QUESTIONS STILL EMANATING FROM LIHUA INTERNATIONAL

Lihua International, Inc. (LIWA) began trading in the U.S. capital markets on September 4, 2009. LIWA consists of 2 Chinese subsidiaries, Danyang Lihua Electron Co., Ltd. (Lihua Electron) and Jiangsu Lihua Copper Industry Co., Ltd. (Lihua Copper).

In December 2009, I wrote an article citing material differences between LIWA’s financial reports filed with the China State Administration for Industry and Commerce (SAIC) and their financial statements filed with the U.S. Securities and Exchange Commission (SEC) for 2008. Select figures from the 2008 SAIC are listed below under the heading of “2008 SAIC.” In May 2010, I wrote an article indicating continued material differences in LIWA’s financial reports filed with the China State Administration of Taxation (SAT) and SEC financial statements for 2009. Select figures from the 2009 SAT are listed below under the heading “2009 SAT.” The original documentation and translated versions are available on-line at http://www.waldomushman.com/Lihua

Also in May 2010, LIWA published their alleged 2009 SAIC. The Chinese credit reporting agency that I used to obtain the 2008 SAIC and 2009 SAT continues to state that the 2009 SAIC are unavailable despite the 7 months lapse of time. The alleged 2009 SAIC listed figures from both 2008 and 2009. Select figures from the alleged 2009 SAIC are listed below under the headings “2008 on 2009 SAIC” and “2009 on 2009 SAIC.” The original documentation is available on-line at http://www.lihuaintl.com/PDF/pdfurl/Lihua%20Electron%20SAIC%5B1%5D.pdf and http://www.lihuaintl.com/PDF/pdfurl/Lihua%20Copper%20SAIC%20report%5B1%5D.pdf

Listed below is a comparison of the 2008 SAIC/2009 SAT and the alleged 2009 SAIC for both subsidiaries, Lihua Electron and Lihua Copper, and in two currencies, the Chinese Yuan (CNY) and the U.S. Dollar (USD). Although paid-up capital matches, the 2008 SAIC/2009 SAT and the alleged 2009 SAIC have major differences most everywhere else. Most shocking are the differences between the other equity and net profit (loss). Most telling are the differences between the profit tax. With such glaring differences, both the 2008 SAIC/2009 SAT and the alleged 2009 SAIC cannot be right. In order for the SEC financial statements, which reconcile to the alleged 2009 SAIC financial reports, to be correct, LIWA paid the Chinese government $1.8 million and $4.1 million for income taxes during 2008 and 2009, respectively. Yet, LIWA reported $0 in profit tax to the same Chinese government on their 2008 SAIC and 2009 SAT financial reports prior to the alleged filing of the 2009 SAIC financial reports.

In my opinion, this anomaly regarding the profit tax still cannot be reconciled and leads me to conclude that the SEC financial statements continue to be wrong.

Disclosure: Author is short LIWA.