·	vulnerability of our business to general economic downturn;

·	operating in the PRC generally and the potential for changes in the laws of the PRC that affect our operations;

·	our failure to meet or timely meet contractual performance standards and schedules;

·	our dependence on the steel and iron markets;

·	exposure to product liability and defect claims;

·	our ability to obtain all necessary government certifications and/or licenses to conduct our business;

·	the cost of complying with current and future governmental regulations and the impact of any changes in the regulations on our operations; and

·	the other factors referenced in this report.

1)	Our board of directors and audit committee have not yet taken an active role in the oversight of our policies and procedures.

2)

The current staff in the accounting department is relatively new and inexperienced, and needs substantial training due to staff turnover, organizational changes, and the higher demands of being a U.S. public company. The accounting skills and understanding necessary to fulfill the requirements of U.S. GAAP-based reporting, including the skills of subsidiary financial statements consolidation, are inadequate.

3)	Our internal audit team is currently understaffed. In addition, the scope and effectiveness of the internal audit function have yet to be developed.

4)

The Company does not have an organization level information system. The major system of record is the K/3 ERP (Version10), the middle range enterprise resource planning package developed by Kingdee International Software Group Co., Ltd. Although capable of supporting other operational functions, K/3 is only deployed as an accounting back office application.

5)

There is a lack of integration and automation for data entry in our accounting software. Lack of integration in this key area has potentially problematic implications. The manual data entry procedures do not include critical accounting checks and balances, such as control totals and batch numbers, and are subject to clerical errors. There are currently no mechanisms in the workflows for verifying and monitoring the completeness and accuracy of the data inputted.

6)

Costing journal entries are supported by an Excel worksheet prepared and adjusted based on the monthly master work-in-progress detail report by job. There is a lack of an audit trail or documentation to show the reasons and sources for the adjustments made on the worksheets. This supporting Excel worksheet is not printed out and attached to the journal entry vouchers. Proper review and authorization of the worksheet and the entries are not evidenced.

7)	The costing module of our accounting software has been customized, but the functionality of the customizations is rudimentary and unrefined, such that the system cannot fulfill the intended purposes, and therefore, requires alternative, manual solutions.

8)

There are insufficient policies and procedures for the development, modification, and use of computer programs and data files. We do not have comprehensive management policies and procedures for critical applications and systems. We have outsourced support for our accounting software. In addition, application and database servers are located in a semi-public area of our corporate offices. Therefore, there are security and information integrity risks associated with our use of accounting software.

9)	The accounting department does not maintain hard copy printouts of the general ledgers, sub-ledgers, and supporting worksheets. Many electronic source documents and worksheets are stored in the staff’s local computers in a disorganized manner.