**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      20-F**




(Mark
      One)


o
            
            **REGISTRATION
                STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE
                ACT OF 1934**


**OR**


þ
            
            **ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**


**For
      the fiscal year ended December 31, 2007.**


**OR**


o
            
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
                ACT OF
                1934**


**OR**


o
            
            **SHELL
                COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
                EXCHANGE
                ACT OF 1934**





**Date
      of event requiring this shell company report**





**For
      the transition period from** **** **to** **** ****





**Commission
      file number: 000-52370**





CHINA
      FORTUNE ACQUISITION CORP. ****





(Exact
      name of Registrant as specified in its charter)





N/A


(Translation
      of Registrant’s name into English)





Cayman
      Islands





(Jurisdiction
      of incorporation or organization)





Jinmao
      Tower, 88 Century Boulevard, Suite 4403, Pudong, Shanghai, People’s Republic of
      China


(Address
      of principal executive offices)




Securities
      registered or to be registered pursuant to Section 12(b) of the Act:





None


(Title
      of
      Class)




Securities
      registered or to be registered pursuant to Section 12(g) of the Act:





Title
                of each class
            
            Name
                of exchange on which each class is to be registeredUnits
            
            OTCBBOrdinary
                Shares
            
            OTCBBWarrants
            
            OTCBB










Securities
      for which there is a reporting obligation pursuant to Section 15(d) of the
      Act:





None


(Title
      of
      Class)





Indicate
      the number of outstanding shares of each of the Issuer’s classes of capital or
      ordinary shares as of the close of the period covered by the annual report:
      11,968,750 ordinary shares, par value US$0.0001 per share, as of
      December 31, 2007.





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act. Yes o No þ





If
      this
      report is an annual or transition report, indicate by check mark if the
      registrant is not required to file reports pursuant to Section 13 or 15(d)
      of the Securities Exchange Act of 1934. Yes o No þ





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
      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 þ No o





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):





Large
      accelerated filer o Accelerated
      filer o Non-accelerated
      filer þ





Indicate
      by check mark which basis of accounting the registrant has used to prepare
      the
      financial statements included in this filing:





US
                GAAPþ
            
            International
                Financial Reporting Standards as issued by the International Accounting
                Standards Boardo
            
            Othero





If
      “Other” has been checked in response to the previous question indicate by check
      mark which financial statement item the registrant has elected to follow.


Item 17 o Item 18 þ





If
      this
      is an annual report, indicate by check mark whether the registrant is a shell
      company (as defined in Rule 12b-2 of the Exchange Act).


Yes þ No o




2


**TABLE
      OF CONTENTS**





PagePART IItem 1.
            IDENTITY
                OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
            5Item 2.
            OFFER
                STATISTICS AND EXPECTED TIMETABLE
            5Item 3.
            KEY
                INFORMATION
            5Item 4.
            INFORMATION
                ON THE COMPANY
            22Item
                4A.
            UNRESOLVED
                STAFF COMMENTS
            34Item
                5.
            OPERATING
                AND FINANCIAL REVIEW AND PROSPECTS
            34Item
                6.
            DIRECTORS,
                SENIOR MANAGEMENT AND EMPLOYEES
            35Item
                7.
            MAJOR
                SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
            38Item
                8.
            FINANCIAL
                INFORMATION
            42Item
                9.
            THE
                OFFER AND LISTING
            42Item
                10.
            ADDITIONAL
                INFORMATION
            43Item
                11.
            QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
            54Item
                12.
            DESCRIPTION
                OF SECURITIES OTHER THAN EQUITY SECURITIES
            54Item
                13.
            DEFAULTS,
                DIVIDEND ARREARAGES AND DELINQUENCIES
            54PART IIItem
                14.
            MATERIAL
                MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
                PROCEEDS
            55Item
                15
            CONTROLS
                AND PROCEDURES
            55Item
                16.
            AUDIT
                COMMITTEE FINANCIAL EXPERT
            56Item 16B.
            CODE
                OF ETHICS
            56Item 16C.
            PRINCIPAL
                ACCOUNTANT FEES AND SERVICES
            56Item 16D.
            EXEMPTIONS
                FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
            56Item 16E.
            PURCHASE
                OF EQUITY SECURITIES BY TH EISSUER AND AFFILIATED
                PURCHASERS
            56PART IIIItem 17.
            FINANCIAL
                STATEMENTS
            56Item 18.
            FINANCIAL
                STATEMENTS
            57Item 19.
            EXHIBITS
            57




3


**INTRODUCTION**





Unless
      otherwise indicated and except where the context otherwise requires, references
      in this annual report on Form 20-F to:





**•**
            
            “we,”
                “us” or “our company” refer to China Fortune Acquisition
                Corp.;**•**
            
            “China”
                or the “PRC” refer to the People’s Republic of China as well as the Hong
                Kong Special Administrative Region and the Macau Special Administrative
                Region, but does not include Taiwan;**•**
            
            “shares”
                or “ordinary shares” refers to our ordinary shares; and**•**
            
            all
                references to “RMB” or “Renminbi” are to the legal currency of China; all
                references to “$,” “dollars,” “US$” and “U.S. dollars” are to the legal
                currency of the United States; and all references to “HKD” and “Hong Kong
                dollars” are to the legal currency of the Hong Kong Special Administrative
                Region.





**FORWARD-LOOKING
      STATEMENTS**





This
      annual report on Form 20-F contains forward-looking statements that involve
      risks and uncertainties. All statements other than statements of historical
      facts are forward-looking statements. These statements involve known and unknown
      risks, uncertainties and other factors that may cause our actual results,
      performance or achievements to be materially different from those expressed
      or
      implied by the forward-looking statements.




This
      annual report contains forward-looking statements as defined in Section 27A
      of
      the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E
      of the Securities Exchange Act of 1934 (the “Exchange Act”). These
      forward-looking statements include information about our possible or assumed
      future results of operations or our performance. Words such as “expects,”
“intends,” “plans,” “believes,” “anticipates,” “estimates,” and variations of
      such words and similar expressions are intended to identify the forward-looking
      statements. Although we believe that the expectations reflected in such
      forward-looking statements are reasonable, no assurance can be given that such
      expectations will prove to be correct. These statements involve known and
      unknown risks and are based upon a number of assumptions and estimates which
      are
      inherently subject to significant uncertainties and contingencies, many of
      which
      are beyond our control. Actual results may differ materially from those
      expressed or implied by such forward-looking statements.




We
      undertake no obligation to publicly update or revise any forward-looking
      statements contained in this annual report, or the documents to which we refer
      you in this annual report, to reflect any change in our expectations with
      respect to such statements or any change in events, conditions or circumstances
      on which any statement is based.




China
      Fortune Acquisition Corp. is a Cayman Islands company that is referred to in
      this annual report on Form 20-F as “China Fortune” “the company,” “we,” “us,” or
“our.” This report should be read in conjunction with our audited consolidated
      financial statements and the accompanying notes thereto, which are included
      in
      Item 18 to this annual report.




4


**PART
      I**





**ITEM
      1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS**




Not
      Applicable.




**ITEM
      2. OFFER STATISTICS AND EXPECTED TIMETABLE**




Not
      Applicable.




**ITEM
      3. KEY INFORMATION**





**A.
      Selected Financial Data**





**Selected
      Consolidated Financial Data**





The
      selected financial information set forth below has been derived from our audited
      financial statements for the period from August 18, 2006 (date of inception)
      to
      December 31, 2007. The information is only a summary and should be read in
      conjunction with our audited financial statements and notes thereto contained
      elsewhere herein. The financial results should not be construed as indicative
      of
      financial results for subsequent periods. See “Item 4. Information on the
      Company” and “Item 5. Operating and Financial Review and Prospects.”




**Selected
      Financial Data**


**(Expressed
      in United States Dollars)**




**Period from August 18, 2006****(inception) to December 31,****2006**
            
            **2007****Consolidated
                Statement of Operations Data:**Investment
                income
            
            $
            -
            
            $
            964,752Formation
                costs and operating expenses
            
            
            4,686
            
            
            123,938Net
                income (loss) before income taxes
            
            
            (4,686
            )
            
            840,814Provision
                for income taxes
            
            
            -
            
            
            -Net
                income (loss)
            
            $
            (4,686
            )
            $
            840,814Weighted
                average shares outstanding
            
            
            2,310,268
            
            
            5,422,092Basic
                and diluted net income (loss) per share
            
            $
            (0.00
            )
            $
            0.16**Consolidated
                Balance Sheet Data:**Cash
                and cash equivalents
            
            
            1,281,727Total
                assets
            
            
            74,755,021Total
                current liabilities
            
            
            1,883,102Total
                shareholders’ equity
            
            
            50,870,001




5




**B.
      Capitalization and Indebtedness**





Not
      applicable.





**C.
      Reasons for the Offer and Use of Proceeds**





Not
      applicable.





**D.
      Risk Factors**





*An
      investment in our securities involves a high degree of risk. You should consider
      carefully all of the risks described below, together with the other information
      contained in this Form 20-F before making a decision to invest in our
      units.*





**Risks
      Related to Our Business**




***We
      are a development stage company with no operating history and, accordingly,
      you
      will not have any basis on which to evaluate our ability to achieve our business
      objective.***




We
      are a
      recently incorporated development stage company with no operating results to
      date. Since we do not have an operating history, you will have no basis upon
      which to evaluate our ability to achieve our business objective, which is to
      acquire an operating business. We have not conducted any discussions and we
      have
      no plans, arrangements or understandings with any prospective acquisition
      candidates. We will not generate any revenues until, at the earliest, after
      the
      consummation of a business combination.




***If
      we are forced to liquidate before a business combination and distribute the
      trust account, our public shareholders will receive less than $8.00 per share
      and our warrants will expire worthless.***




If
      we are
      unable to complete a business combination and are forced to liquidate our
      assets, the per-share liquidation distribution will be less than $8.00 because
      of the expenses incurred in our initial public offering, our general and
      administrative expenses and the anticipated costs of seeking a business
      combination .
      Furthermore, there will be no distribution with respect to our outstanding
      warrants which will expire worthless if we liquidate before the completion
      of a
      business combination.




***Because
      there are numerous companies with a business plan similar to ours seeking to
      effectuate a business combination, including companies seeking to consummate
      a
      business combination with companies in China,  it may be more difficult for
      us to do so.***




There
      are
      numerous similarly structured blank check companies which have completed initial
      public offerings with business plans similar to ours and there are a number
      of
      additional offerings for blank check companies that are still in the
      registration process but have not completed initial public offerings. While
      some
      of those companies must complete a business combination in specific industries,
      a number of them may consummate a business combination in any industry they
      choose. Therefore, we may be subject to competition from these and other
      companies seeking to consummate a business plan similar to ours. Because of
      this
      competition, we cannot assure you that we will be able to effectuate a business
      combination within the required time periods.




***If
      third parties bring claims against us, the proceeds held in trust could be
      reduced and the per-share liquidation price received by shareholders will be
      less than $7.82 per share.***




As
      of
      December 31, 2007, the per-share liquidation price of the funds held in trust
      was $7.82. Our placing of funds in trust may not protect those funds from third
      party claims against us. Although we will seek to have all vendors and service
      providers we engage and prospective target businesses we negotiate with, execute
      agreements with us waiving any right, title, interest or claim of any kind
      in or
      to any monies held in the trust account for the benefit of our public
      shareholders, there is no guarantee that they will execute such agreements.
      Nor
      is there any guarantee that, even if such entities execute such agreements
      with
      us, they will not seek recourse against the trust account. A court could also
      conclude that such agreements are not legally enforceable. Accordingly, the
      proceeds held in trust could be subject to claims which could take priority
      over
      those of our public shareholders. If we liquidate before the completion of
      a
      business combination and distribute the proceeds held in trust to our public
      shareholders, our officers and directors have agreed that they will be jointly
      and severally liable (on a pro rata basis relative to the number of initial
      shares owned by them prior to the completion of the initial public offering)
      to
      ensure that the proceeds in the trust account are not reduced by the claims
      of
      target businesses or claims of vendors or other entities that are owed money
      by
      us for services rendered or contracted for or products sold to us. There can
      be
      no assurance that they will be able to satisfy any indemnification obligations
      that may arise. Therefore, we cannot assure you that the per-share distribution
      from the trust fund, if we liquidate, will not be less than $7.82, plus interest
      then held in the trust fund, due to such claims.


6




Additionally,
      if we are forced to file a bankruptcy case or an involuntary bankruptcy case
      is
      filed against us which is not dismissed, the proceeds held in the trust account
      could be subject to applicable bankruptcy law, and may be included in our
      bankruptcy estate and subject to the claims of third parties with priority
      over
      the claims of our shareholders. To the extent any bankruptcy claims deplete
      the
      trust account, we cannot assure you we will be able to return to our public
      shareholders at least $7.82 per share.




***Our
      shareholders may be held liable for claims by third parties against us to the
      extent of distributions received by them.***




Our
      memorandum and articles of association provides that we will continue in
      existence only until July
      23,
      2009 .
      If we
      have not completed a business combination by such date and amended this
      provision in connection thereto, our corporate existence will cease except
      for
      the purposes of winding up our affairs and dissolving. As a result, this has
      the
      same effect as if we had formally went through a voluntary liquidation procedure
      under the Companies Law (2004 Revision) of the Cayman Islands (the “Companies
      Law”). In such a situation under the Companies Law, a liquidator would give at
      least 21 days’ notice to creditors of his intention to make a distribution by
      notifying known creditors (if any) who have not submitted claims and by placing
      a public advertisement in the Cayman Islands Official Gazette, although in
      practice this notice requirement need not necessarily delay the distribution
      of
      assets as the liquidator may be satisfied that no creditors would be adversely
      affected as a consequence of a distribution before this time period has expired.
      As soon as the affairs of the company are fully wound-up, the liquidator must
      lay his final report and accounts before a final general meeting which must
      be
      called by a public notice at least one month before it takes place. After the
      final meeting, the liquidator must make a return to the Registrar confirming
      the
      date on which the meeting was held and three months after the date of such
      filing the company is dissolved. In the case of a full voluntary liquidation
      procedure, any liability of shareholders with respect to a liquidating
      distribution would be barred if creditors miss the deadline for submitting
      claims. However, it is our intention to liquidate the trust account to our
      public shareholders as soon as reasonably possible and our directors and
      officers have agreed to take any such action necessary to dissolve our company
      and liquidate the trust account as soon as reasonably practicable if we do
      not
      complete a business combination by July 23, 2009. Pursuant to our Articles
      of
      Association, failure to consummate a business combination by July 23, 2009
      will
      trigger an automatic winding up of the company. As such, our shareholders could
      potentially be liable for any claims to the extent of distributions received
      by
      them pursuant to such process and any liability of our shareholders may extend
      beyond the date of such dissolution. Accordingly, we cannot assure you that
      third parties will not seek to recover from our shareholders amounts owed to
      them by us.




***An
      effective registration statement may not be in place when an investor desires
      to
      exercise warrants, thus precluding such investor from being able to exercise
      his, her or its warrants and causing such warrants to be practically
      worthless.***




No
      warrant will be exercisable and we will not be obligated to issue ordinary
      shares unless, at the time a holder seeks to exercise a warrant, we have a
      registration statement under the Securities Act in effect covering the ordinary
      shares issuable upon the exercise of the warrants and a current prospectus
      relating to the ordinary shares. Under the terms of the warrant agreement,
      we
      have agreed to use our best efforts to have a registration statement in effect
      covering the ordinary shares issuable upon exercise of the warrants as of the
      date the warrants become exercisable and to maintain a current prospectus
      relating to the ordinary shares issuable upon exercise of the warrants until
      the
      expiration of the warrants. However, we cannot assure you that we will be able
      to do so. We will not be required to net cash settle the warrants (whether
      in
      the case of our failure to maintain a current prospectus or otherwise).


7




***An
      investor will only be able to exercise a warrant if the issuance of ordinary
      shares upon such exercise has been registered or qualified or is deemed exempt
      under the securities laws of the state of residence of the holder of the
      warrants.***




No
      public
      warrants will be exercisable and we will not be obligated to issue ordinary
      shares unless the ordinary shares issuable upon such exercise has been
      registered or qualified or deemed to be exempt under the securities laws of
      the
      state of residence of the holder of the warrants. Because the exemptions from
      qualification in certain states for resales of warrants and for issuances of
      ordinary shares by the issuer upon exercise of a warrant may be different,
      a
      warrant may be held by a holder in a state where an exemption is not available
      for issuance of ordinary shares upon an exercise and the holder will be
      precluded from exercise of the warrant. At the time that the warrants become
      exercisable (following our completion of a business combination), we expect
      to
      become listed on a national securities exchange, which would provide an
      exemption from registration in every state,. Accordingly, we believe holders
      in
      every state will be able to exercise their warrants as long as our prospectus
      relating to the ordinary shares issuable upon exercise of the warrants is
      current. However, we cannot assure you of this fact. As a result, the public
      warrants may be deprived of any value, the market for such warrants may be
      limited and the holders of such warrants may not be able to exercise their
      warrants if the ordinary shares issuable upon such exercise is not qualified
      or
      exempt from qualification in the jurisdictions in which the holders of such
      warrants reside.




***Since
      we have not yet selected a particular industry or target business with which
      to
      complete a business combination, we are unable to currently ascertain the merits
      or risks of the industry or business in which we may ultimately
      operate.***




We
      may
      consummate a business combination with a company in any industry we choose
      and
      are not limited to any particular industry or type of business. Accordingly,
      there is no current basis for you to evaluate the possible merits or risks
      of
      the particular industry in which we may ultimately operate or the target
      business which we may ultimately acquire. To the extent we complete a business
      combination with a financially unstable company or an entity in its development
      stage, we may be affected by numerous risks inherent in the business operations
      of those entities. If we complete a business combination with an entity in
      an
      industry characterized by a high level of risk, we may be affected by the
      currently unascertainable risks of that industry. Although our management will
      endeavor to evaluate the risks inherent in a particular industry or target
      business, we cannot assure you that we will properly ascertain or assess all
      of
      the significant risk factors. We also cannot assure you that an investment
      in
      our units will not ultimately prove to be less favorable to investors in the
      initial public offering than a direct investment, if an opportunity were
      available, in a target business.




***We
      may issue shares or debt securities to complete a business combination, which
      would reduce the equity interest of our shareholders and likely cause a change
      in control of our ownership.***




Our
      memorandum and articles of association authorizes the issuance of up to
      30,000,000 ordinary shares, par value $.0001 per share, and 1,000,000 preferred
      shares, par value $.0001 per share. There are currently 7,606,250 authorized
      but
      unissued ordinary shares available for issuance (after appropriate reservation
      for the issuance of the shares upon full exercise of our outstanding warrants
      and the unit purchase option granted to EarlyBirdCapital) and all of the
      1,000,000 preferred shares available for issuance. Although we have no
      commitment as of this date, we are likely to issue a substantial number of
      additional ordinary or preferred shares, or a combination of common and
      preferred shares, to complete a business combination. The issuance of additional
      ordinary shares or any number of shares of our preferred shares:




·
            may
                significantly reduce your equity
                interest;




·
            may
                subordinate the rights of holders of ordinary shares if we issue
                preferred
                stock with rights senior to those afforded to our ordinary
                shares;




·
            may
                cause a change in control if a substantial number of our ordinary
                shares
                are issued, which may affect, among other things, our ability to
                use our
                net operating loss carry forwards, if any, and could result in the
                resignation or removal of our present officers and directors;
                and


8




·
            may
                adversely affect prevailing market prices for our ordinary
                shares.




Similarly,
      if we issue debt securities, it could result in:




·
            default
                and foreclosure on our assets if our operating revenues after a business
                combination are insufficient to repay our debt
                obligations;




·
            acceleration
                of our obligations to repay the indebtedness even if we make all
                principal
                and interest payments when due if we breach certain covenants that
                require
                the maintenance of certain financial ratios or reserves without a
                waiver
                or renegotiation of that covenant;




·
            our
                immediate payment of all principal and accrued interest, if any,
                if the
                debt security is payable on demand;
                and




·
            our
                inability to obtain necessary additional financing if the debt security
                contains covenants restricting our ability to obtain such financing
                while
                the debt security is outstanding.




***Our
      ability to successfully effect a business combination and to be successful
      thereafter will be totally dependent upon the efforts of our key personnel,
      some
      of whom may join us following a business combination.***




Our
      ability to successfully effect a business combination is dependent upon the
      efforts of our key personnel. The role of our key personnel in the target
      business, however, cannot presently be fully ascertained. Although our key
      personnel such as Bo Yu, Yufeng Zhang, Aidan Stretch and James Walsh may remain
      with the target business in senior management or advisory positions following
      a
      business combination, it is likely that some or all of the management of the
      target business will remain in place. While we intend to closely scrutinize
      any
      individuals we engage after a business combination, we cannot assure you that
      our assessment of these individuals will prove to be correct. These individuals
      may be unfamiliar with the requirements of operating a public company which
      could cause us to have to expend time and resources helping them become familiar
      with such requirements. This could be expensive and time-consuming and could
      lead to various regulatory issues which may adversely affect our
      operations.




***Our
      key personnel may negotiate employment or consulting agreements with a target
      business in connection with a particular business combination. These agreements
      may provide for them to receive compensation following a business combination
      and as a result, may cause them to have conflicts of interest in determining
      whether a particular business combination is the most advantageous to
      us.***




Our
      key
      personnel will be able to remain with the company after the consummation of
      a
      business combination only if they are able to negotiate employment or consulting
      agreements in connection with the business combination. Such negotiations would
      take place simultaneously with the negotiation of the business combination
      and
      could provide for such individuals to receive compensation in the form of cash
      payments and/or our securities for services they would render to the company
      after the consummation of the business combination. The personal and financial
      interests of such individuals may influence their motivation in identifying
      and
      selecting a target business. However, we believe the ability of such individuals
      to remain with the company after the consummation of a business combination
      will
      not be the determining factor in our decision as to whether or not we will
      proceed with any potential business combination.




***Our
      officers and directors will allocate their time to other businesses thereby
      causing conflicts of interest in their determination as to how much time to
      devote to our affairs. This conflict of interest could have a negative impact
      on
      our ability to consummate a business combination.***




Our
      officers and directors are not required to commit their full time to our
      affairs, which could create a conflict of interest when allocating their time
      between our operations and their other commitments. We do not intend to have
      any
      full time employees prior to the consummation of a business combination. All
      of
      our executive officers are engaged in several other business endeavors and
      are
      not obligated to devote any specific number of hours to our affairs. If our
      officers’ and directors’ other business affairs require them to devote more
      substantial amounts of time to such affairs, it could limit their ability to
      devote time to our affairs and could have a negative impact on our ability
      to
      consummate a business combination. We cannot assure you that these conflicts
      will be resolved in our favor.


9




***Our
      officers and directors may in the future become affiliated with entities engaged
      in business activities similar to those intended to be conducted by us and
      accordingly, may have conflicts of interest in determining to which entity
      a
      particular business opportunity should be presented.***




Our
      officers and directors may in the future become affiliated with entities,
      including other “blank check” companies, engaged in business activities similar
      to those intended to be conducted by us. Additionally, our officers and
      directors may become aware of business opportunities which may be appropriate
      for presentation to us and the other entities to which they owe fiduciary
      duties. Accordingly, they may have conflicts of interest in determining to
      which
      entity a particular business opportunity should be presented. We cannot assure
      you that these conflicts will be resolved in our favor. As a result, a potential
      target business may be presented to another entity prior to its presentation
      to
      us and we may miss out on a potential transaction.




***All
      of our officers and directors own ordinary shares issued prior to this offering
      and Bo Yu, our chairman of the board and chief executive officer, purchased
      units simultaneously with the consummation of our IPO. These securities will
      not
      participate in liquidation distributions. Therefore, our officers and directors
      may have a conflict of interest in determining whether a particular target
      business is appropriate for a business combination*** ***.***





All
      of
      our officers and directors own ordinary shares that were issued prior to our
      IPO
      and Bo Yu, our chairman of the board and chief executive officer, purchased
      insider units upon consummation of the IPO. Such individuals have waived their
      right to receive distributions with respect to their initial shares and the
      shares included within the insider units upon our liquidation if we are unable
      to consummate a business combination. The shares acquired prior to the IPO,
      as
      well as the shares included in the insider units, the warrants included in
      the
      insider units and any warrants purchased by our officers or directors in the
      aftermarket will be worthless if we do not consummate a business combination.
      The personal and financial interests of our directors and officers may influence
      their motivation in timely identifying and selecting a target business and
      completing a business combination. Consequently, our directors’ and officers’
discretion in identifying and selecting a suitable target business may result
      in
      a conflict of interest when determining whether the terms, conditions and timing
      of a particular business combination are appropriate and in our shareholders’
best interest.




***If
      our ordinary shares become subject to the SEC’s penny stock rules,
      broker-dealers may experience difficulty in completing customer transactions
      and
      trading activity in our securities may be adversely
      affected.***




If
      at any
      time we have net tangible assets of $5,000,000 or less and our ordinary shares
      have a market price per share of less than $5.00, transactions in our ordinary
      shares may be subject to the “penny stock” rules promulgated under the
      Securities Exchange Act of 1934. Under these rules, broker-dealers who recommend
      such securities to persons other than institutional accredited investors
      must:




·
            make
                a special written suitability determination for the
                purchaser;




·
            receive
                the purchaser’s written agreement to the transaction prior to
                sale;




·
            provide
                the purchaser with risk disclosure documents which identify certain
                risks
                associated with investing in “penny stocks” and which describe the market
                for these “penny stocks” as well as a purchaser’s legal remedies;
                and




·
            obtain
                a signed and dated acknowledgment from the purchaser demonstrating
                that
                the purchaser has actually received the required risk disclosure
                document
                before a transaction in a “penny stock” can be
                completed.




If
      our
      ordinary shares become subject to these rules, broker-dealers may find it
      difficult to effectuate customer transactions and trading activity in our
      securities may be adversely affected. As a result, the market price of our
      securities may be depressed, and you may find it more difficult to sell our
      securities.


10




***After
      our business combination, we will be solely dependent on a single business
      and a
      limited number of products or services.***




Our
      business combination must be with a business with a fair market value of at
      least 80% of our net assets at the time of such acquisition, although this
      may
      entail the simultaneous acquisitions of several operating businesses at the
      same
      time. By consummating a business combination with only a single entity, our
      lack
      of diversification may subject us to numerous economic, competitive and
      regulatory developments. Further, we would not be able to diversify our
      operations or benefit from the possible spreading of risks or offsetting of
      losses, unlike other entities which may have the resources to complete several
      business combinations in different industries or different areas of a single
      industry. Accordingly, the prospects for our success may be:




·
            solely
                dependent upon the performance of a single business,
                or




·
            dependent
                upon the development or market acceptance of a single or limited
                number of
                products, processes or services.




Alternatively,
      if our business combination entails the simultaneous acquisitions of several
      operating businesses at the same time from different sellers, we would face
      additional risks, including difficulties and expenses incurred in connection
      with the subsequent integration of the operations and services or products
      of
      the acquired companies into a single operating business. If we are unable to
      adequately address these risks, it could negatively impact our profitability
      and
      results of operations.




***We
      may proceed with a business combination even if public shareholders owning
      29.99% of the shares sold in the IPO exercise their conversion rights.***




We
      may
      proceed with a business combination as long as public shareholders owning less
      than 30% of the shares sold in the IPO exercise their conversion rights.
      Accordingly, approximately 29.99% of the public shareholders may exercise their
      conversion rights and we could still consummate a proposed business combination.
      We have set the conversion percentage at 30% in order to reduce the likelihood
      that a group of investors holding a block of our stock will be able to stop
      us
      from completing a business combination that is otherwise approved by a large
      majority of our public shareholders.




***We
      may require shareholders who wish to convert their shares in connection with
      a
      proposed business combination to comply with specific requirements for
      conversion that may make it more difficult for them to exercise their conversion
      rights prior to the deadline for exercising their rights.***




We
      may
      require public shareholders who wish to convert their shares in connection
      with
      a proposed business combination to either tender their certificates to our
      transfer agent at any time prior to the vote taken at the shareholder meeting
      relating to such business combination or to deliver their shares to the transfer
      agent electronically using the Depository Trust Company’s DWAC
      (Deposit/Withdrawal At Custodian) System. In order to obtain a physical stock
      certificate, a shareholder’s broker and/or clearing broker, DTC and our transfer
      agent will need to act to facilitate this request. It is our understanding
      that
      shareholders should generally allot at least two weeks to obtain physical
      certificates from the transfer agent. However, because we do not have any
      control over this process or over the brokers or DTC, it may take significantly
      longer than two weeks to obtain a physical stock certificate. While we have
      been
      advised that it takes a short time to deliver shares through the DWAC System,
      we
      cannot assure you of this fact. Accordingly, if it takes longer than we
      anticipate for shareholders to deliver their shares, shareholders who wish
      to
      convert may be unable to meet the deadline for exercising their conversion
      rights and thus may be unable to convert their shares.




***The
      ability of our shareholders to exercise their conversion rights may not allow
      us
      to effectuate the most desirable business combination or optimize our capital
      structure.***




When
      we
      seek shareholder approval of any business combination, we will offer each public
      shareholder (but not our existing shareholders) the right to have his, her
      or
      its ordinary shares converted to cash if the shareholder votes against the
      business combination and the business combination is approved and completed.
      Such holder must both vote against such business combination and then exercise
      his, her or its conversion rights to receive a pro rata portion of the trust
      account. Accordingly, if our business combination requires us to use
      substantially all of our cash to pay the purchase price, because we will not
      know how many shareholders may exercise such conversion rights, we may either
      need to reserve part of the trust account for possible payment upon such
      conversion, or we may need to arrange third party financing to help fund our
      business combination in case a larger percentage of shareholders exercise their
      conversion rights than we expect. Since we have no specific business combination
      under consideration, we have not taken any steps to secure third party
      financing. Therefore, we may not be able to consummate a business combination
      that requires us to use all of the funds held in the trust account as part
      of
      the purchase price, or we may end up having a leverage ratio that is not optimal
      for our business combination. This may limit our ability to effectuate the
      most
      attractive business combination available to us.


11




***We
      may not adequately assess the fair market value of a target business that we
      seek to acquire.***




The
      target business that we acquire, or acquire control of, must have a fair market
      value equal to at least 80% of our net assets at the time of such acquisition.
      We are not required to obtain an opinion from an unaffiliated third party that
      the target business we select has a fair market value in excess of at least
      80%
      of our net assets. The fair market value of the target may be determined by
      our
      board of directors based upon one or more standards generally accepted by the
      financial community (examples of which may include actual and potential sales,
      earnings and cash flow and book value). Accordingly, our board could rely
      heavily upon assumptions about the future growth and financial prospects of
      a
      target business, rather than its historical results of operations. We cannot
      assure you that such assumptions will prove to be correct. Furthermore, we
      are
      not required to obtain an opinion from an unaffiliated third party indicating
      that the price we are paying is fair to our stockholders from a financial point
      of view unless the target is affiliated with our officers, directors, special
      advisors, existing stockholders or their affiliates. If no opinion is obtained,
      our stockholders will be relying on the judgment of our board of directors,
      whose collective experience in business evaluations for blank check companies
      like ours is not significant.




***Because
      of our limited resources and structure, we may not be able to consummate an
      attractive business combination.***




We
      expect
      to encounter intense competition from entities other than blank check companies
      having a business objective similar to ours, including venture capital funds,
      leveraged buyout funds and operating businesses competing for acquisitions.
      Many
      of these entities are well established and have extensive experience in
      identifying and effecting business combinations directly or through affiliates.
      Many of these competitors possess greater technical, human and other resources
      than we do and our financial resources will be relatively limited when
      contrasted with those of many of these competitors. While we believe that there
      are numerous potential target businesses that we could acquire with the net
      proceeds of the IPO, our ability to compete in acquiring certain sizable target
      businesses will be limited by our available financial resources. This inherent
      competitive limitation gives others an advantage in pursuing the acquisition
      of
      certain target businesses. Furthermore, the obligation we have to seek
      shareholder approval of a business combination may delay the consummation of
      a
      transaction. Additionally, our outstanding warrants, and the future dilution
      they potentially represent, may not be viewed favorably by certain target
      businesses. Any of these obligations may place us at a competitive disadvantage
      in successfully negotiating a business combination. Furthermore, our negotiating
      position with any potential target may be harmed as we approach the deadline
      for
      the consummation of a business combination as such target business will know
      that our deadline cannot be extended. Additionally, because of our structure,
      there may be fewer attractive target businesses available to acquire or
      privately held target businesses may not be inclined to enter into a transaction
      with a publicly held blank check company like us.




***We
      may be unable to obtain additional financing, if required, to complete a
      business combination or to fund the operations and growth of the target
      business, which could compel us to restructure or abandon a particular business
      combination.***




Although
      we believe that the net proceeds of the IPO will be sufficient to allow us
      to
      consummate a business combination, because we have not yet identified any
      prospective target business, we cannot ascertain the capital requirements for
      any particular transaction. If the net proceeds of the initial public offering
      prove to be insufficient, either because of the size of the business
      combination, the depletion of the available net proceeds in search of a target
      business, or the obligation to convert into cash a significant number of shares
      from dissenting shareholders, we will be required to seek additional financing.
      We cannot assure you that such financing will be available on acceptable terms,
      if at all. To the extent that additional financing proves to be unavailable
      when
      needed to consummate a particular business combination, we would be compelled
      to
      either restructure the transaction or abandon that particular business
      combination and seek an alternative target business candidate. In addition,
      if
      we consummate a business combination, we may require additional financing to
      fund the operations or growth of the target business. The failure to secure
      additional financing could have a material adverse effect on the continued
      development or growth of the target business. None of our officers, directors
      or
      shareholders is required to provide any financing to us in connection with
      or
      after a business combination.


12




***Our
      outstanding warrants and option may have an adverse effect on the market price
      of our ordinary shares and make it more difficult to effect a business
      combination.***




We
      issued
      warrants to purchase 9,375,000 ordinary shares as part of the units offered
      in
      the IPO. We also sold the warrants to purchase 250,000 ordinary shares included
      as part of the insider units. We also issued an option to purchase 400,000
      units
      to the representative of the underwriters which, if exercised, will result
      in
      the issuance of an additional 400,000 warrants. To the extent we issue ordinary
      shares to effect a business combination, the potential for the issuance of
      a
      substantial number of additional ordinary shares upon exercise of these warrants
      and option could make us a less attractive acquisition vehicle in the eyes
      of a
      target business. Such securities, when exercised, will increase the number
      of
      issued and outstanding ordinary shares and reduce the value of the shares issued
      to complete the business combination. Accordingly, our warrants and option
      may
      make it more difficult to effectuate a business combination or increase the
      cost
      of acquiring the target business. Additionally, the sale, or even the
      possibility of sale, of the shares underlying the warrants and option could
      have
      an adverse effect on the market price for our securities or on our ability
      to
      obtain future financing. If and to the extent these warrants and option are
      exercised, you may experience dilution to your holdings.




***Our
      management’s ability to require holders of our warrants to exercise such
      warrants on a cashless basis will cause holders to receive fewer ordinary shares
      upon their exercise of the warrants than they would have received had they
      been
      able to exercise their warrants for cash.***




If
      we
      call our warrants for redemption after the redemption criteria have been
      satisfied, our management will have the option to require any holder that wishes
      to exercise his warrant to do so on a “cashless basis.” If our management
      chooses to require holders to exercise their warrants on a cashless basis,
      the
      number of ordinary shares received by a holder upon exercise will be fewer
      than
      it would have been had such holder exercised his warrant for cash. This will
      have the effect of reducing the potential “upside” of the holder’s investment in
      our company.




***If
      our existing shareholders or the purchasers of the insider units exercise their
      registration rights with respect to their initial shares or insider units and
      underlying securities, it may have an adverse effect on the market price of
      our
      ordinary shares and warrants and the existence of these rights may make it
      more
      difficult to effect a business combination.***




Our
      existing shareholders are entitled to demand that we register the resale of
      their ordinary shares at any time commencing three months prior to the date
      on
      which their shares are released from escrow. Additionally, the purchasers of
      the
      insider units are entitled to demand that we register the resale of the
      securities underlying the insider units at any time after we consummate a
      business combination. If such individuals exercise their registration rights
      with respect to all of their securities, then there will be an additional
      2,843,750 ordinary shares and 250,000 warrants eligible for trading in the
      public market. The presence of these additional securities trading in the public
      market may have an adverse effect on the market price of our ordinary shares.
      In
      addition, the existence of these rights may make it more difficult to effectuate
      a business combination or increase the cost of acquiring the target business,
      as
      the shareholders of the target business may be discouraged from entering into
      a
      business combination with us or will request a higher price for their securities
      because of the potential effect the exercise of such rights may have on the
      trading market for our ordinary shares.




***If
      we are deemed to be an investment company, we may be required to institute
      burdensome compliance requirements and our activities may be restricted, which
      may make it difficult for us to complete a business
      combination.***




A
      company
      that, among other things, is or holds itself out as being engaged primarily,
      or
      proposes to engage primarily, in the business of investing, reinvesting, owning,
      trading or holding certain types of securities would be deemed an investment
      company under the Investment Company Act of 1940. Since we will invest the
      proceeds held in the trust fund, it is possible that we could be deemed an
      investment company. Notwithstanding the foregoing, we do not believe that our
      anticipated principal activities will subject us to the Investment Company
      Act
      of 1940. To this end, the proceeds held in trust may be invested by the trustee
      only in United States “government securities” within the meaning of Section
      2(a)(16) of the Investment Company Act of 1940 having a maturity of 180 days
      or
      less or in money market funds meeting certain conditions under Rule 2a-7
      promulgated under the Investment Company Act of 1940. By restricting the
      investment of the proceeds to these instruments, we intend to meet the
      requirements for the exemption provided in Rule 3a-1 promulgated under the
      Investment Company Act of 1940.


13




If
      we are
      nevertheless deemed to be an investment company under the Investment Company
      Act
      of 1940, we may be subject to certain restrictions that may make it more
      difficult for us to complete a business combination, including:




·
            restrictions
                on the nature of our investments;
                and




·
            restrictions
                on the issuance of securities.




In
      addition, we may have imposed upon us certain burdensome requirements,
      including:




·
            registration
                as an investment company;




·
            adoption
                of a specific form of corporate structure;
                and




·
            reporting,
                record keeping, voting, proxy, compliance policies and procedures
                and
                disclosure requirements and other rules and
                regulations.




Compliance
      with these additional regulatory burdens would require additional expense for
      which we have not allotted.




***Because
      we are incorporated under the laws of the Cayman Islands, you may face
      difficulties in protecting your interests, and your ability to protect your
      rights through the U.S. federal courts may be
      limited.***




We
      are a
      company incorporated under the laws of the Cayman Islands, and substantially
      all
      of our assets will be located outside the United States. In addition, certain
      of
      our directors and officers are nationals or residents of jurisdictions other
      than the United States and all or a substantial portion of their assets are
      located outside the United States. As a result, it may be difficult for
      investors to effect service of process within the United States upon our
      directors or executive officers, or enforce judgments obtained in the United
      States courts against our directors or officers. Moreover, we have been advised
      that the PRC does not have treaties providing for the reciprocal recognition
      and
      enforcement of judgments of courts with the United States. Further, it is
      unclear if extraction treaties now in effect between the United States and
      the
      PRC would permit effective enforcement of criminal penalties of the United
      States federal securities laws.




Our
      corporate affairs will be governed by our memorandum and articles of
      association, the Companies Law (as the same may be supplemented or amended
      from
      time to time) or the common law of the Cayman Islands. The rights of
      shareholders to take action against the directors, actions by minority
      shareholders and the fiduciary responsibilities of our directors to us under
      Cayman Islands law are to a large extent governed by the common law of the
      Cayman Islands. The common law of the Cayman Islands is derived in part from
      comparatively limited judicial precedent in the Cayman Islands as well as from
      English common law, the decisions of whose courts are of persuasive authority,
      but are not binding on a court in the Cayman Islands. The rights of our
      shareholders and the fiduciary responsibilities of our directors under Cayman
      Islands law are not as clearly established as they would be under statutes
      or
      judicial precedent in some jurisdictions in the United States. In particular,
      the Cayman Islands has a less developed body of securities laws as compared
      to
      the United States, and some states, such as Delaware, have more fully developed
      and judicially interpreted bodies of corporate law. In addition, Cayman Islands
      companies may not have standing to initiate a shareholder derivative action
      in a
      federal court of the United States.




The
      Cayman Islands courts are also unlikely:




·
            to
                recognize or enforce against us judgments of courts of the United
                States
                based on certain civil liability provisions of U.S. securities laws;
                and


14




·
            to
                impose liabilities against us, in original actions brought in the
                Cayman
                Islands, based on certain civil liability provisions of U.S. securities
                laws that are penal in nature.




There
      is
      no statutory recognition in the Cayman Islands of judgments obtained in the
      United States, although the courts of the Cayman Islands will in certain
      circumstances recognize and enforce a non-penal judgment of a foreign court
      of
      competent jurisdiction without retrial on the merits. The Grand Court of the
      Cayman Islands may stay proceedings if concurrent proceedings are being brought
      elsewhere.




As
      a
      result of all of the above, public shareholders may have more difficulty in
      protecting their interests in the face of actions taken by management, members
      of the board of directors or controlling shareholders than they would as public
      shareholders of a United States company.




**Risks
      related to operations in China**




Business
      combinations with companies with operations in China entail special
      considerations and risks. If we are successful in completing a business
      combination with a target business with operations in China, we will be subject
      to, and possibly adversely affected by, the following risks:






***After
      a business combination, substantially all of our assets will likely be located
      in China and substantially all of our revenue will be derived from our
      operations in China. Accordingly, our results of operations and prospects will
      be subject, to a significant extent, to the economic, political and legal
      policies, developments and conditions in China.***




The
      PRC’s
      economic, political and social conditions, as well as government policies,
      could
      affect our business. The PRC economy differs from the economies of most
      developed countries in many respects.




China’s
      GDP has grown consistently since 1978 (National Bureau of Statistics of China).
      However, we cannot assure you that such growth will be sustained in the future.
      If in the future China’s economy experiences a downturn or grows at a slower
      rate than expected, there may be less demand for spending in certain industries.
      A decrease in demand for spending in certain industries could materially and
      adversely affect our ability to find an attractive target business with which
      to
      consummate a business combination and if we effect a business combination,
      the
      ability of that target business to become profitable.




The
      PRC’s
      economic growth has been uneven, both geographically and among various sectors
      of the economy. The PRC government has implemented various measures to encourage
      economic growth and guide the allocation of resources. Some of these measures
      benefit the overall PRC economy, but may have a negative effect on us, depending
      on the industry in which we engage in a business combination. For example,
      our
      financial condition and results of operations may be adversely affected by
      PRC
      government control over capital investments or changes in tax regulations that
      are applicable to a potential target business and a business
      combination.




The
      PRC
      economy has been transitioning from a planned economy to a more market-oriented
      economy. Although in recent years the PRC government has implemented measures
      emphasizing the use of market forces for economic reform, the reduction of
      state
      ownership of productive assets and the establishment of sound corporate
      governance in business enterprises, a substantial portion of productive assets
      in China is still owned by the PRC government. In addition, the PRC government
      continues to play a significant role in regulating industry development by
      imposing industrial policies. It also exercises significant control over PRC
      economic growth through the allocation of resources, controlling payment of
      foreign currency-denominated obligations, setting monetary policy and providing
      preferential treatment to particular industries or companies. We cannot assure
      you that China’s economic, political or legal systems will not develop in a way
      that becomes detrimental to our business, results of operations and
      prospects.




A
      recent
      positive economic change has been the PRC’s entry into the World Trade
      Organization, or WTO, the sole global international organization dealing with
      the rules of trade between nations. It is believed that the PRC’s entry will
      ultimately result in a reduction on tariffs for industrial products, a reduction
      in trade restrictions and an increase in trading with the United States. If
      actions are not taken to rectify these problems, trade relations may be strained
      and this may have a negative impact on China’s economy.


15




***If
      relations between the United States and the PRC deteriorate, potential target
      businesses or their goods or services could become less
      attractive.***




The
      relationship between the United States and the PRC is subject to sudden
      fluctuation and periodic tension. For instance, the United States recently
      announced its intention to impose new short-term quotas on Chinese clothing
      imports, which may be extended for several years. Such import quotas may
      adversely affect political relations between the two countries and result in
      retaliatory countermeasures by the PRC in industries that may affect our
      ultimate target business. Relations may also be compromised if the U.S. becomes
      a more vocal advocate of Taiwan or proceeds to sell certain military weapons
      and
      technology to Taiwan. Changes in political conditions in the PRC and changes
      in
      the state of Sino-U.S. relations are difficult to predict and could adversely
      affect our operations or cause potential target businesses or their goods and
      services to become less attractive.




***As
      a result of merger and acquisition regulations implemented on September 8,
      2006
      relating to acquisitions of assets and equity interests of Chinese companies
      by
      foreign persons, it is expected that acquisitions will take longer and be
      subject to economic scrutiny by the PRC government authorities such that we
      may
      not be able to complete a transaction.***




On
      September 8, 2006, the Ministry of Commerce, together with several other
      government agencies, promulgated a comprehensive set of regulations governing
      the approval process by which a Chinese company may participate in an
      acquisition of its assets or its equity interests and by which a Chinese company
      may obtain public trading of its securities on a securities exchange outside
      the
      PRC. Although there was a complex series of regulations in place prior to
      September 8, 2006 for approval of Chinese enterprises that were administered
      by
      a combination of provincial and centralized agencies, the new regulations have
      largely centralized and expanded the approval process to the Ministry of
      Commerce (MOFCOM), the State Administration of Industry and Commerce (SAIC),
      the
      State Administration of Foreign Exchange (SAFE) or its branch offices, the
      State
      Asset Supervision and Administration Commission (SASAC), and the China
      Securities Regulatory Commission (CSRC). Depending on the structure of the
      transaction, these regulations will require the Chinese parties to make a series
      of applications and supplemental applications to the aforementioned agencies,
      some of which must be made within strict time limits and depending on approvals
      from one or the other of the aforementioned agencies. The application process
      has been supplemented to require the presentation of economic data concerning
      a
      transaction, including appraisals of the business to be acquired and evaluations
      of the acquirer which will permit the government to assess the economics of
      a
      transaction in addition to the compliance with legal requirements. If obtained,
      approvals will have expiration dates by which a transaction must be completed.
      Also, completed transactions must be reported to MOFCOM and some of the other
      agencies within a short period after closing and be confirmed by such agencies.
      If the completed transactions are not confirmed, it could render the transaction
      legally ineffective even if consummated by the parties. In extreme cases, the
      authorities could suspend or revoke the business license of the Chinese entities
      and cause an unwinding of the transaction. If the transaction was unwound,
      the
      consideration paid to the target business would be returned to us and we would
      then be forced to either attempt to complete a new business combination if
      it
      was prior to June 26, 2009 or we would be required to return any amounts which
      were held in the trust account to our shareholders and dissolve and liquidate.
      It is expected that compliance with the regulations will be more time consuming
      than in the past, will be more costly for the Chinese parties and will permit
      the government much more extensive evaluation and control over the terms of
      the
      transaction. Therefore, acquisitions in China may not be able to be completed
      because the terms of the transaction may not satisfy aspects of the approval
      process and may not be completed, even if approved, if they are not consummated
      within the time permitted by the approvals granted.




***Because
      the September 8, 2006, PRC merger and acquisition regulations permit the
      government agencies to have scrutiny over the economics of an acquisition
      transaction and require consideration in a transaction to be paid within stated
      time limits, we may not be able to negotiate a transaction that is acceptable
      to
      our shareholders or sufficiently protect their interests in a
      transaction.***




The
      regulations have introduced aspects of economic and substantive analysis of
      the
      target business and the acquirer and the terms of the transaction by MOFCOM
      and
      the other governing agencies through submissions of an appraisal report, an
      evaluation report and the acquisition agreement, all of which form part of
      the
      application for approval, depending on the structure of the transaction. The
      regulations also prohibit a transaction at an acquisition price obviously lower
      than the appraised value of the Chinese business or assets. The regulations
      require that in certain transaction structures, the consideration must be paid
      within strict time periods, generally not in excess of a year. Because the
      Chinese authorities have been unhappy with offshore flips which converted
      domestic companies into foreign investment enterprises (FIEs) in order to take
      advantage of certain benefits, including reduced taxation, in China, the new
      regulations require new foreign sourced capital of not less than 25% of the
      domestic company’s post-acquisition capital in order to obtain FIE treatment.
      Accordingly, if a sufficient amount of foreign capital is not infused into
      the
      domestic company, it will not be eligible to obtain FIE treatment. In asset
      transactions there must be no harm of third parties and the public interest
      in
      the allocation of assets and liabilities being assumed or acquired. These
      aspects of the regulations will limit our ability to negotiate various terms
      of
      the acquisition, including aspects of the initial consideration, contingent
      consideration, holdback provisions, indemnification provisions and provisions
      relating to the assumption and allocation of assets and liabilities. Transaction
      structures involving trusts, nominees and similar entities are prohibited.
      Therefore, we may not be able to negotiate a transaction with terms that will
      satisfy our investors and protect our shareholders interests in an acquisition
      of a Chinese business or assets.




16




***The
      PRC merger and acquisition regulations of September 8, 2006, have introduced
      industry protection and anti-trust aspects to the acquisition of Chinese
      companies and assets which may limit our ability to effect an
      acquisition.***




Under
      the
      PRC merger and acquisition regulations, acquisitions of Chinese domestic
      companies relating to “important industries” that may affect the national
      economic security or result in the transfer of “actual control” of companies
      having “famous Chinese brand names” or “well established Chinese brand names”
must be reported and approved by the relevant agencies. The merger and
      acquisition regulations also provide for antitrust review requirements for
      certain large transactions or transactions involving large companies and roll-up
      transactions with the same effect in the relevant Chinese market. In addition,
      certain mergers and acquisitions among foreign companies occurring outside
      of
      the PRC could also be subject to antitrust review in China which is similar
      to
      United States anti-trust law concepts. The regulations use various economic
      tests to determine if the transaction has to be reported to MOFCOM which include
      (i) if any of the parties to the transaction has a turnover in the Chinese
      market of more than RMB 1,500,000,000, (ii) if in a transaction outside of
      the
      PRC, any party thereto has assets in the PRC of more than RMB 3,000,000,000,
      (iii) if any of the parties to the transaction, before its consummation, has
      control not less than 20% of the Chinese market, (iv) if any of the parties
      as a
      result of the transaction will control 25% of the Chinese market, (v) the
      foreign investor has acquired 10 or more enterprises in related industries
      in
      the PRC during the last year, or (vi) if in a transaction outside of the PRC
      results in the foreign entities acquiring 15 or more FIEs in related industries
      within the PRC. Exemptions may be sought from the MOFCOM and SAIC on the basis
      that: (i) the transaction will improve market competition, (ii) the transaction
      will restructure unprofitable entities and ensures employment, (iii) the
      transaction will introduce high technologies and increase international
      competitiveness, and (iv) the transaction will improve the environment.
      Notwithstanding the September 8, 2006, regulations, there is a draft
      anti-monopoly law being considered which may replace or supplement the above
      provisions. Any transaction that we contemplate will have to comply with these
      regulations and may require additional approval or abandonment if we are not
      able to satisfy the requirements of the governmental authorities. When we
      evaluate a potential transaction, we will consider the need to comply with
      these
      regulations which may result in our modifying or not pursuing a particular
      transaction.




Although
      the merger and acquisition regulations provide specific requirements and
      procedures, there are many ambiguities which give the regulators great latitude
      in the approval process which will cause uncertainty in our ability to complete
      a transaction on a timely basis.




The
      merger and acquisition regulations set forth many requirements that have to
      be
      followed, but there are still many ambiguities in the meaning of many
      provisions. Although further regulations are anticipated in the future, until
      there has been clarification either by pronouncements, regulation or practice,
      there is some uncertainty in the scope of the regulations. Moreover, the
      ambiguities give the regulators wide latitude in the enforcement of the
      regulations and the transactions to which they may or may not apply. Therefore,
      we cannot predict the extent to which the regulations will apply to a
      transaction, and therefore, there may be uncertainty in whether or not a
      transaction will be completed until the approval process is under way or until
      the preliminary approvals are obtained.




***The
      Ministry of Information Industry (MII) issued regulations that regulate and
      limit ownership and investment in internet and other value-added
      telecommunications businesses in China which may limit the type of businesses
      we
      will be able to acquire.***




On
      July
      13, 2006, the MII issued a notice with the purpose of increasing the regulation
      of foreign investment in and operations of value added telecom services which
      includes internet and telecommunications businesses in China. The regulations
      require Chinese entities to own and control the following: (i) internet domain
      names, (ii) registered trademarks, and (iii) servers and other infrastructure
      equipment used to host and operate web-sites and conduct business. The ownership
      requirements functionally limit foreign direct and indirect ownership and
      control of the intellectual property of these businesses even when attempted
      through various parallel control, licensing, use and management agreements.
      It
      is anticipated that these regulations will be strictly enforced, and the
      government has provided that the new regulations apply retroactively and
      provides for audit procedures. The failure to comply may cause the MII to
      terminate a telecommunications license or otherwise modify existing agreements
      or require the disposition of the assets by the foreign entity. Any anticipated
      foreign investment in such businesses will be subject to prior approval by
      the
      MII, and it is expected that approval for investment may not be easily obtained
      for foreign investment in these businesses unless in strict compliance.
      Therefore, investment by us in this sector may not be actively pursued because
      certain assets may not be acquirable and accounting consolidation may be
      restricted or not permitted as a result of an unfavorable but permitted
      transaction structure.


17




***If
      the PRC imposes restrictions to reduce inflation, future economic growth in
      the
      PRC could be severely curtailed which could materially and adversely impact
      our
      profitability following a business combination.***




While
      the
      economy of the PRC has experienced rapid growth, this growth has been uneven
      among various sectors of the economy and in different geographical areas of
      the
      country. Rapid economic growth can lead to growth in the supply of money and
      rising inflation. In order to control inflation in the past, the PRC has imposed
      controls on bank credits, limits on loans for fixed assets and restrictions
      on
      state bank lending. Imposition of similar restrictions may lead to a slowing
      of
      economic growth and decrease the interest in the services or products we may
      ultimately offer leading to a material and adverse impact on our
      profitability.




***Any
      devaluation of currencies used in the PRC could negatively impact our target
      business’ results of operations and any appreciation thereof could cause the
      cost of a target business as measured in dollars to
      increase.***




Because
      our objective is to complete a business combination with a target business
      having its primary operating facilities located in the PRC, and because
      substantially all revenues and income following a business combination would
      be
      received in a foreign currency such as Renminbi, the main currency used in
      the
      PRC, the dollar equivalent of our net assets and distributions, if any, would
      be
      adversely affected by reductions in the value of the Renminbi. The value of
      the
      Renminbi fluctuates and is affected by, among other things, changes in the
      PRC’s
      political and economic conditions. To the extent that we need to convert United
      States dollars into Chinese Renminbi for our operations, appreciation of this
      currency against the United States dollar could have a material adverse effect
      on our business, financial condition and results of operations. Conversely,
      if
      we decide to convert our Renminbi into United States dollars for other business
      purposes and the United States dollar appreciates against this currency, the
      United States dollar equivalent of the Renminbi we convert would be reduced.
      The
      conversion of Renminbi into foreign currencies such as the United States dollar
      has been generally based on rates set by the People’s Bank of China, which are
      set daily based on the previous day’s interbank foreign exchange market rates
      and current exchange rates on the world financial markets. Historically, China
      “pegged” its currency to the United States dollar. This meant that each unit of
      Chinese currency had a set ratio for which it could be exchanged for United
      States currency, as opposed to having a floating value like other countries’
currencies. Many countries argued that this system of keeping the Chinese
      currency low when compared to other countries gave Chinese companies an unfair
      price advantage over foreign companies. Due to mounting pressure from other
      countries, the PRC recently reformed its economic policies to establish a
      floating value for its currency. However, China recently adopted a floating
      rate
      with respect to the Renminbi, with a 0.3% fluctuation. As of March 19, 2007,
      the
      exchange rate of the Renminbi was 0.12928 against the United States dollar,
      amounting to approximately an 11% appreciation of the Renminbi. This floating
      exchange rate, and any appreciation of the Renminbi that may result from such
      rate, could cause the cost of a target business as measured in dollars to
      increase. Further, target companies may be adversely affected since the
      competitive advantages that existed as a result of the former policies will
      cease. We cannot assure you that a target business with which we consummate
      a
      business combination will be able to compete effectively with the new policies
      in place.




***Exchange
      controls that exist in the PRC may limit our ability to utilize our cash flow
      effectively following a business combination.***




Following
      a business combination, we will be subject to the PRC’s rules and regulations on
      currency conversion. In the PRC, the State Administration for Foreign Exchange
      (SAFE) regulates the conversion of the Renminbi into foreign currencies.
      Currently, foreign investment enterprises (FIEs) are required to apply to the
      SAFE for “Foreign Exchange Registration Certificates for FIEs.” Following a
      business combination, we will likely be an FIE as a result of our ownership
      structure. With such registration certificates, which need to be renewed
      annually, FIEs are allowed to open foreign currency accounts including a “basic
      account” and “capital account.” Currency conversion within the scope of the
“basic account,” such as remittance of foreign currencies for payment of
      dividends, can be effected without requiring the approval of the SAFE. However,
      conversion of currency in the “capital account,” including capital items such as
      direct investment, loans and securities, still require approval of the SAFE.
      We
      cannot assure you that the PRC regulatory authorities will not impose further
      restrictions on the convertibility of the Renminbi. Any future restrictions
      on
      currency exchanges may limit our ability to use our cash flow for the
      distribution of dividends to our shareholders or to fund operations we may
      have
      outside of the PRC.




18




***If
      the PRC enacts regulations in our target business’ proposed industry segments
      which forbid or restrict foreign investment, our ability to consummate a
      business combination could be severely impaired.***




Many
      of
      the rules and regulations that companies face in China are not explicitly
      communicated. If new laws or regulations forbid foreign investment in industries
      in which we want to complete a business combination, they could severely limit
      the candidate pool of potential target businesses. Additionally, if the relevant
      Chinese authorities find us or the target business with which we ultimately
      complete a business combination to be in violation of any existing or future
      Chinese laws or regulations, they would have broad discretion in dealing with
      such a violation, including, without limitation:




·
            levying
                fines;




·
            revoking
                our business and other licenses;




·
            requiring
                that we restructure our ownership or operations;
                and




·
            requiring
                that we discontinue any portion or all of our
                business.




***Recent
      regulations relating to offshore investment activities by PRC residents may
      increase the administrative burden we face and create regulatory uncertainties
      that may limit or adversely effect our ability to acquire PRC
      companies.***




Regulations
      were issued on January 24, 2005, on April 8, 2005 and on November 21, 2005,
      by
      the SAFE, that will require approvals from, and registrations with, PRC
      government authorities in connection with direct or indirect offshore investment
      activities by PRC residents and PRC corporate entities; however, there has
      been
      a recent announcement that such regulations may be partially reversed. The
      SAFE
      regulations retroactively require approval and registration of direct or
      indirect investments previously made by PRC residents in offshore companies.
      In
      the event that a PRC shareholder with a direct or indirect stake in an offshore
      parent company fails to obtain the required SAFE approval and make the required
      registration, the PRC subsidiaries of such offshore parent company may be
      prohibited from making distributions of profit to the offshore parent and from
      paying the offshore parent proceeds from any reduction in capital, share
      transfer or liquidation in respect of the PRC subsidiaries. Further, failure
      to
      comply with the various SAFE approval and registration requirements described
      above, as currently drafted, could result in liability under PRC law for foreign
      exchange evasion. More recently, however, new regulations have been drafted
      that
      would partially reverse the policy that requires Chinese companies to obtain
      permission from SAFE to own overseas corporate entities.




As
      a
      result of the lack of implementing rules, the uncertainty as to when the new
      draft regulations will take effect, and uncertainty concerning the
      reconciliation of the new regulations with other approval requirements, it
      remains unclear how these existing regulations, and any future legislation
      concerning offshore or cross-border transactions, will be interpreted, amended
      and implemented by the relevant government authorities. We are committed to
      complying with the relevant rules. As a result of the foregoing, we cannot
      assure you that we or the owners of the target business we intend to acquire,
      as
      the case may be, will be able to complete the necessary approval, filings and
      registrations for a proposed business combination. This may restrict our ability
      to implement our business combination strategy and adversely affect our
      operations.




***Because
      Chinese law will govern almost all of any target business’ material agreements,
      we may not be able to enforce our rights within the PRC or elsewhere, which
      could result in a significant loss of business, business opportunities or
      capital.***




Chinese
      law will govern almost all of our target business’ material agreements, many of
      which may be with Chinese governmental agencies. We cannot assure you that
      the
      target business will be able to enforce any of its material agreements or that
      remedies will be available outside of the PRC. The system of laws and the
      enforcement of existing laws and contracts in the PRC may not be as certain
      in
      implementation and interpretation as in the United States. The Chinese judiciary
      is relatively inexperienced in enforcing corporate and commercial law, leading
      to a higher than usual degree of uncertainty as to the outcome of any
      litigation. The inability to enforce or obtain a remedy under any of our future
      agreements could result in a significant loss of business, business
      opportunities or capital.




19




***If
      we acquire a target business through contractual arrangements with one or more
      operating businesses in China, such contracts may not be as effective in
      providing operational control as direct ownership of such businesses and may
      be
      difficult to enforce.***




The
      government of the PRC has restricted or limited foreign ownership of certain
      kinds of assets and companies operating in certain industries. The industry
      groups that are restricted are wide ranging, including certain aspects of
      telecommunications, advertising, food production, and heavy equipment
      manufacturers, for example. In addition there can be restrictions on the foreign
      ownership of businesses that are determined from time to time to be in
“important industries” that may affect the national economic security or having
“famous Chinese brand names” or “well established Chinese brand names.” Subject
      to the review requirements of the Ministry of Commerce and other relevant
      agencies as discussed elsewhere for acquisitions of assets and companies in
      the
      PRC and subject to the various percentage ownership limitations that exist
      from
      time to time, acquisitions involving foreign investors and parties in the
      various restricted categories of assets and industries may nonetheless sometimes
      be consummated using contractual arrangements with permitted Chinese parties.
      To
      the extent that such agreements are employed, they may be for control of
      specific assets such as intellectual property or control of blocks of the equity
      ownership interests of a company which may not be subject to the merger and
      acquisition regulations mentioned above since these types of arrangements
      typically do not involve a change of equity ownership in a PRC operating
      company, injure a third party or affect the social public interest. The
      agreements would be designed to provide our company with the economic benefits
      of and control over the subject assets or equity interests similar to the rights
      of full ownership, while leaving the technical ownership in the hands of Chinese
      parties who would be our nominees and, therefore, may exempt the transaction
      from the merger and acquisition regulations, including the application process
      required thereunder. However, since there has been limited implementation
      guidance provided with respect to the merger and acquisition regulations, there
      can be no assurance that the relevant government agency would not apply them
      to
      a business combination effected through contractual arrangements. If such an
      agency determines that such an application should have been made consequences
      may include levying fines, revoking business and other licenses, requiring
      restructure of ownership or operations and requiring discontinuation of any
      portion of all of the acquired business. These agreements likely also would
      provide for increased ownership or full ownership and control by us when and
      if
      permitted under PRC law and regulation. If we choose to effect a business
      combination that employs the use of these types of control arrangements, we
      may
      have difficulty in enforcing our rights. Therefore these contractual
      arrangements may not be as effective in providing us with the same economic
      benefits, accounting consolidation or control over a target business as would
      direct ownership. For example, if the target business or any other entity fails
      to perform its obligations under these contractual arrangements, we may have
      to
      incur substantial costs and expend substantial resources to enforce such
      arrangements, and rely on legal remedies under Chinese law, including seeking
      specific performance or injunctive relief, and claiming damages, which we cannot
      assure will be sufficient to off-set the cost of enforcement and may adversely
      affect the benefits we expect to receive from the business
      combination.




Moreover,
      we expect that the contractual arrangements upon which we would be relying
      would
      be governed by Chinese law and would be the only basis of providing resolution
      of disputes which may arise through either arbitration or litigation in China.
      Accordingly, these contracts would be interpreted in accordance with Chinese
      law
      and any disputes would be resolved in accordance with Chinese legal procedures.
      Uncertainties in the Chinese legal system could limit our ability to enforce
      these contractual arrangements. In the event we are unable to enforce these
      contractual arrangements, we may not be able to exert the effective level of
      control or receive the full economic benefits of full direct ownership over
      the
      target business.




***If
      our management following a business combination is unfamiliar with United States
      securities laws, they may have to expend time and resources becoming familiar
      with such laws which could lead to various regulatory
      issues.***




Following
      a business combination, our management will likely resign from their positions
      as officers of the company and the management of the target business at the
      time
      of the business combination will remain in place. We cannot assure you that
      management of the target business will be familiar with United States securities
      laws. If new management is unfamiliar with our laws, they may have to expend
      time and resources becoming familiar with such laws. This could be expensive
      and
      time-consuming and could lead to various regulatory issues which may adversely
      affect our operations.




20




***Because
      any target business with which we attempt to complete a business combination
      may
      be required to provide our shareholders with financial statements prepared
      in
      accordance with and reconciled to United States generally accepted accounting
      principles, prospective target businesses may be
      limited.***




In
      accordance with requirements of United States Federal securities laws, in order
      to seek shareholder approval of a business combination, a proposed target
      business may be required to have certain financial statements which are prepared
      in accordance with, or which can be reconciled to, U.S. generally accepted
      accounting principles and audited in accordance with U.S. generally accepted
      auditing standards. To the extent that a proposed target business does not
      have
      financial statements which have been prepared with, or which can be reconciled
      to, U.S. generally accepted accounting principles and audited in accordance
      with
      U.S. generally accepted auditing standards, we may not be able to complete
      a
      business combination with that proposed target business. These financial
      statement requirements may limit the pool of potential target businesses with
      which we may complete a business combination. Furthermore, to the extent that
      we
      seek to acquire a target business that does not have financial statements
      prepared in accordance with United States generally accepted accounting
      principles, it could make it more difficult for our management to analyze such
      target business and determine whether it has a fair market value in excess
      of
      80% of our net assets. It could also delay our preparation of our proxy
      statement that we will send to shareholders relating to the proposed business
      combination with such a target business, thereby making it more difficult for
      us
      to consummate such a business combination.




***If
      certain exemptions within the PRC regarding withholding taxes are removed,
      we
      may be required to deduct Chinese corporate withholding taxes from dividends
      we
      may pay to our shareholders following a business
      combination.***




According
      to the PRC’s applicable income tax laws, regulations, notices and decisions
      related to foreign investment enterprises and their investors (the “Applicable
      Foreign Enterprises Tax Law”), income such as dividends and profits distribution
      from the PRC derived from a foreign enterprise which has no establishment in
      the
      PRC is subject to a 20% withholding tax, unless the relevant income is
      specifically exempted from tax under the Applicable Foreign Enterprises Tax
      Law.
      Currently, profits derived by a shareholder, such as through dividends, from
      a
      foreign-invested enterprise (an “FIE”) is exempted. However, if the foregoing
      exemption is removed in the future following a business combination, we may
      be
      required to deduct certain amounts from dividends we may pay to our shareholders
      to pay corporate withholding taxes.




***After
      we consummate a business combination, our operating company in China will be
      subject to restrictions on dividend payments.***




After
      we
      consummate a business combination, we will rely on dividends and other
      distributions from our operating company to provide us with cash flow and to
      meet our other obligations. Current regulations in China would permit our
      operating company in China to pay dividends to us only out of its accumulated
      distributable profits, if any, determined in accordance with Chinese accounting
      standards and regulations. In addition, our operating company in China will
      be
      required to set aside at least 10% (up to an aggregate amount equal to half
      of
      its registered capital) of its accumulated profits each year. Such reserve
      account may not be distributed as cash dividends. In addition, if our operating
      company in China incurs debt on its own behalf in the future, the instruments
      governing the debt may restrict its ability to pay dividends or make other
      payments to us.




***If
      any dividend is declared in the future and paid in a foreign currency, you
      may
      be taxed on a larger amount in U.S. dollars than the U.S. dollar amount that
      you
      will actually ultimately receive.***




If
      you
      are a U.S. holder, you will be taxed on the U.S. dollar value of your dividends
      at the time you receive them, even if you actually receive a smaller amount
      of
      U.S. dollars when the payment is in fact converted into U.S. dollars.
      Specifically, if a dividend is declared and paid in a foreign currency, the
      amount of the dividend distribution that you must include in your income as
      a
      U.S. holder will be the U.S. dollar value of the payments made in the foreign
      currency, determined at the conversion rate of the foreign currency to the
      U.S.
      dollar on the date the dividend distribution is includible in your income,
      regardless of whether the payment is in fact converted into U.S. dollars. Thus,
      if the value of the foreign currency decreases before you actually convert
      the
      currency into U.S. dollars, you will be taxed on a larger amount in U.S. dollars
      than the U.S. dollar amount that you will actually ultimately
      receive.




21




***We
      may become a passive foreign investment company, which could result in adverse
      U.S. federal income tax consequences to U.S.
      investors.***




If
      we are
      determined to be a passive foreign investment company, known as a “PFIC,” U.S.
      Holders (as defined in the prospectus for our IPO in the section captioned
      “Taxation—United States Federal Income Taxation”) could be subject to adverse
      United States federal income tax consequences. Specifically, if we are
      determined to be a PFIC for any taxable year, each U.S. Holder may be subject
      to
      increased U.S. federal income tax and may be subject to additional reporting
      requirements. In general, we will be classified as a PFIC for any taxable year
      in which either (1) at least 75% of our gross income is passive income or (2)
      at
      least 50% of the value (determined on the basis of a quarterly average) of
      our
      assets is attributable to assets that produce or are held for the production
      of
      passive income. For purposes of these tests, cash, including working capital,
      and investments are considered assets that produce or are held for the
      production of passive income. We cannot assure you that we will not be a PFIC
      in
      the current or any future year. We urge U.S. investors to consult their own
      tax
      advisors regarding the possible application of the PFIC rules.




***The
      legal authorities in China are in the process of evaluating heretofore tax
      and
      fee benefits provided to foreign investors and companies to encourage
      development within the country such that these benefits may be lessened or
      removed with the consequence that expenses may rise impacting margins and net
      income.***




The
      legal
      authorities are evaluating tax and fee benefits that have been available to
      foreign investors and companies operating in China and tax holidays for new
      enterprises. It is anticipated, in the near term, there are going to be changes
      that substantially reduce or eliminate many, if not all, the tax and other
      governmental fee advantages that heretofore have been available to foreign
      entities and newly created entities whether or not such new entities are
      foreign. The goal is to institute greater equalization of tax and government
      fee
      treatment of all corporate and similar entities in China. China is being
      encouraged to create this more equal treatment because of its WTO obligations
      and public opinion within China. There may be phase-ins of various taxes and
      fees for entities that currently benefit from either no or lower tax rates
      and
      fees compared to wholly Chinese companies and entities, but there can be no
      assurance of this. Even if there are phase-in periods, the length of such
      periods is not known. Overall, it is expected that the cost of operating in
      China will increase for those companies and entities that have had various
      tax
      and fee advantages in the past. As a result, any target business we might
      acquire in China that has had or expects to have benefits from some forms of
      preferential tax and fee rates may have increased costs which may have an
      adverse impact on operating margins and net income.





**ITEM
      4. INFORMATION ON THE COMPANY**





**Overview**




We
      are a
      Cayman Islands blank check company organized on August 18, 2006 as an
      exempted company with limited liability.




We
      were
      organized for the purpose of acquiring, through a stock exchange, asset
      acquisition or other similar business combination, an operating business, or
      control of such operating business, through contractual arrangements, that
      has
      its principal operations located in the People’s Republic of China. Our efforts
      in identifying a prospective target business are not limited to a particular
      industry. If we have not completed a business combination by July 23, 2009,
      our
      corporate existence will cease and we will dissolve and liquidate for the
      purposes of winding up our affairs.




On
      July
      23, 2007, we closed our IPO of 9,375,000 units with each unit consisting of
      one
      ordinary share and one warrant, each to purchase one ordinary share at an
      exercise price of $6.00 per share. The units were sold at an offering price
      of
      $8.00 per unit, generating gross proceeds of $75,000,000.




EarlyBirdCapital,
      Inc. acted
      as
      the managing underwriter 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. 333-137797). The Securities and Exchange
      Commission, or the SEC, declared the registration statement effective on July
      17, 2007. Our units began trading on the Over-the-Bulletin Board on August
      8,
      2007.




Simultaneously
      with the consummation of the IPO, we consummated the private sale of 250,000
      insider units at a price of $8.00 per unit, generating total proceeds of
      $2,000,000. The insider units were purchased by Bo Yu, our Chairman of the
      Board
      and Chief Executive Officer. The insider units are identical to the units sold
      in the IPO except that if we call the warrants for redemption, the warrants
      underlying the insider units will be exercisable on a cashless basis so long
      as
      such warrants are held by Mr. Yu or his affiliates. Mr. Yu has agreed that
      the
      insider units (and underlying securities) will not be sold or transferred by
      him
      until after we have completed a business combination.


22


$70,375,000
      of the proceeds of the offering plus the $2,000,000 we received from the sale
      of
      the insider units (for an aggregate of $72,375,000 or $7.72 per unit sold to
      the
      public in the offering) was placed in a trust account at Lehman Brothers,
      maintained by Continental Stock Transfer & Trust Company, acting as trustee.
      This amount includes $1,875,000 of underwriting discounts and commissions
      payable to the underwriters in the offering. The underwriters have agreed that
      such amount will not be paid unless and until we consummate a business
      combination. These proceeds will not be released until the earlier of the
      completion of a business combination and our liquidation. Therefore, unless
      and
      until a business combination is consummated, the proceeds held in the trust
      account will not be available for our use for any expenses related to the
      initial public offering or expenses which we may incur related to the
      investigation and selection of a target business and the negotiation of an
      agreement to acquire a target business. These expenses may be paid prior to
      a
      business combination only from the net proceeds of the initial public offering
      not held in the trust account.





Holders
      of the Company’s units have been able to separately trade the ordinary shares
      and warrants included in such units since on or about August 8, 2007. The
      ordinary shares and warrants are quoted on the OTC Bulletin Board under the
      symbols CFAQF and CFAWF, respectively .




Our
      principal executive offices are located at Jinmao Tower, 88 Century Boulevard,
      Suite 4403, Pudong, Shanghai, People’s Republic of China 200121 and our
      telephone number is 86-21-5049-1188. Our registered office in the Cayman Islands
      is located at M&C Corporate Services Limited, PO Box 309GT, Ugland
      House


South
      Church Street, George Town, Grand Cayman, Cayman Islands. Our agent for service
      of process in the United States is Graubard Miller located at 405 Lexington
      Avenue, New York, New York 10174.




We
      are
      not presently engaged in, and we will not engage in, any substantive commercial
      business until we consummate a business combination. We intend to utilize our
      cash, including the funds held in the trust fund, capital stock, debt or a
      combination of the foregoing in effecting a business combination. Although
      substantially all of the net proceeds of our initial public offering are
      intended to be generally applied toward effecting a business combination, the
      proceeds are not otherwise being designated for any more specific purposes.
      Accordingly, prospective investors will invest in us without an opportunity
      to
      evaluate the specific merits or risks of any one or more business combinations.
      A business combination may involve the acquisition of, or merger with, a company
      which does not need substantial additional capital but which desires to
      establish a public trading market for its shares, while avoiding what it may
      deem to be adverse consequences of undertaking a public offering itself. These
      include time delays, significant expense, loss of voting control and compliance
      with various federal and state securities laws. In the alternative, we may
      seek
      to consummate a business combination with a company that may be financially
      unstable or in its early stages of development or growth.




**Opportunities
      in China**




Opportunities
      for market expansion have emerged for businesses with operations in China due
      to
      certain changes in the PRC’s political, economic and social policies as well as
      certain fundamental changes affecting the PRC and its neighboring countries.
      We
      believe that China represents both a favorable environment for making
      acquisitions and an attractive operating environment for a target business
      for
      several reasons, including:




·
            prolonged
                economic expansion within China, including gross domestic product
                growth
                of approximately 9% on average over the last 25 years, including
                9.5% in
                2004, 9.9% in 2005, 10.7% in 2006, with a projected rate of 10.9%
                for 2007
                (National Bureau of Statistics of
                China);




·
            increased
                government focus within China on privatizing assets, improving foreign
                trade and encouraging business and economic
                activity;




·
            favorable
                labor rates and efficient, low-cost manufacturing
                capabilities;




·
            the
                recent entry of China into the World Trade Organization, the sole
                global
                international organization dealing with the rules of trade between
                nations, which may lead to a reduction on tariffs for industrial
                products,
                a reduction in trade restrictions and an increase in trading with
                the
                United States; and




23




·
            the
                fact that China’s public equity markets are not as well developed and
                active as the equity markets within the United States and are
                characterized by companies with relatively small market capitalizations
                and low trading volumes, thereby causing Chinese companies to attempt
                to
                be listed on the United States equity
                markets.




We
      believe that these factors and others should enable us to acquire a target
      business with growth potential on favorable terms.




**Government
      regulations**




***Government
      regulations relating to foreign exchange controls***




The
      principal regulation governing foreign exchange in China is the Foreign Currency
      Administration Rules (IPPS), as amended. Under these rules, the Renminbi,
      China’s currency, is freely redeemable for trade and service related foreign
      exchange transactions (such as normal purchases and sales of goods and services
      from providers in foreign countries), but not for direct investment, loan or
      investment in securities outside of China unless the prior approval of the
      State
      Administration for Foreign Exchange (“SAFE”) of China is obtained. Foreign
      investment enterprises (“FIEs”) are required to apply to the SAFE for “Foreign
      Exchange Registration Certificates for FIEs.” Following a business combination,
      involving a change of equity ownership of a PRC operating entity or through
      contractual arrangements with a PRC operating entity. Our subsidiary will likely
      be an FIE as a result of our ownership structure. With such registration
      certificates, which need to be renewed annually, FIEs are allowed to open
      foreign currency accounts including a “basic account” and “capital account.”
Currency translation within the scope of the “basic account,” such as remittance
      of foreign currencies for payment of dividends, can be effected without
      requiring the approval of the SAFE. However, redemption of currency in the
      “capital account,” including capital items such as direct investment, loans and
      securities, still require approval of the SAFE. This prior approval may delay
      or
      impair our ability to operate following a business combination. On November
      21,
      2005, the SAFE issued Circular No. 75 on “Relevant Issues Concerning Foreign
      Exchange Control on Domestic Residents’ Corporate Financing and Roundtrip
      Investment Through Offshore Special Purpose Vehicles.” Circular No. 75 confirms
      that the use of offshore special purpose vehicles as holding companies for
      PRC
      investments are permitted as long as proper foreign exchange registrations
      are
      made with the SAFE.




***Government
      regulations relating to taxation***




Until
      recently, the PRC domestic corporate income tax rate was 33%, and foreign
      invested companies were eligible for tax incentives, depending on their sectors
      and locations. However, as part of the recent government policy to improve
      the
      level and quality of foreign investment, China adopted the PRC Enterprise Income
      Tax Law and its Implementing Regulations on March 16, 2007 which became
      effective as of January 1, 2008. The Implementing Regulations of the Enterprise
      Income Tax Law were promulgated by the State Council on December 6, 2007 and
      became effective as of January 1, 2008. The new law unifies the income tax
      rate
      for domestic and foreign invested enterprises at 25%. All companies incorporated
      in China, regardless of type, ownership or location will be subject to the
      same
      tax rate, although some preferential rates will still apply to encourage the
      development of certain sectors, such as hi-tech enterprises, agriculture and
      fishery. Businesses who received preferential rates under the old system will
      have five years to integrate into the new system. Tax incentives will remain
      available for investments in the west and north-east of the country and in
      high-technology industries.




***Regulation
      of foreign currency exchange and dividend
      distribution***




*Foreign
      currency exchange* .
      Foreign
      currency exchange in China is governed by a series of regulations, including
      the
      Foreign Currency Administrative Rules (1996), as amended, and the Administrative
      Regulations Regarding Settlement, Sale and Payment of Foreign Exchange (1996),
      as amended. Under these regulations, the Renminbi is freely redeemable for
      trade
      and service-related foreign exchange transactions, but not for direct
      investment, loans or investments in securities outside China without the prior
      approval of the SAFE. Pursuant to the Administrative Regulations Regarding
      Settlement, Sale and Payment of Foreign Exchange, foreign-invested enterprises
      in China may purchase foreign exchange without the approval of SAFE for trade
      and service-related foreign exchange transactions by providing commercial
      documents evidencing these transactions. They may also retain foreign exchange,
      subject to a cap approved by SAFE, to satisfy foreign exchange liabilities
      or to
      pay dividends. However, the relevant Chinese government authorities may limit
      or
      eliminate the ability of foreign-invested enterprises to purchase and retain
      foreign currencies in the future. In addition, foreign exchange transactions
      for
      direct investment, loan and investment in securities outside China are still
      subject to limitations and require approvals from SAFE.




24


*Regulation
      of Foreign Exchange in Certain Onshore and Offshore
      Transactions* .
      Pursuant to recent regulations issued by the SAFE, PRC residents are required
      to
      register with and receive approvals from SAFE in connection with offshore
      investment activities. SAFE has stated that the purpose of these regulations
      is
      to ensure the proper balance of foreign exchange and the standardization of
      the
      cross-border flow of funds.





On
      October 21, 2005, SAFE issued the Notice on Issues Relating to the
      Administration of Foreign Exchange in Fund-raising and Reverse Investment
      Activities of Domestic Residents Conducted via Offshore Special Purpose
      Companies, or Notice 75, which became effective as of November 1, 2005.





According
      to Notice 75:





•
            prior
                to establishing or assuming control of an offshore company for the
                purpose
                of financing that offshore company with assets or equity interests
                in an
                onshore enterprise in the PRC, each PRC resident, whether a natural
                or
                legal person, must complete the overseas investment foreign exchange
                registration procedures with the relevant local SAFE branch;





•
            an
                amendment to the registration with the local SAFE branch is required
                to be
                filed by any PRC resident that directly or indirectly holds interests
                in
                that offshore company upon either (1) the injection of equity interests
                or
                assets of an onshore enterprise to the offshore company, or (2) the
                completion of any overseas fund raising by such offshore company;
                and





•
            an
                amendment to the registration with the local SAFE branch is also
                required
                to be filed by such PRC resident when there is any material change
                involving a change in the capital of the offshore company, such as
                (1) an
                increase or decrease in its capital, (2) a transfer or swap of shares,
                (3)
                a merger or division, (4) a long term equity or debt investment,
                or (5)
                the creation of any security interests over the relevant assets located
                in
                China.





Moreover,
      Notice 75 applies retroactively. As a result, PRC residents who have established
      or acquired control of offshore companies that have made onshore investments
      in
      the PRC in the past are required to complete the relevant overseas investment
      foreign exchange registration procedures by March 31, 2006. Under the relevant
      rules, failure to comply with the registration procedures set forth in Notice
      75
      may result in restrictions being imposed on the foreign exchange activities
      of
      the relevant onshore company, including the payment of dividends and other
      distributions to its offshore parent or affiliate and the capital inflow from
      the offshore entity, and may also subject relevant PRC residents to penalties
      under PRC foreign exchange administration regulations.





As
      a
      Cayman Islands company, and therefore a foreign entity, if we purchase the
      assets or equity interests of a PRC company owned by PRC residents, such PRC
      residents will be subject to the registration procedures described in the
      regulations as currently drafted. Moreover, PRC residents who are beneficial
      holders of our shares are required to register with SAFE in connection with
      their investment in us.





As
      a
      result of the lack of implementing rules, other uncertainties concerning how
      the
      existing SAFE regulations will be interpreted or implemented, and uncertainty
      as
      to when the new regulations will take effect, we cannot predict how they will
      affect our business operations following a business combination. For example,
      our ability to conduct foreign exchange activities following a business
      combination, such as remittance of dividends and foreign-currency-denominated
      borrowings, may be subject to compliance with the SAFE registration requirements
      by such PRC residents, over whom we have no control. In addition, we cannot
      assure you that such PRC residents will be able to complete the necessary
      approval and registration procedures required by the SAFE regulations. We will
      require all our shareholders, following a business combination, who are PRC
      residents to comply with any SAFE registration requirements, although we have
      no
      control over either our shareholders or the outcome of such registration
      procedures. Such uncertainties may restrict our ability to implement our
      acquisition strategy and adversely affect our business and prospects following
      a
      business combination.




*Dividend
      distribution* .
      The
      principal laws and regulations in China governing distribution of dividends
      by
      foreign-invested companies include:




·
            The
                Sino-foreign Equity Joint Venture Law (1979), as
                amended;




25




·
            The
                Regulations for the Implementation of the Sino-foreign Equity Joint
                Venture Law (1983), as amended;




·
            The
                Sino-foreign Cooperative Enterprise Law (1988), as
                amended;




·
            The
                Detailed Rules for the Implementation of the Sino-foreign Cooperative
                Enterprise Law (1995), as amended;




·
            The
                Foreign Investment Enterprise Law (1986), as amended;
                and




·
            The
                Regulations of Implementation of the Foreign Investment Enterprise
                Law
                (1990), as amended.




Under
      these regulations, foreign-invested enterprises in China may pay dividends
      only
      out of their accumulated profits, if any, determined in accordance with Chinese
      accounting standards and regulations. In addition, wholly foreign-owned
      enterprises in China are required to set aside at least 10% of their respective
      accumulated profits each year, if any, to fund certain reserve funds unless
      such
      reserve funds have reached 50% of their respective registered capital. These
      reserves are not distributable as cash dividends.




***Regulation
      of foreign investors’ merging Chinese enterprises***




On
      August
      8, 2006, the Ministry of Commerce, the State-owned Assets Supervision and
      Administration Commission, State Administration of Taxation, State
      Administration for Industry and Commerce, China Securities Regulatory Commission
      and State Administration of Foreign Exchange jointly promulgated the Provisions
      for Foreign Investors to Merge Domestic Enterprises, which became effective
      September 8, 2006, replacing the Interim Provisions for Foreign Investors to
      Merge Domestic Enterprises issued in March 2003 by four authorities, the
      Ministry of Foreign Trade and Economic Cooperation, State Administration of
      Taxation, State Administration for Industry and Commerce and State
      Administration of Foreign Exchange. The State-owned Assets Supervision and
      Administration Commission and China Securities Regulatory Commission newly
      join
      the regulation promulgation.




The
      requirements and approval procedures for the Equity Acquisition and Assets
      Acquisition remains unchanged as those in the interim regulation. The new
      regulation adds one chapter on the acquisition with equity as the consideration
      including one section on the special purpose company. This chapter stipulated
      the relevant conditions and approval procedures in detail making such
      acquisitions workable. The currently mandatory requirement for the submission
      of
      fund remittance into China will be changed.




The
      Anti-monopoly Chapter in the new regulation is more or less the same as the
      existing interim regulation, although Chinese government is recently tightening
      such control.




We
      cannot
      predict how such regulations especially the anti-monopoly examination will
      affect our future completion of a business combination. However, we are
      confident our strong and in-depth understanding of Chinese market would help
      us
      minimize the negative impacts.




***Use
      of contractual arrangements***




The
      government of the PRC has restricted or limited foreign ownership of certain
      kinds of assets and companies operating in certain industries. The industry
      groups that are restricted are wide ranging, including certain aspects of
      telecommunications, advertising, food production, and heavy equipment
      manufacturers, for example. In addition there can be restrictions on the foreign
      ownership of businesses that are determined from time to time to be in
“important industries” that may affect the national economic security or having
“famous Chinese brand names” or “well established Chinese brand names.” Subject
      to the review requirements of the Ministry of Commerce and other relevant
      agencies as discussed elsewhere for acquisitions of assets and companies in
      the
      PRC and subject to the various percentage ownership limitations that exist
      from
      time to time, acquisitions involving foreign investors and parties in the
      various restricted categories of assets and industries may nonetheless sometimes
      be consummated using contractual arrangements with permitted Chinese parties.
      To
      the extent that such agreements are employed, they may be for control of
      specific assets such as intellectual property or control of blocks of the equity
      ownership interests of a company. The agreements would be designed to provide
      our company with the economic benefits of and control over the subject assets
      or
      equity interests similar to the rights of full ownership, while leaving the
      technical ownership in the hands of Chinese parties who would be our nominees.
      These agreements likely also would provide for increased ownership or full
      ownership and control by us when and if permitted under PRC law and regulation.
      If we choose to effect a business combination that employs the use of these
      types of control arrangements, we may have difficulty in enforcing our rights.
      Therefore these contractual arrangements may not be as effective in providing
      us
      with the same economic benefits, accounting consolidation or control over a
      target business as would direct ownership.




26




**Effecting
      a Business Combination**




*Sources
      of Target Businesses*




We
      anticipate that target business candidates will be brought to our attention
      from
      various unaffiliated sources, including investment bankers, venture capital
      funds, private equity funds, leveraged buyout funds, management buyout funds
      and
      other members of the financial community. Target businesses may be brought
      to
      our attention by such unaffiliated sources as a result of being solicited by
      us
      through calls or mailings. These sources may also introduce us to target
      businesses they think we may be interested in on an unsolicited basis, since
      many of these sources will have read this prospectus and know what types of
      businesses we are targeting.




Our
      officers and directors, as well as their affiliates, may also bring to our
      attention target business candidates that they become aware of through their
      business contacts as a result of formal or informal inquiries or discussions
      they may have, as well as attending trade shows or conventions. Our officers
      and
      directors have close relationships with many private equity sponsors and leading
      mezzanine lenders and a broad range of industry segments.




While
      we
      do not presently anticipate engaging the services of professional firms or
      other
      individuals that specialize in business acquisitions on any formal basis, we
      may
      engage these firms or other individuals in the future, in which event we may
      pay
      a finder’s fee, consulting fee or other compensation to be determined in an
      arm’s length negotiation based on the terms of the transaction. In no event,
      however, will any of our existing officers, directors, shareholders, special
      advisors or any entity with which they are affiliated, be paid any finder’s fee,
      consulting fee or other compensation prior to, or for any services they render
      in order to effectuate, the consummation of a business combination (regardless
      of the type of transaction that it is). If we determine to enter into a business
      combination with a target business that is affiliated with our officers,
      directors, special advisors or shareholders, we would do so only if we obtained
      an opinion from an independent investment banking firm that the business
      combination is fair to our unaffiliated shareholders from a financial point
      of
      view.




*Selection
      of a Target Business and Structuring of a Business Combination*




Our
      management will have virtually unrestricted flexibility in identifying and
      selecting a prospective target business. We have not established any other
      specific attributes or criteria (financial or otherwise) for prospective target
      businesses. In evaluating a prospective target business, our management may
      consider a variety of factors. Examples of such factors may
      include:




·
            financial
                condition and results of operation;




·
            growth
                potential;




·
            experience
                and skill of management and availability of additional
                personnel;




·
            capital
                requirements;




·
            competitive
                position;




·
            barriers
                to entry;




·
            stage
                of development of the products, processes or
                services;




·
            degree
                of current or potential market acceptance of the products, processes
                or
                services;




·
            proprietary
                features and degree of intellectual property or other protection
                of the
                products, processes or services;




·
            regulatory
                environment of the industry; and




·
            costs
                associated with effecting the business
                combination.


27




These
      criteria are not intended to be exhaustive. Any evaluation relating to the
      merits of a particular business combination will be based, to the extent
      relevant, on the above factors as well as other considerations deemed relevant
      by our management in effecting a business combination consistent with our
      business objective. In evaluating a prospective target business, we will conduct
      an extensive due diligence review which will encompass, among other things,
      meetings with incumbent management and inspection of facilities, as well as
      review of financial and other information which is made available to us. This
      due diligence review will be conducted either by our management or by
      unaffiliated third parties we may engage, although we have no current intention
      to engage any such third parties. We will also seek to have all prospective
      target businesses execute agreements with us waiving any right, title, interest
      or claim of any kind in or to any monies held in the trust account. If any
      prospective target business refused to execute such agreement, we would cease
      negotiations with such target business.




The
      time
      and costs required to select and evaluate a target business and to structure
      and
      complete the business combination cannot presently be ascertained with any
      degree of certainty. Any costs incurred with respect to the identification
      and
      evaluation of a prospective target business with which a business combination
      is
      not ultimately completed will result in a loss to us and reduce the amount
      of
      capital available to otherwise complete a business combination.




We
      have
      engaged EarlyBirdCapital, the representative of the underwriters, on a
      non-exclusive basis, to act as our investment banker to assist us in structuring
      a business combination and negotiating its terms (but not for purposes of
      locating potential target candidates for our business combination). We
      anticipate that these services will include assisting us with valuing and
      structuring any proposed offer to be made to a target business and negotiating
      a
      letter of intent and/or definitive agreement with any potential target business.
      We will pay EarlyBirdCapital a cash fee at the closing of our business
      combination of 1.0% of the total consideration paid in connection with the
      business combination, with a maximum fee to be paid of $750,000.




*Fair
      Market Value of Target Business*




The
      target business that we acquire, or acquire control of, must have a fair market
      value equal to at least 80% of our net assets at the time of such acquisition,
      although we may acquire a target business whose fair market value significantly
      exceeds 80% of our net assets. In order to consummate such an acquisition,
      we
      may issue a significant amount of our debt or equity securities to the sellers
      of such businesses and/or seek to raise additional funds through a private
      offering of debt or equity securities. Since we have no specific business
      combination under consideration, we have not entered into any such fund raising
      arrangement and have no current intention of doing so. The fair market value
      of
      the target will be determined by our board of directors based upon one or more
      standards generally accepted by the financial community (such as actual and
      potential sales, earnings, cash flow and/or book value). If our board is not
      able to independently determine that the target business has a sufficient fair
      market value, we will obtain an opinion from an unaffiliated, independent
      investment banking firm with respect to the satisfaction of such criteria.
      We
      will not be required to obtain an opinion from an investment banking firm as
      to
      the fair market value if our board of directors independently determines that
      the target business complies with the 80% threshold.




*Probable
      Lack of Business Diversification*




Our
      business combination must be with a target business or businesses which
      satisfies the minimum valuation standard at the time of such acquisition, as
      discussed above, although this process may entail the simultaneous acquisitions
      of several operating businesses at the same time. Therefore, at least initially,
      the prospects for our success may be entirely dependent upon the future
      performance of a single business. Unlike other entities which may have the
      resources to complete several business combinations of entities operating in
      multiple industries or multiple areas of a single industry, it is probable
      that
      we will not have the resources to diversify our operations or benefit from
      the
      possible spreading of risks or offsetting of losses. By consummating a business
      combination with only a single entity, our lack of diversification
      may:




·
            subject
                us to numerous economic, competitive and regulatory developments,
                any or
                all of which may have a substantial adverse impact upon the particular
                industry in which we may operate subsequent to a business combination,
                and


28




·
            result
                in our dependency upon the development or market acceptance of a
                single or
                limited number of products, processes or
                services.




If
      we
      determine to simultaneously acquire several businesses and such businesses
      are
      owned by different sellers, we will need for each of such sellers to agree
      that
      our purchase of its business is contingent on the simultaneous closings of
      the
      other acquisitions, which may make it more difficult for us, and delay our
      ability, to complete the business combination. With multiple acquisitions,
      we
      could also face additional risks, including additional burdens and costs with
      respect to possible multiple negotiations and due diligence investigations
      (if
      there are multiple sellers) and the additional risks associated with the
      subsequent assimilation of the operations and services or products of the
      acquired companies in a single operating business.




*Limited
      Ability to Evaluate the Target Business’ Management*




Although
      we intend to scrutinize the management of a prospective target business when
      evaluating the desirability of effecting a business combination, we cannot
      assure you that our assessment of the target business’ management will prove to
      be correct. In addition, we cannot assure you that the future management will
      have the necessary skills, qualifications or abilities to manage a public
      company. Furthermore, the future role of our officers and directors, if any,
      in
      the target business following a business combination cannot presently be stated
      with any certainty. While it is possible that each of our executive officers
      could remain in a senior management or advisory position with us following
      a
      business combination, it is unlikely that they will devote their full time
      efforts to our affairs subsequent to a business combination. Moreover, they
      would only be able to remain with the company after the consummation of a
      business combination if they are able to negotiate employment or consulting
      agreements in connection with the business combination. Such negotiations would
      take place simultaneously with the negotiation of the business combination
      and
      could provide for them to receive compensation in the form of cash payments
      and/or our securities for services they would render to the company after the
      consummation of the business combination. While the personal and financial
      interests of our executive officers may influence their motivation in
      identifying and selecting a target business, their ability to remain with the
      company after the consummation of a business combination will not be the
      determining factor in our decision as to whether or not we will proceed with
      any
      potential business combination. Additionally, we cannot assure you that our
      officers and directors will have significant experience or knowledge relating
      to
      the operations of the particular target business.




Following
      a business combination, we may seek to recruit additional managers to supplement
      the incumbent management of the target business. We cannot assure you that
      we
      will have the ability to recruit additional managers, or that any such
      additional managers we do recruit will have the requisite skills, knowledge
      or
      experience necessary to enhance the incumbent management.




*Opportunity
      for Shareholder Approval of Business Combination*




Prior
      to
      the completion of a business combination, we will submit the transaction to
      our
      shareholders for approval, even if the nature of the acquisition is such as
      would not ordinarily require shareholder approval under applicable state law.




In
      connection with seeking shareholder approval of a business combination, we
      will
      furnish our shareholders with proxy solicitation materials prepared in
      accordance with the Securities Exchange Act of 1934, as amended, which, among
      other matters, will include a description of the operations of the target
      business and audited historical financial statements of the business. We will
      publicly announce the record date for determining the shareholders entitled
      to
      vote at the meeting to approve our business combination at least two business
      days prior to such record date.




In
      connection with the vote required for any business combination, all of our
      existing shareholders, including all of our officers and directors, have agreed
      to vote their respective initial shares in accordance with the majority of
      the
      ordinary shares voted by the public shareholders. This voting arrangement shall
      not apply to shares included in units purchased in the initial public offering
      or purchased following the offering in the aftermarket by any of our existing
      shareholders, officers and directors. Accordingly, they may vote these shares
      on
      a proposed business combination any way they choose. We will proceed with the
      business combination only if a majority of the ordinary shares voted by the
      public shareholders are voted in favor of the business combination and public
      shareholders owning less than 30% of the shares sold in the offering both
      exercise their conversion rights and vote against the business
      combination.


29




*Conversion
      Rights*




At
      the
      time we seek shareholder approval of any business combination, we will offer
      each public shareholder the right to have such shareholder’s ordinary shares
      converted to cash if the shareholder votes against the business combination
      and
      the business combination is approved and completed. Our existing shareholders
      will not have such conversion rights with respect to any ordinary shares owned
      by them, directly or indirectly, whether included in their initial shares,
      in
      the insider units or purchased by them in the IPO or in the aftermarket (nor
      will they seek appraisal rights with respect to such shares if appraisal rights
      would be available to them). The actual per-share conversion price will be
      equal
      to the amount in the trust account, inclusive of any interest (calculated as
      of
      two business days prior to the consummation of the proposed business
      combination), divided by the number of shares sold in the IPO. At December
      31,
      2007, the per-share conversion price would be $7.82, or $0.18 less than the
      per-unit offering price of $8.00.




An
      eligible shareholder may request conversion at any time after the mailing to
      our
      shareholders of the proxy statement and prior to the vote taken with respect
      to
      a proposed business combination at a meeting held for that purpose, but the
      request will not be granted unless the shareholder votes against the business
      combination and the business combination is approved and completed.
      Additionally, we may require public shareholders, whether they are a record
      holder or hold their shares in “street name,” to either tender their
      certificates to our transfer agent at any time through the vote on the business
      combination or to deliver their shares to the transfer agent electronically
      using Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System,
      at the holder’s option. The proxy solicitation materials that we will furnish to
      shareholders in connection with the vote for any proposed business combination
      will indicate whether we are requiring shareholders to satisfy such
      certification and delivery requirements. Accordingly, a shareholder would have
      from the time we send out our proxy statement through the vote taken with
      respect to the business combination at such meeting to tender his shares if
      he
      wishes to seek to exercise his conversion rights. This time period varies
      depending on the specific facts of each transaction. However, as the delivery
      process can be accomplished by the shareholder, whether or not he is a record
      holder or his shares are held in “street name,” in a matter of hours by simply
      contacting the transfer agent or his broker and requesting delivery of his
      shares through the DWAC System, we believe this time period is sufficient for
      an
      average investor. However, because we do not have any control over this process,
      it may take significantly longer than we anticipated and investors may not
      be
      able to seek conversion in time. Accordingly, we will only require shareholders
      to deliver their certificates prior to the vote if we give shareholders at
      least
      two weeks prior between the mailing of the proxy solicitation materials and
      the
      meeting date. Traditionally, in order to perfect conversion rights in connection
      with a blank check company’s business combination, a holder could simply vote
      against a proposed business combination and check a box on the proxy card
      indicating such holder was seeking to convert. After the business combination
      was approved, the company would contact such shareholder to arrange for him
      to
      deliver his certificate to verify ownership. As a result, the shareholder then
      had an “option window” after the consummation of the business combination during
      which he could monitor the price of the stock in the market. If the price rose
      above the conversion price, he could sell his shares in the open market before
      actually delivering his shares to the company for cancellation. Thus, the
      conversion right to which shareholders were aware they needed to commit before
      the shareholder meeting would become a continuing right surviving past the
      consummation of the business combination until the converting holder delivered
      his certificate for conversion at the conversion price. The requirement for
      physical or electronic delivery prior to the meeting ensures that a converting
      holder’s election to convert is irrevocable once the business combination is
      approved. However, we will not require the foregoing procedures if we determine
      this problem is no longer an issue. There is a nominal cost associated with
      the
      above-referenced tendering process and the act of certificating the shares
      or
      delivering them through the DWAC system. The transfer agent will typically
      charge the tendering broker $35 and it would be up to the broker whether or
      not
      to pass this cost on to the converting holder. However, this fee would be
      incurred regardless of whether or not we require holders seeking to exercise
      conversion rights to tender their shares prior to the meeting — the need to
      deliver shares is a requirement of conversion regardless of the timing of when
      such delivery must be effectuated. Accordingly, this would not result in any
      increased cost to shareholders when compared to the traditional process.


30






Any
      request for conversion, once made, may be withdrawn at any time up to the vote
      taken with respect to the proposed business combination. Furthermore, if a
      shareholder delivered his certificate for conversion and subsequently decided
      prior to the meeting not to elect conversion, he may simply request that the
      transfer agent return the certificate (physically or electronically). It is
      anticipated that the funds to be distributed to shareholders entitled to convert
      their shares who elect conversion will be distributed promptly after completion
      of a business combination. Public shareholders who convert their stock into
      their share of the trust account still have the right to exercise any warrants
      they still hold.




If
      a vote
      on our initial business combination is held and the business combination is
      not
      approved, we may continue to try to consummate a business combination with
      a
      different target until July 23,
      2009 (24 months from the completion of our initial public offering) .
      If the
      initial business combination is not approved or completed for any reason, then
      public shareholders voting against our initial business combination who
      exercised their conversion rights would not be entitled to convert their
      ordinary shares into a pro rata share of the aggregate amount then on deposit
      in
      the trust account. In such case, if we have required public shareholders to
      tender their certificates prior to the meeting, we will promptly return such
      certificates to the tendering public shareholder. Public shareholders would
      be
      entitled to receive their pro rata share of the aggregate amount on deposit
      in
      the trust account only in the event that the initial business combination they
      voted against was duly approved and subsequently completed, or in connection
      with our liquidation.




We
      will
      not complete any business combination if public shareholders, owning 30% or
      more
      of the shares sold in the initial public offering, both exercise their
      conversion rights and vote against the business combination. Accordingly, it
      is
      our understanding and intention in every case to structure and consummate a
      business combination in which public shareholders owning 29.99% of the shares
      sold in the initial public offering may exercise their conversion rights and
      the
      business combination will still go forward. We have set the conversion
      percentage to 30% in order to reduce the likelihood that a small group of
      investors holding a block of our stock will be able to stop us from completing
      a
      business combination that is otherwise approved by a large majority of our
      public shareholders.




*Automatic
      Dissolution and Subsequent Liquidation If No Business
      Combination*




Our
      memorandum and articles of association provides that we will continue in
      existence only until July 23, 2009. This provision may not be amended
      except in connection with the consummation of a business combination. If we
      have
      not completed a business combination by such date, it will trigger our automatic
      dissolution. This has the same effect as if our board of directors and
      shareholders had formally voted to approve our voluntary winding up and
      dissolution and formally began a voluntary winding up procedure under the
      Companies Law. As a result, no vote would be required from our shareholders
      to
      commence such a voluntary winding up and dissolution. We view this provision
      terminating our corporate life by July 23, 2009 as an obligation to
      our shareholders and will not take any action to amend or waive this provision
      to allow us to survive for a longer period of time except in connection with
      the
      consummation of a business combination. Under the Companies Law, in the case
      of
      a full voluntary liquidation procedure, a liquidator would give at least 21
      days’ notice to creditors of his intention to make a distribution by notifying
      known creditors (if any) who have not submitted claims and by placing a public
      advertisement in the Cayman Islands Official Gazette, although in practice
      this
      notice requirement need not necessarily delay the distribution of assets as
      the
      liquidator may be satisfied that no creditors would be adversely affected as
      a
      consequence of a distribution before this time period has expired. We anticipate
      the trust account would be liquidated shortly following the expiration of the
      21
      day period. As soon as the affairs of the company are fully wound-up, the
      liquidator must lay his final report and accounts before a final general meeting
      which must be called by a public notice at least one month before it takes
      place. After the final meeting, the liquidator must make a return to the
      Registrar confirming the date on which the meeting was held and three months
      after the date of such filing the company is dissolved.




If
      we are
      unable to complete a business combination by July 23, 2009, we will
      distribute to all of our public shareholders, in proportion to their respective
      equity interests, an aggregate sum equal to the amount in the trust account,
      inclusive of any interest, plus any remaining net assets (subject to our
      obligations under Cayman Islands law to provide for claims of creditors). We
      anticipate notifying the trustee of the trust account to begin liquidating
      such
      assets promptly after expiration of the 21 day period and anticipate it will
      take no more than 10 business days to effectuate such distribution. Our initial
      shareholders have waived their rights to participate in any liquidation
      distribution with respect to their initial shares and the shares included within
      the insider units. There will be no distribution from the trust account with
      respect to our warrants which will expire worthless. We will pay the costs
      of
      liquidation from our remaining assets outside of the trust fund. If such funds
      are insufficient, our initial shareholders have contractually agreed to advance
      us the funds necessary to complete such liquidation (currently anticipated
      to be
      no more than $15,000) and have contractually agreed not to seek repayment of
      such expenses.


31




If
      we
      were to expend all of the net proceeds of the IPO, other than the proceeds
      deposited in the trust account, and without taking into account interest, if
      any, earned on the trust account, the per-share liquidation price, as of
      December 31, 2007, would be $7.82 or $0.18 less than the per-unit offering
      price
      of $8.00. **** The
      proceeds deposited in the trust account could, however, become subject to the
      claims of our creditors (which could include vendors and service providers
      we
      have engaged to assist us in any way in connection with our search for a target
      business and that are owed money by us, as well as target businesses themselves)
      which could have higher priority than the claims of our public shareholders.
      Our
      officers and directors have agreed, pursuant to agreements with us and
      EarlyBirdCapital that, if we liquidate prior to the consummation of a business
      combination, they will be personally liable (on a pro rata basis relative to
      the
      number of initial shares owned by them prior to the completion of the offering)
      to pay debts and obligations to target businesses or vendors or other entities
      that are owed money by us for services rendered or contracted for or products
      sold to us in excess of the net proceeds of the initial public offering not
      held
      in the trust account. We cannot assure you, however, that they would be able
      to
      satisfy those obligations. Accordingly, the actual per-share liquidation price
      could be less than $7.82, plus interest, due to claims of
      creditors.




Our
      public shareholders will be entitled to receive funds from the trust account
      only in the event of the expiration of our existence and our liquidation or
      if
      they seek to convert their respective shares into cash upon a business
      combination which the shareholder voted against and which is completed by us.
      In
      no other circumstances will a shareholder have any right or interest of any
      kind
      to or in the trust account.




If
      we are
      unable to consummate a transaction by July 23, 2009, our purpose and
      powers will be limited to dissolving, liquidating and winding up. Upon notice
      from us, the trustee of the trust account will liquidate the investments
      constituting the trust account and will turn over the proceeds to our transfer
      agent for distribution to our public shareholders as part of our plan of
      distribution and dissolution. Concurrently, we shall pay, or reserve for
      payment, from funds not held in trust, our liabilities and obligations, although
      we cannot assure you that there will be sufficient funds for such purpose.
      If
      there are insufficient funds held outside the trust account for such purpose,
      our directors and officers have agreed to indemnify us for all claims of
      creditors to the extent we do not obtain valid and enforceable waivers from
      such
      entities in order to protect the amounts held in trust. We cannot assure you
      that they will be able to satisfy their indemnification obligations if required
      to. As a result, if we liquidate, the per-share distribution from the trust
      fund
      could be less than $7.82 due to claims or potential claims of
      creditors.




Additionally,
      in any liquidation proceedings of the company under Cayman Islands’ law, the
      funds held in our trust account may be included in our estate and subject to
      the
      claims of third parties with priority over the claims of our shareholders.
      To
      the extent any such claims deplete the trust account, we cannot assure you
      we
      will be able to return to our public shareholders the liquidation amounts
      payable to them. Furthermore, a liquidator of the company might seek to hold
      a
      shareholder liable to contribute to our estate to the extent of distributions
      received by them pursuant to the dissolution of the trust account beyond the
      date of dissolution of the trust account. Additionally, we cannot assure you
      that third parties will not seek to recover from our shareholders amounts owed
      to them by us. Furthermore, our board may be viewed as having breached their
      fiduciary duties to our creditors and/or may have acted in bad faith, and
      thereby exposing itself and our company to claims for having paid public
      shareholders from the trust account prior to addressing the claims of creditors.
      We cannot assure you that claims will not be brought against us for these
      reasons.




**Competition
      for Target Business**




In
      identifying, evaluating and selecting a target business, we may encounter
      intense competition from other entities having a business objective similar
      to
      ours. There are numerous blank check companies that have completed initial
      public offerings that are seeking to carry out a business plan similar to our
      business plan. Additionally, we may be subject to competition from entities
      other than blank check companies having a business objective similar to ours,
      including venture capital firms, leverage buyout firms and operating businesses
      looking to expand their operations through the acquisition of a target business.
      Many of these entities are well established and have extensive experience
      identifying and effecting business combinations directly or through affiliates.
      Many of these competitors possess greater technical, human and other resources
      than us and our financial resources will be relatively limited when contrasted
      with those of many of these competitors. While we believe there may be numerous
      potential target businesses that we could acquire with the net proceeds of
      the
      initial public offering, our ability to compete in acquiring certain sizable
      target businesses will be limited by our available financial resources. This
      inherent competitive limitation gives others an advantage in pursuing the
      acquisition of a target business. Further, the following may not be viewed
      favorably by certain target businesses:


32




·
            our
                obligation to seek shareholder approval of a business combination
                may
                delay the completion of a
                transaction;




·
            our
                obligation to convert into cash ordinary shares held by our public
                shareholders to such holders that both vote against the business
                combination and exercise their conversion rights may reduce the resources
                available to us for a business combination;
                and




·
            our
                outstanding warrants and option, and the potential future dilution
                they
                represent.




Any
      of
      these factors may place us at a competitive disadvantage in successfully
      negotiating a business combination. Our management believes, however, that
      our
      status as a public entity and potential access to the United States public
      equity markets may give us a competitive advantage over privately-held entities
      having a similar business objective as ours in acquiring a target business
      with
      significant growth potential on favorable terms.




If
      we
      succeed in effecting a business combination, there will be, in all likelihood,
      intense competition from competitors of the target business. We cannot assure
      you that, subsequent to a business combination, we will have the resources
      or
      ability to compete effectively.




**Facilities**




We
      maintain our principal executive offices at Jinmao Tower, 88 Century Boulevard,
      Suite 4403, Pudong, Shanghai, People’s Republic of China 200121. The cost for
      this space is included in the $7,500 per-month fee Cathay Fortune Corp. will
      charges us for general and administrative services commencing July
      23, 2007 pursuant to a letter agreement between us and Cathay Fortune
      Corp. We believe, based on rents and fees for similar services in the PRC,
      that
      the fee charged by Cathay Fortune Corp. is at least as favorable as we could
      have obtained from an unaffiliated person. We consider our current office space,
      combined with the other office space otherwise available to our executive
      officers, adequate for our current operations.




**Periodic
      Reporting and Audited Financial Statements**




As
      a
      foreign private issuer, we are exempt from the rules under the Securities
      Exchange Act of 1934, as amended, regarding proxy statements. In addition,
      we
      will not be required under the Exchange Act to file current reports with the
      SEC
      as frequently or as promptly as United States companies whose securities are
      registered under the Exchange Act. However, we have agreed with the
      representatives of the underwriters that for the period ending upon our
      liquidation or the consummation of our initial business combination, in
      connection with any proposed business combination, we will deliver to our
      stockholders a proxy statement containing the information required by the rules
      under the Securities Exchange Act of 1934. We have also agreed with the
      representatives of the underwriters that for the period ending on the
      consummation of a business combination, we will comply with the rules and
      regulations under the Exchange Act prescribing the requirements and filing
      deadlines for current reports on Form 8-K and will file reports on Form 6-K
      complying with those rules and regulations. We will also furnish to American
      shareholders an English language version of our annual financial statements
      and
      all other materials regularly provided to other shareholders, and
      publish an English language version of our interim financial statements
      filed with the SEC.




We
      will
      provide stockholders with audited financial statements of the prospective target
      business as part of the proxy solicitation materials sent to stockholders to
      assist them in assessing the target business. In all likelihood, these financial
      statements will need to be prepared in accordance with United States generally
      accepted accounting principles or prepared or reconciled in accordance with
      International Financial Reporting Standards. We cannot assure you that any
      particular target business identified by us as a potential acquisition candidate
      will have financial statements prepared in accordance with United States
      generally accepted accounting principles or prepared or reconciled in accordance
      with International Financial Reporting Standards or that the potential target
      business will be able to prepare its financial statements in accordance with
      United States generally accepted accounting principles or prepared or reconciled
      in accordance with International Financial Reporting Standards. To the extent
      that such financial statements cannot be obtained, we may not be able to acquire
      the proposed target business. While this may limit the pool of potential
      acquisition candidates, we do not believe that this limitation will be
      material.


33




**Legal
      Proceedings**




There
      is
      no litigation currently pending or, to our knowledge, contemplated against
      us or
      any of our officers or directors in their capacity as such.




**ITEM
      4A. UNRESOLVED STAFF COMMENTS**




None.





**ITEM
      5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS**





We
      were
      formed on August 18, 2006 to serve as a vehicle to effect a merger, capital
      stock exchange, asset acquisition or other similar business combination with
      one
      or more operating businesses in PRC. We intend to utilize cash derived from
      the
      proceeds of our recently completed public offering, our capital stock, debt
      or a
      combination of cash, capital stock and debt, in effecting a business
      combination. The issuance of additional share capital:




·
            may
                significantly reduce the equity interest of our
                shareholders;




·
            may
                subordinate the rights of holders of ordinary shares if preferred
                shares
                are issued with rights senior to those afforded to our ordinary
                shares;




·
            will
                likely cause a change in control if a substantial number of our ordinary
                shares are issued, which may affect, among other things, our ability
                to
                use our net operating loss carry forwards, if any, and may also result
                in
                the resignation or removal of one or more of our present officers
                and
                directors; and




·
            may
                adversely affect prevailing market prices for our ordinary
                shares.




Similarly,
      if we issued debt securities, it could result in:




·
            default
                and foreclosure on our assets if our operating revenues after a business
                combination were insufficient to pay our debt
                obligations;




·
            acceleration
                of our obligations to repay the indebtedness even if we have made
                all
                principal and interest payments when due if the debt security contained
                covenants that required the maintenance of certain financial ratios
                or
                reserves and any such covenant were breached without a waiver or
                renegotiation of that covenant;




·
            our
                immediate payment of all principal and accrued interest, if any,
                if the
                debt security was payable on demand;
                and




·
            our
                inability to obtain additional financing, if necessary, if the debt
                security contained covenants restricting our ability to obtain additional
                financing while such security was
                outstanding.




For
      the
      year ended December 31, 2007, we had net income of $845,500 derived from
      interest income of 964,752 offset by $119,252 of formation costs and operating
      expenses.




For
      the
      period from August 18, 2006 (inception) to December 31, 2006, we had a net
      loss
      of 4,686 attributable to formation costs and operating
      expenses.


34


On
      July
      23, 2007, we consummated our IPO. Upon consummation of our IPO,
      $72,735,000 ** of
      the
      net proceeds was deposited in trust, with the remaining net proceeds becoming
      available to pay for business, legal and accounting due diligence on prospective
      acquisitions and continuing general and administrative expenses. We
      intend
      to utilize our cash, including the funds held in the trust fund, capital stock,
      debt or a combination of the foregoing to effect a business combination. To
      the
      extent that our capital stock or debt securities are used in whole or in part
      as
      consideration to effect a business combination, the proceeds held in the trust
      fund as well as any other available cash will be used to finance the operations
      of the target business.




We
      believe that the funds available to us outside of the trust account will be
      sufficient to allow us to operate until July 23, 2009, assuming that a business
      combination is not consummated during that time. Over this time period, we
      will
      be using these funds for identifying and evaluating prospective acquisition
      candidates, performing business due diligence on prospective target businesses,
      traveling to and from the offices, plants or similar locations of prospective
      target businesses, reviewing corporate documents and material agreements of
      prospective target businesses, selecting the target business to acquire and
      structuring, negotiating and consummating the business combination. We
      anticipate that we will incur approximately $400,000 of expenses for legal,
      accounting and other third-party expenses attendant to the due diligence
      investigations, structuring and negotiating of a business combination, $180,000
      for the administrative fee payable to Cathay Fortune Corp. ($7,500 per month
      for
      24 months), $250,000 of expenses for the due diligence and investigation of
      a
      target business by our officers, directors and existing stockholders, $100,000
      of expenses in legal and accounting fees relating to our SEC reporting
      obligations and $535,000 for general working capital that will be used for
      miscellaneous expenses, taxes and reserves, including approximately $120,000
      for
      director and officer liability insurance premiums. We do not believe we will
      need to raise additional funds following the IPO in order to meet the
      expenditures required for operating our business. However, we may need to raise
      additional funds through a private offering of debt or equity securities if
      such
      funds are required to consummate a business combination that is presented to
      us,
      although we have not entered into any such arrangement and have no current
      intention of doing so.




Commencing
      on July 23, 2007 and ending upon the acquisition of a target business or our
      liquidation, we began incurring a fee from Cathay Fortune Corp., an affiliate
      of
      our officers and directors, of $7,500 per month for providing us with office
      space and certain general and administrative services. Additionally, prior
      to
      the date of our IPO, Bo Yu advanced an aggregate of $125,000 to us for payment
      of offering expenses on our behalf. This loan was repaid following our initial
      public offering from the proceeds of the offering.





**ITEM
      6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES**




**Directors
      and Executive Officers**






Our
      current directors and executive officers are as follows:




******Name**
            
            **Age**
            
            **Position**Bo
                Yu
            
            41
            
            Chairman
                of the Board of Directors and Chief Executive OfficerYufeng
                Zhang
            
            32
            
            Chief
                Financial Officer, Secretary, Treasurer and DirectorAidan
                Stretch
            
            40
            
            DirectorJames
                Walsh
            
            40
            
            Director




***Bo
      Yu*** has been
      our chairman of the board and chief executive officer since our inception.
      Mr. Yu founded Cathay Fortune Corp., a private equity firm, in July 2003
      and has served as its chairman of the management committee and chief executive
      officer since that date. From December 2001 to July 2003, Mr. Yu was the
      chairman of the management committee of China Fortune Securities Co., Ltd.,
      a
      leading privately owned broker-dealer in China. From May 1997 to July 2003,
      Mr. Yu served as the chairman of the board of Beijing Leader Investment
      Corp., Ltd., a private derivatives trading and assets management firm. From
      June
      1990 to August 1998, Mr. Yu was the founder and the chairman of the board
      of Dalian DongLi Artistic Textile Co., Ltd., a privately owned textile
      manufacturer. From 1985 to 1990, Mr. Yu held various positions at the
      Municipal Tax Bureau of Dalian City.


35




***Yufeng
      (Edgar) Zhang*** has been
      our chief financial officer and a member of our board of directors since our
      inception. Mr. Zhang has served as a managing director of Cathay Fortune
      since June 2002. From April 2001 to May 2002, Mr. Zhang worked as a senior
      associate at Sinosure Inc., a US-China corporate finance boutique specialized
      in
      advising cross-board transactions for small and middle size companies. From
      July
      1998 to March 2001, Mr. Zhang worked as a senior manager of the investment
      department at DTZ Debenham Tie Leung, a European corporate real estate
      consulting firm, in advising international institutional real estate investments
      in China. From July 1996 to June 1998, Mr. Zhang worked as a manager for
      Shanghai Caohejing Hi-tech Park to facilitate foreign direct investments in
      the
      state-level industrial park. Mr. Zhang received a B.S. from Shanghai Jiao
      Tong University. He is also an active member of Chinese Institute of Certified
      Public Accountants (CICPA).




***Aidan
      Stretch*** has
      served as a member of our board of directors since our inception. Since July
      2006, Mr. Stretch has been a consultant to Cathay Fortune. From January
      2005 until June 2006, Mr. Stretch has served as a managing director of
      WindyPoint Capital Corp., an investment banking firm. From July 1998 to December
      2004, Mr. Stretch served as a managing director of Broadmark Capital Corp.,
      an investment banking firm. From May 1996 to June 1998, Mr. Stretch was the
      principal at Sustainable Development Group, a consulting firm. Mr. Stretch
      received a B.A. from the University of Liverpool, a Diploma of Architecture
      from
      the University of Liverpool and the University of Oregon and has completed
      the
      Environmental Management Program and Executive M.B.A. studies at the University
      of Washington, Graduate School of Business.




***James
      Walsh*** has
      served as a member of our board of directors since our inception. Since July
      2006, Mr. Walsh has been a consultant to Cathay Fortune. From January 2005
      to June 2006, Mr. Walsh served as a director of WindyPoint Capital Corp.
      From March 1999 to December 2005, Mr. Walsh served as a senior vice
      president of Broadmark Capital Corp. From September 1996 to February 1999,
      Mr. Walsh served as an account executive at Honeywell International Inc., a
      New York Stock Exchange listed manufacturer of civil and military avionics
      and
      other aerospace products. Mr. Walsh received a B.A. from Duke University
      and an M.B.A. from the University of Washington, Graduate School of
      Business.




**Executive
      Compensation**




No
      executive officer has received any cash compensation for services rendered
      to
      us. Commencing July 17, 2007 through the acquisition of a target business,
      we
      will pay Cathay Fortune Corp., an affiliate of our officers and directors,
      a fee
      of $7,500 per month for providing us with office space and certain office and
      secretarial services. However, this arrangement is solely for our benefit and
      is
      not intended to provide our officers and directors compensation in lieu of
      a
      salary. Other than the $7,500 per month administrative fee, no compensation
      of
      any kind, including finders, consulting or other similar fees, will be paid
      to
      any of our existing shareholders, including our directors, or any of their
      respective affiliates, prior to, or for any services they render in order to
      effectuate, the consummation of a business combination. However, such
      individuals will be reimbursed for any out-of-pocket expenses incurred in
      connection with activities on our behalf such as identifying potential target
      businesses and performing due diligence on suitable business combinations.
      There
      is no limit on the amount of these out-of-pocket expenses and there will be
      no
      review of the reasonableness of the expenses by anyone other than our board
      of
      directors, which includes persons who may seek reimbursement, or a court of
      competent jurisdiction if such reimbursement is challenged. Because of the
      foregoing, we will generally not have the benefit of independent directors
      examining the propriety of expenses incurred on our behalf and subject to
      reimbursement.




Since
      our
      formation, we have not granted any stock options or stock appreciation rights
      or
      any awards under long-term incentive plans.




**Compensation
      Discussion and Analysis**




Overall,
      following our initial business combination, we will seek to provide total
      compensation packages that are competitive in terms of potential value to our
      executives, and which are tailored to the unique characteristics and needs
      of
      our company within our industry in order to create an executive compensation
      program that will adequately reward our executives for their roles in creating
      value for our shareholders. We intend to be competitive with other similarly
      situated companies in our industry following completion of our initial business
      combination. The compensation decisions regarding our executives will be based
      on our need to attract individuals with the skills necessary for us to achieve
      our business plan, to reward those individuals fairly over time, and to retain
      those individuals who continue to perform at or above our expectations.




36


It
      is
      likely that our executives’ compensation will have three primary
      components – salary, cash incentive bonus and stock-based awards. We will
      view the three components of executive compensation as related but distinct.
      We
      do not believe that significant compensation derived from one component of
      compensation should negate or reduce compensation from other components. We
      anticipate determining the appropriate level for each compensation component
      based in part, but not exclusively, on our view of internal equity and
      consistency, individual performance and other information deemed relevant and
      timely. We have not adopted any formal or informal policies or guidelines for
      allocating compensation between long-term and currently paid out compensation,
      between cash and non-cash compensation, or among different forms of
      compensation.




We
      may
      utilize the services of third parties from time to time in connection with
      the
      hiring and compensation awarded to executive employees. This could include
      subscriptions to executive compensation surveys and other databases.




**Benchmarking
      of Cash and Equity Compensation**




We
      believe it is important when making compensation-related decisions to be
      informed as to current practices of similarly situated publicly held companies.
      We expect to stay apprised of the cash and equity compensation practices of
      publicly held companies in the industry we operate in following our initial
      business combination through the review of such companies’ public reports and
      through other resources. It is expected that any companies chosen for inclusion
      in any benchmarking group would have business characteristics comparable to
      our
      company, including revenues, financial growth metrics, stage of development,
      employee headcount and market capitalization. While benchmarking may not always
      be appropriate as a stand-alone tool for setting compensation due to the aspects
      of our post-acquisition business and objectives that may be unique to us, we
      generally believe that gathering this information will be an important part
      of
      our compensation-related decision-making process.




**Compensation
      Components**




*Base
      Salary* .
      Generally, we anticipate setting executive base salaries at levels comparable
      with those of executives in similar positions and with similar responsibilities
      at comparable companies. We will seek to maintain base salary amounts at or
      near
      the industry norms while avoiding paying amounts in excess of what we believe
      is
      necessary to motivate executives to meet corporate goals. It is anticipated
      base
      salaries will generally be reviewed annually, subject to terms of employment
      agreements, and that we will seek to adjust base salary amounts to realign
      such
      salaries with industry norms after taking into account individual
      responsibilities, performance and experience.




*Annual
      Bonuses.* **** We
      may
      design and utilize cash incentive bonuses for executives to focus them on
      achieving key operational and financial objectives within a yearly time horizon.
      We **** will
      structure cash incentive bonus compensation so that it is taxable to our
      employees at the time it becomes available to them. At this time, it is not
      anticipated that any executive officer’s annual cash compensation will exceed $1
      million, and we have accordingly not made any plans to qualify for any
      compensation deductions under Section 162(m) of the Internal Revenue Code.




*Equity
      Awards.* **** We
      may
      also use stock options and other stock-based awards to reward long-term
      performance. We believe that providing a meaningful portion of our executives’
total compensation package in stock options and other stock-based awards will
      align the incentives of our executives with the interests of our shareholders
      and with our long-term success.




**Board
      Practices**




Our
      board
      of directors is divided into three classes with only one class of directors
      being elected in each year and each class serving a three-year term. The term
      of
      office of the first class of directors, consisting of James Walsh, will expire
      at our first annual meeting of shareholders. The term of office of the second
      class of directors, consisting of Aidan Stretch, will expire at the second
      annual meeting. The term of the third class of directors, consisting of Bo
      Yu
      and Yufeng Zhang, will expire at the third annual meeting.


37




**Employees**




We
      have
      two executive officers. These individuals are not obligated to devote any
      specific number of hours to our matters and intend to devote only as much time
      as he deems necessary to our affairs. The amount of time they will devote in
      any
      time period will vary based on whether a target business has been selected
      for
      the business combination and the stage of the business combination process
      the
      company is in. Accordingly, once management locates a suitable target business
      to acquire, they will spend more time investigating such target business and
      negotiating and processing the business combination (and consequently spend
      more
      time to our affairs) than they would prior to locating a suitable target
      business. We presently expect Messrs. Yu and Zhang to devote an average of
      approximately 10 hours per week to our business. We do not intend to have any
      full time employees prior to the consummation of a business
      combination.





**ITEM
      7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS**




**A.
      Major Shareholders**




The
      following table sets forth information regarding the beneficial ownership of
      our
      ordinary shares as of June 23, 2008 by:




·
            each
                person known by us to be the beneficial owner of more than 5% of
                our
                outstanding ordinary shares;




·
            each
                of our officers and directors; and




·
            all
                our officers and directors as a
                group.




Unless
      otherwise indicated, we believe that all persons named in the table have sole
      voting and investment power with respect to all ordinary shares beneficially
      owned by them.





**Name and Address of Beneficial Owner (1)**
            
            **Amount and Nature of**
              **Beneficial Ownership**
            
            **Percent of Class**Bo Yu (2)
            
            
            2,148,438
            (3)
            
            18.0
            %Yufeng
                Zhang
            
            
            210,938
            
            
            1.8
            %Aidan
                Stretch (4)
            
            
            117,187
            
            
            *James
                Walsh (4)
            
            
            117,187
            
            
            *David
                M. Knott (5)
            
            
            600,000
            (6)
            
            5.0
            %Farallon
                Partners, LLC (7)
            
            
            600,000
            (8)
            
            5.0
            %HBK
                Investments L.P.
            
            
            1,189,500
            (9)
            
            9.9
            %All directors and
                executive officers as a group (four individuals)
            
            
            2,593,750
            (3)
            
            21.7
            %




*Less
      than one percent.


38


(1)
            Unless
                otherwise indicated, the business address of each of the individuals
                is
                Jinmao Tower, 88 Century Boulevard, Suite 4403, Pudong, Shanghai,
                People’s
                Republic of China 200121.





(2)
            Mr.
                Yu has been our chairman of the board and chief executive officer
                since
                our inception.





(3)
            Does
                not include 250,000 ordinary shares issuable upon exercise of warrants
                included within the insider units that are not exercisable and will
                not
                become exercisable within 60 days.





(4)
            The
                business address of these individuals is 1700 Seventh Avenue, Suite
                2100,
                Seattle, Washington 98101.





(5)
            The
                business address of Mr. Knott is 485 Underhill Boulevard, Suite 205,
                Syosset, New York 11791.





(6)
            Represents
                480,000 shares beneficially held by Dorset Management Corporation
                and
                120,000 shares owned by Ostra Capital Partners, L.P. (“Ostra”). The
                general partner of Ostra is Ostra GP, LLC and the manager of Ostra
                GP, LLC
                is an individual employed by one or more entities controlled by David
                M.
                Knott. Mr. Knott is the president of Dorset Management Corporation.
                The
                address of Dorset Management Corporation is the same as that for
                Mr.
                Knott, above. The foregoing information was derived from a Schedule
                13G
                filed with the SEC on July 23, 2007, as amended on February 13,
                2008.





(7)
            The
                business address of Farallon Partners, L.L.C. is c/o Farallon Capital
                Management, L.L.C., One Maritime Plaza, Suite 2100, San Francisco,
                California 94111.





(8)
            Represents
                (i) 188,600 shares of common stock held by Farallon Capital Partners,
                L.P.
                (“FCP”), (ii) 102,800 shares of common stock held by Farallon Capital
                Institutional Partners, L.P. (“FCIP”), (iii) 11,400 shares of common stock
                held by Farallon Capital Institutional Partners II, L.P.(“FCIP II”), (iv)
                8,600 shares of common stock held by Farallon Capital Institutional
                Partners III, L.P. (“FCIP III”), (v) 5,700 shares of common stock held by
                Tinicum Partners, L.P. (“Tinicum”) and (vi) 282,900 shares of common stock
                held by Farallon Capital Offshore Investors II, L.P. (“FCOI II”).The
                foregoing information was derived from a Schedule 13G filed with
                the SEC
                on July 30, 2007, as amended on September 20,
                2007.





(9)
            Represents
                1,189,500 shares over which HBK Investments L.P. (“Investments”), HBK
                Services LLC (“Services”), HBK Partners II L.P. (“Partners”), HBK
                Management LLC (“Management”) and HBK Master Fund L.P. (“Master Fund”)
                each have shared voting and dispositive power. Investments has delegated
                discretion to vote and dispose of the Securities to Services. Services
                may, from time to time, delegate discretion to vote and dispose of
                certain
                of the Securities to HBK New York LLC, HBK Virginia LLC, HBK Europe
                Management LLP and/or HBK Hong Kong Ltd. (collectively, the
                “Subadvisors”). Each of Services and the Subadvisors is under common
                control with Investments. The business address for each of Investments,
                Services, Partners and Management is 300 Crescent Court, Suite 700,
                Dallas, Texas 75201. The foregoing information was derived from a
                Schedule
                13G filed with the SEC on August 17,
                2007.




All
      of
      the ordinary shares issued prior to our IPO have been placed in escrow with
      Continental Stock Transfer & Trust Company, as escrow agent, until (i) nine
      months after the consummation of a business combination with respect to half
      of
      such shares and (ii) one year after the consummation of a business combination
      with respect to the remainder of such shares. These shares may be released
      from
      escrow earlier than such dates if, within the first year after we consummate
      a
      business combination, we consummate a subsequent liquidation, merger, stock
      exchange or other similar transaction which results in all of our shareholders
      having the right to exchange their ordinary shares for cash, securities or
      other
      property. Additionally, if holders of more than 20% of the shares sold in the
      initial public offering vote against a proposed business combination and seek
      to
      exercise their conversion rights and such business combination is consummated,
      our initial shareholders have agreed to forfeit and return to us for
      cancellation a number of shares so that the existing shareholders will
      collectively own no more than 23.81% of our outstanding ordinary shares upon
      consummation of such business combination (without giving effect to any shares
      that may be issued in the business combination). During the escrow period,
      the
      holders of these securities will not be able to sell or transfer their
      securities except to their spouses and children or trusts established for their
      benefit, but will retain all other rights as our shareholders, including,
      without limitation, the right to vote their ordinary shares and the right to
      receive cash dividends, if declared. If dividends are declared and payable
      in
      ordinary shares, such dividends will also be placed in escrow. If we are unable
      to effect a business combination and liquidate, none of our existing
      shareholders will receive any portion of the liquidation proceeds with respect
      to their initial shares.


39




Bo
      Yu
      purchased an aggregate of 250,000 insider units (for an aggregate purchase
      price
      of $2,000,000) from us. The insider units and underlying securities are
      identical to the units and underlying securities offered in the initial public
      offering except that if we call the warrants for redemption, the warrants
      underlying the insider units may be exercisable on a cashless basis at the
      holder’s option (except in the case of a forced cashless exercise upon our
      redemption of the warrants, as described below) so long as such warrants are
      held by Mr. Yu or his affiliates. Additionally, Mr. Yu has waived his
      right to receive distributions upon our liquidation prior to a business
      combination with respect to the securities underlying the insider units.
      Furthermore, he has agreed that the insider units and underlying securities
      will
      not be sold or transferred by him until after we have completed a business
      combination.




Bo
      Yu is
      our “promoter” as that term is defined under the Federal securities
      laws.




**B.** **Related
      Party Transactions**




In
      August
      2006, we issued 2,000,000 ordinary shares to the individuals set forth below
      for
      $25,000 in cash, at a purchase price of $0.0125 per share, as
      follows:





**Name**
            
            **Number of Shares**
            
            **Relationship to Us**Bo
                Yu
            
            
            1,440,000
            
            
            Chairman
                of the Board and Chief Executive OfficerYufeng
                Zhang
            
            
            180,000
            
            
            Chief
                Financial Officer, Secretary, Treasurer and DirectorGang
                Chen
            
            
            180,000
            
            
            StockholderAidan
                Stretch
            
            
            100,000
            
            
            DirectorJames
                Walsh
            
            
            100,000
            
            
            Director




In
      January 2007, Gang Chen transferred his 180,000 shares to Bo Yu for $2,250
      (or
      $0.0125 per share). Effective July 17, 2007, our board of directors
      authorized a stock dividend of 0.171875 ordinary shares for each outstanding
      ordinary share, effectively lowering the purchase price to $0.01 per
      share.




The
      holders of the majority of these shares will be entitled to demand that we
      register these shares pursuant to an agreement to be signed prior to or on
      the
      date of this prospectus. The holders of the majority of these shares may elect
      to exercise these registration rights at any time commencing three months prior
      to the date on which these ordinary shares are released from escrow. In
      addition, these shareholders have certain “piggy-back” registration rights with
      respect to registration statements filed subsequent to our consummation of
      a
      business combination. We will bear the expenses incurred in connection with
      the
      filing of any such registration statements.




Bo
      Yu
      purchased the insider units (for an aggregate purchase price of $2,000,000,
      or
      $8.00 per unit) from us. This purchase took place on a private placement basis
      simultaneously with the consummation of the initial public offering. The
      purchase price for the insider units was delivered to Graubard Miller, our
      counsel in connection with the initial public offering, who also is acting
      solely as escrow agent in connection with the private sale of insider units.
      Continental Stock Transfer & Trust Company deposited the purchase price into
      the trust fund simultaneously with the consummation of the offering. The insider
      units are identical to the units offered in the initial public offering except
      that if we call the warrants for redemption, the warrants underlying the insider
      units may be exercisable on a cashless basis at the holder’s option (except in
      the case of a forced cashless exercise upon our redemption of the warrants)
      so
      long as such warrants are held by Mr. Yu or his affiliates. Additionally,
      Mr. Yu has waived his right to receive distributions upon our liquidation
      prior to a business combination with respect to the securities underlying the
      insider units. Furthermore, he has agreed that the insider units and underlying
      securities will not be sold or transferred by him until after we have completed
      a business combination.


40




The
      holders of the majority of these securities are entitled to demand that we
      register these securities pursuant to an agreement to be signed prior to or
      on
      the date of this prospectus. The holders of the majority of these securities
      may
      elect to exercise these registration rights with respect to such securities
      at
      any time after we consummate a business combination. In addition, these holders
      have certain “piggy-back” registration rights with respect to registration
      statements filed subsequent to such date. We will bear the expenses incurred
      in
      connection with the filing of any such registration statements.




Cathay
      Fortune Corp., an affiliate of our officers and directors, has agreed that,
      commencing July 17, 2007 through the acquisition of a target business, it will
      make available to us a small amount of office space and certain office and
      secretarial services, as we may require from time to time. We have agreed to
      pay
      Cathay Fortune Corp. $7,500 per month for these services. Bo Yu is the chief
      executive officer and chairman of the management committee of Cathay Fortune
      Corp, Yufeng Zhang is a managing director of Cathay Fortune Corp., and each
      of
      Aidan Stretch and James Walsh is a consultant to Cathay Fortune Corp. As a
      result, they will benefit from the transaction to the extent of their interest
      in Cathay Fortune Corp. However, this arrangement is solely for our benefit
      and
      is not intended to provide our officers and directors compensation in lieu
      of a
      salary. We believe, based on rents and fees for similar services in the Shanghai
      area in the PRC, that the fee charged by Cathay Fortune Corp. is at least as
      favorable as we could have obtained from an unaffiliated person. However, as
      our
      directors may not be deemed “independent,” we did not have the benefit of
      disinterested directors approving this transaction.





Bo
      Yu
      advanced to us an aggregate of $125,000 to cover expenses related to the initial
      public offering. The
      loan
      was repaid from the proceeds of our IPO not being placed in the trust
      account .




We
      will
      reimburse our existing shareholders, officers, directors, special advisors
      or
      their affiliates for any reasonable out-of-pocket business expenses incurred
      by
      them in connection with certain activities on our behalf such as identifying
      and
      investigating possible target businesses and business combinations. There is
      no
      limit on the amount of out-of-pocket expenses reimbursable by us, which will
      be
      reviewed only by our board or a court of competent jurisdiction if such
      reimbursement is challenged.




Other
      than the $7,500 per-month administrative fee and reimbursable out-of-pocket
      expenses payable to our officers and directors, no compensation or fees of
      any
      kind, including finder’s fees, consulting fees or other similar compensation,
      will be paid to any of our existing shareholders, officers, directors or special
      advisors or to any of their respective affiliates, for services rendered to
      us
      prior to, or in connection with the consummation of our initial business
      combination (regardless of the type of transaction that it is).




All
      ongoing and future transactions between us and any of our officers and directors
      or their respective affiliates, including loans by our officers and directors,
      will be on terms believed by us to be no less favorable to us than are available
      from unaffiliated third parties. Such transactions or loans, including any
      forgiveness of loans, will require prior approval by a majority of our
      uninterested “independent” directors (to the extent we have any) or the members
      of our board who do not have an interest in the transaction, in either case
      who
      had access, at our expense, to our attorneys or independent legal counsel.
      We
      will not enter into any such transaction unless our disinterested “independent”
directors (or, if there are no “independent” directors, our disinterested
      directors) determine that the terms of such transaction are no less favorable
      to
      us than those that would be available to us with respect to such a transaction
      from unaffiliated third parties. It is our intention to obtain estimates from
      unaffiliated third parties for similar goods or services to ascertain whether
      such transactions with affiliates are on terms that are no less favorable to
      us
      than are otherwise available from such unaffiliated third parties. If a
      transaction with an affiliated third party were found to be on terms less
      favorable to us than with an unaffiliated third party, we would not engage
      in
      such transaction.


41




**C.
      Interest of Experts and Counsel**




Not
      applicable.




**ITEM
      8. FINANCIAL INFORMATION**




**A.
      Consolidated Statements and Other Financial Information**





Please
      see “Item 18. Financial Statements” for a list of the financial statements filed
      as part of this annual report.





**B.
      Significant Changes**





Not
      applicable.





**ITEM
      9. THE OFFER AND LISTING**





**A.
      Offer and Listing Details**




The
      following table sets forth the range of high and low sales prices for the units,
      ordinary shares and warrants for the periods indicated since the units commenced
      public trading on July 18, 2007, and since the ordinary shares and warrants
      commenced public trading on August 8, 2007.





**Units**
            
            **Ordinary Shares**
            
            **Warrants****High**
            
            **Low**
            
            **High**
            
            **Low**
            
            **High**
            
            **Low**2008:Second
                Quarter*
            
            
            8.45
            
            
            7.76
            
            
            7.45
            
            
            7.27
            
            
            1.00
            
            
            0.58First
                Quarter
            
            
            8.50
            
            
            8.18
            
            
            7.40
            
            
            7.25
            
            
            1.16
            
            
            0.952007:Fourth
                Quarter
            
            
            8.65
            
            
            8.18
            
            
            7.35
            
            
            7.25
            
            
            1.45
            
            
            0.92Third
                Quarter
            
            
            8.60
            
            
            8.05
            
            
            7.35
            
            
            7.17
            
            
            1.10
            
            
            0.95




*
      Through
      June 23, 2008.




**B.
      Plan of Distribution**





Not
      applicable.





**C.
      Markets**





Our
      units, ordinary shares and warrants are traded under the symbols “CFAUF,”
“ CFAQF ”
and
      “CFAWF,” respectively, on the OTC Bulletin Board.


42


**D.
      Selling Shareholders**





Not
      applicable.





**E.
      Dilution**





Not
      applicable.





**F.
      Expenses of the Issue**





Not
      applicable.




**ITEM
      10. ADDITIONAL INFORMATION**






**A.
      Share Capital**




Not
      applicable.




**B.
      Memorandum and Articles of Incorporation**




*The
      following represents a summary of certain key provisions of our amended and
      restated memorandum and articles of association. The summary does not purport
      to
      be a summary of all of the provisions of our memorandum and articles of all
      relevant provisions of Cayman Islands law governing the management and
      regulation of Cayman Islands exempted companies.*




**Register**




We
      are a
      black check company incorporated in the Cayman Islands on August 18, 2006 under
      the Companies Law (2004 Revision) of the Cayman Islands (the “Companies Law”)
      with company registration number 172599. Our memorandum and articles of
      association authorizes the issuance of up to 30,000,000 ordinary shares, par
      value $.0001 per share, and 1,000,000 preferred shares, par value $.0001 per
      share.




**Objects
      and Purposes**




Our
      memorandum and articles grants us full power and authority to carry out the
      any
      objectives not prohibited by the Companies Law or any other law of the Cayman
      Islands. Our memorandum and articles of association provides that we will
      continue in existence only until July 23, 2009. If we have not completed a
      business combination by such date, our corporate existence will cease except
      for
      the purposes of winding up our affairs and liquidating.




**Directors**




Our
      board
      of directors is divided into three classes, each of which will generally serve
      for a term of three years with only one class of directors being elected in
      each
      year. There is no cumulative voting with respect to the election of directors,
      with the result that the holders of more than 50% of the shares eligible to
      vote
      for the election of directors can elect all of the directors.




Directors
      may engage in transactions with the Company and vote on such transactions,
      provided the nature of the interest is disclosed. Directors also may exercise
      all the powers of the Company to borrow money and to mortgage or charge its
      undertaking, property and uncalled capital or any part thereof and to issue
      debentures, debenture stock, mortgages, bonds and other such securities whether
      outright or as security for any debt, liability or obligation of the Company
      or
      of any third party.


43




**Rights
      and Obligations of Shareholders**




***Dividends***




Subject
      to the Companies Law (2004 Revision) of the Cayman Islands, directors may
      declare dividends and distributions on our ordinary shares in issue and
      authorize payment on the dividends or distributions out of lawfully available
      funds. No dividend or distribution may be paid except out of the realized or
      unrealized profits of the Company, or out of the share premium account or as
      otherwise permitted by the Companies Law.




***Voting
      Rights***




Subject
      to any rights or restrictions attached to any shares, on a show of hands every
      member who (being an individual) is present in person or by proxy or, if a
      corporation or other non-natural person is present by its duly authorized
      representative or proxy, has one vote and on a poll every member has one vote
      for every share of which he is the holder.




In
      the
      case of joint holders of record the vote of the senior holder who tenders a
      vote, whether in person or by proxy, is accepted to the exclusion of the votes
      of the other joint holders, and seniority is determined by the order in which
      the names of the holders stand in the Register of Members.




A
      member
      of unsound mind, or in respect of whom an order has been made by any court,
      having jurisdiction in lunacy, may vote, whether on a show of hands or on a
      poll, by his committee, receiver, curator bonis, or other person on such
      member's behalf appointed by that court, and any such committee, receiver,
      curator bonis or other person may vote by proxy.




No
      person
      is entitled to vote at any general meeting or at any separate meeting of the
      holders of a class of shares unless he is registered as a member on the record
      date for such meeting nor unless all calls or other monies then payable by
      him
      in respect of shares have been paid.




On
      a poll
      or on a show of hands votes may be cast either personally or by proxy. A member
      may appoint more than one proxy or the same proxy under one or more instruments
      to attend and vote at a meeting. Where a member appoints more than one proxy
      the
      instrument of proxy shall state which proxy is entitled to vote on a show of
      hands.




A
      member
      holding more than one share need not cast the votes in respect of his shares
      in
      the same way on any resolution and therefore may vote a share or some or all
      such shares either for or against a resolution and/or abstain from voting a
      share or some or all of the shares and, subject to the terms of the instrument
      appointing him, a proxy appointed under one or more instruments may vote a
      share
      or some or all of the shares in respect of which he is appointed either for
      or
      against a resolution and/or abstain from voting.




Any
      person in consequence of the death or bankruptcy or liquidation or dissolution
      of a member (or in any other way than by transfer) who becomes the holder of
      a
      share may vote at any general meeting in respect thereof in the same manner
      as
      if he were the registered holder of such Shares, provided that forty-eight
      hours
      at least before the time of the holding of the meeting or adjourned meeting,
      as
      the case may be, at which he proposes to vote, he satisfies the directors of
      his
      entitlement to such shares, or the directors have previously admitted his right
      to vote at such meeting in respect thereof.




***Change
      to Rights of Shareholders***




Shareholders
      may change the rights of their class of shares by:




·
            getting
                the written consent of three-quarters of the shareholders of that
                class;
                or


·
            passing
                a special resolution at a general meeting of the shareholders of
                that
                class.




There
      are
      no general limitations on the rights to own shares specified by the
      articles.




44




**General
      Meetings**




A
      general
      meeting may be convened:




·
            by
                a majority of directors at any
                time;




·
            our
                chief executive officer; or




·
            our
                chairman of the board.




They
      shall on a members requisition forthwith proceed to convene an extraordinary
      general meeting of the Company.




A
      members
      requisition is a requisition of members of the Company holding at the date
      of
      deposit of the requisition not less than ten per cent. in par value of the
      capital of the Company which as at that date carries the right of voting at
      general meetings of the Company. The
      requisition must state the objects of the meeting and must be signed by the
      requisitionists and deposited at the registered office, and may consist of
      several documents in like form each signed by one or more
      requisitionists.




If
      the
      directors do not within twenty-one days from the date of the deposit of the
      requisition duly proceed to convene a general meeting to be held within a
      further twenty-one days, the requisitionists, or any of them representing more
      than one-half of the total voting rights of all of them, may themselves convene
      a general meeting, but any meeting so convened shall not be held after the
      expiration of three months after the expiration of the said twenty-one
      days.




A
      general
      meeting convened as aforesaid by requisitionists shall be convened in the same
      manner as nearly as possible as that in which general meetings are to be
      convened by Directors.




Notice
      of
      a general meeting is given to all shareholders. All business transacted at
      an
      extraordinary general meeting or an annual general meeting is considered special
      business except:




·
            the
                declaration and sanctioning of dividends;




·
            consideration
                and adoption of the accounts and balance sheet and the reports of
                directors and auditors and other documents required to be annexed
                to the
                balance sheet;




·
            the
                election of directors;




·
            appointment
                of auditors (where special notice of the intention for such appointment
                is
                not required by applicable law) and other
                officers;




·
            the
                fixing or remuneration of the auditors, and the voting of remuneration
                or
                extra remuneration to the
                directors;




·
            the
                granting of any mandate or authority to the directors to offer, allot,
                grant options over or otherwise dispose of the unissued shares in
                the
                capital of the Company representing not more than twenty per cent.
                in
                nominal value of its existing share capital;
                and




·
            the
                granting of any mandate or authority to the directors to repurchase
                the
                securities of the Company.




A
      quorum
      of shareholders is required to be present at any meeting in order to carry
      out
      business. A quorum consists of the holder or holders present in person or by
      proxy entitled to exercise more than fifty percent of the voting rights of
      the
      shares of each class or series of shares entitled to vote as a class or series
      thereon and the same proportion of the votes of the remaining shares entitled
      to
      vote thereon unless the Company has only one member entitled to vote at such
      general meeting in which case the quorum consists of that one member present
      in
      person or by proxy or (in the case of a corporation or other non-natural person)
      by a duly authorized representative.




There
      is
      no requirement under Cayman Islands law to convene an annual meeting or to
      convene any general meeting of the shareholders. The directors are permitted
      to
      designate any general meeting of shareholders as an annual general meeting.




45




**Changes
      in Capital**




We
      may
      increase our share capital by ordinary resolution. The new shares will be
      subject to all of the provisions to which the original shares are subject.
      We
      may also by ordinary resolution:




·
            consolidate
                and divide all or any of our share capital into shares of a larger
                amount;


·
            sub-divide
                existing shares into shares of a smaller amount;
                and


·
            cancel
                any shares which, at the date of the resolution, are not held or
                agreed to
                be held by any person.




We
      may
      reduce our share capital and any capital redemption reserve by special
      resolution in accordance with relevant provisions of Cayman Islands law.




**Indemnity**




Pursuant
      to our amended and restated memorandum and articles of association, every
      director, agent or officer of the Company shall be indemnified out of the assets
      of the Company against any liability incurred by him as a result of any act
      or
      failure to act in carrying out his functions other than such liability (if
      any)
      that he may incur by his own fraud or willful default. No such director, agent
      or officer shall be liable to the Company for any loss or damage in carrying
      out
      his functions unless that liability arises through the fraud or willful default
      of such director, agent or officer. ****




**Certain
      Requirements and Restrictions**




Our
      amended and restated memorandum and articles of association sets forth certain
      requirements and restrictions that shall apply to us until the consummation
      of a
      business combination. Specifically, Articles 168 through 171 of our amended
      and
      restated articles of association will provide among other things, that:




·
            prior
                to the consummation of any business combination, we shall submit
                such
                business combination to our shareholders for
                approval;


·
            we
                may consummate our initial business combination if: (i) approved
                by a
                majority of the ordinary shares voted by the public shareholders
                and (ii)public
                shareholders owning less than 30% of the ordinary shares sold in
                the
                initial public offering exercise their conversion rights described
                below


·
            if
                our initial business combination is approved and consummated, public
                shareholders who voted against the business combination and exercised
                their redemption rights will receive their pro rata share of the
                trust
                account (net of taxes);


·
            we
                will continue in existence only untilJuly
                23, 2009,
                otherwise our corporate existence will cease by operation of law
                and we
                will distribute to all of our public shareholders their pro rata
                share of
                the trust account (net of taxes);
                and


·
            we
                may not consummate any share capital exchange, stock purchase, asset
                acquisition or similar transaction other than a business combination
                that
                meets the conditions specified in this Form 20-F, including the
                requirement that our initial business combination be with one or
                more
                operating businesses whose fair market value, either individually
                or
                collectively, is equal to at least 80% of our net assets held in
                trust
                (net of taxes) at the time of such business
                combination.




**C.
      Material Contracts**




As
      of
      December 31, 2007, the Company has not entered into any material
      contracts.




**D.
      Exchange Controls and Other Limitations Affecting Security
      Holders**




Under
      Cayman Islands law, there are currently no restrictions on the export or import
      of capital, including foreign exchange controls or restrictions that affect
      the
      remittance of dividends, interest or other payments to nonresident holders
      of
      our shares.




46




**E.
      Taxation**




*The
      following summary of the material Cayman Islands and United States federal
      income tax consequences of an investment in ordinary shares is based upon laws
      and relevant interpretations thereof in effect as of the date of this Form
      20-F,
      all of which are subject to change. This summary does not deal with all possible
      tax consequences relating to an investment in our ordinary shares, such as
      the
      tax consequences under state, local and other tax laws.*




**Cayman
      Islands Taxation**




The
      Government of the Cayman Islands, will not, under existing legislation, impose
      any income, corporate or capital gains tax, estate duty, inheritance tax, gift
      tax or withholding tax upon the company or its shareholders. The Cayman Islands
      are not party to any double taxation treaties.




No
      Cayman
      Islands stamp duty is payable in respect of the issue or transfer of ordinary
      shares. However, an instrument transferring title to an ordinary share, if
      brought to or executed in the Cayman Islands, is subject to Cayman Islands
      stamp
      duty.




We
      have
      applied for and can expect to receive an undertaking from the
      Governor-in-Cabinet of the Cayman Islands that, in accordance with section
      6 of
      the Tax Concessions Law (1999 Revision) of the Cayman Islands, for a period
      of
      20 years from the date of the undertaking, no law which is enacted in the Cayman
      Islands imposing any tax to be levied on profits, income, gains or appreciations
      shall apply to us or our operations and, in addition, that no tax to be levied
      on profits, income, gains or appreciations or which is in the nature of estate
      duty or inheritance tax shall be payable (i) on the shares, debentures or other
      obligations of the company or (ii) by way of the withholding in whole or in
      part
      of a payment of dividend or other distribution of income or capital by the
      company to its members or a payment of principal or interest or other sums
      due
      under a debenture or other obligation of the company.




**United
      States Federal Income Taxation**




This
      section describes the material United States federal income tax consequences
      of
      the acquisition, ownership and disposition of our ordinary shares and warrants.
      This section does not address any aspect of United States federal gift or estate
      tax, or the state, local or foreign tax consequences of an investment in our
      ordinary shares and warrants. This section only applies to you if you hold
      your
      ordinary shares and warrants as capital assets for tax purposes. This discussion
      does not discuss all the tax consequences that may be relevant to particular
      investors in light of their circumstances or to investors that are subject
      to
      special rules, including:




·
            a
                bank;


·
            a
                dealer in securities or currencies;


·
            a
                trader in securities that elects to use a mark-to-market method of
                accounting for your securities
                holdings;


·
            a
                tax-exempt organization;


·
            an
                insurance company;


·
            a
                person liable for alternative minimum
                tax;


·
            a
                person that actually or constructively owns 10% or more of the vote
                or
                value of our shares;


·
            a
                person that holds ordinary shares that are a hedge or that are hedged
                against currency risks or as part of a straddle or a conversion
                transaction;


·
            a
                U.S. holder (as defined below) whose functional currency is not the
                U.S.
                dollar;


·
            a
                person who acquired shares pursuant to the exercise of a compensatory
                stock option; or


·
            a
                person who owns shares through a partnership or other pass-through
                entity.




This
      section is based on the Internal Revenue Code of 1986, as amended, its
      legislative history, existing and proposed regulations promulgated thereunder,
      and judicial and administrative interpretations thereof, all as in effect as
      of
      the date hereof and all of which are subject to changes, possibly retroactively. There
      is
      currently no comprehensive tax treaty between the United States and the Cayman
      Islands.


47


For
      purposes of the United States federal income tax discussion below, you are
      a
      U.S. holder if you are a beneficial owner of ordinary shares or warrants and
      you
      are:




·
            a
                citizen or resident of the United
                States;


·
            a
                domestic corporation;


·
            an
                estate whose income is subject to United States federal income tax
                regardless of its source;


·
            or
                a trust if (A) a United States court can exercise primary supervision
                over
                the trust’s administration and one or more United States persons are
                authorized to control all substantial decisions of the trust, or
                (B) the
                trust was in existence on August 20, 1996, and validly elected to
                continue
                to be treated as a United States domestic
                trust.




In
      general, the tax consequences for shares owned by a partnership depends on
      the
      tax status of the parties.




A
      non-U.S. holder is a beneficial owner of ordinary shares or warrants that is
      not
      a United States Holder for United States federal income tax
      purposes.




*You
      should consult your own tax advisor regarding the United States federal, state
      and local tax consequences of owning and disposing of the ordinary shares or
      warrants in your particular circumstances.*




This
      discussion addresses only United States federal income taxation .




*Allocation
      of Purchase Price Between Shares and Warrants*




For
      U.S.
      federal income tax purposes, a U.S. holder must allocate the purchase price
      of a
      unit between the share and the warrants that comprise the unit based on the
      relative fair market value of each and must compute its basis in the share
      and
      warrants in accordance with that allocation. We may be required to allocate
      a
      portion of the purchase price of the unit to each component comprising part
      of
      the unit. While uncertain, it is possible that the IRS could apply, by analogy,
      rules pursuant to which our allocation of the purchase price will be binding
      on
      a U.S. holder of a unit, unless the U.S. holder explicitly discloses in a
      statement attached to the U.S. holder’s timely filed U.S. federal income tax
      return for the taxable year that includes the acquisition date of the unit
      that
      the U.S. holder’s allocation of the purchase price between the share and the
      warrants that comprise the unit is different from our allocation. Our allocation
      is not, however, binding on the IRS.




Each
      U.S.
      holder is advised to consult such holder’s own tax advisor with respect to the
      risks associated with an allocation of the purchase price between the shares
      and
      the warrants that comprise a unit that is inconsistent with our allocation
      of
      the purchase price.




*Taxation
      of Dividends*




*U.S.
      Holders.* Under
      the
      United States federal income tax laws, and subject to the personal foreign
      investment company rules discussed below, if you are a U.S. holder, the gross
      amount of any dividend we pay out of our current or accumulated earnings and
      profits (as determined for United States federal income tax purposes) is subject
      to United States federal income taxation. If you are a non-corporate U.S.
      holder, dividends paid to you in taxable years beginning before January 1,
      2011
      that constitute qualified dividend income will be taxable to you at a maximum
      tax rate of 15% provided that you hold our ordinary shares for more than 60
      days
      during the 120-day period beginning 60 days before the ex-dividend date and
      meet
      other holding period requirements. Dividends we pay with respect to our ordinary
      shares generally will be qualified dividend income provided that, in the year
      in
      which the dividend is paid, our ordinary shares are readily tradable on an
      established securities market in the United States.




The
      dividend will not be eligible for the dividends-received deduction generally
      allowed to United States corporations in respect of dividends received from
      other United States corporations. Distributions in excess of current and
      accumulated earnings and profits, as determined for United States federal income
      tax purposes, will be treated as a non-taxable return of capital to the extent
      of your basis in our ordinary shares and thereafter as capital gain. If the
      dividend is declared and paid in a foreign currency, the amount of the dividend
      distribution that you must include in your income as a U.S. holder will be
      the
      U.S. dollar value of the payments made in the foreign currency, determined
      at
      the spot foreign currency/U.S. dollar rate on the date the dividend distribution
      is includible in your income, regardless of whether the payment is in fact
      converted into U.S. dollars. Therefore, since the value of the foreign currency
      may decrease before you actually convert the currency into U.S. dollars, you
      may
      actually be taxed on a larger amount in U.S. dollars than the U.S. dollar amount
      that you will ultimately receive. Generally, any gain or loss resulting from
      currency exchange fluctuations during the period from the date you include
      the
      dividend payment in income to the date you convert the payment into U.S. dollars
      will be treated as ordinary income or loss and will not be eligible for the
      special tax rate applicable to qualified dividend income. The gain or loss
      generally will be income or loss from sources within the United States for
      foreign tax credit limitation purposes.




48




Dividends
      will be income from sources outside the United States, but generally will be
      passive income or financial services income, which is treated separately from
      other types of income for purposes of computing the foreign tax credit allowable
      to you.




*Non-U.S.
      Holders.* If
      you
      are a non-U.S. holder, dividends paid to you in respect of our ordinary shares
      will not be subject to United States federal income tax unless the dividends
      are
      effectively connected with your conduct of a trade or business within the United
      States, and the dividends are attributable to a permanent establishment that
      you
      maintain in the United States if that is required by an applicable income tax
      treaty as a condition for subjecting you to United States taxation on a net
      income basis. In such cases you will be taxed in the same manner as a U.S.
      holder. If you are a corporate non-U.S. holder, effectively connected dividends
      may, under certain circumstances, be subject to an additional branch profits
      tax
      at a 30% rate or at a lower rate if you are eligible for the benefits of an
      income tax treaty that provides for a lower rate.




*Taxation
      of Capital Gains*




*U.S.
      Holders.* Subject
      to the PFIC rules discussed below, if you are a U.S. holder and you sell or
      otherwise dispose of your ordinary shares or warrants, you will recognize
      capital gain or loss for United States federal income tax purposes equal to
      the
      difference between the U.S. dollar value of the amount that you realize and
      your
      tax basis, determined in U.S. dollars, in your ordinary shares or warrants.
      Capital gain of a noncorporate U.S. holder that is recognized before January
      1,
      2011 is generally taxed at a maximum rate of 15% where the holder has a holding
      period greater than one year. The gain or loss will generally be income or
      loss
      from sources within the United States for foreign tax credit limitation
      purposes. Your ability to deduct capital losses is subject to limitations.




*Non-U.S.
      Holders.* If
      you
      are a non-U.S. holder, you will not be subject to United States federal income
      tax on gain recognized on the sale or other disposition of your ordinary shares
      or warrants unless:




·
            the
                gain is effectively connected with your conduct of a trade or business
                in
                the United States and the dividends are attributable to a permanent
                establishment that you maintain in the United States if that is required
                by an applicable income tax treaty as a condition for subjecting
                you to
                United States taxation on a net income basis;
                or


·
            you
                are an individual, you are present in the United States for 183 or
                more
                days in the taxable year of the sale and certain other conditions
                exist




If
      you
      are a corporate non-U.S. holder, effectively connected gains that you recognize,
      under certain circumstances, may also be subject to an additional branch profits
      tax at a 30% rate or at a lower rate if you are eligible for the benefits of
      an
      income tax treaty that provides for a lower rate.




*Exercise,
      Disposition or Lapse of Warrants*




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. Shares acquired pursuant
      to the exercise of a warrant will have a tax basis equal to the U.S. holder’s
      tax basis in the warrant (that is, an amount equal to the portion of the
      purchase price of each Unit allocated to the warrant as described above in
      “Allocation of Purchase Price Between Shares and Warrants”), increased by the
      amount paid to exercise the warrant. The holding period of such share would
      begin on the day following the date of exercise of the warrant and will not
      include the period during which the U.S. holder held the warrant.




49




Subject
      to the discussion of the PFIC rules below, upon the sale or other disposition
      of
      a warrant (other than by exercise), a U.S. holder will recognize capital gain
      or
      loss in an amount equal to the difference between the amount realized and the
      U.S. holder’s tax basis in the warrant (that is, as discussed above, the portion
      of the purchase price of a unit allocated to such warrant). Such gain or loss
      will be long-term capital gain or loss if the U.S. holder has held the warrant
      for more than one year. Under certain circumstances, we have the right to redeem
      the warrants. A redemption of warrants will be treated as a sale or exchange
      of
      the warrants.




The
      terms
      of the warrant provide for certain adjustments to the number of shares for
      which
      the warrant may be exercised or to the exercise price of the warrants. Such
      adjustment may, under certain circumstances, result in constructive
      distributions that could be taxable as a dividend to the U.S. holder of the
      warrants. Conversely, the absence of an appropriate adjustment may result in
      a
      constructive distribution that could be taxable as a dividend to a U.S. holder
      of the shares. See “Taxation of Dividends.”




If
      a
      warrant is allowed to lapse unexercised, a U.S. holder will recognize a capital
      loss in an amount equal to such holder’s tax basis in the warrant. Such loss
      will be long-term if the warrant has been held for more than one year. The
      ability to deduct any such loss may be subject to certain limitations, and
      holders should consult their own tax advisors as to the potential applicability
      to them of such limitations.




As
      discussed above in “Allocation of Purchase Price Between Shares and Warrants”,
      the allocation of price of a unit between the share and the warrants comprising
      such unit is not binding on the IRS. If the IRS were successfully to challenge
      your allocation, the amount of gain recognized upon disposition of a share
      or
      warrant could be increased, and the amount of loss recognized upon disposition
      of a share or warrant or upon lapse of a warrant could be reduced.




*Passive
      Foreign Investment Company Rules*




Special
      United States tax rules apply to a company that is considered a passive foreign
      investment company, or PFIC. Under these rules, we will be classified as a
      PFIC
      for United States federal income tax purposes in any taxable year in which
      either:




·
            At
                least 75% of our gross income for the taxable year is passive income;
                or


·
            at
                least 50% of the gross value, determined on the basis of a quarterly
                average, of our assets is attributable to assets that produce or
                are held
                for the production of passive
                income.




Passive
      income generally includes dividends, interest, royalties, rents (not including
      certain rents and royalties derived in the active conduct of a trade or
      business), annuities and gains from assets that produce passive income. If
      a
      foreign corporation owns directly or indirectly at least 25% by value of the
      stock of another corporation, the foreign corporation is treated for purposes
      of
      the PFIC tests as owning its proportionate share of the assets of the other
      corporation, and as receiving directly its proportionate share of the other
      corporation’s income.




Newly
      formed corporations, such as us, are excepted out of the PFIC rules for their
      first year of existence. In addition, we expect to conduct our affairs in a
      manner so that we will not qualify as a PFIC in the foreseeable future. Our
      determination of whether we are a PFIC is, however, not binding on the Internal
      Revenue Service. We cannot assure you that we will not be a PFIC in any future
      year.




If
      we are
      treated as a PFIC, and you are a U.S. holder that does not make a mark-to-market
      election, as described below, you will be subject to special rules with respect
      to:




·
            any
                gain you realize on the sale or other disposition of your ordinary
                shares
                or warrants; and




50




·
            any
                excess distribution that we make to you (generally, any distributions
                to
                you during a single taxable year that are greater than 125% of the
                average
                annual distributions received by you in respect of the ordinary shares
                during the three preceding taxable years or, if shorter, your holding
                period for the ordinary shares or ordinary
                shares).




Under
      these rules:




·
            the
                gain or excess distribution will be allocated ratably over your holding
                period for the ordinary shares;


·
            the
                amount allocated to the taxable year in which you realized 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


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




51




Special
      rules apply for calculating the amount of the foreign tax credit with respect
      to
      excess distributions by a PFIC.




If
      you
      own ordinary shares in a PFIC that are treated as marketable shares, you may
      make a mark-to-market election. If you make this election, you will not be
      subject to the PFIC rules described above. Instead, in general, you will include
      as ordinary income each year the excess, if any, of the fair market value of
      your ordinary shares or warrants at the end of the taxable year over your
      adjusted basis in your ordinary shares or warrants. These amounts of ordinary
      income will not be eligible for the favorable tax rates applicable to qualified
      dividend income or long-term capital gains. You will also be allowed to take
      an
      ordinary loss in respect of the excess, if any, of the adjusted basis of your
      ordinary shares over their fair market value at the end of the taxable year
      (but
      only to the extent of the net amount of previously included income as a result
      of the mark-to-market election). Your basis in the ordinary shares or warrants
      will be adjusted to reflect any such income or loss amounts. Your gain, if
      any,
      recognized upon the sale of your ordinary shares or warrants will be taxed
      as
      ordinary income.




In
      addition, notwithstanding any election you make with regard to the ordinary
      shares, dividends that you receive from us will not constitute qualified
      dividend income to you if we are a PFIC either in the taxable year of the
      distribution or the preceding taxable year. Dividends that you receive that
      do
      not constitute qualified dividend income are not eligible for taxation at the
      15% maximum rate applicable to qualified dividend income. Instead, you must
      include the gross amount of any such dividend paid by us out of our accumulated
      earnings and profits (as determined for United States federal income tax
      purposes) in your gross income, and it will be subject to tax at rates
      applicable to ordinary income.




If
      you
      own ordinary shares during any year that we are a PFIC, you must file Internal
      Revenue Service Form 8621.




You
      should consult your own tax advisor regarding the application of the PFIC rules
      to our ordinary shares or warrants in your particular circumstances, including
      the availability of making an election to avoid adverse United States federal
      income tax consequences under the PFIC rules in the case we are determined
      to be
      a PFIC in a future year.




*Backup
      Withholding and Information Reporting*




If
      you
      are a noncorporate U.S. holder, information reporting requirements, on Internal
      Revenue Service Form 1099, generally will apply to:




·
            dividend
                payments or other taxable distributions made to you within the United
                States, and


·
            the
                payment of proceeds to you from the sale of ordinary shares effected
                at a
                United States office of a broker.




52




Additionally,
      backup withholding may apply to such payments if you are a noncorporate U.S.
      holder that:




·
            fails
                to provide an accurate taxpayer identification number,


·
            is
                notified by the Internal Revenue Service that you have failed to
                report
                all interest and dividends required to be shown on your federal income
                tax
                returns, or


·
            in
                certain circumstances, fails to comply with applicable certification
                requirements.




If
      you
      are a non-U.S. holder, you are generally exempt from backup withholding and
      information reporting requirements with respect to:




·
            dividend
                payments made to you outside the United States by us or another non-United
                States payor and


·
            other
                dividend payments and the payment of the proceeds from the sale of
                ordinary shares and warrants effected at a United States office of
                a
                broker, as long as the income associated with such payments is otherwise
                exempt from United States federal income tax, and the payor or broker
                does
                not have actual knowledge or reason to know that you are a United
                States
                person and you have furnished the payor or
                broker:


·
            dividend
                payments if you have provided us with an Internal Revenue Service
                Form
                W-8BEN or an acceptable substitute form upon which you certify, under
                penalties of perjury, that you are a non-United States person,
                or


·
            other
                documentation upon which it may rely to treat the payments as made
                to a
                non-United States person in accordance with U.S. Treasury regulations,
                or


·
            you
                otherwise establish an exemption.




Payment
      of the proceeds from the sale of ordinary shares or warrants effected at a
      foreign office of a broker generally will not be subject to information
      reporting or backup withholding. However, a sale of ordinary shares or warrants
      that is effected at a foreign office of a broker will be subject to information
      reporting and backup withholding if:




·
            the
                proceeds are transferred to an account maintained by you in the United
                States,


·
            the
                payment of proceeds or the confirmation of the sale is mailed to
                you at a
                United States address, or


·
            the
                sale has some other specified connection with the United States as
                provided in U.S. Treasury
                regulations,




unless
      the broker does not have actual knowledge or reason to know that you are a
      United States person and the documentation requirements described above are
      met
      or you otherwise establish an exemption.




In
      addition, a sale of ordinary shares or warrants effected at a foreign office
      of
      a broker will be subject to information reporting if the broker is:




·
            a
                United States person,


·
            a
                controlled foreign corporation for United States tax
                purposes,


·
            a
                foreign person 50% or more of whose gross income is effectively connected
                with the conduct of a United States trade or business for a specified
                three-year period, or


·
            a
                foreign partnership, if at any time during its tax
                year:


·
            one
                or more of its partners are “U.S. persons”, as defined in U.S. Treasury
                regulations, who in the aggregate hold more than 50% of the income
                or
                capital interest in the partnership,
                or


·
            such
                foreign partnership is engaged in the conduct of a United States
                trade or
                business,




unless
      the broker does not have actual knowledge or reason to know that you are a
      United States person and the documentation requirements described above are
      met
      or you otherwise establish an exemption. Backup withholding will apply if the
      sale is subject to information reporting and the broker has actual knowledge
      that you are a United States person.




53




You
      generally may obtain a refund of any amounts withheld under the backup
      withholding rules that exceed your income tax liability by filing a refund
      claim
      with the United States Internal Revenue Service.




**F.
      Dividends and Paying Agents**




Not
      applicable.




**G.
      Statement by Experts**




Not
      applicable.




**H.
      Documents on Display**




We
      file
      annual reports and other information with the SEC. You may read and copy any
      report or document we file, including the exhibits, at the SEC’s public
      reference room located at 450 Fifth Street, N.W., Washington, D.C. 20549. Please
      call the SEC at 1-800-SEC-0330 for further information on the public reference
      room. Such materials can also be obtained on the SEC’s site on the internet at http://www.sec.gov .




We
      will
      also provide without charge to each person, including any beneficial owner,
      upon
      written or oral request of that person, a copy of any and all of the information
      that has been incorporated by reference in this annual report. Please direct
      such requests to Yufeng Zhang, Chief Financial Officer, China Fortune
      Acquisition Corp., Jinmao Tower, 88 Century Boulevard, Suite 4403, Pudong,
      Shanghai, People’s Republic of China.




**I.
      Subsidiary Information**





Not
      applicable.




**ITEM
      11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**




Market
      risk is a broad term for the risk of economic loss due to adverse changes in
      the
      fair value of a financial instrument. These changes may be the result of various
      factors, including interest rates, foreign exchange rates, commodity prices
      and/or equity prices. $ 72,375,000 of the
      net offering proceeds has been placed into a trust account at Lehman
      Brothers maintained
      by Continental Stock Transfer & Trust Company, acting as trustee. The
      proceeds held in trust will only be invested in United States “government
      securities,” defined as any Treasury Bill issued by the United States having a
      maturity of 180 days or less or
      in
      money market funds meeting certain conditions under Rule 2a-7 promulgated under
      the Investment Company Act of 1940 .
      Thus,
      we are subject to market risk primarily through the effect of changes in
      interest rates on government securities. In addition, following a business
      combination, 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
      12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES**




Not
      applicable.




**PART
      II**




**ITEM
      13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES**




There
      has
      been no default of any indebtedness nor is there any arrearage in the payment
      of
      dividends.




54




**ITEM
      14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS**




There
      have been no changes to the instruments defining the rights of the holders
      of
      any class of registered securities, and the rights of holders of the registered
      securities have not been altered by the issuance or modification of any other
      class of securities. There are no restrictions on working capital and no removal
      or substitution of assets securing any class of our registered securities.




**ITEM
      15. CONTROLS AND PROCEDURES**




(a) Disclosure
      Controls and Procedures .
      Disclosure controls and procedures are controls and other procedures that are
      designed to ensure that information required to be disclosed in company reports
      filed or submitted under the Securities Exchange Act of 1934 (the “Exchange
      Act”) is recorded, processed, summarized and reported, within the time periods
      specified in the Securities and Exchange Commission’s rules and forms.
      Disclosure controls and procedures include, without limitation, controls and
      procedures designed to ensure that information required to be disclosed in
      company reports filed or submitted under the Exchange Act is accumulated and
      communicated to management, including our chief executive officer and chief
      financial officer, as appropriate to allow timely decisions regarding required
      disclosure.




As
      required by Rules 13a-15 and 15d-15 under the Exchange Act, our chief executive
      officer and chief financial officer carried out an evaluation of the
      effectiveness of the design and operation of our disclosure controls and
      procedures as of December 31, 2007. Based upon their evaluation, they concluded
      that our disclosure controls and procedures were effective.




(b) Management’s
      Annual Report on Internal Control over Financial Reporting .




Our
      internal control over financial reporting is a process designed by, or under
      the
      supervision of, our chief executive officer and chief financial officer and
      effected by our board of directors, management and other personnel, to provide
      reasonable assurance regarding the reliability of our financial reporting and
      the preparation of our financial statements for external purposes in accordance
      with generally accepted accounting principles. Internal control over financial
      reporting includes policies and procedures that pertain to the maintenance
      of
      records that in reasonable detail accurately and fairly reflect the transactions
      and dispositions of our assets; provide reasonable assurance that transactions
      are recorded as necessary to permit preparation of our financial statements
      in
      accordance with generally accepted accounting principles, and that our receipts
      and expenditures are being made only in accordance with the authorization of
      our
      board of directors and management; and provide reasonable assurance regarding
      prevention or timely detection of unauthorized acquisition, use or disposition
      of our assets that could have a material effect on our financial
      statements.




This
      annual report does not include a report of management’s assessment regarding
      internal control over financial reporting or an attestation report of the
      company’s registered public accounting firm due to a transition period
      established by rules of the Securities and Exchange Commission for newly public
      companies.




(c) Attestation
      Report of the Registered Public Accounting Firm .




Not
      applicable.




(d) Changes
      in Internal Control over Financial Reporting .




During
      the most recently completed fiscal quarter, there has been no change in our
      internal control over financial reporting that has materially affected, or
      is
      reasonably likely to materially affect, our internal control over financial
      reporting.




55




**ITEM
      16A AUDIT COMMITTEE FINANCIAL EXPERT**




Not
      Applicable.




**ITEM
      16B. CODE OF ETHICS**




In
      July
      2007, our board of directors adopted a code of ethics that applies to our
      directors, officers and employees as well as those of our subsidiaries. Requests
      for copies of our code of ethics should be sent in writing to China Fortune
      Acquisition Corp., Jinmao
      Tower, 88 Century Boulevard, Suite 4403, Pudong, Shanghai, People’s Republic of
      China .




**ITEM
      16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES**




The
      aggregate fees billed for the last fiscal year for professional services
      rendered by our auditor are as follows:




**2006**
            
            ******2007**Audit
                Fees
            
            $
            -
            
            $
            27,500Audit-Related
                Fees
            
            $
            -
            
            $
            20,000Tax
                Fees
            
            $
            -
            
            $
            -All
                Other Fees
            
            $
            -
            
            $
            -





Audit
      fees represent fees for professional services related to the audit of our
      financial statements for the period from August
      28, 2006to December
      31, 2007. Audit-related fees represent fees for professional services
      related to the filing of our registration statement with the SEC.




Our
      board
      of directors pre-approves all audit, audit-related and non-audit services not
      prohibited by law to be performed by our independent auditors and associated
      fees prior to the engagement of the independent auditor with respect to such
      services. ****




**ITEM
      16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
      COMMITTEE** S




Not
      applicable.




**ITEM
      16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
      PURCHASERS**




Not
      applicable.




**PART
      III**




**ITEM
      17. FINANCIAL STATEMENTS**




We
      have
      elected to provide financial statements pursuant to Item 18.




56




**ITEM
      18. FINANCIAL STATEMENTS**




The
      following financial statements are filed as part of this annual report.




**Page**
                **Number**Report
                  of Independent Registered Public Accounting Firm
              F-1Balance
                  Sheet
              F-2Statement
                  of Operations
              F-3Statement
                  of Cash Flows
              F-4Statement
                  of Changes
                  inShareholders’ Equity
              F-5Notes
                  to Financial Statements
              F-6




**ITEM
      19. EXHIBITS**




**Exhibit No.**
              
              **Description**1.1
              
              Form
                  of Underwriting Agreement.*1.2
              
              Form
                  of Selected Dealers Agreement.*3.1
              
              Memorandum
                  and Articles of Association.**4.1
              
              Specimen
                  Unit Certificate.*4.2
              
              Specimen
                  Ordinary Share Certificate.*4.3
              
              Specimen
                  Warrant Certificate.*4.4
              
              Form
                  of Unit Purchase Option to be granted to
                  Representative.*4.5
              
              Form
                  of Warrant Agreement between Continental Stock Transfer & Trust
                  Company and the Registrant.*10.1
              
              Letter
                  Agreement among the Registrant, EarlyBirdCapital, Inc. and Bo
                  Yu.*10.2
              
              Letter
                  Agreement among the Registrant, EarlyBirdCapital, Inc. and Gang
                  Chen.*10.3
              
              Letter
                  Agreement among the Registrant, EarlyBirdCapital, Inc. and Yufeng
                  Zhang.*10.4
              
              Letter
                  Agreement among the Registrant, EarlyBirdCapital, Inc. and Aidan
                  Stretch.*10.5
              
              Letter
                  Agreement among the Registrant, EarlyBirdCapital, Inc. and James
                  Walsh.*10.6
              
              Form
                  of Investment Management Trust Agreement between Continental Stock
                  Transfer & Trust Company and the Registrant.*10.7
              
              Form
                  of Stock Escrow Agreement between the Registrant, Continental Stock
                  Transfer & Trust Company and the Initial
                  Stockholders.*10.8
              
              Form
                  of Letter Agreement between Cathay Fortune Corp. and Registrant
                  regarding
                  administrative support.*10.9
              
              Form
                  of Promissory Note, dated as of September 8, 2006, issued to Cathay
                  Fortune Corp.*10.10
              
              Form
                  of Registration Rights Agreement among the Registrant and the Initial
                  Stockholders.*10.11
              
              Form
                  of Subscription Agreement among the Registrant, EarlyBirdCapital,
                  Inc.,
                  Graubard Miller and Bo Yu.*31.1
              
              Form
                  of Certification of the Chief Executive Officer Pursuant to Rule
                  13a-14
                  and 15d-14 under the Securities Exchange Act of 1934, as
                  Amended31.2
              
              Form
                  of Certification of the Chief Financial Officer Pursuant to Rule
                  13a-14
                  and 15d-14 under the Securities Exchange Act of 1934, as
                  Amended32.1
              
              Certification
                  of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350
                  as
                  Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
                  200232.2
              
              Certification
                  of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350
                  as
                  Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002





*
      Incorporated by reference to the Registrant's Form F-1 (Commission File No. 333-137797 )


57


**SIGNATURES**




The
      registrant hereby certifies that it meets all of the requirements for filing
      on
      Form 20-F and has duly caused and authorized the undersigned to sign this annual
      report on its behalf.




CHINA
                FORTUNE ACQUISITION CORP.By:
            /s/
                Yufeng ZhangYufeng
                ZhangDated:
                June 27, 2008
            
            Chief
                Financial Officer, Secretary and
                Treasurer




58




**CHINA
      FORTUNE ACQUISITION CORP.**


**(A
        CORPORATION IN THE DEVELOPMENT STAGE)**





**INDEX
      TO FINANCIAL STATEMENTS**





Page**Report
                of Independent Registered Public Accounting Firm**
            
            
            F-2**Financial
                Statements**Balance
                Sheet
            
            
            F-3Statements
                of Operations
            
            
            F-4Statements
                of Changes
                inShareholders’ Equity
            
            
            F-5Statements
                of Cash Flows
            
            
            F-6Notes
                to Financial Statements
            
            
            F-7
                - F-12




F-1




**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





To
      the
      Board of Directors


China
      Fortune Acquisition Corp.





We
      have
      audited the accompanying balance sheet of China Fortune Acquisition Corp. (a
      corporation in the development stage) as of December 31, 2007 and the related
      statements of operations, changes
      inshareholders’ equity and cash flows for the year then ended and for
      the periods from August 18, 2006 (inception) to December 31, 2006 and 2007.
      These financial statements are the responsibility of the Company’s management.
      Our responsibility is to express an opinion on these financial statements based
      on our audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. The company is not required to
      have, nor were we engaged to perform, an audit of its internal control over
      financial reporting. Our audit included consideration of internal control over
      financial reporting as a basis for designing audit procedures that are
      appropriate in the circumstances, but not for the purpose of expressing an
      opinion on the effectiveness of the company’s internal control over financial
      reporting. Accordingly, we express no such opinion. An audit also includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements, assessing the accounting principles used and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audits provide a
      reasonable basis for our opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of China Fortune Acquisition Corp.
      as
      of December 31, 2007, and the results of its operations and its cash flows
      for
      the year then ended and for the periods from August 18, 2006 (inception) to
      December 31, 2006 and 2007, in conformity with accounting principles generally
      accepted in the United States of America.





/s/
      UHY llp





Albany


June
      13,
      2008


F-2


**CHINA
      FORTUNE ACQUISITION CORP.**


**(A
        CORPORATION IN THE DEVELOPMENT STAGE)**


**BALANCE
      SHEET**


**December
      31, 2007**





**ASSETS****CURRENT
                ASSETS**Cash
            
            $
            1,281,727Investments
                held in Trust Account
            
            
            73,339,752Prepaid
                expenses
            
            
            133,542Total
                current assets
            
            
            74,755,021Total
                assets
            
            $
            74,755,021**LIABILITIES
                AND SHAREHOLDERS’
                EQUITY****CURRENT
                LIABILITIES**Accrued
                expenses
            
            $
            8,102Deferred
                underwriters fees
            
            
            1,875,000Total
                current liabilities
            
            
            1,883,102Ordinary
                shares, subject to possible conversion, 2,811,563 shares at conversion
                value
            
            
            22,001,918Total
                liabilities
            
            
            23,885,020SHAREHOLDERS'
                  EQUITYPreferred
                shares, $.0001 par value Authorized 1,000,000 shares; none issued
            
            
            -Ordinary
                shares, $.0001 par value Authorized 30,000,000
                shares Issued and outstanding 11,978,750 shares
            
            
            1,197Additional
                paid-in capital
            
            
            50,027,990Earnings
                accumulated during the development stage
            
            
            840,814Total
                shareholders'
                equity
            
            
            50,870,001Total
                liabilities and stockholders’ equity
            
            $
            74,755,021





*See
      notes to financial statements.*




F-3


**CHINA
      FORTUNE ACQUISITION CORP.**


**(A
        CORPORATION IN THE DEVELOPMENT STAGE)**


**STATEMENTS
      OF OPERATIONS**


**For
      the Year ended December 31, 2007 and for the Periods From**


**August
      18, 2006 (Inception) to December 31, 2007 and 2006**




**Period
                from August 18, 2006****(inception)
                to December 31,****2007**
            
            **2006**
            
            **2007**Investment
                income
            
            $
            964,752
            
            $
            -
            
            $
            964,752Formation
                costs and operating expenses
            
            
            119,252
            
            
            4,686
            
            
            123,938Net
                income (loss) before income taxes
            
            
            845,500
            
            
            (4,686
            )
            
            840,814Provision
                for income taxes
            
            
            -
            
            
            -
            
            
            -Net
                income (loss)
            
            $
            845,500
            
            $
            (4,686
            )
            $
            840,814Weighted
                average shares outstanding
            
            
            6,615,668
            
            
            2,310,268
            
            
            5,422,092Basic
                and diluted net income (loss) per share
            
            $
            0.13
            
            $
            (0.00
            )
            $
            0.16





*See
      notes to financial statements.*


F-4





**CHINA
      FORTUNE ACQUISITION CORP.**


**(A
        CORPORATION IN THE DEVELOPMENT STAGE)**


**STATEMENT
      OF CHANGES IN SHAREHOLDERS’ EQUITY**


**For
      the Year ended December 31, 2007 and for the Periods From**


**August
      18, 2006 (Inception) to December 31, 2007 and 2006**




**Earnings****(Deficit)****Accumulated****Additional**
            
            **During
                the****Ordinary
                Shares**
            
            **Paid-in**
            
            **Development**
            
            **Shareholders'****Shares**
            
            **Amount**
            
            **Capital**
            
            **Stage**
            
            **Equity**Balance
                at August 18, 2006 (inception)
            
            
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -Common
                shares issued to initial stockholders at $0.01 per
                share
            
            
            2,343,750
            
            
            234
            
            
            24,766
            
            
            -
            
            
            25,000Net
                loss for the period
            
            
            -
            
            
            -
            
            
            -
            
            
            (4,686
            )
            
            (4,686
            )Balance
                at December 31, 2006
            
            
            2,343,750
            
            
            234
            
            
            24,766
            
            
            (4,686
            )
            
            20,314Sale
                of 9,375,000 units, net of underwriters discount and offering expense
                (includes 2,811,563 shares subject to possible redemption)
            
            
            9,375,000
            
            
            938
            
            
            70,005,067
            
            
            -
            
            
            70,006,005Proceeds
                subject to possible conversion of 2,811,563 shares
            
            
            -
            
            
            -
            
            
            (21,705,266
            )
            
            -
            
            
            (21,705,266
            )Proceeds
                from issuance of underwriter purchase option
            
            
            -
            
            
            -
            
            
            100
            
            
            -
            
            
            100Proceeds
                from private placement of insider units
            
            
            250,000
            
            
            25
            
            
            1,999,975
            
            
            -
            
            
            2,000,000Accretion
                of trust relating to ordinary shares subject to possible
                redemption
            
            
            -
            
            
            -
            
            
            (296,652
            )
            
            -
            
            
            (296,652
            )Net
                income for 2007
            
            
            -
            
            
            -
            
            
            -
            
            
            845,500
            
            
            845,500Balance
                at December 31, 2007
            
            
            11,968,750
            
            $
            1,197
            
            $
            50,027,990
            
            $
            840,814
            
            $
            50,870,001




See
      notes to financial
      statements.




F-5





**CHINA
      FORTUNE ACQUISITION CORP.**


**(A
        CORPORATION IN THE DEVELOPMENT STAGE)**


**STATEMENTS
      OF CASH FLOWS**


**For
      the Year ended December 31, 2007 and for the Periods From**


**August
      18, 2006 (Inception) to December 31, 2007 and 2006**





**Period
                from August 18, 2006****(inception)
                to December 31,****2007**
            
            **2006**
            
            **2007****CASH
                FLOWS FROM OPERATING ACTIVITIES**Net
                income (loss)
            
            $
            845,500
            
            $
            (4,686
            )
            $
            840,814Adjustments
                to reconcile net income (loss) to net cashprovided
                by (used in) operating activities:Change
                in operating assets and liabilities:Prepaid
                expenses
            
            
            (133,542
            )
            
            -
            
            
            (133,542
            )Accrued
                expenses
            
            
            3,641
            
            
            4,461
            
            
            8,102Net
                cash provided by (used in) operating activities
            
            
            715,599
            
            
            (225
            )
            
            715,374**CASH
                FLOWS FROM INVESTING ACTIVITIES**Cash
                held in trust account
            
            
            (73,339,752
            )
            
            -
            
            
            (73,339,752
            )Net
                cash used in investing activities
            
            
            (73,339,752
            )
            
            -
            
            
            (73,339,752
            )**CASH
                FLOWS FROM FINANCING ACTIVITIES**Proceeds
                from sale of ordinary shares to founding shareholders
            
            
            -
            
            
            25,000
            
            
            25,000Proceeds
                from notes payable, related party
            
            
            -
            
            
            125,000
            
            
            125,000Repayment
                of notes payable, related party
            
            
            (125,000
            )
            
            -
            
            
            (125,000
            )Payment
                of deferred offering costs
            
            
            -
            
            
            (113,765
            )
            
            (113,765
            )Proceeds
                from initial public offering, net of offering expenses
            
            
            71,994,770
            
            
            -
            
            
            71,994,770Proceeds
                from issuance of underwriter purchase option
            
            
            100
            
            
            -
            
            
            100Proceeds
                from private placement of insider units
            
            
            2,000,000
            
            
            -
            
            
            2,000,000Net
                cash provided by financing activities
            
            
            73,869,870
            
            
            36,235
            
            
            73,906,105**Increase
                in cash**
            
            
            1,245,717
            
            
            36,010
            
            
            1,281,727**Cash,
                beginning of period**
            
            
            36,010
            
            
            -
            
            
            -**Cash,
                end of year**
            
            $
            1,281,727
            
            $
            36,010
            
            $
            1,281,727**SUPPLEMENTAL
                DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:**Accrued
                offering costs
            
            $
            1,875,000
            
            $
            -
            
            $
            1,875,000Fair
                value of underwriter purchase option
            
            $
            1,198,600
            
            $
            -
            
            $
            1,198,600Cash
                paid for income taxes
            
            $
            -
            
            $
            -
            
            $
            -




See
      notes to financial
      statements.




F-6


**CHINA
      FORTUNE ACQUISITION CORP.**


**(A
        CORPORATION IN THE DEVELOPMENT STAGE)**


**NOTES
      TO FINANCIAL STATEMENTS**


**December
      31, 2007**





**NOTE
      1 — ORGANIZATION AND BUSINESS OPERATIONS**





China
      Fortune Acquisition Corp. (the “Company”) was incorporated in the Cayman Islands
      on August 18, 2006 as a blank check company whose objective is to acquire,
      through a stock exchange, asset acquisition or other similar business
      combination, an operating business, or control of such operating business
      through contractual arrangements, that has its principal operations located
      in
      the People’s Republic of China.





All
      activity through December 31, 2007 relates to the Company’s formation, the
      public offering described below and efforts to consummate a business
      combination. The Company has selected December 31 as its fiscal
      year-end.





The
      registration statement for the Company’s public offering (“Offering”) was
      declared effective July 17, 2007. The Company consummated the offering on
      July 23, 2007 and received net proceeds of approximately $72,050,000 (Note
      3)
      and $2,000,000 from the sale of Insider Units (Note 4). The Company’s management
      has broad discretion with respect to the specific application of the net
      proceeds of this Offering, although substantially all of the net proceeds of
      this Offering are intended to be generally applied toward consummating a
      business combination with an operating business that has its principal
      operations located in the People’s Republic of China (“Business Combination”).
      Furthermore, there is no assurance that the Company will be able to successfully
      effect a Business Combination. An initial amount of $72,375,000 (including
      $2,000,000 of proceeds from the Insider Units was deposited into a trust account
      (“Trust Account”) and is invested in United States “government securities”
within the meaning of Section 2(a)(16) of the Investment Company Act of 1940
      having a maturity of 180 days or less or in money market funds meeting certain
      conditions under Rule 2a-7 promulgated under the Investment Company Act of
      1940
      until the earlier of (i) the consummation of its first Business Combination
      and
      (ii) liquidation of the Company. The placing of funds in the Trust Account
      may
      not protect those funds from third party claims against the Company. Although
      the Company will seek to have all vendors, prospective target businesses and
      other entities it engages execute agreements with the Company waiving any right,
      title, interest or claim of any kind in or to any monies held in the Trust
      Account, there is no guarantee that they will execute such agreements. The
      Company’s directors have agreed that they will be proportionally liable under
      certain circumstances to ensure that the proceeds in the Trust Account are
      not
      reduced by the claims of target businesses or by vendors or other entities
      that
      are owed money by the Company for services rendered contracted for or products
      sold to the Company. However, there can be no assurance that they will be able
      to satisfy those obligations. The remaining net proceeds (not held in the Trust
      Account) may be used to pay for business, legal and accounting due diligence
      on
      prospective acquisitions and continuing general and administrative
      expenses.





The
      Company, after signing a definitive agreement for the acquisition of a target
      business, is required to submit such transaction for shareholder approval.
      In
      the event that shareholders owning 30% or more of the shares sold in the
      Offering vote against the Business Combination and exercise their conversion
      rights described below, the Business Combination will not be consummated. All
      of
      the Company’s shareholders prior to the Offering, including all of the officers
      and directors of the Company (“Initial Shareholders”), have agreed to vote their
      2,343,750 founding ordinary shares in accordance with the vote of the majority
      in interest of all other shareholders of the Company (“Public Shareholders”)
      with respect to any Business Combination. After
      consummation of a Business Combination, these voting safeguards will no longer
      be applicable.


F-7


**CHINA
      FORTUNE ACQUISITION CORP.**


**(A
        CORPORATION IN THE DEVELOPMENT STAGE)**


**NOTES
      TO FINANCIAL STATEMENTS**


**December
      31, 2007**





**NOTE
      1 — ORGANIZATION AND BUSINESS OPERATIONS** (Continued)





With
      respect to a Business Combination which is approved and consummated, any Public
      Shareholder who voted against the Business Combination may demand that the
      Company convert his or her shares. The per share conversion price will equal
      the
      amount in the Trust Account, calculated as of two business days prior to the
      consummation of the proposed Business Combination, divided by the number of
      ordinary shares held by Public Shareholders at the consummation of the Offering.
      Accordingly, Public Shareholders holding 29.99% of the aggregate number of
      shares owned by all Public Shareholders may seek conversion of their shares
      in
      the event of a Business Combination. Such Public Shareholders are entitled
      to
      receive their per share interest in the Trust Account computed without regard
      to
      the shares held by Initial Shareholders. Accordingly, a portion of the net
      proceeds from the Offering and
      earnings thereon(29.99% of the amount held in the Trust Account,
      $22,001,918) have
      been classified as ordinary shares subject to possible conversion on the
      accompanying balance sheet.





The
      Company’s memorandum and articles of association provides that the Company will
      continue in existence only until July 23, 2009. If the Company has not completed
      a Business Combination by such date, its corporate existence will cease and
      it
      will dissolve and liquidate for the purposes of winding up its affairs. In
      the
      event of liquidation, it is likely that the per share value of the residual
      assets remaining available for distribution (including Trust Fund assets) will
      be less than the initial public offering price per share in the Offering
      (assuming no value is attributed to the Warrants contained in the Units to
      be
      offered in the Offering discussed in Note 3).





**NOTE
      2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





*Investment
      Held in Trust*




The
      Trust Account at December 31, 2007 is comprised of U.S Treasury Bills
      carried at market. Such securities generate current income which is exempt
      from
      federal income tax.





*Earnings
      Per Share*




Basic
      earnings per share is computed by dividing net loss by the weighted-average
      number of shares of ordinary shares outstanding during the period. Basic
      earnings per share is computed by dividing income available to ordinary
      shareholders by the weighted average ordinary shares outstanding during the
      period. Calculation of the weighted average ordinary shares outstanding during
      the period is based on 2,343,750 initial shares outstanding throughout each
      period from August 18, 2006 (inception) to July 17, 2007 and 11,968,750 ordinary
      shares outstanding after the effective date of the offering and closing of
      the
      private placement.




Diluted
      earnings per share reflects the potential dilution that could occur if
      securities or other contracts to issue ordinary shares were exercised or
      converted into ordinary shares or resulted in the issuance of ordinary
      shares that then shared in the earning of the Company. As the warrants
      issued in the public offering are not yet exercisable, basic and diluted
      earnings per share were the same during 2007.





Earning
      per share for the period form the effective date of the public offering to
      December 31, 2007 attributable to ordinary shares subject to possible conversion
      approximated $0.10 per ordinary share.


F-8


**CHINA
      FORTUNE ACQUISITION CORP.**


**(A
        CORPORATION IN THE DEVELOPMENT STAGE)**


**NOTES
      TO FINANCIAL STATEMENTS**


**December
      31, 2007**





**NOTE
      2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** (Continued)





*Use
      of Estimates*




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities at the date of the financial statements and the reported amounts
      of
      expenses during the reporting period. Actual results could differ from those
      estimates.




*Effect
      of Recent Accounting Pronouncements*




SFAS
      141R, Business Combinations




In
      December 2007, the FASB issued Statement of Financial Accounting Standards
      No. 141 (revised 2007), ‘‘Business Combinations’’ (‘‘FAS 141R’’).
      FAS 141R replaces Statement of Financial Accounting Standards No. 141,
‘‘Business Combinations’’ (‘‘FAS 141’’), although it retains the
      fundamental requirement in FAS 141 that the acquisition method of
      accounting be used for all business combinations. FAS 141R establishes
      principles and requirements for how the acquirer in a business combination
      (a) recognizes and measures the assets acquired, liabilities assumed and
      any noncontrolling (‘‘minority’’) interest in the acquiree, (b) recognizes
      and measures the goodwill acquired in a business combination or a gain from
      a
      bargain purchase and (c) determines what information to disclose regarding
      the business combination. FAS 141R applies prospectively to business
      combinations for which the acquisition date is on or after the beginning of
      the
      Company’s 2009 fiscal year. The Company is currently assessing the potential
      effect of FAS 141R on its financial statements.





SFAS
      160,
      Noncontrolling Interests in Consolidated Financial Statements




In December
      2007, the FASB issued Statement of Financial Accounting Standards No. 160,
‘‘Noncontrolling (‘‘minority’’) Interests in Consolidated Financial Statements’’
(‘‘FAS 160’’). FAS 160 establishes accounting and reporting standards
      for the noncontrolling (‘‘minority’’) interest in a subsidiary, commonly
      referred to as minority interest. Among other matters, FAS 160 requires
      (a) the noncontrolling (‘‘minority’’) interest be reported within equity in
      the balance sheet and (b) the amount of consolidated net income
      attributable to the parent and to the noncontrolling (‘‘minority’’) interest to
      be clearly presented in the statement of income. FAS 160 is effective for
      the Company’s 2009 fiscal year. FAS 160 is to be applied prospectively,
      except for the presentation and disclosure requirements, which shall be applied
      retrospectively for all periods presented. The Company is currently assessing
      the potential effect of FAS 160 on its financial statements.




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


F-9


**CHINA
      FORTUNE ACQUISITION CORP.**


**(A
        CORPORATION IN THE DEVELOPMENT STAGE)**


**NOTES
      TO FINANCIAL STATEMENTS**


**December
      31, 2007**





**NOTE
      3 — PUBLIC OFFERING**





On
      July
      23, 2007, the Company sold 9,375,000 units (“Units”) at a price of $8.00 per
      Unit in the Offering. Each Unit consists of one ordinary share of the Company
      and one Redeemable Purchase Warrant (“Warrants”). Each Warrant entitles the
      holder to purchase from the Company one ordinary share at an exercise price
      of
      $6.00 commencing the later of the completion of a Business Combination and
      July
      17, 2008 and expiring July 16, 2011. The Company may redeem the Warrants, at
      a
      price of $.01 per Warrant upon 30 days’ notice while the Warrants are
      exercisable, only in the event that the last sale price of the ordinary shares
      is at least $11.50 per share for any 20 trading days within a 30 trading day
      period ending on the third day prior to the date on which notice of redemption
      is given. If
      the
      Company redeems the Warrants as described above, management will have the option
      to require any holder that wishes to exercise his Warrant to do so on a
      "cashless basis." In such event, the holder would pay the exercise price by
      surrendering his Warrants for that number of ordinary shares equal to the
      quotient obtained by dividing (x) the product of the number of ordinary shares
      underlying the Warrants, multiplied by the difference between the exercise
      price
      of the Warrants and the "fair market value" (defined below) by (y) the fair
      market value. The "fair market value" shall mean the average reported last
      sale
      price of the ordinary shares for the 10 trading days ending on the third trading
      day prior to the date on which the notice of redemption is sent to holders
      of
      Warrants. In
      accordance with the warrant agreement relating to the Warrants sold and issued
      in the Offering, the Company is only required to use its best efforts to
      maintain the effectiveness of the registration statement covering the Warrants.
      The Company will not be obligated to deliver securities, and there are no
      contractual penalties for failure to deliver securities, if a registration
      statement is not effective at the time of exercise. Additionally, in the event
      that a registration is not effective at the time of exercise, the holder of
      such
      Warrant shall not be entitled to exercise such Warrant and in no event (whether
      in the case of a registration statement not being effective or otherwise) will
      the Company be required to net cash settle the warrant exercise. Consequently,
      the Warrants may expire unexercised and unredeemed.





The
      Company paid the underwriters in the Offering an underwriting discount of 5.5%
      of the gross proceeds of the Offering and a non-accountable expense allowance
      of
      0.5% of the gross proceeds of the Offering. However,
      the underwriters agreed that 2.5% of the underwriting discounts will not be
      payable unless and until the Company completes a Business Combination and have
      waived their right to receive such payment upon the Company’s liquidation if it
      is unable to complete a Business Combination. Accordingly, the Company has
      recorded deferred underwriting fees of $1,875,000 on the accompanying balance
      sheet.





The
      Company also issued a unit purchase option, for $100, to EarlyBirdCapital,
      Inc.
      (“EBC”), the representative of the underwriters in the Offering, to purchase
      400,000 Units at an exercise price of $10.00 per Unit. The Units issuable upon
      exercise of this option are identical to the Units sold in the Offering. The
      Company accounted for the fair value of the unit purchase option, inclusive
      of
      the receipt of the $100 cash payment, as an expense of the Offering resulting
      in
      a charge directly to shareholders’ equity. The Company estimated that the fair
      value of this unit purchase option was approximately $1.2 million ($2.99 per
      Unit) using a Black-Scholes option-pricing model. The fair value of the unit
      purchase option granted to the underwriter was estimated as of the date of
      grant
      using the following assumptions: (1) expected volatility of 42.88%, (2)
      risk-free interest rate of 4.74% and (3) expected life of 5 years. The
      Company will have no obligation to net cash settle the exercise of the unit
      purchase option or the Warrants underlying the unit purchase option. The holder
      of the unit purchase option will not be entitled to exercise the unit purchase
      option or the Warrants underlying the unit purchase option unless a registration
      statement covering the securities underlying the unit purchase option is
      effective or an exemption from registration is available. If the holder is
      unable to exercise the unit purchase option or underlying Warrants, the unit
      purchase option or Warrants, as applicable, will expire
      worthless.


F-10


**CHINA
      FORTUNE ACQUISITION CORP.**


**(A
        CORPORATION IN THE DEVELOPMENT STAGE)**


**NOTES
      TO FINANCIAL STATEMENTS**


**December
      31, 2007**





**NOTE
      4 — INSIDER UNITS**





Simultaneously
      with the consummating of the Offering, one of the Initial Stockholders purchased
      250,000 Units (“Insider Units”) at $8.00 per Unit (for an aggregate purchase
      price of $2,000,000) privately from the Company. All of the proceeds received
      from these purchases were placed in the Trust Account. The Insider Units
      purchased are identical to the Units sold in the Offering except that if the
      Company calls the Warrants for redemption, the warrants included in the Insider
      Units may be exercisable on a “cashless basis,” at the holder’s option (except
      in the case of a forced cashless exercise upon the Company’s redemption of the
      Warrants, as described above), so long as such securities are held by such
      purchaser or his affiliates. Furthermore, the purchaser has agreed that the
      Insider Units will not be sold or transferred by him until after the Company
      has
      completed a Business Combination.





**NOTE
      5 — NOTE PAYABLE, RELATED PARTY**





At
      inception, the Company issued a $125,000 unsecured promissory note to Mr. Bo
      Yu,
      the Company’s Chairman and Chief Executive Officer. The note was non-interest
      bearing andwas repaid from proceeds of the public offering.




**NOTE
      6 — COMMITMENTS**





The
      Company occupies office space provided by an affiliate of the Company’s officers
      and directors. Such affiliate agreed that, until the Company consummates a
      Business Combination or its liquidation, it will make such office space, as
      well
      as certain office and secretarial services, available to the Company, as may
      be
      required by the Company from time to time. The Company has agreed to pay such
      affiliate $7,500 per month for such services commencing on July 17, 2007.
      Expense under the arrangement approximated $45,000 during the year ended
      December 31, 2007.





Pursuant
      to letter agreements dated as of September 26, 2006 with the Company and EBC,
      the initial shareholders have waived their rights to receive distributions
      with
      respect to their founding shares upon the Company’s liquidation.





The
      Initial Shareholders and the holders of the Insider Units (or underlying
      securities) are entitled to registration rights with respect to their founding
      shares or Insider Units (or underlying securities) pursuant to an agreement
      dated as of July 17, 2007. The holders of the majority of the founding shares
      are entitled to make up to two demands that the Company register such shares.
      The holders of the majority of the founding shares can elect to exercise these
      registration rights at any time commencing three months prior to the date on
      which these ordinary shares are to be released from escrow. The holders of
      the
      Insider Units (or underlying securities) are entitled to demand that the Company
      register these securities at any time after the Company consummates a Business
      Combination. In addition, the Initial Shareholders and holders of the Insider
      Units (or underlying securities) have certain “piggy-back” registration rights
      on registration statements filed after the Company’s consummation of a Business
      Combination.





EBC
      has
      been engaged by the Company to act as the Company’s non exclusive investment
      banker in connection with a proposed Business Combination. For assisting the
      Company in structuring and negotiating the terms of a Business Combination,
      the
      Company will pay EBC a cash transaction fee equal to 1% of the total
      consideration paid in connection with the Business Combination, with a maximum
      fee to be paid of $750,000.


F-11


**CHINA
      FORTUNE ACQUISITION CORP.**


**(A
        CORPORATION IN THE DEVELOPMENT STAGE)**


**NOTES
      TO FINANCIAL STATEMENTS**


**December
      31, 2007**





**NOTE
      7 — PREFERRED SHARES**





The
      Company is authorized to issue 1,000,000 preferred shares with such
      designations, voting and other rights and preferences as may be determined
      from
      time to time by the Board of Directors.





The
      agreement with the underwriters prohibits the Company, prior to a Business
      Combination, from issuing preferred shares which participates in the proceeds
      of
      the Trust Account or which votes as a class with the ordinary shares on a
      Business Combination.


**NOTE
        8 - SHAREHOLDERS' EQUITY**
 
 Effective
        June 17, 2007, the Company’s Board of Directors authorized a stock dividend of
        0.171875 ordinary shares for each outstanding ordinary share. On June 17,
        2007,
        the Company’s Memorandum and Articles of Association were amended to increase
        the authorized ordinary shares from 25,000,000 to 30,000,000 ordinary shares.
        All references in the accompanying financial statements to the number of
        ordinary shares have been retroactively restated to reflect these
        transactions.
 F-12