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EX-23.1 - CONSENT OF MALONE BAILEY LLP - AJ Acquisition Corp. V, Inc.fs12011ex23i_chinaalumn.htm
 
As filed with the Securities and Exchange Commission on March 18, 2011
Registration No. 333-____


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

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

 
China Aluminum Foil, Inc.
(Exact name of registrant as specified in its charter)

Nevada
 
000-53890
 
27-1805188
(State or other jurisdiction of
incorporation or organization)
 
(Primary Standard Industrial
Classification Code Number)
 
(I.R.S. Employer
Identification No.)
 

 
Building No. 35, No. 1 Cui Zhu Street, High-tech Development Area,
Zhengzhou City, Henan Province, China
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)
 

 
CSC Services of Nevada, Inc.
2215 B. Renaissance Drive
Las Vegas, NV 89119
(800)927-9800
 (Name, address, including zip code, and telephone number, including area code, of agent for service)
 

 
It is respectfully requested that the Securities and Exchange Commission send copies of all notices, orders and communications to:

William N. Haddad
DLA Piper LLP (US)
1251 Avenue of the Americas
New York, NY  10020
Tel: (212) 335-4500
Fax: (212) 335-4501
 
Approximate date of commencement of proposed sale to public:  as soon as practicable after this Registration Statement is declared effective.
 
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. x
 
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 registration statement for the same offering.  o
 
 
 
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier registration statement for the same offering.  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer o
 
   Accelerated filer o
 
Non-accelerated filer  o
 
    Smaller reporting company  x
(Do not check if a smaller reporting company)
 
 CALCULATION OF REGISTRATION FEE
 
Title of Each Class of
Securities to be Registered
 
Amount
to be Registered
 
Proposed Maximum Offering
Price per Security(1)
   
Proposed Maximum Aggregate
Offering Price(1)
   
Amount of
Registration
Fee
 
Common Stock
 
10,100,000  Shares
  $ 2.00     $ 20,200,000     $ 2,346  
                             
Total
              $ 20,200,000     $ 2,346  
 
(1)           Estimated solely for the purpose of calculating the registration fee.
 
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.
 
 
 
 
  SUBJECT TO COMPLETION, DATED MARCH ___, 2011
 
The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
 
 PROSPECTUS

 10,100,000 Shares
 
 China Aluminum Foil, Inc.
 
 Common Stock 

 
This prospectus relates to the resale, by the selling shareholders identified in this prospectus, of up to 10,100,000 shares of our common stock issued or issuable to the selling shareholders.
 
We will not receive any proceeds from the sale by the selling shareholders of these shares.  We are paying the cost of registering the shares covered by this prospectus as well as various related expenses.  The selling shareholders are responsible for all discounts, selling commission and other costs related to the offer and sale of their shares.  If required, the number of shares to be sold, the public offering price of those shares, the names of any broker-deals and any applicable commission or discount will be included in a supplement to this prospectus, called a prospectus supplement.
 
The selling shareholders and any participating broker-dealers may be deemed to be “underwriters” within the meaning of the Securities Act of 1933, as amended, or the Securities Act, in connection with such sales.  In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the share purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.
 
Our common stock is not traded on any exchange. We intend to engage a market maker to apply to have our common stock quoted on the OTC Bulletin Board once our shareholders have free trading shares; however, there is no guarantee that we will obtain a listing.
 
Investing in our common stock is highly speculative and involves a high degree of risk. You should consider carefully the risks and uncertainties in the section entitled “Risk Factors” beginning on page 6 of this prospectus.
 
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
 
The date of this prospectus is [____________], 2011.
 
 
 
 
1
4
4
6
12
12
12
13
13
22
32
35
36
37
38
40
41
42
42
42
43
43
                INDEX TO FINANCIAL STATEMENTS
 
F-1
II-1
II-1
II-5
II-5
   
 
 
 

 
Unless the context otherwise requires, the terms “we,” “us,” “our,” “China Aluminum,” and “the Company” refer to China Aluminum Foil, Inc., a Nevada corporation, and its consolidated subsidiaries.  References to “dollars” and “$” are to United States dollars. Any logos or trademarks mentioned in this prospectus are the property of their respective owners.
 
You may rely only on the information contained in this prospectus. We have not authorized anyone to provide information or to make representations not contained in this prospectus. This prospectus is neither an offer to sell nor a solicitation of an offer to buy any securities other than those registered by this prospectus, nor is it an offer to sell or a solicitation of an offer to buy securities where an offer or solicitation would be unlawful. Neither the delivery of this prospectus, nor any sale made under this prospectus, means that the information contained in this prospectus is correct as of any time after the date of this prospectus.
 

 
 
 
 
This summary highlights selected information from this prospectus and the documents incorporated by reference into this prospectus. This summary may not contain all of the information that may be important to you. Please carefully read the entire prospectus, including the information under the heading “Risk Factors” and our financial statements and the related notes incorporated by reference into this prospectus, before making an investment decision.
 
Overview
 
We were incorporated in the State of Nevada on January 29, 2010 as AJ Acquisition V, Inc. Since inception we have been engaged in organizational efforts and obtaining initial financing. Our business purpose was to seek the acquisition of or merger with, an existing company.  On November 8, 2010 we filed an amendment to our articles of incorporation to change our name to China Aluminum Foil, Inc., and on November 8, 2010 we entered into, and closed, a share exchange agreement with Lucky Express, now our wholly owned subsidiary.
 
Current Business
 
Upon acquiring Lucky Express pursuant to the share exchange, we adopted the business of Lucky Express.  We are mainly engaged in the development, production and distribution of various aluminum foils to domestic and overseas markets. Our aluminum foil products can be widely used in multiple industries for different purposes. Currently a majority of our products are used for household daily consumption and container production. However, we intend to expand into other high potential business segments, such as cigarette packaging, pharmaceutical packaging and electronic components.
 
We have one production line with an annual capacity of approximately 20,000 metric tons. We plan to build or rent another production line to expand our capacity. Due to long-term efforts to streamline production process and reduce wastage and pollution during production, we were recognized as one of the “High Tech New Star Enterprises” in Henan province. We are also recognized for our strong R&D capabilities in the aluminum foil industry in central China.
 
Principal Products
 
Aluminum foil is a paper-thin sheet of rolled aluminum that can be torn easily and used to wrap and store food, in art, decoration, insulation and in heat exchangers. Because aluminum foil is paper-thin, the foil is extremely pliable and can be bent or wrapped around objects with ease. In North America, aluminum foil is sometimes alternatively called al-foil or alu-foil.
 
We develop and manufacture various types of aluminum foils. The production of aluminum foil involves a complex production process and requires advanced technology and equipment.  The principal products made by company ranges from 0.005mm to 0.08mm in thickness.  We purchase raw aluminum with thickness of 0.3mm and produce different types of aluminum foil by rolling process. Currently our products mainly fall into two product segments: aluminum foil used by households for daily consumption and aluminum foil used for the production of containers such as meal boxes, cake cups, as well as many other applications.
 
Our Strengths:
 
Superior  Quality of Aluminum Foil
 
We produce a superior quality of aluminum foil.  The quality of our products has consistently been rateed the highest among aluminum foil customers in China.
 
 
 
Large and Diverse Customer Base Across Several Markets and Industries
 
Our products are in demand in a broad range of markets and industries. We believe this insulates us from any concentration risk or dependence on a certain industry.  A downturn in one industry may be made up for by increased demand in another industry which purchases our products. We sell our products to various industries, including, the appliance, manufacturing, telecommunications, food packaging industries.
 
Our Cost Structure is Lower than the Average Cost Structure of our Competitors
 
Our location, method of manufacture and our transportation costs allow us to maintain a cost structure which is lower than the average cost structure of our competitors. All of our manufacturing equipment is made in China with close collaboration with the equipment supplier which allows us to manufacture our products at a low cost. In addition, we are located in Zhengzhou, Henan Province, China which has one of the largest bauxite ore reserves in China, allowing us to transport products and supplies cost efficiently. We transport materials and products directly from the production facilities of a nearby company which allows us to limit our transportation costs.
 
Proven Track Record of Growth
 
We have had very strong annual growth of 158.8% through our first two years of operation and production of aluminum foil.  We have a strategic plan which we believe will allow us to continue this growth by expanding our production capacity and introducing higher margin products.
 
Superior Technology and a Highly Efficient Manufacturing Process
 
We have superior technology due to a license agreement which allows us to license 9 patents from an affiliate of ours.  We have developed a highly efficient manufacturing process through close collaboration with our equipment supplier pursuant to which we have been able to lower our cost and improve our yield.
 
An Experienced and Dedicated Management Team
 
Our management team members have an average of greater than 20 years of experience in the aluminum industry, and our management team has more than 100 years of experience in the aluminum industry.
 
Growth Strategy:
 
We intend to pursue the following strategies to achieve our goal:
 
Continue to Increase Our Production Capacity
 
We will continue to expand into new production lines and increase our production capacity of ultra-thin aluminum foil which is used in pharmaceutical and electronic industries. We plan to install a 1600mm cold-rolling production line that we expect will increase capacity by approximately 15,000 metric tons, or 75% more than our  2010 capacity.
 
Further Increase our Market Share and Economies of Scale
 
We will expand our market share and customer base by expanding and improving our product quality and lowering production and sales cost which will allow us to increasingly capitalize on economies of scale.
 

 
Introduce New Products with Higher Margins
 
We plan to begin production of aluminum foil products used in pharmaceutical packaging and electronic components since such products have much high margins and offer significant growth opportunities.
 
Expand our Product Offerings in Emerging Markets
 
We intend to increase revenues by exporting our products to emerging markets including but not limited to Southeast Asia, Africa and Latin America.
 
Continue to Enhance Manufacturing Efficiencies
 
We will focus our research and development on advanced processing techniques to develop more sophisticated products that command higher margins, and we will continue to improve margins through increased efficiencies in our production process.
 
Our Corporate Information
 
We were incorporated in the State of Nevada on January 29, 2010 as AJ Acquisition V, Inc. Since inception we have been engaged in organizational efforts and obtaining initial financing. Our business purpose was to seek the acquisition of or merger with, an existing company.  On November 8, 2010 we filed an amendment to our articles of incorporation to change our name to China Aluminum Foil, Inc., and on November 8, 2010 we entered into, and closed, a share exchange agreement with Lucky Express, now our wholly owned subsidiary.  
 
Our principal offices are located at Building No.35, No.1 Cui Zhu Street, High-tech Development Area, Zhengzhou City, Henan Province, China.  Our telephone number is (86) 371-67539696.  Our fiscal year end is June 30.
 
 
 
-3-

 
 
Common stock outstanding before the offering
 
10,201,011 shares as of March 18, 2011.
   
Common stock offered by selling shareholders
 
Consists of up to 10,100,000 shares of our common stock issued or issuable to the selling shareholders
   
Common stock to be outstanding after the offering
 
 10,201,011 shares.
   
Use of proceeds
 
We will not receive any proceeds from the sale of the common stock hereunder. See “Use of Proceeds” for a complete description.
   
Ticker Symbol
 
Our common stock is not traded on any exchange. We intend to engage a market maker to apply to have our common stock quoted on the OTC Bulletin Board once our shareholders have free trading shares; however, there is no guarantee that we will obtain a listing.
 
   
Risk Factors
 
Please read the section entitled “Risk Factors” beginning on page 6 of this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our common stock.
 
 
The following income statement data for the six months ended December 31, 2010 and December 31, 2009  and balance sheet data as of December 31, 2010 were derived from our unaudited consolidated financial statements included elsewhere in this prospectus. The income statement data for the years ended June 30, 2010 and June 30, 2009 were derived from our audited consolidated financial statements included elsewhere in this prospectus. These historical results are not necessarily indicative of results to be expected in any future period. You should read the following summary financial information together with the other information contained in this prospectus, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and related notes included elsewhere.
 
 
 
STATEMENT OF INCOME DATA
(In thousands except per share data) 
 
   
Twelve Months Ended
   
Six Months Ended
 
   
June 30, 2010
   
June 30, 2009
   
December 31, 2010
   
December 31, 2009
 
               
(Unaudited)
   
(Unaudited)
 
Sales revenue
 
$
44,134
   
$
17,053
   
$
37,445
   
$
18,314
 
Cost of goods sold
   
42,001
     
18,002
     
36,233
     
16,934
 
Gross Profit
   
2,133
     
(949
   
1,212
     
1,380
 
                                 
Operating expenses
                               
  Selling expenses
   
397
     
150
     
66
     
223
 
  General and administrative expenses
   
576
     
330
     
192
     
267
 
Total operating expenses 
   
973
     
480
     
258
     
490
 
                                 
Income (loss) from operations
   
1,160
     
(1,429
   
954
     
890
 
  Interest income
   
1
     
1
     
1
     
-
 
  Bank Charge
   
(5
)
   
(1
)
   
(1
)
   
(1
)
                                 
Income (loss) before income tax
   
1,156
     
(1,429
   
954
     
889
 
                                 
  Current Income Tax Expense
   
-
     
-
     
261
     
-
 
  Deferred Income Tax Benefit
   
-
     
-
     
(234
)
   
-
 
                                 
Net Income (Loss)
 
$
1,156
   
$
(1,429
 
$
927
   
$
889
 
                                 
Other comprehensive income
                               
  Foreign currency translation adjustments
   
15
     
9
     
527
     
262
 
Total Comprehensive Income (Loss)
 
$
1,171
   
$
(1,420
 
$
1,454
   
$
1,151
 
                                 
                                 
Earnings (loss)per share - basic and diluted
   
11.56
     
(14.29
   
0.31
     
8.89
 
Weighted average shares outstanding - basic and diluted
   
100
     
100
     
3,035
     
100
 

   
At June 30,
   
At December 31,
 
 BALANCE SHEET DATA
 
2010
   
2009
   
2010
 
  (In thousands)
             
(Unaudited)
 
Working capital (deficiency)
                 
Total assets
 
$
16,133
   
$
7,877
   
$
     13,495
 
Short-term debt
   
-
     
-
     
-
 
Long-term debt (including current portion)
   
-
     
-
     
-
 
Total deferred credits and other liabilities
   
8,580
     
1,653
     
4,229
 
Stockholders' equity
   
7,553
     
6,224
     
        9,267
 



 
 
Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors and all other information contained in this prospectus before purchasing our common stock. If any of the following events were to occur, our business, financial condition or results of operations could be materially and adversely affected. In these circumstances, the market price of our common stock could decline, and you could lose some or all of your investment. Additional risks and uncertainties not currently known to us or that we currently believe to be immaterial could also materially and adversely affect our business, financial condition, operating results and/or cash flow.
 
We expect to incur costs related to our planned acquisitions and expansion into new plants and ventures, which may not prove to be profitable. Moreover, any delays in our expansion plans could cause our profits to decline and jeopardize our business.
 
We anticipate that our proposed expansion of our production facilities may include the acquisition and construction of new or additional facilities. Our cost estimates and projected completion dates for construction of new production facilities may change significantly as the projects progress. In addition, our projects will entail significant construction risks, including shortages of materials or skilled labor, unforeseen environmental or engineering problems, weather interferences and unanticipated cost increases, any of which could have a material adverse effect on the projects and could delay their scheduled openings. A delay in scheduled openings of production facilities will delay our receipt of sales revenues from such facilities, which, when coupled with the increased costs and expenses of our expansion, could cause a decline in our profits.
 
Our plans to finance, develop, and expand our production facilities will be subject to many risks inherent in the rapid expansion of a high growth business enterprise, including unanticipated design, construction, regulatory and operating problems, and the significant risks commonly associated with implementing a marketing strategy in changing and expanding markets. These projects may not become operational within their estimated time frames and budgets as projected at the time we enter into a particular agreement, or at all. In addition, we may develop projects as joint ventures in an effort to reduce our financial commitment to individual projects. The significant expenditures required to expand our production plants may not ultimately result in increased profits.
 
When our future expansion projects become operational, we will be required to add and train personnel, expand our management information systems and control expenses. If we do not successfully address our increased management needs or are otherwise unable to manage our growth effectively, our operating results could be materially and adversely affected.
 
Our products may not achieve market acceptance.
 
We are currently selling our products principally in Eastern, Central and Southern China.  Achieving market acceptance for our products, particularly in new markets, will require substantial marketing efforts and the expenditure of significant funds.  There is substantial risk that any new markets may not accept or be as receptive to our products.  In addition, we intend to market our products as premium and super-premium quality products and to adopt a corresponding pricing model, which may not be accepted in new or existing markets.  Market acceptance of our current and proposed products will depend, in large part, upon our ability to inform potential customers that the distinctive characteristics of our products make them superior to competitive products and justify their pricing.  Our current and proposed products may not be accepted by consumers or able to compete effectively against other premium or non-premium products. Lack of market acceptance would limit our revenues and profitability.
 
The recent global economic and financial market crisis could significantly impact our financial condition.
 
Current global economic conditions could have a negative effect on our business and results of operations. Economic activity in China, United States and throughout much of the world has undergone a sudden, sharp economic downturn following the recent housing downturn and subprime lending collapse in both the United States and Europe.  Market disruptions have included extreme volatility in securities prices, as well as severely diminished liquidity and credit availability.  The economic crisis may adversely affect us in a variety of ways. Access to lines of credit or the capital markets may be severely restricted, which may preclude us from raising funds required for operations and to fund continued expansion.  It may be more difficult for us to complete strategic transactions with third parties. The financial and credit market turmoil could also negatively impact our suppliers and customers, which could decrease our ability to source, produce and distribute our products and could decrease demand for our products. While it is not possible to predict with certainty the duration or severity of the current disruption in financial and credit markets, if economic conditions continue to worsen, it is possible these factors could significantly impact our financial condition.
 
 
 
Our results of operations may be affected by fluctuations in availability and price of raw materials.
 
The raw materials we use are subject to price fluctuations due to various factors beyond our control, including, among other pertinent factors:
 
·  
increasing market demand;
 
·  
inflation;
 
·  
severe climatic and environmental conditions;
 
·  
commodity price fluctuations;
 
·  
currency fluctuations; and
 
·  
changes in governmental and agricultural regulations and programs.
 
For example, our raw material cost increased by approximately 20% in 2010 due to various factors, including, we believe, general economic conditions, such as inflation and fuel prices, and rising production costs.  We also expect that our raw material prices will continue to fluctuate and be affected by these factors in the future. Changes to our raw materials prices may result in increases in production and packaging costs, and we may be unable to raise the prices of our products to offset such increases in the short term or at all. As a result, our results of operations may be materially and adversely affected.
 
We are subject to public company reporting and other requirements for which we will incur substantial costs and our accounting and other management systems and resources may not be adequately prepared.
 
We incur significant legal, accounting, insurance and other expenses as a result of being a public company.  For example, laws and regulations affecting public companies, including the provisions of the Sarbanes-Oxley Act of 2002, or SOX, and rules related to corporate governance and other matters subsequently adopted by the U.S. Securities and Exchange Commission, or the SEC, result in substantial costs to us, including legal and accounting costs, and may divert our management’s attention from other matters that are important to our business.  Compliance with Section 404 of SOX requires that our management annually assess the effectiveness of our internal control over financial reporting.  
 
 A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the registrant’s annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls.  A “significant deficiency” is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the registrant’s financial reporting.  A “deficiency” in internal control over financial reporting exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis.  
 
We significantly depend on our management team.
 
Chuahong Xie, our executive officers is responsible for an important aspect of our operations.  In addition, we rely on management and senior personnel to ensure that our sourcing, production, sales, distribution and other business functions are effective.  Losing the services of our executive officers or key personnel could be detrimental to our operations.  We do not have key-man life insurance for any of our executive officers or other employees.
 
 
 
Investors may not be able to enforce judgments entered by United States courts against certain of our officers and directors.
 
We are incorporated in the State of Nevada.  However, a majority of our directors and executive officers, and certain of our principal shareholders, live outside of the U.S., principally in China. As a result, you may not be able to effect service of process upon those persons within the U.S. or enforce against those persons judgments obtained in U.S. courts.
 
We face substantial competition in connection with the marketing and sale of our products.
 
Our products compete with other premium quality brands as well as less expensive, non-premium brands. Our products face competition from non-premium producers distributing in our marketing area and other producers packaging their products in our marketing area. Many of our competitors are well established, have greater financial, marketing, personnel and other resources, have more established distribution channels into major markets, and have products that have gained wide customer acceptance in the marketplace. Our largest competitors are multinational companies and companies owned by the government of China.  The greater financial resources of such competitors will permit them to procure a large amount of raw material at a volume discount and to implement extensive marketing  and promotional programs, both generally and in direct response to advertising efforts by us. The aluminum foil industry in China is also characterized by the introduction of new products, accompanied by substantial promotional campaigns. We may be unable to compete successfully or our competitors may develop products which have superior qualities or gain wider market acceptance than ours.
 
Doing business in China involves various political and economic risks.
 
We conduct substantially all of our operations and generate significant amount of our revenue in China. Accordingly, our business, financial condition, results of operations and prospects are affected significantly by economic, political and legal developments in China. China’s economy differs from the economies of most developed countries in many respects, including:
 
·  
the higher level of government involvement and regulation;
 
·  
the early stage of development of the market-oriented sector of the economy;
 
·  
the rapid growth rate;
 
·  
the higher level of control over foreign exchange; and
 
·  
government control over the allocation of many resources.
 
As China’s economy has been transitioning from a planned economy to a more market-oriented economy, the government of China has implemented various measures to encourage economic growth and guide the allocation of resources. While these measures may benefit the overall economy of China, they may also have a negative effect on us.
 
Although the government of China has in recent years implemented measures emphasizing the utilization of market forces for economic reform, the PRC government continues to exercise significant control over economic growth in China through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and imposing policies that impact particular industries or companies in different ways.  Any adverse change in the economic conditions or government conditions or government policies in China could have a material adverse effect on the overall economic growth and the level of consumer spending in China, which in turn could lead to a reduction in demand for our products and consequently have a material adverse effect on our business and prospects.
 
Extensive regulation of our industry in China could increase our expenses resulting in reduced profits.
 
We are subject to extensive regulation by China’s National Development and Reform Committee Ministry, and by other provincial and local authorities in jurisdictions in which our products are processed or sold, regarding the processing, packaging, storage, distribution and labeling of our products.  Other applicable laws and regulations governing our products may include nutritional labeling and serving size requirements. Our processing facilities and products are subject to periodic inspection by national, provincial and local authorities. We believe that we are currently in substantial compliance with all material governmental laws and regulations and maintain all material permits and licenses relating to our operations. Nevertheless, we may fall out of substantial compliance with current laws and regulations or may be unable to comply with any future laws and regulations. To the extent that new regulations are adopted, we will be required, possibly at considerable expense, to adjust our activities in order to comply with such regulations. Our failure to comply with applicable laws and regulations could subject us to civil remedies, including fines, injunctions, recalls or seizures, as well as potential criminal sanctions, which could have a material adverse effect on our business, operations and finances.
 
 
 
 
Regulations affecting acquisitions of PRC companies by foreign entities may make it more difficult for us to complete acquisitions and grow our business.
 
In 2005, the PRC State Administration of Foreign Exchange, or SAFE, issued a public notice, known as “Circular 75,” concerning the application of foreign exchange regulations to mergers and acquisitions involving foreign investment in China.  Among other things, the public notice provides that if an offshore company controlled by PRC residents intends to acquire a PRC company, such acquisition will be subject to strict examination by the relevant foreign exchange authorities.  Under Circular 75, if an acquisition of a PRC company by an offshore company controlled by PRC residents occurred prior to the issuance of Circular 75, certain PRC residents were required to submit a registration form to the local SAFE branch to register their ownership interests in the offshore company before March 31, 2006.  Such PRC residents must also amend the registration form if there is a material event affecting the offshore company, such as, among other things, a change to the company’s share capital, a transfer of shares, or if the company is involved in a merger, an acquisition or a spin-off transaction or uses its assets in China to guarantee offshore obligations.
 
As there is still significant uncertainty in China regarding the interpretation and implementation of Circular 75, we cannot predict how these regulations will affect our future acquisition strategy and business operations. For example, if we decide to acquire additional PRC companies, we or the owners of such companies may not be able to complete the filings and registrations, if any, required by the SAFE notices. This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects.
 
In addition, in 2006 six PRC regulatory authorities, including the PRC Ministry of Commerce and the PRC Securities Regulatory Commission, jointly promulgated a rule entitled “Provisions regarding Mergers and Acquisitions of Domestic Enterprises by Foreign Investors,” or the New M&A Rules. The New M&A Rules establish additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex, including, in some circumstances, advance notice to the Ministry of Commerce of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise. Compliance with the New M&A Rules, and any related approval processes, including obtaining approval from the Ministry of Commerce, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.
 
The PRC government’s recent measures to curb inflation rates could adversely affect future results of operations.
 
China has faced rising inflation in recent years. The government of China undertook various measures to alleviate the effects of inflation, especially with respect to key commodities.  In January 2008, the PRC National Development and Reform Commission announced national price controls on various products.  Similarly, the government of China may conclude that the prices of our products are too high and may institute price controls that would limit our ability to set prices for our products as we might wish.  The government of China has also encouraged local governments to institute price controls on similar products.  Such price controls could adversely affect our future results of operations and, accordingly, the price of our common stock.
 
The PRC currency is not a freely convertible currency, which could limit our ability to obtain sufficient foreign currency to support our business operations in the future.
 
The PRC currency, the “Renminbi” or “RMB,” is not freely convertible into other foreign currencies, and we receive substantially all of our revenues in Renminbi. We rely on the PRC government’s foreign currency conversion policies, which may change at any time, in regard to our currency exchange needs. In China, the government has control over Renminbi reserves through, among other things, direct regulation of the conversion of Renminbi into other foreign currencies and restrictions on foreign imports. Although foreign currencies that are required for current account transactions can be bought freely at authorized PRC banks, the proper procedural requirements prescribed by PRC law must be met. At the same time, PRC companies are also required to sell their foreign exchange earnings to authorized PRC banks and the purchase of foreign currencies for capital account transactions still requires prior approval of the PRC government. This substantial regulation by the PRC government of foreign currency exchange may restrict our business operations and a change in any of these government policies could negatively impact our operations, which could result in a loss of profits.
 
 
 
In order for our China subsidiaries to pay dividends to us, a conversion of Renminbi into U.S. dollars is required, which, if not permitted by the PRC government, would interrupt our cash flows. Under current PRC law, the conversion of Renminbi into foreign currency for capital account transactions generally requires approval from SAFE and, in some cases, other government agencies. Government authorities may impose restrictions that could have a negative impact in the future on the conversion process and upon our ability to meet our cash needs and to pay dividends to our shareholders. Although our subsidiaries’ classification as wholly foreign-owned enterprises, or WFOEs, under PRC law permits them to declare dividends and repatriate their funds to us in the United States, any change in this status or the regulations permitting such repatriation could prevent them from doing so.  Any inability to repatriate funds to us would in turn prevent us from utilizing our PRC cash to pay creditors in U.S. dollars or other currencies or to pay dividends to our shareholders.
 
Fluctuations in the exchange rate between the PRC currency and the U.S. dollar could adversely affect our operating results.
 
The functional currency of our operations in China is the Renminbi. However, results of our operations are translated at average exchange rates into U.S. dollars for purposes of reporting results. As a result, fluctuations in exchange rates may adversely affect our expenses and results of operations as well as the value of our assets and liabilities. Fluctuations may adversely affect the comparability of period-to-period results. We do not currently use hedging techniques, and any hedging techniques we may use in the future may not eliminate, and may exacerbate, the effects of currency fluctuations. Thus, exchange rate fluctuations could cause our profits, and therefore our stock prices, to decline.
 
Under the New EIT Law, we may be classified as a “resident enterprise” of China, which would likely result in unfavorable tax consequences to us and our non-PRC shareholders.
 
Under China’s Enterprise Income Tax Law, or the New EIT Law, and its implementing rules, which became effective in 2008, an enterprise established outside of China with “de facto management bodies” within China is considered a “resident enterprise,” meaning that it can be treated in a manner similar to a Chinese enterprise for enterprise income tax purposes.  Under the implementing rules of the New EIT Law, de facto management means substantial and overall management and control over the production and operations, personnel, accounting, and properties of the enterprise.  Because the New EIT Law and its implementing rules are new, it is unclear how tax authorities will determine tax residency based on the facts of each case.
 
If the PRC tax authorities determine that China Aluminum Foil, Inc. is a “resident enterprise” for PRC enterprise income tax purposes, unfavorable PRC tax consequences could follow. First, we may be subject to enterprise income tax at a rate of 25% on our worldwide taxable income as well as PRC enterprise income tax reporting obligations. Second, although under the New EIT Law and its implementing rules dividends paid to us from our PRC subsidiaries would qualify as “tax-exempt income,” such dividends may be subject to a 10% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax, have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes. Finally, it is possible that future guidance issued with respect to the new “resident enterprise” classification could result in a situation in which a 10% withholding tax is imposed on dividends we pay to our non-PRC shareholders and with respect to gains derived by our non-PRC shareholders from transferring our shares.  Although we are monitoring the possibility of “resident enterprise” treatment for the 2008 and 2009 tax years and evaluating appropriate organizational changes to avoid this treatment, our efforts and evaluation may prove unsuccessful and incorrect.
 
If we were treated as a “resident enterprise” by PRC tax authorities, we would be subject to tax in both the U.S. and China, and our PRC tax may not be creditable against our U.S. tax.
 
 
We do not intend to pay and may be restricted from paying dividends on our common stock.
 
We have never declared or paid dividends on our capital stock and we do not intend to declare dividends in the foreseeable future. We currently intend to retain future earnings to fund our continued growth. Furthermore, if we decide to pay dividends, foreign exchange and other regulations in China may restrict our ability to distribute retained earnings from China or convert those payments from Renminbi into foreign currencies.
 
Lack of bank deposit insurance puts our funds at risk of loss from bank foreclosures or insolvencies.
 
We maintain certain bank accounts in China that are not protected by any insurance. As of June 30, 2010, Shensheng held approximately RMB 839 thousand in bank accounts in China.  As of December 30, 2010, Shensheng held approximately RMB 14.6 million in bank accounts in China.  If a PRC bank holding our funds experienced insolvency, it may not permit us to withdraw our funds, which would result in a loss of such funds and reduction of our net assets.
 
Limited and uncertain trademark protection in China makes the ownership and use of our trademark uncertain.
 
We have obtained trademark registrations for the use of our trade name “中园,” Chinese, which have been registered with the PRC Trademark Bureau of the State Administration for Industry and Commerce with respect to our products.  We are able to use this trademark pursuant to a license agreement with Zhengzhou Aluminum Co. Ltd.  We believe our trademark is important to the establishment of consumer recognition of our products.  However, due to uncertainties in PRC trademark law, the protection afforded by our trademark may be less than we currently expect and may, in fact, be insufficient. Moreover, even if it is sufficient, in the event it is challenged or infringed, we may not have the financial resources to defend it against any challenge or infringement and such defense could in any event be unsuccessful. Moreover, any events or conditions that negatively impact our trademark could have a material adverse effect on our business, operations and finances.
 
Our lack of patent protection could permit our competitors to copy our trade secrets and formula and thus gain a competitive advantage.
 
We own no patents covering our products or production processes, and we expect to rely principally on know-how and the confidentiality of our formula and production processes for our products in producing competitive product lines. We only license 9 patents pursuant to a license agreement with Zhengzhou Aluminum Co., Ltd.. Any breach of confidentiality by our executives or employees having access to our formula and production processes could result in our competitors gaining access to such formula or production processes. The ensuing competitive disadvantage could reduce our revenues and our profits.
 
One of our shareholders owns a significant percentage of our stock and will be able to exercise significant influence over our affairs.
 
Congfu Li, our Chairman, beneficially owned approximately 32% of our common stock as of March 18, 2011.  Our executive officers and directors as a group beneficially owned approximately 53% of our common stock as of March 18, 2011.  Consequently, these individuals will likely be able to determine the composition of our board of directors, retain the voting power to approve certain matters requiring shareholder approval and continue to have significant influence over our operations.  The interests of these shareholders may be different than the interests of other shareholders on these matters.  This concentration of ownership could also have the effect of delaying or preventing a change in our control or otherwise discouraging a potential acquirer from attempting to obtain control of us, which in turn could reduce the price of our common stock.
 
Failure to comply with the U.S. foreign corrupt practices act and Chinese anti-corruption laws could subject us to penalties and other adverse consequences.

Our executive officers, employees and other agents may violate applicable law in connection with the marketing or sale of our products, including China’s anti-corruption laws and the U.S. Foreign Corrupt Practices Act, or the FCPA, which generally prohibits United States companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. In addition, we are required to maintain records that accurately and fairly represent our transactions and have an adequate system of internal accounting controls. Foreign companies, including some that may compete with us, are not subject to these prohibitions, and therefore may have a competitive advantage over us. The PRC also strictly prohibits bribery of government officials. However, corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur rom time-to-time in the PRC.
 
While we intend to implement measures to ensure compliance with the FCPA and China’s anti-corruption laws by all individuals involved with our company, our employees or other agents may engage in such conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations. In addition, our brand and reputation, our sales activities or our stock price could be adversely affected if we become the target of any negative publicity as a result of actions taken by our employees or other agents.
 

 
 
The statements included in this prospectus that are not purely historical are forward-looking statements within the meaning of Section 21E of the Exchange Act, and Section 27A of the Securities Act. These statements include, but are not limited to, statements about our plans, objectives, expectations, strategies, intentions or other characterizations of future events or circumstances and are generally identified by the words “may,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “targets,” “could,” “would,” and similar expressions. Because these forward-looking statements are subject to a number of risks and uncertainties, our actual results could differ materially from those expressed or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed under the heading “Risk Factors” and in other documents we file from time to time with the Securities and Exchange Commission, or the SEC. All forward-looking statements included in this prospectus are based on information available to us on the date hereof. Our business and the associated risks may have changed since the date this prospectus was originally filed with the SEC. We assume no obligation to update any such forward-looking statements.
 
 
We will not receive any proceeds from the sale of the shares by the selling shareholders. All net proceeds from the sale of the common stock covered by this prospectus will go to the selling shareholders.
 
 
Our common stock is not traded on any exchange. We intend to engage a market maker to apply to have our common stock quoted on the OTC Bulletin Board once our shareholders have free trading shares; however, there is no guarantee that we will obtain a listing.
 
There is currently no trading market for our common stock and there is no assurance that a regular trading market will ever develop. OTC Bulletin Board securities are not listed and traded on the floor of an organized national or regional stock exchange. Instead, OTC Bulletin Board securities transactions are conducted through a telephone and computer network connecting dealers. OTC Bulletin Board issuers are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange.
 
To have our common stock listed on any of the public trading markets, including the OTC Bulletin Board, we will require a market maker to sponsor our securities. We have not yet engaged any market maker to sponsor our securities and there is no guarantee that our securities will meet the requirements for quotation or that our securities will be accepted for listing on the OTC Bulletin Board. This could prevent us from developing a trading market for our common stock.
 
On March 18, 2011,  there were 10,201,011 shares of our common stock issued and outstanding that were held by approximately 41 shareholders of record. 
 
 
 
 
We have not declared or paid any dividends on our common stock and presently do not expect to declare or pay any such dividends in the foreseeable future.  Payment of dividends to our shareholders would require payment of dividends by our PRC subsidiaries to us.  This, in turn, would require a conversion of Renminbi into US dollars and repatriation of funds to the US.  Under current PRC law, the conversion of Renminbi into foreign currency for capital account transactions generally requires approval from SAFE and, in some cases, other government agencies.  Government authorities may impose restrictions that could have a negative impact in the future on the conversion process and upon our ability to meet our cash needs, and to pay dividends to our shareholders.  Although our subsidiaries’ classification as WFOEs under PRC law permits them to declare dividends and repatriate their funds to us in the United States, any change in this status or the regulations permitting such repatriation could prevent them from doing so.  Any inability to repatriate funds to us would in turn prevent payments of dividends to our shareholders.
 
 
Overview
 
Zhengzhou Shensheng Aluminum Foil Co., Ltd. (“Shensheng”) was originally formed on Feb 4, 2008. We are a manufacturer of aluminum foil products in central China. Demand for our aluminum foil is driven primarily by spending in the consumer products and electrical manufacturing industries. We have benefited from continued improvement of living standard among Chinese consumers and strong growth of aluminum foil usage as the PRC has rapidly urbanized.
 
Our principal business is the production of aluminum foil ranging from 0.005mm to 0.08mm in thickness. We operate one aluminum production line, which has an annual capacity of approximately 20,000 MT. Our products are tailor-made to customers’ individual requirements.  China Aluminum Foil’s products are further processed by downstream manufacturers and incorporated into a wide variety of end products including, among others, home appliances, kitchen supplies, packaging, and specialized construction materials. Our facilities and head office are located in Zhengzhou of Henan Province.
 
On November 8, 2010, we completed a reverse acquisition transaction through a share exchange with Lucky Express Limited (hereafter referred to as “Lucky Express”), a Hong Kong entity established on April 22, 2010, and its shareholders, whereby we acquired 100% of the issued and outstanding capital stock of Lucky Express in exchange for 99,000 shares of our Common Stock which constituted 99% of our issued and outstanding common stock  immediately after the consummation of the reverse acquisition. As a result of the reverse acquisition, Lucky Express became our wholly-owned subsidiary and the former stockholders of Lucky Express became our controlling stockholders. The share exchange transaction with Lucky Express and the Shareholders was treated as a reverse acquisition for accounting and financial reporting purposes, with Lucky Express as the acquirer and us as the acquired party. After the reverse acquisition, we changed our name to China Aluminum Foil, Inc. By virtue of our ownership of Lucky Express, we also own Zhengzhou Shentong Investment Consulting Co., Ltd. (“Shentong”), which is a wholly owned foreign subsidiary of Lucky Express and which effectively and substantially controls Shensheng, through a series of captive agreements known as variable interest agreements (the “VIE Agreements”) with Shentong.
 
Critical Accounting Policies
 
Our financial statements are affected by the accounting policies used and the estimates and assumptions made by management during their preparation.  A complete listing of these policies is included in Note 2 of the notes to our financial statements for the years ended June 30, 2010 and 2009.  We have identified below the accounting policies that are of particular importance in the presentation of our financial position, results of operations and cash flows, and which require the application of significant judgment by management.
 
 
Basis of preparation
 
The accompanying consolidated financial statements reflect the financial position, results of operations and cash flows of the Company and all of its wholly owned subsidiary and its VIE as of June 30, 2010 and 2009, and for the years ended June 30, 2010 and 2009, and have been prepared in accordance with U.S Generally Accepted Accounting Principles (“US GAAP”).
 
Basis of consolidation
 
The consolidated financial statements include the accounts of the Company, its subsidiaries, and it’s VIE. All significant inter-company transactions and balances have been eliminated upon consolidation.
 
We consolidate Shensheng because it meets the requirement of being a VIE under US GAAP. In general, a VIE is a corporation, partnership, limited liability company, trust, or any other legal structure used to conduct activities or hold assets that either (1) has an insufficient amount of equity to carry out its principal activities without additional subordinated financial support, (2) has a group of equity owners that are unable to make significant decisions about its activities, or (3) has a group of equity owners that do not have the obligation to absorb losses or the right to receive returns generated by its operations.
 
Use of Estimates
 
In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those estimates.
 
Fair Value of Financial Instruments
 
ASC 820 “Fair Value Measurements and Disclosures”, adopted January 1, 2008, defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The carrying amounts reported in the balance sheets for current receivables and payables qualify as financial instruments. Management concluded the carrying values are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and if applicable, their stated interest rate approximates current rates available. The three levels are defined as follows:
 
·  
Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
 
·  
Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
 
·  
Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value. It is management’s opinion that as of June 30, 2010 and 2009, the estimated fair values of the financial instruments were not materially different from their carrying values as presented on the balance sheet. This is attributed to the short maturities of the instruments and that interest rates on the borrowings approximate those that would have been available for loans of similar remaining maturity and risk profile at respective balance sheet dates.
 
Revenue Recognition
 
We derived revenues from sales of aluminum foils products, aluminum ingots and providing processing services. We recognize sales in accordance with United States Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements” and SAB No. 104, “Revenue Recognition.” We recognize revenue when the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services were rendered, (iii) the price to the customer is fixed or determinable and (iv) collection of the resulting receivable is reasonably assured.
 
 
Principal Factors Affecting Our Financial Performance
 
Our operating results are primarily affected by the following factors:
 
·  
Growth in the Chinese Economy — We operate our facilities in China and derive significant portion of our revenues from sales to customers in China. Economic conditions in China, therefore, affect virtually all aspects of our operations, including the demand for our products, the availability and prices of our raw materials and our other expenses. China has experienced significant economic growth, achieving a compound annual growth rate of approximately 10% in real gross domestic product from 1996 through 2009. (World Economic Outlook (April 2010) through International Monetary Fund Data Mapper). China is expected to experience continued growth in all areas of investment and consumption, even in the face of a global economic recession. However, China has not been entirely immune to the global economic slowdown and is experiencing a slowing of its growth rate.
 
·  
Supply and Demand in the Aluminum Market — We are subject to macroeconomic factors dictating the supply and demand of aluminum and aluminum foil in the PRC. Bauxite and aluminum prices have been volatile in the past, and while they have stabilized since the first quarter of 2009, our revenues and earnings could be dramatically affected by increases and decreases in bauxite and aluminum costs.
 
·  
Production Capacity — In order to capture the market share and take advantage of the demand for our products, we have expanded, and wish to continue to expand our production capacity. Increased capacity has had a significant impact on our ability to increase revenues and net income through increased product sales. We have signed an operating lease of a newly constructed 15,000MT aluminum foil plant adjacent to our current facilities. If we successfully expand our production capacity, we should be able to gain new customers in new markets.
 
·  
Our Product Mix — Our gross margin is affected by our product mix.  We produce and sell products according to customer orders.  In general, we receive higher profit margins on our thinner products than we receive on our thicker products.  We therefore strive to allocate our capacity to the highest margin product mix possible for a given output tonnage by focusing our product mix on thinner products where possible.
 
Results of Operations
 
Comparison of Six Months Ended December 31, 2010 and December 31, 2009 (Unaudited)
 
The following table sets forth key components of our results of operations during the six month periods ended December 31, 2010 and 2009, both in dollars and as a percentage of our revenues.
 

   
Six Months Ended
 
   
December 31, 2010
   
December 31, 2009
 
   
(Unaudited)
   
(Unaudited)
 
Revenue
 
$
37,445,221
   
$
18,313,528
 
Cost of goods sold
   
36,232,888
     
16,933,814
 
Gross Profit
   
1,212,333
     
1,379,714
 
                 
Operating expenses
               
  Selling expenses
   
65,827
     
223,185
 
  General and administrative expenses
   
192,097
     
266,888
 
Total operating expenses 
   
257,924
     
490,073
 
                 
Income (loss) before income tax
   
953,898
     
889,488
 
                 
  Current Income Tax Expense
   
260,944
     
-
 
  Deferred Income Tax Benefit
   
(233,975
)
   
-
 
                 
Net Income (Loss)
 
$
926,929
   
$
889,488
 
                 
Other comprehensive income
               
  Foreign currency translation adjustments
   
527,086
     
262,237
 
Total Comprehensive Income (Loss)
 
$
1,454,015
   
$
1,151,725
 
 
 
 
Revenues.  Revenues consist of revenue from the sale of aluminum foil and aluminum. Our net revenues increased to $37.4 million in the six months ended December 31, 2010 from $18.3 million in the same period in 2009, representing a 104.5% increase. This increase was mainly driven by increase in sales volume of aluminum foils from 3, 431 MT in the first six months of 2009 to 6,161 MT in the same period of 2010.
 
Cost of Goods Sold.  Our cost of sales increased $19.3 million, or 114.2%, to $36.2 million in the six months ended December 31, 2010, from $16.9 million in the same period in 2009. The cost of sales as a percentage of revenues increased from 92.5% to 96.8% over the same period. Our cost of sales is largely dictated by movements in aluminum prices as aluminum typically represents more than 95% of our cost of goods sold.
 
Gross Profit and Gross Margin.  Our gross profit decreased $0.17 million to $1.21 million in the six months ended December 31, 2011 from $1.38 million in the same period in 2009. Gross margin declined from 7.53% for the six months ended December 31, 2009 to 3.24% for the six months ended December 31, 2010. The decrease in gross margin was primarily due to the narrowing of the spread between aluminum purchase price and aluminum foil sales prices.
 
Selling Expenses. During the six months ended December 31, 2010, our selling expenses decreased by $157,358 to $65,827, compared to $223,185 for the same period in 2009 which was mainly due to the increase of selling to existing large customers that reduces selling commissions and related expenses.
 
General and Administrative Expenses.  Our general and administrative expenses decreased $74,791 to $192,097 in the six months ended December 31, 2010, from $266,888 in the same period in 2009. The majority of the decrease is due to restructuring of our general administrative to reduce cost and improve efficiency.
 
Income Before Income Taxes.  Our income before income taxes increased to $0.95 million in the six months ended December 31, 2010 from $0.89 million in the same period in 2009. This increase was due to a decrease in our selling, general and administrative expenses as discussed above.
 
Net Income.  In the six months ended December 31, 2010, we generated net income of $926,929, compared to $889,488 million in the same period in 2009. This decrease was primarily attributable to the factors discussed above.
 
Liquidity and Capital Resources
 
As of December 31, 2010, we had cash and cash equivalents of $2,399,102, consisting primarily of cash on hand and demand deposits. The following table provides detailed information about our net cash flows for the six months ended December 31, 2010. To date, we have financed our operations organically and through cash flows from equity contributions by our shareholders.
 
For the six months ended December 31, 2010 and December 31, 2009
 
Working Capital
 
   
At December 31, 2010
   
At June 30,
2010
 
Current Assets
 
$
7,485,901
   
$
10,377,854
 
Current Liabilities
 
$
4,228,637
   
$
8,580,441
 
Working Capital
 
$
3,257,264
   
$
1,797,413
 
 
 

 
Cash Flows
 
   
Six Months Ended
   
Six Months Ended
 
   
December 31, 2010
   
December 31, 2009
 
Net Cash Provided by (Used in) Operating Activities
 
$
1,880,757
   
$
960,097
 
Net Cash Provided by (Used In) Investing Activities
 
$
117,511
   
$
(844,414
)
Net Cash Provided by Financing Activities
 
$
128,880
   
$
-
 
Effect of Exchange Rate Changes
 
$
135,212
   
$
34,023
 
Increase (Decrease) In Cash During The Period
 
$
2,262,360
   
$
149,706
 
 
Operating activities
 
During the six month period ended December 31, 2010 we received net cash of $1,880,757 from operating activities, compared to net cash received of $960,097 from operating activities during the six month period ended December 31, 2009.  
 
Our cash flows from operating activities changed significantly because we took measures to manage our accounts receivable. The increase in cash from operating activities during the six month period ended December 31, 2010 was primarily due to cash received from accounts receivable. 
 
Prior to third quarter of 2011, we purchased majority of aluminum from Zhengzhou Aluminum Co., Ltd. Management determined to eliminate this type of related party transactions and instead conduct business with the Zhengzhou Aluminum Co., Ltd on an arms-length basis as of the third quarter of 2011. This action required that the loan granted to Zhengzhou Aluminum to be repaid. This resulted in a reduction of approximately $4.8 million in operating cash.
 
We now purchase aluminum mainly from third-party trading companies. We believe that this level of transparency is of value to our shareholders. Because China Aluminum Foil's purchases from such trading companies are made at prevailing market prices for aluminum (just as its purchases from the China Aluminum Co., Ltd were previously made), management believes that this practice provides transparency benefits to shareholders without increasing its expenses beyond where they would have been if China Aluminum Foil still purchased directly from the Zhengzhou Aluminum Co., Ltd. We believe that the Zhengzhou Aluminum Co., Ltd is likely able to capitalize on its proximity to China Aluminum Foil to offer aluminum to trading companies for a competitive price, as transportation costs tend to be one of the few variables in the cost of China Aluminum's raw materials, as industry commodity prices are substantially identical in the region.
 
Investing activities
 
During the six month period ended December 31, 2010 we received net cash of $117,511 from investing activities, including $127,783 received from notes receivable and $10,272 in purchase of property, plant and equipment. During the six month period ended December 31, 2009 we spent net cash of $844,414 on investing activities, including $185,554 paid for notes receivable, $515,898 in prepayment for an office building and $142,962 in purchases of property, plant and equipment.
 
Financing activities
 
During the six month period ended December 31, 2010 we received net cash of $128,880 from financing activities, compared to net cash spending of $0 from financing activities during the six month period ended December 31, 2009.  The net received from financing activities in the period in 2010 was entirely the result of capital contributions.
 
During the six month period ended December 31, 2010 we recognized a gain of $135,212 due to the effect of exchange rates on our cash, compared to a gain of $34,023 due to the same effect during the six month period ended December 31, 2009.  Our net cash increased by $2,262,360 during the six month period ended December 31, 2010, compared to a net cash increase of $149,706 during the six month period ended December 31, 2009.
 
 
 
We anticipate that we will meet our ongoing cash requirements by retaining income as well as through equity or debt financing.  We plan to cooperate with various individuals and institutions to acquire the financing required to manufacture and distribute our products and anticipate this will continue until we accrue sufficient capital reserves to finance all of our expansion efforts independently.
 
We intend to meet our cash requirements for the next 12 months through retained earnings and a combination of debt financing and equity financing by way of public or private placements.  We currently do not have any arrangements in place to complete any private placement financings and there is no assurance that we will be successful in completing any private placement financings. However, there is no assurance that any such financing will be available or if available, on terms that will be acceptable to us.  We may not raise sufficient funds to fully carry out our business plan.
 
Comparison of Fiscal Years Ended June 30, 2010 and 2009
 
The following table sets forth key components of our results of operations during the twelve months ended June 30, 2010 and 2009, both in U.S. dollars.
 
 
 
For the year ended June 30,
 
   
2010
   
2009
 
Revenue
 
$
44,133,557
   
$
17,053,296
 
Cost of goods sold
   
42,001,203
     
18,002,345
 
Gross Profit
   
2,132,354
     
(949,049
)
 
         
 
 
Operating expenses
         
 
 
  Selling expenses
   
397,170
     
149,515
 
  General and administrative expenses
   
576,494
     
330,135
 
Total operating expenses 
   
973,664
   
479,650 
 
                 
Income (loss) before income tax
   
1,154,321
     
(1,428,033
)
  Income tax
   
-
     
-
 
 
         
 
 
Net Income (Loss)
 
$
1,154,321
   
$
(1,428,033
)
 
         
 
 
Other comprehensive income
         
 
 
  Foreign currency translation adjustments
   
15,176
     
8,570
 
Total Comprehensive Income (Loss)
 
$
1,169,497
   
$
(1,419,463
)
 
Revenues.  Revenues consist of revenue from the sale of aluminum foil and aluminum. During the year ended June 30, 2010 we generated $44,133,557 in revenues, compared to revenues of $17,053,296 during the year ended June 30, 2009, representing a 158.8% increase year-over-year. This increase was mainly driven by increase in sales volume of aluminum foils from 5,233MT in 2009 to 8,214MT in 2010.
 
Cost of Goods Sold.  Our cost of goods sold increased $24.0 million, or 133.3%, to $42.0 million in 2010, from $18 million in 2009. The cost of goods sold as a percentage of revenues decreased from 105.5% to 95.2% over the same period. The higher cost ratio in 2009 is mainly due to lower operating efficiency during the ramp up period of the new production line.
 
Gross Profit and Gross Margin.  Our gross profit increased from a gross loss of $949,049 during the year ended June 30, 2009 to a gross profit of $2,132,354 during the year ended to June 30, 2010. Gross margin as a percentage of net revenue increased to 4.83% in 2010, from -5.57% in 2009. The increase in gross margin was primarily due to greater production efficiencies after ramp up period.
 
Selling Expenses. For the year ended June 30, 2010, our selling expenses increased by $247,655, or 165.6%, to $397,170 in 2010, compared to $149,515 in 2009, which was mainly due to the increase of packaging material expenditures in line with the increase of sales and associated packaging.
 
 
General and Administrative Expenses.  Our general and administrative expenses increased $246,359 to $576,494 during the year ended June 30, 2010, from $330,135 during the same period in 2009. The majority of the increase is due to additional expenses and hiring of personals to support more productions and sales efforts as we increase our capacity.
 
Income Before Income Taxes.  Our income before income taxes increased to $1,154,321 for the year ended June 30, 2010 from loss of 1,428,033 during the same period in 2009. This increase was due to the significant increase in production capacity, revenue and associated operating profits in 2010.
 
Net Income.  For year ended June 30, 2010, we generated net income of $1,154,321 compared to net loss of $1,428,033 during the same period in 2009. This decrease was primarily attributable to the factors discussed above.
 
Liquidity and Capital Resources
 
For the years ended June 30, 2010 and June 30, 2009
 
As of June 30, 2010 we had $136,742 in cash and cash equivalent. As of June 30, 2010 we had total assets of $16,133,591 and total liabilities of $8,577,441, compared to total assets of $7,877,011 and total liabilities of $1,652,889 as of June 30, 2009.
 
Working Capital
 
   
At June 30, 2010
   
At June 30, 2009
 
Current Assets
 
$
10,377,854
   
$
2,583,869
 
Current Liabilities
 
$
8,577,441
   
$
1,652,889
 
Working Capital
 
$
1,800,413
   
$
930,980
 

Cash Flows
 
   
Twelve Months Ended
   
Twelve Months Ended
 
   
June 30, 2010
   
June 30, 2009
 
Net Cash Provided by (Used in) Operating Activities
 
$
(7,417,280)
   
$
432,741
 
Net Cash Provided by (Used In) Investing Activities
 
$
(521,823)
   
$
(483,874)
 
Net Cash Provided by Financing Activities
 
$
7,912,013
   
$
131,974
 
Effect of Exchange Rate Changes
 
$
52,107
   
$
27,295
 
Increase (Decrease) In Cash During The Period
 
$
25,017
   
$
108,136
 
 
Operating activities
 
During the year ended June 30, 2010 we used net cash of $7,417,280 in operating activities, compared to net cash received of $432,741 from operating activities during the year ended June 30, 2009. The decrease in cash from operating activities during the year ended June 30, 2010 was primarily due to an increase in our accounts receivable, accounts payable and customer deposits as well as an increase in cash we advanced to our suppliers. Additionally, during the year ended June 30, 2009, we accounted $3,065,723 provided from a related party as cash received from operating activities.
 
Investing activities
 
During the year ended June 30, 2010 we used net cash of $521,823 in investing activities, including $518731 in prepayment for an office building and $3,092 in purchases of property, plant and equipment.  During the year ended June 30, 2009 we spent net cash of $483,874 on investing activities, including $477,369 in prepayment for an office building and $6,505 in purchases of property, plant and equipment.
 
 
 
Financing activities
 
During the year ended June 30, 2010 we received net cash of $7,912,013 from financing activities, compared to net cash spending of $131,974 from financing activities during the year ended June 30, 2009.  In both years, the net cash received from financing activities was entirely the result of proceeds received from related parties.
 
During the year ended June 30, 2010 we recognized a gain of $52,107 due to the effect of exchange rates on our cash, compared to a gain of $27,295 due to the same effect during the year ended June 30, 2009.  Our net cash increased by $25,017 during the year ended June 30, 2010, compared to a net cash increase of $108,136 during the year ended June 30, 2009.
 
We anticipate that we will meet our ongoing cash requirements by retaining income as well as through equity or debt financing.  We plan to cooperate with various individuals and institutions to acquire the financing required to manufacture and distribute our products and anticipate this will continue until we accrue sufficient capital reserves to finance all of our expansion efforts independently.
 
We intend to meet our cash requirements for the next 12 months through retained earnings and a combination of debt financing and equity financing by way of private placements.  We currently do not have any arrangements in place to complete any private placement financings and there is no assurance that we will be successful in completing any private placement financings. However, there is no assurance that any such financing will be available or if available, on terms that will be acceptable to us.  We may not raise sufficient funds to fully carry out our business plan
 
Off-Balance Sheet Arrangements
 
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.
 
inflation
 
Inflation has not had a material effect on our business and we do not expect that inflation will materially affect our business in the foreseeable future. Our management closely monitors price changes in the aluminum industry and continuously maintains effective cost control in operations.
 
Taxation
 
United States and Hong Kong
 
We are subject to United States tax at a tax rate of 34%. No provision for income taxes in the United States has been made as we have no income taxable in the United States due to the fact that we operate a VIE structure in China. Our subsidiary, Lucky Express, is incorporated in Hong Kong and is taxed on profits generated in Hong Kong at the rate of 16.5%. However, since Lucky Express is merely a holding company, we do not expect to generate any profits in Hong Kong or be subject to such taxes.
 
People’s Republic of China
 
Income Taxes — We account for income taxes in accordance with ASC 740 “Income Taxes.” ASC 740 requires an asset and liability approach for financial accounting and reporting for income taxes and allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before we are able to realize their benefits, or that future deductibility is uncertain. There was no deferred tax asset or liability for the years ended June 30, 2010 and 2009.
 
Because all of our operations are conducted in the PRC, we are governed by the EIT Law. This law and its implementing rules impose a unified EIT rate of 25% on all enterprises, unless they qualify for certain limited exceptions.
 
 
Under the EIT Law, an enterprise established outside China with “de facto management bodies” within China is considered a “resident enterprise,” meaning that it can be treated in a manner similar to a Chinese enterprise for enterprise income tax purposes. The implementing rules of the EIT Law define de facto management as “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise.
 
On April 22, 2009, the State Administration of Taxation issued the Notice Concerning Relevant Issues Regarding Cognizance of Chinese Investment Controlled Enterprises Incorporated Offshore as Resident Enterprises pursuant to Criteria of de facto Management Bodies, or the Notice, further interpreting the application of the EIT Law and its implementation non-Chinese enterprise or group controlled offshore entities. Pursuant to the Notice, an enterprise incorporated in an offshore jurisdiction and controlled by a Chinese enterprise or group will be classified as a “non-domestically incorporated resident enterprise” if (i) its senior management in charge of daily operations reside or perform their duties mainly in China; (ii) its financial or personnel decisions are made or approved by bodies or persons in China; (iii) its substantial assets and properties, accounting books, corporate chops, board and shareholder minutes are kept in China; and (iv) at least half of its directors with voting rights or senior management often resident in China. A resident enterprise would be subject to an enterprise income tax rate of 25% on its worldwide income and must pay a withholding tax at a rate of 10% when paying dividends to its non-PRC shareholders. However, it remains unclear as to whether the Notice is applicable to an offshore enterprise incorporated by a Chinese natural person. Nor are detailed measures on imposition of tax from non-domestically incorporated resident enterprises are available. Therefore, it is unclear how tax authorities will determine tax residency based on the facts of each case.
 
We may be deemed to be a resident enterprise by Chinese tax authorities. If the PRC tax authorities determine that we are a “resident enterprise” for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income as well as PRC enterprise income tax reporting obligations. In our case, this would mean that income such as interest on financing proceeds and non-China source income would be subject to PRC enterprise income tax at a rate of 25%. Second, although under the EIT Law and its implementing rules dividends paid to us from our PRC subsidiary would qualify as “tax-exempt income,” we cannot guarantee that such dividends will not be subject to a 10% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax, have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes. Finally, it is possible that future guidance issued with respect to the new “resident enterprise” classification could result in a situation in which a 10% withholding tax is imposed on dividends we pay to our non-PRC shareholders and with respect to gains derived by our non-PRC shareholders from transferring our shares. We are actively monitoring the possibility of “resident enterprise” treatment for the 2010 tax year.
 
Since 2008, we have been subject to tax at a statutory rate of 25% on income reported in our statutory financial statements filed after appropriate tax adjustments in the relevant periods. Our future effective income tax rate depends on various factors, such as tax legislation, the geographic composition of our pre-tax income and non-tax deductible expenses incurred.
 
Value Added Taxes — We are also subject to value added tax, or VAT, on the sale of our products. The applicable VAT rate is 17% for products sold in the PRC. The amount of VAT liability is determined by applying the applicable tax rate to the invoiced amount of goods sold (output VAT) less VAT paid on purchases made with the relevant supporting invoices (input VAT). Under the commercial practice in the PRC, we pay VAT based on tax invoices issued. The tax invoices may be issued subsequent to the date on which revenue is recognized, and there may be a considerable delay between the date on which the revenue is recognized and the date on which the tax invoice is issued. In the event that the PRC tax authorities dispute the date on which revenue is recognized for tax purposes, the PRC tax office has the right to assess a penalty, which can range from zero to five times the amount of the taxes which are determined to be late or deficient. Any tax penalty assessed is expensed as a period expense if and when a determination has been made by the taxing authorities that a penalty is due.
 
Description of Property
 
We used the manufacturing plant and offices provided by Zhengzhou Aluminum for free for the years ended June 30, 2010 and 2009. The imputed rental expenses were $73,406 and $73,041 for the years ended June 30, 2010 and 2009, and were included in the rent expense and additional paid in capital of the year.
 
 
 
 
 
Description of Business
 
Overview
 
We were incorporated in the State of Nevada on January 29, 2010 as AJ Acquisition V, Inc. Since inception we have been engaged in organizational efforts and obtaining initial financing. Our business purpose was to seek the acquisition of or merger with, an existing company.  On November 8, 2010 we filed an amendment to our articles of incorporation to change our name to China Aluminum Foil, Inc., and on November 8, 2010 we entered into, and closed, a share exchange agreement with Lucky Express, now our wholly owned subsidiary.  Our principal offices are located at Building No.35, No.1 Cui Zhu Street, High-tech Development Area, Zhengzhou City, Henan Province, China.  Our telephone number is (86) 371-67539696.  Our fiscal year end is June 30.
 
Current Business
 
Upon acquiring Lucky Express pursuant to the share exchange, we adopted the business of Lucky Express.  We are mainly engaged in the development, production and distribution of various aluminum foils to domestic and overseas markets.  Our aluminum foil products can be widely used in multiple industries for different purposes. Currently a majority of our products are used for household daily consumption and container production. However, we intend to expand into other high potential business segments, such as cigarette packaging, pharmaceutical packaging and electronic components.
 
We have one production line with an annual capacity of approximately 20,000 metric tons. We plan to build or rent another production line to expand our capacity. Due to long-term efforts to streamline production process and reduce wastage and pollution during production, we were recognized as one of the “High Tech New Star Enterprises” in Henan province. We are also recognized for our strong R&D capabilities in the aluminum foil industry in central China.
 
Share Exchange
 
On November 8, 2010 we entered into and closed a share exchange agreement (the “Share Exchange Agreement”) with Lucky Express (China) Ltd., a company incorporated under the laws of Hong Kong (“Lucky Express”) and the holders of 100% of the share capital of Lucky Express (the “Lucky Express Shareholders”), including our director, Congfu Li.  According to the terms of the Share Exchange Agreement, we agreed to acquire 1,000,000 issued and outstanding shares of Lucky Express, being all of the issued and outstanding shares of Lucky Express, from the Selling Shareholders in exchange for 10,000,000 shares of our common stock.
 
Lucky Express’s wholly owned subsidiary, Zhengzhou Shentong Investment Consulting Co., Ltd., a wholly owned foreign enterprise organized under the laws of China (“Shentong Investment”) has entered into a number of contracts with Zhengzhou Shensheng Aluminum Foil Co., Ltd., a company organized under the laws of China (“Shensheng”), which is engaged in the production of aluminum foil, and Zhengzhou Aluminum Co., Ltd., the sole shareholder of Shensheng.  A full description of these contractual arrangements is included under the heading “Organization”, below.
 
We had 100,000 shares of our common stock issued and outstanding before the closing of the transactions contemplated by the Share Exchange Agreement.  Upon the closing of the transactions, we issued 10,000,000 shares of our common stock to the Lucky Express Shareholders.  The shares were issued in reliance upon an exemption from registration pursuant to Regulation S promulgated under the Securities Act of 1933, as amended (the “Securities Act”).  
 
Organization
 
Our relationship with Shensheng and its shareholder is governed by a series of contractual arrangements between Shentong Investment, Shensheng and Zhengzhou Aluminum Co., Ltd., the sole shareholder of Shensheng (the “Shensheng Shareholder”).  Under the laws of China, the contractual arrangements constitute valid and binding obligations of the parties of such agreements.  Each of the contractual arrangements and the rights and obligations of the parties thereto are enforceable and valid in accordance with the laws of China.  Other than pursuant to the contractual arrangements between Shentong Investment, Shensheng and the Shensheng Shareholder, described below, Shensheng cannot transfer any of the funds generated from their operations
 
 
 
 
Our current corporate structure is as follows:
 

On August 12, 2010, Shentong Investment entered into the following contractual arrangements with Shensheng and the Shensheng Shareholder:
 
Consultation Agreement. Pursuant to the exclusive consulting services agreements between Shentong Investment and Shensheng, Shentong Investment has the exclusive right to provide to Shensheng general business operation services, including advice and strategic planning, as well as consulting services related human resources, staffing and training (the “Services”). Under this agreement, Shentong Investment owns the intellectual property rights developed or discovered through research and development, in the course of providing the Services, or derived from the provision of the Services. Shensheng pay a quarterly consulting service fees in Renminbi (“RMB”) to Shentong Investment that is equal to all of Shensheng’ profits for such quarter.
 
Operating Agreement. Pursuant to the operating agreement among Shentong Investment, Shensheng and the Shensheng Shareholder, Shentong Investment provides guidance and instructions on Shensheng’ daily operations, financial management and employment issues. The Shensheng Shareholder must designate the candidates recommended by Shentong Investment as their representatives on the boards of directors of Shensheng. Shentong Investment has the right to appoint senior executives of Shensheng. In addition, Shentong Investment agrees to guarantee Shensheng’s performance under any agreements or arrangements relating to Shensheng’s business arrangements with any third party. Shensheng, in return, agrees to pledge their accounts receivable and all of their assets to Shentong Investment. Moreover, Shensheng agrees that without the prior consent of Shentong Investment, Shensheng will not engage in any transactions that could materially affect their respective assets, liabilities, rights or operations, including, without limitation, incurrence or assumption of any indebtedness, sale or purchase of any assets or rights, incurrence of any encumbrance on any of their assets or intellectual property rights in favor of a third party or transfer of any agreements relating to their business operation to any third party. The term of this agreement is twenty (20) years from August 12, 2010 and may be extended only upon Shentong Investment’s written confirmation prior to the expiration of the this agreement, with the extended term to be mutually agreed upon by the parties.
 
 
 
Share Pledge Agreement. Under the share pledge agreement between the Shensheng Shareholder and Shentong Investment, the Shensheng Shareholder pledged all of their equity interests in Shensheng to Shentong Investment to guarantee Shensheng’s performance of their obligations under the consulting services agreement. If Shensheng or the Shensheng Shareholder breaches their respective contractual obligations, Shentong Investment, as pledgee, will be entitled to certain rights, including the right to sell the pledged equity interests. The Shensheng Shareholder also agreed that upon occurrence of any event of default, Shentong Investment shall be granted an exclusive, irrevocable power of attorney to take actions in the place and stead of the Shensheng Shareholder to carry out the security provisions of the equity pledge agreement and take any action and execute any instrument that Shentong Investment may deem necessary or advisable to accomplish the purposes of the equity pledge agreement. The Shensheng Shareholder agreed not to dispose of the pledged equity interests or take any actions that would prejudice Shentong Investment’s interest. The equity pledge agreement will expire two (2) years after Shensheng’s obligations under the consulting services agreements have been fulfilled.
 
Option AgreementUnder the option agreement between the Shensheng Shareholder and Shentong Investment, the Shensheng Shareholder irrevocably granted Shentong Investment or its designated person an exclusive option to purchase, to the extent permitted under PRC law, all or part of the equity interests in Shensheng for the cost of the initial contributions to the registered capital or the minimum amount of consideration permitted by applicable PRC law. Shentong Investment or its designated person has sole discretion to decide when to exercise the option, whether in part or in full. The term of this agreement is twenty (20) years from August 12, 2010 and may be extended prior to its expiration by written agreement of the parties.
 
Proxy Agreement. Pursuant to the proxy agreement between the Shensheng Shareholder and Shentong Investment, the Shensheng Shareholder agreed to irrevocably grant a person to be designated by Shentong Investment with the right to exercise the Shensheng Shareholder’s voting rights and their other rights, including the attendance at and the voting of the Shensheng Shareholder’s shares at shareholders’ meetings (or by written consent in lieu of such meetings) in accordance with applicable laws and its Articles of Association, including but not limited to the rights to sell or transfer all or any of their equity interests of Shensheng, and appoint and vote for the directors and Chairman as the authorized representative of the Shensheng Shareholder.  The term of the proxy agreement will be ten (10) years. The proxy agreement may be terminated by joint consent of the parties or upon 30-day written notice from Shentong Investment.
 
Since the Shensheng Shareholder does not have the characteristics of a controlling financial interest or does not have sufficient equity at risk for Shensheng to finance its activities without additional subordinated financial support from other parties, Shensheng’s financial statements become consolidated as our own.  As such, and due to the interest we hold in Shensheng through Lucky Express, the following business description describes the business and operations of Shensheng as our own.
 
For accounting purposes, the reverse acquisition transaction with Lucky Express was treated as a reverse acquisition, with Lucky Express as the acquirer and China Aluminum Foil, Inc. as the acquired party. Unless the context suggests otherwise, when we refer in this report to business and financial information for periods prior to the consummation of the reverse acquisition, we are referring to the business and financial information of Lucky Express.
 
Principal Products
 
Aluminum foil is a paper-thin sheet of rolled aluminum that can be torn easily and used to wrap and store food, in art, decoration, insulation and in heat exchangers. Because aluminum foil is paper-thin, the foil is extremely pliable and can be bent or wrapped around objects with ease. In North America, aluminum foil is sometimes alternatively called al-foil or alu-foil.
 
We develop and manufacture various types of aluminum foils. The production of aluminum foil involves a complex production process and requires advanced technology and equipment. We purchase raw aluminum with thickness of 0.3mm and produce different types of aluminum foil by rolling process. Currently our products mainly fall into two product segments: aluminum foil used by households for daily consumption and aluminum foil used for the production of containers such as meal boxes, cake cups, as well as many other applications.
 
 
In general, aluminum foil is aluminum prepared in thin metal leafs, with thickness of less than 0.2mm (0.008inch), although much thinner gauge, down to 0.006mm, is also widely used. It is normally produced from aluminum ingots by a rolling process. Aluminum foil is at the downstream of the entire aluminum industry chain. China is not rich in bauxite, but leads the world in aluminum production. The Chinese government limits the export of primary aluminum, and encourages the export of value added aluminum products which provides opportunities for increased margins for China’s aluminum foil industry.
 
As a metal, aluminum has its own advantages over other metals due to its light weight, recyclability, flexibility and limited pollution. Aluminum foil can also act as a complete barrier to light, oxygen, odors and flavors, moisture, as well as bacteria. Therefore aluminum foil is widely used in various industries, such as packaging, household daily needs, electronics, construction, etc.
 
From the international perspective, the aluminum foil industry appears to be tied to the global economy and has been recovering from the global financial crisis gradually. For example, in Europe the aluminum foil deliveries in the first quarter of 2010 reached the same level as calculated prior to the economic recession in 2008. Figures released by the European Aluminum Foil Association (EAFA) show an increase of 17 % compared to last year and a total amount just 1.5 % below 2008 levels. Total deliveries in first quarter 2010 reached 213,000 tons versus 182,200 tons in first quarter 2009.
 
As different customers require different specifications, we will arrange the manufacturing based on their demands. For long-term customers, we usually sign a framework agreement to determine the annual quantity, specifications, processing charge and other terms.
 
Aluminum foil manufacturing is a technologically complicated and capital-intensive process that requires the coordinated use of machinery and raw materials at various stages of manufacturing. Currently, we mainly rely on cast-rolling technique during the manufacturing process. Generally speaking, aluminum foil is produced by rolling heated aluminum ingots down to coils, then cold rolling the coil to the required foil thicknesses. The process of cast-rolling is much less energy intensive and has become the preferred process.
 
Our manufacturing process is as follows: 0.05mm thick aluminum foil blank is rolled by intermediate mill firstly, and then rolled by the finishing mill to the thickness required of the products. After that the products are separated by aluminum foil separator and cut into small volumes according to different requirements. Lastly, according to the final product specifications, different annealing processes are used. Annealing is a heat treatment wherein a material is altered, causing changes in its properties such as strength and hardness. It is a process that produces specific characteristics by heating to above the recrystallization temperature and maintaining a suitable temperature, and then cooling. Annealing is used to induce ductility, soften material, relieve internal stresses, refine the structure by making it homogeneous, and improve cold working properties of the aluminum foil once it is ready for use.
 
After quality inspection, the final products are then packaged for sale and sent to warehouses. The technology for aluminum foil manufacturing is mature and advanced, widely used in domestic and oversea companies. The only difference lies in specification and quantity in the rolling mill and processing configuration. The manufacturing process can be illustrated as follows:
 
 
As packaging material, aluminum foil can be a complete barrier to light, oxygen, moisture and bacteria. They are widely used in all kinds consumer, commercial and industrial packaging.
 
 
We are also the supplier of aluminum foil to the 2010 Shanghai World Expo. Our product is used as the main material of meal boxes which are supplied to the World Expo.
 
The table below lists the percentage of different products in total sales revenue in during the last two fiscal years:
 
   
Product
 
July, 2008 to
June 2009
   
July, 2009 to
June 2010
 
  1  
Household Aluminum Foil
    61 %     42 %
  2  
Aluminum Foil for Containers
    31 %     50 %
  3  
Others
    8 %     8 %
Total
        100 %     100 %

Due to the high volatility of primary aluminum price in recent years, like most aluminum foil manufacturers, we price our products based on the price we paid for the raw material plus a processing fee, thus transferring the risk from aluminum price fluctuation to our customers.
 
The processing fee charged differs depending on what product we are producing. In general, the higher the product quality and the production complexity are, the higher the processing charge will be. Normally, higher valued-added products requiring advanced production facilities and technology are billed at a higher processing charge.
 
Raw Materials
 
We purchase the raw aluminum required for processing into aluminum foil from our suppliers.  The main suppliers of the raw material in 2009 and 2010 for each of the company’s reportable segments are listed below:
 
Main Supplier
 
2010
Amount of Raw Material
   
% of Raw Material
   
2009
Amount of Raw Material
   
% of Raw Material
 
Zhengzhou Aluminum Co., LTD
    22,964,593.84       99%       14,527,306.96       96.8%  
 
In China, aluminum raw material is priced according to the price of the aluminum ingot plus the processing charge. In this model, the price of the ingot is determined by the market price and the processing charge that is negotiated based on various factors, such as product specifications, production complexity, and technical parameters. To ensure superior product quality, we have always aimed to acquire high quality raw material.
 
We aim to maintain multiple supply sources of our key raw materials to ensure that our production will not rely on single supplier. In addition, we strive to develop strategic relationships with new suppliers to secure a stable supply of materials and introduce competition in our supply chain, thereby increasing our bargain ability to get a better pricing and reducing our business risk to possible price fluctuations.
 
Zhengzhou Aluminum is the sole shareholder of our operating VIE, Shensheng. Prior to third quarter of 2011, we purchased majority of raw materials from Zhengzhou Aluminum pursuant to competitively-priced supply contracts or bidding arrangements.
 
Management decided to develop additional supply sources to reduce the risk of concentrated suppliers and eliminate this type of related party transactions. We now purchase aluminum mainly from third-party trading companies at market price. We plan to continue to diversify our supplier sources.
 
Markets
 
The output of aluminum foil production in China has increased dramatically over the past ten years.  This has mostly been driven by increasing demand from both Chinese and overseas markets. In 2009, aluminum foil manufacturers totaled more than 150 with an aggregate annual output of 1650 kilotons. Over the past 6 years, the aluminum foil output in China has grown at a rate of 25%. Since 2006, China has ranked as No.1 in terms of aluminum foil capacity and output.
 
 
 
Data Source: China nonferrous metal industry association
 
The growth of China’s economy and various downstream industries which require aluminum foil has fueled the growth of demand for aluminum foil in China. The growth began to accelerate from 2001, reaching 830 kilotons in 2007. The demand mainly comes from heat transmission (47.5%), packaging (17.2%), capacitor (15.9%) and the other applications (19.4%). Although the demand has been increasing steadily, the average per capita consumption rate in China is still lower than the average level of the world.
 
 
Data Source: Report of China Aluminum Processing and Aluminum Market compiled by Sunlight Metal Consulting (Beijing) Co., LTD
 
 
 
In 2004 China became a net exporter of aluminum foil. Currently, Chinese aluminum foil manufacturers still do not have the technology and engineering quality of their Western competitors. As a result, Chinese industry imports much of the high end aluminum foil which is produced using more advanced techniques.
 
 
Data Source: General Administration of Customs of the People’s Republic of China
 
In China the aluminum foil industry is very fragmented and numerous manufacturers exist with no dominant leader. The price is determined by the aggregate demand and supply of the industry. In 2009, there were nearly 150 different companies operating in the industry with an average output of 10 kilotons. In certain low value-added segments, competition is extremely intensive. The global financial crisis in 2008 results in a reshuffle of the industry. Many small manufacturers went out of business, and large and well-capitalized businesses gained shares in terms of volume.
 
The industry can be categorized into multiple product segments. Most of large producers focus on a few segments. Although fragmented as a whole, producers can take a leadership role in their respective segments. Chinese producers compete against each other on cost, R&D capabilities and improved engineering process which can enable them to gain market share in China as well as in the global industry. It is an industry with high entry barriers, which result mainly from the complexity of production technology and the large investment involved to begin operations.
 
Distribution Methods and Customers
 
Our products are sold domestically and internationally. For our international sales, we sell our products to the exporters who then export our products to the Middle East, America, Europe and other areas. We provide customer service with quick response for all of our domestic and international customers, which has resulted in relatively high customer satisfaction. The table below lists our customers representing 10% or more of sales as of June 30, 2010.
 

   
Company
 
Amount ($)
   
% of total sales
 
  1  
Zhengzhou Aluminum Co., LTD
    10,415,782.15       23.6 %
  2  
Zhengzhou Longsheng Aluminum Co., LTD
    9,243,745.05       20.9 %
  3  
Zhengzhou Haifeng Aluminum Co., LTD
    6,161,264.74       13.96 %
  4  
Guangzhou Huafeng Aluminum Foil Product Co., LTD
    4,563,279.13       10.34 %
Total
        30,384,071.07       68.8 %
 
 
Zhengzhou Aluminum, the sole shareholder of Shensheng, is our main exporter. Starting from March 2010, we obtained our own export license and started conducting export business independently.
 
We have built a direct marketing system which includes door-to-door sales, telemarketing, online marketing and other forms of sales. The marketing team promotes products for domestic consumption as well as export.  Exporting of our products plays a very important role in our sales. We have built a good relationship with exporters that help to market our products overseas. During our most recently completed two fiscal years, exports of our products have accounted for 23% to 30% of our revenues.  The table below lists the sales percentage of main foreign areas in recent two years:
 
     
July 2008 to
June 2009
   
July 2009 to
June 2010
 
 
Total Sales (in tons)
    5233       8214  
 
Exports (in tons)
    1586       1853  
Total
      30 %     23 %

Our exports are generally sold in Europe and the Middle East.  The following table lists exports of our products to the two regions as a percentage of our total sales:
 
   
July 2008 to
June 2009
   
July 2009 to
June 2010
 
Sales to Middle East
    11 %     18 %
Sales to Europe
    19 %     0 %
 
Competition
 
We face competition from various aluminum foil manufacturers ranging from small, private businesses to large, state-owned enterprises.
 
Many of our competitors have longer operating histories, better brand recognition and greater financial resources than we do.  In order for us to successfully compete in our industry we will need to:
 
·  
Maintain the quality of our products;
 
·  
continue developing our relationships with domestic and international distributors; and
 
·  
increase our financial resources.
 
However, there can be no assurance that even if we implement these strategies we will be able to compete effectively with other companies in our industry.
 
We expect that the competition in China aluminum foil market will be concentrated on the following aspects:
 
1)  
Product quality. Product quality is the most important characteristic that differentiates one product over its competing products. Superior quality products not only command price premium, but also take more market shares in the long term.
2)  
Cost control. By improving production technology and yield, lowering production cost, the enterprises will gain an advantage in the competition.
3)  
Customer service. What an enterprise provides to the customers should be not only the products, but also added value project, which will help the enterprise get returning customers and stable orders.
4)  
Branding. Companies making brand products typically charge a premium over non-brand name competitors. Moreover, brand is closely related to customer loyalty.

We believe that we will be able to effectively compete in our industry because we focus on our aluminum foil production process and R&D in order to improve the quality of our equipment, product, and production. We are currently one of the leading suppliers of aluminum foil in the Chinese market. We have also enjoyed competitive advantages from the synergies of working closely with our largest supplier and sole shareholder: Zhengzhou Aluminum.
 
 
Intellectual Property
 
We have filed for the protection of our name with the relevant Chinese authorities.  Zhengzhou Aluminum has also filed for the protection of the trademarks and patents which they have authorized us to use under the agreements described below.
 
We entered into two intellectual property contracts with Zhengzhou Aluminum, our sole shareholder. According to these contracts, Zhengzhou Aluminum authorizes us to use one registered patent, eight utility models and the trademark of ‘Zhong Yuan’ for free from March 2008 to March 2017. Zhengzhou Aluminum bears the annual fees of the patent and the utility models, and we cover the costs of technical support provided to us by Zhengzhou Aluminum in connection with the usage of the patent and utility models.
 
The patent, which is a shortened production technique for the production of ultrathin aluminum foil was registered in January 2008. The eight utility models were registered separately from August to October, 2007. The registered period of the trademark is from March 2008 to March 2018.  Our authorized rights relating to the patent, the utility models and the trademark are properly protected by patent law, trademark law, contract law and relevant regulations of China.
 
Research and Development
 
We did not incur any research and development expenses for the years ended June 30, 2010 and 2009.
 
Reports to Security Holders
 
We are subject to the reporting and other requirements of the Exchange Act and we intend to furnish our shareholders with annual reports containing financial statements audited by our independent auditors and to make available quarterly reports containing unaudited financial statements for each of the first three quarters of each year.
 
The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549.  The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.  The address of that site is www.sec.gov.
 
Government Regulations
 
Members of the aluminum foil industry participate in the Nonferrous Metal Processing Association. The national industrial policy is set by the National Development and Reform Committee (“NRDC”), which regularly issues “Industry Structure Adjustment Guidelines”. These guidelines specify which industry is to be supported, limited, or eliminated by the national industrial policy.
 
The primary industrial and economic policies for the aluminum foil industry include:
 
Rules to accelerate the aluminum industry structure adjustment
 
The NRDC and the Ministry of Finance issued Rules to Accelerate Aluminum Industry Structure Adjustment to specify the objectives for the structure adjustment of aluminum processing industry. It requires that by end of 2010 the ratio of aluminum sheet/plate/foil to aluminum extrusion reaches 6:4, industrial aluminum extrusion to construction aluminum extrusion 7:3, light gauge foils to medium gauge foils 4:6, and that out-of –dated production facilities are to be replaced by advanced production facilities.
 
 
 
Entrance Condition for Aluminum Industry
 
The NDRC issued Entrance Condition for Aluminum Industry, specifying detailed criteria for new entry to this industry with regard to production facility, energy and resource consumption, environment protection, land usage, production safety, etc. It stipulates that the new projects should focus on the production of aluminum sheet, plate, foil and extrusions.
 
Environmental Protection Laws and Regulations
 
The Ministry of Environmental Protection of the People’s Republic of China is responsible for uniform supervision and control of environmental protection in China. It formulates national environmental quality and discharge standards and monitors China’s environmental system. Environmental protection bureaus at the county level or above are responsible for environmental protection within their respective jurisdictions.
 
Environmental regulations require companies to file an environmental impact report with the relevant environmental bureau for approval before undertaking the construction of a new production facility or any major expansion or renovation of an existing production facility. New facilities built pursuant to this approval are not permitted to operate until the relevant environmental bureau has performed an inspection and is satisfied that the facilities are in compliance with environmental standards.
 
The environmental protection law requires that facilities that produce pollutants or other hazards to incorporate environmental protection measures in their operations and establish an environmental protection responsibility system. Such system includes adoption of effective measures to control and properly dispose of waste gases, water and residue, dust or other waste materials. Any entity that discharges pollution must registers with the relevant environmental protection authority.
 
Penalties for breaching the Environmental Protection Law include a warning, payment of damages, and imposition of a fine. Any entity undertaking a construction project that fails to install pollution prevention and control facilities in compliance with environmental standards for a construction project may be ordered to suspend production or operation and fined. Criminal liability may be imposed for a material violation of environmental laws and regulations that causes loss of property or personal casualty.
 
Effect of Environmental Regulations
 
As we conduct our manufacturing activities in China, we are subject to the requirements of Chinese environmental laws and regulations on air emission, waste water discharge, solid waste and noise. We aim to comply with environmental laws and regulations. We are not subject to any admonitions, penalties, investigations or inquiries imposed by the environmental regulators, nor are we subject to any claims or legal proceedings to which we are named as defendant for violation of any environmental law or regulation. We do not have any reasonable basis to believe that there is any threatened claim, action or legal proceedings against us that would have a material adverse effect on our business, financial condition or results of operations.
 
We expect to comply with all applicable laws, rules and regulations relating to our business, and at this time, we do not anticipate incurring any material capital expenditures to comply with any environmental regulations or other requirements.
 
While our intended projects and business activities do not currently violate any laws, any regulatory changes that impose additional restrictions or requirements on us or on our potential customers could adversely affect us by increasing our operating costs or decreasing demand for our products or services, which could have a material adverse effect on our results of operations.
 
Employees
 
As of March 18, 2011, we employed a total of full time 146 employees and no part time employees.
 
We comply with the labor laws and regulations of PRC and enter labor contracts with all the employees. We have not experienced any significant labor disputes or any difficulty in recruiting staff for our operations. Our employees in China participate in a compulsory pension plan organized by the Chinese government. We are required to make monthly contributions to the plan for each employee at the rate of 20% of his or her average monthly salary. In addition, according to laws and regulations of China, we are required to cover our employees in China with other types of social insurance. We believe that we are in material compliance with the relevant Chinese laws.
 
 
 
 
Directors
 
The following table sets forth the name and age of each member of our board of directors, the positions and offices held by each director with us, and the period during which the director has served as one of our directors. Directors serve until the election and qualification of their successors.
 
Name
 
Age
 
Position
 
Director Since
Congfu Li
 
51
 
Director, Chairman of the Board
 
2010
Chuanhong Xie
 
42
 
President, Chief Executive Officer, Secretary, Chief Financial Officer and Treasurer
   
Guobin Wang
 
42
 
Director
 
2010
Junlin Zhang
 
46
 
Director
 
2010
 
Congfu Li, Director and Chairman of the Board
 
Mr. Li has experience with a varied collection of business ventures as an entrepreneur, employee and management.  Most recently, Mr. Li has taken on entrepreneurial and advisory roles with businesses and associated organizations involved in the processing of aluminum.  Since 2005 Mr. Li has acted as the Chairman and General Manager of Zhengzhou Aluminum Co., Ltd. where he chairs board of director meetings and is in charge of the daily operations of the company.  Since 2008 Mr. Li has also acted as the Chairman and General Manager of Zhengshou Shensheng Aluminum Co., LTD., our VIE, where he also chairs board of director meetings and is in charge of the daily operations of the company.
 
Since 2008, Mr. Li has also acted as the Chairman of the Henan Aluminum Processing Association as well as a standing director of the China Aluminum Processing Association where he attends conferences and activities held by the associations.
 
Mr. Li’s experience in the field of aluminum processing and successful entrepreneurial history are the reasons we have appointed him to our board of directors.
 
Chuanhong Xie, President, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer
 
From 2000 to February 2003, Mr. Xie served as the deputy director of the finance department for Zhengzhou Aluminum, where he was involved in the company’s financial management.  From February 2003 to March 2005, Mr. Xie served as the administrative manager for Zhengzhou Aluminum, where he managed the executive body of the company and from March 2005 to February 2008 he was promoted to the position of director of the board and board secretary. In this position he was responsible for the management of Board of Directors and the daily production operation and management of Zhengzhou Aluminum. In February 2008 he was additionally appointed as deputy general management of Shensheng, our VIE where he has been involved in the management of the daily operations of the company.
 
We have appointed Mr. Xie as our officer due to the fact that he has been engaged in the operation and management work in the aluminum industry for a long time. He is very familiar with the aluminum industry and has a wealth of experience in the management of aluminum enterprises.
 
Guobin Wang, Director
 
From January 2006 to July 2008 Mr. Wang served as the manager of the human resources department for Zhengzhou Aluminum.  In July 2008, Mr. Wang was additionally appointed as director of the board and director of the shareholder’s committee.  In August 2009, Mr. Wang also became the chairman of the labor union for Zhengzhou Aluminum.  We have appointed Mr. Wang to our board of directors due to his familiarity with human resources issues and specifically human resources issues as they relate to operations of a aluminum producers and processors.
 
 
 
Junlin Zhang, Director
 
Mr. Zhang has served as the chairman of Henan Jiuzhou Antiseptic Co., Ltd,  as well as the deputy director of Housing and Urban & Rural Construction Bureau of Changyuan. He also currently serves as the deputy president of China Antiseptic Technology Association as well as the standing director of China Enterprise Confederation and China Enterprise Association.  In Nov 2005, at the 3rd China International Antiseptic Congress, Mr. Zhang was awarded the Chinese Entrepreneurs Integrity, Chinese Antiseptic Master, Top 10 Entrepreneurs Antiseptic, Advanced Individual in Antiseptic prizes.  In Feb 2006 and Feb 2007, he was awarded the Yearly Good Corporate Manager prize by the Henan Construction Department. In Mar 2007, he was awarded Outstanding Contribution in China Antiseptic Industry. In Apr 2009, he was awarded Leading Person in China Antiseptic Industry. In Jul 2010, he was awarded "Excellence in Engineering" by Bureau of Human Resources of Change County, Henan.
 
Mr. Zhang’s business experience and ability to excel in management and director roles are the reasons he was appointed to our board of directors.
 
Other Directorships
 
None of our directors hold any other directorships in any company with a class of securities registered pursuant to section 12 of the Exchange Act or subject to the requirements of section 15(d) of such Act or any company registered as an investment company under the Investment Company Act of 1940.
 
Director Independence, Board of Directors and Director Nominees
 
We are not required to have any independent directors.  Since our Board of Directors does not include a majority of independent directors, the decisions of the Board regarding director nominees are made by persons who have an interest in the outcome of the determination.  The Board will consider candidates for directors proposed by security holders, although no formal procedures for submitting candidates have been adopted.  Unless otherwise determined, at any time not less than 90 days prior to the next annual Board meeting at which a slate of director nominees is adopted, the Board will accept written submissions from proposed nominees that include the name, address and telephone number of the proposed nominee; a brief statement of the nominee’s qualifications to serve as a director; and a statement as to why the security holder submitting the proposed nominee believes that the nomination would be in the best interests of our security holders.  If the proposed nominee is not the same person as the security holder submitting the name of the nominee, a letter from the nominee agreeing to the submission of his or her name for consideration should be provided at the time of submission.  The letter should be accompanied by a résumé supporting the nominee’s qualifications to serve on the Board, as well as a list of references.
 
The Board identifies director nominees through a combination of referrals from different people, including management, existing Board members and security holders.  Once a candidate has been identified, the Board reviews the individual’s experience and background and may discuss the proposed nominee with the source of the recommendation.  If the Board believes it to be appropriate, Board members may meet with the proposed nominee before making a final determination whether to include the proposed nominee as a member of the slate of director nominees submitted to security holders for election to the Board.
 
Some of the factors which the Board considers when evaluating proposed nominees include their knowledge of and experience in business matters, finance, capital markets and mergers and acquisitions.  The Board may request additional information from each candidate prior to reaching a determination, and it is under no obligation to formally respond to all recommendations, although as a matter of practice, it will endeavor to do so.
 
Conflicts of Interest
 
Our directors are not obligated to commit their full time and attention to our business and, accordingly, they may encounter a conflict of interest in allocating their time between our operations and those of other businesses.  In the course of their other business activities, they may become aware of investment and business opportunities which may be appropriate for presentation to us as well as other entities to which they owe a fiduciary duty.  As a result, they may have conflicts of interest in determining to which entity a particular business opportunity should be presented.  They may also in the future become affiliated with entities that are engaged in business activities similar to those we intend to conduct.
 
 
 
In general, officers and directors of a corporation are required to present business opportunities to the corporation if:
 
·  
the corporation could financially undertake the opportunity;
 
·  
the opportunity is within the corporation’s line of business; and
 
·  
it would be unfair to the corporation and its stockholders not to bring the opportunity to the attention of the corporation.
 
We have adopted a code of ethics that obligates our directors, officers and employees to disclose potential conflicts of interest and prohibits those persons from engaging in such transactions without our consent.
 
Significant Employees
 
Other than as described above, we do not expect any other individuals to make a significant contribution to our business.
 
Family Relationships
 
There are no family relationships among any of our officers or directors.
 
Involvement in Certain Legal Proceedings
 
To the best of our knowledge, none of our directors or executive officers has, during the past ten years:
 
·  
been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
 
·  
had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
 
·  
been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;
 
·  
been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
 
·  
been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
 
·  
been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
 
Except as set forth in our discussion below in "Certain Relationships and Related Transactions" none of our directors, director nominees or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.
 
 
Audit Committee
 
We do not currently have an audit committee or a committee performing similar functions. The Board of Directors as a whole participates in the review of our financial statements and disclosure.
 
Code of Ethics
 
We adopted a code of ethics that applies to our officers, directors and employees. 
 
Executive Officers
 
The following table sets forth the name and age of each of our executive officers, the positions and offices held by each executive officer with us, and the period during which the executive officers has served as one of our executive officers.  All officers serve at the pleasure of the board of directors.
 
Name
 
Age
 
Position
 
Officer Since
Chuanhong Xie
 
42
 
President, Chief Executive Officer, Secretary, Chief Financial Officer and Treasurer
 
2010

Chuanhong Xie’s biographical summary is included under “— Directors” above.
 
Consultants
 
We may retain compensation consultants to the extent we deem it necessary and appropriate.  We do not expect to delegate our authority and responsibility to make management decisions to consultants or any other persons, or for any consultant to have any discretionary authority or the authority to bind us in any material respect.
 
 
Transactions with Related Persons
 
On November 8, 2010, pursuant to the closing of a share exchange transaction with Lucky Express, we issued:
 

3,136,690 shares of our common stock to Congfu Li, our Director;

1,692,270 shares to Junlin Zhang, our Director;

324,240 shares to Guobin Wang, our Director;

126,600 shares to Chuanhong Xie, our President, CEO, Secretary, CFO, Treasurer; and

1,571,130 shares to Chunlei Sheng, our affiliate.
 
 
Additionally, as of June 30, 2010 we owed $8,052,813 to Zhengzhou Aluminum, the sole shareholder of our VIE for raw material supplies and undertook the following transactions with Zhengzhou Aluminum (“ZA”) during the normal course of business during the years ended June 30, 2010 and June 30, 2009.
 
   
Year Ended June 30,
 
Type of transaction
 
2010
   
2009
 
Sales
   
12,076,356
     
7,610,378
 
Purchase of raw material
   
49,482,529
     
16,865,063
 
Purchase of Utility
   
887,240
     
819,640
 
Other purchases
   
289,981
     
427,007
 
Prepayments of Building paid by ZA
   
493,307
     
336,656
 
Salary paid by ZA
   
445,472
     
384,483
 
Cash Receipts/(Advance)
   
7,795,921
     
-
 
Leasing equipment from ZA
   
25,021
     
24,897
 
Repair services provided by ZA
   
37,400
     
37,213
 
Imputed rental expense for Use of offices, plants and equipments of ZA
   
162,531
     
161,722
 
Others
   
269,046
     
-
 

We used the manufacturing plant and offices provided by Zhengzhou Aluminum for free for the years ended June 30, 2010 and 2009. The imputed rental expenses were $73,406 and $73,041 for the years ended June 30, 2010 and 2009, and were included in the rent expense and additional paid in capital of the year.
 
We leased manufacturing equipment from Zhengzhou Aluminum under a one year lease agreement for the period from January 1, 2009 to December 31, 2009. For the years ended June 30, 2010 and 2009, the rental expenses paid were $25,021 and $24,897 respectively, and were included in the rental expense of the year and the imputed rental expenses were $89,125 and $88,682 for the years ended June 30, 2010 and 2009 and were included in the rent expense and additional paid in capital of the year.
 
For the years ended June 30, 2010 and 2009, Zhengzhou Aluminum paid the payment of $493,307and $336,656 for the building located in Zhengzhou Hi-tech Development Area and the land use right to which the building is attached on our behalf.
 
There have been no other transactions since the beginning of our last fiscal year or any currently proposed transactions in which we are, or plan to be, a participant and the amount involved exceeds $120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which any related person had or will have a direct or indirect material interest.
 
Review, Approval or Ratification of Transactions with Related Persons
 
Although we have not adopted formal procedures for the review, approval or ratification of transactions with related persons, we adhere to a general policy that such transactions should only be entered into if they are on terms that, on the whole, are no more favorable, or no less favorable, than those available from unaffiliated third parties and their approval is in accordance with applicable law.  
 
 
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters
 
The following table sets forth, as of March 18, 2011, information concerning the beneficial ownership of shares of our common stock held by our directors, our executive officers, our directors and executive officers as a group, and each person known by us to be a beneficial owner of 5% or more of our outstanding common stock.
 
Beneficial ownership is determined according to the rules of the SEC.  Beneficial ownership means that a person has or shares voting or investment power of a security and includes any securities that person has the right to acquire within 60 days after the measurement date, such as pursuant to options, warrants or convertible notes.  Except as otherwise indicated, we believe that each of the beneficial owners of our common stock listed below, based on information each of them has given to us, has sole investment and voting power with respect to such beneficial owner’s shares, except where community property or similar laws may apply.  For purposes of the column for shares underlying convertible securities, in accordance with rules of the SEC, shares of our common stock underlying securities that a person has the right to acquire within 60 days of March 18, 2011 are deemed to be beneficially owned by such person for the purpose of computing the percentage ownership of that person, but we do not treat them as outstanding for the purpose of computing the ownership percentage of any other person.
 
 

 
Name and Address of Beneficial Owner (1)
 
Total
Outstanding
   
Percent (6)
Directors and Executive Officers
           
Congfu Li(2)
   
3,228,690
     
32
%
Chuahong Xie (3)
   
126,600
     
1
 
Guobin Wang (4)
   
324,240
     
3
 
Junlin Zhang (5)
   
1,692,270
     
17
%
Directors and executive officers as a group (9 persons)
   
5,371,800
     
53
%
                 
5% Beneficial Owners
               
Chunlei Sheng
   
1,571,130
     
16
%
                 
 
* Less than 1%

(1) The address for each Beneficial Owner is Building 35, No. 1 Cuizhou Road, Hi-Tech, Exploit Area, Zhengzhou City, Henan PRC.
(2) Congfu Li is a Director of the Company and our Chairman of the Board.
(3) Chuanhong Xie is our President, Chief Executive Officer, Secretary, Chief Financial Officer and Treasurer.
(4) Guobin Wang is a Director of the Company.
(5) Junlin Zhang is a Director of the Company.
(6) Based on 10,201,011 issued and outstanding shares of our common stock.
 
Changes in Control
 
As of March 18, 2011 we had pension plans or compensatory plans or other arrangements which provide compensation in the event of termination of employment or a change in our control.
 
Executive Compensation
 
The following summary compensation table sets forth the total annual compensation paid or accrued by Lucky Express to or for the account of our principal executive officer during the last completed fiscal year and each other executive officer whose total compensation exceeded $100,000 in either of the last two fiscal years:
 
 
Name and Principal Position
Year
Salary
($)
Total
($)
Congfu Li (2)
2009
29,216
29,216
2010
29,363
29,363
     
Chuanhong Xie (3)
2009
21,912
21,912
2010
22,022
22,022

(1) We have omitted certain columns in the summary compensation table pursuant to Item 402(a)(5) of Regulation S-K as no compensation was awarded to, earned by, or paid to any of the executive officers or directors required to be reported in that table or column in any fiscal year covered by that table.
(2) Congfu Li has served as our President, Chief Executive Officer, Chief Financial Officer, Treasurer and Secretary from September 2, 2010 to November 8, 2010.
(3) Chuanhong Xie has served as our President, Chief Executive Officer, Chief Financial Officer, Treasurer and Secretary from November 8, 2010.
 
 
 
Option Grants
 
As of March 18, 2011 we had not granted any options or stock appreciation rights to our named executive officers or directors.
 
Management Agreements
 
We have not yet entered into any consulting or management agreements with any of our current executive officers or directors.
 
Compensation of Directors
 
Our directors did not receive any compensation for their services as directors from our inception to March 18, 2011.  We have no formal plan for compensating our directors for their services in the future in their capacity as directors, although such directors are expected in the future to receive options to purchase shares of our common stock as awarded by our Board of Directors or by any compensation committee that may be established.
 
Pension, Retirement or Similar Benefit Plans
 
There are no arrangements or plans in which we provide pension, retirement or similar benefits to our directors or executive officers.  We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the Board of Directors or a committee thereof.
 
Compensation Committee Interlocks and Insider Participation

We do not currently have a compensation committee of the Board of Directors or a committee performing similar functions. The Board of Directors as a whole participates in the consideration of executive officer and director compensation.  None of the members of our Board of Directors is an officer or employee of our company.  None of our executive officers serve, or in the past year has served, as a member of the board of directors or Compensation Committee of any entity that has one or more executive officers serving on our Board of Directors.
 
 
This prospectus relates to the resale, by the selling shareholders named below, of up to 10,100,000 shares of our common stock issued to the selling shareholders.
 
The following table sets forth the number of shares beneficially owned by each of the selling shareholders as of March 18, 2011.  Except as disclosed under this prospectus, none of the selling shareholders has held a position or office or had a material relationship with us within the past three years other than as a result of the ownership of our common stock or other securities of ours.  The selling shareholders may offer the shares under this prospectus from time to time and may elect to sell none, some or all of the shares set forth next to their names.
 
Beneficial ownership is determined in accordance with rules promulgated by the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. This table is based upon information supplied to us by the selling shareholders and information filed with the SEC. Except as otherwise indicated, we believe that each selling shareholder has sole voting and investment power with respect to all shares of the common stock shown as beneficially owned by it. The percentage of the selling shareholders’ beneficial ownership after the offering is based on 10,100,100 shares of our common stock issued and outstanding.
 
We may amend or supplement this prospectus from time to time in the future to update or change this list and shares which may be resold.
 

Selling Shareholder 
 
Number of Shares
of Common Stock
Beneficially Owned
Prior to the Offering
   
Percentage of
Shares Beneficially
Owned Prior to the Offering (1)
 
Number of Shares
Registered for
Sale Hereby
 
Number of Shares
of Common Stock
to be Beneficially
Owned after
Completion of
the Offering (1)
 
Congfu Li (2)
 
3,231,690
  31.68%  
3,231,690
 
0
 
Chuahong Xie(3)
 
126,600
  1.24%  
126,600
 
0
 
Guobin Wang (4)
 
324,240
  3.18%  
324,240
 
0
 
Junlin Zhang. (5)
 
1,692,270
  16.59%  
1,162,270
 
0
 
Chunlei Sheng(6)
 
 1,571,130
  15.40%  
1,571,130
 
0
 
Dejun Shang
 
329,710
  3.23%  
329,710
 
0
 
Yan Xu
 
329,710
  3.23%  
329,710
 
0
 
Jinqiao Zheng
 
218,770
  2.14%  
218,770
 
0
 
Fengqin Zhao
 
75,750
  *  
75,750
 
0
 
Kunlun Wang
 
116,230
  1.14%  
116,230
 
0
 
Wenling Xu
 
74,250
  *  
74,250
 
0
 
Yu Shi
 
10,000
  *  
10,000
 
0
 
Qianying Han
 
254,110
  2.49%  
254,110
 
0
 
Hongbin Wang
 
254,110
  2.49%  
254,110
 
0
 
Wei Song
 
254,110
  2.49%  
254,110
 
0
 
Yibo Zhang
 
80,150
  *  
80,150
 
0
 
Zongchao Zhao
 
68,310
  *  
68,310
 
0
 
Jianwei Dong
 
72,860
  *  
72,860
 
0
 
Jinlian Deng
 
73,770
  *  
73,770
 
0
 
Gaoyiang Wang
 
55,560
  *  
55,560
 
0
 
Rudong Yan
 
39,160
  *  
39,160
 
0
 
Changzheng Zhao
 
40,080
  *  
40,080
 
0
 
Haijun Ren
 
44,630
  *  
44,630
 
0
 
Quanqi Jin
 
66,490
  *  
66,490
 
0
 
Zhongqiang Ren
 
41,900
  *  
41,900
 
0
 
Dongwei Zhang
 
43,720
  *  
43,720
 
0
 
Baozhu Yang
 
45,450
  *  
45,540
 
0
 
Renhe Liu
 
42,810
  *  
42,810
 
0
 
Baomin Yang
 
40,990
  *  
40,990
 
0
 
Chunshan Zhao
 
53,740
  *  
53,740
 
0
 
Bo Lian
 
58,290
  *  
58,290
 
0
 
Shanhe Zhang
 
40,990
     
40,990
 
0
 
Wei Gu
 
71,950
  *  
71,950
 
0
 
Yanbo Wang
 
40,080
  *  
40,080
 
0
 
Baoying Wang
 
84,700
  *  
84,700
 
0
 
Yu Cui
 
126,600
 
1.24%
 
126,600
 
0
 
Constant Growth
 
1,250
  *  
1,250
 
0
 
Moreau Ventures
 
1,250
  *  
1,250
 
0
 
Richlink
 
1,500
  *  
1,500
 
0
 
Richard L. Anslow
 
600
     
600
  0  
Gregg E. Jaclin
 
400
     
400
  0  
                   
TOTAL
 
10,100,000
 
99.01%
 
10,100,000
 
0
 

* Less than 1%
 
(1)          We do not know when or in what amounts the selling shareholders will offer shares for sale, if at all. The selling shareholders may sell any or all of the shares included in and offered by this prospectus. Because the selling shareholder may offer all or some of the shares pursuant to this offering, we cannot estimate the number of shares that will be held by the selling shareholders after completion of the offering. However, for purposes of this table, we have assumed that after completion of the offering all of the securities registered will be sold by the selling shareholders. The percentage of shares to be beneficially owned after completion of the offering is calculated on the basis of 10,201,011 shares of our common stock issued and outstanding following completion of the offering and sale by the selling shareholders.
 
 
 
(2)           Congfu Li is a Director of the Company and our Chairman of the Board.
 
(3)           Chuanhong Xie is our President, Chief Executive Officer, Secretary, Chief Financial Officer and Treasurer.
 
(4)           Guobin Wang is a Director of the Company.
 
(5)           Junlin Zhang is a Director of the Company.
 
 
General
 
Our authorized capital stock consists of 100,000,000 shares of common stock, $0.001 par value and 10,000,000 shares of preferred stock, $0.001 par value.
 
Common Stock
 
As of March 18, 2011 we had 10,201,011 shares of our common stock issued and outstanding.
 
Holders of our common stock have no preemptive rights to purchase additional shares of common stock or other subscription rights.  Our common stock carries no conversion rights and is not subject to redemption or to any sinking fund provisions.  All shares of our common stock are entitled to share equally in dividends from sources legally available, when, as and if declared by our Board of Directors, and upon our liquidation or dissolution, whether voluntary or involuntary, to share equally in our assets available for distribution to our security holders.
 
Our Board of Directors is authorized to issue additional shares of our common stock not to exceed the amount authorized by our Articles of Incorporation, on such terms and conditions and for such consideration as our Board may deem appropriate without further security holder action.
 
Voting Rights
 
Each holder of our common stock is entitled to one vote per share on all matters on which such stockholders are entitled to vote.  Since the shares of our common stock do not have cumulative voting rights, the holders of more than 50% of the shares voting for the election of directors can elect all the directors if they choose to do so and, in such event, the holders of the remaining shares will not be able to elect any person to our Board of Directors.
 
Dividend Policy
 
Holders of our common stock are entitled to dividends if declared by our Board of Directors out of funds legally available for the payment of dividends.  From our inception to March 18, 2011 we did not declare any dividends.
 
We do not intend to issue any cash dividends in the future.  We intend to retain earnings, if any, to finance the development and expansion of our business.  However, it is possible that our management may decide to declare a stock dividend in the future.  Our future dividend policy will be subject to the discretion of our Board of Directors and will be contingent upon future earnings, if any, our financial condition, our capital requirements, general business conditions and other factors.
 
Preferred Stock
 
We are authorized to issue up to 10,000,000 shares of preferred stock, par value $0.001.  As of March 18, 2011, we did not have any issued and outstanding shares of preferred stock.  Under our Articles of Incorporation, our Board of Directors has the power, without further action by the holders of common stock, to determine the relative rights, preferences, privileges and restrictions of the preferred stock, and to issue the preferred stock in one or more series.  The designation of rights, preferences, privileges and restrictions could include preferences as to liquidation, redemption and conversion rights, voting rights, dividends or other preferences, any of which may be dilutive of the interest of the holders of our common stock.
 
 
Listing
 
Our common stock is not traded on any exchange. We intend to engage a market maker to apply to have our common stock quoted on the OTC Bulletin Board once our shareholders have free trading shares; however, there is no guarantee that we will obtain a listing.
 
There is currently no trading market for our common stock and there is no assurance that a regular trading market will ever develop. OTC Bulletin Board securities are not listed and traded on the floor of an organized national or regional stock exchange. Instead, OTC Bulletin Board securities transactions are conducted through a telephone and computer network connecting dealers. OTC Bulletin Board issuers are traditionally smaller companies that do not meet the financial and other listing requirements of a regional or national stock exchange.
 
To have our common stock listed on any of the public trading markets, including the OTC Bulletin Board, we will require a market maker to sponsor our securities. We have not yet engaged any market maker to sponsor our securities and there is no guarantee that our securities will meet the requirements for quotation or that our securities will be accepted for listing on the OTC Bulletin Board. This could prevent us from developing a trading market for our common stock.
 
 
Each selling shareholder of the common stock and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of common stock included in this prospectus on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. A selling shareholder may use any one or more of the following methods when selling shares:
 
·  
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
 
·  
block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
 
·  
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
 
·  
an exchange distribution in accordance with the rules of the applicable exchange;
 
·  
privately negotiated transactions;
 
·  
settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a part;
 
·  
broker-dealers may agree with the selling shareholders to sell a specified number of such shares at a stipulated price per share;
 
·  
through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
 
·  
a combination of any such methods of sale; or
 
·  
any other method permitted pursuant to applicable law.
 
The selling shareholders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus.
 
Broker-dealers engaged by the selling shareholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling shareholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with the Financial Industry Regulatory Authority’s, or FINRA, NASD Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA’s NASD IM-2440.
 
 
In connection with the sale of the common stock or interests therein, the selling shareholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the common stock in the course of hedging the positions they assume. The selling shareholders may also sell shares of the common stock short and deliver these securities to close out their short positions, or loan or pledge the common stock to broker-dealers that in turn may sell these securities. The selling shareholders may also enter into option or other transactions with broker-dealers or other financial institutions for the creation of one or more derivative securities that require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
 
The selling shareholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales.  
 
 We are paying the cost of registering the shares covered by this prospectus as well as various related expenses.
 
Because the selling shareholders may be deemed to be “underwriters” within the meaning of the Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act, including Rule 172 thereunder. In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this prospectus. There is no underwriter or coordinating broker acting in connection with the proposed sale by the selling shareholders of the shares registered hereunder.
 
Under applicable rules and regulations under the Exchange Act any person engaged in the distribution of the shares registered hereunder may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the selling shareholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of shares of the common stock by the selling shareholders or any other person. We will make copies of this prospectus available to the selling shareholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).
 
 
DLA Piper LLP (US), New York, New York, will issue a legal opinion as to the validity of the issuance of the shares of common stock offered under this prospectus.
 
 
The financial statements as of June 30, 2010 and 2009 incorporated by reference in this prospectus and elsewhere in the registration statement have been so included in reliance on the report of Malone Bailey LLP, an independent registered public accounting firm, upon the authority of said firm as experts in auditing and accounting.
 
 
No expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of the shares of common stock was employed on a contingency basis or had, or is to receive, in connection with the offering, a substantial interest, directly or indirectly, in the registrant nor was any such person connected with the registrant as a promoter, managing or principal underwriter, voting trustee, director, officer or employee.
 
 
 
MATERIAL CHANGES

There have been no material changes since June 30, 2010 that have not been described in this prospectus, our Quarterly Reports on Form 10-Q for the quarterly periods ended July 31, 2010 and October 31, 2010, and our Current Reports on Form 8-K, in each case as amended.
 
 
These reports include, but are not limited to, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports. Information on our website does not constitute part of and is not incorporated by reference into this prospectus, the registration statement of which it forms a part, or any other report we file or furnish with the SEC (except to the extent such information is expressly incorporated by reference herein or therein). Our SEC reports can also be accessed through the SEC’s website at www.sec.gov and may be read or copied at the SEC’s Public Reference Room located at 100 F Street, NE, Washington, D.C., 20549. Information regarding the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.
 
 
 
 
 
Page
   
Consolidated Financial Statements as of June 30, 2010 and 2009
 
Report of Independent Registered Public Accounting Firm with respect to audited consolidated financial statements as of June 30, 2010 and 2009
F-1
Consolidated Balance Sheets as of June 30, 2010 and 2009
F-2
Consolidated Statements of Income for the years ended June 30, 2010 and 2009
F-3
Consolidated Statements of Stockholders’ Equity for the years ended June 30, 2010 and 2009
F-4
Consolidated Statements of Cash Flows for the years ended June  30, 2010 and 2009
F-5
Notes to Consolidated Financial Statements
F-6
Interim Consolidated Financial Statements as of December 31, 2010 and June 30, 2010
 
Consolidated Balance Sheets as of December 31, 2010 and June 30, 2010
F-17
Consolidated Statements of Operations for the six months ended December 31, 2010 and December 31, 2009
F-18
Consolidated Statements of Cash Flows for the six months ended December 31, 2010 and December 31, 2009
F-19
Notes to Interim Consolidated Financial Statements
F-20



 
To the Board of Directors and Stockholders of
China Aluminum Foil Incorporation
Nevada, United States

We have audited the accompanying consolidated balance sheets of China Aluminum Foil Incorporation and its Subsidiaries (the “Company”) as of June 30, 2010 and 2009, and the related consolidated statements of operations and comprehensive income, changes in stockholders’ equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2010 and 2009 and the results of its operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
 
/s/ MaloneBailey, LLP
www.malonebailey.com
Houston, Texas

November 8, 2010


China Aluminum Foil Inc.
Consolidated Balance Sheets
 (Stated in US dollars)

 
 
As of June 30,
 
   
2010
   
2009
 
ASSETS
           
 Current assets
           
  Cash and cash equivalents
 
$
136,742
   
$
111,725
 
  Accounts receivable
   
5,003,961
     
63,945
 
  Advances to suppliers
   
1,412,365
     
74,488
 
  Other receivables
   
301,113
     
169,283
 
  Inventory, net
   
3,308,935
     
2,137,613
 
  Notes receivable
   
214,738
     
26,815
 
 Total Current Assets
   
10,377,854
     
2,583,869
 
 
         
 
 
 Prepayments for office building
   
1,278,768
     
755,476
 
 Property, plant and equipment, net
   
4,207,210
     
4,537,666
 
 Other assets
   
269,759
     
-
 
 
         
 
 
TOTAL ASSETS
 
$
16,133,591
   
$
7,877,011
 
LIABILITIES & SHAREHOLDERS’ EQUITY
         
 
 
 Current Liabilities
         
 
 
  Accounts payable
 
$
356,216
   
$
706,228
 
  Customer deposits
   
-
     
155,600
 
  Accrued expenses and other liabilities
   
102,966
     
57,287
 
  Taxes payable
   
62,015
     
6,482
 
  Due to related parties
   
8,059,244
     
727,292
 
 Total Current Liabilities
   
8,580,441
     
1,652,889
 
TOTAL LIABILITIES
 
$
8,580,441
   
$
1,652,889
 
 
         
 
 
SHAREHOLDERS’ EQUITY
         
 
 
   Preferred stock: $0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding
   Common Stock (par value $0.001 per share; 100,000,000 shares authorized; 100,000 shares issued and outstanding as of June 30, 2010 and 2009)
 
$
100
   
$
100
 
  Additional paid in capital
   
7,798,387
     
7,634,856
 
  Retained deficit
   
(390,518
)
   
(1,540,839
)
  Accumulated other comprehensive income
   
145,181
     
130,005
 
TOTAL SHAREHOLDERS’ EQUITY
   
7,553,150
     
6,224,122
 
                 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
   $
16,133,591
   
$
7,877,011
 
 
The accompanying notes are an integrated part of these consolidated financial statements
 

China Aluminum Foil Inc.
Consolidated Statements of Operations and Comprehensive Income
 (Stated in US dollars)

 
 
For the year ended June 30,
 
   
2010
   
2009
 
Sales revenue
 
$
44,133,557
   
$
17,053,296
 
Cost of goods sold
   
42,001,203
     
18,002,345
 
Gross Profit
   
2,132,354
     
(949,049
)
 
         
 
 
Operating expenses
         
 
 
  Selling expenses
   
397,170
     
149,515
 
  General and administrative expenses
   
580,494
     
330,135
 
Total operating expenses 
   
977,664
   
479,650 
 
                 
Income (loss) from operations
   
1,154,690
     
(1,428,699
)
  Interest income
   
713
     
1,185
 
  Bank charge
   
(5,082
)
   
(519
)
 
         
 
 
Income (loss) before income tax
   
1,150,321
     
(1,428,033
)
  Income tax
   
-
     
-
 
 
         
 
 
Net Income (Loss)
 
$
1,150,321
   
$
(1,428,033
)
 
         
 
 
Other comprehensive income
         
 
 
  Foreign currency translation adjustments
   
15,176
     
8,570
 
Total Comprehensive Income (Loss)
 
$
1,165,497
   
$
(1,419,463
)
 
The accompanying notes are an integrated part of these consolidated financial statements


China Aluminum Foil Inc.
Consolidated Statement of Shareholders’ Equity
(Stated in US dollars)
 
   
Common Stock
   
Additional
   
Accumulated Other Comprehensive
             
   
No. of Shares
   
Amount
   
Paid-in
Capital
   
Income
 (Loss)
   
Retained Earnings
   
Total
Equity
 
                                     
Balance as of June 30, 2008
   
100,000
     
100
     
7,473,134
     
121,435
     
(112,806
)
   
7,481,863
 
Net income
   
-
     
-
     
-
     
-
     
(1,428,033
)
   
(1,428,033
)
Leasing expense for using parent’s   equipments and premises
   
-
     
-
     
161,722
     
-
     
-
     
161,722
 
Foreign currency translation adjustment
   
-
     
-
     
-
     
8,570
     
-
     
8,570
 
Balance as of June 30, 2009
   
100,000
     
100
     
7,634,8569
     
130,005
     
(1,540,839
)
   
6,224,122
 
Net income
   
-
     
-
     
-
     
-
     
1,150,321
     
1,150,321
 
Leasing expense for using parent’s equipments and premises
   
-
     
-
     
163,531
     
-
     
-
     
163,531
 
Foreign currency translation adjustment
   
-