a US$16.5 million loan to Degussa GmbH in 2006 and was involved in a series of lawsuits and arbitration proceedings, which we agreed to settle in June 2011. See "Business—Legal and Arbitration Proceedings." In addition, Degussa Cathay Biotech ceased construction and closed down this construction-in-progress plant in 2007. We discontinued accruing our share of loss of Degussa Cathay Biotech in March 2007 because we did not have the ability to exercise significant influence over the operating and financial policies of Degussa Cathay Biotech because Degussa Cathay Biotech has not provided its financial statements to Cathay Shandong since March 2007. We further determined that the lawsuits and arbitration proceedings and the fact that the plant was closed down indicated that our equity investment in Degussa Cathay Biotech was impaired and the decline in value below our carrying amount of the investment was other than temporary. We recognized impairments of RMB15.8 million and RMB9.8 million in our investment in Degussa Cathay Biotech in 2006 and 2007, respectively, and the carrying value of this investment has been nil since December 31, 2007. We do not have any obligation to fund any future losses of Degussa Cathay Biotech.

Share-Based Compensation

        We measure the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award and recognize the cost as an expense in our consolidated statements of income over the period during which an employee is required to provide services in exchange for the award, which is generally the vesting period.

        In determining the estimated fair value of our ordinary shares, as of June 5, 2006, January 25, 2007, December 9, 2008, September 8, 2010, February 15, 2011, February 18, 2011 and February 21, 2011, we have considered the guidance prescribed by the AICPA Audit and Accounting Practice Aid "Valuation of Privately-Held-Company Equity Securities Issued as Compensation," or the "Practice Aid," and relied in part on a valuation report prepared by an independent valuer based on data we provided. The valuation report provided us with guidelines in determining the fair value, but the determination was made by our management. We considered both the discounted cash flow, or DCF, method of the income approach and the market approach in assessing the fair value of ordinary shares

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underlying the options granted. The determination of the fair value of our ordinary shares requires complex and subjective judgments to be made regarding our projected financial and operating results, our unique business risks, the liquidity of our shares and our operating history and prospects at the time of each grant. Major assumptions made in calculating the fair value of our ordinary shares include:

    We assigned the relative importance of the DCF method and market approach. In determining the fair value of our ordinary shares in 2006, 2007 and 2008, we assigned 70% weight to the DCF method of the income approach and 30% weight to the market approach. Under the market approach, public companies similar to the Company have to be identified for comparison. There was no single public company similar in all aspects to us and the trading multiples of the selected companies varied. Therefore, in deriving appropriate multiples to be used for valuation under the market approach, we had to make certain subjective adjustments to the financial metrics of the selected companies. This rendered the results obtained by the market approach, although still relevant for consideration, less conclusive than the DCF method of the income approach. Due to the global financial crisis, the market capitalization of public traded comparable companies fluctuated in 2009 and 2010 while our operations and long term cash flow forecast had not changed as significantly over the same period. In view of the above, we considered the income approach to be more reliable than the market approach in determining the fair value of our company. We assigned 100% weighting to the DCF method of the income approach/discounted cash flow method and used the market approach as a cross-check to derive the fair value of our ordinary shares as of the valuation dates in September 2010 and February 2011;

    We used weighted average costs of capital, or WACCs, of between 16.0% and 18.5%. We chose these based on factors including risk-free rate, comparative industry risk, equity risk premium, company size and non-systematic risk factors;

    We assessed financial and capital market data of publicly traded companies in the same or similar sector. We then selected the companies that were comparable to our company as of the valuation dates as a basis for deriving the discount rates used in the DCF method and the market approach;

    Under the market approach, we assessed capital market data of the selected comparable companies and then calculated their ratios of enterprise value to revenue and enterprise value to earnings before interest, taxes, depreciation and amortization, or EBITDA, to determine valuations. Due to the different growth rates, profit margins and risk levels between us and the comparable companies, we made price multiple adjustments. We used the adjusted multiples of the comparable companies in the valuation of our enterprise value; and

    We quantified discount for lack of marketability by using the Black-Scholes option-pricing model. This method treats the right to sell a company's shares freely before a liquidity event as a put option. The further the valuation date is from an expected liquidation event, the higher the put option value and thus the higher the implied discount for lack of marketability. We used discounts for lack of marketability of between 7.0% and 21.0% in our valuations.

        The income approach involves applying appropriate discount rates to estimated cash flows that are based on five year earnings forecasts. Our revenues and earnings growth rates, as well as major milestones achieved, contributed significantly to the increase in the fair value of our ordinary shares. However, these fair values are inherently uncertain and highly subjective. The assumptions we used in deriving the fair values are consistent with our business plan. These assumptions include: no material changes in the existing political, legal and economic conditions in China; no major changes in the tax rates applicable to our subsidiaries and consolidated affiliated entities in China; our ability to retain competent management, key personnel and staff to support our ongoing operations; and no material deviation in market conditions from economic forecasts. These assumptions are inherently uncertain.

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We assessed the risks associated with achieving our forecasts in selecting the appropriate discount rates, which ranged from 16.0% to 18.5%.

        Under the market approach, we calculated and analyzed different value measures and market multiples of comparable companies to derive a series of multiples that we considered representative of the industry average. These comparable publicly traded companies are engaged in the same or a similar line of business as our company. In addition, the shares of all of these companies are actively traded in a public, free and open market, either on an exchange or over the counter. We then adjusted the market multiples based on our growth rate, business risks and profitability. Thereafter, we applied the adjusted multiples to our performance indicators to determine our value. We specifically applied the financial ratios of enterprise value to revenue and enterprise value to EBITDA in arriving at an indicative value of our company under the market approach.

        Since our capital structure consisted of convertible preferred shares and ordinary shares as of the grant dates, we allocated our enterprise value between each class of equity using the option pricing model. The option pricing model treats ordinary shares and preferred shares as call options on the enterprise value, with exercise prices based on the liquidation preference of the preferred shares. This method involves making estimates of the anticipated timing of a potential liquidity event, such as a sale of our company or an initial public offering, and estimates of the volatility of our equity securities. The anticipated timing is based on the plans of our board and management. Estimating the volatility of the share price of a privately held company is complex because there is no readily available market for the shares. The independent valuation firm estimated the volatility of our shares based on historical volatility of comparable companies' shares. Had we used different estimates of volatility, the allocations between preferred and ordinary shares would have been different.

        The estimated fair value of our ordinary shares increased to US$3.69 on September 8, 2010 from US$0.87 on June 5, 2006, primarily due to the following significant factors and events:

    the significant progress made on our research and development efforts for the commercial production of biobutanol;

    completion of the following acquisitions: (i) a 34.55% equity interest in Shanghai Cathay and Cathay R&D in June 2006, (ii) a 19.5% equity interest in Cathay Shandong in November 2006, (iii) a 15% equity interest in Cathay Shandong in May 2007, and (iv) the assets of Jilin Jifa Biotech Medical Food Co., Ltd. in March 2008;

    the growth in sales of our biobutanol and LCDAs; and

    the improvement in our financial position and our ability to expand our business due to the completion of the Series B and Series C convertible preferred share financings.

        The estimated fair value of our ordinary shares increased to US$5.43 on February 15, 2011 from US$3.69 on September 9, 2010, primarily due to the following factors and events during this period:

    the significant technological and production process breakthroughs in certain key areas, such as (i) the development of inhibitor tolerant strains for biomass conversion in connection with the production of biobutanol, (ii) the completion of our I+G process development and submission of data to a design institute to begin facility design and (iii) the successful preparation of I+G samples in acceptable qualities and yields;

    the improvement in our financial reporting and internal control function following the hiring of our chief financial officer in February 2011, who has experience in financial reporting for a U.S.-listed high-tech company;

    the initiation of preparations for our initial public offering in the first quarter of 2011 and the proximity of this offering, which increased the expected liquidity of our securities; and

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    the reduced uncertainties in achieving our business plan and financial forecasts as a result of the foregoing, which reduced the perceived risks and required rate of return for investing in our equity securities.

        We have granted the following options to our employees and certain external consultants as of the date of this prospectus. See "Management—2007 Share Incentive Plan."

Grant Date
  Number of
Options
  Exercise
Price
  Fair Value per
Ordinary Share at
Grant Date
  Fair Value per
Option at
Grant Date
 

June 5, 2006

    2,394,000     US$1.00     US$0.87     US$0.33  

January 25, 2007

    3,246,000     US$2.03     US$1.99     US$0.86  

December 9, 2008

    840,000     US$5.35     US$3.28     US$0.72  

September 8, 2010

    938,000     US$5.35     US$3.69     US$1.31  

February 15, 2011

    170,000     US$5.35     US$5.43     US$2.44  

February 18, 2011

    400,000     US$5.35     US$5.43     US$2.34  

February 21, 2011

    75,000     US$5.35     US$5.43     US$2.24  

        The following outlines the specific assumptions made by the independent valuation firm for the valuation of each of our grant of options:

 
  Options
Granted on
June 5, 2006
  Options
Granted on
January 25, 2007
  Options
Granted on
December 9, 2008
  Options
Granted on
September 8, 2010
  Options
Granted on
February 15,
18 and 21, 2011
 

Estimated fair value of ordinary shares

    US$0.87     US$1.99     US$3.28     US$3.69     US$5.43  

Risk-free interest rate range

    5.5%     5.3%     4.1%     3.5%     3.22%  

Expected life range (number of years)

    5.9     6.3     5.97     6.8     5.0 - 6.0  

Expected dividends

    0.0%     0.0%     0.0%     0.0%     0.0%  

Expected volatility

    34.5%     33.4%     35.0%     40.0%     41.0%  

        The determination of the fair value of share-based compensation awards as of the date of the grant using an option-pricing model is affected by our share price as well as assumptions regarding a number of complex and subjective variables, including our expected share price volatility over the term of the awards, actual and projected employee share option exercise behavior, risk-free interest rates and expected dividends. When estimating the fair value of our ordinary shares, both internal and external sources of information are reviewed. As we have historically been a private company, the sources utilized to determine the fair value of the underlying shares at the date of measurement are subjective in nature. Furthermore, we are required to estimate forfeitures at the time of grant and record share-based compensation expenses only for those awards that are expected to vest. If actual forfeitures differ from these estimates, we may need to revise those estimates used in subsequent periods.

        If factors change and we employ different assumptions for estimating share-based compensation expense in future periods or if we decide to use a different valuation model, our share-based compensation in future periods may differ significantly from what we have recorded in prior periods and could materially affect our operating income, net income and net income per share.

        The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable, which are characteristics not present in our option grants. Existing valuation models, including Black-Scholes, may not provide reliable measures of the fair value of our share-based compensation. Consequently, there is a risk that estimates of the fair values of our share-based compensation awards on the grant dates may be significantly different from the actual values realized upon the exercise, expiration, early termination or forfeiture of those share-based payments in the future. Certain share-based compensation awards, such

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as employee share options, may expire worthless or otherwise result in zero intrinsic value as compared to the fair value originally estimated on the grant date and reported in our financial statements.

        Alternatively, values that are significantly higher than fair values originally estimated on the grant date and reported in our financial statements may be realized from these instruments. There is currently no market-based mechanism or other practical application to verify the reliability and accuracy of the estimates stemming from these valuation models, nor is there a means to compare and adjust the estimates to actual values.

        There are significant differences among valuation models and there is a possibility that we will adopt different valuation models in the future. This may result in a lack of consistency in future periods and materially affect the fair value estimates of share-based compensation awards. It may also result in a lack of comparability with other companies that use different models, methods and assumptions.

Series C Convertible Preferred Share Derivative

        We issued Series C convertible preferred shares in October 2007. According to our articles of association, in the event that our company issues and sells shares in an initial public offering at a price lower than the purchase price of US$5.35 per share, or Series C Price, we will make a payment to the Series C convertible preferred shareholders equal to the difference between the Series C Price and the initial public offering price, multiplied by the number of Series C convertible preferred shares. We considered this feature an embedded derivative, or the Series C share derivative. We estimated the fair value of the Series C share derivative on the grant date and each balance sheet date as a put option using the Black-Scholes option-pricing model, based on the following assumptions:

 
  At
October 29,
2007
  At
December 31,
2007
  At
October 10,
2008
  At
December 31,
2008
  At
December 31,
2009
  At
December 31,
2010
  At
March 31,
2011

Expected initial public offering date

  June 30, 2008   June 30, 2008   December 31, 2010   December 31, 2010   June 30, 2011   June 30, 2011   June 30, 2011

Fair value of ordinary shares as if Series C preferred shares would be converted

  US$4.72   US$4.71   US$3.66   US$3.72   US$2.88   US$4.37   US$6.74

Exercise price

  US$5.35   US$5.35   US$5.35   US$5.35   US$5.35   US$5.35   US$5.35

Discount rate

  15.5%   15.5%   17%   16%   18%   17.5%   15%

Expected volatility rate

  31%   34%   37%   48%   42%   34%   25%

        The underlying price used in the option-pricing model is estimated using the fair value of our ordinary shares assuming all preferred shares have been converted. The resulting amount was then discounted by 95% at each measurement date because we believe the probability of the payment is 5% since it will be paid only upon an initial public offering with an offering price lower than the Series C Price. At each measurement date above, we determined that there was a 5% probability that our board of directors would authorize an initial public offering at an offering price below the Series C Price, for example, in the unlikely event when borrowings from local banks were inadequate to accommodate our expansion plans. In addition, we recognize changes to the fair value of the Series C convertible share derivative liability in gain (loss) derivatives at each balance sheet date. For a discussion of the significant factors and events that contribute to the increase of the estimated fair value of our ordinary shares from 2006 to the first quarter in 2011, see "—Share-Based Compensation."

        We assessed the probability of making the payment to the Series C convertible preferred shareholders as of June 30, 2011 and determined that this probability has increased. This increase was primarily due to the tightening of credit in China and other developments in China's commercial lending environment in the second quarter of 2011 which have made it more difficult for us to obtain

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bank financing for our expansion plans. For a discussion of the recent developments and the potential negative impact on our business expansion, see "Risk Factors—Risks Related to Our Company and Our Industry—Our future liquidity needs are uncertain and we may need to raise additional funds in the future." As a result of these developments, we believe that our business expansion now increasingly depends on our ability to access the capital markets when needed and to raise capital in addition to bank financing. We assessed that, as of June 30, 2011, the probability of our board of directors authorizing an initial public offering at an offering price below the Series C Price increased to 70%. Therefore, we determined that the estimated fair value of the Series C share derivative using the option-pricing model will then be discounted by 30% as of June 30, 2011. As a result of this assessment and the increase in the fair value of our Series C share derivative, we expect to incur an estimated additional non-cash expense charge of RMB1.1 million in the three months ended June 30, 2011 and our Series C share derivative liability under accrued expenses and other payables to increase to RMB1.1 million as of June 30, 2011, assuming an expected initial public offering date of August 5, 2011, fair value of our ordinary shares on an as-converted basis of US$5.85, a discount rate of 15% and an expected volatility rate of 23% as of June 30, 2011.

Deferred Tax Assets and Tax Uncertainties

        Deferred tax assets have been recorded by Cathay Shandong, Cathay Shandong Industrial, Cathay R&D, Cathay Shanghai and Cathay Jilin.

        As of December 31, 2007, we provided a full valuation allowance of deferred tax assets on Cathay Shandong Industrial, Cathay R&D, Cathay Shanghai and Cathay Jilin because they had recent losses. In 2008, Cathay Shandong Industrial started to generate significant earnings and we expect it to continue to generate future taxable income in the future. Accordingly, we reversed approximately RMB12.4 million of the valuation allowance related to Cathay Shandong Industrial in 2008. No valuation allowance was provided for deferred tax assets of Cathay Shandong and Cathay Shandong Industrial as of December 31, 2008, 2009, 2010 and March 31, 2011. Cathay R&D, Cathay Shanghai and Cathay Jilin still have full valuation allowances as of December 31, 2008, 2009, 2010 and March 31, 2011 because they are not expected to generate future taxable income over the period in which the benefits of their deferred tax assets are expected to be realized.

        We recognize impact of a tax position if that position is more likely than not to be sustained upon examination based on the technical merits and classify interest and penalties related to unrecognized tax benefits, if any, as part of income tax expense in our consolidated statements of operations.

Selected Quarterly Results of Operations

        The following table sets forth our unaudited selected quarterly results of operations for the nine quarters in the period from January 1, 2009 to March 31, 2011. You should read the following table in conjunction with our audited consolidated financial statements and related notes included elsewhere in this prospectus. We have prepared the unaudited selected quarterly financial information on substantially the same basis as our audited consolidated financial statements, and it reflects all adjustments, consisting only of normal recurring adjustments, that we consider necessary for a fair presentation of our operating results for the periods presented. Our quarterly operating results may fluctuate from quarter to quarter due to changes in customer demand, product mix and other variations, and the historical quarterly results presented below are not necessarily indicative of the results that may be expected for any future quarters or for any full year. There are many factors,

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including those discussed under "Risk Factors," that could have a material effect on our business and operating results.

 
  Three Months Ended  
 
  March 31,
2009
  June 30,
2009
  September 30,
2009
  December 31,
2009
  March 31,
2010
  June 30,
2010
  September 30,
2010
  December 31,
2010
  March 31,
2011
 
 
  (RMB in thousands)
 

Revenues, net

    49,093     70,609     62,327     114,753     147,191     197,483     191,614     279,757     271,166  

Cost of revenues

    (39,363 )   (58,614 )   (47,363 )   (87,799 )   (120,826 )   (186,984 )   (179,835 )   (270,391 )   (253,881 )
                                       

Gross profit

    9,730     11,995     14,964     26,954     26,365     10,499     11,779     9,366     17,285  
                                       

Operating income (expenses):

                                                       
 

Research and development

    (1,993 )   (2,089 )   (2,775 )   (2,455 )   (2,362 )   (2,508 )   (2,729 )   (3,257 )   (2,664 )
 

Sales and marketing

    (2,942 )   (3,000 )   (4,280 )   (3,752 )   (4,493 )   (2,744 )   (4,042 )   (4,635 )   (6,547 )
 

General and administrative

    (15,309 )   (8,801 )   (9,521 )   (11,615 )   (11,907 )   (10,998 )   (13,666 )   (14,064 )   (13,455 )
 

Government grant income

    1,028     1,297     1,028     1,028     1,708     1,597     1,027     1,228     1,490  
                                       

Operating income (loss)

    (9,486 )   (598 )   (584 )   10,160     9,311     (4,154 )   (7,631 )   (11,362 )   (3,891 )
                                       

Other income (expenses):

                                                       

Interest income

    508     189     199     187     185     308     177     259     226  

Interest expenses

    (736 )   (665 )   (620 )                       (6,873 )

Foreign currency exchange gain (loss), net

    (2,666 )   (567 )   (304 )   (1,444 )   (1,283 )   (1,349 )   3,117     3,627     2,745  

Gain (loss) on derivatives

    (4,977 )   480     (185 )   3,077     1,235     2,662     386     84     4,456  
                                       

Income (loss) before income taxes

    (17,357 )   (1,161 )   (1,494 )   11,980     9,448     (2,533 )   (3,951 )   (7,392 )   (3,337 )

Income tax benefit (expense)

    22     (995 )   (990 )   (2,248 )   (2,401 )   (2,437 )   (2,196 )   (2,095 )   (2,670 )
                                       

Net income (loss)

    (17,335 )   (2,156 )   (2,484 )   9,732     7,047     (4,970 )   (6,147 )   (9,487 )   (6,007 )
                                       

        We have generally experienced growth in our quarterly revenues in the period from January 1, 2009 to March 31, 2011, driven primarily by customer demand, changes to our product mix and the commencement of our biobutanol production. Our revenues in the first quarter of 2009 were relatively low because our sales of LCDA products were small as a result of the global financial crisis. Our revenues increased in the following quarters as the market demand recovered. In addition, we began our biobutanol production in the beginning of 2010, which contributed to the significant growth in our quarterly revenues in 2010 compared to 2009. In particular, our revenues significantly increased in the fourth quarter of 2010 as we increased the biobutanol production and sales in that quarter. Moreover, our quarterly operating results also fluctuate because any large customer of our LCDA products may adjust the phasing of its orders and shift its purchase order from quarter to quarter. Due to our dependence on a small number of large customers, the addition or absence of a single order from our largest customers in any given quarter could affect our revenues in that quarter. For example, compared to the previous quarter, our revenues slightly declined in the third quarters of 2009 and 2010 and the first quarter of 2011 primarily because a certain customer changed its order of LCDA products to the following quarter. Our gross margin decreased significantly starting from the second quarter of 2010 primarily due to the significant growth of our biobutanol sales, which generated negative gross margin. The negative gross margin of biobutanol sales increased from the second quarter of 2010 as a result of the significant increase in corn prices.

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Results of Operations

        The following table sets forth our results of operations for the periods indicated. Our historical results presented below are not necessarily indicative of the results that may be expected for our fiscal year ending December 31, 2011 or any other future period.

 
  Year Ended December 31,   Three Months Ended March 31,  
 
  2008   2009   2010   2010   2011  
 
  RMB   % of
Total
Revenues
  RMB   % of
Total
Revenues
  RMB   US$   % of
Total
Revenues
  RMB   % of
Total
Revenues
  RMB   US$   % of
Total
Revenues
 
 
  (in thousands, except for percentages)
 

Revenues, net

    378,675     100.0     296,782     100.0     816,045     124,619     100.0     147,191     100.0     271,166     41,410     100.0  

Cost of revenues

   
(305,193

)
 
(80.6

)
 
(233,139

)
 
(78.6

)
 
(758,036

)
 
(115,760

)
 
(92.9

)
 
(120,826

)
 
(82.1

)
 
(253,881

)
 
(38,770

)
 
(93.6

)

Gross profit

    73,482     19.4     63,643     21.4     58,009     8,859     7.1     26,365     17.9     17,285     2,640     6.4  

Research and development expenses

    (12,124 )   (3.2 )   (9,312 )   (3.1 )   (10,856 )   (1,658 )   (1.3 )   (2,362 )   (1.6 )   (2,664 )   (407 )   (1.0 )

Sales and marketing expenses

    (23,175 )   (6.1 )   (13,974 )   (4.7 )   (15,914 )   (2,430 )   (2.0 )   (4,493 )   (3.1 )   (6,547 )   (1,000 )   (2.4 )

General and administrative expenses

    (50,925 )   (13.4 )   (45,246 )   (15.3 )   (50,635 )   (7,733 )   (6.2 )   (11,907 )   (8.1 )   (13,455 )   (2,054 )   (5.0 )

Government grant income

    10,024     2.6     4,381     1.5     5,560     849     0.7     1,708     1.2     1,490     228     0.6  

Operating (loss) income

    (2,718 )   (0.7 )   (508 )   (0.2 )   (13,836 )   (2,113 )   (1.7 )   9,311     6.3     (3,891 )   (593 )   (1.4 )

Other income (expenses):

                                                                         

Interest income

    11,855     3.1     1,083     0.4     929     142     0.1     185     0.1     226     35     0.1  

Interest expenses

    (1,528 )   (0.4 )   (2,021 )   (0.7 )                       (6,873 )   (1,050 )   (2.5 )

Foreign currency exchange gain (loss)

    (9,710 )   (2.6 )   (4,981 )   (1.7 )   4,112     628     0.5     (1,283 )   (0.8 )   2,745     419     1  

Gain (loss) on derivatives

    (15,545 )   (4.1 )   (1,605 )   (0.5 )   4,367     667     0.5     1,235     0.8     4,456     680     1.6  

Income (loss) before income taxes

    (17,646 )   (4.7 )   (8,032 )   (2.7 )   (4,428 )   (676 )   (0.6 )   9,448     6.4     (3,337 )   (509 )   (1.2 )

Income tax benefit (expense)

    6,762     1.8     (4,211 )   (1.4 )   (9,129 )   (1,394 )   (1.1 )   (2,401 )   (1.6 )   (2,670 )   (408 )   (1.0 )

Net income (loss)

    (10,884 )   (2.9 )   (12,243 )   (4.1 )   (13,557 )   (2,070 )   (1.7 )   7,047     4.8     (6,007 )   (917 )   (2.2 )

 

 
  Year Ended December 31,   Three Months Ended March 31,  
 
  2008   2009   2010   2010   2011  
 
  RMB
  RMB
  RMB
  US$
  RMB
  RMB
  US$
 

Basic earnings (loss) per ordinary share

    (0.28 )   (0.31 )   (0.35 )   (0.05 )   0.06     (0.15 )   (0.02 )

Diluted earnings (loss) per ordinary share

    (0.28 )   (0.31 )   (0.35 )   (0.05 )   0.06     (0.15 )   (0.02 )

Ordinary shares used in computation:

                                           
 

Basic

    38,915,973     38,915,973     38,915,973     38,915,973     38,915,973     38,915,973     38,915,973  
 

Diluted

    38,915,973     38,915,973     38,915,973     38,915,973     40,482,187     38,915,973     38,915,973  

Comparison of the Three-Month Periods Ended March 31, 2011 and March 31, 2010

        Revenues.    Total revenues increased to RMB271.2 million (US$41.4 million) in the three months ended March 31, 2011 from RMB147.2 million in the same period in 2010. Our LCDA revenue increased to RMB105.6 million (US$16.1 million) in the three months ended March 31, 2011 from RMB66.6 million in the same period in 2010, primarily due to the continued increase in the sales volume of our LCDAs driven by the increase in demand for our LCDAs. Our LCDA sales volume

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increased to 2,875 metric tons in the three months ended March 31, 2011 from 1,894 metric tons in the same period in 2010. Our revenue from biobutanol products increased to RMB162.9 million (US$24.9 million) in the three months ended March 31, 2011 from RMB77.9 million in the same period in 2010, primarily due to continued increase in the sales volume of our biobutanol products, as we continued to ramp up our biobutanol production. Our biobutanol sales volume increased to 7,227 metric tons in the three months ended March 31, 2011 from approximately 4,090 metric tons in the same period in 2010.

        Cost of Revenues and Gross Profit.    Total cost of revenues increased to RMB253.9 million (US$38.8 million) in the three months ended March 31, 2011 from RMB120.8 million in the same period of 2010.

        Our LCDA cost of revenues increased to RMB81.0 million (US$12.4 million) in the three months ended March 31, 2011 from RMB45.8 million in the same period in 2010. This increase was primarily due to the increase in the sales volume of our LCDAs as discussed above and an increase in the unit cost to approximately RMB25,800 per metric ton in the three months ended March 31, 2011 from approximately RMB23,200 per metric ton in the same period in 2010. This increase in the unit cost of LCDAs was primarily due to an increase in the costs of petroleum-based oil, a major raw material for LCDAs, to approximately RMB12,700 per metric ton in the three months ended March 31, 2011 from approximately RMB9,800 per metric ton in the same period in 2010.

        Our cost of revenues for biobutanol products increased to RMB172.8 million (US$26.4 million) in the three months ended March 31, 2011 from RMB75.0 million in the same period in 2010. This increase was primarily due to an increase in the sales volume of our biobutanol products as discussed above and an increase in the unit cost, which amounted to RMB11,200 per metric ton, in the three months ended March 31, 2011 compared to RMB9,820 per metric ton in the same period in 2010. The increase in the unit cost of biobutanol was primarily due to an increase in the price of corn, a major raw material for biobutanol, to approximately RMB1,948 per metric ton in the three months ended March 31, 2011 from approximately RMB1,596 per metric ton in the same period in 2010.

        Our gross profit decreased by 34.4% to RMB17.3 million (US$2.6 million) in the three months ended March 31, 2011 from RMB26.4 million in the same period in 2010 while our gross margin decreased to 6.4% in the three months ended March 31, 2011 from 17.9% in the three months ended March 31, 2010. Our overall gross margin decreased primarily because revenue from biobutanol products, which had a lower gross margin, represented a higher percentage of our total revenues in the three months ended March 31, 2011.

        Gross profit from the sale of our LCDAs amounted to RMB24.6 million (US$3.8 million), representing a gross margin of 23.3%, in the three months ended March 31, 2011, compared to RMB20.9 million, representing a gross margin of 31.3%, in the same period in 2010. The decrease in gross margin in LCDA sales was primarily due to the increase in the cost of petroleum-based oil as discussed above.

        Gross loss from the sale of our biobutanol products amounted to RMB9.9 million (US$1.5 million), representing a negative gross margin of 6.1% in the three months ended March 31, 2011, compared to gross profit of RMB2.9 million, representing a gross margin of 3.7%, in the same period in 2010. The gross loss and negative gross margin from the sale of our biobutanol products were primarily due to the continued increase in corn prices as discussed above, which resulted in a significant increase in our cost of revenues.

        Operating Expenses.    Our operating expenses increased by 20.8% to RMB22.7 million (US$3.5 million) in the three months ended March 31, 2011 from RMB18.8 million in the same period in 2010. Operating expenses as a percentage of our total revenues decreased to 8.4% in the three months ended March 31, 2011 from 12.7% in the same period in 2010.

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    Research and Development Expenses.  Our research and development expenses increased by 12.8% to RMB2.7 million (US$0.4 million) in the three months ended March 31, 2011 from RMB2.4 million in the same period in 2010. This increase was primarily due to an increase in salaries and employee benefits and other costs as a result of increased research and development activities relating to the commercialization of I+G and development of biobutanol using cellulosic biomass.

    Sales and Marketing Expenses.  Our sales and marketing expenses increased by 45.7% to RMB6.5 million (US$1.0 million) in the three months ended March 31, 2011 from RMB4.5 million in the same period in 2010. This increase was primarily related to the increase in shipping expenses as a result of increased overseas sales of our LCDAs in the three months ended March 31, 2011.

    General and Administrative Expenses.  Our general and administrative expenses increased by 13.0% to RMB13.5 million (US$2.1 million) in the three months ended March 31, 2011 from RMB11.9 million in the same period in 2010. This increase was primarily due to the increase in salaries expenses resulting from an increase in our head count and the increase in land use tax and property tax paid by Cathay Jilin in the three months ended March 31, 2011.

        Government Grant Income.    Our government grant income decreased by 12.8% to RMB1.5 million (US$0.2 million) in the three months ended March 31, 2011 from RMB1.7 million in the same period in 2010. We received government grants totaling RMB74.0 million relating to our production facility in Shandong between November 2001 and July 2003, which we recognize as deferred government grant income and amortize RMB4.1 million annually over the average depreciation period of 18 years for the applicable production facility.

        Other Income (Expenses).    Our other income in the three months ended March 31, 2011 consisted of RMB0.2 million (US$0.03 million) in interest income, RMB2.7 million (US$0.4 million) in foreign currency exchange gains and RMB4.5 million (US$0.7 million) in gains on derivatives. Our other expenses in the three months ended March 31, 2011 consisted of RMB6.9 million (US$1.0 million) in interest expense. Our other income in the three months ended March 31, 2010 consisted of RMB0.2 million in interest income and RMB1.2 million in gains on derivatives, and other expenses in the three months ended March 31, 2010 consisted of a foreign currency exchange loss of RMB1.3 million. The increase in our gains on derivatives was primarily due to a gain on the revaluation of a derivative liability which increased from RMB0.3 million in the three months ended March 31, 2010 to RMB4.6 million in the three months ended March 31, 2011 as a result of reduced discount rate, reduced volatility and shortened expected term to an initial public offering event when the derivative is valued. We expect to incur an estimated additional non-cash expense charge of RMB1.1 million on derivatives in the three months ended June 30, 2011, resulting from the increase in, and a significantly smaller discount of, the fair value of our Series C share derivative. We used a significantly smaller discount rate because our board of directors concluded that, as of June 30, 2011, the probability that it would authorize an initial public offering at an offering price below the Series C Price increased. We received foreign currency exchange gains in the first quarter of 2011 primarily due to the trade receivables and cash denominated in Euros held by us while the Euro appreciated against the U.S. dollar by 6.0% in the three months ended March 31, 2011. In addition, we incurred foreign currency exchange gains related to Cathay Jilin's U.S. dollar borrowing from Cathay Biotech, as a result of the appreciation of the RMB against the U.S. dollar by 1.0% in the three months ended March 31, 2011. We incurred a foreign exchange loss in the three months ended March 31, 2010 due to the trade receivables and cash held by us denominated in Euros while the Euro depreciated against the U.S. dollar by 6.0% in the three months ended March 31, 2010.

        Income Tax Expense.    Our income tax expense increased to RMB2.7 million (US$0.4 million) in the three months ended March 31, 2011 from RMB2.4 million in the same period in 2010 primarily because Cathay Shandong was not granted Advanced and New Technology Enterprise status for 2011

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and calculated income tax at a 25% rate. Our effective income tax rates were 25% and negative 80% for the three months ended March 31, 2010 and 2011, respectively. Our negative effective income tax rate for the three months ended March 31, 2011 was primarily due to the different percentage of contribution from the operating results in the LCDA segment versus the biobutanol segment and in our different group companies. Our biobutanol segment incurred higher losses during the period with no deferred tax benefit recorded.

        Net Income.    Primarily as a result of the foregoing, we incurred a net loss of RMB6.0 million (US$0.9 million) for the three months ended March 31, 2011 as compared to a net income of RMB7.0 million for the three months ended March 31, 2010.

Comparison of the Years Ended December 31, 2010 and December 31, 2009

        Revenues.    Total revenues increased to RMB816.0 million (US$124.6 million) in 2010 from RMB296.8 million in 2009. Our LCDA revenue increased to RMB420.1 million (US$64.2 million) in 2010 from RMB271.9 million in 2009, primarily due to an increase in demand for our LCDAs driven by the recovery of global economic conditions, increased acceptance of our products by existing customers and increased sales into the adjacent market. Our revenue from biobutanol products increased to RMB385.5 million (US$58.9 million) in 2010 from RMB23.4 million in 2009, primarily due to an increase in the sales volume of our biobutanol products and its co-products and by-products, as we commenced demonstration operation of our biobutanol production facility in 2010.

        Cost of Revenues and Gross Profit.    Total cost of revenues increased to RMB758.0 million (US$115.8 million) in 2010 from RMB233.1 million in 2009. Our LCDA cost of revenues increased to RMB336.8 million (US$51.4 million) in 2010 from RMB210.3 million in 2009. This increase was primarily due to an increase in the sales volume of our LCDAs. Our LCDA sales volume increased to 11,354 metric tons in 2010 from 7,505 metric tons in 2009.

        Our cost of revenues for biobutanol products increased to RMB421.1 million (US$64.3 million) in 2010 from RMB22.6 million in 2009 when our biobutanol facility was in the construction and trial run period. This increase was primarily due to a substantial increase in the sales volume of our biobutanol products and its co-products and by-products as well as an increase in the cost. We sold 18,804 metric tons of biobutanol in 2010, compared to 1,290 metric tons in 2009. The unit cost of our biobutanol increased to approximately RMB11,000 per metric ton in 2010 from approximately RMB8,000 per metric ton in 2009, primarily due to (i) the RMB15.0 million in incremental depreciation cost in 2010 after Biobutanol Phase 1 plant and equipment started demonstration production from 2010, and (ii) an increase in corn prices by 23.2% from RMB1,517 per metric ton in 2009 to RMB1,869 per metric ton in 2010.

        Our gross profit decreased by 8.9% to RMB58.0 million (US$8.9 million) in 2010 from RMB63.6 million in 2009 while our gross margin decreased to 7.1% in 2010 from 21.4% in 2009 primarily because our revenue from biobutanol products, which had a lower gross margin, represented a higher percentage of our total revenues in 2010.

        Gross profit from the sale of our LCDAs amounted to RMB83.3 million (US$12.7 million), representing a gross margin of 19.8%, in 2010, compared to RMB61.5 million, representing a gross margin of 22.6%, in 2009. This reduction in gross margin for LCDA sales was primarily due to the increase in the cost of petroleum-based oil as discussed above and, to a lesser extent, due to a decrease in the average selling price of our LCDAs as reported in RMB. Our LCDA sales outside China were mainly made in Euros or U.S. dollars. Although the selling price of our LCDAs denominated in Euros or U.S. dollars remained stable between 2009 and 2010, the average selling price of LCDAs in RMB, our reporting currency, declined to RMB34,500 per metric ton in 2010 from RMB35,800 per metric ton in 2009, as a result of the appreciation of the RMB against the Euro and the U.S. dollar.

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        Gross loss from the sale of our biobutanol products amounted to RMB35.6 million (US$5.4 million), representing a gross margin of negative 9.2%, in 2010, compared to gross profit of RMB0.8 million, representing a gross margin of 3.3%, in 2009. The gross loss and reduction in gross margin for our biobutanol sales were primarily due to the increase in our cost of revenues as a result of the incremental depreciation cost and the increase of corn costs as discussed above. The reduction in gross margin was partly offset by an increase in the average selling price of biobutanol to approximately RMB10,270 per metric ton in 2010 from approximately RMB7,320 per metric ton in 2009, which corresponded to the increase in the price of butanol as a result of an increase in crude oil price during the same period.

        Operating Expenses.    Our operating expenses increased by 13.0% to RMB77.4 million (US$11.8 million) in 2010 from RMB68.5 million in 2009. Operating expenses as a percentage of our total revenues decreased to 9.5% in 2010 from 23.0% in 2009.

    Research and Development Expenses.  Our research and development expenses increased by 16.6% to RMB10.9 million (US$1.7 million) in 2010 from RMB9.3 million in 2009. This increase was primarily due to an increase in salaries and employee benefits and other costs as a result of increased research activities relating to the commercial production of biobutanol products and LCDA products.

    Sales and Marketing Expenses.  Our sales and marketing expenses increased by 13.9% to RMB15.9 million (US$2.4 million) in 2010 from RMB14.0 million in 2009. This increase was primarily related to the increase in shipping expenses as a result of increased sales of our LCDAs overseas in 2010.

    General and Administrative Expenses.  Our general and administrative expenses increased by 11.9% to RMB50.6 million (US$7.7 million) in 2010 from RMB45.2 million in 2009. This increase was primarily due to the increase in salaries and employee benefits paid to our management and supporting staff, as well as the exemption of a payment of land-use tax by the local government in 2009. This increase was also due to an increase in depreciation expenses relating to an office building completed in December 2009.

        Government Grant Income.    Our government grant income increased by 26.9% to RMB5.6 million in 2010 (US$0.9 million) from RMB4.4 million in 2009. We received government grants totaling RMB74.0 million relating to our production facility in Shandong between November 2001 and July 2003, which we recognize as deferred government grant income and amortize RMB4.1 million annually over the average depreciation period of 18 years for the applicable production facility. In 2010, we also received a local government grant of RMB1.4 million to offset the increased price of corn.

        Other Income (Expenses).    Our other operating income in 2010 consisted of RMB0.9 million (US$0.1 million) in interest income, RMB4.1 million (US$0.6 million) in foreign currency exchange gains and RMB4.4 million (US$0.7 million) in gain on derivatives. Cathay Jilin had a U.S. dollar denominated loan from us and, due to the appreciation of RMB against U.S. dollar in 2010, Cathay Jilin recognized a foreign exchange gain of approximately RMB4.2 million (US$0.6 million). Our other income in 2009 consisted of RMB1.1 million in interest income, and other expenses in 2009 consisted of RMB2.0 million in interest expenses incurred as a result of our bank borrowings in the same year, a foreign currency exchange loss of RMB5.0 million and a loss on derivatives of RMB1.6 million. Due to the suspension of construction of our biobutanol production facility in Jilin Province, we ceased interest capitalization until construction resumed in September 2009, and incurred interest expense of RMB2.0 million (incurred from January 2009 to September 2009) in other operating expenses. We had significant cash or receivables denominated in both Euros and U.S. dollars. Due to the depreciation of the Euro against the U.S. dollar and the depreciation of the U.S. dollar against the Renminbi, we incurred significant exchange losses in 2009.

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        Income Tax Expense.    Our income tax expense increased to RMB9.1 million (US$1.4 million) in 2010 from RMB4.2 million in 2009 primarily due to the higher taxes incurred by Cathay Shandong and Cathay Shandong Industrial in 2010, as a result of increased statutory income tax rates. At the same time, as we did not recognize deferred tax benefits related to our loss-making subsidiaries in the PRC, the change of deferred income tax assets between 2009 and 2010 were small.

        Net Loss.    As a result of the foregoing, we incurred a net loss of RMB13.6 million (US$2.1 million) in 2010 compared to a net loss of RMB12.2 million in 2009.

Comparison of the Years Ended December 31, 2009 and December 31, 2008

        Revenues.    Total revenues decreased by 21.6% to RMB296.8 million in 2009 from RMB378.7 million in 2008. Our LCDA revenue decreased to RMB271.8 million in 2009 from RMB328.0 million in 2008. This decrease was primarily due to the global financial crisis that occurred beginning in late 2008 which caused reduced demand for our LCDAs in 2009. We conducted trial production of biobutanol in 2008 and 2009. Our revenue from biobutanol products decreased to RMB23.4 million in 2009 from RMB50.4 million in 2008 primarily because we suspended the construction and trial production between October 2008 and August 2009 in response to the global financial crisis, and our sales volume decreased as a result.

        Cost of Revenues and Gross Profit.    Total cost of revenues decreased by 23.6% to RMB233.1 million in 2009 from RMB305.2 million in 2008, which was in line with the decrease in our revenues. Our LCDA cost of revenues decreased to RMB210.3 million in 2009 from RMB253.3 million in 2008, primarily due to a decrease in the sales volume of our LCDAs as well as a decrease in the unit cost. Our LCDA sales volume decreased to 7,505 metric tons in 2009 from 8,221 metric tons in 2008. The unit cost of our LCDAs decreased to approximately RMB28,000 per metric ton in 2009 from approximately RMB31,000 per metric ton in 2008, primarily due to a decrease in the unit cost of petroleum-based oil to approximately RMB7,300 per metric ton in 2009 from approximately RMB11,200 per metric ton in 2008 as a result of the significant decrease in petroleum prices caused by the global financial crisis that developed in the second half of 2008.

        Our biobutanol facility was in construction and trial production in 2008 and 2009. Our cost of revenues from biobutanol products produced during trial production decreased to RMB22.6 million in 2009 from RMB51.7 million in 2008, primarily due to a decrease in the sales volume of our biobutanol products as well as a decrease in the unit cost. We sold 1,290 metric tons of biobutanol in 2009, compared to 1,835 metric tons in 2008. The unit cost of our biobutanol decreased to approximately RMB8,000 per metric ton in 2009 from approximately RMB11,500 per metric ton in 2008, primarily because we improved the production yield in 2009 and reduced raw material waste, which was higher during our first test production in 2008 than in 2009.

        Our gross profit decreased by 13.4% to RMB63.6 million in 2009 from RMB73.5 million in 2008 while our gross margin increased to 21.4% in 2009 from 19.4% in 2008. The increase in gross margin was primarily due to an improvement in yields from our bioprocesses. Gross profit from the sale of our LCDAs amounted to RMB61.5 million, representing a gross margin of 22.6%, in 2009, compared to RMB74.7 million, representing a gross margin of 22.8%, in 2008. Our gross margins for LCDA sales remained stable between 2008 and 2009 primarily due to the combined effect of reduced unit cost of LCDAs as discussed above and a decrease of the average selling price of LCDAs as a result of the decrease in commodity market prices caused by the global financial crisis.

        Gross profit from the sale of our biobutanol products amounted to RMB0.8 million, representing a gross margin of 3.3%, in 2009, compared to gross loss of RMB1.3 million, representing a gross margin of negative 2.6%, in 2008. The gross loss and negative gross margin from the sale of our biobutanol products in 2008 resulted primarily from the raw material waste during the first round of test

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production. As we improved our bioprocesses and production yield, our gross profit and gross margin for biobutanol sales improved in 2009.

        Operating Expenses.    Our operating expenses decreased by 20.5% to RMB68.5 million in 2009 from RMB86.2 million in 2008. Operating expenses as a percentage of our total revenues increased to 23.0% in 2009 from 22.7% in 2008.

    Research and Development Expenses.  Our research and development expenses decreased by 23.2% to RMB9.3 million in 2009 from RMB12.1 million in 2008. This decrease was primarily due to a decrease in salaries and employee benefits resulting from reduced headcount in 2009 in response to the global financial crisis.

    Sales and Marketing Expenses.  Our sales and marketing expenses decreased by 39.7% to RMB14.0 million in 2009 from RMB23.2 million in 2008. This decrease was primarily due to a significant decrease in shipping expenses as a result of the decrease in export sales of our LCDAs.

    General and Administrative Expenses.  Our general and administrative expenses decreased by 11.2% to RMB45.2 million in 2009 from RMB50.9 million in 2008. This decrease was primarily due to decreased salaries and employee benefits resulting from reduced headcount in 2009 in response to the global financial crisis. Other corporate expenses also decreased in 2009 as a result of our tighter control on expenditures.

        Government Grant Income.    Our government grant income in 2009 decreased by 56.3% to RMB4.4 million in 2009 from RMB10.0 million in 2008. This decrease was primarily due to government grants in 2008 totaling RMB5.9 million for our contributions to the local community. We did not receive such grants in 2009. We received government grants totaling RMB74.0 million relating to our production facility in Shandong Province between November 2001 and July 2003, which we recognize as deferred government grant income and amortize RMB4.1 million annually over the average depreciation period of 18 years for this production facility.

        Other Income (Expenses).    Our other income in 2009 consisted of RMB1.1 million in interest income and other expenses consisted of RMB2.0 million in interest expense, RMB5.0 million in foreign currency exchange losses and losses on derivatives of RMB1.6 million. Other income in 2008 consisted of RMB11.9 million in interest income, while other expenses consisted of RMB1.5 million in interest expenses, RMB9.7 million in foreign currency exchange losses and RMB15.5 million as a result of losses on foreign exchange derivatives. The decrease in interest income in 2009 was primarily due to the decrease of our average cash balance as a result of the repurchase of our Series C convertible preferred shares in late 2008. The slight increase in interest expense in 2009 was primarily due to the increase in our long-term bank borrowings. We incurred significant foreign exchange losses in 2008 due to the depreciation of U.S. dollar against Renminbi in 2008. Our foreign exchange losses decreased in 2009 primarily due to a decrease in the amount of U.S. dollar denominated cash and cash equivalents that we held. In addition, in 2008 we also incurred a loss on a foreign exchange forward contracts and a loss from the revaluation of a derivative of RMB11.9 million and RMB3.6 million, respectively.

        Income Tax Expense.    We had an income tax expense of RMB4.2 million in 2009 as compared to an income tax benefit of RMB6.8 million in 2008. We recognized an income tax benefit in 2008 primarily due to the release of a valuation allowance of RMB12.3 million related to Cathay Shandong Industrial as it changed to an accumulated profits position in 2008.

        Net Loss.    As a result of the foregoing, we had a net loss of RMB12.2 million in 2009 compared to a net loss of RMB10.9 million in 2008.

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Liquidity and Capital Resources

        To date, we have financed our operations primarily through cash flows from operations, short-term and long-term bank borrowings and equity contributions from our shareholders. Our cash and cash equivalents primarily consist of cash on hand and highly liquid investments with a maturity of three months or less.

        As of December 31, 2010 and March 31, 2011, we had short-term bank borrowings from various commercial banks in China with an aggregate outstanding balance of RMB150.0 million (US$22.9 million), bearing an average interest rate of 5.73% and 6.12% per annum, respectively. These short-term bank borrowings have terms of up to one year and expire at various times throughout the year.

        We obtained a long-term credit facility of RMB300.0 million from a commercial bank in China in August 2009, and the aggregate outstanding balance of our long-term bank borrowings was RMB200.0 million as of December 31, 2009 and RMB300.0 million (US$45.8 million) as of December 31, 2010 and March 31, 2011. Our long-term bank borrowings will become due in August 2014 and carry variable interest rates, which equal the prevailing base lending rate published by the People's Bank of China. The effective interest rate of our long-term bank borrowings was 5.76% as of December 31, 2010 and 6.22% as of March 31, 2011. Our long-term bank borrowings are guaranteed by Cathay Shandong and Cathay Shandong Industrial and are secured by Cathay Jilin's land-use right, plant and buildings and equipment.

        We believe that our current levels of cash and cash equivalents and cash flows from operations, together with proceeds from this initial public offering, will be sufficient to fund our operations and planned expansions, including expanding production capacities, strengthening our research and development capability, expanding our sales and marketing efforts and general working capital needs, for at least the next 12 months following this offering. However, we may need additional cash resources in the future if we experience changed business conditions or other developments or if we decide to pursue opportunities for investment, acquisition, strategic cooperation or other similar actions. If we determine that our cash requirements exceed our amounts of cash and cash equivalents on hand, we may seek to issue equity or equity-linked securities or obtain a credit facility. Recent measures taken by the PBOC to tighten the supply of credit have made it more difficult for us to obtain bank financing for our expansion plans. See "Risk Factors—Risks Related to Our Company and Our Industry—Our future liquidity needs are uncertain and we may need to raise additional funds in the future." Any issuance of equity or equity-linked securities could cause dilution for our shareholders. Any incurrence of indebtedness could increase our debt service obligations and cause us to be subject to restrictive operating and finance covenants. It is possible that, when we need additional cash resources, financing will only be available to us in amounts or on terms that would not be acceptable to us or financing will not be available at all. The unavailability of bank financing or a prolonged delay in obtaining bank financing, if not compensated by a capital injection, may adversely affect our expansion plans and have an adverse impact on our results of operations.

        The following table sets forth a summary of our net cash flows for the periods indicated:

 
  Year Ended December 31,   Three Months Ended March 31,  
 
  2008   2009   2010   2011  
 
  RMB
  RMB
  RMB
  US$
  RMB
  US$
 
 
  (in thousands)
 

Net cash (used in) provided by operating activities

    (36,971 )   45,135     7,695     1,175     (47,887 )   (7,313 )

Net cash used in investing activities

    (602,605 )   (118,108 )   (171,394 )