Hong Yuan Holding Group (HGYN)

[12yearplan]

Background and Reasons for the Reverse Stock Split; Potential Consequences of
the Reverse Stock Split



The Company’s common stock is quoted on the OTCQB under the symbol “CERP”. The
shares of common stock of the Company have traded at very low prices for some
time. As of February 15, 2013, the last reported closing price of the Company’s
common stock was $0.04. The Reverse Stock Split is intended to increase the per
share stock price. We believe that the Reverse Stock Split will make our common
stock more attractive to a broader range of institutional and other investors,
as we have been advised that the current market price of our common stock may
affect its acceptability to certain institutional investors, professional
investors and other members of the investing public. Many brokerage houses and
institutional investors have internal policies and practices that either
prohibit them from investing in low-priced stocks or tend to discourage
individual brokers from recommending low-priced stocks to their customers. In
addition, some of those policies and practices may function to make the
processing of trades in low-priced stocks economically unattractive to
brokers. Moreover, because brokers’ commissions on low-priced stocks generally
represent a higher percentage of the stock price than commissions on
higher-priced stocks, the current average price per share of common stock can
result in individual stockholders paying transaction costs representing a higher
percentage of their total share value than would be the case if the share price
were substantially higher. We believe that the Reverse Stock Split will make our
common stock a more attractive and cost effective investment for many investors,
which will enhance the liquidity of the holders of our common stock. In
addition, the Reverse Stock Split may enhance our ability to have our common
stock listed on a national securities exchange, such as the NASDAQ Capital
Market, where our common stock was previously listed, although we cannot provide
any assurance that our minimum bid price would be or remain following the
Reverse Stock Split over the minimum bid price requirement of any such stock
exchange or that we will otherwise quality for such a listing. Accordingly, we
believe that approval of the Reverse Stock Split is in the Company’s and our
stockholders’ best interests.