##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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(Mark One)

|x | QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2007.



| ̈ | TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------

FOR THE TRANSITION PERIOD FROM  TO
.

Commission File Number 000-32860



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SHANGHAI CENTURY ACQUISITION
CORPORATION

(Exact name of registrant as specified in its charter)



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|                                               |  |                                     
|---------------------------------------------- |  | ------------------------------------
|Cayman Islands                                 |  | N/A                                 
|(State or other jurisdiction of incorporation) |  | (I.R.S. Employer Identification No.)

23rdFloor, Shun Ho Tower

24 - 30 Ice House Street

Central, Hong Kong SAR

China

(Address of principal executive offices)

(852) 2854-8989

(Registrants telephone number, including area code)



---

Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the Exchange Act) during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Larger accelerated filer ̈Accelerated filer ̈Non-accelerated filer  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  x    No ̈

As of June 30, 2007, 17,500,000 shares of common stock, par value $0.0005 per share, were issued and outstanding.



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##### Table of Contents

|                              |  |                                                                                                                                                                                                                                                                                                 |  |         
|----------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------
|                              |  |                                                                                                                                                                                                                                                                                                 |  | Page No.
|Part I. Financial Information |  |                                                                                                                                                                                                                                                                                                
|                              |  |                                                                                                                                                                                                                                                                                                
|Item 1                        |  | Financial Statements                                                                                                                                                                                                                                                                            |  |         
|                              |  |                                                                                                                                                                                                                                                                                                
|                              |  | Balance Sheets as at December 31, 2006 and June 30, 2007                                                                                                                                                                                                                                        |  | 3       
|                              |  |                                                                                                                                                                                                                                                                                                
|                              |  | Statements of Operations for the three-month period ended June 30, 2006, for the three-month period ended June 30, 2007, for the six-month period ended June 30, 2006, for the six-month period ended June 30,
2007 and for the period from April 25, 2005 (date of inception) to June 30, 2007 |  | 4       
|                              |  |                                                                                                                                                                                                                                                                                                
|                              |  | Statements of Shareholders Equity for the period from April 25, 2005 (date of inception) to December 31, 2005, for the year ended December 31, 2006 and for the six-month period ended June 30, 2007                                                                                           |  | 5       
|                              |  |                                                                                                                                                                                                                                                                                                
|                              |  | Statements of Cash Flows for the three-month period ended June 30, 2006, for the three-month period ended June 30, 2007, for the six-month period ended June 30, 2006, for the six-month period ended June 30,
2007 and for the period from April 25, 2005 (date of inception) to June 30, 2007 |  | 6       
|                              |  |                                                                                                                                                                                                                                                                                                
|                              |  | Notes to Unaudited Financial Statements                                                                                                                                                                                                                                                         |  | 7       
|                              |  |                                                                                                                                                                                                                                                                                                
|Item 2                        |  | Managements Discussion and Analysis and Results of Operations                                                                                                                                                                                                                                  |  | 20      
|                              |  |                                                                                                                                                                                                                                                                                                
|Item 3                        |  | Quantitative and Qualitative Disclosures About Market Risk                                                                                                                                                                                                                                      |  | 26      
|                              |  |                                                                                                                                                                                                                                                                                                
|Item 4T                       |  | Controls and Procedures                                                                                                                                                                                                                                                                         |  | 26      
|                              | 
|Part II. Other Information    |  |                                                                                                                                                                                                                                                                                                
|                              |  |                                                                                                                                                                                                                                                                                                
|Item 1A                       |  | Risk Factors                                                                                                                                                                                                                                                                                    |  | 26      
|                              |  |                                                                                                                                                                                                                                                                                                
|Item 2                        |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                                                                                                                                                                                     |  | 27      
|                              |  |                                                                                                                                                                                                                                                                                                
|Item 5                        |  | Other Information                                                                                                                                                                                                                                                                               |  | 27      
|                              |  |                                                                                                                                                                                                                                                                                                
|Item 6                        |  | Exhibits                                                                                                                                                                                                                                                                                        |  | 33      
|                              | 
|Signatures                    |  |                                                                                                                                                                                                                                                                                                
|                              | 
|Exhibit Index                 |  |                                                                                                                                                                                                                                                                                                



2



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##### Table of Contents

PART I. FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

SHANGHAI CENTURY ACQUISITION CORPORATION

(a development stage enterprise)

BALANCE SHEETS AS AT DECEMBER 31, 2006 AND JUNE 30, 2007

(Unaudited)

(Expressed in United States Dollars)



|                                                                                                                                                                                    |  |      |  |                   |             |   |               |   |             |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- |  | ----------------- | ----------- | - | ------------- | - | ----------- | -
|                                                                                                                                                                                    |  |      |  | December 31, 2006 |             |   | June 30, 2007 |  
|                                                                                                                                                                                    |  | Note |  | US$               |             |   | US$           |  
|ASSETS                                                                                                                                                                              |  |      |  |                   |             |   |               |   |             |  
|                                                                                                                                                                                    |  |      | 
|Current assets                                                                                                                                                                      |  |      |  |                   |             |   |               |   |             |  
|Cash and cash equivalents                                                                                                                                                           |  |      |  |                   | 1,023,328   |   |               |   | 75,540      |  
|Restricted cash equivalents held in Trust Account                                                                                                                                   |  | 2    |  |                   | 111,296,035 |   |               |   | 112,376,329 |  
|Amount due from a related company                                                                                                                                                   |  | 5    |  |                   | 5,750       |   |               |   | 5,750       |  
|Receivable from underwriters                                                                                                                                                        |  |      |  |                   | 100         |   |               |   | 100         |  
|Prepayments, deposits and other receivables                                                                                                                                         |  |      |  |                   | 48,048      |   |               |   | 758,489     |  
|                                                                                                                                                                                    |  |      |  |                   |             |   |               |   |             |  
|Total current assets                                                                                                                                                                |  |      |  |                   | 112,373,261 |   |               |   | 113,216,208 |  
|                                                                                                                                                                                    |  |      |  |                   |             |   |               |   |             |  
|                                                                                                                                                                                    |  |      | 
|Property, plant and equipment                                                                                                                                                       |  |      |  |                   |             |   |               |   |             |  
|Leasehold improvements                                                                                                                                                              |  |      |  | $                 | 90,911      |   |               | $ | 95,693      |  
|Computer and office equipment                                                                                                                                                       |  |      |  |                   | 32,143      |   |               |   | 41,412      |  
|                                                                                                                                                                                    |  |      |  |                   |             |   |               |   |             |  
|                                                                                                                                                                                    |  |      |  |                   | 123,054     |   |               |   | 137,105     |  
|Less : accumulated depreciation                                                                                                                                                     |  |      |  |                   | (12,362     | ) |               |   | (45,385     | )
|                                                                                                                                                                                    |  |      |  |                   |             |   |               |   |             |  
|Total fixed assets                                                                                                                                                                  |  |      |  |                   | 110,692     |   |               |   | 91,720      |  
|                                                                                                                                                                                    |  |      |  |                   |             |   |               |   |             |  
|Total assets                                                                                                                                                                        |  |      |  | $                 | 112,483,953 |   |               | $ | 113,307,928 |  
|                                                                                                                                                                                    |  |      |  |                   |             |   |               |   |             |  
|                                                                                                                                                                                    |  |      | 
|LIABILITIES, ORDINARY SHARES SUBJECT TO REDEMPTION AND SHAREHOLDERS EQUITY                                                                                                         |  |      |  |                   |             |   |               |   |             |  
|                                                                                                                                                                                    |  |      | 
|Current liabilities                                                                                                                                                                 |  |      |  |                   |             |   |               |   |             |  
|Accrued expenses                                                                                                                                                                    |  |      |  | $                 | 199,582     |   |               | $ | 933,769     |  
|Amounts due to founders                                                                                                                                                             |  | 4    |  |                   | 18,733      |   |               |   | 21,855      |  
|Warrants liability                                                                                                                                                                  |  | 6    |  |                   | 22,856,250  |   |               |   | 31,625,000  |  
|                                                                                                                                                                                    |  |      |  |                   |             |   |               |   |             |  
|Total current liabilities                                                                                                                                                           |  |      |  |                   | 23,074,565  |   |               |   | 32,580,624  |  
|                                                                                                                                                                                    |  |      |  |                   |             |   |               |   |             |  
|Total liabilities                                                                                                                                                                   |  |      |  | $                 | 23,074,565  |   |               | $ | 32,580,624  |  
|                                                                                                                                                                                    |  |      |  |                   |             |   |               |   |             |  
|                                                                                                                                                                                    |  |      | 
|Ordinary shares subject to possible redemption (2,873,563 ordinary shares at $7.60 per share, plus accrued interest of $359,887 at
December 31, 2006 and $630,610 at June 30, 2007) |  | 7    |  | $                 | 22,198,962  |   |               | $ | 22,469,685  |  
|                                                                                                                                                                                    |  |      |  |                   |             |   |               |   |             |  
|                                                                                                                                                                                    |  |      | 
|Shareholders equity                                                                                                                                                                |  |      |  |                   |             |   |               |   |             |  
|Ordinary shares - $0.0005 par value; 50,000,000 shares authorized; 17,500,000 issued and outstanding at December 31, 2006 and
June 30, 2007                                         |  |      |  | $                 | 8,750       |   |               | $ | 8,750       |  
|                                                                                                                                                                                    |  |      | 
|Preferred shares - $0.0005 par value; 5,000,000 shares authorized; none issued and outstanding at December 31, 2006 and June 30, 2007                                               |  | 9    |  |                   |            |   |               |   |            |  
|Additional paid-in capital                                                                                                                                                          |  | 8    |  |                   | 73,153,546  |   |               |   | 73,246,883  |  
|Unit purchase option                                                                                                                                                                |  | 3    |  |                   | 2,572,400   |   |               |   | 2,572,400   |  
|Deficit accumulated during the development stage                                                                                                                                    |  |      |  |                   | (8,524,270  | ) |               |   | (17,570,414 | )
|                                                                                                                                                                                    |  |      |  |                   |             |   |               |   |             |  
|Total shareholders equity                                                                                                                                                          |  |      |  |                   | 67,210,426  |   |               |   | 58,257,619  |  
|                                                                                                                                                                                    |  |      |  |                   |             |   |               |   |             |  
|Commitments and contingencies                                                                                                                                                       |  | 5    |  |                   |             |   |               |   |             |  
|                                                                                                                                                                                    |  |      | 
|Total liabilities, ordinary shares subject to redemption and shareholders equity                                                                                                   |  |      |  | $                 | 112,483,953 |   |               | $ | 113,307,928 |  
|                                                                                                                                                                                    |  |      |  |                   |             |   |               |   |             |  

See accompanying notes to the financial statements.



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##### Table of Contents

SHANGHAI CENTURY ACQUISITION CORPORATION

(a development stage enterprise)

STATEMENTS OF OPERATIONS

FOR THE
THREE-MONTH PERIOD ENDED JUNE 30, 2006,

FOR THE THREE-MONTH PERIOD ENDED JUNE 30, 2007,

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2006,

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2007

AND FOR THE PERIOD FROM APRIL 25, 2005 (DATE OF INCEPTION)

TO JUNE 30, 2007

(Unaudited)

(Expressed in United States Dollars)



|                                             |  |      |  |                                      |            |   |                                      |   |            |                                    |  |   |                                    |   |  |                                                             |            |   |  |   |             |  
|-------------------------------------------- |  | ---- |  | ------------------------------------ | ---------- | - | ------------------------------------ | - | ---------- | ---------------------------------- |  | - | ---------------------------------- | - |  | ----------------------------------------------------------- | ---------- | - |  | - | ----------- | -
|                                             |  |      |  | Three-monthperiod endedJune 30, 2006 |            |   | Three-monthperiod endedJune 30, 2007 |   |            | Six-monthperiod endedJune 30, 2006 |  |   | Six-monthperiod endedJune 30, 2007 |   |  | Period fromApril 25, 2005(date ofinception) toJune 30, 2007 |           
|                                             |  | Note |  | US$                                  |            |   | US$                                  |   |            | US$                                |  |   | US$                                |   |  | US$                                                         |           
|Revenues                                     |  |      |  | $                                    |           |   |                                      | $ |           |                                    |  | $ |                                   |   |  | $                                                           |           |   |  | $ |            |  
|Operating expenses                           |  |      |  |                                      | (326,788   | ) |                                      |   | (1,615,814 | )                                  |  |   | (367,115                           | ) |  |                                                             | (2,727,283 | ) |  |   | (4,166,392  | )
|                                             |  |      |  |                                      |            |   |                                      |   |            |                                    |  |   |                                    |   |  |                                                             |            |   |  |   |             |  
|Operating loss                               |  |      |  |                                      | (326,788   | ) |                                      |   | (1,615,814 | )                                  |  |   | (367,115                           | ) |  |                                                             | (2,727,283 | ) |  |   | (4,166,392  | )
|Interest income                              |  |      |  |                                      | 932,719    |   |                                      |   | 1,372,290  |                                    |  |   | 932,719                            |   |  |                                                             | 2,720,612  |   |  |   | 6,343,134   |  
|Increase in fair value of warrants liability |  | 6    |  |                                      | (1,654,936 | ) |                                      |   | (5,893,750 | )                                  |  |   | (1,654,936                         | ) |  |                                                             | (8,768,750 | ) |  |   | (19,116,546 | )
|                                             |  |      |  |                                      |            |   |                                      |   |            |                                    |  |   |                                    |   |  |                                                             |            |   |  |   |             |  
|Net loss before income tax expense           |  |      |  |                                      | (1,049,005 | ) |                                      |   | (6,137,274 | )                                  |  |   | (1,089,332                         | ) |  |                                                             | (8,775,421 | ) |  |   | (16,939,804 | )
|Income tax expense                           |  | 2.4  |  |                                      |           |   |                                      |   |           |                                    |  |   |                                   |   |  |                                                             |           |   |  |   |            |  
|                                             |  |      |  |                                      |            |   |                                      |   |            |                                    |  |   |                                    |   |  |                                                             |            |   |  |   |             |  
|Net loss                                     |  |      |  | $                                    | (1,049,005 | ) |                                      | $ | (6,137,274 | )                                  |  | $ | (1,089,332                         | ) |  | $                                                           | (8,775,421 | ) |  | $ | (16,939,804 | )
|                                             |  |      |  |                                      |            |   |                                      |   |            |                                    |  |   |                                    |   |  |                                                             |            |   |  |   |             |  
|Basic and diluted net loss per share         |  |      |  | $                                    | (0.08      | ) |                                      | $ | (0.35      | )                                  |  | $ | (0.13                              | ) |  | $                                                           | (0.50      | ) |  | $ | (1.62       | )
|                                             |  |      |  |                                      |            |   |                                      |   |            |                                    |  |   |                                    |   |  |                                                             |            |   |  |   |             |  

See accompanying notes to the financial statements.



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SHANGHAI CENTURY ACQUISITION CORPORATION

(a development stage enterprise)

STATEMENTS OF SHAREHOLDERS EQUITY

FOR THE PERIOD FROM APRIL 25, 2005

(DATE OF INCEPTION) TO DECEMBER 31, 2005,

FOR THE YEAR ENDED DECEMBER 31, 2006 AND

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2007

(Unaudited)

(Expressed in United States Dollars)



|                                                                                                                                     |  |                 |  |                           |       |     |                    |             |                                              |  |     |                     |  |     |             |   |  |   |             |  
|------------------------------------------------------------------------------------------------------------------------------------ |  | --------------- |  | ------------------------- | ----- | --- | ------------------ | ----------- | -------------------------------------------- |  | --- | ------------------- |  | --- | ----------- | - |  | - | ----------- | -
|                                                                                                                                     |  | Ordinary shares |  | Additionalpaid-in capital |       |     | Unitpurchaseoption |             | Deficitaccumulatedduring thedevelopmentstage |  |     | Shareholdersequity | 
|                                                                                                                                     |  | Shares          |  | Amount                    |       |     |                    |            
|                                                                                                                                     |  |                 |  | US$                       |       | US$ |                    |             | US$                                          |  | US$ |                     |  | US$ |            
|Ordinary shares issued :                                                                                                             |  |                 |  |                           |       |     |                    |             |                                              |  |     |                     |  |     |             |   |  |   |             |  
|April 25, 2005                                                                                                                       |  | 1,062,500       |  | $                         | 531   |     | $                  | 10,094      |                                              |  | $   |                    |  | $   |            |   |  | $ | 10,625      |  
|October 21, 2005                                                                                                                     |  | 2,062,500       |  |                           | 1,031 |     |                    | 13,344      |                                              |  |     |                    |  |     |            |   |  |   | 14,375      |  
|Net loss                                                                                                                             |  |                |  |                           |      |     |                    |            |                                              |  |     |                    |  |     | (14,156     | ) |  |   | (14,156     | )
|                                                                                                                                     |  |                 |  |                           |       |     |                    |             |                                              |  |     |                     |  |     |             |   |  |   |             |  
|Balance at December 31, 2005                                                                                                         |  | 3,125,000       |  |                           | 1,562 |     |                    | 23,438      |                                              |  |     |                    |  |     | (14,156     | ) |  |   | 10,844      |  
|                                                                                                                                     |  |                 |  |                           |       |    
|Sale of 14,375,000 units and underwriters unit purchase option, net of underwriters discount and offering expenses                 |  | 14,375,000      |  |                           | 7,188 |     |                    | 109,984,326 |                                              |  |     |                    |  |     |            |   |  |   | 109,991,514 |  
|Reclassification of warrants (Note 6)                                                                                                |  |                |  |                           |      |     |                    | (12,508,454 | )                                            |  |     |                    |  |     |            |   |  |   | (12,508,454 | )
|Reclassification of equity amount subject to redemption; 2,873,563 ordinary shares at $7.60 per share plus accrued interest (Note
7) |  |                |  |                           |      |     |                    | (21,839,075 | )                                            |  |     |                    |  |     | (359,887    | ) |  |   | (22,198,962 | )
|Unit purchase option (Note 3)                                                                                                        |  |                |  |                           |      |     |                    | (2,572,400  | )                                            |  |     | 2,572,400           |  |     |            |   |  |   |            |  
|Amortization of share options (Note 10)                                                                                              |  |                |  |                           |      |     |                    | 65,711      |                                              |  |     |                    |  |     |            |   |  |   | 65,711      |  
|Net loss                                                                                                                             |  |                |  |                           |      |     |                    |            |                                              |  |     |                    |  |     | (8,150,227  | ) |  |   | (8,150,227  | )
|                                                                                                                                     |  |                 |  |                           |       |     |                    |             |                                              |  |     |                     |  |     |             |   |  |   |             |  
|Balance at December 31, 2006                                                                                                         |  | 17,500,000      |  |                           | 8,750 |     |                    | 73,153,546  |                                              |  |     | 2,572,400           |  |     | (8,524,270  | ) |  |   | 67,210,426  |  
|                                                                                                                                     |  |                 |  |                           |       |    
|Amortization of share options (Note 10)                                                                                              |  |                |  |                           |      |     |                    | 93,337      |                                              |  |     |                    |  |     |            |   |  |   | 93,337      |  
|Reclassification of accrued interest subject to redemption (Note 7)                                                                  |  |                |  |                           |      |     |                    |            |                                              |  |     |                    |  |     | (270,723    | ) |  |   | (270,723    | )
|Net loss                                                                                                                             |  |                |  |                           |      |     |                    |            |                                              |  |     |                    |  |     | (8,775,421  | ) |  |   | (8,775,421  | )
|                                                                                                                                     |  |                 |  |                           |       |     |                    |             |                                              |  |     |                     |  |     |             |   |  |   |             |  
|Balance at June 30, 2007                                                                                                             |  | 17,500,000      |  | $                         | 8,750 |     | $                  | 73,246,883  |                                              |  | $   | 2,572,400           |  | $   | (17,570,414 | ) |  | $ | 58,257,619  |  
|                                                                                                                                     |  |                 |  |                           |       |     |                    |             |                                              |  |     |                     |  |     |             |   |  |   |             |  

See accompanying notes to the financial statements.



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SHANGHAI CENTURY ACQUISITION CORPORATION

(a development stage enterprise)

STATEMENTS OF CASH FLOWS

FOR THE
THREE-MONTH ENDED JUNE 30, 2006,

FOR THE THREE-MONTH ENDED JUNE 30, 2007,

FOR THE SIX-MONTH ENDED JUNE 30, 2006,

FOR THE SIX-MONTH ENDED JUNE 30, 2007

AND FOR THE PERIOD FROM APRIL 25, 2005 (DATE OF INCEPTION)

TO JUNE 30, 2007

(Unaudited)

(Expressed in United States Dollars)



|                                                                                            |  |                                      |              |   |                                      |   |            |                                    |  |   |                                    |   |  |                                                             |            |   |  |   |              |  
|------------------------------------------------------------------------------------------- |  | ------------------------------------ | ------------ | - | ------------------------------------ | - | ---------- | ---------------------------------- |  | - | ---------------------------------- | - |  | ----------------------------------------------------------- | ---------- | - |  | - | ------------ | -
|                                                                                            |  | Three-monthperiod endedJune 30, 2006 |              |   | Three-monthperiod endedJune 30, 2007 |   |            | Six-monthperiod endedJune 30, 2006 |  |   | Six-monthperiod endedJune 30, 2007 |   |  | Period fromApril 25, 2005(date ofinception) toJune 30, 2007 |           
|                                                                                            |  | US$                                  |              |   | US$                                  |   |            | US$                                |  |   | US$                                |   |  | US$                                                         |           
|Cash flows from operating activities                                                        |  |                                      |              |   |                                      |   |            |                                    |  |   |                                    |   |  |                                                             |            |   |  |   |              |  
|                                                                                            |  |                                      |              |   |                                     
|Net loss                                                                                    |  | $                                    | (1,049,005   | ) |                                      | $ | (6,137,274 | )                                  |  | $ | (1,089,332                         | ) |  | $                                                           | (8,775,421 | ) |  | $ | (16,939,804  | )
|Adjustments to reconcile net loss to net cash provided by/ (used in) operating activities : |  |                                      |              |   |                                      |   |            |                                    |  |   |                                    |   |  |                                                             |            |   |  |   |              |  
|Depreciation                                                                                |  |                                      |             |   |                                      |   | 17,000     |                                    |  |   |                                   |   |  |                                                             | 33,023     |   |  |   | 45,385       |  
|Interest income                                                                             |  |                                      | (499,800     | ) |                                      |   | (662,117   | )                                  |  |   | (499,800                           | ) |  |                                                             | (1,080,294 | ) |  |   | (3,126,329   | )
|Amortization of share options                                                               |  |                                      | 7,445        |   |                                      |   | 51,678     |                                    |  |   | 7,445                              |   |  |                                                             | 93,337     |   |  |   | 159,048      |  
|Revaluation of warrants liability                                                           |  |                                      | 1,654,936    |   |                                      |   | 5,893,750  |                                    |  |   | 1,654,936                          |   |  |                                                             | 8,768,750  |   |  |   | 19,116,546   |  
|Increase in amount due from a related company                                               |  |                                      | (5,750       | ) |                                      |   |           |                                    |  |   | (5,750                             | ) |  |                                                             |           |   |  |   | (5,750       | )
|Increase in accrued expenses                                                                |  |                                      | 77,079       |   |                                      |   | 342,220    |                                    |  |   | 79,388                             |   |  |                                                             | 734,187    |   |  |   | 933,769      |  
|(Increase)/decrease in prepayments, deposits and other receivables                          |  |                                      | (88,771      | ) |                                      |   | 332,938    |                                    |  |   | (88,771                            | ) |  |                                                             | (710,441   | ) |  |   | (758,489     | )
|                                                                                            |  |                                      |              |   |                                      |   |            |                                    |  |   |                                    |   |  |                                                             |            |   |  |   |              |  
|Net cash provided by/(used in) operating activities                                         |  |                                      | 96,134       |   |                                      |   | (161,805   | )                                  |  |   | 58,116                             |   |  |                                                             | (936,859   | ) |  |   | (575,624     | )
|                                                                                            |  |                                      |              |   |                                      |   |            |                                    |  |   |                                    |   |  |                                                             |            |   |  |   |              |  
|                                                                                            |  |                                      |              |   |                                     
|Cash flows from investing activities                                                        |  |                                      |              |   |                                      |   |            |                                    |  |   |                                    |   |  |                                                             |            |   |  |   |              |  
|                                                                                            |  |                                      |              |   |                                     
|Purchase of restricted cash equivalents held in trust account                               |  |                                      | (109,250,000 | ) |                                      |   |           |                                    |  |   | (109,250,000                       | ) |  |                                                             |           |   |  |   | (109,250,000 | )
|Purchase of fixed assets                                                                    |  |                                      | (2,046       | ) |                                      |   | (3,293     | )                                  |  |   | (2,046                             | ) |  |                                                             | (14,051    | ) |  |   | (137,105     | )
|                                                                                            |  |                                      |              |   |                                     
|Net cash used in investing activities                                                       |  |                                      | (109,252,046 | ) |                                      |   | (3,293     | )                                  |  |   | (109,252,046                       | ) |  |                                                             | (14,051    | ) |  |   | (109,387,105 | )
|                                                                                            |  |                                      |              |   |                                      |   |            |                                    |  |   |                                    |   |  |                                                             |            |   |  |   |              |  
|                                                                                            |  |                                      |              |   |                                     
|Cash flows from financing activities                                                        |  |                                      |              |   |                                      |   |            |                                    |  |   |                                    |   |  |                                                             |            |   |  |   |              |  
|                                                                                            |  |                                      |              |   |                                     
|Proceeds from issuance of ordinary shares to founders                                       |  |                                      |             |   |                                      |   |           |                                    |  |   |                                   |   |  |                                                             |           |   |  |   | 25,000       |  
|Payment of offering costs                                                                   |  |                                      |             |   |                                      |   |           |                                    |  |   |                                   |   |  |                                                             |           |   |  |   | (68,129      | )
|Proceeds from amounts due to founders                                                       |  |                                      | 65,678       |   |                                      |   | 15,178     |                                    |  |   | 166,640                            |   |  |                                                             | 46,252     |   |  |   | 288,163      |  
|Repayment of amounts due to founders                                                        |  |                                      | (160,321     | ) |                                      |   | (24,397    | )                                  |  |   | (160,321                           | ) |  |                                                             | (43,130    | ) |  |   | (266,308     | )
|Proceeds from initial public offering, net of underwriters discount and offering expenses  |  |                                      | 110,059,543  |   |                                      |   |           |                                    |  |   | 110,059,543                        |   |  |                                                             |           |   |  |   | 110,059,543  |  
|                                                                                            |  |                                      |              |   |                                      |   |            |                                    |  |   |                                    |   |  |                                                             |            |   |  |   |              |  
|Net cash provided by/(used in) financing activities                                         |  |                                      | 109,964,900  |   |                                      |   | (9,219     | )                                  |  |   | 110,065,862                        |   |  |                                                             | 3,122      |   |  |   | 110,038,269  |  
|                                                                                            |  |                                      |              |   |                                      |   |            |                                    |  |   |                                    |   |  |                                                             |            |   |  |   |              |  
|Net increase/(decrease) in cash and cash equivalents                                        |  |                                      | 808,988      |   |                                      |   | (174,317   | )                                  |  |   | 871,932                            |   |  |                                                             | (947,788   | ) |  |   | 75,540       |  
|Cash and cash equivalents at beginning of period                                            |  |                                      | 87,171       |   |                                      |   | 249,857    |                                    |  |   | 24,227                             |   |  |                                                             | 1,023,328  |   |  |   |             |  
|                                                                                            |  |                                      |              |   |                                      |   |            |                                    |  |   |                                    |   |  |                                                             |            |   |  |   |              |  
|Cash and cash equivalents at end of period                                                  |  | $                                    | 896,159      |   |                                      | $ | 75,540     |                                    |  | $ | 896,159                            |   |  | $                                                           | 75,540     |   |  | $ | 75,540       |  
|                                                                                            |  |                                      |              |   |                                      |   |            |                                    |  |   |                                    |   |  |                                                             |            |   |  |   |              |  

See accompanying notes to the financial statements.



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##### Table of Contents

SHANGHAI CENTURY ACQUISITION CORPORATION

(a development stage enterprise)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

JUNE 30, 2007

NOTE 1 ORGANIZATION, BUSINESS OPERATIONS AND BASIS OF PRESENTATION

Organization and Business Operations

Shanghai
Century Acquisition Corporation (the Company) was incorporated in the Cayman Islands on April 25, 2005 with an authorized share capital of 50,000,000 ordinary shares (par value $0.0005 per share) and 5,000,000 preferred shares (par
value $ 0.0005 per share). The Companys founders contributed $25,000 to the formation of the Company and were issued 3,125,000 ordinary shares. The Company was formed to acquire, through a stock exchange, asset acquisition or other
similar business combination, or control, through contractual arrangements, an operating business having its primary operations located in the Peoples Republic of China. The Company has neither engaged in any operations nor generated revenue
to date. The Company is considered to be in the development stage and is subject to the risks associated with activities of development stage companies.

The registration statement for the Companys initial public offering (as discussed in Note 3 below) (the Public Offering) was declared effective April 24, 2006. The Company completed the Public
Offering on April 28, 2006 and received net proceeds of approximately $109,991,514. The Company intends to use substantially all of the net proceeds of the Public Offering to acquire a target business (Business Combination),
including identifying and evaluating prospective acquisition candidates, selecting the target business, and structuring, negotiating and consummating the Business Combination, and the payment of legal and accounting expenses and advisory and
investment banking fees payable in connection with the Business Combination. There is no assurance, however, that the Company will be able to successfully effect a Business Combination.

As at June 30, 2007, an amount of approximately $112,376,329 (including interest) of the net proceeds plus investment income, was held in a trust
account (Trust Account) and invested in short-term United States government securities. Under the agreement governing the Trust Account, the funds in the Trust Account may only be invested in United States government securities having a
maturity of one hundred and eighty days or less or in money market funds (see note 2.2). The funds will continue to be kept in the Trust Account until the earlier of (i) the consummation of the Business Combination or (ii) distribution of
the Trust Account as described below.

The funds held in the Trust Account (excluding $3,300,000 to be paid to the underwriters upon
consummation of a Business Combination and a portion of the interest earned and other expenses in connection with the Business Combination) may be used as consideration to pay the sellers of a target business for which the Company ultimately
completes a Business Combination. Any amount not paid as consideration to the sellers of the target business may be used to finance operations of the target business or to effect other acquisitions, as determined by the Companys board of
directors at that time.

In the event that the Company does not consummate a Business Combination within 18 months from the date of the
completion of the Public Offering (or 24 months from the completion of the Public Offering if certain extension criteria have been satisfied), the Company will be dissolved and the proceeds held in the Trust Account (excluding one-half of the
interest earned) will be distributed to the Companys public shareholders. In the event of such distribution, the per share value of the residual assets remaining available for distribution (including the amount held in the Trust Account ) may
be less than the public offering price of $8.00 per unit (see Note 3).



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##### Table of Contents

SHANGHAI CENTURY ACQUISITION CORPORATION

(a development stage enterprise)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

JUNE 30, 2007



Basis of Presentation

The financial statements include the accounts of the Company. The Company has not commenced operations since its inception on April 25, 2005. All activities and expenses incurred are related to the Companys
formation and capital raising activities. The Company has selected December 31 as its fiscal year end.

The accompanying interim
financial statements for the three-month periods ended June 30, 2006 and 2007, for the six-month periods ended June 30, 2006 and 2007 and for the period from April 25, 2005 (date of inception) to June 30, 2007, have been prepared
by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with
accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading.
The December 31, 2006 balance sheet was derived from audited financial statements included in the Companys Annual Report on Form 10-K filed April 19, 2007 (Form 10-K). The accompanying interim financial statements should
be read in conjunction with the audited financial statements and the notes thereto, included in the Form 10-K.

In the opinion of
management, all adjustments (which include normal recurring adjustments, except as disclosed herein) necessary to present a fair statement of financial position as of June 30, 2007, the results of operations and cash flows for the three- and
six- month periods ended June 30, 2006 and 2007, and for the period from April 25, 2005 (date of inception) to June 30, 2007 as applicable, have been made. The results of operations for the three-month period ended June 30, 2007
is not necessarily indicative of the operating results for the full fiscal year or any future periods.

NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES



|2.1 | Cash and cash equivalents:
|--- | --------------------------

Cash and cash
equivalents comprise cash at bank and on hand and demand deposits with banks and other financial institutions.



|2.2 | Restricted cash equivalents held in Trust Account:
|--- | --------------------------------------------------

The restricted cash equivalents held in the Trust Account as at June 30, 2007 consist of U.S. government treasury bills purchased with an original maturity of three months or less at date of acquisition. The Company classifies this
investment as held-to-maturity securities as the Company has the ability and intent to hold the securities until maturity. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums, or
discounts, if any. Interest income, including amortization of the premium and discount arising at acquisition is recorded on an accrual basis.



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SHANGHAI CENTURY ACQUISITION CORPORATION

(a development stage enterprise)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

JUNE 30, 2007



|2.3 | Use of estimates:
|--- | -----------------

The preparation of financial
statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include the fair value of warrants and the underwriters unit
purchase option and consultants and employees share options. Actual results could differ from those estimates.



|2.4 | Income taxes:
|--- | -------------

Under current Cayman Islands laws,
the Company is not subject to income tax, and accordingly, no income tax benefit or deferred tax asset has been recognized in respect of the net losses incurred.



|2.5 | Property, plant & equipment:
|--- | ----------------------------

Property,
plant and equipment are stated at cost. Depreciation is calculated on straight-line basis over the estimated useful lives of the assets. The estimated useful live of computer and office equipment is 2 years. Leasehold improvements are over the
shorter of 2 years and unexpired term of the lease.



|2.6 | Recently issued accounting standards:
|--- | -------------------------------------

The Company
does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.



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##### Table of Contents

SHANGHAI CENTURY ACQUISITION CORPORATION

(a development stage enterprise)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

JUNE 30, 2007



|2.7 | Basic and diluted net loss per share:
|--- | -------------------------------------

For the
periods concerned, the number of shares used in the calculation of basic and diluted net loss per share is as follows:



|                                       |  |                                       |            |   |                                        |   |            |                                     |  |   |                                     |   |  |                                                              |            |   |  |   |             |  
|-------------------------------------- |  | ------------------------------------- | ---------- | - | -------------------------------------- | - | ---------- | ----------------------------------- |  | - | ----------------------------------- | - |  | ------------------------------------------------------------ | ---------- | - |  | - | ----------- | -
|                                       |  | Three-monthperiod ended June 30, 2006 |            |   | Three-month period ended June 30, 2007 |   |            | Six-monthperiod ended June 30, 2006 |  |   | Six-monthperiod ended June 30, 2007 |   |  | Period fromApril 25, 2005(date ofinception)
to June 30, 2007 |           
|Net loss                               |  | $                                     | (1,049,005 | ) |                                        | $ | (6,137,274 | )                                   |  | $ | (1,089,332                          | ) |  | $                                                            | (8,775,421 | ) |  | $ | (16,939,804 | )
|                                       |  |                                       |            |   |                                       
|Denominator:                           |  |                                       |            |   |                                        |   |            |                                     |  |   |                                     |   |  |                                                              |            |   |  |   |             |  
|Basic weighted average shares          |  |                                       | 13,666,667 |   |                                        |   | 17,500,000 |                                     |  |   | 8,395,833                           |   |  |                                                              | 17,500,000 |   |  |   | 10,453,498  |  
|Effect of dilutive redeemable warrants |  |                                       |           |   |                                        |   |           |                                     |  |   |                                    |   |  |                                                              |           |   |  |   |            |  
|Effect of dilutive share options       |  |                                       |           |   |                                        |   |           |                                     |  |   |                                    |   |  |                                                              |           |   |  |   |            |  
|                                       |  |                                       |            |   |                                        |   |            |                                     |  |   |                                     |   |  |                                                              |            |   |  |   |             |  
|Diluted weighted average shares        |  |                                       | 13,666,667 |   |                                        |   | 17,500,000 |                                     |  |   | 8,395,833                           |   |  |                                                              | 17,500,000 |   |  |   | 10,453,498  |  
|                                       |  |                                       |            |   |                                        |   |            |                                     |  |   |                                     |   |  |                                                              |            |   |  |   |             |  
|                                       |  |                                       |            |   |                                       
|Basic loss per share                   |  | $                                     | (0.08      | ) |                                        | $ | (0.35      | )                                   |  | $ | (0.13                               | ) |  | $                                                            | (0.50      | ) |  | $ | (1.62       | )
|Diluted loss per share                 |  | $                                     | (0.08      | ) |                                        | $ | (0.35      | )                                   |  | $ | (0.13                               | ) |  | $                                                            | (0.50      | ) |  | $ | (1.62       | )

During the periods presented, the Companys dilutive potential common shares outstanding
consist of 14,375,000 redeemable warrants, 2,000,000 ordinary shares issuable upon exercise of the unit purchase option, and 250,000 share options. The computation of diluted loss per share for the periods presented, did not assume conversions of
redeemable warrants, the unit purchase option or the share options because, when applying the if-converted method, the effect of these conversions was anti-dilutive.



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SHANGHAI CENTURY ACQUISITION CORPORATION

(a development stage enterprise)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

JUNE 30, 2007



|2.8 | Stock-Based Compensation Expense:
|--- | ---------------------------------

The Company
adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment, (SFAS 123(R)) which requires the measurement and recognition of compensation expense for all share-based payment awards
based on estimated fair values.

SFAS 123(R) requires companies to estimate the fair value of share-based payment awards on the date of
grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Companys statement of operations.

The Company used lattice-binomial option-pricing model (lattice-binomial model) as a method of valuation for share-based awards. For
additional information, see Note 10. The Companys determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by the Companys stock price as well as assumptions regarding a
number of highly complex and subjective variables. These variables include, but are not limited to, the Companys expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors.
Because the Companys stock options have certain characteristics that are significantly different from traded options, and because changes in the subjective assumptions can materially affect the estimated value, in managements opinion,
the existing valuation model may not provide an accurate measure of the fair value of the Companys employee stock options.



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SHANGHAI CENTURY ACQUISITION CORPORATION

(a development stage enterprise)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

JUNE 30, 2007



NOTE 3INITIAL PUBLIC OFFERING

On April 28, 2006, the Company completed the sale of 14,375,000 units in the Public Offering at a price of $8.00 per unit. Each unit consists of one
ordinary share of the Company, $0.0005 par value, and one warrant (see Note 6). Each warrant entitles the holder to purchase from the Company one ordinary share at an exercise price of $6.00 commencing on the later of (a) the completion of a
Business Combination with a target business, or (b) April 24, 2007. The warrants expire on April 23, 2010. The Company may redeem the warrants (including any warrants issued upon exercise of the unit purchase option described below)
at a price of $0.01 per warrant at any time after the warrants become exercisable to the extent the last sales price of the Companys ordinary shares equals or exceeds $11.50 per share for any 20 trading days within a 30 trading day period.

In addition, on April 28, 2006, the Company sold to the underwriters, for $100, an option to purchase up to a total of 1,000,000
units as compensation for their services (the unit purchase option). The units issuable upon exercise of the unit purchase option are identical to those offered in the Public Offering, except that the warrants have an exercise price of
$7.50.

The unit purchase option expires on April 23, 2011 and is exercisable at $10.00 per unit commencing on the later of
(a) the completion of a Business Combination, or (b) April 24, 2007. In lieu of the payment of the exercise price, the option may be converted into units on a net-share settlement or cashless exercise basis to the extent that the
market value of the units at the time of conversion exceeds the exercise price of the option. The option may only be exercised or converted by the option holder and cannot be redeemed for cash by the Company or the option holder.

The sale of the underwriters option was accounted for as an equity transaction in accordance with Emerging Issues Task Force No. 00-19, Accounting
for Derivative Financial Instruments Indexed to, and Potentially Settled in a Companys Own Stock, and was measured at its fair value on the date of the sale in accordance with Statements of Financial Accounting Standards No. 123 (revised
2004), Share-based Payment. The Company has determined, based upon a lattice model, that the estimated fair value of the option on the date of sale was approximately $2.5724 per unit or an aggregate of $2,572,400, assuming an expected life of 56
months, volatility of 33.7779% and a risk-free interest rate of 5.2390%.

The volatility calculation of 33.7779% is based on the latest
five year average volatility of an index of 447 companies drawn from the Shanghai Stock Exchange Composite Index that had been trading for at least five years and that had market capitalizations of less than $400 million (Index). Since
the Company did not have a trading history at the time the option was issued, the Company estimated the potential volatility of its common stock price by referring to the latest five year average volatility of the Index because management believes
that the average volatility of such index was a reasonable benchmark to use in estimating the expected volatility of the Companys common stock after consummation of a business combination. Although an expected life of five years was taken into
account for purposes of assigning a fair value to this option, to the extent the Company does not consummate a Business Combination within the prescribed time period and liquidates, the underwriters option would become worthless.

Pursuant to Rule 2710(g)(1) of the NASD Conduct Rule, the option to purchase 1,000,000 units is deemed to be underwriting compensation and therefore
upon exercise, the underlying shares and warrants are subject to a 180-day lock-up. Additionally, the option may not be sold, transferred, assigned, pledged or hypothecated for a one-year period (including the foregoing 180-day period) following the
date of the Public Offering.



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SHANGHAI CENTURY ACQUISITION CORPORATION

(a development stage enterprise)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

JUNE 30, 2007



NOTE 4AMOUNTS DUE TO FOUNDERS

The founders of the Company have entered into a revolving credit agreement with the Company in the amount of $125,000. Advances under the credit facility
were interest-free and payable before October 22, 2006.

For the period from April 25, 2005 (inception) to June 30, 2007,
the Company drew $125,000 against the revolving credit line and obtained additional borrowings from the founders of $160,346 to pay a portion of the expenses of the Public Offering such as the Securities and Exchange Commission registration fee,
National Association of Securities Dealers registration fee, American Stock Exchange registration fee, and certain legal fees, administrative fees and other expenses.

In addition, $2,817 of the costs incurred prior to the formation of Company was to be reimbursed to one of the founders.

As of June 30, 2007, the amount due to the founders was $21,855.

NOTE 5AMOUNT DUE FROM A RELATED COMPANY

The Company has agreed to pay FDC Consultants Limited, a company owned and managed by Mr. Franklin D. Chu, the Companys
co-chief executive officer, $7,500 per month for office space and general and administrative services including secretarial support commencing on April 24, 2006 and continuing until (i) the consummation of a Business Combination,
(ii) 18 months from commencement of the Public Offering if the Company does not effect a Business Combination, or (iii) 24 months from the consummation of the Public Offering if a letter of intent, agreement in principle or definitive
agreement has been executed within 18 months of commencement of the Public Offering and the Company has not effected a Business Combination.

In addition, the Company prepaid $5,750 as at June 30, 2007 for certain office and secretarial services according to the service agreement.

NOTE 6WARRANTS LIABILITY

Under the terms of the warrant agreement, no warrants will be exercised unless at the time
of exercise a prospectus relating to ordinary shares issuable upon exercise of the warrants is current and the ordinary shares have been registered or qualified or deemed to be exempt under the securities laws of the state of residence of the holder
of the warrants. The Company has agreed to meet these conditions and use their best efforts to maintain a current prospectus relating to ordinary shares issuable upon exercise of the redeemable warrants until the expiration of the warrants. The
warrant agreement does not specify the consequences or penalty imposed against the Company in the event the Company is unable to file and complete an effective registration statement to deliver registered shares.



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SHANGHAI CENTURY ACQUISITION CORPORATION

(a development stage enterprise)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

JUNE 30, 2007



NOTE 6WARRANTS LIABILITY (continued)



Under EITF No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially
Settled in, a Companys Own Stock, if (a) a derivative contract requires physical or net-share settlement by delivery of registered shares and does not specify any circumstances under which net-cash settlement would be permitted or
required and (b) the contract does not specify how the contract would be settled in the event that the company is unable to deliver registered shares, then net-cash settlement is assumed if the company is unable to deliver registered shares
(because it is unlikely that nonperformance would be an acceptable alternative). In consequence, a derivative within the abovementioned parameters is recognized as an asset or liability where share settlement is not within the companys
control. Accordingly, in connection with the issuance of the units (see Note 3), the Company has recorded the fair value of the warrants as a liability with any changes in the fair value of such warrants at each reporting date being recorded through
the Companys statement of operations. The Company will continue to adhere to the accounting policies set forth above until the warrant agreement is amended or there are developments which support a different accounting treatment.

The Company has determined that the estimated fair value of the warrants on April 24, 2006, the date of issuance, and on June 30, 2007 was
approximately $0.87 and $2.20 per warrant, respectively, or an aggregate of $12,508,454 and $31,625,000, respectively. Since the warrants were not traded or quoted on a market exchange at the time of issuance, the fair value of the warrants as of
April 24, 2006 was estimated based on a lattice-binomial model using an expected life of 48 months, a volatility of 33.7779%, a risk-free interest rate of 5.204% and taking into consideration the liquidity risk and the forfeiture risk that the
warrants could become worthless if the Company does not consummate a Business Combination within the prescribed period and liquidates. The fair value of the warrants as of June 30, 2007 was based on a quoted market price.

NOTE 7AMOUNT OF EQUITY SUBJECT TO POSSIBLE REDEMPTION

The Company is required to obtain shareholder approval for any business combination of a target business. In the event that public shareholders owning 20% or more of the ordinary shares sold in the Public Offering vote against a business
combination, the Company will not proceed with a business combination if the public shareholders exercise their redemption rights. That is, the Company can still effect a business combination if the public shareholders owning up to approximately
19.99% of the ordinary shares sold in the Public Offering exercise their redemption rights.

This redemption obligation with respect to up
to 19.99% of the ordinary shares sold in the Public Offering will exist regardless of how a business combination is structured. That is, the Company would be required to redeem up to an amount equal to the product of approximately 19.99% of the
14,375,000 ordinary shares sold in the Public Offering (or 2,873,563 ordinary shares) multiplied by an initial cash per-share redemption price of $7.60. The actual per-share redemption price will be equal to the quotient of the amount in the Trust
Account plus all accrued interest not previously released to the Company, as of two business days prior to the proposed consummation of the business combination, divided by 14,375,000 ordinary shares.

Accordingly, under the provision of EITF D-98, Classification and Measurement of Redeemable Securities, the Company has classified 19.99% of the
net proceeds from the Public Offering, or $21,839,075, and the related accrued interest of approximately $630,610 outside permanent equity as of June 30, 2007.



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##### Table of Contents

SHANGHAI CENTURY ACQUISITION CORPORATION

(a development stage enterprise)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

JUNE 30, 2007



NOTE 8PROCEEDS FROM PUBLIC OFFERING

The following is the classification of the net proceeds from the Public Offering:



|                                                                  |  |   |            
|----------------------------------------------------------------- |  | - | -----------
|Classified as liability:                                          |  |   |            
|Warrants liability (note 6)                                       |  | $ | 12,508,454 
|                                                                  | 
|Classified outside of permanent equity:                           |  |   |            
|Amount subject to possible redemption at $7.60 per share (note 7) |  | $ | 21,839,075 
|                                                                  | 
|Classified as permanent equity:                                   |  |   |            
|Additional paid-in capital                                        |  | $ | 73,064,397 
|Par value of 14,375,000 ordinary shares at $0.0005 per par value  |  |   | 7,188      
|Unit purchase option (note 3)                                     |  |   | 2,572,400  
|                                                                  |  |   |            
|                                                                  |  | $ | 75,643,985 
|                                                                  |  |   |            
|Net proceeds from the Public Offering                             |  | $ | 109,991,514
|                                                                  |  |   |            

NOTE 9PREFERRED SHARES

The Company is authorized to issue 5,000,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors. No preferred
shares have been issued during the periods presented.

NOTE 10SHARE OPTIONS

On June 8, 2006, the Company engaged an independent consultant (consultant A) to assist the Company in matters related to a Business
Combination. The term of the contract is three years expiring on June 8, 2009 unless terminated earlier. As part of the compensation for services provided to the Company, the Company granted to consultant A (i) an option to purchase 50,000
ordinary shares which vests six months after the consummation of a Business Combination and (ii) an option to purchase 75,000 ordinary shares which vests on April 24, 2009, provided the consulting agreement has not been terminated prior to
the date on which either option becomes vested. The exercise price of both options is $7.10, the closing market price of the ordinary shares on the first day that ordinary shares of the Company were traded. Both options will expire upon the earlier
of (i) the date the consulting agreement is terminated, or (ii) October 24, 2007 if a Business Combination is not consummated on or prior to such date and the Company has not entered into a letter of intent, agreement in principle or
definitive agreement on or prior to such date, or (iii) April 24, 2008 if a Business Combination is not consummated on or prior to such date.

The Company has determined that the estimated fair value of these options on the date of grant was approximately $2.064 per share or $258,000 using the lattice option pricing model. The risk-free rate for the expected
term of the option is based on the 3 year US Treasury Yield as at the issue date.



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SHANGHAI CENTURY ACQUISITION CORPORATION

(a development stage enterprise)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

JUNE 30, 2007



NOTE 10SHARE OPTIONS (continued)



On February 1, 2007, the Company further granted an option to consultant A to purchase 100,000
ordinary shares which vests six months after the consummation of a Business Combination, and an option to another independent consultant (consultant B) to purchase 10,000 ordinary shares which vests six months after the consummation of a
Business Combination. Both options were granted for consulting services to be provided to the Company in connection with matters related to a Business Combination.

The exercise price of the two options granted on February 1, 2007 is $7.38, the closing market price of the ordinary share on the grant date. These options will expire upon the earlier of (i) the date the
consulting agreement is terminated, or (ii) October 24, 2007 if a Business Combination is not consummated on or prior to such date and the Company has not entered into a letter of intent, agreement in principle or definitive agreement on
or prior to such date, or (iii) April 24, 2008 if a Business Combination is not consummated on or prior to such date.

The
Company determined that the estimated fair value of the options granted on February 1, 2007 was approximately $1.082 per share or $119,000 using the lattice option pricing model. The risk-free rate for the expected term of the option is based
on the 3 year US Treasury Yield as at the issue date.

On May 18, 2007, the Company further granted an option to consultant B to
purchase 3,000 ordinary shares which vests six months after the consummation of a Business Combination, provided the consulting agreement has not been terminated prior to the date which the option becomes vested. The option was granted for
consulting services to be provided to the Company in connection with matters related to a Business Combination.

On the same date, the
Company granted an option to each of its two employees to purchase an aggregate of 10,000 ordinary shares which vests six months after the consummation of a Business Combination, provided their employment agreements have not been terminated prior to
the date which the options become vested. The option was granted for secretarial and administrative services to be provided to the Company.

The exercise price of the three options granted on May 18, 2007 is $7.79, the closing market price of the ordinary shares on the grant date. These options will expire upon the earlier of (i) the date the consulting or employment
agreement is terminated, or (ii) October 24, 2007 if a Business Combination is not consummated on or prior to such date and the Company has not entered into a letter of intent, agreement in principle or definitive agreement on or prior to
such date, or (iii) April 24, 2008 if a Business Combination is not consummated on or prior to such date. The termination of the services with the Company may be made by the Company in its sole discretion.

The Company determined that the estimated fair value of the options granted on May 18, 2007 was approximately $1.0 per share or $13,000 using the
lattice option pricing model. The risk-free rate for the expected term of the option is based on the 3 year US Treasury Yield as at the issue date.

On May 22, 2007, the Company granted an option to another independent consultant (consultant C) to purchase 2,000 ordinary shares which vests six months after the consummation of a Business Combination. The option was
granted for services to be provided to the Company in connection with matters related to a Business Combination.



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SHANGHAI CENTURY ACQUISITION CORPORATION

(a development stage enterprise)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

JUNE 30, 2007



NOTE 10SHARE OPTIONS (continued)



The exercise price of the option granted on May 22, 2007 is $7.80, the closing market price of
the ordinary shares on the grant date. This option will expire upon the earlier of (i) October 24, 2007 if a Business Combination is not consummated on or prior to such date and the Company has not entered into a letter of intent,
agreement in principle or definitive agreement on or prior to such date, or (ii) April 24, 2008 if a Business Combination is not consummated on or prior to such date, or (iii) August 31, 2007.

The Company determined that the estimated fair value of the option granted on May 22, 2007 was approximately $0.60 per share or $1,200 using the
lattice option pricing model. The risk-free rate for the expected term of the option is based on the US Treasury Yield with the same maturity of the option as at the grant date.

The assumptions used in determining the fair value of the options granted on each respective date are as follows:



|                        |  |                                |   |  |                                    |   |  |                                |   |  |                                |  
|----------------------- |  | ------------------------------ | - |  | ---------------------------------- | - |  | ------------------------------ | - |  | ------------------------------ | -
|                        |  | Options grantedon June 8, 2006 |   |  | Options grantedon February 1, 2007 |   |  | Options grantedon May 18, 2007 |   |  | Options grantedon May 22, 2007 |  
|Valuation assumptions   |  |                                |   |  |                                    |   |  |                                |   |  |                                |  
|Expected dividend yield |  | 0                              | % |  | 0                                  | % |  | 0                              | % |  | 0                              | %
|Expected volatility     |  | 20.00                          | % |  | 14.00                              | % |  | 13.26                          | % |  | 13.26                          | %
|Expected term(years)    |  | 3                              |   |  | 2                                  |   |  | 3                              |   |  | 1.28                           |  
|Risk-free interest rate |  | 4.97                           | % |  | 4.93                               | % |  | 4.71                           | % |  | 4.86                           | %

Stock option activity during the periods indicated is as follows:



|                                                                  |  |                 |  |                               |       |                                           |      |                          |   |        
|----------------------------------------------------------------- |  | --------------- |  | ----------------------------- | ----- | ----------------------------------------- | ---- | ------------------------ | - | -------
|                                                                  |  | Numberof shares |  | Weightedaverageexercise price |       | Weighted averageremainingcontractual term |      | Aggregateintrinsic value
|Balance at April 25, 2005 (date of inception) and January 1, 2006 |  |                |  | $                             |      |                                           |      |                          |   |        
|Granted on June 8, 2006                                           |  | 125,000         |  |                               | 7.100 |                                           |      |                          |   |        
|Granted on February 1, 2007                                       |  | 110,000         |  |                               | 7.380 |                                           |      |                          |   |        
|Granted on May 18, 2007                                           |  | 13,000          |  |                               | 7.790 |                                           |      |                          |   |        
|Granted on May 22, 2007                                           |  | 2,000           |  |                               | 7.800 |                                           |      |                          |   |        
|                                                                  |  |                 |  |                               |       |                                           |      |                          |   |        
|Balance at June 30, 2007                                          |  | 250,000         |  | $                             | 7.265 |                                           | 2.87 |                          | $ | 283,830
|                                                                  |  |                 |  |                               |       |                                           |      |                          |   |        
|Exercisable at June 30, 2007                                      |  |                |  | $                             |      |                                           |     |                          |   |       
|                                                                  |  |                 |  |                               |       |                                           |      |                          |   |        



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SHANGHAI CENTURY ACQUISITION CORPORATION

(a development stage enterprise)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

JUNE 30, 2007



NOTE 10SHARE OPTIONS (continued)



The weighted average grant date fair values of the options granted during the periods were as
follows:



|                                                                  |  |                 |  |                                     |      
|----------------------------------------------------------------- |  | --------------- |  | ----------------------------------- | -----
|Nonvested shares                                                  |  | Numberof shares |  | Weightedaveragegrant-date fairvalue
|Balance at April 25, 2005 (date of inception) and January 1, 2006 |  |                |  | $                                   |     
|Granted on June 8, 2006                                           |  | 125,000         |  |                                     | 2.064
|Granted on February 1, 2007                                       |  | 110,000         |  |                                     | 1.082
|Granted on May 18, 2007                                           |  | 13,000          |  |                                     | 1.000
|Granted on May 22, 2007                                           |  | 2,000           |  |                                     | 0.600
|                                                                  |  |                 |  |                                     |      
|Balance at June 30, 2007                                          |  | 250,000         |  | $                                   | 1.565
|                                                                  |  |                 |  |                                     |      

The Company has accounted for these share options under SFAS 123 (R) and EITF No. 96-18,
Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services, by recording compensation based on the fair value at grant date and, where applicable, their then-current
fair values at each interim reporting date for such awards and amortizing the compensation amount over the expected term of the respective consulting or employment agreements which approximates the expected life of the respective options. The amount
of compensation recognized for these options for the six-month period ended June 30, 2007 was $93,337. At June 30, 2007, there was $257,152 of total unrecognized compensation cost related to nonvested share options. The cost is expected to
be recognized over a weighted average period of 1.1 years.



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SHANGHAI CENTURY ACQUISITION CORPORATION

(a development stage enterprise)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

JUNE 30, 2007



NOTE 11ACQUISITION

On May 29, 2007, the Company announced that it has entered into a definitive share purchase agreement (Purchase Agreement) to acquire 100 percent of the shares of privately-owned Sichuan Kelun
Pharmaceutical Co., Ltd. (Kelun), a pharmaceutical company based in China, for a total consideration of approximately $235.4 million comprising of cash and ordinary shares over a specified period of time subject to the achievement of
performance milestones. Kelun started its business in 1996. Since that time Kelun and its subsidiaries have been principally engaged in the development and production of IV solution products and their sale and distribution in China.

In connection with the acquisition, management determined that Kelun will be treated as the accounting acquirer for the following reasons: (i)
immediately after the transaction, Kelun shareholders will hold approximately 53.3% of the voting rights in the combined company; (ii) under the Purchase Agreement, Kelun shareholders will have controlling rights over the election of directors of
the combined company; and (iii) the Company is a non-operating company while Kelun and its subsidiaries are operating entities and Keluns management will continue to operate the combined company. Since the Company is not an operating company,
the acquisition is treated as the issuance of shares of Kelun for the Companys net assets, and the carrying value of the Companys assets approximates their fair values. Therefore, no purchase accounting fair value adjustments will be
required and no goodwill will be recorded as a result of the Acquisition.

The proposed acquisition has been unanimously approved by the
board of directors of the Company and Kelun. It is subject to the approval by a majority of the shareholders of the Company in person or by proxy at a meeting to be held for that purpose as well as certain closing conditions, including obtaining
approval from the Chinese government. In addition, the Company will not complete the acquisition if its shareholders holding 20% or more of the ordinary shares issued in its initial public offering both vote against the acquisition and elect to
convert their ordinary shares into a pro rata share of the funds in the Companys trust account. Following the closing of the business combination, the Company will be renamed China Kelun Pharmaceutical Corporation (China Kelun).



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|Item 2. | Managements Discussion and Analysis and Results of Operations
|------- | --------------------------------------------------------------

The following discussion should be read in conjunction with the financial statements and footnotes thereto incorporated by reference in this report.

Forward-Looking Statements

Certain statements contained in this interim report that are not
historical facts, including, but not limited to, statements that can be identified by the use of forward-looking terminology such as may, expect, anticipate, predict, believe,
plan, estimate or continue or the negative thereof or other variations thereon or comparable terminology, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995,
and involve a number of risks and uncertainties. The actual results of the future events described in such forward-looking statements in this interim report could differ materially from those stated in such forward-looking statements due to various
factors, including but not limited to, our being a development stage company with no operating history, our dependence on key personnel some of whom may join us following a business combination, our personnel allocating their time to other
businesses and potentially having conflicts of interest with our business, our potentially being unable to obtain additional financing to complete a business combination including the proposed business combination discussed below under the heading
Entry into Definitive Share Purchase Agreement, the ownership of our securities being concentrated and those other risks and uncertainties detailed in the Companys filings with the Securities and Exchange Commission, including our
registration statement on Form F-1 originally filed December 12, 2005 and the definitive prospectus thereunder, our annual report on Form 10-K for the year ended December 31, 2006, and our current reports on Form 8-K filed on May 29,
2007 and June 5, 2007, respectively, and the uncertainties set forth from time to time in the Companys filings and other public statements.

Critical Accounting Policies

Share-Based Compensation

We adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment, or SFAS 123R, on January 1, 2006. Under SFAS
123R, we are required to measure the cost of all share-based payment transactions based on their grant- date fair value and recognize the cost as an expense in our financial statements over the requisite service period, which is generally the period
from the date of grant to the date when the share compensation is no longer contingent upon additional service from the option holder, or the vesting period.

Since the date of incorporation, we have issued a unit purchase option to the underwriters in April 2006 for services provided in connection with our initial public offering and two share options in June 2006 to an
independent consultant for services provided in connection with a business combination. We determine the fair value of these share options as of the grant date using the lattice-option pricing model. Under this model, we make a number of assumptions
regarding the fair value of the options, including:



| |  |  | the expected volatility of our future ordinary share price;
| | - |  | -----------------------------------------------------------



| |  |  | the expected dividend rate; and
| | - |  | -------------------------------



| |  |  | the expected life of the options.
| | - |  | ---------------------------------

To determine the estimated fair value of our share options, we believe that the expected volatility is the most subjective assumption due to the lack of trading history of our ordinary shares. Changes in the volatility assumption could
significantly impact the estimated fair values of the options calculated by the lattice option pricing model. Expected volatility is estimated based upon the average volatility of an index of certain guideline companies for a period that is
commensurate with the life of the options. Guideline companies were used because we did not have a trading history at the time the options were issued and prior to having sufficient share price history to calculate our own volatility, we believe the
average volatility of the guideline companies is a reasonable benchmark to use in estimating the expected volatility of our ordinary shares.

For the unit purchase option issued to the underwriters of our initial public offering, we used an expected volatility of 33.7779%, expected dividend yield of 0% and a risk-free interest rate of 5.2390%. For the options granted to the
independent consultant, we



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used an expected volatility of 20%, expected life of the options of three years, expected dividend yield of 0% and a risk-free interest rate of 4.97%. Based
on a lattice option pricing model, the estimated fair value of the unit purchase option was $2.5724 per unit or an aggregate of $2,572,400 and the estimated fair value of the share options issued to the independent consultant was $2.064 per share or
an aggregate of $258,000.

Changes in our estimates and assumptions regarding the expected volatility could significantly impact the
estimated fair values of our share options determined under the binomial valuation model and, as a result, our net loss.

Warrants Liability

On April 28, 2006, we completed the sale of 14,375,000 units in our initial public offering at a price of $8.00 per unit. Each unit
consists of one ordinary share of the Company, $0.0005 par value, and one warrant. Each warrant entitles the holder to purchase from us one ordinary share at an exercise price of $6.00 commencing on the completion, if it occurs, of the acquisition
(Acquisition) by the Company of all of the issued and outstanding shares of Sichuan Kelun Pharmaceutical Co., Ltd. (Kelun), a joint stock limited company incorporated and existing under the laws of the Peoples Republic
of China (the PRC or China). The warrants expire on April 23, 2010.

In addition, on April 28, 2006, we
sold to the underwriters, for $100, an option to purchase up to a total of 1,000,000 units as compensation for their services (the unit purchase option). The units issuable upon exercise of the unit purchase option are identical to those
offered in our initial public offering, except that the warrants have an exercise price of $7.50. The unit purchase option expires on April 23, 2011 and is exercisable at $10.00 per unit commencing on the completion of the Acquisition.

Under the terms of the warrant agreement, no warrants will be exercised unless at the time of exercise a prospectus relating to ordinary
shares issuable upon exercise of the warrants is current and the ordinary shares have been registered or qualified or deemed to be exempt under the securities laws of the state of residence of the holder of the warrants. We have agreed to meet these
conditions and use our best efforts to maintain a current prospectus relating to ordinary shares issuable upon exercise of the warrants until the expiration of the warrants. The warrant agreement does not specify the consequences or penalty imposed
against us in the event we are unable to file and complete an effective registration statement to deliver registered shares.

Under EITF
No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Companys Own Stock(EITF No. 00-19), if (a) a derivative contract requires physical or net-share settlement by
delivery of registered shares and does not specify any circumstances under which net-cash settlement would be permitted or required and (b) the contract does not specify how the contract would be settled in the event that we are unable to
deliver registered shares, then net-cash settlement is assumed if we are unable to deliver registered shares (because it is unlikely that nonperformance would be an acceptable alternative). In consequence, a derivative within the
abovementioned parameters is recognized as an asset or a liability where share settlement is not within the Companys control. Accordingly, in connection with the issuance of the units upon the initial public offering, we have recorded
the fair value of the warrants as a liability with any changes in the fair value of such warrants at each reporting date being recorded through our statement of operations. We will continue to adhere to the accounting policies set forth above until
the warrant agreement is amended or there are developments which support a different accounting treatment.

We have determined that the
estimated fair value of the warrants on April 24, 2006, the date of issuance, and on June 30, 2007 was approximately $0.87 and $2.20 per warrant, respectively, or an aggregate of $12,508,454 and $31,625,000, respectively. Since the
warrants were not traded or quoted on a market exchange at the time of issuance, the fair value of the warrants as of April 24, 2006 was estimated based on a lattice-binomial model using an expected life of 48 months, a volatility of 33.7779%,
a risk-free interest rate of 5.204% and taking into consideration the liquidity risk and the forfeiture risk that the warrants could become worthless if we do not consummate a business combination within the prescribed period and liquidates. The
fair value of the warrants as of June 30, 2007 was based on a quoted market price.



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The volatility calculation of 33.7779% was based on the latest five year average volatility of an index
of 447 companies drawn from the Shanghai Stock Exchange Composite Index, or the Shanghai Index, that have been trading for at least five years and that have market capitalizations of less than $400 million. Since we did not have a trading history at
the time the option was issued, we estimated the potential volatility of our ordinary share price by referring to the latest five year average volatility of the Shanghai Index because our board of directors believes that the average volatility of
this index is a reasonable benchmark to use in estimating the expected volatility of our ordinary shares after consummation of a business combination. Although an expected life of five years was taken into account for purposes of assigning a fair
value to the option, to the extent we do not consummate a business combination within the prescribed time period and liquidate the underwriters option would become worthless.

Amount of Equity Subject to Possible Redemption

We are required to obtain shareholder
approval for any business combination of a target business, which includes the proposed Acquisition of Kelun. In the event that our public shareholders owning 20% or more of the ordinary shares sold in our initial public offering vote against a
business combination, we will not proceed with a business combination if the public shareholders exercise their redemption rights. That is, we can still effect a business combination if the public shareholders owning up to approximately 19.99% of
the ordinary shares sold in our initial public offering exercise their redemption rights.

This redemption obligation with respect to up to
19.99% of the ordinary shares sold in our initial public offering will exist regardless of how a business combination is structured. That is, we would be required to redeem up to an amount equal to the product of approximately 19.99% of the
14,375,000 ordinary shares sold in the public offering (or 2,873,563 ordinary shares) multiplied by an initial cash per- share redemption price of $7.60. The actual per-share redemption price will be equal to the quotient of the amount in our trust
account plus all accrued interest not previously released to us, as of two business days prior to the proposed consummation of the business combination, divided by 14,375,000 ordinary shares.

Accordingly, under the provision of EITF D-98, Classification and Measurement of Redeemable Securities,we have classified 19.99% of the net
proceeds from the initial public offering, or $21,839,075, and the related accrued interest of approximately $630,610 outside permanent equity as of June 30, 2007.

Entry into Definitive Share Purchase Agreement

On May 28, 2007, we entered into a definitive
share purchase agreement (Purchase Agreement) with Kelun, a joint stock limited company incorporated and existing under the laws of the PRC, and all the existing shareholders of Kelun (the Kelun Shareholders), pursuant to
which we will acquire all of the issued and outstanding share capital of Kelun from the Kelun Shareholders (the Acquisition). The Acquisition constitutes a business combination as defined in our amended and restated articles of
association. Kelun is principally engaged in the development and production of intravenous solution products and sales and distribution of these products to hospitals, clinics and other healthcare facilities in the PRC.

The aggregate purchase price payable by us to the Kelun Shareholders includes Shanghai Centurys ordinary shares and cash payments as described
below, which will be paid in the following manner:



| |  |  | At the closing of the Acquisition, we will issue an aggregate of 20,000,000 ordinary shares to the Kelun Shareholders, provided that, if the combined net profit of
Kelun for 2006 (subject to carveouts of certain accounting items as set forth in the share purchase agreement) equals or is less than RMB101.7 million, then the number of ordinary shares payable to the Kelun Shareholders will be subject to
renegotiation by us, Kelun and the Kelun Shareholders. For purposes of the foregoing calculation, such net profit of Kelun for 2006 will be based on the combined financial accounts of Kelun, as well as certain subsidiaries it acquired as part of a
restructuring to facilitate the Acquisition, for the financial year ended December 31, 2006 prepared by the management of Kelun in accordance with US GAAP based on the audited financial accounts of each such company after adjustments for
inter-company transactions and unrealized profits relating thereto and for the 20% minority interest in two subsidiaries;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Following the closing of the Acquisition, if the post-combination entity achieves or exceeds RMB180 million, RMB260 million and RMB370 million in net profit
(excluding the effects of certain accounting items) in 2007, 2008 and 2009, respectively, we
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | will issue to the Kelun Shareholders an aggregate of 5,000,000 additional ordinary shares after the end of 2007, 2,000,000 additional ordinary shares after
the end of 2008 and 2,000,000 additional ordinary shares after the end of 2009; and
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Following the closing of the Acquisition, we will pay an aggregate of $11,500,000 to the Kelun Shareholders within 60 days after the earlier of (a) the date
when we send the notice of redemption to the holders of our outstanding redeemable warrants after the last sales price of our ordinary shares equals or exceeds $11.50 per share for any 20 trading days within a 30 trading day period ending three
business days before we send the notice of redemption and (b) the date when the agent for our warrants notifies us that at least 70% of the outstanding warrants have been exercised.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The parties intend that the current management of Kelun will operate the post-Acquisition business following the closing of the Acquisition. These
management members include Mr. Gexin Liu, the current chairman of Keluns board of directors, Mr. Zhipeng Cheng, an executive director and the general manager of Kelun, Ms. Hui Pan, an executive director and the vice president of
Kelun for procurement, Mr. Long Liang, an executive director and the head of the research and development division of Kelun, Mr. Suihua Liu, the current vice president of Kelun in charge of financial matters, human resources and general
administration, Mr. Deguang Chen, the current deputy general manager of Kelun in charge of sales and marketing, and Mr. Yangyu Wan, the current vice president of Kelun in charge of production.

Following the closing of the Acquisition, we will be renamed as China Kelun Pharmaceutical Corporation.

Consummation of the Acquisition is subject to PRC regulatory approvals, the approval of our shareholders and certain other conditions, including that in
the event that 20% or more of our outstanding ordinary shares (excluding, for this purpose, those ordinary shares issued prior to our initial public offering) vote against the proposed Acquisition of Kelun and exercise their conversion rights, the
Acquisition will not be consummated. In light of such conditions, and the fact that we must complete a business combination by no later than April 28, 2008, we cannot assure you that we will be able to complete the Acquisition of Kelun.

For a more complete discussion of the proposed Acquisition, see our current reports on Form 8-K filed with the Securities and Exchange
Commission on May 29, 2007 and June 5, 2007, respectively. Our shareholders and other interested persons are advised to read, when available, our preliminary proxy statement and definitive proxy statement in connection with our
solicitation of proxies for approval of the Acquisition and related matters at a general meeting of our shareholders.

Results of Operations

We were formed on April 25, 2005, to serve as a vehicle to effect a merger, capital stock exchange, asset acquisition or other
similar business combination with an operating business which we believe has significant growth potential. Our initial business combination must be with a target business whose fair market value is at least equal to 80% of our net assets. We
consummated our initial public offering on April 28, 2006. Our activities to date have been comprised solely of organizational activities, preparing for and consummating our initial public offering, and efforts associated with identifying a
target for a business combination. We have neither engaged in any operations nor generated any revenues for the three-month and six-month periods ended June 30, 2007.

For the three-month and six-month periods ended June 30, 2007, we earned interest income of approximately $1.4 million and $2.7 million,
respectively, and incurred operating expenses of approximately $1.6 million and $2.7 million, respectively. Our expenses consist primarily of legal and accounting fees (including principally fees associated with the negotiation and execution of the
Purchase Agreement with Kelun and the Kelun Shareholders, as described above), overhead fees, insurance, travel expenses in connection with our search for a target company, and certain other expenses associated with being a public company. We have
also recorded an expense of approximately $5.9 million and $8.8 million in the three-month and six-month periods ended June 30, 2007, respectively, which represent increases in fair value of warrants liability during the respective periods.

The net proceeds to us from the sale of our units, after deducting offering expenses of approximately $8,308,586 including underwriting
discounts of approximately $4,600,000, and an additional $3,300,000 to be paid to the underwriters if a business combination is consummated (less $0.24 for each share converted to cash in connection with our business combination), was



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$106,691,414. Of this amount, $105,950,000 was placed in a trust account and the remaining $741,414 became available to be used in connection with acquiring
a target business, including identifying and evaluating prospective acquisition candidates, selecting the target business, and structuring, negotiating and consummating the business combination, including the payment of legal and accounting expenses
and our advisory and investment banking fees payable in connection with the business combination. Funds held in the trust account would only be used to pay these expenses and fees upon the consummation of a business combination, but would not
otherwise be available for these uses. To the extent that our securities are used in whole or in part as consideration to effect a business combination, the proceeds held in the trust account (excluding $3,300,000 to be paid to the underwriters upon
consummation of a business combination, amounts payable to any shareholders who exercise their redemption rights, one-half of the interest income which may be released to us each calendar quarter to fund our working capital and general corporate
purposes, and expenses associated with the business combination that are in excess of the amounts not held in trust and cash payments made to the Kelun Shareholders and to Shanghai Century Capital Corporation (SHCC), a company in
formation controlled by our Co-Chief Executive Officers, as a consideration for its management consulting services to be rendered to our company following the Acquisition, if they become payable under the Purchase Agreement) as well as any other net
proceeds not expended may be used to finance the operations of the target business or to effect other acquisitions, as our board of directors determines at that time. We and Keluns management currently have no commitments for the use of the
funds in the trust account following the completion of the Acquisition, although a portion may be used to pay the cash consideration to the Kelun Shareholders and to pay the consulting fees to SHCC if they become payable. We previously believed that
the funds available to us outside of the trust account, including one-half of the interest income to be distributed to us each calendar quarter, would be sufficient to allow us to operate for a 24 month-period following our initial public offering,
assuming that a business combination is not consummated during that time. However, we have incurred approximately $1.4 million in operating expenses in 2006 and approximately $2.7 million in operating expenses during the first six months of 2007,
which consist primarily of legal and accounting fees, overhead fees, insurance, travel expenses in connection with the search of a target company, the structuring, negotiation and documentation of the Acquisition, the preparation of our preliminary
proxy statement on Schedule 14A to be filed with the Securities and Exchange Commission as well as certain other expenses associated with being a public company. We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business or to consummate the Acquisition, but we may need to use a portion of funds held in the trust account to settle any unpaid amounts of these operating expenses upon the consummation of the Acquisition.

On April 28, 2006, in connection with our initial public offering, we sold to the underwriters, for $100, an option to purchase up to
a total of 1,000,000 units as compensation for their services. The units issuable upon exercise of the option are identical to those offered in our initial public offering, except that the warrants have an exercise price of $7.50. The option expires
on April 23, 2011 and is exercisable at $10.00 per unit commencing on the completion of a business combination. In lieu of the payment of the exercise price, the option may be converted into units on a net-share settlement or cashless exercise
basis to the extent that the market value of the units at the time of conversion exceeds the exercise price of the option. The option may only be exercised or converted by the option holder and cannot be redeemed for cash by us or the option holder.

In June 2006, we engaged Consultant A to assist us in matters related to a business combination. The term of the contract is three years
expiring on June 8, 2009 unless terminated earlier. As part of his compensation for services provided to us, we granted to Consultant A (a) an option to purchase 50,000 ordinary shares which vests six months after the consummation of a
business combination and (b) an option to purchase 75,000 ordinary shares which vests on April 24, 2009, provided the consulting agreement has not been terminated prior to the date on which either option become vested. The exercise price
of both options is $7.10, the closing market price of our ordinary shares on the first day that they were traded on the American Stock Exchange. Both options will expire upon the earlier of (i) the date the consulting agreement is terminated,
or (ii) April 24, 2008 if a business combination is not consummated on or prior to that date. We have determined that the estimated fair value of these options on the date of grant was approximately $2.064 per share, or an aggregate of
$258,000, using the lattice option pricing model.

In February 2007, we further granted an option to Consultant A to purchase 100,000
ordinary shares which vests six months after the consummation of the Acquisition, and an option to Consultant B to purchase 10,000 ordinary shares which vests six months after the consummation of the Acquisition. Both options were granted for
consulting services to be provided to us in connection with matters related to the Acquisition. The exercise price of the two options granted on February 1, 2007 is $7.38, the closing market



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price of the ordinary shares on the grant date. These options will expire upon the earlier of (i) the date the consulting agreement is terminated, or
(ii) April 24, 2008 if a business combination is not consummated on or prior to that date. We determined that the estimated fair value of the options granted on February 1, 2007 was approximately $1.082 per share, or an aggregate of
$119,000, using the lattice option pricing model.

In May 2007, we granted (a) to Consultant B an option to purchase 3,000 ordinary
shares and (b) to Consultant C an option to purchase 2,000 ordinary shares. Each of these options vests six months after the consummation of the Acquisition. The exercise price of the option granted to Consultant B is $7.79, the closing market
price of our ordinary share on the grant date. The exercise price of the option granted to Consultant C is $7.80, the closing market price of our ordinary shares on the grant date. These options will expire upon the earlier of (i) the date the
consulting agreement is terminated, or (ii) April 24, 2008 if a business combination is not consummated on or prior to that date.

In May 2007, we granted options to two of our employees to purchase an aggregate of 10,000 ordinary shares which vests six months after the consummation of the Acquisition. The exercise price of these two options is $7.79, the closing
market price of the ordinary share on the grant date. These options will expire upon the earlier of (i) the date the employment agreement is terminated, or (ii) April 24, 2008 if a business combination is not consummated on or prior
to that date.

We determined that the estimated fair value of these options granted to Consultant B and two of our employees in May 2007
was approximately $1.0 per share, or an aggregate of $13,000 using the lattice option pricing model. We determined that the estimated fair value of the option granted to Consultant C in May 2007 was approximately $0.60 per share, or an aggregate of
$1,200, using the lattice option pricing model.

We have accounted for these share options under the fair value method of Statement of
Financial Accounting Standards No.123 (revised 2004) and EITF No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services, by recording compensation based
on the fair value at grant date and, where applicable, their then-current fair values at each interim reporting date for these awards and amortizing the compensation amount over the expected term of the respective consulting or employment contracts
which approximates the expected life of the respective options. The amount of compensation recognized for these share options was $93,337 for the period ended June 30, 2007.

Also in May 2007, we agreed to grant an option to our advisor, Dr. Raymond Kuo Fung Chien, to purchase 100,000 ordinary shares. This option
will be granted if he is elected to our board, which will occur if the Acquisition is completed and such election is approved by our shareholders. The exercise price of this option is $7.95, the closing market price of the ordinary shares on
May 24, 2007.

Off-Balance Sheet Commitments and Arrangements

We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any unconsolidated third parties. In addition, we have not entered into any derivative contracts that are
indexed to our shares and classified as shareholders equity, or that are not reflected in our financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves
as credit, liquidity or market risk support to that entity. Moreover, we do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or
research and development services with us.

Contractual Obligations

We have agreed to pay FDC Consultants Limited, a company owned and managed by Mr. Franklin D. Chu, our Co-Chief Executive Officer, $7,500 per month for office space and general and administrative services
including secretarial support until (i) the consummation of a business combination, (ii) 18 months after our initial public offering if we do not effect a business combination or (iii) 24 months after our initial public offering if a
letter of intent, agreement in principle or definitive agreement has been executed within 18 months of our initial public offering and we have not effected a business combination. Other than this agreement, as of December 31, 2006 and June 30,
2007, we had no contractual obligations or commitments.



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|Item 3. | Quantitative and Qualitative Disclosures about Market Risk
|------- | ----------------------------------------------------------

Market risk is the sensitivity of income to changes in interest rates, foreign exchanges, commodity prices, equity prices, and other market-driven rates or prices. We are not presently engaged in any substantive commercial business.
Accordingly, we are not and, until that time as it consummates a business combination, it will not be, exposed to risks associated with foreign exchange rates, commodity prices, equity prices or other market-driven rates or prices.

The net proceeds of our initial public offering held in the trust account have been invested only in United States government securities,
defined as any Treasury Bill issued by the United States having a maturity of 180 days or less. Thus, we are subject to market risk primarily through the effect of changes in interest rates on government securities. In addition, following the
Acquisition, it is possible that some or all of our revenues and expenses may be denominated in non-United States currencies, primarily Renminbi, which could subject us to increased risks relating to foreign exchange rate fluctuations that could
have a material adverse effect on our business, financial condition and operating results.



|Item 4T. | Controls and Procedures
|-------- | -----------------------

Evaluation of
disclosure controls and procedures. An evaluation of the effectiveness of our disclosure controls and procedures as of June 30, 2007 was made under the supervision and with the participation of our management, including our principal
executive officer and our principal financial officer. Based on that evaluation, they concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report to ensure that information required to be
disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms, and that information
required to be disclosed by us in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its executive and principal financial officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure.

Changes in internal controls over financial reporting.During the most recently completed fiscal quarter, there have been no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal controls over
financial reporting.

PART II. OTHER INFORMATION



|Item 1A. | Risk Factors
|-------- | ------------

Except as described below, there have
been no material changes to the risk factors previously disclosed in the annual report on Form 10-K for the fiscal year ended December 31, 2006 filed with the Securities and Exchange Commission on April 19, 2007. The following risk factor
supersedes the corresponding risk factor in such Form 10-K:

We may be classified as a passive foreign investment company, which could
result in adverse United States federal income tax consequences to U.S. holders.

Based upon the composition of our
assets to date (which have largely consisted of cash and other investment assets), as well as our income to date (which has largely consisted of interest), it is likely that we will be classified as a passive foreign investment company, or PFIC, for
United States federal income tax purposes for 2006 and 2007. This characterization could result in adverse U.S. tax consequences to you if you are a U.S. investor. For example, our U.S. investors will become subject to increased tax liabilities
under U.S. tax laws and regulations and will be subject to burdensome reporting requirements. The determination of whether we are a PFIC is made on an annual basis and will depend on the composition of our income and assets from time to time. A
non-U.S. corporation will be considered a PFIC for any taxable year if either (1) at least 75% of its gross income is passive income or (2) at least 50% of the value of its assets (based on an average of the quarterly values of the assets
during a taxable year) is attributable to assets that produce or are held for the production of passive income. The market value of the assets of Kelun and its operating entities may be determined in large part by the market price of our ordinary
shares,



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which is likely to fluctuate before and after the Acquisition. Additionally, our classification as a PFIC may depend upon how and when we expend cash
proceeds raised in any financings, including our initial public offering. If we are treated as a PFIC for any taxable year during which U.S. holders hold ordinary shares or warrants, certain adverse United States federal income tax consequences
could apply to U.S. holders. See Item 5Other InformationMaterial United States Federal Income Tax ConsiderationsTax Consequences to U.S. HoldersPassive Foreign Investment Company Rules.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------



| | (a) | Unregistered Sales of Equity Securities by Issuer
| | --- | -------------------------------------------------

None.



| | (b) | Use of Proceeds
| | --- | ---------------

On April 28, 2006, we closed our
initial public offering of 14,375,000 units (including 1,875,000 units subject to the underwriters over allotment option, which was exercised in full). Each unit consists of one ordinary share, par value $0.0005 and one warrant. The units were
sold at an offering price of $8.00, generating gross proceeds to the Company of $115,000,000. I-Bankers Securities Incorporated, WR Hambrecht + Co and Ladenburg Thalmann & Co. Inc. acted as the co-managing underwriters for the initial
public offering. The securities sold in the offering were registered under the Securities Act of 1933 pursuant to a registration statement on Form F-1 (No. 333-130260). The Securities and Exchange Commission declared the registration statement
effective on April 24, 2006. The Companys units began trading on the American Stock Exchange on Tuesday, April 25, 2006 shortly after the Companys registration statement was declared effective by the Securities and Exchange
Commission.

We paid a total of $4,600,000 in underwriting discounts and commissions, and incurred fees of approximately $408,586 for other
costs and expenses related to the offering. An additional $3,300,000 was deposited in the trust account and will be paid to the underwriters if a business combination is consummated.

After deducting the underwriting discounts and commissions and the offering expenses, the total net proceeds to us from the offering were approximately
$106,691,414, excluding an additional $3,300,000 to be paid to the underwriter, of which $105,950,000 was deposited into a trust account and the remaining proceeds are available to be used to provide for business, legal and accounting due diligence
and advisory fees in connection with prospective business combinations, compliance with securities laws and regulations, and continuing general and administrative expenses.



|Item 5. | Other Information
|------- | -----------------

Material United States Federal Income Tax
Considerations

General

The
following is a summary of certain material U.S. federal income tax consequences of the acquisition, ownership and disposition of our ordinary shares and warrants. The discussion below of the U.S. federal income tax consequences to U.S.
Holders will apply to a beneficial owner of ordinary shares or warrants that is for U.S. federal income tax purposes:



| |  |  | an individual citizen or resident of the U.S.;
| | - |  | ----------------------------------------------



| |  |  | a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) that is created or organized (or treated as created or organized) in
or under the laws of the United States, any state thereof or the District of Columbia;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an estate whose income is includible in gross income for U.S. federal income tax purposes regardless of its source; or
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | a trust if (a) a U.S. court can exercise primary supervision over the trusts administration and one or more U.S. persons are authorized to control all
substantial decisions of the trust, or (b) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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If a beneficial owner of our ordinary shares and warrants is not described as a U.S. Holder and is not an
entity treated as a partnership or other pass-through entity for U.S. federal income tax purposes, this owner will be considered a Non-U.S. Holder. The U.S. federal income tax consequences applicable to Non-U.S. Holders is described
below under the heading Non-U.S. Holders.

This summary is based on the Internal Revenue Code of 1986, as amended (the
Code), its legislative history, existing and proposed Treasury regulations promulgated under the Code, published rulings and court decisions, all as currently in effect. These authorities are subject to change or differing
interpretations, possibly on a retroactive basis.

This discussion does not address all aspects of U.S. federal income taxation that may be
relevant to Shanghai Century or to any particular holder based on its individual circumstances. In particular, this discussion considers only holders that own our ordinary shares and warrants as capital assets and does not address the potential
application of the alternative minimum tax or the U.S. federal income tax consequences to holders that are subject to special rules, including:



| |  |  | financial institutions or financial services entities;
| | - |  | --------------------------------------------------------



| |  |  | broker-dealers;
| | - |  | ---------------



| |  |  | taxpayers who have elected mark-to-market accounting;
| | - |  | -----------------------------------------------------



| |  |  | tax-exempt entities;
| | - |  | --------------------



| |  |  | governments or agencies or instrumentalities thereof;
| | - |  | -----------------------------------------------------



| |  |  | insurance companies;
| | - |  | --------------------



| |  |  | regulated investment companies;
| | - |  | -------------------------------



| |  |  | real estate investment trusts;
| | - |  | ------------------------------



| |  |  | certain expatriates or former long-term residents of the United States;
| | - |  | -----------------------------------------------------------------------



| |  |  | persons that actually or constructively own 10% or more of our voting shares;
| | - |  | -----------------------------------------------------------------------------



| |  |  | persons that hold our ordinary shares or warrants as part of a straddle, constructive sale, hedging, conversion or other integrated transaction; or
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | persons whose functional currency is not the U.S. dollar.
| | - |  | ---------------------------------------------------------

This discussion does not address any aspect of U.S. federal non-income tax laws, such as gift or estate tax laws, or state, local or non-U.S. tax laws. Additionally, the discussion does not consider the tax treatment
of partnerships or other pass-through entities or persons who hold our ordinary shares or warrants through these entities. If a partnership (or other entity classified as a partnership for U.S. federal income tax purposes) is the beneficial owner of
our ordinary shares and warrants, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership.

We have not sought, and will not seek, a ruling from the Internal Revenue Service (IRS) or an opinion of counsel as to any U.S. federal
income tax consequence described herein. The IRS may disagree with the description in this report and in our other filings with the Securities and Exchange Commission, and its determination may be upheld by a court.

Because of the complexity of the tax laws and because the tax consequences to us or to any holder of our securities may be affected by matters not
discussed in this report, each holder of our securities is urged to consult with its tax advisor with respect to the specific tax consequences of the ownership and disposition of our ordinary shares and warrants, including the applicability and
effect of state, local and non-U.S. tax laws, as well as U.S. federal tax laws.



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Tax Consequences to U.S. Holders

Taxation of Distributions Paid on Ordinary Shares

Subject to the passive foreign investment company
(PFIC) rules discussed below, a U.S. Holder will be required to include in gross income as ordinary income the amount of any dividend paid on our ordinary shares. A distribution on our ordinary shares will be treated as a dividend for
U.S. federal income tax purposes to the extent the distribution is paid out of our current or accumulated earnings and profits (as determined for U.S. federal income tax purposes). That dividend will not be eligible for the dividends-received
deduction generally allowed to U.S. corporations in respect of dividends received from other U.S. corporations. Distributions in excess of these earnings and profits will be applied against and reduce the U.S. Holders basis in its ordinary
shares and, to the extent in excess of that basis, will be treated as gain from the sale or exchange of these ordinary shares.

With
respect to non-corporate U.S. Holders for taxable years beginning before January 1, 2011, dividends may be taxed at the lower applicable long-term capital gains rate (see  Taxation on the Disposition of Ordinary Shares and
Warrants below) provided that (1) our ordinary shares are readily tradable on an established securities market in the United States, (2) we are not a PFIC, as discussed below, for either the taxable year in which the dividend was
paid or the preceding taxable year, and (3) certain holding period requirements are met. It is not entirely clear, however, whether a U.S. Holders holding period for our ordinary shares would be suspended for purposes of clause
(3) above for the period that that holder had a right to have these ordinary shares redeemed by us. In addition, under recently published IRS authority, ordinary shares are considered for purposes of clause (1) above to be readily tradable
on an established securities market in the United States only if they are listed on certain exchanges, which presently include the American Stock Exchange and the Nasdaq Global Market. While we expect that our ordinary shares will continue to be
listed and traded on the American Stock Exchange before we succeed in applying for listing of each of our securities on the Nasdaq Global Market, U.S. Holders nevertheless should consult their own tax advisors regarding the availability of the lower
rate for any dividends paid with respect to our ordinary shares.

Taxation on the Disposition of Ordinary Shares and Warrants

Subject to the discussion of the PFIC rules below, upon a sale or other taxable disposition of our ordinary shares or warrants (which, in general, would
include a redemption of ordinary shares under the exercise by a U.S. Holder of its redemption rights), a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between the amount realized and the U.S.
Holders adjusted tax basis in the ordinary shares or warrants. See  Exercise or Lapse of a Warrant below for a discussion regarding a U.S. Holders basis in the ordinary shares acquired as a result of the exercise of a
warrant.

Capital gains that U.S. Holders recognize generally are subject to U.S. federal income tax at the same rate as ordinary income,
except that long-term capital gains that non-corporate U.S. Holders recognize are generally subject to U.S. federal income tax at a maximum rate of 15% for taxable years beginning before January 1, 2011 (and 20% thereafter). Capital gain or
loss will constitute long-term capital gain or loss if the U.S. Holders holding period for the ordinary shares or warrants exceeds one year. The deductibility of capital losses is subject to various limitations.

Exercise or Lapse of a Warrant

Subject to the
discussion of the PFIC rules below, a U.S. Holder generally will not recognize gain or loss upon the exercise of a warrant. Ordinary shares acquired as a result of the exercise of a warrant for cash generally will have a tax basis equal to the U.S.
Holders tax basis in the warrant, increased by the amount paid to exercise the warrant. The holding period of these ordinary shares generally would begin on the day after the date of exercise of the warrant. If the terms of a warrant provide
for any adjustment to the number of shares of ordinary shares for which the warrant may be exercised or to the exercise price of the warrants, this adjustment may, under certain circumstances, result in constructive distributions that could be
taxable to the U.S. Holder of the warrants. Conversely, the absence of an appropriate adjustment similarly may result in a constructive distribution that could be taxable to the U.S. Holders of the ordinary shares. See Taxation of
Distributions Paid on Ordinary Shares above. If a warrant is allowed to lapse unexercised, a U.S. Holder generally will recognize a capital loss equal to that holders tax basis in the warrant.



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Passive Foreign Investment Company Rules

A foreign corporation will be a passive foreign investment company, or PFIC, if at least 75% of its gross income in a taxable year, including its pro rata
share of the gross income of any company in which it is considered to own at least 25% of the shares by value, is passive income. Alternatively, a foreign corporation will be a PFIC if at least 50% of its assets in a taxable year, ordinarily
determined based on fair market value and averaged quarterly over the year, including its pro rata share of the assets of any company in which it is considered to own at least 25% of the shares by value, are held for the production of, or produce,
passive income. Passive income generally includes dividends, interest, rents, royalties, and gains from the disposition of passive assets.

Based on the composition of our assets to date (which have largely consisted of cash and other investment assets), as well as the composition of our income to date (which has largely consisted of interest), it is likely that we will be
treated as a PFIC in 2006 and 2007. Our actual PFIC status for any taxable year, however, will not be determinable until after the end of the taxable year, and accordingly there can be no assurance with respect to our status as a PFIC for the
current taxable year or any future taxable year.

If we are a PFIC for any taxable year during which a U.S. Holder held our ordinary shares
or warrants, and the U.S. Holder did not make a timely qualified electing fund (QEF) election for the first taxable year of its holding period for our ordinary shares or a mark-to-market election for that first taxable year, as described
below, that holder will be subject to special rules with respect to:



| |  |  | any gain that the U.S. Holder recognizes on the sale or other taxable disposition of its ordinary shares or warrants; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | any excess distribution made to the U.S. Holder (generally, any distributions to that U.S. Holder during a taxable year that are greater than 125% of the average
annual distributions that this U.S. Holder receives from us in respect of the ordinary shares during the three preceding taxable years or, if shorter, that U.S. Holders holding period for the ordinary shares).
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Under these rules,



| |  |  | the U.S. Holders gain or excess distribution will be allocated ratably over the U.S. Holders holding period for the ordinary shares or warrants;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the amount allocated to the taxable year in which the U.S. Holder recognized the gain or excess distribution will be taxed as ordinary income;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the amount allocated to each prior year, with certain exceptions, will be taxed at the highest tax rate in effect for that year and applicable to the U.S. Holder;
and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such year.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------

In addition, if we are a PFIC, a U.S. Holder who acquires our ordinary shares or warrants from a deceased U.S. Holder who dies before January 1,
2010 generally will be denied the step-up of U.S. federal income tax basis for these shares or warrants to their fair market value at the date of the deceased holders death. Instead, that U.S. Holder would have a tax basis in these shares or
warrants equal to the deceased holders tax basis, if lower.

In general, a U.S. Holder may avoid the PFIC tax consequences described
above in respect to our ordinary shares acquired as part of a unit in this offering by making a timely QEF election to include in income its pro rata share of our net capital gains (as long-term capital gain) and other earnings and profits (as
ordinary income), on a current basis, in each case whether or not distributed. A U.S. Holder may make a separate election to defer the payment of taxes on undistributed income inclusions under the QEF rules, but if deferred, any these taxes will be
subject to an interest charge.

A U.S. Holder may not make a QEF election with respect to its warrants. As a result, if we were a PFIC at
any time during the period the U.S. Holder held the warrants, any gain recognized by a U.S. Holder who sells or otherwise disposes of a warrant (other than upon exercise of a warrant) generally will be subject to the special tax and interest charge
rules treating the gain as an excess distribution, as described above. If a U.S. Holder that exercises these warrants properly makes a QEF election with respect to the newly acquired ordinary shares (or has previously made a QEF election with
respect to our ordinary shares), the QEF election will



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apply to the newly acquired ordinary shares, but the adverse tax consequences relating to PFIC shares will continue to apply with respect to these ordinary
shares (which generally will be deemed to have a holding period for the purposes of the PFIC rules that includes the period the U.S. Holder held the warrants), unless the U.S. Holder makes a purging election. The purging election creates a deemed
sale of these shares at their fair market value. The gain required to be recognized as a result of the purging election is subject to the special tax and interest charge rules treating the gain as an excess distribution, as described above. As a
result of the purging election, the U.S. Holder will have a new basis and holding period in the ordinary shares acquired upon the exercise of the warrants for purposes of the PFIC rules.

The QEF election is made on a stockholder-by-stockholder basis and, once made, can be revoked only with the consent of the IRS. A U.S. Holder generally
makes a QEF election by attaching a completed IRS Form 8621 (Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund), including the information provided in a PFIC annual information statement, to a timely filed
U.S. federal income tax return for the tax year to which the election relates. Retroactive QEF elections generally may be made only by filing a protective statement with this return and if certain other conditions are met or with the consent of the
IRS.

In order to comply with the requirements of a QEF election, a U.S. Holder must receive certain information from us. Upon request from
a U.S. Holder, we will endeavor to provide to the U.S. Holder no later than 90 days after the request this information as the IRS may require, including a PFIC annual information statement, in order to enable the U.S. Holder to make and maintain a
QEF election. However, there is no assurance that we will have timely knowledge of our status as a PFIC in the future or of the required information to be provided.

If a U.S. Holder has elected the application of the QEF rules to our ordinary shares, and the special tax and interest charge rules do not apply to these shares (because of a timely QEF election for the first tax year
of the U.S. Holders holding period for our ordinary shares or a purge of the PFIC taint as a result of a purging election), any gain recognized on the appreciation of our ordinary shares generally will be taxable as capital gain and no
interest charge will be imposed. As discussed above, U.S. Holders of a QEF are currently taxed on their pro rata shares of its earnings and profits, whether or not distributed. In that case, a subsequent distribution of these earnings and profits
that were previously included in income generally will not be taxable as a dividend. The tax basis of a U.S. Holders shares in a QEF will be increased by amounts that are included in income, and decreased by amounts distributed but not taxed
as dividends, under the above rules. Similar basis adjustments apply to property if by reason of holding this property the U.S. Holder is treated under the applicable attribution rules as owning shares in a QEF.

Although a determination as to our PFIC status will be made annually, an initial determination that our company is a PFIC will generally apply for
subsequent years to a U.S. Holder who held ordinary shares or warrants while we were a PFIC, whether or not we meet the test for PFIC status in those years. A U.S. Holder who makes the QEF election discussed above for our first tax year in which the
U.S. Holder holds (or is deemed to hold) our ordinary shares and for which we are determined to be a PFIC, however, will not be subject to the PFIC tax and interest charge rules (or the denial of basis step-up at death) discussed above in respect to
these shares. In addition, that U.S. Holder will not be subject to the QEF inclusion regime with respect to these shares for the tax years in which we are not a PFIC. On the other hand, if the QEF election is not effective for each of our tax years
in which we are a PFIC and the U.S. Holder holds (or is deemed to hold) our ordinary shares, the PFIC rules discussed above will continue to apply to these shares unless the holder makes a purging election and pays the tax and interest charge with
respect to the gain inherent in these shares attributable to the pre-QEF election period.

Alternatively, if a U.S. Holder owns ordinary
shares in a PFIC that is treated as marketable stock, the U.S. Holder may make a mark-to-market election. If the U.S. Holder makes a valid mark-to-market election, that holder generally will not be subject to the PFIC rules described above in
respect to its ordinary shares. Instead, in general, the U.S. Holder will include as ordinary income each year the excess, if any, of the fair market value of its ordinary shares at the end of its taxable year over the adjusted basis in its ordinary
shares. The U.S. Holder also will be allowed to take an ordinary loss in respect of the excess, if any, of the adjusted basis of its ordinary shares over the fair market value of its ordinary shares at the end of its taxable year (but only to the
extent of the net amount of previously included income as a result of the mark-to-market election). The U.S. Holders basis in its ordinary shares will be adjusted to reflect any such income or loss amounts, and any further gain recognized on a
sale or other taxable disposition of the ordinary shares will be treated as ordinary income. Currently, a mark-to-market election may not be made with respect to warrants.



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The mark-to-market election is available only for stock that is regularly traded on a national securities
exchange that is registered with the SEC or on the Nasdaq Global Market, or on a foreign exchange or market that the IRS determines has rules sufficient to ensure that the market price represents a legitimate and sound fair market value. While we
expect that our ordinary shares will continue to be listed and traded on the American Stock Exchange before we succeed in applying for listing of each of our securities on the Nasdaq Global Market, U.S. Holders nonetheless should consult their own
tax advisors regarding the availability and tax consequences of a mark-to-market election in respect to our ordinary shares under their particular circumstances.

If we are a PFIC and, at any time, have a non-U.S. subsidiary that is classified as a PFIC, U.S. Holders generally would be deemed to own a portion of the shares of this lower-tier PFIC, and generally could incur
liability for the deferred tax and interest charge described above if we receive a distribution from, or dispose of all or part of our interest in, the lower-tier PFIC. Upon request, we will endeavor to cause any lower-tier PFIC to provide to a U.S.
Holder no later than 90 days after the request the information that may be required to make or maintain a QEF election with respect to the lower-tier PFIC. U.S. Holders are urged to consult their own tax advisors regarding the tax issues raised by
lower-tier PFICs.

If a U.S. Holder owns (or is deemed to own) shares during any year in a PFIC, that holder may have to file an IRS Form
8621 (whether or not a QEF or mark-to-market election is made).

The rules dealing with PFICs and with the QEF and mark-to-market elections
are very complex and are affected by various factors in addition to those described above. Accordingly, U.S. Holders of our ordinary shares and warrants should consult their own tax advisors concerning the application of the PFIC rules to our
ordinary shares and warrants under their particular circumstances.

Tax Consequences to Non-U.S. Holders

Dividends paid to a Non-U.S. Holder in respect of its ordinary shares generally will not be subject to U.S. federal income tax, unless the dividends are
effectively connected with the Non-U.S. Holders conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base that that holder
maintains in the United States).

In addition, a Non-U.S. Holder generally will not be subject to U.S. federal income tax on any gain
attributable to a sale or other disposition of our ordinary shares or warrants unless this gain is effectively connected with its conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, is
attributable to a permanent establishment or fixed base that that holder maintains in the United States) or the Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of sale or other
disposition and certain other conditions are met (in which case, this gain from United States sources generally is subject to tax at a 30% rate or a lower applicable tax treaty rate).

Dividends and gains that are effectively connected with the Non-U.S. Holders conduct of a trade or business in the United States (and, if required
by an applicable income tax treaty, are attributable to a permanent establishment or fixed base in the United States) generally will be subject to tax in the same manner as for a U.S. Holder and, in the case of a Non-U.S. Holder that is a
corporation for U.S. federal income tax purposes, may also be subject to an additional branch profits tax at a 30% rate or a lower applicable tax treaty rate.

Backup Withholding and Information Reporting

In general, information reporting for U.S. federal income tax purposes
will apply to distributions made on our ordinary shares within the United States to a non-corporate U.S. Holder and to the proceeds from sales and other dispositions of our ordinary shares or warrants by a non-corporate U.S. Holder to or through a
U.S. office of a broker. Payments made (and sales and other dispositions effected at an office) outside the United States will be subject to information reporting in limited circumstances.

In addition, backup withholding of United States federal income tax, currently at a rate of 28%, generally will apply to dividends paid on our ordinary
shares to a non-corporate U.S. Holder and the proceeds from sales and other dispositions of shares or warrants by a non-corporate U.S. Holder, in each case who:



| |  |  | fails to provide an accurate taxpayer identification number;
| | - |  | ------------------------------------------------------------



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| |  |  | is notified by the IRS that backup withholding is required; or
| | - |  | --------------------------------------------------------------



| |  |  | in certain circumstances, fails to comply with applicable certification requirements.
| | - |  | -------------------------------------------------------------------------------------

A Non-U.S. Holder generally may eliminate the requirement for information reporting and backup withholding by providing certification of its foreign
status, under penalties of perjury, on a duly executed applicable IRS Form W-8 or by otherwise establishing an exemption.

Backup
withholding is not an additional tax. Rather, the amount of any backup withholding will be allowed as a credit against a U.S. Holders or a Non-U.S. Holders U.S. federal income tax liability and may entitle that holder to a refund,
provided that certain required information is timely furnished to the IRS.



|Item 6. | Exhibits
|------- | --------

The following exhibits are filed with
this report:



|     |  |                                                                                                        
|---- |  | -------------------------------------------------------------------------------------------------------
|31.1 |  | Certification required by Rule 13a-14(a) or Rule 15d-14(a).                                            
|     | 
|31.2 |  | Certification required by Rule 13a-14(a) or Rule 15d-14(a).                                            
|     | 
|32.1 |  | Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|     | 
|32.2 |  | Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

Dated: August 14, 2007



SHANGHAI CENTURY ACQUISITION CORPORATION/s/ Franklin D. ChuFranklin D. ChuCo-Chief Executive Officer(principal executive officer)/s/ Anthony Kai Yiu LoAnthony Kai Yiu LoCo-Chief Executive Officer(principal financial officer)




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EXHIBIT INDEX



|       |  |                                                                                                        
|------ |  | -------------------------------------------------------------------------------------------------------
|Number |  | Description                                                                                            
|31.1   |  | Certification required by Rule 13a-14(a) or Rule 15d-14(a).                                            
|       | 
|31.2   |  | Certification required by Rule 13a-14(a) or Rule 15d-14(a).                                            
|       | 
|32.1   |  | Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|       | 
|32.2   |  | Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.