**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549










**FORM
      10-K**









**x** **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**





For
      the
      transition period from ___________ to
      ___________




Commission
      File Number 333-40790











**CHINA
      MARINE FOOD GROUP LIMITED**


(Exact
      name of registrant as specified in its charter)




NEVADA
            
            87-0640467(State
                or other jurisdiction of
              Incorporation
                or organization)
            
            (IRS
                Employer Identification No.)




**Da
      Bao Industrial Zone, Shishi City**


**Fujian,
      China**


**362700**


(Address
      of principal executive offices)





**86-595-8898-7588**


(Issuer's
      telephone number, including area code)









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


**COMMON
      STOCK**





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


**NONE**





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act. Yes oNo x





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Exchange Act. Yes ࿠ No x





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 x No  ̈





Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein, and will not be contained, to the best
      of registrant’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-K or any amendment to
      this
      Form 10-K.  ̈





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.


Large
      accelerated filer  ̈ Accelerated
      filer  ̈ Non-accelerated
      filer x





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





As
      of
      December 31, 2007, the aggregate market value of the registrant’s common
      stock held by non-affiliates of the registrant was $53,850,351.92 based on
      the
      closing sale price as reported on the Over-the-Counter Bulletin Board. As of
      March 24, 2008, there were 22,972,301 shares of common stock outstanding.





**DOCUMENTS
      INCORPORATED BY REFERENCE**





None









China
      Marine Food Group Limited




**FORM
      10-K**





For
      the
      Year Ended December 31, 2007





**TABLE
      OF CONTENTS**





PART
                IITEM
                1.
            
            Business
            
            5ITEM
                1A.
            
            Risk
                Factors
            
            30ITEM
                1B.
            
            Unresolved
                Staff Comments
            
            40ITEM
                2.
            
            Properties
            
            41ITEM
                3.
            
            Legal
                Proceedings
            
            42ITEM
                4.
            
            Submission
                of Matters to a Vote of Security Holders
            
            42PART
                IIITEM
                5.
            
            Market
                for Registrant’s Common Equity, Related Stockholder Matters and IssuerPurchases
                of Equity Securities
            
            42ITEM
                6.
            
            Selected
                Financial Data
            
            43ITEM
                7.
            
            Management's
                Discussion and Analysis of Financial Condition and Results of
                Operations
            
            44ITEM
                7A.
            
            Quantitative
                and Qualitative Disclosures About Market Risk
            
            60ITEM
                8.
            
            Financial
                Statements and Supplementary Data
            
            62ITEM
                9.
            
            Changes
                In and Disagreements with Accountants on Accounting and Financial
                Disclosure
            
            87ITEM
                9A.
            
            Controls
                and Procedures
            
            87ITEM
                9B.
            
            Other
                Information
            
            88PART
                IIIITEM
                10.
            
            Directors
                and Executive Officers of the Registrant
            
            89ITEM
                11.
            
            Executive
                Compensation
            
            91ITEM
                12.
            
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            
            95ITEM
                13.
            
            Certain
                Relationships and Related Transactions
            
            96ITEM
                14.
            
            Principal
                Accountant Fees and Services
            
            98PART
                IVITEM
                15
            
            Exhibits,
                Financial Statement Schedules
            
            98**SIGNATURES**
            
            
            
            100




2




**INFORMATION
      REGARDING FORWARD-LOOKING STATEMENTS**




This
      Annual Report on Form 10-K contains forward-looking statements. These statements
      relate to future events or our future financial performance. These statements
      involve known and unknown risks, uncertainties and other factors that may cause
      our actual results, levels of activity, performance or achievements to be
      materially different from any future results, levels of activity, performance,
      or achievements expressed or implied by forward-looking statements. In some
      cases, you can identify forward-looking statements by terminology such as "may,"
      "will," "should," "expect," "plan," "anticipate," "believe," "estimate,"
      "predict," "potential" or "continue," the negative of such terms or other
      comparable terminology. These statements are only predictions. Actual events
      or
      results may differ materially.




Although
      we believe that the expectations reflected in the forward-looking statements
      are
      reasonable, we cannot guarantee future results, levels of activity, performance
      or achievements. Moreover, neither we nor any other person assumes
      responsibility for the accuracy and completeness of the forward-looking
      statements. We undertake no duty to update any of the forward-looking statements
      after the date of this report to conform such statements to actual results
      or to
      changes in our expectations.




Readers
      are also urged to carefully review and consider the various disclosures made
      by
      us which attempt to advise interested parties of the factors which affect our
      business, including without limitation the disclosures made in *PART
      I. ITEM 1A:. Risk Factors* and *PART
      II. ITEM 6 "Management's Discussion and Analysis or Plan of
      Operatio* n"
      included herein.




3


**PART
      I.**




**ITEM
      1.**  **Business**





**BUSINESS
      DEVELOPMENT & ORGANIZATION WITHIN LAST FIVE YEARS**





***Overview***





We
      are a
      holding company whose primary business operations are conducted through our
      direct, wholly owned subsidiary, Nice Enterprise Trading H.K. Co., Ltd. (“Nice
      Enterprise”), and its subsidiaries - Shishi Rixiang Marine Food Co., Ltd.
      (“Rixiang”), Shishi Huabao Jixiang Water Products Co., Ltd. (“Jixiang”) and
      Shishi Huabao Mingxiang Foods Co., Ltd. (“Mingxiang”). We engage in the business
      of processing, distribution and sale of processed seafood products, as well
      as
      the sale of marine catch. Our objective is to establish ourselves as a leading
      producer of processed seafood products in the PRC and overseas
      markets.





***Our
      Corporate Structure***











***Our
      Corporate History***





We
      were
      incorporated in the State of Nevada on October 1, 1999 under the name New
      Paradigm Productions, Inc. to engage in the production and marketing of
      meditation music and related supplies.





Starting
      January 1, 2000, we commenced a private placement of our common stock in
      reliance upon an exemption from registration under Section 4(2) of the
      Securities Act and Regulation D promulgated thereunder. We offered 100,000
      shares of our common stock at $.35 per share to certain accredited investors.
      The offering closed in March 2000 and we raised gross proceeds in the amount
      of
      $35,000. As a result of the offering , our
      issued and outstanding common stock increased from 900,000 shares to 1,000,000
      shares.





On
      July
      5, 2000, we filed a registration statement on Form SB-2 with the Securities
      and
      Exchange Commission or the SEC under the Securities Act, to register shares
      of
      our common stock (Registration Statement No. 333-40790). The registration
      statement was declared effective on October 26, 2000. We sold 77,000 shares
      of
      our common stock pursuant to registration statement, raising a total of $77,000
      in gross proceeds. As a result of the offering, our issued and outstanding
      common stock increased to 1,077,000 shares.





On
      September 13, 2007, we entered into a Stock Purchase Agreement (“SPA”) with
      Halter Financial Investments, L.P., a Texas limited partnership (“HFI”) pursuant
      to which we agreed to sell to HFI, 1,005,200 shares of our post reverse
      stock-split common stock for $400,000. After consummation of the transaction,
      HFI became the holder of 1,005,200 shares of our common stock, or 87.5% of
      the
      1,148,826 shares of our then outstanding common stock. In addition, the terms
      of
      the SPA required us to declare and pay a special cash dividend of $0.364 per
      post stock-split share to our shareholders of record as of September 12, 2007.
      Stockholders holding a total of 1,077,000 shares received a special cash
      dividend in the total amount of $392,028 which amount was funded with proceeds
      from the stock sale. Effective on September 25, 2007, we effectuated a 7.5
      to 1
      reverse stock split and increased our authorized shares of common stock to
      100,000,000.




4





Upon
      the
      closing of the HFI transaction, Jody St. Clair resigned as our sole director
      and
      executive officer and in anticipation of her resignation, she appointed Richard
      Crimmins as our sole director, President, Secretary-Treasurer, Chief Executive
      Officer, Chief Operating Officer and Chief Financial Officer.





We
      discontinued our principal operations as of December 2002 and have been, until
      our reverse acquisition with Nice Enterprise on November 17, 2007 described
      below, investigating potential acquisitions or opportunities.





***Acquisition
      of Nice Enterprise and Related Financing***





On
      November 17, 2007, we completed a reverse acquisition transaction with Nice
      Enterprise through a share exchange with Nice Enterprise’s former stockholders.
      Pursuant to the share exchange agreement, the shareholders of Nice Enterprise
      exchanged 100% of their outstanding capital stock in Nice Enterprise for
      approximately 15,624,034 shares of our common stock, or approximately 93.15%
      shares of our outstanding common stock after the share exchange. In connection
      with the share exchange, a majority of our shareholders of record as of November
      16, 2007 approved a resolution by our board of directors to change our name
      from
      New Paradigm Productions, Inc. to China Marine Food Group Limited. The name
      change became effective on January 9, 2008 upon the filing of a Certificate
      of
      Amendment to our Amended Articles of Incorporation with the State of Nevada
      on
      the twentieth day following the mailing of a Definitive Information Statement
      to
      our shareholders. Concurrently with the closing of the reverse acquisition
      on
      November 17, 2007, we completed a private placement of our securities to
      certain accredited investors who subscribed for units consisting one share
      of
      common stock and a warrant to purchase one-fifth of one share of our common
      stock. The investors subscribed for aggregate of 6,199,441 shares of our common
      stock and warrants to purchase an aggregate of 1,239,888 shares of our common
      stock at $3.214 per unit. The units were offered and sold pursuant to exemptions
      from registration under the Securities Act, including without limitation,
      Regulation D and Regulation S promulgated under the Securities Act. Each warrant
      issued to the investors has a term of three years and is exercisable at any
      time
      for a price equal to $4.1782 in cash or on a cashless exercise
      basis.





In
      connection with the private placement, our principal stockholder, Pengfei Liu,
      entered into a make good agreement pursuant to which Mr. Liu agreed, subject
      to
      certain conditions discussed below, to place into an escrow account, 6,199,441
      shares of common stock of the Company he beneficially owns. If we do not
      generate net income of $10.549 million for the fiscal year ending December
      31,
      2008 and $14.268 million for the fiscal year ending December 31, 2009, the
      shares held in escrow will be transferred to the private placement investors,
      on
      a pro rata basis in accordance with the following formula: If the 2008 net
      income threshold is not achieved then an amount of shares equal to (($10.549
      million - 2008 adjusted net income)/$10.549 million) multiplied by 50% of
      the escrowed shares will be transferred to the private placement investors.
      If
      the 2009 net income threshold is not achieved then an amount of shares equal
      to
      (($14.268 million - 2009 adjusted net income)/$14.268 million) multiplied by
      50%
      of the escrowed shares will be transferred to the private placement investors.
      In the event that the net income for 2008 and 2009 meet the minimum net income
      thresholds for those respective years, then no transfer of the escrowed shares
      shall be made to the private placement investors and the shares will then be
      returned to Mr. Liu.





Additionally,
      upon the close of the reverse acquisition, Richard Crimmins, our sole director,
      submitted his resignation letter pursuant to which he resigned from all offices
      of the Company he holds which resignations will become effective immediately.
      Mr. Liu replaced him as our Chief Executive Officer and Interim Secretary
      effective on the close of the reverse acquisition. Prior to the effective date
      of the reverse acquisition, Mr. Liu served at Nice Enterprise as its Chief
      Executive Officer.





On
      January 11, 2008 we filed a request with the National Association of Securities
      Dealers (NASD) to change its name and symbol. Our new trading symbol is CMFO.
      The change of name and new symbol became effective on January 22, 2008.





For
      accounting purposes, the share exchange transaction was treated as a reverse
      acquisition with Nice Enterprise as the acquirer and China Marine Food Group
      Limited as the acquired party.





***Background
      History of Nice Enterprise***





Prior
      to
      the establishment of Mingxiang, Pengfei Liu, our founder, Executive Chairman
      and
      CEO of our Company, was engaged in the trading of marine catch from 1983 to
      1994, where he bought marine catch from local suppliers and sold them to seafood
      traders in other regions such as Zhejiang Province.




In
      March
      1994, Pengfei Liu, through his company Shishi City Xiangzhi Dabao Seafood
      Processing Factory, entered into a joint venture with Zhoushan Fishery
      Processing Factory to establish Mingxiang, to engage in the processing and
      sale
      of seafood products. Mingxiang established its place of business close to
      Xiangzhi (Shishi) Port, which is one of the largest fishing ports in the Fujian
      Province, occupying premises with a land area of about 3,300 sq.m. Mingxiang
      then commenced business as a small enterprise processing and supplying roasted
      file fish to customers in Fujian and Zhejiang Provinces.




5





Our
      business grew steadily between 1994 and 1997. In 1997, to protect the goodwill
      that had been built up for our products sold under our “Mingxiang ( 明祥 )”
brand;
      we registered the “Mingxiang” brand in the PRC as a trademark. The trademark
      covers marine food products such as dried fish slices, roasted shelled prawns
      and shredded squid.





In
      1998,
      we added shredded roasted squid to our range of products and expanded our
      production facilities to occupy a land area of about 8,000 sq.m. At that time,
      we employed about 40 employees. We also commenced the construction of cold
      storage facilities occupying a land area of about 2,000 sq.m. and with a storage
      capacity of 1,000 tons.





In
      1999,
      we completed the construction of our cold storage facilities. The new cold
      storage facilities increased the shelf-life of and enabled the prolonged storage
      of the raw materials, works-in-progress and finished products of our processed
      seafood products. With the cold storage facilities, we became less susceptible
      to seasonal fluctuations in market demand and supply of raw materials and
      products. This significantly increased our processed seafood production
      capacity.





In
      2000,
      we expanded our product range to include roasted prawns. We also acquired an
      additional land of about 7,300 sq.m. at our business premises to build
      additional production facilities as well as office and staff dormitory
      facilities.





Through
      a
      series of equity transfers agreements from 1996, Mr. Liu and his spouse Yazuo
      Qiu acquired full control of Mingxiang in 2001. With the change in shareholder’s
      control and the expanded scope of business to include export activities, we
      obtained a new business license for Mingxiang on April 9, 2001. In the same
      year, we obtained an import-export license from the Fujian Province
      International Trade Cooperation Bureau. We believe we were one of the first
      domestic companies in the processed seafood industry in Quanzhou City, Fujian
      Province to obtain this license. This was a significant milestone in our history
      as the license allowed us to export these products to foreign markets. In the
      same year, we commenced the export of our processed seafood products to Japan.





We
      also
      established Jixiang in 2001. Jixiang is our property-holding company, and owns
      the building ownership rights to all our properties save for two properties
      which are owned by Mingxiang.





All
      our
      land use rights and properties, including production plant, cold storage
      facility, office tower and staff dormitory, are managed by these two property
      holding companies, Mingxiang and Jixiang. In particular, Mingxiang is
      responsible for the rental income related to the collection on the 33 shop
      spaces at our factory in Dabao Industrial Zone. The rental contracts are based
      on 1-year lease term. The operations of these two property holding companies
      are
      solely property management.





In
      2002,
      our “Mingxiang” brand was recognised as a “Fujian Province Famous Brand”. In
      June of the same year, we commenced our marine catch business, through the
      chartering of two fishing vessels with an aggregate net tonnage of 44 tons.





In
      2003,
      we commenced the export of our dried processed seafood products to the Russian
      market. In May 2004, Nice Enterprise Trading H.K. Co., Ltd., a company
      incorporated in Hong Kong and wholly-owned by Pengfei Liu, established Rixiang,
      a limited liability company with a registered capital of US$1,000,000. Rixiang
      carried on the main businesses of processing and storage of marine food and
      marine catch. Since January 2005, Rixiang has been the operating subsidiary
      of
      our Company.





In
      2003,
      we also completed the construction of additional cold storage facilities. The
      new cold storage facilities increased our cold storage capacity from 1,000
      tons
      to 2,020 tons.




We
      also
      started selling frozen processed seafood products, which include frozen whole
      squids and fishes in 2003. Since then, our frozen processed seafood product
      range has expanded to include readily consumable products, including squid
      rings
      and slices and octopus cuts and slices.





In
      2003
      and 2004, the processing of our frozen seafood products involved only basic
      processing (such as cleaning, washing, sorting and packing). From 2005, our
      frozen processed seafood products processes shifted to more advanced processing
      as we observed a growing market in processed seafood products such as squid
      slice, octopus cuts, octopus slices and squid rings.




In
      April
      2006, our subsidiary Rixiang entered into a memorandum of understanding for
      research and development collaboration with the Ocean University of China in
      order to further develop our product development capabilities.





We
      have
      grown from a domestic market-oriented seafood enterprise with over 80 employees
      in 2003 into a medium-sized nationwide seafood enterprise with advanced
      processing facilities and equipment, and more than 600 employees in 2007. Our
      employees currently include 8 research and development staff. We also retain
      two
      marine products specialists from Japan to provide consultancy
      services.





6





**OUR
      PRINCIPAL PRODUCTS AND THE MARKET**





We
      are a
      seafood producer engaged in the processing, distribution and sale of processed
      seafood products under our “Mingxiang” brand, as well as the sale of marine
      catch.





Our
      business philosophy may be summarized in the following phrase:





“To
      achieve benefits through innovation and to develop new markets through
      branding”




Our
      dried
      processed seafood products are predominantly sold under our registered
      trademark, the “Mingxiang ( 明祥 )”
brand.
      These products are sold to over 30 distributors in various provinces in the
      PRC
      such as Fujian, Guangdong, Jiangsu, Shandong and Zhejiang and in turn
      sub-distributed to about 1,200 retail points (including major supermarkets
      and
      retailers such as Wal-Mart and Carrefour) throughout these provinces. Our frozen
      processed seafood products are sold to both domestic and overseas customers.
      Our
      marine catch is sold to customers in Fujian and Shandong Provinces, some of
      whom
      directly export the marine catch to Japan, South Korea and Taiwan.





Our
      business premises are located close to Xiangzhi (Shishi) Port, the largest
      fishing port in Fujian Province and one of the state-level fishing port centres.
      We have also been designated as a state base for the quality control testing
      of
      marine products in Fujian Province.





Our
      objective is to establish ourselves as a leading producer of processed seafood
      products in the PRC and overseas markets.





***Processed
      Seafood Products***





Using
      a
      combination of Japanese traditional seafood processing methods and modern
      scientific seafood processing techniques, our product development efforts during
      the period under review have yielded 18 processed seafood products comprising
      dried seafood products such as roasted squid, roasted file fish, roasted prawns,
      shredded roasted squid and smoked eel as well as frozen processed seafood
      products. Our frozen processed seafood products include frozen Japanese butter
      fish, frozen octopus and frozen squid rings. Our production facilities are
      located at Dabao Industrial Zone, Xiangzhi Town, Shishi City, Fujian Province,
      occupying a total land area of 17,600 sq.m. This includes cold storage
      facilities with a total storage capacity of 2,020 tons. We have five production
      lines for the processing of our roasted file fish, roasted prawns, shredded
      roasted squid, roasted squid and smoked seafood products.





We
      have
      established sales networks in various large and medium sized cities in the
      PRC
      and our export markets, such as Japan and Russia. We believe our products are
      sold by some of our distributors to end-consumers in South Korea, Taiwan and
      Ukraine. Our dried processed seafood products are mainly sold in supermarkets
      in
      Fujian and Zhejiang Provinces and their ** surrounding
      areas, and through our sales network of over 30 distributors, each of whom
      has
      its own sales network and is authorized by us to distribute our products
      exclusively in a specific vicinity.




Our
      sales
      to domestic and foreign markets for the fiscal years ended December 31, 2007,
      2006 and 2005 are set out below:





**Year
                ended December 31,****Dried
                Processed Seafood Products**
            
            **2007**
            
            **2006**
            
            **2005****(%)**
            
            **(%)**
            
            **(%)**PRC
                sales
            
            
            99.3
            
            
            98.8
            
            
            93.2Export
                sales(1)
            
            
            0.7
            
            
            1.2
            
            
            6.8




**Notes:**


(1)
      The
      decrease in export sales was mainly due to our increased marketing efforts
      in
      the PRC, which resulted in higher domestic sales.




**Year
                ended December 31,****Frozen
                Processed Seafood Products**
            
            **2007**
            
            **2006**
            
            **2005****(%)**
            
            **(%)**
            
            **(%)**PRC
                sales(1)
            
            
            100.0
            
            
            97.3
            
            
            96.4Export
                sales(2)
            
            
            0.0
            
            
            2.7
            
            
            3.6





**Notes:**




(1)  These
      comprise sales to local distributors made on an ad hoc basis.




(2)  These
      comprise sales to foreign distributors.




7





Our
      dried
      processed seafood products are predominantly sold under our registered
      trademark, the “Mingxiang” brand.





A
      portion
      of our frozen processed seafood products are consumed directly by end-consumers
      with little or no additional processing. All our dried and frozen processed
      seafood products are manufactured free of preservatives. We use ingredients
      such
      as sugar, salt and spices in the production of our dried processed seafood
      products. The raw materials for our processed seafood products are obtained
      through fresh marine catch and not from seafood breeding farms.





We
      have
      obtained the “Green Food” awards in respect of our roasted file fish, frozen
      fish, roasted king prawns and shredded squid. We are committed to the highest
      standards of quality control in the production of our processed seafood
      products, as evidenced by our ISO9001, ISO14001, HACCP certification and the
      EU
      export registration.





Our
      credit-worthiness, quality and processed seafood products have received
      considerable acknowledgement and favorable feedback from the public. Please
      refer to the section “Awards and Certification” on Page 16 for further details
      of the awards and certifications that we have received.





Today,
      our products are exported to many countries including Japan, Russia and Ukraine.
      We are a State-designated base for quality assurance testing of marine products.
      Please see the section “Quality Assurance” on Page 28 for more
      details.





***Marine
      Catch***





We
      engage
      in the sale of marine catch. We work with local fishermen and charter six
      fishing vessels with an aggregate net tonnage of 256 tons, to harvest marine
      catch from the East China Sea and the Taiwan Strait. Our marine catch is
      harvested from the deep seas and is not bred through aquaculture.





The
      vessels are usually chartered for three-year periods, and the charter rates
      are
      dependent on the size of the vessels. Typically, the annual rental of our
      vessels ranges from approximately $104,000 to $156,000. Such rentals are paid
      quarterly in cash and within ten days from the commencement of the rental
      period. During the term of the agreements, we bear the costs of fuel, fishing
      equipment and facilities, wages of the crew and other expenses, whilst the
      vessel owners are responsible for ensuring the seaworthiness of the vessels
      and
      the validity of the permits and licenses for the undertaking of fishing
      operations.





The
      marine catch is sold to seafood traders in Fujian and Shandong Provinces, the
      PRC, some of whom directly export the marine catch to Japan, South Korea, and
      Taiwan. To preserve the freshness of the marine catch sold to our customers,
      we
      constantly pack the harvested marine catch in ice and endeavor to deliver the
      marine catch to our customers within the shortest time practicable. Upon the
      return of the vessels to Xiangzhi (Shishi) Port, a small proportion of the
      marine catch is sold to our customers at Xiangzhi (Shishi) Port itself, and
      the
      rest is transported back to our business premises at Dabao Industrial Zone,
      Xiangzhi Town, Shishi City, Fujian Province for further sorting and packing.
      Thereafter, most of our marine catch is collected by our customers at our
      business premises, and a small proportion is transported to our customers at
      their respective destinations. Please refer to the section “Production
      Facilities and Processes” on Page 12 for further details as to the fishing
      operations conducted for the sale of our marine catch.





Due
      to
      the nature of the fishing operations, the size of a customer’s order typically
      depends on the volume of marine catch that the fishing vessels harvest in a
      fishing trip. A customer therefore typically places an order only after
      receiving information as to the volume of marine catch harvested in a fishing
      trip. Our marine catch is priced based on market price, fishing yield and
      seasonality. We are of the view that these factors do not cause substantial
      fluctuations in the prices of our marine catch.





***Our
      Products***





Our
      products can be divided into two main categories, namely (1) processed seafood
      products; and (2) marine catch. All of our production is undertaken by our
      subsidiary, Rixiang.





8




The
      following table sets out some of our main products, as well as the main markets
      in which they are sold:





**Processed
                Seafood**
            
            
            
            **Main
                Markets****Products**
            
            **Products
                / Species**
            
            **Markets
                in the PRC**
            
            **Foreign
                Markets**(a)
                Dried processed seafood products
            
            Roasted
                file fish, shredded roasted squid, roasted squid, smoked eel, roasted
                prawn, Jingdu roasted fish
            
            Hangzhou,
                Ningbo, Taizhou, Wenzhou and Ruian Cities in Zhejiang Province
            
            Japan,
                Russia and UkraineShishi, Quanzhou,
              Xiamen, Fuzhou and Zhangzhou Cities in Fujian ProvinceQingdao
                City, Shandong Province(b)
                Frozen processed seafood products
            
            Cuttlefish,
                octopus, pomfret, shelled prawns,sliced squid
            
            Qingdao
                City, Shandong Province (for sale in South Korea)
            
            JapanShishi
                City, Fujian Province (for sale in Taiwan)**Marine
                Catch**
            
            Cuttlefish
                (*Sepia
                esculenta*),
                hairtail fish (*Trichiurus
                japonicus*),
                Japanese butter fish (*Psenepis
                Anomala*),
                squid (*Loligo
                bleekeri*)
            
            Shishi
                City, Fujian Province (for sale in Taiwan)
            
            -Qingdao
                City, Shandong Province (for sale in South Korea and
                Japan)





***Processed
      Seafood Products***





We
      purchase fresh seafood, the primary ingredient from which our dried and frozen
      processed seafood products are manufactured, from fishermen and traders. Our
      raw
      materials are stored in cold storage facilities located at our production
      facilities. The production processes of our dried and frozen processed seafood
      products are described in further detail under the section “Production
      Facilities and Process” on Page 12.





Dried
      Processed Seafood Products





seafood1
            
            seafood2
            
            seafood3
            
            seafood4Roasted
                file fish
            
            Roasted
                squid
            
            Roasted
                prawn
            
            Smoked
                eel





The
      main
      dried processed seafood products manufactured by us are roasted file fish,
      shredded roasted squid, roasted squid, smoked eel and roasted prawn.





The
      ingredients used in the production of our dried processed seafood products
      are
      fresh seafood (such as fish, prawns and cuttlefish), natural flavoring, sugar,
      salt and spices.





9




Frozen
      Processed Seafood Products





seafood5
            
            seafood6
            
            seafood7
            
            seafood8Pomfret
            
            Octopus
            
            Shelled
                prawns
            
            Sliced
                squid





Our
      frozen processed seafood products comprise cuttlefish, octopus, pomfret, shelled
      prawns and sliced squid. Some of our frozen seafood products (such as cuttlefish
      and squid) are packaged and can be consumed without additional processing.
      Our
      other frozen processed seafood products are intermediate products sold to our
      customers for further processing before sale to the end-consumer. Our frozen
      processed seafood products are mainly exported to Japan and South Korea directly
      or through our customers.





***Marine
      Catch***





The
      principal species of marine catch harvested in the East China Sea and Taiwan
      Strait and sold by our Company are as follows:




**Cuttlefish
                (*****Sepia
                esculenta*****)**seafood9
            
            Cuttlefish
                is commonly found in the East China Sea and the Taiwan Strait. Cuttlefish
                is often processed and sold as fresh sushi and snacks.**Hairtail
                Fish (*****Trichiurus
                japonicus*****)**seafood10
            
            Hairtail
                fish, usually found in the East China Sea and the Taiwan Strait,
                is one of
                the best-selling marine catch in the PRC. It is a regular dish for
                home
                working and fine-dining restaurants**Japanese
                Butter Fish (*****Psenepis
                Anomala*****)**seafood11
            
            Japanese
                butter fish is usually found in the East China Sea and the Taiwan
                Strait
                between September and November every year.**Squid
                (*****Loligo
                bleekeri*****)**seafood12
            
            Squids
                are commonly found in the seas of the Taiwan Strait. Squid contains
                many
                nutrients such as proteins, fats, carbohydrate, calcium and phosphorus.
                Its fine taste and springy texture makes the squid a popular food
                with
                consumers.





10




***Production
      Facilities and Process***





The
      production of our dried and frozen processed seafood products is carried out
      at
      our production facilities in Dabao Industrial Zone, Xiangzhi Town, Shishi City,
      Fujian Province. As at December 31, 2007, we own five production lines for
      the
      manufacture of dried processed seafood products and one production line for
      the
      manufacture of frozen processed seafood products. Maximum annual production
      capacities of our production lines are about 4,300 tons of dried processed
      seafood products and 360 tons of frozen processed seafood. We also own cold
      storage facilities with cold storage capacity of 2,020 tons.




We
      place
      great emphasis on quality assurance at every stage of our production process
      and
      have clearly defined procedures to manufacture products of consistently high
      quality. Please refer to the section “Quality Assurance” on Page 28 for more
      details.





Dried
      Processed Seafood Products





The
      key
      stages of our production process for our dried processed seafood products are
      as
      follows:









1.
            *Receiving
                and storing raw and packaging materials.*All
                raw materials undergo visual inspection to ensure freshness and firmness
                before they are accepted and stored. Inspection is carried out by
                way of
                random sampling.





Samples
      are taken from each batch of raw materials and sent to the quality control
      department where physical (e.g. visual inspection), chemical and micro-organism
      tests are conducted. Raw materials which do not adhere to our requirements
      are
      rejected.





Our
      other
      ingredients such as salt, sugar and spices are sourced from suppliers within
      the
      PRC. They are stored in warehouses or temperature-controlled facilities after
      inspection and approval.





Our
      packaging materials are kept in a warehouse after they have been inspected
      and
      approved.





2.
            *Ice-packing.*To
                maintain the freshness of our raw materials, a portion of the raw
                materials is packed in ice and transported directly to our production
                facilities for processing, whereas the remaining raw materials are
                packed
                in ice and transported to our cold storage facilities for storage
                at minus
                two to two degrees Celsius for no longer than 24 hours, upon which
                they
                must be delivered to the production facilities for
                processing.





11





3.
            *Cleaning.*At
                the production facilities, the raw materials are cleaned by removing
                unwanted portions such as heads, innards and
                shells.





4.
            *Slicing.*The
                raw materials are then sliced on stainless steel tables.





5.
            *Washing
                and draining.*The
                raw materials are then sent to the washing pool for washing so as
                to
                remove oil, blood stains, remnant innards and other stains. After
                washing,
                the raw materials are drained to remove excess water
                content.





6.
            *Marinating
                and adding flavouring.*Other
                ingredients such as salt, sugar and spices are then added in the
                required
                amounts according to our recipes, left to marinate for a set period
                and
                mixed at stipulated intervals.





7.
            *Steam-drying
                / Roasting.*The
                raw materials are arranged on wire mesh trays, which are stacked
                in
                trolleys and rolled into a heating machine. Roasting takes place
                under
                controlled temperatures via a roasting conveyor belt, where moisture
                levels are monitored. Depending on the product, we will slice or
                shred the
                raw materials after roasting.





8.
            *Weighing,
                packaging and metal detection.*The
                dried processed seafood products are then packed into their respective
                packaging materials and sealed. After a calibrated metal detector
                to
                ensure that the products do not contain any traces of metal particles.
                Metal contamination might have been inherent in the raw materials
                or
                caused by production process of which some stages are
                automated.





9.
            *Packing
                and delivery.*The
                packets of dried processed seafood products are then packed into
                boxes,
                which are then stored in our warehouse. Our products are delivered
                to
                customers on a “first in, first out”
basis.





Frozen
      Processed Seafood Products





Part
      of
      the production of our frozen processed seafood products is carried out in a
      sterile sealed production unit. The key stages of our production process for
      our
      frozen processed seafood products are as follows:











1.
            *Receiving
                and storing raw materials.*As
                with our dried processed seafood products, all the raw materials
                for our
                frozen processed seafood products undergo inspection and approval
                before
                they are accepted and stored. Inspection is carried out by way of
                random
                sampling. Samples are taken from each batch of raw materials and
                sent to
                the quality control department where physical (e.g. visual inspection),
                chemical and micro-organism tests are conducted. Raw materials which
                do
                not adhere to our requirements are
                rejected.





Packaging
      materials are kept in a warehouse after they have been inspected and
      approved.




12




2.
            *Ice-packing.*To
                maintain the freshness of our raw materials, a portion of the raw
                materials is packed in ice and transported directly to our production
                facilities for processing, whereas the remaining raw materials are
                packed
                in ice and transported to our cold storage facilities for storage
                at minus
                two to two degrees Celsius for no longer than 24 hours, upon which
                they
                must be delivered to the production facilities for processing. These
                raw
                materials are removed from cold storage only immediately prior to
                processing.





3.
            *Cleaning
                and washing.*At
                the production facilities, the raw materials are cleaned by removing
                unwanted portions such as heads, innards and
                shells.





4.
            *Selection.*The
                raw materials are selected based on weight for further
                processing.





5.
            *Slicing
                and shaping.*The
                raw materials are then cut into slices and trimmed in order to attain
                the
                desired dimensions.





6.
            *Cleaning
                and sterilizing.*The
                raw materials then undergo further cleaning and sterilizing in order
                to
                remove bacteria.





7.
            *Grooving.*Where
                necessary for some of our sliced products, grooves are made on the
                slices.
                The grooves enable better absorption of condiments during
                consumption.





8.
            *Arranging
                and packaging.*The
                slices are then placed in neat arrangements in designated packs.





9.
            *Quick
                freezing.*The
                slices are then sent for quick freezing to a temperature of minus
                thirty-five degrees Celsius.





10.
            *Metal
                detection.*The
                products are then passed through a metal detector to ensure they
                do not
                contain any metal particles.





11.
            *Packing
                and delivery.*The
                products are then packed and sealed. All the packaged products are
                then
                stored immediately in our cold storage facilities, where they are
                delivered in a “first in, first out” basis. Our products are transported
                in refrigerated containers which must comply with required standards
                of
                cleanliness and hygiene. Delivery is provided by a third-party logistics
                company using refrigeration containers at below minus 18 degrees
                Celsius.





Marine
      Catch





We
      currently charter six fishing vessels with an aggregate net tonnage of 256
      tons
      to harvest marine catch from the East China Sea and the Taiwan Strait. The
      harvestation is carried out by the owners of the chartered fishing vessels
      and
      their employees. Each fishing vessel is manned by approximately 16 persons
      on
      average.




13





The
      key
      stages of the harvestation, sorting, transportation and process in respect
      of
      our marine catch are as follows:









1.
            *Preparations.*Prior
                to setting off for the fishing grounds, the fishermen procure sufficient
                fuel, fishing equipment and facilities, emergency facilities, ice,
                food
                and grocery supplies for the entire duration of the fishing voyage,
                which
                typically lasts between three to five days. Detailed checks are conducted
                on the fishing vessels to ensure their safety and sea-worthiness,
                and on
                the fishing equipment to ensure that they are in a good condition.
                The
                fishermen also consult the most recent weather reports issued by
                provincial and state-level meteorological stations to check whether
                the
                weather conditions are suitable for
                fishing.





2.
            *Embarkation
                and Harvestation of Marine Catch.*After
                the preparatory work is completed, the fishing vessels embark on
                the
                fishing voyage and depart for fishing grounds located at the East
                China
                Sea and the Taiwan Strait. The fishermen decide on the specific locations
                of the fishing grounds based on their experience and local knowledge
                after
                observing weather conditions, water temperature and direction of
                the
                tide.





Upon
      arrival at the fishing grounds, the fishermen commence the harvestation of
      marine catch. The harvestation is conducted in cycles and repeated until the
      fishermen decide to cease harvestation and return to port.





A
      typical
      harvestation cycle for each fishing vessel lasts around 1⁄2 hour (for cuttlefish)
      and between 1 to 11⁄2 hours (for other types of marine catch) and comprises the
      following steps:





a.
            Fishing
                net with net mouth of approximately 150 to 200 metres in circumference,
                depending on the size of the fishing vessel, is cast into the sea.
                The
                depth depends on the species of marine catch sought to be harvested.
                For
                cuttlefish, the net is typically lowered to a depth of approximately
                100
                meters below sea level, whereas for the other marine catch species
                the net
                is typically lowered to the seabed, at a depth of approximately 300
                to 500
                metres below sea level.





b.
            The
                fishing vessels harvesting cuttlefish are fitted with light bulbs
                which
                are lit in order to attract the cuttlefish to swim up to a level
                suitable
                for harvestation. Three of the fishing vessels are currently designated
                for the harvestation of cuttlefish and therefore fitted with the
                light
                bulbs.


c.
            For
                the types of marine catch other than cuttlefish, the fishing net
                is then
                towed by the fishing vessel around the fishing ground.





d.
            After
                fishing for 1⁄2 hour (for cuttlefish) or towing for between 1 to 11⁄2 hours
                (for the other types of marine catch), the fishing net is raised
                and the
                harvested marine catch is brought on board the fishing vessel, sorted
                and
                packed in ice.




14




e.
            When
                the fishing net is cleared of marine catch, the fishing vessel is
                ready to
                commence the next harvestation cycle. As described above, the choice
                of
                fishing ground depends on the experience and local knowledge of the
                fishermen after taking into account weather conditions, water temperature
                and tide direction.




3.
            *Preliminary
                Sorting and Ice-Packing.*Upon
                the completion of each harvestation cycle, the harvested marine catch
                is
                stored in insulated containers and constantly packed in ice in order
                to
                preserve its freshness.





4.
            *Return
                to Port.*Upon
                completion of the last harvestation cycle, the fishing vessels commence
                their return to Xiangzhi (Shishi) Port at Shishi City, Fujian Province.
                When the fishing vessels are within approximately five to ten nautical
                miles from Xiangzhi (Shishi) Port, the captains of the fishing vessels
                will contact our Manager (Fishing and Procurement) to report the
                estimated
                volume of each species of marine catch harvested. Our Manager (Fishing
                and
                Procurement) then contacts our customers to inform them of the volume
                of
                marine catch harvested, to negotiate prices, and to arrange the logistics
                of collection / delivery. This reduces the time between harvestation
                and
                collection / delivery and ensures that the marine catch is sold fresh
                to
                our customers.





5.
            *Unloading
                and Transportation*.
                Upon arrival at Xiangzhi (Shishi) Port, the marine catch is unloaded
                on to
                shore. Most of the marine catch is transported using our
                temperature-insulated trucks to our business premises at Dabao Industrial
                Zone, Shishi City Fujian Province, which is five to ten minutes by
                road
                from Xiangzhi (Shishi) Port. A small proportion of marine catch,
                which had
                been sorted and packed while on board the fishing vessels, is sold
                to
                customers at Xiangzhi (Shishi)
                Port.





6.
            *Sorting
                and Packing.*At
                our business premises, the marine catch is sorted according to species
                and
                size. The sorted marine catch is then weighed, packed in ice and
                stored in
                styrofoam boxes for collection by or delivery to customers (as the
                case
                may be). For the marine catch which is not immediately (i.e. within
                three
                hours) collected by or delivered to our customers, the boxes are
                stored at
                our cold storage facilities at a temperature of minus five degrees
                Celsius
                to preserve the freshness of the marine
                catch.





7.
            *Collection
                / Delivery.*Most
                of our marine catch is collected by our customers from our business
                premises. A small proportion of marine catch is delivered to our
                customers.





Marine
      catch for the Taiwan market is transported by road using temperature-insulated
      trucks to our customers at Quanzhou, Yongning and Dongshan Ports in Fujian
      Province. The distance between these ports and our business premises at Dabao
      Industrial Zone, Shishi City, Fujian Province ranges from approximately 30
      minutes to 3 hours by road. From these ports, the marine catch is shipped to
      Taiwan. Based on the foregoing, the time taken between the fishing vessels’
return to port and the delivery of the marine catch to our customers at these
      ports is typically three to eight hours.





Marine
      catch for the South Korea market is loaded on to temperature-controlled
      containers, at temperatures of between minus five to minus ten degrees Celsius,
      and transported by road to our customer at Qingdao City, Shandong Province.
      From
      Qingdao City, Shandong Province, the marine catch is subsequently shipped to
      South Korea. Based on the foregoing, the time taken between the fishing vessels’
return to port and the delivery of the marine catch to our customer at Qingdao
      City, Shandong Province is typically 23 to 28 hours.





***Awards
      and Certifications***





As
      testimony to the quality of our products, our credit worthiness in the PRC
      business community as well as our management capabilities, we have received
      several awards and certification in the course of our history, as listed
      below:





**Year**
            
            **Subsidiary**
            
            **Award**
            
            **Period**
            
            **Awarding
                Body**
            
            **Significance**November
                2001
            
            Mingxiang
            
            Branded
                Products (fresh roasted prawn, roasted file fish, shredded
                squid)
            
            2001
            
            2001
                China International Agriculture Expo
            
            Recognition
                of our brand and our branding effortsDecember
                2001
            
            Mingxiang
            
            National
                Brand-making Leading Enterprise
            
            -
            
            Ministry
                of Agriculture, China
            
            Recognition
                of our efforts to create our brand and increase brand-awareness of
                our
                productsJanuary
                2002
            
            Mingxiang
            
            Green
                Consumer Recommendation
            
            2002
                - 2003
            
            Fujian
                Consumer Committee
            
            Recognition
                of our product quality, environmental friendly products, integrity
                in our
                dealings with consumers




15




**Year**
            
            **Subsidiary**
            
            **Award**
            
            **Period**
            
            **Awarding
                Body**
            
            **Significance**April
                2003
            
            Mingxiang
            
            Leading
                Corporation in Processing Agricultural Products (Province
                level)
            
            -
            
            Fujian
                Village Enterprise Bureau
            
            Recognition
                of our efforts and contribution in the development of processed
                agricultural productsApril
                2003
            
            Mingxiang
            
            A-Grade
                Tax Payer
            
            2003
                - 2004
            
            Quanzhou
                District Tax BureauAugust
                2003
            
            Mingxiang
            
            Quanzhou
                Contract-Abiding Creditworthy Enterprise
            
            2001
                - 2002
            
            Quanzhou
                Civil Administration
            
            Recognition
                of integrity in our operations and commercial dealingsSeptember
                2003
            
            Mingxiang
            
            Fujian
                Province Aquatic Industrialization Leading Enterprise
            
            2003
                - 2004
            
            Fujian
                Province Marine Fisheries Bureau, Fujian Department of
                Finance
            
            Recognition
                of our efforts and contribution in the development of processed
                agricultural productsMay
                1, 2007
            
            Mingxiang
            
            Green
                Food - roasted file fish
            
            May
                2007 - May 2010
            
            China
                Green Food Development Centre
            
            Recognition
                of environmental awareness, non-pollution in our production
                chainMay
                1, 2007
            
            Mingxiang
            
            Green
                Food - dried shredded squid
            
            May
                2007 - May 2010
            
            China
                Green Food Development Centre
            
            Recognition
                of environmental awareness, non-pollution in our production
                chainMay
                1, 2007
            
            Mingxiang
            
            Green
                Food - frozen fish
            
            May
                2007 - May 2010
            
            China
                Green Food Development Centre
            
            Recognition
                of environmental awareness, non-pollution in our production
                chainMay
                1, 2007
            
            Mingxiang
            
            Green
                Food - roasted king prawn
            
            May
                2007 - May 2010
            
            China
                Green Food Development Centre
            
            Recognition
                of environmental awareness, non-pollution in our production
                chainMay
                17, 2007
            
            Rixiang
            
            Green
                Food - roasted file fish
            
            May
                2007 - May 2010
            
            China
                Green Food Development Centre
            
            Recognition
                of environmental awareness, non-pollution in our production
                chainMay
                17, 2007
            
            Rixiang
            
            Green
                Food - dried shredded squid
            
            May
                2007 - May 2010
            
            China
                Green Food Development Centre
            
            Recognition
                of environmental awareness, non-pollution in our production
                chain




16




**Year**
            
            **Subsidiary**
            
            **Award**
            
            **Period**
            
            **Awarding
                Body**
            
            **Significance**May
                17, 2007
            
            Rixiang
            
            Green
                Food - roasted yellow croaker
            
            May
                2007 - May 2010
            
            China
                Green Food Development Centre
            
            Recognition
                of environmental awareness, non-pollution in our production
                chainMay
                17, 2007
            
            Rixiang
            
            Green
                Food - roasted prawn
            
            May
                2007 - May 2010
            
            China
                Green Food Development Centre
            
            Recognition
                of environmental awareness, non-pollution in our production
                chainMay
                17, 2007
            
            Rixiang
            
            Green
                Food - roasted shredded squid
            
            May
                2007 - May 2010
            
            China
                Green Food Development Centre
            
            Recognition
                of environmental awareness, non-pollution in our production
                chainMay
                17, 2007
            
            Rixiang
            
            Green
                Food - roasted fish bones
            
            May
                2007 - May 2010
            
            China
                Green Food Development Centre
            
            Recognition
                of environmental awareness, non-pollution in our production
                chainMay
                17, 2007
            
            Rixiang
            
            Green
                Food - roasted squid
            
            May
                2007 - May 2010
            
            China
                Green Food Development Centre
            
            Recognition
                of environmental awareness, non-pollution in our production
                chainMay
                17, 2007
            
            Rixiang
            
            Green
                Food - squid slices
            
            May
                2007 - May 2010
            
            China
                Green Food Development Centre
            
            Recognition
                of environmental awareness, non-pollution in our production
                chainMay
                17, 2007
            
            Rixiang
            
            Green
                Food - roasted searobin fillet
            
            May
                2007 - May 2010
            
            China
                Green Food Development Centre
            
            Recognition
                of environmental awareness, non-pollution in our production
                chainJanuary
                2004
            
            Mingxiang
            
            Civilised
                and Creditworthy Enterprise
            
            2002
                - 2003
            
            Shishi
                City Government Civilization Bureau, Shishi City Economic Bureau,
                Shishi
                National Tax Bureau, Shishi District Tax Bureau
            
            Recognition
                of our regard for integrity in our operations, our creditworthiness
                and
                contribution to the economyJanuary
                2004
            
            Mingxiang
            
            Quanzhou
                Agricultural Industrialization Leading Enterprise
            
            For
                January 2004 - December 2006
            
            Quanzhou
                Department of Agriculture, Quanzhou Finance Bureau
            
            Recognition
                of our efforts and contribution in the development of processed
                agricultural products




17




**Year**
            
            **Subsidiary**
            
            **Award**
            
            **Period**
            
            **Awarding
                Body**
            
            **Significance**September
                2006
            
            Mingxiang
            
            Key
                Leading Enterprise (Province level)
            
            2006
                - 2007
            
            Fujian
                Province Agriculture Industrialization Leading Group
            
            Recognition
                of our efforts and contribution in the development of processed
                agricultural productsDecember
                2006
            
            Mingxiang
            
            A-Grade
                Tax Payer Credit Enterprise
            
            2004
                - 2005
            
            Quanzhou
                National Tax Bureau, Quanzhou District Tax Bureau
            
            Recognition
                of our tax creditworthinessDecember
                2004
            
            Mingxiang
            
            National
                Foodstuff Industry Excellent Leading Enterprise
            
            2003
                - 2004
            
            China
                Foodstuff Industry Association
            
            Recognition
                of quality of our productsJune
                2005
            
            Mingxiang
            
            2004
                “AAA” bank-rated Creditworthy Enterprise
            
            2005-2006
            
            China
                Agricultural Bank, Fujian Branch
            
            Recognition
                of the quality of our enterprise, economic standing, operational
                efficiency and potential for growthAugust
                2, 2005
            
            Mingxiang
            
            Fujian
                Province Famous Brand
            
            Valid
                for 3 years
            
            Fujian
                Province Branded Products Authentication Committee
            
            Recognition
                of our brand and our branding
                efforts





**DISTRIBUTION**





***Sales
      and Marketing***





Our
      sales
      and marketing team comprises 19 employees, headed by our Executive Chairman,
      Director and CEO Pengfei Liu. The team is responsible for monitoring domestic
      sales, which includes co-coordinating orders from customers as well as
      distributing our products to the customers.





***Distribution
      Network***





We
      have
      established a wide distribution network which allows us to maintain our
      competitiveness in the industry. Our products are exported to various countries,
      including Japan, Russia and Ukraine. We believe our products are sold by some
      of
      our distributors to end-consumers in South Korea, Taiwan and USA.





As
      of
      December 31, 2007, we have 34 distributors in five provinces in the PRC, namely
      Fujian, Guangdong, Jiangsu, Shandong and Zhejiang, as follows:





**Province**
            
            **No.
                of Distributors**Fujian
            
            20Guangdong
            
            1Jiangsu
            
            1Shandong
            
            2Zhejiang
            
            10**Total**
            
            **34**





These
      distributors in turn sub-distribute our dried processed seafood products to
      about 1,200 retail points (including major supermarkets and retailers such
      as
      Wal-Mart and Carrefour) throughout these provinces.





18





One
      of
      our main considerations when appointing distributors is the purchasing and
      consumer spending power in the particular region in which we intend to
      distribute our products.





Before
      we
      appoint new distributors or extend the distribution arrangement with existing
      distributors to distribute our products in a particular region or country,
      the
      potential distributor or existing distributor is subject to our stringent
      selection or review process. We will only appoint distributors who are able
      to
      meet our requirements such as sales target.





We
      select
      each distributor based on four criteria:





a.
            ***Strong
                Financial Background***:.
                We require the distributor to provide us with its most recent audited
                financial statements so we may verify whether its financial status
                is
                strong and healthy. We further require the distributor to settle
                the bills
                in cash, without offering any credit terms, in the first year of
                doing
                business with us.





b.
            ***Strong
                Distribution Network***.
                The distributor should have a strong, well-established marketing
                and
                distribution network in the corresponding
                region.





c.
            ***Good
                Reputation and Track Record***.
                We only select those distributors with good reputations in the industry
                in
                regard to their business background, marketing experience and distribution
                network. In particular, the distributor should have a track record
                in
                developing and maintaining the brand images of the products it
                distributes.





d.
            ***Marketing
                Strategy***.
                We require the distributor to implement our overall marketing strategy
                for
                our products and to supplement it by designing its own marketing
                plans
                specifically for the respective region. The distributor should be
                able to
                assist us in building our brand image and achieving a significant
                market
                share in a said period of time.





We
      appoint different distributors for different products in different regions
      in
      the PRC and in the various overseas markets.




We
      usually appoint one exclusive distributor to cover a specific county, district,
      city or province. Under the distributorship agreements, our distributors are
      obliged to price and sell our products in accordance with the indicative prices
      which we provide, and are not permitted to arbitrarily adjust the sale price
      of
      the products except in accordance with product promotions. The distributors
      must
      also duly carry out market operation activities and promotional methods which
      are jointly developed with us, and to bear the costs of its own advertisements
      and marketing activities. The distributorship agreements also contain provisions
      for the protection of our intellectual property rights.





For
      our
      export sales, we sell our products through sales agents or traders in the PRC
      or
      directly to distributors in the overseas market.





Our
      sales
      and marketing team is also responsible for marketing our products within the
      PRC. The team contacts and visits our customers regularly to obtain feedback
      and
      suggestions on our products, and to foster and build our relationships with
      them. We normally sign distributorship agreements with a one-year term. Our
      agreements stipulate the price range in which the distributors may sell our
      products and also stipulate sales targets which our distributors have to achieve
      before the agreements are renewed.





We
      advertise our products regularly in supermarket brochures, and outdoor
      billboards. We also participate in exhibitions in the PRC such as the China
      Export Trade Fair and the China Seafood Exposition, as well as overseas
      exhibitions such as those in South Korea, Japan and Boston, USA.





**NEW
      PRODUCTS**





On
      April
      28, 2006, our subsidiary Rixiang entered into a memorandum of understanding
      for
      collaboration with the Ocean University of China’s Food Sciences and Engineering
      Institute for the development of: (1) bioactive peptide products from leftovers
      of aquatic processed products; and (2) collagen protein and collagen peptide
      protein products from fish skin. For details, please see “Research and
      Development.”





**COMPETITION**





We
      operate in a competitive environment and we expect to face more intense
      competition from our existing competitors and new market entrants in the future.
      We believe that the principal competitive factors in our industry include, *inter
      alia* ,
      brand
      awareness, product range and quality, customer and supplier relationships,
      cost
      and quality of raw materials, technical expertise in production and pricing.
      Of
      these factors, we believe that product quality is the most
      important.




19




To
      the
      best of our knowledge, our principal competitors within the PRC are the
      following major seafood product manufacturers in the PRC:




**Business**
            
            **Principal
                Competitors**Dried
                and Frozen Processed Seafood Products
            
            (1)China
                Aquatic Zhoushan Marine Fisheries Corporation; and
              
              (2)Liaoning
                Dalian Seafood Industry Group Co., Ltd.
              
              Both
                in terms of their size and operationsSale
                of Marine Catch
            
            (1)Fujian
                Seafood Industry Co., Ltd; and
              
              (2)Fujian
                Huayang Aquatic Products Group Co., Ltd.
              
              Both
                in terms of their geographical proximity to our customer
                base





There
      may
      be companies based in other countries which offer a similar product range as
      we
      do but which currently operate in different markets from us. In the future,
      we
      may face competition from these companies as we expand into their markets and *vice
      versa* .




***Competitive
      Strengths***





We
      believe that our competitive strengths are as follows:





**1.**
            **We
                have a wide distribution network**





We
      have
      established a wide distribution network which allows us to maintain our
      competitiveness in the industry. We have over 30 distributors in various
      provinces in the PRC such as Fujian, Guangdong, Jiangsu, Shandong and Zhejiang.
      These distributors in turn sub-distribute our dried processed seafood products
      to about 1,200 retail points (including major supermarkets and retailers such
      as
      Wal-Mart and Carrefour) throughout these provinces. We also have a strong
      overseas customer base in various countries including Ukraine, Japan and Russia.
      These include, amongst others, established companies such as JCR Corporation
      of
      Japan and Fleish Russia Company of Russia. Please refer to the section “Major
      Customers” on Page 23 for further details. ****





**2.**
            **We
                have an established brand name and track
                record**





We
      have
      been involved in the production of processed seafood products since commencing
      our operations in 1994. Our “Mingxiang” brand has been conferred the “Famous
      Brand” award. In addition, we have also obtained the “Green Food” award in
      respect of our roasted file fish, shredded roasted squid, roasted king prawn
      and
      frozen fish products. This attests to the established standing of our
“Mingxiang” brand and the high quality of our products. We have also received
      several other awards and accreditations as described in the section “Awards and
      Certifications” on Page 16. We believe such accolades attest to our established
      reputation in the industry.





We
      also
      believe that our established track record in the processed seafood industry
      instills confidence in our products and attracts new customers from South Korea,
      Japan, Taiwan, Russia and Ukraine, and potential customers from the European
      Union. Our stable customer base and large distributor network in Fujian Province
      and Zhejiang Province have enabled our Company to introduce new products into
      these markets in a shorter time and gain quicker market acceptance and
      recognition.





**3.**
            **We
                develop high quality
                products**





We
      use
      fresh seafood as the primary ingredient for our processed seafood products.
      Our
      superior recipes and production know-how enable us to develop and produce
      products with high-quality taste and texture and which are well-received by
      end-consumers.





We
      have
      been awarded HACCP certification and have obtained the EU export registration,
      which enable us to export our products to the US and the EU respectively. In
      addition, our products, namely our roasted file fish, shredded roasted squid,
      roasted squid, roasted prawn and frozen fish have been certified as “Green
      Food”, a recognition that the production of our products is carried out under
      certain sanitary conditions with limited use of chemical additives. We believe
      we are one of the first companies in the seafood industry in Fujian Province
      to
      be awarded this certification, which is a further testament to the quality
      of
      our products.





**4.**
            **We
                have a strong leadership as well as a dedicated and experienced management
                and procurement team**





Our
      Company is led by our Executive Chairman and CEO, Pengfei Liu, who has more
      than
      30 years of experience in the seafood industry. Mr Liu’s drive and passion have
      been instrumental in our success to-date. He has conceptualized and implemented
      our strategies in the past and successfully led us in our transition from a
      small and local seafood enterprise to a nationwide seafood enterprise with
      advanced seafood processing facilities.





Mr
      Liu is
      ably supported by a team of experienced managers, most of whom have an average
      of five to ten years’ experience in their respective fields. These personnel
      support our Executive Chairman and CEO in charting and managing our growth.
      We
      believe the members of our procurement team have a strong grasp and good
      understanding of industry trends, market cycles and seasonal factors, and have
      the ability to discern and procure high-quality seafood at reasonable
      prices.




20





The
      management team receives regular training in the course of our Company obtaining
      and renewing our ISO and HACCP qualifications. The training, which is conducted
      over 10 to 15 days every year, involves process management, quality control,
      sanitary and hygiene operating procedures and standards. We believe that such
      training raises our competence and environmental / sanitary awareness, and
      places us in an advantageous position compared to other operators in the seafood
      industry who do not undergo such training.





**5.**
            **We
                have established strong relationships with our customers / distributors**





We
      have
      maintained close working relationships with our customers who are reputable
      distributors of processed seafood products. Our relationships with some of
      our
      PRC customers and distributors have been established for more than ten years.
      In
      particular, we have enjoyed good relationships with, among others, Qingdao
      Haizhan Seafood Co., Ltd. (“Qingdao Haizhan”), Wenzhou Rixin Foodstuff Co., Ltd.
      (“Wenzhou Rixin”), and Zhejiang Ruian Laodu Seafood Wholesale Proprietor
      (“Zhejiang Ruian Laodu”), for an average of approximately 8 years.





Qingdao
      Haizhan is in the business of distributing dried and frozen seafood products.
      To
      the best of our knowledge, Qingdao Haizhan has a distribution network of over
      1,000 retailers and a sales workforce of about 60 people.





Wenzhou
      Rixin is a distributor of dried seafood in Wenzhou City, Zhejiang Province.
      To
      the best of our knowledge, Wenhou Rixin has a distribution network of about
      1,000 retailers and a sales workforce of about 60 people.





Zhejiang
      Ruian Laodu is a large distributor of dried seafood in Ruian City, Zhejiang
      Province. To the best of our knowledge, Zhejiang Ruian Laodu has a distribution
      network of about 300 retailers and a sales workforce of about 20 people.





Regarding
      the percentage of sales represented by each party listed above; please refer
      to
      the section “Major Customers” on Page 23 for details.





We
      view
      our customers as long-term business partners who are important in the strategic
      growth of our operations and broadening the geographic reach of our products.





**6.**
            **We
                are strategically located**





We
      are
      based in Fujian Province which is situated in southeast China on the coast
      of
      the East China Sea. Fujian is one of the nine coastal provinces in the PRC
      and
      is a vital navigation hub between the East China Sea and the South China Sea.
      It
      is also rich in agricultural and marine resources.





Our
      main
      raw materials for our marine catch business come from the Taiwan Strait, which
      is also where we conduct our marine catch operations. The Taiwan Strait is
      rich
      in marine resources. Our business operations and production facilities are
      located at Shishi City, Fujian Province, where Xiangzhi (Shishi) Port has been
      designated as one of the national-level fishing ports. It is the largest port
      in
      Fujian Province and is one of the five largest fishing ports in the PRC in
      terms
      of supply of marine catch and tonnage of fishing vessels. Fujian Province is
      rich in agricultural and marine resources, which enables our procurement of
      raw
      materials for our processed seafood business at low cost. We believe our
      strategic location gives us access to an abundant supply of fresh marine
      products and hence allows us to manage our costs more effectively.





**7.**
            **We
                have strong research and development capabilities**





We
      place
      strong emphasis on the quality of our products and on our ability to develop
      new
      products. To ensure that our products are well-received by our customers and
      consumers, we have carried out research and development to improve the taste,
      texture and packaging of our processed seafood products. Through our research
      and development efforts, we have developed new products and improved the quality
      of our existing products, which have been well-received by our customers and
      consumers. These products include our crispy fish-bone snacks, roasted squid
      and
      roasted prawns.





Our
      strong product development capabilities allow us to constantly introduce new
      products into the market and maintain consumer interest and loyalty in our
      “Mingxiang” brand products. We believe that our strategic collaboration with the
      Ocean University of China will further strengthen our research and development
      capabilities.




21




**8.**
            **We
                are a designated National Marine Products Quality Assurance Testing
                Base**





We
      have
      been designated as a quality assurance testing base by the National Marine
      Foods
      Quality Supervision Testing Centre and our testing base is the only assessment
      base in the southern provinces of the PRC. We test the hygiene and quality
      of
      ingredients and products according to industrial standards. Our testing base
      caters to seafood processing companies from Fujian, Guangdong, Guangxi and
      Zhejiang Provinces, the PRC. We believe our role in quality assurance testing
      further strengthens our reputation as a producer of quality processed seafood
      products.





For
      the
      above reasons, we believe that we will be able to maintain our market position
      and competitive edge over our competitors.





**MAJOR
      SUPPLIERS**





The
      following table sets out our five major suppliers of raw materials for 2007,
      2006 and 2005:




**As
                  a Percentage of Our Purchases of Raw Materials (%)**
                **Year
                  ended December 31,****2007**
            
            
            **2006**
            
            
            **2005**Shishi
                City Tianwang Seafood Products Trading Proprietor
            
            
            21.8
            
            
            14.3
            
            
            12.2Jinjiang
                City Shenhu Town Hongyuan Seafood Products Trading
                Proprietor
            
            
            17.6
            
            
            7.9
            
            
            10.9Shishi
                City Nanfu Seafood Products Wholesale Proprietor
            
            
            15.6
            
            
            18.6
            
            
            17.9Shishi
                City Fugui Seafood Products Trading Proprietor
            
            
            18.5
            
            
            11.7
            
            
            10.7Shishi
                City Huali Seafood Products Trading Proprietor
            
            
            16.4
            
            
            10.0
            
            
            13.4**TOTAL**
            
            
            **89.9**
            
            
            **62.5**
            
            
            **65.1**





Trading
      in fresh fish and other seafood is mainly carried out by individual fishermen,
      who ply their trade in and around various fishing ports in Shishi City, Fujian
      Province. The above major suppliers are fish and seafood traders in markets
      in
      and surrounding Shishi City, Fujian Province. We procure from these suppliers
      fresh fish and other seafood, which are used as raw materials in the production
      of our processed seafood products. These suppliers also supply fresh fish and
      other seafood to other companies.





Before
      2005, we mainly sourced for supplies of fresh fish and other seafood directly
      from various fishermen when their trawlers docked at the ports. For convenience
      and greater savings in procurement expenses, from 2005 onwards we sourced our
      supplies from the five major suppliers, Therefore the percentage of our
      purchases from the above 5 major suppliers increased significantly in
      2005.




Though
      certain of our major suppliers accounted for more than 10% of our total
      purchases for the fiscal year ended December 31, 2007, we believe we are able
      to
      source our raw materials from alternative suppliers should the need
      arise.





None
      of
      our directors, executive officers and controlling shareholders is related to
      or
      has any interest in any of our major suppliers listed above. To the best of
      our
      knowledge, save as disclosed above, none of our major suppliers is related
      to or
      has any interest in one another, and none of our major suppliers is related
      to
      or has any interest in the customers stated in the section “Major Customers”
below.





**MAJOR
      CUSTOMERS**





The
      following table sets out our major customers accounting for 5.0% or more of
      our
      Company’s sales in 2007, 2006 and 2005:




**Year
                ended December 31,****Products**
            
            **2007**
            
            **2006**
            
            **2005**Qingdao
                Haizhan Seafood Co., Ltd.(1)
            
            
            Dried
                and frozen processed seafood products
            
            
            9.9
            
            
            14.3
            
            
            9.8Wenzhou
                Rixin Foodstuff Co., Ltd.(2)
            
            
            Dried
                processed seafood products
            
            
            9.8
            
            
            14.0
            
            
            10.8Zhejiang
                Ruian Laodu Seafood Wholesale Proprietor(3)
            
            
            Dried
                and frozen processed seafood products
            
            
            9.3
            
            
            7.9
            
            
            5.1Wenling
                City Xingfeng Foodstuff Co., Ltd.(4)
            
            
            Dried
                processed seafood products
            
            
            8.9
            
            
            9.7
            
            
            7.0Fuzhou
                Chaohui Foodstuff Company(5)
            
            
            Dried
                processed seafood products
            
            
            7.9
            
            
            5.3
            
            
            2.7Qingdao
                Xinqinghua Seafood Products Company(6)
            
            
            Marine
                catch, namely cuttlefish, squid, hairtail fish
            
            
            3.9
            
            
            11.0
            
            
            19.6Shenhu
                Town Dongshun Seafood Products Trading Proprietor(7)
            
            
            Marine
                catch, namely cuttlefish, squid, hairtail fish
            
            
            4.3
            
            
            4.7
            
            
            5.8Shishi
                City Junxu Seafood Products Trading Proprietor(8)
            
            
            Marine
                catch, namely cuttlefish, squid, hairtail fish
            
            
            4.3
            
            
            7.5
            
            
            11.4Shihuazhou
                Marine Products Wholesale Proprietor(9)
            
            
            Marine
                catch, namely cuttlefish, squid, hairtail fish
            
            
            4.1
            
            
            7.8
            
            
            12.5**TOTAL**
            
            
            
            
            
            **62.4**
            
            
            **82.2**
            
            
            **84.7**





Notes:





1)
            Qingdao
                Haizhan Seafood Co., Ltd. deals in dried and frozen seafood products
                and,
                to the best of our knowledge, has a distribution network of over
                1,000
                retailers. It has been our customer since 1996. The company is
                wholly-owned by another of our major customer, Qingdao Xinqinghua
                Seafood
                Products Company, and its associates. Our sales to Qingdao Haizhan
                Seafood
                Co., Ltd. have increased from 2005 to 2006 as it expanded its sales
                network to include supermarkets, which have resulted in increased
                orders
                from them. We believe that we will be less reliant on Qingdao Haizhan
                Seafood Co., Ltd. and Qingdao Xinqinghua Seafood Products Company
                for our
                sales in future, as we enter new markets and increase market penetration
                of existing markets.




22




2)
            Wenzhou
                Rixin Foodstuff Co., Ltd. is a distributor of dried seafood in Wenzhou
                City, Zhejiang Province, and has, to the best of our knowledge, a
                distribution network of about 1,000 retailers. It was one of our
                first
                distributors and has been our key business partner since 1994. Our
                sales
                to Wenzhou Rixing Foodstuff Co., Ltd. increased due to the expansion
                of
                its geographic distribution coverage from the city to the suburban
                areas.





3)
            Zhejiang
                Ruian Laodu Seafood Wholesale Proprietor is a large distributor of
                dried
                seafood in Ruian City, Zhejiang Province. It has been our customer
                since
                2005 but has increased its purchases from us due to the expansion
                of its
                distribution network which covers, to the best of our knowledge,
                300
                retailers.





4)
            Wenling
                City Xingfeng Foodstuff Co., Ltd. is a distributor of dried seafood
                in
                Wenling City, Zhejiang Province, and has, to the best of our knowledge,
                a
                distribution network of over 700 retailers. It has been our customer
                since
                1997. Our sales to Wenling City Xingfeng Foodstuff Co Ltd increased
                due to
                the expansion of their geographic distribution coverage from county
                to
                city-level in Wenling City, Zhejiang Province.





5)
            Fuzhou
                Chaohui Foodstuff Co., Ltd. is a distributor of dried processed seafood
                products located in Fuzhou City, Fujian Province. It became one of
                our
                major customers in 2005 and ours sales to Fuzhou Chaohui Foodstuff
                Co.,
                Ltd. increased substantially during the past two
                years.





6)
            Qingdao
                Xinqinghua Seafood Products Company is a trader of fresh seafood
                in
                Qingdao City, Shandong Province. It sources and purchases supplies
                for
                Korean fishery companies and has been our customer since 1996.





7)
            Shenhu
                Town Dongshun Seafood Products Trading Proprietor is a trader of
                fresh
                seafood in Quanzhou City, Fujian Province. It sources and purchases
                supplies for Taiwanese fishery companies in the seafood business,
                and has
                been our customer since 2002. The percentage of our sales to Zhusheng
                Chen
                has been decreasing due to a larger percentage increase in our total
                sales.





8)
            Shishi
                City Junxu Seafood Products Trading Proprietor is a trader of fresh
                seafood in Quanzhou City, Fujian Province. It sources and purchases
                supplies for Taiwanese fishery companies in the seafood business,
                and has
                been our customer since 2002.





9)
            Shihuazhou
                Marine Products Wholesale Proprietor is a trader of fresh seafood
                in
                Quanzhou City, Fujian Province. It sources and purchases supplies
                for
                Taiwanese fishery companies in the seafood business, and has been
                our
                customer since 2002.





None
      of
      our directors, executive officers and controlling shareholders is related to
      or
      has any interest in any of our major customers listed above. To the best of
      our
      knowledge, save as disclosed above, none of our major customers is related
      to or
      has any interest in one another, and none of our major customers is related
      to
      or has any interest in the suppliers stated in the section “Major Suppliers” on
      Page 23. We are not dependent on any one of our major customers as we are able
      to sell our fresh fish and seafood range, as well as our processed dried seafood
      products to other customers.




23





**INTELLECTUAL
      PROPERTY**





Except
      as
      disclosed below, we are not dependent on nor do we own any registered trademark
      or patent or any other intellectual property rights:





***Trademarks***





Our
      brand
      name distinguishes our products from that of our competitors and increase
      consumer awareness of our products. We have currently registered the following
      trademarks:




**Trademark****(1)**
            
            **Class**
            
            **Place
                of Registration**
            
            **Status
                / Validity Period**trademark
            
            Class
                40 covering processed seafood, agricultural foods, processed teas,
                processed herbs, chemical testing and processing
            
            PRC
            
            Registered
                / January 28, 2003 to January 27,
                2013





**Note** :





1)
            The
                above “Mingxiang” trademark was originally registered under the name of
                “Fujian Province Shishi City Huabao Mingxiang Foods Development Co.” on
                January 14, 1997. In a Confirmation of Approval to Trademark Transfer
                dated June 14, 2001, the PRC Trademark Bureau approved the transfer
                of
                this trademark to Mingxiang and the trademark is now registered in
                Mingxiang’s name under a Trademark Registration Certificate No. 930539.





We
      intend
      to further develop our “Mingxiang” brand image in the markets where we currently
      operate, and to promote it in new markets. In that regard, we intend to apply
      for registration of our trademark in the overseas markets where we conduct
      our
      sales, as we consider appropriate.





***Registered
      Packaging Designs***





We
      hold
      registered packaging designs in respect of the packaging of the majority of
      our
      processed seafood products. The details are as follows:





**Description
                of Registered Packaging Designs**
            
            **Place
                of Registration**
            
            **Status/Validity
                of Period**Packaging
                for Sakura squid
            
            PRC
            
            10
                years from March 28, 2003Packaging
                for roasted squid
            
            PRC
            
            10
                years from April 11, 2001Packaging
                for “Fisherman’s Dainty” Products
            
            PRC
            
            10
                years from September 7, 1998Packaging
                for roasted king prawn
            
            PRC
            
            10
                years from May 12, 1998Packaging
                for yellow croaker
            
            PRC
            
            10
                years from May 12, 1998





Save
      as
      disclosed above, as at the date of this Form 10-K, our business or profitability
      is not materially dependent on any other trademarks, copyrights, registered
      designs, patents, grant of licenses from third parties, new manufacturing
      processes and intellectual property rights.





**GOVERNMENT
      REGULATIONS**





The
      following is a description of the material licenses and permits issued to
      companies in our Company in order for us to carry out our operations, other
      than
      those pertaining to general business registration requirements:





***Hygiene
      Certificates***





We
      view
      hygiene control as a critical aspect of food production operations and place
      great emphasis on the hygienic preparation of our processed seafood products
      to
      ensure they are safe for consumption. We have received the following hygiene
      certificates in relation to our operations:




**Subsidiary**
            
            **Name
                of Certificate**
            
            **Description
                of License/Permit**
            
            **Issuing
                Authority**
            
            **Period
                of Validity**Mingxiang
            
            Hygiene
                License
            
            Permit
                to process seafood products
            
            Shishi
                City Hygiene Bureau
            
            March
                13, 2006 to March 12, 2008 [Renewal application accepted and awaiting
                issuance of formal license]Rixiang
            
            Hygiene
                License
            
            Permit
                to process seafood and agricultural products, research and processing
                biochemical products.
            
            Shishi
                City Hygience Bureau
            
            March
                13, 2006 to March 12, 2008****[Renewal application accepted and awaiting issuance of formal
                license]Rixiang
            
            Certificate
                of Hygiene Registration
            
            Registration
                of conformity with hygiene standards for the export of the following
                food
                products: frozen processed seafood products (excluding double-shelled
                categories and dried processed seafood products)
            
            National
                Accreditation Supervision Committee
            
            May
                31, 2006 to May 31, 2009




24




***Other
      Licenses and Permits***





Our
      other
      licenses and permits are as follows:





**Subsidiary**
            
            **Name
                of Certificate**
            
            **Description
                of License/Permit**
            
            **Issuing
                Authority**
            
            **Period
                of Validity**Mingxiang
            
            National
                Industrial Product Manufacturing License
            
            Permit
                to process seafood (dried)
            
            Fujian
                Province Quality Technology Supervisory Bureau
            
            November
                10, 2005 to November 10, 2008Rixiang
            
            Customs
                Registration Certificate
            
            Permit
                to file import-export documents with China Customs
            
            China
                Customs
            
            Dated
                December 14, 2004 until July 14, 2009Mingxiang
            
            Certificate
                of Approval for Enterprises with Foreign Trade Rights in the People’s
                Republic of China
            
            To
                import-export company’s products and technologies, raw materials,
                facilities, equipment
            
            Fujian
                Foreign Trade Economic Cooperation Department
            
            Valid
                from September 4, 2000; no expiration dateRixiang
            
            EU
                Export Registration
            
            Approval
                for Rixiang to export marine products to EU
            
            European
                Commission
            
            Valid
                from October 6, 2006; no expiration
                date





A
      fishing
      license is required for each fishing vessel that conducts marine catches at
      sea.
      Under the charter agreements entered into between our subsidiary Rixiang and
      the
      owners of the fishing vessels, the latter is responsible for obtaining and
      maintaining the requisite fishing licenses.





Save
      as
      disclosed above, as at the date of this Form 10-K, our business or profitability
      is not materially dependent on any other licenses and permits.





**RESEARCH
      AND DEVELOPMENT**





We
      believe that constant innovation in developing new processes and products that
      are well-received by consumers is vital to our continued success. As at December
      31, 2007, our research and development team comprises eight personnel. The
      focus
      of our research and development is directed towards satisfying the preferences
      of consumers, with the following objectives:





1.
            To
                improve our products in the areas of safety and quality (of taste,
                texture, hygiene and packaging);





2.
            To
                develop new products;




25




3.
            To
                achieve full customer satisfaction;





4.
            To
                reduce costs and create value; and





5.
            To
                develop products for low-value fish types and to increase the value
                of
                processing by-products.





Our
      main
      research and development activities include: (1) experimenting with various
      small fish species for the production of fish mash, (2) improving the taste
      and
      texture of our dried processed seafood products, (3) finding new uses for
      leftovers such as fish heads, prawn heads and shells which would otherwise
      be
      disposed, and (4) developing new products, including marine health products.
      Our
      research and development efforts enable us to develop efficient production
      processes which lower the cost of production, yet produce superior-quality
      products.





Some
      of
      the highlights of our research and development activities are set out
      below.




***Product
      Development***





Through
      our research and development activities, we have developed products which have
      been well-received by consumers and improved our production processes. For
      the
      period under review, we have through our research and development introduced
      18
      new processed seafood products, including smoked eel, Sakura squid, and sliced
      squid. We believe that our constant product innovation has led to our increasing
      reputation as a producer of processed natural seafood products.





***Collaboration
      with Ocean University of China***





On
      April
      28, 2006, our subsidiary Rixiang entered into a memorandum of understanding
      for
      collaboration with the Ocean University of China’s Food Sciences and Engineering
      Institute. The Ocean University of China is one of the renowned institutions
      in
      the PRC for ocean studies. The collaboration with Ocean University of China
      will
      allow us to tap into its technical know-how, to acquire new technical knowledge
      and processing techniques. In turn, we serve as a research base of the research
      and development work of Ocean University of China. We believe that we will
      benefit from the exchange of information and technological know-how.





The
      collaboration with Ocean University of China since April 2006 have been focused
      on developing new products and by-products from raw marine catch used in the
      processing of seafood products, in particular (1) the development of bioactive
      peptide products from leftovers of aquatic processed products; and (2) the
      development of collagen protein and collagen peptide protein products from
      fish
      skin:





1.
            *Development
                of bioactive peptide products from leftovers of processed seafood
                products*





Bioactive
      peptide protein found in aquatic products is used to produce angiotensin
      converting enzyme (ACE) inhibitors. ACE is a compound which increases the
      pressure within blood vessels, thereby causing high blood pressure. An ACE
      inhibitor helps slow the activity of the ACE. Using Bioactive peptide protein
      developed ACE inhibitors avoids the harmful side effects associated with using
      synthetic medicine for lowering hypertension.





2.
            *Development
                of collagen protein and collagen peptide protein products from fish
                skin*





This
      technique involves the extraction of collagen protein from fish skin. The
      collagen protein is then converted into marine biological collagen peptide
      protein using a directional enzyme hydrolysis technology and velum separation
      technology. Fish-skin collagen protein is mainly used as an ingredient for
      cosmetic products and health food products. We note that some cosmetics
      manufacturers have begun to use marine biological collagen peptide protein
      and
      collagen protein in their products.





The
      Ocean
      University of China would provide technical and training support in the
      development of production techniques and commercialization of the above said
      products. The research and development activities are conducted at our
      production facilities at Dabao Industrial Zone, Xiangzhi Town, Shishi City,
      Fujian Province.





Our
      research and development expenses amounted to approximately $33,000, $98,000
      and
      $20,000 for 2007, 2006 and 2005 respectively. The increase in research and
      development expenses in 2006 was due mainly to fees paid to the Ocean University
      of China following the formalization of the collaboration as mentioned above.
      Research and development expenses are presented as part of general and
      administrative expenses in the financial statements.





As
      part
      of our strategy to expand and develop our business, we plan to further expand
      our research and development team to about ten personnel in 2008. We intend
      to
      (1) set aside $0.8 million for research and development expenses, (2)
      collaborate with the Ocean University of China on one or two specialized
      research topics each year and (3) commercialize the products of our research
      and
      development efforts.




26





**QUALITY
      ASSURANCE**





We
      believe that the quality of our products is the key to our continued growth
      and
      success. We place great emphasis on quality assurance and the consistent quality
      of our products at all stages of our production processes. We attribute our
      success to date to our commitment to and production of quality products. As
      such, we believe that good quality control has been a key competitive strength
      of our Company. Our aim is that our “Mingxiang” brand should continue to be
      identified with tasty and high-quality processed marine seafood
      products.





As
      a
      testimony to our commitment to quality products and processes, we have been
      awarded the following awards and certifications:





**Subsidiary**
            
            **Award/Certification**
            
            **Awarding/Certification
                Body**
            
            **Validity
                Period**Rixiang
            
            Validation
                of conformity with HACCP standards(1)for the export of marine products to the US
            
            CIQ
            
            November
                13, 2007 to November 13, 2008Rixiang
            
            EU(2)export registration for export of our marine products to the
                EU
            
            European
                Commission
            
            No
                validity periodMingxiang
            
            ISO9001:2000(3)quality management system certification
            
            CNAB
                $ CCIC Quality Certification Centre
            
            December
                5, 2006 to December 4, 2009Mingxiang
            
            ISO14001:2004(4)environmental management system certification in respect of the processing
                of fish and prawn-type marine food products and the relevant environmental
                management
            
            CNAB
                & CCIC Conformity Assessment Services Co, Ltd.
            
            December
                15, 2005 to December 14, 2008





**Notes** :





1)
            Under
                the PRC’s Regulations on Administration of Certification of Hazard
                Analysis and Critical Control Point System (HACCP), applicants for
                the
                HACCP certification have to apply to CNAB-recognised certification
                and
                accreditation entities and comply with domestic and international
                sanitary
                criteria set out in various legislation including the PRC Sanitary
                Requirements for Export Food Manufacturing Enterprises and the HACCP
                System and Guidelines for its Application by the Codex Alimentarius
                Commission. CIQ, a HACCP-certification authority, will verify an
                exporter’s HACCP certification if (a) the product to be exported falls
                within one of the following categories, namely (1) canned food, (2)
                marine
                food products (excluding live, fresh, dry and marinated products),
                (3)
                meat and meat products, (4) frozen vegetables, (5) fruit or vegetable
                juice, (6) instant frozen food containing meat or marine food products;
                or
                (b) where such verification is required by authorities in the destination
                country. We believe that the HACCP certification enables our products
                to
                be more widely accepted by our domestic and international customers
                and
                aid to increase the export of our
                products.





2)
            The
                EU certification process ensures that the product conforms to the
                appropriate provisions and relevant legislation which implements
                certain
                European Directives. In the case of marine food products, the applicable
                European Directives include 91/493/EEC and
                94/356/EC.





3)
            ISO9001:2000
                is an international standard for quality management developed by
                the
                International Organization for Standardization. It sets requirements
                as to
                how an organization should manage its processes that influence product
                quality, and evaluates an organization’s resource management, process
                management and evaluation process that ensure its products conform
                to
                customer and applicable regulatory
                requirements.





4)
            ISO14001:2004
                is an internationally recognized standard for environment management
                systems, including energy management, waste management and process
                improvement.





Please
      refer to the section “Awards and Certifications” on Page 16 for further details
      of awards and certifications which we have obtained in respect of our products.
      To attain and maintain these accreditations, we have set up a quality control
      program in accordance with ISO9001:2000 standards. We have a comprehensive
      document management system in respect of our quality control system manuals,
      program documents, records and related documentation, which encompasses
      issuance, amendment, filing, recovery and destruction of the documents. Our
      quality control measures are designed to ensure we meet the standards under
      Sanitation Standard Operating Procedures (“SSOP”), Good Manufacturing Practice
      (“GMP”) and HACCP quality assurance systems, production control and product
      quality specifications. SSOP is an action plan that details procedures to
      maintain sanitary conditions throughout a food processing facility. This
      includes procedures on food handling and sanitation practices such as proper
      thawing methods, prevention of contamination and certain aspects of employee
      and
      environmental hygiene. GMP includes regulations promulgated by the U.S. Food
      and
      Drug Administration under the authority of the Federal Food, Drug and Cosmetic
      Act, which requires manufacturers, processors and packagers of drugs, medical
      devices and food to take proactive steps to ensure that their products are
      safe,
      pure and effective.




27





Our
      quality control program requires our employees to undergo training conducted
      internally in relation to our quality control policies, targets and procedures,
      as well as production and processing techniques and operational
      procedures.





We
      have
      established the following quality control procedures to ensure the high standard
      of quality of our processed seafood products:





In-coming





All
      incoming raw materials are inspected and approved by our quality control
      department. The quality control checks include hygiene, freshness and safety
      checks and dimensional checks (for packaging materials) to ensure that the
      raw
      materials conform to our health, freshness and safety standards and required
      specifications. Inspection is carried out by way of random sampling. Samples
      are
      extracted from each batch of raw materials and sent to the quality control
      department, where physical and chemical tests are conducted in our
      laboratory.





Raw
      materials that pass the quality control checks are then sent for storage in
      the
      cold storage facilities until they are required in the production
      process.





In-process





At
      each
      stage in the production process, we have quality inspectors who are responsible
      for sieving out inferior products, and to do random selection of products for
      testing in our laboratory. In our laboratory, these samples are tested for
      micro-organisms and to ensure that they fulfill hygiene and safety standards.
      Our machinery and equipment are also inspected regularly to ensure that they
      are
      in good working condition.





Finished
      products





The
      finished products undergo a final round of inspection before they are sent
      to
      the warehouse for storage to await delivery to our customers. Random samples
      are
      selected and brought to our laboratory for testing to ensure that they fulfill
      hygiene, safety and product standards. In respect of product standards, for
      example, we test our dried processed products to ensure that there is adequate
      but not excessive water content. Our finished products also go through a
      specially calibrated metal detector to ensure that products are not contaminated
      by metal particles from the production equipment.





After-sales





Our
      quality control department is also responsible for after-sales service, to
      address customers’ feedback or complaints.





Quality
      Assurance Testing Base





In
      January 2001, we were designated as a quality assurance testing base by the
      National Marine Foods Quality Supervision Testing Centre. The National Marine
      Foods Quality Supervision Testing Centre was established in 1986 and is based
      in
      Qingdao City, Shandong Province. This testing body is responsible for quality
      testing of the state’s designated products, research and development and grading
      of marine products, including fresh, frozen, dried and pickled marine processed
      products. As a designated testing base, we test the hygiene and quality of
      ingredients and products according to industrial standards. Our testing base
      caters to seafood processing companies from Fujian, Guangdong, Guangxi and
      Zhejiang Provinces, all in the PRC. We believe that we benefit in the provision
      of such services, as we are kept informed of industry news and technological
      developments. Currently we do not charge a fee for such services.




**ENVIRONMENTAL
      LAW COMPLIANCE**





On
      December 15, 2005, we received a Certificate of Environment Management System,
      certifying that we have been assessed and are in compliance with the environment
      management standard ISO14001: 2004. The scope of certification is for the
      production and the relative environmental management activity of fish, shrimp
      and other marine food. The registration number of the certificate is
      04005E10367ROM. The certificate is valid until December 14, 2008.





When
      our
      production plant was constructed, it was designed to comply with these
      environmental laws by directly disposing of the use water to a nearby sewage
      treatment plant for further handling. Because our production plant was built
      to
      comply with these environmental laws, we are not required to pay for any ongoing
      fees to the sewage treatment plant, nor has there been any material effects
      on
      our capital expenditures, earnings and competitive position.




28




**EMPLOYEES**





We
      set
      out below the total number of our employees and the various functions which
      they
      serve as at December 31, 2007, 2006 and 2005 respectively.




**As
                at December 31,****Functions**
            
            
            **2007**
            
            
            **2006**
            
            
            **2005**Sales
                and Marketing
            
            
            19
            
            
            16
            
            
            9Finance
                and Administration
            
            
            20
            
            
            17
            
            
            13Fishing
                and Procurement(1)
            
            
            102(2
            )
            
            135
            
            
            114Production,
                Research & Development, and Quality Control
            
            
            493
            
            
            492
            
            
            353**TOTAL**
            
            
            **634**
            
            
            **660**
            
            
            **489**





**Note** :





1)
            These
                figures include those fishermen who operate the fishing vessels that
                we
                charter for our marine catch business, who are paid by our
                Company.





2)
            The
                decrease in number of employees was mainly due to the reduction in
                number
                of chartered vessels from nine (9) in 2006 to six (6) as at December
                31,
                2007.





All
      of
      our employees are based in the PRC. Our PRC permanent employees are unionized.
      We have not experienced any strikes, labor disputes or work stoppages by our
      employees and believe our relationship with our employees is good.





***Staff
      Training***





We
      view
      our human resource as one of our key assets and place great emphasis on staff
      training that not only imparts job skills but also inculcates desirable working
      attitudes.





Therefore,
      our employees at all levels are required to undergo training relevant for their
      positions. The training includes technical training which is conducted by both
      internal and external trainers. Training aspects include quality control, export
      trading procedures, permits, quality standards and compliance with quality
      standards, as well as management training.





In
      addition, a new employee undergoes orientation on hygiene requirements,
      compliance with company policies and procedures as well as the required
      technical skills before taking up his appointment.




**Website
      Access to our SEC Reports**




You
      may
      obtain a copy of the following reports, free of charge through the SEC’s website
      at www.sec.gov as soon as reasonably practicable after electronically filing
      them with, or furnishing them to, the SEC: our Annual Reports on Form 10-K;
      our
      Quarterly Reports on Form 10-Q; our Current Reports on Form 8-K; and amendments
      to those reports filed or furnished pursuant to Section 13(a) of the Securities
      Exchange Act of 1934, as amended (the "Exchange Act"). Our Proxy Statements
      for
      our Annual Stockholder Meetings are also available through our Internet website.
      Our Internet website and the information contained therein or connected thereto
      are not intended to be incorporated into this Annual Report on Form 10-K.





The
      public may also read and copy any materials filed with the SEC at the SEC's
      Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The Public
      Reference Room may be contact at (800) SEC-0330. You may also access our other
      reports via that link to the SEC website.




**ITEM
      1A.**  **Risk
      Factors**




**RISKS
      RELATED TO OUR BUSINESS**





***We
      are dependent on the supply of fresh seafood in our production of processed
      seafood products and disruptions in the supply of fresh seafood could adversely
      affect our business operations.***





We
      use
      fresh seafood as the primary ingredient in our processed seafood products.
      Our
      processed seafood products accounted for approximately, 76.5%, 60.3% and 47.2%
      of our sales in the fiscal years ended December 31, 2007, 2006 and 2005
      respectively. Our production of processed seafood products is largely dependent
      on the continuous supply of fresh seafood, which in turn could be affected
      by a
      large number of factors, including environmental factors, the availability
      of
      seafood stock, weather conditions, the policies and regulations of the
      governments of the relevant territories where such fishing is carried out,
      the
      ability of the fishing companies and fishermen that supply us to continue their
      operations and pressure from environmental or animal rights groups.




29





Specifically,
      fishing activities in waters around the PRC are restricted in certain months
      to
      ensure sustainable aquatic resources. In particular, the PRC Ministry of
      Agriculture imposes restrictions against fishing in the South China Sea in
      the
      months of June and July. There is no assurance that the PRC government may
      not
      impose more stringent fishing regulations, including but not limited to longer
      or more frequent periods that restrict fishing. Such restrictions against
      fishing or unfavorable weather conditions have a direct impact on the
      availability of the raw materials required for the production of our processed
      seafood products, and could lead to a shortage and/or an increase in the prices
      of our raw materials. Any shortage in the supply of or increase in the prices
      of
      the raw materials for our processed seafood products will adversely affect
      our
      business, profitability and financial condition.





***Our
      profitability will be affected by fluctuations in the prices of our major raw
      materials.***





Our
      financial performance may be affected by changes in production costs
      brought about by fluctuations in the prices of our raw materials. Our major
      raw
      materials are fresh seafood which accounted for approximately 78.4%, 74.2%
      and
      64.6% of our total cost of sales of processed seafood products in the fiscal
      years ended December 31, 2007, 2006 and 2005 respectively. The prices of our
      major raw materials may fluctuate due to changes in supply and demand
      conditions.  Any shortage in supply or upsurge in demand of our major raw
      materials may lead to an increase in prices, which may adversely affect our
      profitability due to increased production costs and lower profit
      margins.





***We
      are dependent on five major customers. In the event any one of these major
      customers ceases to purchase or reduce their purchases from us, and we are
      unable to secure new contracts, our sales will be adversely
      affected.***





Our
      top
      five major customers accounted for approximately 45.8%, 56.9% and 64.1% of
      our
      sales in the fiscal years ended December 31, 2007, 2006 and 2005 respectively.
      In the event these and other major customers do not continue to purchase from
      us
      or reduce their purchases from us or develop their own ability to manufacture
      the products that we sell to them, and we are unable to secure new contracts
      or
      new customers that can replace the loss of these customers within a short time
      frame, our business and profitability will be affected. Please see the section
      “Major Customers” on Page 23 for more details.





***We
      are dependent on five major suppliers for our raw materials. In the event we
      are
      no longer able to secure raw materials from these suppliers and are unable
      to
      find alternative sources of supply at similar or more competitive rates, our
      operations and profitability will be adversely
      affected.***





For
      the
      production of our processed seafood products, we rely on our major suppliers
      for
      a significant portion of the supply of fresh seafood. Purchases from our top
      five suppliers of raw materials accounted for approximately 89.9%, 62.5% and
      65.1% of our total purchases of raw materials in the fiscal years ended December
      31, 2007, 2006 and 2005 respectively. In the event that we are unable to secure
      our raw materials from these suppliers and we are unable to find alternative
      sources of supply at similar or more competitive rates, our business and
      operations will be adversely affected. Please see the section “Major Suppliers”
on Page 23 for more details.





***A
      significant portion of our business activities is transacted in cash and our
      internal controls in relation to cash management may not be able to address
      all
      the risks associated with the handling of cash and cash
      transactions.***





Due
      to
      the nature of our business, our procurement of raw materials is fully transacted
      on a cash basis and a significant portion of our sales are transacted in cash.
      Our cash payment for the procurement of raw materials accounted for the whole
      of
      our total cost of sales for each of the fiscal years ended December 31, 2006,
      2005 and 2004. Starting from 2007, we have requested our major suppliers to
      open
      bank accounts and thus we could settle the purchases through bank
      instructions. Sales transacted in cash accounted for 1.6%, 42.9% and 25.8%
      of our total sales for the fiscal years ended December 31, 2007, 2006 and 2005
      respectively.





The
      internal controls in relation to cash management that we have put in place
      may
      not be able to address all the risks associated with the handling of cash and
      cash transactions. We may therefore be exposed to risks such as loss, theft,
      misappropriation and forgery of the cash used in our transactions. In the event
      such risks materialize, our financial position, business and results of
      operations may be materially and adversely affected.





***Our
      profitability and continued growth is dependent on our ability to yield
      commercially viable products, to enhance our product range and expand our
      customer base.***





The
      seafood processing industry is highly competitive. The growth potential of
      the
      seafood processing industry is dependant on population growth and consumer
      preferences. therefore believe that our profitability and continued growth
      is
      dependant on our ability to expand our customer base in existing and new markets
      by introducing new products that are fast growing and profitable in the
      populations that we serve, as well as our ability to develop commercially viable
      products through our product development efforts. If we do not succeed in these
      efforts, the growth of our sales may slow down and adversely affect our
      profitability. Please refer to the section “Research and Development” on Page 26
      for further details of our research and development efforts.




30





***Since
      we do not have long-term contracts with our suppliers and customers there is
      no
      guarantee that our suppliers will continue to supply us with raw materials,
      or
      that our customers will continue to purchase our
      products.***





We
      do not
      have long-term contracts with our suppliers and our customers. Accordingly,
      there can be no assurance that we will continue to be able to obtain sufficient
      quantities of raw materials in a timely manner from our existing suppliers
      on
      acceptable terms, or that our existing customers will continue to purchase
      our
      products on terms that are acceptable to us or at all. In the event that we
      are
      unable to source for new suppliers or new customers on terms that are acceptable
      to us, our business and operations will be adversely affected.





***We
      may be exposed to potential risks relating to our internal controls over
      financial reporting and our ability to have those controls attested to by our
      independent auditors*** **.**





As
      directed by Section 404 of the Sarbanes-Oxley Act of 2002 or SOX 404, the SEC
      adopted rules requiring public companies to include a report of management
      on
      the company’s internal controls over financial reporting in their annual
      reports, including Form 10-K. In addition, the independent registered public
      accounting firm auditing a company’s financial statements must also attest to
      and report on management’s assessment of the effectiveness of the company’s
      internal controls over financial reporting as well as the operating
      effectiveness of the company’s internal controls. We were not subject to these
      requirements for the fiscal year ended December 31, 2006; accordingly, we have
      not evaluated our internal control systems in order to allow our management
      to
      report on, and our independent auditors to attest to, our internal controls
      as
      required by these requirements of SOX 404. Under current law, we will be subject
      to these requirements beginning with our annual report for the fiscal year
      ending December 31, 2007. We can provide no assurance that we will comply with
      all of the requirements imposed thereby. There can be no assurance that we
      will
      receive a positive attestation from our independent auditors. In the event
      we
      identify significant deficiencies or material weaknesses in our internal
      controls that we cannot remediate in a timely manner or we are unable to receive
      a positive attestation from our independent auditors with respect to our
      internal controls, investors and others may lose confidence in the reliability
      of our financial statements.





***We
      currently lack an independent board of directors, which may result in the
      approval of transactions and policies without independent
      review.***





We
      currently do not have any independent directors on our board. However, we intend
      to appoint at least two within ninety days.





In
      the
      absence of a majority of independent directors, our executive officers could
      establish policies and enter into transactions without independent review and
      approval thereof, subject to certain restrictions under our Articles of
      Incorporation. In addition, although we intend to establish audit and
      compensation committees which will consist entirely of outside directors, until
      those committees are established, transactions and compensation policies could
      be approved without independent review. These and other transactions could
      present the potential for a conflict of interest between our Company and its
      stockholders generally and the controlling officers, stockholders or directors.





***There
      is no assurance that we will be able to execute our future plans successfully,
      or that our future plans will result in commercial
      success.***





We
      intend
      to, *inter
      alia* and
      expand our operations and production capacity in the PRC by constructing new
      cold storage facilities and expanding our production facilities. Our expansion
      plans involve a number of risks, including *inter
      alia* the
      costs of investment in fixed assets, costs of working capital tied up in
      inventories, as well as other working capital requirements. Our expansion will
      also depend on our ability to secure new customers and/or sufficient orders.
      Failure to secure new customers or sufficient orders or to meet our customers’
orders would materially and adversely affect our business and financial
      performance.





There
      is
      no assurance that our future plans will result in commercial success. If we
      are
      unable to execute our expansion plans successfully, our business and financial
      performance would be materially and adversely affected.





***Changes
      in consumer preferences or discretionary consumer spending could adversely
      impact our results.***





Our
      continued growth and success depends in part on the popularity of our products.
      Sales of our marine catch and processed seafood products as a percentage of
      our
      total sales for the period under review were as follows:





**Year
                ended December 31,****Products**
            
            **2007**
            
            **2006**
            
            **2005****(%)**
            
            **(%)**
            
            **(%)**Marine
                catch
            
            
            23.5
            
            
            39.7
            
            
            52.8Processed
                seafood products
            
            
            76.5
            
            
            60.3
            
            
            47.2




31




Shifts
      in
      consumer preferences or eating habits away from processed seafood products
      will
      materially affect our business. In addition, our continued success depends,
      in
      general, on the economic conditions, disposable income and consumer confidence
      in the countries in which we sell our products, all of which can affect
      discretionary consumer spending in such countries. Adverse changes in these
      factors would reduce the flow of customers and limit our pricing which will
      reduce our profitability.





***Our
      business activities are subject to certain laws and regulations and our
      operations may be affected if we should fail to have in force the requisite
      licenses and permits.***





We
      are
      required to obtain various licenses and permits in order to conduct our business
      of production and export of processed seafood products. These include the
      Hygiene Registration Certificate, which is a requirement in order to carry
      on
      the production of food products in the PRC, as well as the HACCP certificate
      and
      EU export registration, which is a requirement in order to export our processed
      seafood products to certain countries. Please see the section “Other Licenses
      and Permits” on Page 26 for further details. Our business is also subject to
      applicable laws and regulations. Please see the section “Government Regulations”
of this Form 10-K for a summary of the material laws and regulations that apply
      to our Company.





Any
      failure to comply with the conditions stipulated in our licenses and permits
      may
      lead to their revocation or non-renewal. Any failure to observe the applicable
      laws and regulations may lead to the termination or suspension of some or all
      of
      our business activities or penalties being imposed on us. The occurrence of
      any
      of these events may adversely affect our business, financial condition and
      results of operations.





***Our
      processed seafood products may be illegally tampered with such that they are
      rendered unfit for consumption and have to be recalled and
      destroyed.***





Our
      processed seafood products are packed in plastic materials that can be
      illegally tampered with. Illegal tampering of our processed seafood products
      could result in such products being rendered unfit for consumption or cause
      them
      to fail to meet customer specifications, health and/or safe handling
      requirements. This may lead to a loss of customer confidence in our products;
      affect our reputation, cause product recalls and/or product destruction. In
      addition, we may incur substantial litigation costs and may be ordered to
      compensate consumers in the event of any illness or death caused by the
      consumption of an illegally tampered seafood product.





In
      the
      event that our processed seafood products are recalled or destroyed as a result
      of illegal tampering or a claim is made against us arising from the consumption
      of our products, our reputation, business goodwill and sales will be adversely
      affected.





***Product
      or raw material deterioration will lead to loss of sales, higher costs, negative
      publicity, and payment of compensation to our customers and/or product liability
      claims.***





Our
      raw
      materials and frozen processed seafood products, being perishable in nature,
      may
      deteriorate due to various reasons such as malfunctioning cold storage
      facilities, delivery delays or poor handling. This may lead to a delay in
      production or delivery of our products, a loss in revenue, costs incurred in
      the
      purchase of replacement raw materials and payment of compensation to our
      customers. Any deterioration in our raw materials or processed seafood products
      could have a material adverse effect on our business, operations and
      reputation.





Currently,
      we do not have any product liability insurance in respect of our products.
      We
      believe that premiums for product liability insurances are high compared to
      the
      risk of claims. In the event that the consumption of our processed seafood
      products causes harm, illness or death to a consumer of our products, whether
      as
      a result of product deterioration, spoiling, sabotage, willful action, omission
      or negligence, we may be liable to complaints, lawsuits and claims from
      consumers of our products which in turn could generate negative publicity and
      materially and adversely affect our business, financial condition and our
      operations.





***Outbreak
      of disease or widespread contamination in any of the raw materials that we
      use
      in our production or any food scares may lead to a loss in consumer confidence
      and reduce the demand for our processed seafood
      products.***





One
      of
      our competitive strengths is our established brand name and track record. We
      have received several awards and certificates for our high quality products,
      including the “Green Food” award. Any outbreak of disease or widespread
      contamination in any of the raw materials that we use in the production of
      our
      products or food scares in the markets in which our processed seafood products
      are manufactured or sold may have an adverse impact on our business as it may
      lead to a loss in consumer confidence and reduce the demand of our processed
      seafood products. It may also affect our sources of supply and we may have
      to
      look for alternative sources of supply which may be more costly, or which may
      not be available. If this develops into actual events, our operations and
      profitability will be adversely affected.




***Any
      failure to meet health and hygiene standards may result in the suspension of
      licenses, accreditations or the loss of our ability to import and export our
      products.***





We
      are
      subject to annual checks carried out by the General Administration of Quality
      Supervision, Inspection and Quarantine of the PRC (CIQ). The CIQ’s annual check
      encompasses the inspection of food preparation, production and processing
      operations, as well as health checks on our employees. Failure to meet the
      required standards may result in our being required to take remedial measures
      to
      meet the health and hygiene standards, or in extreme cases, the cancellation
      or
      suspension of the license(s) and accreditation(s) required for us to carry
      on
      our operations. In the event that this should occur, our operations and
      financial condition will be materially and adversely affected and could lead
      to
      a loss in customer confidence in our products.




32





In
      addition, the CIQ makes random inspections on the processed seafood products
      that we export. Failure to meet the required standards of hygiene may affect
      our
      ability to export our processed seafood products and meet our customers’ orders
      on time. It may also lead to a restriction on our ability to export our
      processed seafood products which will materially and adversely affect our
      business, financial condition and operations.





***Our
      chartering agreements with owners of fishing vessels may be prematurely
      terminated, making it difficult for us to carry out our business
      operations.***





We
      have
      currently entered into agreements to charter six fishing vessels for our marine
      catch operations. Under these agreements, the owners of the fishing vessels
      are
      obliged and required, among other conditions, to procure  and
      maintain the fishing licenses required to conduct the fishing of marine catch.
      Although our agreements are for various periods expiring between end 2007 and
      end 2009, there is a risk that these agreements may be prematurely terminated,
      for example, if the vessel owners fail to provide us with seaworthy vessels
      or
      fail to procure and maintain valid fishing licenses. There is also a risk that
      these owners will not renew or extend our chartering agreements upon expiry.
      If
      we are unable to enter into new chartering agreements on similar terms and
      on a
      timely basis, such premature termination or failure to renew or extend the
      agreements may have an adverse effect on the financial performance and prospects
      of our marine catch business.





***We
      bear the risk of loss in shipment of our products and have no insurance to
      cover
      such loss*** **.**




Under
      the
      shipping terms of our standard customer contracts, we bear the risk of loss
      in
      shipment of our products and do not insure this risk. since management considers
      the risk of loss to be minimal, with export sales representing less than 1%
      of
      our total sales. Moreover, we believe that the shipping companies that we use
      carry adequate insurance or are sufficiently solvent to cover any loss in
      shipment. Nevertheless, there can be no assurance that we will be adequately
      reimbursed upon the loss of a significant shipment of our products.




***We
      are dependent on our Executive Directors and Executive Officers. Any loss in
      their services without suitable replacement may adversely affect our
      operations.***





Our
      success to date has been largely due to the contribution of Pengfei Liu, our
      Executive Chairman and CEO. Mr. Liu is the founder of our Company, and has
      spearheaded our expansion and growth. He is responsible for our operations,
      marketing, public relations, strategic planning and development of new products
      and markets. Our continued success is dependent, to a large extent, on our
      ability to retain his services.





The
      continued success of our business is also dependent on our key management and
      operational personnel such as our Deputy CEO and Executive Director, Shaobin
      Yang, and our other executive officers. We rely on their experience in the
      processed seafood and marine catch industry, product development, sales and
      marketing and on their relationships with our customers and suppliers.





The
      loss
      of the services of any of our executive directors or executive officers without
      suitable replacement or the inability to attract and retain qualified personnel
      will adversely affect our operations and hence, our revenue and
      profits.




***We
      are dependent on our customers’ ability to maintain and expand their sales and
      distribution channels. Should these distributors be unsuccessful in maintaining
      and expanding their distribution channels, our results of operations will be
      adversely affected.***





Demand
      for our products from end-consumers and our prospects depend on the retail
      growth and penetration rate of our products to end-consumers. Sales of our
      products are conducted mainly through distributors, over whom we have limited
      control. As of December 31, 2007, our distribution network is comprised of
      34
      distributors located in five provinces. These distributors sub-distribute our
      dried processed seafood products to about 1,200 retail points, including major
      supermarkets. We are thus dependent on the sales and distribution channels
      of
      our distributors for broadening the geographic reach of our products. Should
      these distributors be unable to maintain and expand their distribution channels,
      our results of operations and financial position will be adversely
      affected.





***Failure
      to compete effectively in a competitive environment may affect our
      profitability.***





We
      operate in the highly competitive processed seafood industry. We believe that
      our major competitors include international and domestic seafood processors.
      Some of these competitors may have significantly greater financial, technical
      and marketing resources, stronger brand name recognition and larger existing
      customer base than we do.





We
      also
      believe that these competitors may have the ability to respond more quickly
      to
      new or emerging technologies or may adapt more quickly to changes in
      customer requirements or may devote greater resources to the development,
      promotion and sales of their products than us.




33




There
      is
      no assurance that we will be able to continue competing successfully against
      present and future competitors. We believe that important factors to achieving
      success in our industry include maintaining customer loyalty by cultivating
      long-term customer relationships, achieving consistent product renewal and
      maintaining the quality of our products. If we are unable to attain these,
      we
      may lose our customers to our competitors and this will adversely affect our
      market share. Increased competition may also force us to lower our prices,
      thus
      reducing our profit margins and affecting our financial performance and
      condition. Such competition may have a material adverse effect on our business,
      financial position and results of operations. Please refer to the section
      captioned “Competition” in this Form 10-K for further details as to our present
      competitors.





***Any
      outbreak of earthquake, tsunami, adverse weather or oceanic conditions or other
      calamities may result in disruption in our operations and could adversely affect
      our sales.***





We
      are
      based in Fujian Province which is situated in southeast China on the coast
      of
      the East China Sea. Fujian is a vital navigation hub between the East China
      Sea
      and South China Sea, and is also rich in agricultural and marine resources.
      Our
      main raw materials for our marine catch business come from the Taiwan Straight,
      which is also the place where we conduct our marine catch
      operations.





In
      2004,
      an undersea earthquake occurred off the west coast of Sumatra Indonesia. This
      earthquake triggered a series of devastating tsunamis along the costs of most
      landmasses boarding the Indian Ocean. More than 225,000 people in 11 countries
      were killed, and coastal communities were inundated with waves up to 100
      feet.





Due
      to
      the location of our business, we may be at risk of experiencing another tsunami,
      earthquake or other adverse weather or oceanic conditions. This may result
      in
      the breakdown of our facilities, such as our cold storage facilities, which
      will
      in turn lead to deterioration of our products with the potential for spoilage.
      This could adversely affect our ability to fulfill our sales orders and
      adversely affect our profitability.





Adverse
      weather conditions affecting the fishing grounds where the fishing vessels
      chartered by us operate such as storms, cyclones and typhoons or cataclysmic
      events such as tsunamis may also decrease the volume of our fish catches or
      may
      even hamper our fishing operations. Our operations may also be adversely
      affected by major climatic disruptions such as El Nino which in the past has
      caused significant decreases in seafood catches worldwide.





***We
      are in the business of processing, distributing and selling processed seafood
      products and marine catch. Thus, a dramatic reduction in fish resources may
      adversely affect our business.***





We
      are in
      the business of processing, distributing, and selling processed seafood
      products, as well as selling marine catch. As such, 100% of our raw materials
      are obtained through the practice of fishing. Due to over-fishing, the stocks
      of
      certain species of fish may be dwindling and to counteract such over-fishing,
      governments may take action that may be detrimental to our ability to conduct
      our operations. If the solution proffered or imposed by the governments
      controlling the fishing grounds either restrict our ability to procure seafood
      supply or if such action limits the types, quantities and species of fish
      that we are able to procure or catch, our operations and prospects may be
      adversely affected.





***We
      are exposed to the credit risk of our customers which may cause us to make
      larger allowances for doubtful trade receivables or incur bad debt
      write-offs.***





Our
      customers may default on their payments to us. Although we review the credit
      risk of our customers regularly, such risks will nevertheless arise from events
      or circumstances that are difficult to anticipate or control, such as an
      economic downturn.





Our
      trade
      receivables turnover days were approximately 27, 33 and 57 days in 2007, 2006
      and 2005 respectively. Our allowances for doubtful trade receivables as at
      December 31, 2007, 2006, and 2005 were approximately $21,000, $6,000 and $22,000
      respectively, and in the range of 0.5% to 0.6% of our gross trade
      receivables.





As
      a
      result of this credit risk exposure of our customers defaulting on their
      payments to us, we may have to make larger allowances for doubtful trade
      receivables or incur bad debt write-offs, both of which may have an adverse
      impact on our profitability.





***We
      may be subject to foreign exchange risk and may incur losses arising from
      exchange differences upon settlement.***





We
      sell
      our dried processed seafood products, frozen processed seafood products and
      marine catch mainly to local customers. Direct exports as a percentage of our
      sales ranged between 0.5% to 4.2% during the period under review. Our sales
      are
      denominated in RMB and US$, while our purchases are denominated in RMB.




34




For
      the
      period under review, the percentages of our sales denominated in RMB and US$
      were as follows:





**Year
                ended December 31,****2007**
            
            **2006**
            
            **2005****(%)**
            
            **(%)**
            
            **(%)**RMB
            
            
            99.5
            
            
            99.1
            
            
            95.8US$
            
            
            0.5
            
            
            0.9
            
            
            4.2





We
      may
      incur losses arising from exchange differences upon settlement. To the extent
      that our sales, purchases and expenses are not naturally matched in the same
      currency and there are timing differences between collections and payments,
      we
      will be exposed to any adverse fluctuations in the exchange rates between the
      various foreign currencies and the RMB. Any restrictions over the conversion
      or
      timing of conversion of foreign currencies may also expose us to adverse
      fluctuations in exchange rates. As a result, our earnings may be materially
      and
      adversely affected.





On
      July
      21, 2005, the Renminbi was unpegged against the US$ and pegged against a basket
      of currencies on a “managed float currency regime”. As at December 31, 2007, the
      closing exchange rate was approximately US$1.00 to RMB7.3141. There is no
      assurance that the PRC’s foreign exchange policy will not be further altered. In
      the event that the PRC’s policy is altered, significant fluctuations in the
      exchange rates of RMB against the US$ will arise. As a result we will be subject
      to significant foreign exchange exposure and in the event that we incur foreign
      exchange losses, our financial performance will be adversely
      affected.





We
      currently do not have a formal hedging policy with respect to our foreign
      exchange exposure as our foreign exchange gains and losses over the past three
      fiscal years ended December 31, 2007, 2006 and 2005 respectively, have been
      relatively low. We will continue to monitor our foreign exchange exposure in
      the
      future and will consider hedging any material foreign exchange exposure should
      the need arise.





Please
      refer to the section “Foreign Exchange Exposure” of this Form 10-K for further
      details.





***Our
      products and brand name may be replicated or counterfeited which will in turn
      have an adverse effect on our Company and we may be affected by intellectual
      property rights disputes.***





We
      have
      registered certain trademarks in the PRC, details of which are set out in the
      section “Intellectual Property” on Page 25. Despite the protection of our
      trademark under the intellectual property laws of the PRC, such laws may not
      be
      adequate or effectively enforced against third parties who may violate our
      proprietary rights by illegally using our trademarks or our brand name. Our
      products and brand names may be replicated or counterfeited, which in turn
      may
      adversely affect our reputation and brand image.





Policing
      unauthorized use of our trademarks or brand is difficult and costly,
      particularly in countries where the laws may not fully protect our proprietary
      rights. There can be no assurance that our means of protecting our proprietary
      rights will be adequate. Any unauthorized use of our trademarks and brand may
      damage our brand, recognition and reputation. This may lead to our customers
      losing confidence in our brand and products, which, in turn, may lead to a
      loss
      in our business and hence sales.





**RISKS
      RELATED TO DOING BUSINESS IN CHINA**





***Our
      operations in the PRC are subject to the laws and regulations of the PRC and
      any
      changes in the laws or policies of the PRC may have a material impact on our
      operations and financial performance.***





As
      our
      processed seafood products and marine catch businesses are carried out in the
      PRC, we are subject to and have to operate within the framework of the PRC
      legal
      system. Any changes in the laws or policies of the PRC or the implementation
      thereof, for example in areas such as foreign exchange controls, tariffs, trade
      barriers, taxes, export license requirements and environmental protection,
      may
      have a material impact on our operations and financial performance.





The
      corporate affairs of our companies in the PRC are governed by their articles
      of
      association and the corporate and foreign investment laws and regulations of
      the
      PRC. The principles of the PRC laws relating to matters such as the fiduciary
      duties of directors and other corporate governance matters and foreign
      investment laws in the PRC are relatively new. Hence, the enforcement of
      investors or shareholders' rights under the articles of association of a PRC
      company and the interpretation of the relevant laws relating to corporate
      governance matters remain largely untested in the PRC.




35




***Introduction
      of new laws or changes to existing laws by the PRC government may adversely
      affect our business if stricter regulations are imposed on the overseas business
      practices of PRC companies***





Our
      operations are carried out through our wholly-owed subsidiaries which are
      located in the PRC. As such, the laws of the PRC govern our businesses and
      operations. The PRC legal system is a codified system of written laws,
      regulations, circulars, administrative directives and internal guidelines.
      The
      PRC government is still in the process of developing its legal system to
      encourage foreign investment and to align itself with global practices and
      standards. As the PRC economy is undergoing development at a faster rate than
      the changes to its legal system, some degree of uncertainty exists in connection
      with whether and how existing laws and regulations apply to certain events
      and
      circumstances. Some of the laws and regulations and the interpretation,
      implementation and enforcement of such laws and regulations are also at an
      experimental stage and are subject to policy changes. Hence, precedents on
      the
      interpretation, implementation and enforcement of certain PRC laws are limited
      and court decisions in the PRC do not have binding effect on lower courts.
      Accordingly, the outcome of dispute resolutions and litigation may not be as
      consistent or predictable as in other more developed jurisdictions and it may
      be
      difficult to obtain swift and equitable enforcement of the laws in the PRC,
      or
      to obtain enforcement of a judgment by a court or another
      jurisdiction.





In
      particular, on August 8, 2006, six PRC regulatory bodies, including the Ministry
      of Commerce (MOFCOM) and the China Securities Regulatory Commission (“CSRC”),
      jointly promulgated the new “Regulations on Foreign Investors Merging with or
      Acquiring Domestic Enterprises”, which took effect on September 8, 2006 (“2006
      M&A Rules”). The 2006 M&A Rules regulate, *inter
      alia* ,
      the
      acquisition of PRC domestic companies by foreign investors.





On
      September 21, 2006, the CSRC promulgated the “Guidelines on Domestic Enterprises
      Indirectly Issuing or Listing and Trading their Stocks on Overseas Stock
      Exchanges” (the “CSRC Guidelines”).





Under
      the
      2006 M&A Rules and the CSRC Guidelines, the listing of overseas special
      purpose vehicles (“SPV”) which are controlled by PRC entities or individuals are
      subject to the prior approval of the CSRC.





The
      2006
      M&A Rules and the CSRC Guidelines do not provide any express requirement for
      an SPV to retroactively obtain CSRC approval where the restructuring steps
      had
      been completed prior to September 8, 2006.





Yuan
      Tai
      Law Offices, our Legal Adviser on PRC Law, is of the opinion that (i) we have
      obtained all the necessary governmental approvals from PRC authorities for
      the
      restructuring of our subsidiaries prior to September 8, 2006, (ii) we do not
      need to obtain CSRC approval and (iii) it is not necessary for us to comply
      retroactively with the requirement of obtaining the prior approval of the CSRC
      for our public listing in the U.S.





There
      is
      no assurance that these PRC authorities will not issue further directives,
      regulations, clarifications or implementation rules requiring us to obtain
      further approvals in relation to our public listing in the U.S.





***PRC
      foreign exchange control may limit our ability to utilize our cash effectively
      and affect our ability to receive dividends and other payments from our PRC
      subsidiaries.***





Our
      PRC
      subsidiaries, which are foreign investment entities (“FIEs”), are subject to the
      PRC rules and regulations on currency conversion. In the PRC, the State
      Administration of Foreign Exchange (“SAFE”) regulates the conversion of the RMB
      into foreign currencies. Currently, foreign investment enterprises (including
      wholly foreign-owned enterprises) are required to apply to the SAFE for “Foreign
      Exchange Registration Certificates for FIEs”. With such registration
      certification (which have to be renewed annually), FIEs are allowed to open
      foreign currency accounts including the “current account” and “capital account”.
      Currently, transactions within the scope of the "current account" (for example,
      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” (for example, for capital items such as direct
      investments, loans and securities) still requires the approval of the SAFE.
      Our
      PRC operating subsidiary Rixiang has obtained the "Foreign Exchange Registration
      Certificates for FIEs", which is subject to annual review.





There
      is
      no assurance that the PRC regulatory authorities will not impose restrictions
      on
      the convertibility of the RMB for FIEs. In 2007 and 2006, approximately 99.5%
      and 99.1% of our sales respectively was denominated in RMB. As such, any future
      restrictions on currency exchanges may limit our ability to utilize funds
      generated in the PRC to fund any potential business activities outside the
      PRC
      or to distribute dividends to our shareholders.




***Our
      subsidiaries, operations and significant assets are located outside the U.S.
      Shareholders may not be accorded the same rights and protection that would
      be
      accorded under the Securities Act. In addition, it could be difficult to enforce
      a U.S. judgment against our Directors and officers.***





Our
      subsidiaries, operations and assets are located in the PRC. Our subsidiaries
      are
      therefore subject to the relevant laws in the PRC. U.S. law may provide
      shareholders with certain rights and protection which may not have corresponding
      or similar provisions under the laws of the PRC. As such, investors in our
      common stock may or may not be accorded the same level of shareholder rights
      and
      protection that would be accorded under the Securities Act. In addition, all
      our
      current executive directors are non-residents of the U.S. and the assets of
      these persons are mainly located outside the U.S. As such, there may be
      difficulty for our shareholders to affect service of process in the U.S., or
      to
      enforce a judgment obtained in the U.S. against any of these
      persons.




36




***We
      are subject to the PRC's environmental laws and regulations and in the event
      stricter rules are imposed to protect the environment, we may have to incur
      higher costs to comply with such rules.***





Our
      production facilities in the PRC will be subject to environmental laws and
      regulations imposed by the PRC authorities, *inter
      alia* ,
      in
      respect of air protection, waste management and water protection. In the event
      stricter rules are imposed on air protection, waste management and water
      protection by the PRC authorities, we may have to incur higher costs to comply
      with such rules. Accordingly, our financial performance may be adversely
      affected. In addition, we require license for the discharge of pollutants for
      our operations, which is subject to annual review and renewal. In the event
      that
      we fail to renew our license with the relevant authority, our operations and
      financial performance will be adversely affected.





***The
      outbreak of avian influenza and/or other communicable diseases, if uncontrolled,
      could affect our financial performance and prospects.***





The
      avian
      influenza virus is a virus found chiefly in birds, but infections with these
      viruses can occur in humans. In January of 2004, the first case of the avian
      influenza was reported in Guangxi, Hunan and Hubei provinces. Later reports
      also
      came from Anhui, Liaoning, Shanghai and Guangdong provinces. As of August
      2006, there have been 88 recorded outbreaks of the avian influenza in the
      PRC.





Because
      our operations are carried out through our wholly-owned subsidiaries located
      in
      the PRC, the outbreak of avian influenza and/or other communicable diseases,
      if
      uncontrolled, can have an adverse effect on business sentiments and environment.
      In addition, if any of our employees, our customers or our suppliers, is
      affected by the outbreak of communicable diseases, it can adversely affect,
      among others, our operations, our customers **'** orders
      and our supply of raw materials. Accordingly, our sales and profitability will
      be materially and adversely affected.





***Changes
      in China’s political or economic situation could harm us and our operating
      results*** .





Economic
      reforms adopted by the Chinese government have had a positive effect on the
      economic development of the country, but the government could change these
      economic reforms or any of the legal systems at any time. This could either
      benefit or damage our operations and profitability. Some of the things that
      could have this effect are:




·
            Level
                of government involvement in the
                economy;


·
            Control
                of foreign exchange;


·
            Methods
                of allocating resources;


·
            Balance
                of payments position;


·
            International
                trade restrictions; and


·
            International
                conflict.





The
      Chinese economy differs from the economies of most countries belonging to the
      Organization for Economic Cooperation and Development, or OECD, in many ways.
      As
      a result of these differences, we may not develop in the same way or at the
      same
      rate as might be expected if the Chinese economy were similar to those of the
      OECD member countries.





***The
      Chinese government exerts substantial influence over the manner in which we
      must
      conduct our business activities. Government action in the future may require
      us
      to divest ourselves of any interest we hold in Chinese
      properties.***





China
      only recently has permitted provincial and local economic autonomy and private
      economic activities. The Chinese government has exercised and continues to
      exercise substantial control over virtually every sector of the Chinese economy
      through regulation and state ownership. Our ability to continue to operate
      in
      China may be affected by changes in its laws and regulations, including those
      relating to taxation, import and export tariffs, environmental regulations,
      land
      use rights, property and other matters. We believe that our operations in China
      are in material compliance with all applicable legal and regulatory
      requirements. However, the central or local governments of the jurisdictions
      in
      which we operate may impose new, stricter regulations or interpretations of
      existing regulations that would require additional expenditures and efforts
      on
      our part to ensure our compliance with such regulations or interpretations.





Accordingly,
      government actions in the future including any decision not to continue to
      support recent economic reforms and to return to a more centrally planned
      economy or regional or local variations in the implementation of economic
      policies, could have a significant effect on economic conditions in China or
      particular regions thereof, and could require us to divest ourselves of any
      interest we then hold in Chinese properties or joint ventures.




37




***Future
      inflation in China may inhibit our ability to conduct business in China.***





In
      recent
      years, the Chinese economy has experienced periods of rapid expansion and highly
      fluctuating rates of inflation. During the past ten years, the rate of inflation
      in China has been as high as 20.7% and as low as -2.2%. These factors have
      led
      to the adoption by the Chinese government, from time to time, of various
      corrective measures designed to restrict the availability of credit or regulate
      growth and contain inflation. High inflation may in the future cause the Chinese
      government to impose controls on credit and/or prices, or to take other action,
      which could inhibit economic activity in China, and thereby harm the market
      for
      our products.





***Restrictions
      on currency exchange may limit our ability to receive and use our revenues
      effectively.***





The
      majority of our revenues will be settled in Renminbi and U.S. dollars, and
      any
      future restrictions on currency exchanged may limit our ability to use revenue
      generated in Renminbi to fund any future business activities outside China
      or to
      make dividend or other payments in the U.S. dollars. Although the Chinese
      government introduced regulations in 1996 to allow greater convertibility of
      the
      Renminbi for current account transactions, significant restrictions still
      remain, including primarily the restriction that foreign-invested enterprises
      may only buy, sell or remit foreign currencies after providing valid commercial
      documents, at those banks in China authorized to conduct foreign exchange
      business. In addition, conversion of Renminbi for capital account items,
      including direct investment and loans, is subject to governmental approval
      in
      China, and companies are required to open and maintain separate foreign exchange
      accounts for capital account items. We cannot be certain that the Chinese
      regulatory authorities will not impose more stringent restrictions on the
      convertibility of the Renminbi.





***The
      value of our securities will be affected by the foreign exchange rate between
      U.S. dollars and Renminbi.***





The
      value
      of our common stock will be affected by the foreign exchange rate between U.S.
      dollars and Renminbi, and between those currencies and other currencies in
      which
      our sales may be denominated. For example, to the extent that we need to convert
      U.S. dollars into Renminbi for our operational needs and should the Renminbi
      appreciate against the U.S. dollar at that time, our financial position, the
      business of the company, and the price of our common stock may be harmed.
      Conversely, if we decide to convert our Renminbi into U.S. dollars for the
      purpose of declaring dividends on our common stock or for other business
      purposes and the U.S. dollar appreciates against the Renminbi, the U.S. dollar
      equivalent of our earnings from our subsidiaries in China would be reduced.




**RISKS
      RELATED TO THE MARKET FOR OUR STOCK**




***Pengfei
      Liu will have significant influence over the outcome of matters submitted to
      Shareholders for approval.***





Mr.
      Liu
      currently owns approximately 50.96% of our authorized share capital. As a
      result, he will be able to exercise significant influence over all matters
      requiring shareholder approval, including the appointment of our directors
      and
      the approval of significant corporate transactions. **** His
      ownership and control may also have the effect of delaying or preventing a
      future change in control, impeding merger, consolidation, takeover or other
      business combination or discourage a potential acquirer from making a tender
      offer.





***Our
      share price may be volatile, which can result in substantial losses for
      investors who purchase our common stock.***





The
      market price of our common stock may be highly volatile and can fluctuate
      significantly and rapidly in response to, *inter
      alia* ,
      the
      following factors, some of which are beyond our control:





·
            Variations
                in our operating results;





·
            Success
                or failure of our management team in implementing business and growth
                strategies;





·
            Gain
                or loss of an important business relationship or adverse financial
                performance by a significant customer or group of
                customers;





·
            Changes
                in securities analysts’ recommendations, perceptions or estimates of our
                financial performance;





·
            Changes
                in conditions affecting theseafood
                packaging and processingindustry,
                the general economic conditions or stock market sentiments or other
                events
                or factorsin
                the PRC;





·
            Changes
                or developments in laws, regulations or taxes in the seafood processing
                and packaging industry in the PRC;





·
            The
                temporary or permanent loss of our seafood processing and packaging
                facilities due to casualty, weather or any extended or extraordinary
                maintenance or inspection that may be
                required.





·
            Changes
                in market valuations and share prices of companies with similar businessesthat
                may be listed in the U.S. or anywhere else in the
                world;





·
            Additions
                or departures of key personnel;




38




·
            Fluctuations
                in stock market prices and volume; or





·
            Involvement
                in litigation.





***Additional
      funds raised through issue of new shares for our future growth will dilute
      Shareholders’ equity interests.***





Although
      we have identified our expansion plans as avenues to pursue growth in our
      business, we may also find other opportunities to grow, including acquisitions
      which cannot be predicted at this juncture. Under such circumstances, we may
      seek to sell additional equity or debt securities or obtain a credit facility.
      If new shares placed to new and/or existing shareholders are issued in the
      future, they may be priced at a discount to the then prevailing market price
      of
      our shares trading on the OTC Bulletin Board or any other stock exchanges,
      in
      which case, existing shareholders' equity interest will be diluted. If we fail
      to utilize the new equity to generate a commensurate increase in earnings,
      our
      earnings per share will be diluted and this could lead to a decline in our
      share
      price. Any additional debt financing may, apart from increasing interest expense
      and gearing, contain restrictive covenants with respect to dividends, future
      fund raising exercises and other financial and operational matters.





***Negative
      publicity may adversely affect our share price.***





One
      of
      our competitive strengths is our established brand name and track record. We
      have been involved in the production of processes seafood products since
      commencing our operations in 1994. Our “Mingxiang” brand has been conferred the
“Famous Brand” award, and our products have received several other awards such
      as the “Green Food” award. Please see “Competition” on Page 20. We have also
      established a track record in the processed seafood industry which instills
      confidence in our products and attracts new customers from South Korea, Japan,
      Taiwan, Russia and Ukraine, as well as potential customers from the European
      Union. Negative publicity involving us, any of our directors or executive
      officers may adversely affect our stock market price whether or not such
      negative publicity is justified.




***Our
      common stock is quoted on the OTC Bulletin Board which may have an unfavorable
      impact on our stock price and liquidity.***





Our
      common stock is quoted on the OTC Bulletin Board under the symbol CMFO. The
      OTC
      Bulletin Board is a significantly more limited market than the New York Stock
      Exchange or NASDAQ system. The quotation of our shares on the OTC Bulletin
      Board
      may result in a less liquid market available for existing and potential
      stockholders to trade shares of our common stock, could depress the trading
      price of our common stock and could have a long-term adverse impact on our
      ability to raise capital in the future.




***Certain
      provisions of our Amended Articles of Incorporation may make it more difficult
      for a third party to effect a change- in-control.***




Our
      Amended Articles of Incorporation authorizes our board of directors to issue
      up
      to 1,000,000 shares of preferred stock. The preferred stock may be issued in
      one
      or more series, the terms of which may be determined at the time of issuance
      by
      our board of directors without further action by the stockholders. These terms
      may include voting rights including the right to vote as a series on particular
      matters, preferences as to dividends and liquidation, conversion rights,
      redemption rights and sinking fund provisions. The issuance of any preferred
      stock could diminish the rights of holders of our common stock, and therefore
      could reduce the value of such common stock. In addition, specific rights
      granted to future holders of preferred stock could be used to restrict our
      ability to merge with, or sell assets to, a third party. The ability of our
      board of directors to issue preferred stock could make it more difficult, delay,
      discourage, prevent or make it more costly to acquire or effect a
      change-in-control, which in turn could prevent the stockholders from recognizing
      a gain in the event that a favorable offer is extended and could materially
      and
      negatively affect the market price of our common stock.





**ITEM
      1B.**  **Unresolved
      Staff Comments**





On
      January 11, 2008, we received a letter from the Securities & Exchange
      Commission (“SEC”) in regards to comments of the Form S-1 filed with the
      Commission on December 14, 2007. We made appropriate amendments pursuant to
      the
      letter from the SEC dated January 11, 2008 and filed with the Commission Form
      S-1 (Amendment No. 1) on February 5, 2008.





On
      February 28, 2008, we received a letter from the SEC in regards to comments
      of
      the Form S-1 (Amendment No. 1) filed with the Commission on February 5, 2008.
      We
      made the appropriate amendments pursuant to the letter from the SEC dated
      February 28, 2008 and filed with the Commission Form S-1 (Amendment No. 2)
      on
      March 14, 2008.




39




**ITEM
      2.**  **Properties**





**LAND
      USE RIGHTS**





As
      at
      December 31, 2007, we owned the following land-use rights in Dabao Industrial
      Zone, Xiangzhi Town, Shishi City, Fujian Province:





**Certificate
                Reference No.**
            
            **Location**
            
            **Use**
            
            **Date
                of Expiration of Tenure**
            
            **Land
                Area**
              **(square
                meters)**
            
            **Encumbrance**ShiXiangGuoYong
                (2006) No. 0005
            
            Plot
                0005 (2006), Dabao Industrial Zone, Xiangzhi Town, Shishi City, Fujian
                Province
            
            Industrial
            
            December
                31, 2052
            
            3,374.05
            
            NilSiXiangGuoYong
                (2001) No. 0006
            
            Plot
                0006 (2001), Dabao Industrial Zone, Xiangzhi Town, Shishi City, Fujian
                Province
            
            Industrial
            
            March
                11, 2052
            
            3,638.25
            
            NilShiXiangGuoYong
                (2001) No. 0007
            
            Plot
                0007, Dabao Industrial Zone, Xiangzhi Town, Shishi City, Fujian
                Province
            
            Industrial
            
            December
                31, 2052
            
            3,960.32
            
            NilShiXiangGuoYong
                (2002) No. 0009
            
            Plot
                0009, Dabao Industrial Zone, Xiangzhi Town, Shishi City, Fujian
                Province
            
            Industrial
            
            December
                2, 2052
            
            6,723.08
            
            Nil.





**BUILDINGS**





As
      at
      December 31, 2007, we owned the following building ownership rights in Dabao
      Industrial Zone, Xiangzhi Town, Shishi City, Fujian Province:





**Reference
                No.**
            
            **Location**
            
            **Use**
            
            **Date
                of Expiry of Tenure**
            
            **Land/Floor
                Area (square meters)**
            
            **Encumbrance**ShiXiang
                (2001) No.0016
            
            Block
                A at Plot 0006 (2001), Dabao Industrial Zone, Xiangzhi Town, Shishi
                City,
                Fujian Province
            
            Production
                and packaging facilities
            
            June
                5, 2051
            
            705.60/1,489.60
            
            NilShiXiang
                (2001) No. 0017
            
            Block
                B at Plot 0006 (2001), Dabao Industrial Zone, Xiangzhi Town, Shishi
                City,
                Fujian Province
            
            Boiler
                facilities
            
            June
                5, 2051
            
            145.38/145.38
            
            NilShiXiang
                (2001) No. 0018
            
            Block
                C at Plot 0006 (2001), Dabao Industrial Zone, Xiangzhi Town, Shishi
                City,
                Fujian Province
            
            Production
                and cutting/slicing facilities
            
            June
                5, 2051
            
            934.46/1,991.29
            
            NilShiXiang
                (2001) No. 0019
            
            Cold
                storage facility at Plot 007(2001), Dabao Industrial Zone, Xiangzhi
                Town,
                Shishi City, Fujian Province
            
            Cold
                Storage
            
            June
                5, 2051
            
            1,224.84/1,289.29
            
            NilShiXiang
                (2001) no. 0020(1)
            
            Block
                A at Plot 0009 (2002), Dabao Industrial Zone, Xiangzhi Town, Shishi
                City,
                Fujian Province
            
            Staff
                dormitory
            
            June
                5, 2051
            
            1,561.17/3,347.54
            
            NilShiFangQuan
              ZhengXiangZhi
              No.
                00018(1)
            
            Block
                B at Plot 0009 (2002), Dabao Industrial Zone, Xiangzhi Town, Shishi
                City,
                Fujian Province
            
            Office
            
            September
                28, 2052
            
            942.19/3,268.41
            
            NilShiFangQuan
              Zheng
              XiangZhi
              No.
                00567
            
            Block
                A at Plot 0005 (2006), Dabao Industrial Zone, Xiangzhi Town, Shishi
                City,
                Fujian Province
            
            Factory
                Space
            
            December
                31, 2052
            
            620.00/620.00
            
            NilShiFangQuan
              Zheng
              XiangZhi
              No.
                00568
            
            Block
                B at Plot 0005 (2006), Dabao Industrial Zone, Xiangzhi Town, Shishi
                City,
                Fujian Province
            
            Factory
                Use
            
            December
                31, 2052
            
            670.56/670.56
            
            Nil




40




**Note** :





1)
            Mingxiang
                owned the building ownership rights to these two properties. Jixiang
                owned
                the building ownership rights to the other
                properties.





**ITEM
      3.**  **Legal
      Proceedings**




From
      time
      to time, we may become involved in various lawsuits and legal proceedings which
      arise in the ordinary course of business. However, litigation is subject to
      inherent uncertainties, and an adverse result in these or other matters may
      arise from time to time that may harm our business. We are currently not aware
      of any pending legal proceedings which involve us or any of our properties
      or
      subsidiaries.





**ITEM
      4.**  **Submission
      of Matters to a Vote of Security Holders**




**Change
      of Name; Reverse Merger**





On
      November 17, 2007, the Majority Controlling Shareholder approved a Joint Written
      Consent of the Sole Director and Majority Stockholder to Action Taken Without
      A
      Meeting (“Consent”) to enter into a Share Exchange Agreement (“Agreement”) with
      Nice Enterprise Trading H.K. Co., Limited (“Nice Enterprise”) and Nice
      Enterprise’s Shareholders. Furthermore, the Consent stated that we had accepted
      the resignation of Richard Crimmins from the Board of Director and that Pengfei
      Liu, Shaobin Yang and Weipeng Liu have been appointed to the Board of Directors
      of the Company effective as of the Closing Date referenced in the Agreement.
      Finally, the Consent approved the name change of our Company from New Paradigm
      Productions, Inc. to China Marine Food Group Limited which was filed on Form
      8-K
      with the Commission on November 23, 2007.





**PART
      II.**





**ITEM
      5.**  **Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchase
      of Equity Securities**




**MARKET
      INFORMATION**





Our
      common stock is quoted on OTC Bulletin Board, under the trading symbol CMFO.
      The
      CUSIP number is 16943R 106. The market for our stock is highly volatile. We
      cannot assure you that there will be a market in the future for our common
      stock. The OTC Bulletin Board securities are not listed and traded on the floor
      of an organized national or regional stock exchange. Instead, OTC Bulletin
      Board
      securities transactions are conducted through a telephone and computer network
      connection dealers in stocks. OTC Bulletin Board Stocks are traditionally
      smaller companies that do not meet the financial and other listing requirements
      of a regional or national stock exchange.





The
      following table shows the high and low prices of our common shares on the OTC
      Bulletin Board for each quarter within the last two fiscal years.





High
            
            Low**Fiscal
                2007**First
                Quarter
            
            $
            0.75
            
            $
            0.75Second
                Quarter
            
            $
            0.75
            
            $
            0.80Third
                Quarter
            
            $
            15.00
            
            $
            0.80Fourth
                Quarter
            
            $
            4.78
            
            $
            2.55**Fiscal
                2006**First
                Quarter
            
            $
            0.75
            
            $
            0.75Second
                Quarter
            
            $
            0.75
            
            $
            0.80Third
                Quarter
            
            $
            0.80
            
            $
            0.80Fourth
                Quarter
            
            $
            0.80
            
            $
            0.80




41




The
      above
      quotations for our common stock reflect inter-dealer prices, without retail
      mark-up, mark-down or commissions and may not represent actual
      transactions.





**HOLDERS**





As
      of
      March 24, 2008, there were 85 holders of record of our common
      stock.





**DIVIDENDS**





Pursuant
      to a Stock Purchase Agreement with Halter Financial Investments, L.P. dated
      September 13, 2007, we paid a special cash dividend in the aggregate amount
      of
      $392,028, or $$0.364 per share, to holders of our common stock outstanding
      on
      September 12, 2007.




Other
      than the cash dividend describe above, we have never paid or declared dividends.
      However, holders of our common stock are entitled to dividends if declared
      by
      our board of directors out of funds legally available. We do not, however,
      anticipate the declaration or payment of any dividends at the moment. We intend
      to retain earnings, if any, to finance the development and expansion of our
      business. Future dividend policy will be subject to the discretion of our board
      of directors and will be contingent upon future earnings, if any, our financial
      condition, capital requirements, general business conditions and other factors.
      Therefore, there can be no assurance that any dividends of any kind will ever
      be
      paid.





**ITEM
      6.**  **Selected
      Financial Data**





The
      following tables summarize the consolidated financial data of China Marine
      for
      the periods presented. You should read the following financial information
      together with the information under “Management’s Discussion and Analysis of
      Financial Condition and Results of Operations” and our consolidated financial
      statements and the related notes to these consolidated financial statements
      appearing elsewhere herein. The selected consolidated statements of operations
      data for the financial years ended December 31, 2007; and the selected
      consolidated balance sheet data as of December 31, 2007 are derived from our
      consolidated financial statements, which are included elsewhere herein, and
      have
      been audited by Cordovano and Honeck, LLP (“C & H”), an independent
      registered public accounting firm, as indicated in their report. Whereas the
      selected consolidated statements of operations data for the financial years
      ended December 31, 2006 and 2005; and the selected consolidated balance sheet
      data as of December 31, 2006 are derived from our consolidated financial
      statements, which are included elsewhere herein, and have been audited by Zhong
      Yi (Hong Kong) C.P.A. Company Limited, an independent registered public
      accounting firm, as indicated in their report.




**Year
                ended December
                31,****2007**
            
            
            **2006**
            
            
            **2005****(in
                thousands)**Revenue
            
            $
            36,425
            
            $
            27,442
            
            $
            14,939Cost
                of sales
            
            
            (25,649
            )
            
            (19,730
            )
            
            (11,198
            )**Gross
                profit**
            
            
            **10,776**
            
            
            **7,712**
            
            
            **3,741**Depreciation
                and amortization
            
            
            (37
            )
            
            (32
            )
            
            (26
            )Selling
                and distribution expenses
            
            
            (149
            )
            
            (94
            )
            
            (57
            )General
                and administrative expenses
            
            
            (598
            )
            
            (388
            )
            
            (208
            )Other
                income
            
            
            223
            
            
            110
            
            
            128Interest
                expense
            
            
            (333
            )
            
            (272
            )
            
            (215
            )**Income
                before income tax**
            
            
            **9,882**
            
            
            **7,036**
            
            
            **3,363**Income
                tax expense
            
            
            (1,221
            )
            
            -
            
            
            (14
            )**Net
                income attributable to the Shareholders**
              **of
                the Company**
            
            **$**
            **8,661**
            
            **$**
            **7,036**
            
            **$**
            **3,349**Earnings
                per Share — basic (US$)(1)
            
            **$**
            0.377
            
            **$**
            0.450
            
            **$**
            0.214Earnings
                per Share — diluted (US$)(2)
            
            **$**
            0.344
            
            **$**
            0.450
            
            **$**
            0.214Weighted
                average shares outstanding - basic(1)
            
            
            22,972
            
            
            15,624
            
            
            15,624Weighted
                average shares outstanding - diluted(2)
            
            
            25,142
            
            
            15,624
            
            
            15,624





**Note:**




(1)
            Basic
                earnings per share is computed using the weighted average number
                of the
                ordinary shares outstanding during the
                year.


(2)
            Diluted
                earnings per share is computed using the weighted average number
                of the
                ordinary shares and ordinary share equivalents outstanding during
                the year
                plus the number of warrants issued during the
                year.





42




**As
                at December 31,****2007**
            
            
            **2006****(in
                thousands)****Balance
                Sheet Data:**Cash
                and cash equivalents
            
            $
            24,477
            
            $
            9,182Total
                current assets
            
            
            30,013
            
            
            11,643Total
                assets
            
            
            34,130
            
            
            15,430Short-term
                borrowings
            
            
            772
            
            
            3,793Total
                current liabilities
            
            
            2,602
            
            
            5,115Total
                stockholders’ equity
            
            
            31,528
            
            
            10,315





**ITEM
      7.**  **Management's
      Discussion and Analysis or Financial Condition and Results of
      Operation**





**Forward
      Looking Statements**





*The
      information in this discussion contains forward-looking statements within the
      meaning of Section 27A of the Securities Act of 1933, as amended, and Section
      21E of the Securities Exchange Act of 1934, as amended. These forward-looking
      statements involve risks and uncertainties, including statements regarding
      our
      capital needs, business strategy and expectations. Any statements contained
      herein that are not statements of historical facts may be deemed to be
      forward-looking statements. In some cases, you can identify forward-looking
      statements by terminology such as "may", "will", "should", "expect", "plan",
      "intend", "anticipate", "believe", "estimate", "predict", "potential" or
      "continue", the negative of such terms or other comparable terminology. Actual
      events or results may differ materially. We disclaim any obligation to publicly
      update these statements, or disclose any difference between its actual results
      and those reflected in these statements. The information constitutes
      forward-looking statements within the meaning of the Private Securities
      Litigation Reform Act of 1995.*





**OVERVIEW**





We
      are a
      holding company whose primary business operations are conducted through our
      direct, wholly owned subsidiary, Nice Enterprise, and its
      subsidiaries ,
      Shishi
      Rixiang Marine Foods Co. Ltd. (“Rixiang”), which is incorporated in the
      PRC. We
      engage in the business of processing, distribution and sale of processed seafood
      products, as well as the sale of marine catch. Our objective is to establish
      ourselves as a leading producer of processed seafood products in the PRC and
      overseas markets.





**Reverse
      acquisition and private placement**





On
      November 17, 2007, we completed a reverse acquisition transaction with Nice
      Enterprise through
      a share exchange with Nice Enterprise’s former stockholders.





Pursuant
      to the share exchange agreement, the shareholders of Nice
      Enterprise exchanged 100% of their outstanding capital stock in Nice
      Enterprise for
      approximately 15,624,034 shares of our
      common stock, or approximately 93.15% shares
      of our outstanding common
      stock after
      the share exchange. In
      connection with the share exchange ,
      a
      majority of our shareholders of record as of November 16, 2007 approved a
      resolution by our board of directors to change our name from New Paradigm
      Productions, Inc. to China
      Marine Food Group Limited (“China Marine”). The name
      change became effective on January 9, 2008 upon the filing of a Certificate
      of
      Amendment to our Amended Articles of Incorporation with the State of Nevada
      on
      the twentieth day following the mailing of a Definitive Information Statement
      to
      our shareholders.





Concurrently
      with the closing of the reverse acquisition on November 17, 2007 , we
      completed a private placement of
      our
      securities to
      certain accredited investors who
      subscribed for units
      consisting one
      share
      of common stock and a warrant to purchase one-fifth of one share of our common
      stock. The investors subscribed for aggregate of 6,199,441 shares
      of our common
      stock and warrants to purchase an aggregate of 1,239,888
      shares of our common
      stock at $3.214
      per unit .
      The units
      were  offered
      and sold
      pursuant to exemptions from
      registration under the Securities Act, including without limitation, Regulation D and Regulation S promulgated under the Securities Act. Each warrant issued
      to
      the investors has
      a
      term of three years and is exercisable at any time for a price equal to $4.1782
      in cash or on a cashless exercise basis.





Upon the
      close of the reverse acquisition, Richard Crimmins, our sole
      director, submitted his resignation letter pursuant to which he resigned from
      all offices of the Company he
      holds
      which resignations will become
      effective immediately. Mr. Liu
      replaced him as our Chief
      Executive Officer and Interim
      Secretary effective on the close of the reverse acquisition .
      Prior
      to the effective date of the reverse acquisition, Mr. Liu served at Nice
      Enterprise as  its
      Chief
      Executive Officer.





For
      accounting purposes, the share exchange transaction was treated
      as a reverse acquisition with Nice Enterprise as the acquirer and China Marine
      as the acquired party. When we refer herein to business and financial
      information for periods prior to the consummation of the reverse acquisition,
      we
      are referring to the business and financial information of Nice Enterprise
      on a
      consolidated basis unless the context suggests otherwise.




43





**Sales**





We
      are a
      seafood producer engaged in the processing, distribution and sale of seafood
      products, as well as the sale of marine catch. Our two other subsidiaries,
      Shishi Huabao Mingxiang Foods Co., Ltd (“Mingxiang”) and Shishi Huabao Jixiang
      Water Products Co., Ltd (“Jixiang”) are property holding companies. These
      two
      companies operate solely to manage our land use rights and properties, including
      our production plant, cold storage facility, office tower and staff
      dormitory.





Our
      dried
      processed seafood products include dried prawns, dried squids, dried file fish,
      roasted prawns, shredded roasted squids, roasted squids, roasted file fish,
      roasted sea eels and other seafood items. Our dried processed seafood is
      predominantly sold under our registered trademark, the “Mingxiang” brand name.
      Our brand name has been awarded the “Fujian Famous Brand” award by the Fujian
      Commerce Authority. Our dried processed seafood products are mainly sold to
      distributors in Fujian Province and Zhejiang Province, who in turn distribute
      them to major supermarkets and retailers throughout these
      provinces.





Our
      frozen processed seafood products include frozen Japanese butter fish, frozen
      octopus and frozen squid rings. These are sold directly to wholesalers within
      the PRC and overseas, either through direct export or through export agents.
      Our
      products are sold to overseas market such as Japan, South Korea, Taiwan, Russia,
      Ukraine and USA.





Our
      marine catch mainly consists of four main species, namely squid, hairtail fish,
      Japanese butter fish and cuttlefish. We work with local fishermen and charter
      a
      number of fishing vessels to harvest marine catch from the East China Sea and
      the Taiwan Strait. The marine catch is sold to customers in the Fujian and
      Shandong Provinces, some of whom directly export the marine catch to Japan,
      South Korea and Taiwan.





All
      the
      harvest from our marine catch is sold to customers on a direct basis. We do
      not
      use any of our own marine catch for the production of our processed seafood
      products. Instead, the raw materials for our processed seafood products are
      solely purchased from independent fishermen in nearby markets for further
      processing.




Sales
      of
      our processed seafood products accounted for approximately 76.5%, 60.3% and
      47.2% of our total sales in year 2007, 2006 and 2005 respectively. Sales of
      our
      marine catch accounted for approximately 23.5%, 39.7% and 52.8% of our total
      sales in year 2007, 2006 and 2005 respectively. Having
      recognized that the processed seafood segment has significant growth potential,
      and that the gross profit margin for the sales of marine catch may deteriorate
      due to higher fuel and operating costs, we will continue to focus our resources
      on the processed seafood segment.





A
      detailed breakdown of our sales by major geographical markets is set out in
      the
      section “Results of Operations” herein.





Factors
      that can affect our sales are as follows:





·
            The
                level of sales is dependent on our ability to produce and harvest
                on a
                timely basis. Raw material costs accounted for approximately 78.4%,
                74.2%
                and 64.6% of our total cost of sales of processed seafood products
                in year
                2007, 2006 and 2005 respectively. The availability of these raw materials
                could be affected by a large number of factors, including,*inter
                alia*,
                the availability of fish stock, weather conditions, government policies
                and regulations where such fishing is carried out, the stability
                of
                supplies from fishermen and pressure from environmental or animal
                rights
                groups.





Specifically,
      fishing activities in waters around the PRC are restricted in June and July
      each
      year to ensure sustainable aquatic resources. As such, some of our suppliers
      such as fishermen are restricted from fishing during this period due to the
      restrictions against fishing along the Taiwan Strait imposed by the PRC’s
      Ministry of Agriculture. There is no assurance that the PRC government may
      not
      impose more stringent fishing regulations, including but not limited to longer
      or more frequent periods that restrict fishing.





Any
      shortage in the supply of or increase in the prices of the raw materials for
      our
      processed seafood products will adversely affect our sales.





·
            Our
                ability to maintain existing accreditations such as HACCP, ISO9001:2000,
                ISO14001:2004 and the EU Export Certification accreditations will
                affect
                our ability to maintain our presence in our existing market and to
                expand
                into new market territories.





·
            Our
                ability to price our products competitively against existing competitors
                and new market entrants by achieving economies of
                scale.





·
            Our
                ability to build on our established track record and reputation as
                a
                supplier of high quality processed seafood products and capability
                to
                deliver products in a timely
                manner.





·
            Our
                ability to maintain existing business relationships and to secure
                new
                customers, which may be affected by the general economic or political
                conditions in our local and overseas
                markets.




44




·
            Our
                ability to introduce new products to capture a wider group of consumers
                and to cater to different and changing consumers’
                preferences.





Please
      refer to the section “Risk Factors” herein for further information on other
      factors that may affect our revenue.





**Production
      facilities and employees**





Our
      production facilities are located at Dabao Industrial Zone, Xiangzhi Town,
      Shishi City, Fujian Province, the PRC. We have five production lines for the
      processing of dried processed seafood products: roasted file fish, roasted
      prawns, shredded roasted squid, roasted squids and smoked products, and one
      production line for the processing of frozen seafood products.





As
      at December
      31, 2007, we
      employed 634 employees.





**Seasonality**





We
      do not
      experience any significant seasonality in relation to sales for our processed
      seafood products. However, sales are usually higher before and during the
      Chinese New Year. As for the sales of our marine catch, in particular, hairtail
      fish, cuttlefish and Japanese butter fish, sales may be lower in June and July
      due to the reduced supplies as a result of the restriction on fishing in the
      Taiwan Strait during these two months **.**


**Cost
      of sales**





Our
      cost
      of sales comprises the cost of our processed seafood operations and the cost
      of
      our marine catch. The breakdown is as follows:





**Year
                ended December 31,****US$
                ’000**
            
            **2007**
            
            **2006**
            
            **2005**Processed
                seafood products
            
            
            18,798
            
            
            11,364
            
            
            5,451Marine
                catch
            
            
            6,851
            
            
            8,366
            
            
            5,747**Total**
            
            
            25,649
            
            
            19,730
            
            
            11,198





***Cost
      of sales - Processed seafood products***





Our
      cost
      of sales comprises mainly raw materials, direct labour and manufacturing
      overheads. The following table sets out details of our cost of
      sales:





**Year
                ended December 31,****2007**
            
            **2006**
            
            **2005****US$’000**
            
            **%**
            ****
            **US$’000**
            ****
            **%**
            ****
            **US$’000**
            ****
            **%**Raw
                materials
            
            
            14,734
            
            
            78.4
            
            
            8,438
            
            
            74.2
            
            
            3,522
            
            
            64.6Direct
                labor
            
            
            1,507
            
            
            8.0
            
            
            1,312
            
            
            11.6
            
            
            700
            
            
            12.8Manufacturing
                overheads
            
            
            2,557
            
            
            13.6
            
            
            1,614
            
            
            14.2
            
            
            1,229
            
            
            22.6**Total**
            
            
            **18,798**
            
            
            **100.0**
            
            
            **11,364**
            
            
            **100.0**
            
            
            **5,451**
            
            
            **100.0**





**Raw
      materials**





Raw
      materials comprise mainly seafood such as fish, prawns and squids, salt, sugar
      and other seasonings. We use seafood which are fished from the open sea and
      not
      bred through aquaculture. The costs of these raw materials are dependent on
      the
      prevailing market prices, which are relatively stable as there is a stable
      and
      abundant supply from the existing market. We are located close to the Xiangzhi
      (Shishi) fishing port, which is one of the largest fishing ports in the Fujian
      province, and one of the state-level fishing port centres.





We
      believe our strategic location allows us to have up-to-date information on
      the
      market price of our raw materials and this has allowed us to purchase our raw
      materials at the best available price.





Our
      proximity to our suppliers has also allowed us to have fresh supplies of raw
      materials and this has enabled us to ensure freshness and quality in our
      finished products. The proximity has also enabled us to reduce raw material
      transportation costs and lead-time to obtain our supplies.





Raw
      material costs accounted for approximately 78.4%, 74.2% and 64.6% of our cost
      of
      sales in year 2007, 2006 and 2005 respectively. The percentage of raw materials
      cost as a proportion of the total cost of sales is affected by the product
      mix
      for the relevant financial year and the market price of the raw materials.
      We
      mitigate the fluctuation in pricing by bulk purchasing and stock management.
      We
      are able to stock up our raw materials when prices are lower, as we have our
      own
      cold storage facility. This will ensure a steady supply of raw materials for
      the
      processing of seafood products throughout the year.




45


The
      increase in raw material costs from 2005 to 2006 and from 2006 to 2007 was
      due
      to the increased production and sales of processed seafood
      products.





**Direct
      labor**





Direct
      labor costs accounted for 8.0% to 12.8% of our cost of sales for the years
      under
      review. Direct labor includes mainly salaries and wages paid to employees who
      are involved in the production process. Direct labor costs are dependent on
      factors such as the production volume, the number of employees, wage rate and
      applicable government regulations (including minimum wage requirements,
      statutory welfare and insurance fund contributions). The fluctuation in the
      direct labor costs as a percentage of costs of sales is dependent on the degree
      of processing required for the end
      products. The increase in our production scale over the past few years has
      enabled us to enjoy economies of scale and higher productivity through job specialization and
      training.





The
      total
      headcount as at December 31, 2007 has increased to 634 from 254 in the beginning
      of 2005. The increase was mainly due to an increase in the production headcount,
      from 135 in the beginning of 2005 to 493 as at December 31, 2007, arising from
      the increase in the scale of the production operations for our processed seafood
      products.





**Manufacturing
      overheads**





Manufacturing
      overheads comprise depreciation, water and electricity and packaging materials
      which are used directly in the packaging of finished goods.





***Cost
      of sales - Marine catch***




**Year
                ended December 31,****2007**
            
            
            **2006**
            
            
            **2005****US$’000**
            
            
            **%**
            
            
            **US$’000**
            
            
            **%**
            
            
            **US$’000**
            
            
            **%**Rental
                / charter hires
            
            
            930
            
            
            13.6
            
            
            1,085
            
            
            13.0
            
            
            1,043
            
            
            18.2Crew
                salaries and wages
            
            
            437
            
            
            6.4
            
            
            378
            
            
            4.5
            
            
            300
            
            
            5.2Bunker
                fuel
            
            
            3,484
            
            
            50.8
            
            
            4,532
            
            
            54.2
            
            
            3,301
            
            
            57.4Repair
                & maintenance
            
            
            1,154
            
            
            16.8
            
            
            1,213
            
            
            14.5
            
            
            545
            
            
            9.5Other
                expenses
            
            
            846
            
            
            12.4
            
            
            1,158
            
            
            13.8
            
            
            558
            
            
            9.7**Total**
            
            
            **6,851**
            
            
            **100.0**
            
            
            **8,366**
            
            
            **100.0**
            
            
            **5,747**
            
            
            **100.0**





**Rental
      / charter hires**





We
      commenced our marine catch operation in June 2002, with the chartering of two
      fishing vessels with an aggregate net tonnage of 44 tons. In December 2007,
      we
      have a fleet of six chartered fishing vessels with an aggregate net tonnage
      of
      256 tons. However, taking into consideration of the significant growth potential
      in the
      processed seafood segment and the deteriorating gross profit margin for the
      sales of marine catch due to higher fuel and operating costs, we decided to
      focus our resources on the processed seafood segment going forward. In this
      connection, all the chartering agreements with the fishermen have been
      terminated by us at the end of 2007. We are not subject to any penalties for
      terminating these chartering agreements which are about to be ended in 2008
      or
      2009.





**Crew
      salaries and wages**





We
      have
      entered into agreements with the owners of fishing vessels, from whom we have
      chartered six fishing vessels for our marine catch operations by the end of
      2007. The size of the fishing crew has increased over the last few years as
      we
      increased the number of fishing vessels. Pursuant to the agreements, we are
      required to bear the salaries and wages of the fishing crew.





**Bunker
      fuel**





Our
      main
      cost of operations is the cost of bunker fuel for the operation of the chartered
      vessels. The price of bunker fuel is dependent on world oil prices. The unit
      cost of bunker fuel has increased from $0.47 - 0.52 per litre in year 2005,
      to
      $0.70 - 0.95 per litre in year 2007. The increase in fuel prices is consistent
      with the increase in world oil prices. In addition, the fishing vessels made
      more voyages from 2005 to 2006, as evidenced by the increase in revenue from
      our
      marine catch. The reduction in bunker fuel cost from 2006 to 2007 was mainly
      due
      to a decrease in the number of chartered fishing vessels from 10 in 2006 to
      9 in
      the first six months of 2007 which was further reduced to 6 in July
      2007.




46




**Repair
      and maintenance and other expenses**





Repair
      and maintenance costs relate to the repair of the vessels and the fishing nets
      used for our marine catch operations. The vessels require regular maintenance
      both during their voyages and when they are back to the port. Included under
      other expenses mainly include the costs of ice required to keep the freshness
      of
      the marine catch. The fishes are sorted and packed in ice boxes and then sent
      directly to customers upon reaching the port.





**Selling
      and distribution expenses**





Our
      selling and distribution expenses comprise mainly salaries of sales and
      marketing staff, costs in participating in exhibitions, freight charges,
      advertisement and product and hygiene inspection costs by the General
      Administration of Quality Supervision, Inspection and Quarantine of the
      PRC ,
      Health
      and Food Safety Authority, Quality and Technical Supervision Board. Our selling
      and distribution expenses accounted for approximately 0.4%, 0.3% and 0.4% of
      our
      total revenue in year 2007, 2006 and 2005 respectively.





**General
      and administrative expenses**





Our
      administrative expenses comprise mainly salaries and staff benefits for
      employees, provision for doubtful debt, traveling and entertainment expenses.
      Our administrative expenses accounted for approximately 1.6%, 1.4% and 1.4%
      of
      our total revenue in year 2007, 2006 and 2005 respectively.


**Other
      income**





Other
      income related mainly to rental income, government subsidies and interest
      income.





Rental
      income related to the collection of rental on the 33 shop spaces at our factory
      in Dabao Industrial Zone. The rental contracts are based on 1-year lease term.
      The government subsidies relate to grants by the government for research and
      development projects undertaken and for accreditations like HACCP & ISO
      certification and Green Food certification undertaken by us.





**Interest
      expense**





Our
      interest expense related to interest costs incurred on the various short-term
      bank borrowings taken by us for working capital requirements. Our interest
      expense accounted for approximately 0.9%, 1.0% and 1.4% of our total revenue
      in
      year 2007, 2006 and 2005 respectively.





**Income
      tax expense**





Our
      profit is subject to the prevailing tax rate applicable to the respective
      jurisdictions in which we operate.





Prior
      to
      January 2005, our business was carried out under Mingxiang which was
      incorporated as a PRC limited liability company and thus was subjected to an
      Enterprise Income Tax rate of 33% of its taxable income.





According
      to the Income Tax Law of the PRC for Enterprises with Foreign Investment and
      Foreign Enterprises, foreign investment enterprises engaged in production
      established in coastal economic open zones or in the old urban districts of
      cities where the special economic zones or the economic and technological
      development zones are located may pay income taxes at a reduced rate of 24.0%.
      In addition, foreign investment enterprises engaged in production having a
      period of operation of not less than 10 years shall be exempted from income
      tax
      for the first 2 profit-making years and a 50.0% reduction in the income tax
      payable for the next 3 years.





With
      effect from January 1, 2005, Rixiang acquired the business operations of
      Mingxiang, which subsequently became a property holding company. Rixiang was
      incorporated as a FIE and was granted the tax incentives for FIEs, and was
      exempted from income tax for 2005 and 2006. For 2007, 2008 and 2009, Rixiang
      will be subject to PRC state income tax of 12%.




Jixiang
      is also a property holding company and is not subject to tax.





The
      lower
      effective tax rates for the financial years under review were due mainly to
      tax
      exemption granted under the tax incentives . However,
      such tax incentives may be withdrawn in the future without prior notice.





**RESULTS
      OF OPERATIONS**





We
      derive
      our sales from the sales of processed seafood products and marine catch, the
      breakdown of our sales and gross profit by product, as well as by geographical
      location of our customers for the years ended December 31, 2007, 2006 and 2005
      is set out below:




47





**Breakdown
      of our past performance by principal products and geographical
      regions**





**Sales
      by product**





**Year
                ended December 31,****2007**
            
            **2006**
            
            **2005****US$’000**
            ****
            **%**
            ****
            **US$’000**
            ****
            **%**
            ****
            **US$’000**
            ****
            **%**Processed
                seafood products
            
            
            27,863
            
            
            76.5
            
            
            16,551
            
            
            60.3
            
            
            7,046
            
            
            47.2Marine
                catch
            
            
            8,562
            
            
            23.5
            
            
            10,891
            
            
            39.7
            
            
            7,893
            
            
            52.8**Total**
            
            
            **36,425**
            
            
            **100.0**
            
            
            **27,442**
            
            
            **100.0**
            
            
            **14,939**
            
            
            **100.0**





**Sales
      by geographical region**





**Year
                ended December 31,****2007**
            
            **2006**
            
            **2005****US$’000**
            ****
            **%**
            ****
            **US$’000**
            ****
            **%**
            ****
            **US$’000**
            ****
            **%**PRCShandong
            
            
            5,047
            
            
            13.9
            
            
            6,613
            
            
            24.1
            
            
            4,224
            
            
            28.3Zhejiang
            
            
            14,131
            
            
            38.8
            
            
            9,129
            
            
            33.3
            
            
            3,458
            
            
            23.1Fujian
            
            
            16,041
            
            
            44.0
            
            
            11,025
            
            
            40.2
            
            
            6,408
            
            
            42.9Others
            
            
            1,011
            
            
            2.8
            
            
            425
            
            
            1.5
            
            
            217
            
            
            1.5Total
                PRC(1)
            
            
            36,230
            
            
            99.5
            
            
            27,192
            
            
            99.1
            
            
            14,307
            
            
            95.8Asia
                (2)
            
            
            97
            
            
            0.2
            
            
            99
            
            
            0.4
            
            
            287
            
            
            1.9Others
                (3)
            
            
            98
            
            
            0.3
            
            
            151
            
            
            0.5
            
            
            345
            
            
            2.3**Total**
            
            
            **36,425**
            
            
            **100.0**
            
            
            **27,442**
            
            
            **100.0**
            
            
            **14,939**
            
            
            **100.0**





**Notes:**





(1)
            Sales
                to PRC include sales to local PRC distributors who in turn sell our
                products to Taiwan, Japan and South Korea. Such sales amounted to
                $6.1
                million, $8.5 million and $6.8 million in year 2007, 2006 and 2005
                respectively.





(2)
            Sales
                to Asia mainly related to exports to
                Japan.





(3)
                Export
                    sales to other countries include sales to Russia and
                    Ukraine.





**Gross
      profit by product**





**Year
                ended December 31,****2007**
            
            **2006**
            
            **2005****US$’000**
            ****
            **%**
            ****
            **US$’000**
            ****
            **%**
            ****
            **US$’000**
            ****
            **%**Processed
                seafood products
            
            
            9,065
            
            
            84.1
            
            
            5,186
            
            
            67.2
            
            
            1,595
            
            
            42.6Marine
                catch
            
            
            1,711
            
            
            15.9
            
            
            2,526
            
            
            32.8
            
            
            2,146
            
            
            57.4**Total**
            
            
            **10,776**
            
            
            **100.0**
            
            
            **7,712**
            
            
            **100.0**
            
            
            **3,741**
            
            
            **100.0**





**Gross
      profit margin by product**





**Year
                ended December 31,****2007**
            
            **2006**
            
            **2005****%**
            ****
            **%**
            
            **%**Processed
                seafood products
            
            
            32.5
            
            
            31.3
            
            
            22.6Marine
                catch
            
            
            20.0
            
            
            23.2
            
            
            27.2**Overall**
            
            
            **29.6**
            
            
            **28.1**
            
            
            **25.0**





48




**Year
      2007 compared to Year 2006**





**Sales**





Our
      revenue increased by approximately $9.0 million or 32.7% from $27.4 million
      in
      2006 to $36.4 million in 2007. The increase in revenue was due to the continued
      growth in sales of our processed seafood products, which was partially offset
      by
      the decrease in sales of our marine catch segment. Sales of our processed
      seafood products increased by $11.3 million or 68.3%, whereas sales of our
      marine catch segment dropped by $2.3 million or 21.4%.





The
      processed seafood products operations continued to be the growth driver for
      us
      as our products continue to gain market acceptance, in the Fujian and Zhejiang
      provinces. The higher sales in the processed seafood products segment were
      due
      to the continued sales and marketing effort in the Fujian and Zhejiang
      provinces. The number of sales staff has further increased from 14 to 19 during
      the period under review.





Sales
      of
      our marine catch segment decreased by $2.3 million as we chartered nine fishing
      vessels only in the first six months of 2007 which was further reduced to six
      in
      July 2007, whereas there were 10 in total in the same period last year. Our
      chartered vessels have taken lesser voyages in 2007 because of higher fuel
      costs. As the result of the decrease in the number of chartered fishing vessels
      and the number of voyages, total volume of marine catches in 2006 was
      approximately 6,600 tons as compared to 4,900 tons in 2007, a decrease of 25.4%
      in terms of total weight of our marine catches.





Because
      we do not use our own marine catch as raw materials for our processed seafood
      products, the described decrease in the number of vessels and the number of
      voyages only affected our marine catch operations, not our processed seafood
      operations. Having recognized that the processed seafood segment has significant
      growth potential, and that the gross profit margin for the sales of marine
      catch
      may drop, we will continue to focus our resources on the processed seafood
      segment. In particular, we are currently exploring the neighborhood areas like
      Guangdong and Shanghai, which are expected to contribute revenues in the second
      quarter of 2008. We believe the growth of sales driven by the processed seafood
      segment will outweigh the decrease in sales of marine catch this
      year.





**Gross
      profit**





Gross
      profit grew by 39.7%, from $7.7 million to $10.8 million for the period under
      review. Overall, gross profit margin improved by 1.5 percentage point from
      28.1%
      in 2006 to 29.6% in 2007. Increased gross profit margin from 31.3% in year
      2006
      to 32.5% in 2007 was achieved from the processed seafood products operations,
      whereas gross profit margin for the marine catch segment was reduced from 23.2%
      to 20.0% for the same period under review.





The
      gross
      profit margin for our processed seafood products increased mainly due to the
      cost savings in terms of material costs and overheads stemming from better
      utilization of our facilities as we enjoy economies of scale from higher
      production volume.





The
      decline in gross profit margin of our marine catch segment was mainly due to
      higher cost of fuel which increased from average $0.69 per litre in 2006 to
      $0.76 per litre in 2007, an increase of approximately 10.2%. Gross profit margin
      of our marine catches was further deteriorated by the increase in the payroll
      of
      the crew from approximately $378,000 in 2006 to $437,000 in 2007.





**Selling
      and distribution expenses**





Selling
      and distribution expenses increased from approximately $94,000 in 2006 to
      $149,000 in 2007. This was mainly due to the increase in salaries and wages
      of
      $53,000 for the period under review.





Salaries
      and wages increased as sales and marketing headcount increased from 14 in 2006
      to 19 in 2007 as we increased sales and marketing efforts in our domestic market
      of Fujian and Zhejiang provinces.





As
      a
      percentage of sales, the selling and distribution expenses were 0.4% in 2007
      as
      compared to 0.3% in 2006.





**General
      and administrative expenses**





In
      2006,
      general and administrative expenses were approximately $388,000 as compared
      to
      $598,000 in 2007. This was mainly due to the increase in salaries and wages
      of
      $163,000 in 2007 as a result of the increase in number of senior management
      and
      the bonus provision, and the increase in traveling and entertainment expenses
      of
      $21,000 for the same period under review.




Overall,
        as a percentage of sales, general and administrative expenses were 1.6% and
        1.4%
        in year 2007 and 2006 respectively.




49





**Other
      income**





Other
      income increased from approximately $110,000 in 2006 to $223,000 in 2007. The
      increase was mainly contributed by an increase in government grants and interest
      income of $47,000 and $59,000 respectively.





We
      received $62,000 as grants from the Shishi City and Quanzhou City Civil
      Administration in 2007 mainly as a compliment for the accreditation of EU Export
      Certification, development fund for deep sea fish, a subsidy for facility
      expansion and bank loan interest. The increase in interest income was due to
      higher cash balances with banks as a result of strong operational cash inflow
      and net proceeds from the private placement taken place in November
      2007.





**Interest
      expense**





Our
      interest expense increased by $61,000 from $272,000 in 2006 to $333,000 in
      2007.
      The increase was due to the higher effective interest rate of around 1.1
      percentage point per annum for those loans renewed during the period under
      review.





**Income
      before income tax**





Our
      income before income tax increased by $2.8 million or 40.4% from $7.0 million
      in
      2006 to $9.9 million in 2007. The increase was mainly due to the increase in
      sales of 32.7% and improved gross profit margin by 1.5 percentage point as
      a
      whole. As discussed above, the significant improvement was due to higher sales
      activities and revenue from our processed seafood products and thus the
      advantage from economies of scale.


**Income
      tax expense**





Our
      income tax expense for 2006 was nil as compared to $1.2 million in 2007. This
      was because our business activities were operated under Rixiang which was fully
      exempted from tax for 2005 and 2006 and subject to PRC state income tax of
      12.0%
      for the following three years.





**Year
      2006** **compared to Year 2005**





**Sales**





Our
      revenue increased by approximately $12.5 million or 83.7% from $14.9 million
      in
      2005 to $27.4 million in 2006. The increase in revenue was due to the strong
      increase in sales of our processed seafood products and continued growth in
      our
      marine catch segment. Sales of our processed seafood products increased by
      $9.5
      million, whereas sales of our marine catch segment increased by $3.0
      million.





The
      processed seafood products segment continues to be the growth driver for us
      as
      our products continue to gain market acceptance, in the Fujian and Zhejiang
      provinces. The higher sales in the processed seafood products segment were
      due
      to the continued sales and marketing efforts in the Fujian and Zhejiang
      provinces. The total number of sales staff has increased from 9 to 16 as we
      increase our coverage to the rural and suburban areas within the Fujian and
      Zhejiang provinces. This increase in marketing efforts has resulted in an
      increase in our distributorship and customer base in these two provinces from
      approximately 51 distributors in 2005 to 58 in 2006.





We
      were
      able to grow our revenue for 2006 as our processed seafood products continued
      to
      do well especially in the Fujian and Zhejiang markets. Our top selling products,
      including roasted fish, roasted prawn, roasted squid and Jingdu roasted fish,
      constituted the majority of the increase in turnover in 2006 as compared to
      2005.





The
      increase in revenue from our marine catch was due to higher demand from Fujian
      and Shandong customers and wholesalers. The sales to our customers were mainly
      exported to their overseas customers in Taiwan and South Korea/ Japan
      respectively. The strong market demand for our marine catch from these markets
      was largely due to their low domestic supply as a result of higher cost of
      marine operations in these markets. The strong demand was also due to the
      quality and the variety of our marine catch from the Taiwan Strait.





**Gross
      profit**





Gross
      profit increased from approximately $3.7 million in 2005 to $7.7 million in
      2006. Overall, gross profit margin increased from 25.0% to 28.1% during this
      period.





Gross
      profit margin for our processed seafood products increased from 22.6% in 2005
      to
      31.3% in 2006, mainly due to lower material costs and overheads as we enjoyed
      economies of scale from higher production volume. The increase in gross profit
      margin was also due to the greater value added to our products during the
      production process, resulting in higher selling price for our processed seafood
      products.




50





The
      decline in gross profit margin from the marine catch was mainly due to the
      higher fuel cost which increased by approximately 36% from $0.48-$0.51 per
      litre
      in 2005 to $0.63-$0.72 per litre in 2006. The increase in cost of fuel was
      mitigated slightly by the higher selling price of our product and an improved
      tonnage of our catches in 2006.





**Selling
      and distribution expenses**





In
      2006,
      selling and distribution expenses were approximately $94,000 as compared to
      $57,000 in 2005. The increase of 64.9% was mainly due to the increase in
      salaries and wages of $27,000 and the advertisement costs of $13,000. Salaries
      and wages increased as sales and marketing headcount increased from 9 in 2005
      to
      16 in 2006. We increased sales and marketing efforts mainly in our domestic
      market of Fujian and Zhejiang provinces.





As
      a
      percentage of sales, the selling and distribution expenses were 0.4% in 2005
      as
      compared to 0.3% in 2006.





**General
      and administrative expenses**





In
      2005,
      administrative expenses were approximately $208,000 as compared to $388,000
      in
      2006. The increase is mainly due to the increase in salaries and wages and
      other
      payroll costs of $32,000, traveling and entertainment expenses of $40,000 and
      research and development costs of $78,000. The increase in salaries and wages
      was mainly due to higher overtime and bonus paid in 2006, which was in line
      with
      the increased production of our Company. Traveling and entertainment costs
      also
      increased in line with the higher sales activities. Research and development
      costs related to the collaboration with the Ocean University of China’s Food
      Sciences and Engineering Institute which will focus on developing new products
      and by-products from raw marine catch used in the processing of seafood
      products.





Overall,
      as a percentage of sales, administrative expenses were both 1.4% in 2005 and
      2006.




**Other
      income**





Other
      income decreased from approximately $128,000 in 2005 to $110,000 in 2006. The
      decrease was because we received lesser government grants in 2006 as compared
      to
      2005. In 2005, we were awarded both the Provincial Leading Corporation in
      Agricultural Products Processing and Fujian Provincial Aquatic Industrialization
      Leading Enterprise, which resulted in the higher government grants.





The
      lower
      government grant was partially offset by higher interest income from $13,000
      in
      2005 to $20,000 in 2006 due to higher cash balances with banks as a result
      of
      strong operational cash inflow.





**Interest
      expense**





Our
      interest expense increased by $57,000 or 26.5% from approximately $215,000
      in
      2005 to $272,000 in 2006. The increase was due to the additional bank loans
      of
      $493,000 taken by us for the working capital needs in 2006.





**Income
      before income tax**





Our
      income before income tax increased by $3.6 million or 109.2% from approximately
      $3.4 million in 2005 to $7.0 million in 2006. The increase was mainly due to
      the
      increase in sales of 83.7% and higher gross margin achieved in 2006. As
      discussed above, the significant improvement was due to the increase in sales
      from both our processed seafood operations and marine catch
      segment.





**Income
      tax expense**





The
      major
      operating arm of our Company, Rixiang, was exempted from income tax for both
      2005 and 2006 and thus there was nil income tax expense incurred in 2006. Tax
      in
      2005 related to Mingxiang’s operations prior to the transfer of its business
      operations to Rixiang in January 2005.





**REVIEW
      OF FINANCIAL POSITION**





**Current
      assets**





As
      at
      December 31, 2006, our current assets amounted to $11.6 million, representing
      7 5.5%
      of
      our total assets of $15.4 million. It comprised cash and cash equivalents of
      $9.2 million, accounts receivable of $1.3 million, inventories of $1.1 million
      and other receivables and prepayments of $35,000.





As
      at
      December 31, 2007, our current assets increased to $30.0 million, representing
      87.9% of our total assets of $34.1 million. It comprised cash and cash
      equivalents of $24.5 million, accounts receivable of $4.2 million, inventories
      of $1.2 million and other receivables and prepayments of $0.1
      million.




51





Increase
      in cash and cash equivalents was mainly due to strong operational cash inflow
      and net proceeds from the private placement taken place in November
      2007.





Accounts
      receivable were mainly represented by amounts due from distributors and
      wholesalers. Our Company usually extended unsecured credit period to long
      established customers up to 3 months. Since our practice is to perform constant
      credit checks and pursue the past due accounts proactively, there was no
      material uncollectible debts identified in the past.





Inventories
      were mainly related to raw materials comprising mainly frozen prawns, frozen
      fish and squids used for the production and processing of dried and frozen
      products. Our inventories also included some finished goods, work-in-progress
      and packaging materials.





**Non-current
      assets**





As
      at
      December 31, 2006, our non-current assets amounted to $3.8 million and comprised
      mainly property, plant and equipment and land use rights.





Our
      property, plant and equipment amounting to $3.2 million were made up mainly
      of
      buildings amounting to $1.6 million and plant and machinery amounting to $1.5
      million. Buildings related to our production plant, cold room, office buildings
      and workers’ dormitories. Plant and machinery related mainly to our production
      lines, freezing machines, roasting and drying machines. The remaining $0.1
      million related to office equipment and motor vehicles.





As
      at
      December 31, 2007, our non-current assets amounted to $4.1 million and accounted
      for approximately 12.1% of our total assets. No material capital expenditure
      items were occurred in 2007.





**Current
      liabilities**





Our
      current liabilities of $5.1 million as at December 31, 2006 comprised short-term
      bank loans of $3.8 million, accounts payable of $0.2 million, amount due to
      a
      shareholder of $0.7 million and other payables of $0.4 million.





As
      at
      December 31, 2007, our current liabilities of $2.6 million comprised short-term
      bank loans of $0.8 million, accounts payable of $0.4 million, amount due to
      a
      shareholder of $0.3 million, income tax payable of $0.3 million and other
      payables of $0.8 million.





The
      short-term bank loans were used for our working capital
      requirements.  The effective interest rate on
      the
      borrowing is about
      8.7% per annum in 2007.
      We
      have negotiated with the bank for more favourable interest rate on loans and
      thus we have repaid part of the loans in December 2007 and then borrowed the
      same amount in January 2008 for the said arrangement.





Regarding
      the accounts payable, the related turnover day was about a week due to the
      short
      credit period allowed by the fishermen which was consistent with the market
      practice.





The
      amount due to a shareholder was unsecured, interest free and with no fixed
      terms
      of repayment.





**Stockholders’
      equity**





Our
      stockholders’ equity of $10.3 million as at December 31, 2006 comprised
      additional paid-in capital of $0.7 million, statutory reserve of $1.7 million,
      accumulated other comprehensive income of $64,000 and retained earnings of
      $7.8
      million.





As
      at
      December 31, 2007, our stockholders’ equity amounted to $31.5 million and
      comprised additional paid-in capital of $16.6 million, statutory reserve of
      $3.1
      million, accumulated other comprehensive income of $1.2 million and retained
      earnings of $10.6 million.





Increase
      in additional paid-in capital was mainly raised from the transaction of reverse
      acquisition and private placement taken place in November 2007.





Statutory
      reserve is established for the purpose of providing employee facilities and
      other collective benefits to the employees and is non-distributable other than
      in liquidation. Under the PRC law, appropriation to the statutory reserve should
      be at least 10% of the after-tax net income until the reserve is equal to 50%
      of
      the registered capital. We contributed about 15% of our after-tax net income
      to
      the reserve on a yearly basis.





We
      declared a final dividend of $4.6 million in 2007 and it was fully paid during
      the same period under review.




52








**LIQUIDITY
      AND CAPITAL RESOURCES**





Our
      operations are funded through a combination of stockholders’ equity, borrowings
      and internally generated funds from our operations. Our cash and cash
      equivalents as at December 31, 2007 amounted to approximately $24.5 million
      and
      our total indebtedness which comprises short-term bank loans was $0.8
      million.





A
      summary
      of our cash flows for 2007, 2006 and 2005 is as follows:





**Year
                ended December 31,****US$’000**
            
            **2007**
            
            **2006**
            
            **2005**Net
                cash provided by operating activities
            
            
            6,701
            
            
            9,375
            
            
            2,254Net
                cash (used in) investing activities
            
            
            (21
            )
            
            (1
            )
            
            (14
            )Net
                cash provided by / (used in) financing activities
            
            
            7,959
            
            
            (3,024
            )
            
            (1,410
            )Foreign
                currency translation adjustment
            
            
            656
            
            
            210
            
            
            (171
            )Net
                change in cash and cash equivalents
            
            
            15,295
            
            
            6,560
            
            
            659Cash
                and cash equivalents at the beginning of the year
            
            
            9,182
            
            
            2,622
            
            
            1,963Cash
                and cash equivalents at the end of the year
            
            
            24,477
            
            
            9,182
            
            
            2,622





**Year
      2007**





**Net
      cash provided by operating activities**





In
      2007,
      our net cash provided by operating activities amounted to approximately $6.7
      million. The major source of cash inflow from operating activities was from
      net
      income of $8.7 million. Changes in operating assets and liabilities included
      cash outflow resulting from increase in accounts receivable of $2.9 million
      and
      other receivables of $0.1 million. This was offset by cash inflow from cash
      received from increase in accounts payable of $0.2 million, other payables
      of
      $0.3 million and income tax payable of $0.3 million.





**Net
      cash used in investing activities**





In
      2007,
      our net cash used in investing activities was approximately $21,000 which arose
      from the acquisition of production and office equipment.





**Net
      cash provided by financing activities**





In
      2007,
      our cash provided by financing activities was approximately $8.0 million. This
      comprised mainly the increase in additional paid-in capital of $15.9 million
      which was raised form the transaction of reverse acquisition and private
      placement taken place in November 2007, net of offering costs of $4.0 million.
      This was offset by the dividend being paid of $4.6 million, repayment of bank
      loans of $3.0 million and decrease in amount due to a shareholder of $0.4
      million.





**Year
      2006**





**Net
      cash provided by operating activities**





In
      2006,
      our net cash provided by operating activities amounted to approximately $9.4
      million. The major source of cash inflow from operating activities was from
      net
      income of $7.0 million. Changes in operating assets and liabilities included
      cash inflow resulting from cash received from accounts receivable of $2.4
      million, increase in accounts payable of $0.2 million and other payables of
      $0.1
      million. This was offset by cash outflow from higher inventories of 0.6
      million.




**Net
      cash used in investing activities**





In
      2006,
      our net cash used in investing activities was approximately $1,000 which arose
      from the acquisition of office equipment.





**Net
      cash used in financing activities**





In
      2006,
      our cash used in financing activities was approximately $3.0 million. This
      comprised a net increase in bank loans taken up by us for our working capital
      requirements of $0.5 million, which was offset by repayment of amount due to
      a
      shareholder of $3.5 million.




53





**Year
      2005**





**Net
      cash provided by operating activities**





In
      2005,
      our net cash provided by operating activities amounted to approximately $2.3
      million. The major source of cash inflow from operating activities was from
      net
      income of $3.3 million. Changes in operating assets and liabilities included
      cash outflow resulting from increase in accounts receivable of $2.6 million
      and
      payment of income tax amounting to $0.3 million. This was offset by cash inflow
      from lower inventories of $0.6 million, cash received from other receivables
      and
      prepayments of $0.7 million and increase in other payables of $0.2
      million.





**Net
      cash used in investing activities**





In
      2005,
      our net cash used in investing activities was approximately $14,000, which
      arose
      from the acquisition of production equipment and plant and
      machinery.





**Net
      cash used in financing activities**





In
      2005,
      our net cash used in financing activities was $1.4 million. This comprised
      a net
      increase in bank loans of $0.4 million which was offset by repayment of amount
      due to a shareholder of $1.6 million and distribution of dividend of $0.2
      million.





**Use
      of proceeds**





We
      believe that after taking into account our cash position, available bank
      facilities and cash from operating activities, we have adequate working capital
      for our present requirements.





However,
      we do have the expansion plan for the use of proceeds being raised from the
      private placement taken place on November 17, 2007. Here below is the breakdown
      for the use of proceeds and the expected timeline for corresponding
      commitments.


**Use
                  of Proceeds**
              
              **Amount
                  in $’m**
              
              **Year
                  to Spend**Construct
                  new cold storage facilities
              
              
              6.0
              
              
              2008-2009Acquire
                  land use right and construct new processing plant
              
              
              6.5
              
              
              2008-2009Upgrade
                  part of the processing plant and equipment
              
              
              0.6
              
              
              2008Construct
                  new sterile sealed production unit
              
              
              0.6
              
              
              2008Develop
                  and promote new markets
              
              
              1.0
              
              
              2008-2009Support
                  research and development
              
              
              0.8
              
              
              2008-2009Working
                  capital (including offering expenses)
              
              
              4.4
              
              
              2007-2008**Total**
              
              
              **19.9**





After
      the
      private placement, the relative cost of capital resources would decrease
      correspondingly given the increase in the equity financing and the same level
      of
      bank borrowings.





Apart
      from the expansion plan discussed above and the commitments set out in the
      section of “Commitments and Contingencies” herein, we do not have any other
      material commitments for capital expenditures and other expenditures. We believe
      that the current operating activities would be able to generate adequate cash
      flows supporting the daily operations. We do not have any fund raising plan
      at
      the moment.





**CAPITAL
      EXPENDITURE AND INVESTMENTS**





A
      summary
      of our capital expenditure for the last three financial years ended December
      31,
      2007, 2006 and 2005 is as follows:





**Year
                ended December 31,****US$’000**
            
            **2007**
            
            **2006**
            
            **2005**Land
                use right
            
            
            -
            
            
            -
            
            
            -Leasehold
                buildings
            
            
            -
            
            
            -
            
            
            -Plant
                and machinery
            
            
            20
            
            
            -
            
            
            13Office
                equipment
            
            
            1
            
            
            1
            
            
            1Motor
                vehicles
            
            
            -
            
            
            -
            
            
            -21
            
            
            1
            
            
            14




No
      material capital expenditure items were occurred during the period under
      review.




54





**COMMITMENTS
      AND CONTINGENCIES**





**Operating
      lease commitment**





No
      material operating lease commitment was identified as at the end of
      2007.





**Guarantees**





We
      are
      the guarantor for the following bank loan:


**As
                  of December 31,****Guarantor**
              
              **Guarantee**
              
              **2007**
              
              **2006**Shishi
                  Huabao Mingxiang Foods Co., Ltd.
              
              Shishi
                Yu Ching Knitting and Clothing Company
              
              $
              640,000
              
              $
              640,000





In
      accordance with FIN 45 *“Guarantor’s
      Accounting and Disclosure Requirements for Guarantees, Including Indirect
      Guarantees and Indebtedness of Others”* ,
      guarantor must recognize a liability for the fair value of the obligations
      it
      assumes under certain guarantees. We have determined the fair value of the
      indemnification to be insignificant. Accordingly, we have not recorded any
      liabilities for these agreements as of December 31, 2007 and 2006. The guarantee
      expired on January 10, 2008 and it was renewed through January 10,
      2010.





**CRITICAL
      ACCOUNTING POLICIES & RECENT ACCOUNTING PRONOUNCEMENTS**





·
            Basis
                of presentation





These
      accompanying financial statements have been prepared in accordance with
      generally accepted accounting principles in the United States of America (“US
      GAAP”).





·
            Basis
                of consolidation





The
      consolidated financial statements include the financial statements of China
      Marine, Nice
      Enterprise, Rixiang, Jixiang and Mingxiang .





All
      significant intercompany balances and transactions within the Company have
      been
      eliminated upon consolidation.





·
            Use
                of estimates





In
      preparing these financial statements, management makes estimates and assumptions
      that affect the reported amounts of assets and liabilities in the balance sheets
      and revenues and expenses during the years reported. The most significant
      estimates and assumptions relate to the Black-Scholes fair value calculation
      of
      the Company’s warrants. Actual results may differ from these
      estimates.





·
            Cash
                and cash equivalents





The
      Company considers all highly liquid securities with original maturities of
      three
      months or less when acquired to be cash equivalents. At December 31, 2007 and
      2006, the Company had $24,476,647 and $9,182,239, respectively, in cash
      equivalents.





·
            Accounts
                receivable and allowance for doubtful
                accounts





Accounts
      receivable consists of amounts due from customers. The Company extends unsecured
      credit to its customers in the ordinary course of business but mitigates the
      associated risks by performing credit checks and actively pursuing past due
      accounts. An allowance for doubtful accounts is established and determined
      based
      on management’s assessment of known requirements, aging of receivables, payment
      history, the customer’s current credit worthiness and the economic environment.





·
            Inventories





Inventories
      include direct materials, labor and factory overhead and are stated at lower
      of
      cost or market value, cost being determined on a weighted average costing
      method. The Company periodically reviews historical sales activity to determine
      excess, slow moving items and potentially obsolete items and also evaluates
      the
      impact of any anticipated changes in future demand. The Company provides
      inventory allowances based on excess and obsolete inventories determined
      principally by customer demand. As of December 31, 2007, 2006 and 2005, the
      Company did not record an allowance for obsolete inventories, nor have there
      been any write-offs.




55




·
            Property,
                plant and equipment





Property,
      plant and equipment are stated at cost less accumulated depreciation and
      accumulated impairment losses, if any. Depreciation is calculated on the
      straight-line basis over the following expected useful lives from the date
      on
      which they become fully operational and after taking into account their
      estimated residual values:





Depreciable
                life
            
            Residual
                valueBuildings
            
            
            30-50
                years
            
            
            10
            %Plant
                and machinery
            
            
            10-30
                years
            
            
            10
            %Office
                equipments
            
            
            8-10
                years
            
            
            10
            %Motor
                vehicles
            
            
            5
                years
            
            
            10
            %





·
            Intangible
                assets





All
      lands
      in the PRC are owned by the PRC government. The government in the PRC, according
      to the relevant PRC law, may sell the right to use the land for a specified
      period of time. Thus, all of the Company’s land purchases in the PRC are
      considered to be leasehold land and are stated at cost less accumulated
      amortization and any recognized impairment loss. Amortization is provided over
      the term of the land use right agreements on a straight-line basis, which is
      50
      years and they will expire in 2052.





·
            Impairment
                of long-lived assets





In
      accordance with SFAS No. 144, *“Accounting
      for the Impairment or Disposal of Long-Lived Assets”* , 
      long-lived assets and certain identifiable intangible assets held and used
      by
      the Company are reviewed for impairment whenever events or changes in
      circumstances indicate that the carrying amount of an asset may not be
      recoverable. Recoverability
      of assets to be held and used is evaluated by a comparison of the carrying
      amount of assets to estimated discounted net cash flows expected to be generated
      by the assets. If such assets are considered to be impaired, the impairment
      to
      be recognized is measured by the amount by which the carrying amounts of the
      assets exceed the fair value of the assets. There has been no impairment during
      the years ended December 31, 2007, 2006 and 2005.





·
            Revenue
                recognition





The
      Company derives revenues from the processing, distribution and sale of processed
      seafood products and sale of marine catch. The Company recognizes its revenues
      net of value-added taxes (“VAT”). The Company is subject to VAT which is levied
      on the majority of the products at the rate of 17% on the invoiced value of
      sales. Output VAT is borne by customers in addition to the invoiced value of
      sales and input VAT is borne by the Company in addition to the invoiced value
      of
      purchases to the extent not refunded for export sales.





Revenue
      is recognized when the products are delivered to and received by the customers,
      collectibility is reasonably assured and the prices are fixed and
      determinable.





The
      Company has distributor arrangements with certain parties for sale of its marine
      catch. The distributor agreements do not provide chargeback, price protection,
      or stock rotation rights. Accordingly, the Company records the revenue when
      products are delivered to and received by the distributors. The Company presents
      revenue net of VAT incurred.





Rental
      income from operating leases on properties is recognized on a straight-line
      basis over the lease period.





·
            Cost
                of revenue





Cost
      of
      revenue consists primarily of material costs, direct labor, depreciation and
      manufacturing overheads, which are directly attributable to the manufacture
      of
      products.





·
            Government
                subsidy income





Subsidy
      income is received at a discretionary amount as determined by the local PRC
      government. Subsidy income is recognized at their fair value where there is
      a
      reasonable assurance that the subsidy will be received and the Company will
      comply with applicable conditions. Subsidy income is recognized in the
      accompanying consolidated statements of operations at the period when it was
      received from the local PRC government.




56




·
            Advertising
                expenses





Advertising
      costs are expensed as incurred in accordance with the American Institute of
      Certified Public Accountants (“AICPA”) Statement of Position 93-7, *“Reporting
      for Advertising Costs”* .
      Advertising expenses for the years ended December 31, 2007, 2006 and 2005 were
      $22,856, $29,471 and $2,070, respectively.





·
            Retirement
                plan costs





Contributions
      to retirement schemes (which are defined contribution plans) are charged to
      general and administrative expenses in the accompanying consolidated statements
      of operations as the related employee service is provided.





·
            Comprehensive
                income





SFAS
      No. 130, *“Reporting
      Comprehensive Income”,* establishes standards for reporting and display of comprehensive income, its
      components and accumulated balances. Comprehensive income as defined includes
      all changes in equity during a period from non-owner sources. Accumulated other
      comprehensive income, as presented in the accompanying statement of changes
      in
      owners’ equity consists of changes in unrealized gains and losses on foreign
      currency translation. This comprehensive income is not included in the
      computation of income tax expense or benefit.





·
            Income
                taxes





The
      Company accounts for income tax using SFAS No. 109 *“Accounting
      for Income Taxes”* ,
      which
      requires the asset and liability approach for financial accounting and reporting
      for income taxes. Under this approach, deferred income taxes are provided for
      the estimated future tax effects attributable to temporary differences between
      financial statement carrying amounts of assets and liabilities and their
      respective tax bases, and for the expected future tax benefits from loss
      carry-forwards and provisions, if any. Deferred tax assets and liabilities
      are
      measured using the enacted tax rates expected in the years of recovery or
      reversal and the effect from a change in tax rates is recognized in the
      statement of operations and comprehensive (loss) income in the period of
      enactment. A valuation allowance is provided to reduce the amount of deferred
      tax assets if it is considered more likely than not that some portion of, or
      all
      of the deferred tax assets will not be realized.





·
            Net
                income per share





The
      Company calculates net income per share in accordance with SFAS No. 128, *“Earnings
      per Share”* .
      Basic
      income per share is computed by dividing the net income by the weighted average
      number of common shares outstanding during the period. Diluted income per share
      is computed similar to basic income per share except that the denominator is
      increased to include the number of additional common shares that would have
      been
      outstanding if the potential common stock equivalents had been issued and if
      the
      additional common shares were dilutive.





·
            Foreign
                currencies translation





The
      reporting currency of the Company is in United States dollar (“US$”).
      Transactions denominated in currencies other than US$ are translated into US$
      at
      the average rate for the period. Monetary assets and liabilities denominated
      in
      currencies other than US$ are translated into US$ at the rates of exchange
      ruling at the balance sheet date. The resulting exchange differences are
      recorded in other expenses in the statements of operations.





The
      financial records of the Company’s operating subsidiaries are maintained in
      their local currency, the Renminbi (“RMB”), which is the functional
      currency. Assets and liabilities are translated at the exchange rates at
      the balance sheet date, equity accounts are translated at historical exchange
      rates, and income and expenses items are translated using the average rate
      for
      the period. The translation adjustments are recorded in accumulated other
      comprehensive income in the statements of stockholders’ equity.





·
            Stock-based
                compensation





The
      Company adopts SFAS No. 123R, *“Accounting
      for Stock-Based Compensation”* ,
      using
      the fair value method. Under
      SFAS No. 123R, stock-based compensation expense is measured at the
      grant date based on the value of the option or restricted stock and is
      recognized as expense, less expected forfeitures, over the requisite service
      period.





·
            Segment
                reporting





SFAS
      No.
      131 *“Disclosures
      about Segments of an Enterprise and Related Information”* establishes standards for reporting information about operating segments on
      a
      basis consistent with the Company’s internal organization structure as well as
      information about geographical areas, business segments and major customers
      in
      financial statements. The Company operates in two principal reportable segments:
      sale of processed seafood products and sale of marine catch.




57





·
            Fair
                value of financial instruments





The
      Company values its financial instruments as required by SFAS No. 107, *“Disclosures
      about Fair Value of Financial Instruments”* .
      The
      estimated fair value amounts have been determined by the Company, using
      available market information and appropriate valuation methodologies. The
      estimates presented herein are not necessarily indicative of amounts that the
      Company could realize in a current market exchange.





The
      Company’s financial instruments primarily include cash and cash equivalents,
      accounts receivable, other receivables and prepayments, short-term borrowings,
      accounts payable, due to a shareholder, other payables and accrued
      liabilities.





As
      of the
      balance sheet date, the estimated fair values of financial instruments were
      not
      materially different from their carrying values as presented due to short
      maturities of these instruments.





·
            Related
                parties





Parties,
      which can be a corporation or individual, are considered to be related if the
      Company has the ability, directly or indirectly, to control the other party
      or
      exercise significant influence over the other party in making financial and
      operating decisions. Companies are also considered to be related if they are
      subject to common control or common significant influence.





·
            Registration
                payment arrangements





The
      Company accounts for registration payment arrangement in accordance with FASB
      Staff Position EITF 00-19-2, *“**Accounting*** *for*** *Registration*** *Payment*** *Arrangements**”***(“FSP
      EITF 00-19-2”) which provides guidance on the accounting for registration payment arrangements.
      FSP
      EITF 00-19-2 specifies that the contingent obligation to make future
      payments or otherwise transfer consideration under a registration payment
      arrangement, whether issued as a separate agreement or included as a provision
      of a financial instrument or other agreement, should be separately recognized
      and measured in accordance with FASB Statement No. 5,*“**Accounting
      for Contingencies”*.
      A
      registration payment arrangement is defined in FSP EITF 00-19-2 as an
      arrangement with both of the following characteristics: (1) the arrangement
      specifies that the issuer will endeavor (a) to file a registration
      statement for the resale of specified financial instruments and/or for the
      resale of equity shares that are issuable upon exercise or conversion of
      specified financial instruments and for that registration statement to be
      declared effective by the Securities and Exchange Commission within a specified
      grace period, and/or (b) to maintain the effectiveness of the registration
      statement for a specified period of time (or in perpetuity); and (2) the
      arrangement requires the issuer to transfer consideration to the counterparty
      if
      the registration statement for the resale of the financial instrument or
      instruments subject to the arrangement is not declared effective or if
      effectiveness of the registration statement is not maintained.





·
            Uncertain
                tax positions





The
      Company adopted Financial Accounting Standards Board Interpretation No. 48, *“Accounting
      for Uncertainty in Income Taxes”* (“FIN
      48”), on January 1, 2007. FIN 48 prescribes a more likely than not
      threshold for financial statement recognition and measurement of a tax position
      taken or expected to be taken in a tax return. This Interpretation also provides
      guidance on derecognition of income tax assets and liabilities, classification
      of current and deferred income tax assets and liabilities, accounting for
      interest and penalties associated with tax positions, accounting for income
      taxes in interim periods, and income tax disclosures. The Company did not have
      any adjustment to the opening balance of retained earnings as of January 1,
      2007 as a result of the implementation of FIN 48. For the year ended
      December 31, 2007, the Company did not have any interest and penalties
      associated with tax positions. As of December 31, 2007, the Company did not
      have any significant unrecognized uncertain tax positions.





·
            Recently
                issued accounting standards





In
      February 2007, the FASB issued Statement of Financial Accounting Standard No.
      159,*“The
      Fair Value Option for Financial Assets and Financial
      Liabilities”*,
      or SFAS
      159. SFAS 159 permits companies to choose to measure many financial instruments
      and certain other items at fair value. It is expected to expand the use of
      fair
      value measurements which is consistent with the Financial Accounting Standards
      Board’s long-term measurement objectives for accounting for financial
      instruments. SFAS 159 is effective for our first fiscal year that begins after
      November 15, 2007, which is our fiscal year 2009 that begins in January 2008.
      The Company is currently evaluating the impact of this statement to its
      financial position and results of operations.





In
      December 2007, the FASB issued SFAS No. 141 (Revised 2007), *‘’Business
      Combinations’’* ,
      or SFAS
      No. 141R. SFAS No. 141R will change the accounting for business combinations.
      Under SFAS No. 141R, an acquiring entity will be required to recognize all
      the
      assets acquired and liabilities assumed in a transaction at the acquisition-date
      fair value with limited exceptions. SFAS No. 141R will change the accounting
      treatment and disclosure for certain specific items in a business combination.
      SFAS No. 141R applies prospectively to business combinations for which the
      acquisition date is on or after the beginning of the first annual reporting
      period beginning on or after December 15, 2008. Accordingly, any business
      combinations we engage in will be recorded and disclosed following existing
      GAAP
      until January 1, 2009. We expect SFAS No. 141R will have an impact on accounting
      for business combinations once adopted but the effect is dependent upon
      acquisitions at that time. We are still assessing the impact of this
      pronouncement.




58





In
      December 2007, the FASB issued SFAS No. 160, *"Noncontrolling Interests in Consolidated Financial Statements--An Amendment
      of
      ARB No. 51’’* ,
      or SFAS
      No. 160. SFAS No. 160 establishes new accounting and reporting standards for
      the
      noncontrolling interest in a subsidiary and for the deconsolidation of a
      subsidiary. SFAS No. 160 is effective for fiscal years beginning on or after
      December 15, 2008. We believe that SFAS 160 should not have a material impact
      on
      our financial position or results of operations.





**FOREIGN
      EXCHANGE EXPOSURE**





Our
      sales
      are denominated in RMB and US dollars whilst our purchases and operating
      expenses are all denominated in RMB. As such, we may be exposed to any
      significant transactional foreign exchange exposure for our operations. However,
      to the extent that we may enter into transactions in currencies other than
      RMB
      in future, particularly as we penetrate into overseas markets, our financial
      results may be subject to fluctuations between those foreign currencies and
      RMB.





The
      percentage of our sales denominated in RMB and US dollars are as
      follows:





**Year
                ended December 31,****(%)**
            
            **2007**
            
            **2006**
            
            **2005****Sales**RMB
            
            
            99.5
            
            
            99.1
            
            
            95.8US
                dollars
            
            
            0.5
            
            
            0.9
            
            
            4.2**Total**
            
            
            **100.0**
            
            
            **100.0**
            
            
            **100.0**





On
      July
      21, 2005, the RMB was unpegged against the US dollars and pegged against a
      basket of currencies on a “managed-float currency regime”. As at December 31,
      2007, the exchange rate was approximately US$1.00 to RMB7.3141. There is no
      assurance that the PRC's foreign exchange policy will not be further altered.
      In
      the event that the PRC's policy is altered, significant fluctuations in the
      exchange rates of RMB against US dollars may arise. As a result we will be
      subject to significant foreign exchange exposure and in the event that we incur
      foreign exchange losses, our financial performance will be adversely
      affected.





Our
      net
      foreign exchange gains or losses for the last three financial years ended
      December 31, 2007, 2006 and 2005 are as follows:





**Year
                ended December 31,****2007**
            
            **2006**
            
            **2005**Net
                foreign exchange gains/ (losses) (US$’000)
            
            
            14
            
            
            1
            
            
            (2
            )As
                a percentage of income before tax (%)
            
            
            0.14
            
            
            0.02
            
            
            0.05





We
      do not
      have a formal hedging policy with respect to our foreign exchange exposure
      as
      our foreign exchange gains/ losses for the period under review have been
      relatively insignificant. We will continue to monitor our foreign exchange
      exposure in the future and will consider hedging any material foreign exchange
      exposure should the need arise. Should we enter into any hedging transaction
      in
      the future, such transaction shall be subject to review by o ur
      board of
      directors .
      In
      addition, should we establish any formal hedging policy in the future, such
      policy shall be subject to review and approval by o ur
      board prior to
      implementation.





**INFLATION**





During
      the period under review, inflation did not have a material impact on our
      financial performance.





**ITEM
      7A.****Quantitative
      and Qualitative Disclosures about Market Risks**




***Interest
      Rate Risk***





We
      are
      exposed to interest rate risk primarily with respect to our short-term bank
      loans. Although the interest rates are fixed for the terms of the loans, the
      terms are typically twelve months and interest rates are subject to change
      upon
      renewal. There were no material changes in interest rates for short-term bank
      loans in 2007. A hypothetical 1.0% increase in the annual interest rates for
      all
      of our credit facilities at the average of $3.9 million would decrease net
      income before provision for income taxes by approximately $39,000 per annum.
      Management monitors the banks’ interest rates in conjunction with our cash
      requirements to determine the appropriate level of debt balances relative to
      other sources of funds. We have not entered into any hedging transactions in
      an
      effort to reduce our exposure to interest rate risk.




59




***Foreign
      Exchange Risk***





While
      our
      reporting currency is the US dollar, all of our consolidated revenues and
      consolidated costs and expenses are denominated in RMB. All of our assets are
      denominated in RMB except for some cash and cash equivalents and accounts
      receivables. As a result, we are exposed to foreign exchange risk as our
      revenues and results of operations may be affected by fluctuations in the
      exchange rate between US dollar and RMB. If the RMB depreciates against the
      US
      dollar, the value of our RMB revenues, earnings and assets as expressed in
      our
      US dollar financial statements will decline. We have not entered into any
      hedging transactions in an effort to reduce our exposure to foreign exchange
      risk.





***Inflation***




Inflationary
      factors such as increases in the cost of our product and overhead costs may
      adversely affect our operating results. Although we do not believe that
      inflation has had a material impact on our financial position or results of
      operations to date, a high rate of inflation in the future may have an adverse
      effect on our ability to maintain current levels of gross margin and selling
      and
      distribution, general and administrative expenses as a percentage of net
      revenues if the selling prices of our products do not increase to cope with
      these increased costs.




60




**ITEM
      8.**  **Financial
      Statements and Supplementary Data**





**CHINA
      MARINE FOOD GROUP LIMITED**




**INDEX
      TO CONSOLIDATED FINANCIAL STATEMENTS**




**Page**Report
                  of Independent Registered Public Accounting Firm
              
              F-2
                  - F-3Consolidated
                  Balance Sheets
              
              F-4Consolidated
                  Statements of Income
              
              F-5Consolidated
                  Statements of Cash Flows
              
              F-6
                  - F-7Consolidated
                  Statements of Changes in Stockholders’ Equity
              
              F-8Notes
                  to Consolidated Financial Statements
              
              F-9
                  - F-25











**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





The
      Board
      of Directors and stockholders of


**China
      Marine Food Group Limited**





We
      have
      audited the accompanying consolidated balance sheet of China Marine Food Group
      Limited (“the Company”) as of December 31, 2007 and the related consolidated
      statements of income, cash flows and stockholders’ equity for the year ended
      December 31, 2007. The consolidated financial statements are the responsibility
      of the Company’s management. Our responsibility is to express an opinion on
      these consolidated financial statements based on our audits.





We
      conducted our audit 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
      consolidated financial statements are free of material misstatement. The Company
      is not required to have, nor were we engaged to perform, an audit of its
      internal control over financial reporting. Our audits include 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 consolidated financial statements, assessing the accounting
      principles used and significant estimates made by management, as well as
      evaluating the overall consolidated financial statement presentation. We believe
      that our audit provides a reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of the Company as of December
      31, 2007 and the results of their operations and their cash flows for the year
      ended December 31, 2007 in conformity with accounting principles generally
      accepted in the United States of America.







/s/
      Cordovano and Honeck LLP


Englewood,
      Colorado USA


March
      20,
      2008




F-2




**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





The
      Board
      of Directors and stockholders of


**Nice
      Enterprise Trading H.K. Co., Limited**





We
      have
      audited the accompanying consolidated balance sheets of Nice Enterprise Trading
      H.K. Co., Limited and its subsidiaries (“the Company”) as of December 31, 2006
      and 2005 and the related consolidated statements of operations and comprehensive
      income, cash flows and stockholders’ equity for each of the two years ended
      December 31, 2006 and 2005. The 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 audits include 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 consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of the Company as of December
      31, 2006 and 2005 and the results of operations and cash flows for each of
      the
      two years ended December 31, 2006 and 2005 and in conformity with accounting
      principles generally accepted in the United States of America.




Zhong
      Yi
      (Hong Kong) C.P.A. Company Limited


Certified
      Public Accountants





Hong
      Kong, China


September
      20, 2007




F-3




**CHINA
      MARINE FOOD GROUP LIMITED**


**CONSOLIDATED
      BALANCE SHEETS**


**(Currency
      expressed in United States Dollars (“US$”), except for number of
      shares)**




As
                of December 31,2007
            
            2006**ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            24,476,647
            
            $
            9,182,239Accounts
                receivable, net
            
            
            4,183,437
            
            
            1,289,669Inventories
            
            
            1,187,335
            
            
            1,136,086Prepaid
                expenses
            
            
            165,528
            
            
            34,884Total
                current assets
            
            
            30,012,947
            
            
            11,642,878Property,
                plant and equipment, net
            
            
            3,510,837
            
            
            3,236,455Intangible
                assets, net
            
            
            605,823
            
            
            550,303Total
                assets
            
            $
            34,129,607
            
            $
            15,429,636**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**Current
                liabilities:Short-term
                borrowings
            
            $
            772,481
            
            $
            3,792,640Accounts
                payable, trade
            
            
            436,620
            
            
            228,093Amount
                due to a shareholder
            
            
            262,388
            
            
            646,094Salaries
                payable
            
            
            345,319
            
            
            168,659Income
                tax payable
            
            
            341,094
            
            
            -Other
                payables and accrued liabilities
            
            
            443,533
            
            
            279,218Total
                current liabilities
            
            
            2,601,435
            
            
            5,114,704Stockholders’
                equity:Common
                stock, $0.001 par value; 100,000,000 shares authorized; 22,972,301
                and
                15,624,034 shares issued and outstanding as of December 31, 2007
                and 2006,
                respectively
            
            
            22,972
            
            
            15,624Additional
                paid-in capital
            
            
            16,579,443
            
            
            661,791Statutory
                reserve
            
            
            3,110,266
            
            
            1,724,269Accumulated
                other comprehensive income
            
            
            1,252,896
            
            
            63,967Retained
                earnings
            
            
            10,562,595
            
            
            7,849,281Total
                stockholders’ equity
            
            
            31,528,172
            
            
            10,314,932Total
                liabilities and stockholders’ equity
            
            $
            34,129,607
            
            $
            15,429,636




See
      accompanying notes to consolidated financial statements.




F-4


**CHINA
      MARINE FOOD GROUP LIMITED**


**CONSOLIDATED
      STATEMENTS OF INCOME**


**(Currency
      expressed in United States Dollars (“US$”))**





Years
                ended December 31,2007
            
            2006
            
            2005Revenue,
                net
            
            $
            36,425,327
            
            $
            27,442,022
            
            $
            14,938,563Cost
                of revenue
            
            
            25,649,518
            
            
            19,730,190
            
            
            11,197,620Gross
                profit
            
            
            10,775,809
            
            
            7,711,832
            
            
            3,740,943Operating
                expenses:Depreciation
                and amortization
            
            
            37,013
            
            
            32,075
            
            
            25,749Selling
                and distribution
            
            
            148,840
            
            
            94,399
            
            
            57,628General
                and administrative
            
            
            597,767
            
            
            387,699
            
            
            207,882Total
                operating expenses
            
            
            783,620
            
            
            514,173
            
            
            291,259Income
                from operations
            
            
            9,992,189
            
            
            7,197,659
            
            
            3,449,684Other
                income (expenses):Other
                income
            
            
            13,533
            
            
            18,940
            
            
            19,606Subsidy
                income
            
            
            62,142
            
            
            15,453
            
            
            41,625Rental
                income
            
            
            68,066
            
            
            54,861
            
            
            53,379Interest
                income
            
            
            79,183
            
            
            20,322
            
            
            13,375Interest
                expense
            
            
            (332,816
            )
            
            (271,593
            )
            
            (215,054
            )Total
                other expenses
            
            
            (109,892
            )
            
            (162,017
            )
            
            (87,069
            )Income
                before income taxes
            
            
            9,882,297
            
            
            7,035,642
            
            
            3,362,615Income
                tax expense
            
            
            (1,220,942
            )
            
            -
            
            
            (13,595
            )Net
                income
            
            $
            8,661,355
            
            $
            7,035,642
            
            $
            3,349,020Net
                income per share - basic
            
            $
            0.377
            
            $
            0.450
            
            $
            0.214Net
                income per share - diluted
            
            $
            0.344
            
            $
            0.450
            
            $
            0.214Weighted
                average shares outstanding - basic
            
            
            22,972,301
            
            
            15,624,034
            
            
            15,624,034Weighted
                average shares outstanding - diluted
            
            
            25,142,105
            
            
            15,624,034
            
            
            15,624,034




See
      accompanying notes to consolidated financial statements.




F-5


**CHINA
      MARINE FOOD GROUP LIMITED**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(Currency
      expressed in United States Dollars (“US$”))**




Years
                ended December 31,2007
            
            2006
            
            2005**Cash
                flows from operating activities:**Net
                income
            
            $
            8,661,355
            
            $
            7,035,642
            
            $
            3,349,020Adjustments
                to reconcile net income to net cashprovided
                by (used in) operating activities:Depreciation
            
            
            209,501
            
            
            273,941
            
            
            259,840Amortization
            
            
            14,792
            
            
            14,261
            
            
            13,846(Reversal)
                of allowance for doubtful accounts
            
            
            -
            
            
            (15,934
            )
            
            2,960Changes
                in operating assets and liabilities:Accounts
                receivable, trade
            
            
            (2,893,768
            )
            
            2,352,405
            
            
            (2,600,714
            )Inventories
            
            
            (51,249
            )
            
            (575,378
            )
            
            580,882Other
                receivables and prepayments
            
            
            (130,644
            )
            
            (11,643
            )
            
            676,424Accounts
                payable, trade
            
            
            208,527
            
            
            180,877
            
            
            47,216Other
                payables and accrued liabilities
            
            
            340,975
            
            
            121,152
            
            
            175,957Income
                taxes payable
            
            
            341,094
            
            
            -
            
            
            (251,792
            )Net
                cash provided by operating activities
            
            
            6,700,583
            
            
            9,375,323
            
            
            2,253,639**Cash
                flows from investing activities:**Purchase
                of property, plant and equipment
            
            
            (21,079
            )
            
            (917
            )
            
            (14,241
            )Net
                cash used in investing activities
            
            
            (21,079
            )
            
            (917
            )
            
            (14,241
            )**Cash
                flows from financing activities:**Repayment
                of amount due to a shareholder
            
            
            (383,706
            )
            
            (3,517,622
            )
            
            (1,645,120
            )Drawdown
                from short-term borrowings
            
            
            772,481
            
            
            3,792,640
            
            
            3,299,505Repayment
                of short-term borrowings
            
            
            (3,792,640
            )
            
            (3,299,505
            )
            
            (2,871,011
            )Proceeds
                from private placement (net of offering costs of $4,000,000 paid
                in
                cash)
            
            
            15,925,000
            
            
            -
            
            
            -Dividends
                paid
            
            
            (4,562,044
            )
            
            -
            
            
            (193,003
            )Net
                cash provided by (used in) financing activities
            
            
            7,959,091
            
            
            (3,024,487
            )
            
            (1,409,629
            )**Foreign
                currency translation adjustment**
            
            
            655,813
            
            
            209,907
            
            
            (170,541
            )**NET
                CHANGE IN CASH AND CASH EQUIVALENTS**
            
            
            15,294,408
            
            
            6,559,826
            
            
            659,228**CASH
                AND CASH EQUIVALENTS, BEGINNING OF YEAR**
            
            
            9,182,239
            
            
            2,622,413
            
            
            1,963,185**CASH
                AND CASH EQUIVALENTS,****END
                OF YEAR**
            
            $
            24,476,647
            
            $
            9,182,239
            
            $
            2,622,413




F-6




**SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATION**Cash
                paid for income taxes
            
            $
            879,848
            
            $
            -
            
            $
            265,387Cash
                paid for interest expenses
            
            $
            332,816
            
            $
            271,593
            
            $
            215,054





**SUPPLEMENTAL
                DISCLOSURE OF NONCASH INVESTING AND FINANCING
                TRANSACTIONS**Warrant
                shares granted for offering costs
            
            $
            1,941,014
            
            $
            -
            
            $
            -Dividends
                paid set off against amount due from a shareholder of the
                Company
            
            $
            -
            
            $
            -
            
            $
            1,645,120





See
      accompanying notes to consolidated financial statements.




F-7




**CHINA
      MARINE FOOD GROUP LIMITED**


**CONSOLIDATED
      STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY**


**(Currency
      expressed in United States Dollars (“US$”), except for number of
      shares)**




Common
                stockNo
                of
              share
            
            
            Par
                Value
            
            
            Additional
              paid-in
              capital
            
            
            Statutory
              reserve
            
            
            Accumulated
              other
              comprehensive
              income
            
            
            Retained
              earnings
            
            
            Total
              Stockholder’s
              equityBalance
                at January 1, 2005
            
            
            *15,624,034
            
            $
            15,624
            
            $
            661,791
            
            $
            -
            
            $
            24,601
            
            $
            1,027,011
            
            $
            1,729,027Transfer
                of retained earnings to statutory reserve
            
            
            -
            
            
            -
            
            
            -
            
            
            591,281
            
            
            -
            
            
            (591,281
            )
            
            -Distribution
                of dividends
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (1,838,123
            )
            
            (1,838,123
            )Comprehensive
                income:Net
                income for the year
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            *-*
            
            
            3,349,020
            
            
            3,349,020Foreign
                currency translation adjustment
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (170,541
            )
            
            -
            
            
            (170,541
            )Total
                comprehensive income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            3,178,479Balance
                as of December 31, 2005
            
            
            *15,624,034
            
            
            15,624
            
            
            661,791
            
            
            591,281
            
            
            (145,940
            )
            
            1,946,627
            
            
            3,069,383Transfer
                of retained earnings to statutory reserve
            
            
            -
            
            
            -
            
            
            -
            
            
            1,132,988
            
            
            -
            
            
            (1,132,988
            )
            
            -Comprehensive
                income:Net
                income for the year
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            7,035,642
            
            
            7,035,642Foreign
                currency translation adjustment
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            209,907
            
            
            -
            
            
            209,907Total
                comprehensive income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            7,245,549Balance
                as of December 31, 2006
            
            
            *15,624,034
            
            
            15,624
            
            
            661,791
            
            
            1,724,269
            
            
            63,967
            
            
            7,849,281
            
            
            10,314,932Shares
                issued for reverse acquisition
            
            
            1,148,826
            
            
            1,149
            
            
            (1,149
            )
            
            -
            
            
            -
            
            
            -
            
            
            -Proceeds
                from private placement (net of offering costs of $5,941,014 cash
                and
                warrant shares granted)
            
            
            6,199,441
            
            
            6,199
            
            
            15,918,801
            
            
            -
            
            
            -
            
            
            -
            
            
            15,925,000Transfer
                of retained earnings to statutory reserve
            
            
            -
            
            
            -
            
            
            -
            
            
            1,385,997
            
            
            -
            
            
            (1,385,997
            )
            
            -Distribution
                of dividends
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (4,562,044
            )
            
            (4,562,044
            )Comprehensive
                incomeNet
                income for the year
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            8,661,355
            
            
            8,661,355Foreign
                currency translation adjustment
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1,188,929
            
            
            -
            
            
            1,188,929Total
                comprehensive income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            9,850,284Balance
                as of December 31, 2007
            
            
            22,972,301
            
            $
            22,972
            
            $
            16,579,443
            
            $
            3,110,266
            
            $
            1,252,896
            
            $
            10,562,595
            
            $
            31,528,172




*Restated
      for reverse stock split (See Note 1)




See
      accompanying notes to consolidated financial statements.




F-8


**CHINA
      MARINE FOOD GROUP LIMITED**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Currency
      expressed in United States Dollars (“US$”))**





**1.**
            **ORGANIZATION
                AND BUSINESS BACKGROUND**





Effective
      November 17, 2007, New Paradigm Productions, Inc. (“NPP”) which was incorporated
      in the State of Nevada on October 1, 1999, merged with Nice Enterprise Trading
      H.K. Co., Limited (“Nice Enterprise”). Subsequent to the merger, NPP changed its
      name to China Marine Food Group Limited (“China Marine”).





NPP
      was
      originally incorporated for the purpose of engaging in the production and
      marketing of meditation music and related supplies. As of
      December 2002, NPP discontinued its principal operations investigated potential
      acquisitions and opportunities.





**Recapitalization
      and Reorganization**





On
      September 13, 2007, NPP entered into a Stock Purchase Agreement (“SPA”) with
      Halter Financial Investments, L.P. (“HFI”), a Texas limited partnership pursuant
      to which NPP agreed to sell to HFI, 1,005,200 shares of post reverse stock-split
      common stock for $400,000. After consummation of the transaction, HFI became
      the
      holder of 1,005,200 shares of common stock, or 87.5% of the 1,148,826 shares
      of
      the outstanding common stock. In addition, the terms of the SPA required NPP
      to
      declare and pay a special cash dividend of $0.364 per post stock-split share
      to
      shareholders of record as of September 12, 2007. Stockholders holding a total
      of
      1,077,000 shares received a special cash dividend in the total amount of
      $392,028 which amount was funded with proceeds from the
      stock sale. Effective on September 25, 2007, NPP effectuated a 7.5 to 1 reverse
      stock split and increased authorized shares of common stock to 100,000,000.





Upon
      the
      closing of the HFI transaction, Jody St. Clair resigned as the sole director
      and
      executive officer and in anticipation of her resignation, she appointed Richard
      Crimmins as sole director, President, Secretary-Treasurer, Chief Executive
      Officer, Chief Operating Officer and Chief Financial Officer.





On
      November 17, 2007, NPP completed a reverse acquisition transaction with Nice
      Enterprise (as described in more details below) through a share exchange with
      Nice Enterprise’s former stockholders. Pursuant to the share exchange agreement,
      the shareholders of Nice Enterprise exchanged 100% of their outstanding capital
      stock in Nice Enterprise for approximately 15,624,034 shares of NPP’s common
      stock, or approximately 93.15% shares of our outstanding common stock after
      the
      share exchange. .





Additionally,
      upon the close of the reverse acquisition, Richard Crimmins, our sole director,
      submitted his resignation letter pursuant to which he resigned from all offices
      of the Company he holds which resignations will become effective immediately.
      Pengfei Liu (“Mr. Liu”) replaced him as our Chief Executive Officer and Interim
      Secretary effective on the close of the reverse acquisition. Prior to the
      effective date of the reverse acquisition, Mr. Liu served at Nice Enterprise
      as
      its Chief Executive Officer.





Concurrently
      with the closing of the reverse acquisition on November 17, 2007, NPP completed
      a private placement of securities to certain accredited investors who subscribed
      to units consisting of one share of common stock and one warrant to purchase
      one-fifth of one share of the common stock. The investors subscribed to an
      aggregate of 6,199,441 units, consisting of 6,199,441 shares of our common
      stock
      and warrants to purchase an aggregate of 1,239,888 shares of the common stock
      at
      $3.214 per unit. The units were offered and sold pursuant to exemptions from
      registration under the Securities Act of 1933, including without limitation,
      Regulation D and Regulation S promulgated under the Securities Act. The gross
      cash proceeds from the private placement totaled $19,925,000 less estimated
      transaction cost of $5,941,014 cash and warrant shares granted. Also in
      connection with this share exchange and private placement transactions, NPP
      granted 929,916 warrant shares to certain agents and consultants exercisable
      at
      $4.1782 per share for a term of three years





At
      November 16, 2007, a majority of the shareholders approved a resolution by
      our
      board of directors to change the name from NPP to its current name. China Marine
      was then assigned a new stock symbol ‘’CMFO’’.




F-9




In
      connection with the private placement, the principal stockholder, Mr. Liu,
      entered into a make good agreement pursuant to which Mr. Liu agreed, subject
      to
      certain conditions discussed below, to place into an escrow
      account, 6,199,441 shares of the Company’s common stock he beneficially
      owns. If the Company does not generate net income of $10.549 million for the
      fiscal year ending December 31, 2008 and $14.268 million for the fiscal year
      ending December 31, 2009, the shares held in escrow will be transferred to
      the
      private placement investors, on a pro rata basis in accordance with the
      following formula: If the 2008 net income threshold is not achieved then an
      amount of shares equal to (($10.549 million - 2008 adjusted net income)/$10.549
      million) multiplied by 50% of the escrowed shares will be transferred to the
      private placement investors. If the 2009 net income threshold is not achieved
      then an amount of shares equal to (($14.268 million - 2009 adjusted net
      income)/$14.268 million) multiplied by 50% of the escrowed shares will be
      transferred to the private placement investors. In the event that the net income
      for 2008 and 2009 meet the minimum net income thresholds for those respective
      years, then no transfer of the escrowed shares shall be made to the private
      placement investors and the shares will then be returned to Mr.
      Liu.


Upon
      completion of the share exchange and the private placement transactions, Nice
      Enterprise became a wholly-owned subsidiary of China Marine. The share exchange
      transaction is accounted for as a reverse acquisition and recapitalization
      of
      China Marine whereby Nice Enterprise is deemed to be the accounting acquirer
      (legal acquiree) and China Marine to be the accounting acquiree (legal
      acquirer). China Marine is deemed to be a continuation of the business of Nice
      Enterprise. Accordingly, the accompanying consolidated financial statements
      include the following:





(1)
            the
                balance sheet consists of the net assets of the accounting acquirer
                at
                historical cost and the net assets of the accounting acquiree at
                historical cost





(2)
            the
                financial position, results of operations, and cash flows of the
                accounting acquirer for all periods presented as if the recapitalization
                occurred at the beginning of the earliest period presented and the
                operations of the accounting acquiree from the date of share exchange
                transaction.





**Business
      History of Nice Enterprise**





Nice
      Enterprise was incorporated in Hong Kong on April 25, 2006 as a private limited
      company. Its principal activity is investment holding.





On
      June
      19, 2006, Nice Enterprise acquired from Nice (H.K) Enterprise Trading Co. (“Nice
      HK”) the entire equity interest in Shishi Rixiang Marine Foods Co., Ltd.
      (“Rixiang”) at a total consideration of US$0.13 (equivalent to RMB 1). Nice HK
      was registered in Hong Kong on June 26, 2003 as a sole-proprietorship. Both
      Nice
      Enterprise and Nice HK were wholly owned by Mr. Liu Pengfei, a permanent
      resident of the Hong Kong Special Administrative Region. The principle activity
      of Nice HK is investment holding and wholly owned Rixiang, a private limited
      liability company incorporated in the People’s Republic of China
      (“PRC”).





Rixiang
      was incorporated in Shishi City, Fujian Province, the PRC on May 19, 2004 as
      a
      limited liability company, with a paid-in capital of $1,000,000. It operates
      as
      a distributor of seafood products and trades with customers in domestic and
      overseas markets.





On
      August
      30, 2006, Nice Enterprise, through Rixiang, entered into separate equity
      transfer agreements each with Shishi Huabao Jixiang Water Products Co., Ltd
      (“Jixiang”) and Shishi Huabao Mingxiang Foods Co., Ltd (“Mingxiang”), whereby
      Rixiang paid a cash consideration of US$0.56 million (equivalent to RMB 4.5
      million) and US$3.76 million (equivalent to RMB 30 million) to the existing
      equity owners of Jixiang and Mingxiang to acquire the entire paid-in capital
      of
      each of the companies. Both Jixiang and Mingxiang were wholly owned by Mr.
      Liu
      and his wife.





Jixiang
      was incorporated in Shishi City, Fujian Province, the PRC on April 19, 2001
      as a
      limited liability company, with a paid-in capital of US$0.54 million (equivalent
      to RMB 4.5 million). It operates in the dried seafood processing
      industry.





Mingxiang
      was incorporated in Shishi City, Fujian Province, the PRC on April 9, 2001
      as a
      limited liability company, with a paid-up capital of US$3.62 million (equivalent
      to RMB 30 million). It operates as a distributor of seafood products and trades
      with customers in domestic and overseas markets.




F-10







Because
      Nice Enterprise, Rixiang, Jixiang and Mingxiang are entities under common
      control, the ownership transfer transaction was accounted for as a transfer
      of
      entities under common control under the guidance of Statements of Financial
      Accounting Standards ("SFAS") No. 141, *“Business
      Combinations”* .
      Hence,
      the consolidation of Nice Enterprise, Rixiang, Jixiang and Mingxiang was
      accounted for at historical cost and prepared on the basis as if the
      reorganization became effective as of the beginning of the first period
      presented in the accompanying consolidated financial statements.





During
      2005, substantial portion of business of Jixiang and Mingxiang was transferred
      to Rixiang and since then Jixiang and Mingxiang became property holding
      companies.





China
      Marine, Nice Enterprise, Rixiang, Jixiang and Mingxiang are hereinafter referred to as “the Company”.





**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING
                POLICIES**





·
            Basis
                of presentation





These
      accompanying financial statements have been prepared in accordance with
      generally accepted accounting principles in the United States of America (“US
      GAAP”).





·
            Basis
                of consolidation





The
      consolidated financial statements include the financial statements of China
      Marine, Nice
      Enterprise, Rixiang, Jixiang and Mingxiang .





All
      significant intercompany balances and transactions within the Company have
      been
      eliminated upon consolidation.





·
            Use
                of estimates





In
      preparing these financial statements, management makes estimates and assumptions
      that affect the reported amounts of assets and liabilities in the balance sheets
      and revenues and expenses during the years reported. The most significant
      estimates and assumptions relate to the Black-Scholes fair value calculation
      of
      the Company’s warrants.  Actual
      results may differ from these estimates.





·
            Cash
                and cash equivalents





The
      Company considers all highly liquid securities with original maturities of
      three
      months or less when acquired to be cash equivalents. At December 31, 2007 and
      2006, the Company had $24,476,647 and $9,182,239, respectively, in cash
      equivalents.





·
            Accounts
                receivable and allowance for doubtful
                accounts





Accounts
      receivable consists of amounts due from customers. The Company extends unsecured
      credit to its customers in the ordinary course of business but mitigates the
      associated risks by performing credit checks and actively pursuing past due
      accounts. An allowance for doubtful accounts is established and determined
      based
      on management’s assessment of known requirements, aging of receivables, payment
      history, the customer’s current credit worthiness and the economic environment.





·
            Inventories





Inventories
      include direct materials, labor and factory overhead and are stated at lower
      of
      cost or market value, cost being determined on a weighted average costing
      method. The Company periodically reviews historical sales activity to determine
      excess, slow moving items and potentially obsolete items and also evaluates
      the
      impact of any anticipated changes in future demand. The Company provides
      inventory allowances based on excess and obsolete inventories determined
      principally by customer demand. As of December 31, 2007, 2006 and 2005, the
      Company did not record an allowance for obsolete inventories, nor have there
      been any write-offs.




F-11





·
            Property,
                plant and equipment





Property,
      plant and equipment are stated at cost less accumulated depreciation and
      accumulated impairment losses, if any. Depreciation is calculated on the
      straight-line basis over the following expected useful lives from the date
      on
      which they become fully operational and after taking into account their
      estimated residual values:





Depreciable
                life
            
            Residual
                valueBuildings
            
            
            30-50
                years
            
            
            10
            %Plant
                and machinery
            
            
            10-30
                years
            
            
            10
            %Office
                equipments
            
            
            8-10
                years
            
            
            10
            %Motor
                vehicles
            
            
            5
                years
            
            
            10
            %





·
            Intangible
                assets





All
      lands
      in the PRC are owned by the PRC government. The government in the PRC, according
      to the relevant PRC law, may sell the right to use the land for a specified
      period of time. Thus, all of the Company’s land purchases in the PRC are
      considered to be leasehold land and are stated at cost less accumulated
      amortization and any recognized impairment loss. Amortization is provided over
      the term of the land use right agreements on a straight-line basis, which is
      50
      years and they will expire in 2052.





·
            Impairment
                of long-lived assets





In
      accordance with SFAS No. 144, *“Accounting
      for the Impairment or Disposal of Long-Lived Assets”* ,
      long-lived assets and certain identifiable intangible assets held and used
      by
      the Company are reviewed for impairment whenever events or changes in
      circumstances indicate that the carrying amount of an asset may not be
      recoverable. Recoverability
      of assets to be held and used is evaluated by a comparison of the carrying
      amount of assets to estimated discounted net cash flows expected to be generated
      by the assets. If such assets are considered to be impaired, the impairment
      to
      be recognized is measured by the amount by which the carrying amounts of the
      assets exceed the fair value of the assets. There has been no impairment during
      the years ended December 31, 2007, 2006 and 2005.





·
            Revenue
                recognition





The
      Company derives revenues from the processing, distribution and sale of processed
      seafood products and sale of marine catch. The Company recognizes its revenues
      net of value-added taxes (“VAT”). The Company is subject to VAT which is levied
      on the majority of the products at the rate of 17% on the invoiced value of
      sales. Output VAT is borne by customers in addition to the invoiced value of
      sales and input VAT is borne by the Company in addition to the invoiced value
      of
      purchases to the extent not refunded for export sales.





Revenue
      is recognized when the products are delivered to and received by the customers,
      collectibility is reasonably assured and the prices are fixed and
      determinable.





The
      Company has distributor arrangements with certain parties for sale of its marine
      catch. The distributor agreements do not provide chargeback, price protection,
      or stock rotation rights. Accordingly, the Company records the revenue when
      products are delivered to and received by the distributors. The Company presents
      revenue net of VAT incurred.





Rental
      income from operating leases on properties is recognized on a straight-line
      basis over the lease period.





·
            Cost
                of revenue





Cost
      of
      revenue consists primarily of material costs, direct labor, depreciation and
      manufacturing overheads, which are directly attributable to the manufacture
      of
      products.




F-12




·
            Government
                subsidy income





Subsidy
      income is received at a discretionary amount as determined by the local PRC
      government. Subsidy income is recognized at their fair value where there is
      a
      reasonable assurance that the subsidy will be received and the Company will
      comply with applicable conditions. Subsidy income is recognized in the
      accompanying consolidated statements of operations at the period when it was
      received from the local PRC government.





·
            Advertising
                expenses





Advertising
      costs are expensed as incurred in accordance with the American Institute of
      Certified Public Accountants (“AICPA”) Statement of Position 93-7, *“Reporting
      for Advertising Costs”* .
      Advertising expenses for the years ended December 31, 2007, 2006 and 2005 were
      $22,856, $29,471 and $2,070, respectively.





·
            Retirement
                plan costs





Contributions
      to retirement schemes (which are defined contribution plans) are charged to
      general and administrative expenses in the accompanying consolidated statements
      of operations as the related employee service is provided.





·
            Comprehensive
                income





SFAS
      No. 130, *“Reporting
      Comprehensive Income”,* establishes standards for reporting and display of comprehensive income, its
      components and accumulated balances. Comprehensive income as defined includes
      all changes in equity during a period from non-owner sources. Accumulated other
      comprehensive income, as presented in the accompanying statement of changes
      in
      owners’ equity consists of changes in unrealized gains and losses on foreign
      currency translation. This comprehensive income is not included in the
      computation of income tax expense or benefit.





·
            Income
                taxes





The
      Company accounts for income tax using SFAS No. 109 *“Accounting
      for Income Taxes”* ,
      which
      requires the asset and liability approach for financial accounting and reporting
      for income taxes. Under this approach, deferred income taxes are provided for
      the estimated future tax effects attributable to temporary differences between
      financial statement carrying amounts of assets and liabilities and their
      respective tax bases, and for the expected future tax benefits from loss
      carry-forwards and provisions, if any. Deferred tax assets and liabilities
      are
      measured using the enacted tax rates expected in the years of recovery or
      reversal and the effect from a change in tax rates is recognized in the
      statement of operations and comprehensive (loss) income in the period of
      enactment. A valuation allowance is provided to reduce the amount of deferred
      tax assets if it is considered more likely than not that some portion of, or
      all
      of the deferred tax assets will not be realized.





·
            Net
                income per share





The
      Company calculates net income per share in accordance with SFAS No. 128, *“Earnings
      per Share”* .
      Basic
      income per share is computed by dividing the net income by the weighted average
      number of common shares outstanding during the period. Diluted income per share
      is computed similar to basic income per share except that the denominator is
      increased to include the number of additional common shares that would have
      been
      outstanding if the potential common stock equivalents had been issued and if
      the
      additional common shares were dilutive.





·
            Foreign
                currencies translation





The
      reporting currency of the Company is in United States dollar (“US$”).
      Transactions denominated in currencies other than US$ are translated into US$
      at
      the average rate for the period. Monetary assets and liabilities denominated
      in
      currencies other than US$ are translated into US$ at the rates of exchange
      ruling at the balance sheet date. The resulting exchange differences are
      recorded in other expenses in the statements of operations.




F-13




The
      financial records of the Company’s operating subsidiaries are maintained in
      their local currency, the Renminbi (“RMB”), which is the functional
      currency.  Assets and liabilities are translated at the exchange rates at
      the balance sheet date, equity accounts are translated at historical exchange
      rates, and income and expenses items are translated using the average rate
      for
      the period.  The translation adjustments are recorded in accumulated other
      comprehensive income in the statements of stockholders’ equity.





·
            Stock-based
                compensation





The
      Company adopts SFAS No. 123R, *“Accounting
      for Stock-Based Compensation”* ,
      using
      the fair value method. Under
      SFAS No. 123R, stock-based compensation expense is measured at the
      grant date based on the value of the option or restricted stock and is
      recognized as expense, less expected forfeitures, over the requisite service
      period.





·
            Segment
                reporting





SFAS
      No.
      131 *“Disclosures
      about Segments of an Enterprise and Related Information”* establishes standards for reporting information about operating segments on
      a
      basis consistent with the Company’s internal organization structure as well as
      information about geographical areas, business segments and major customers
      in
      financial statements. The Company operates in two principal reportable segments:
      sale of processed seafood products and sale of marine catch.





·
            Fair
                value of financial instruments





The
      Company values its financial instruments as required by SFAS No. 107, *“Disclosures
      about Fair Value of Financial Instruments”* .
      The
      estimated fair value amounts have been determined by the Company, using
      available market information and appropriate valuation methodologies. The
      estimates presented herein are not necessarily indicative of amounts that the
      Company could realize in a current market exchange.





The
      Company’s financial instruments primarily include cash and cash equivalents,
      accounts receivable, other receivables and prepayments, short-term borrowings,
      accounts payable, due to a shareholder, other payables and accrued
      liabilities.





As
      of the
      balance sheet date, the estimated fair values of financial instruments were
      not
      materially different from their carrying values as presented due to short
      maturities of these instruments.





·
            Related
                parties





Parties,
      which can be a corporation or individual, are considered to be related if the
      Company has the ability, directly or indirectly, to control the other party
      or
      exercise significant influence over the other party in making financial and
      operating decisions. Companies are also considered to be related if they are
      subject to common control or common significant influence.





·
            Registration
                payment arrangements





The
      Company accounts for registration payment arrangement in accordance with FASB
      Staff Position EITF 00-19-2, *“* *Accounting
      for Registration Payment Arrangements”* ** (“FSP
      EITF 00-19-2”) which provides guidance on the accounting
      for registration payment arrangements .
      FSP
      EITF 00-19-2 specifies that the contingent obligation to make future
      payments or otherwise transfer consideration under a registration payment
      arrangement, whether issued as a separate agreement or included as a provision
      of a financial instrument or other agreement, should be separately recognized
      and measured in accordance with FASB Statement No. 5, *“* *Accounting
      for Contingencies”* .
      A
      registration payment arrangement is defined in FSP EITF 00-19-2 as an
      arrangement with both of the following characteristics: (1) the arrangement
      specifies that the issuer will endeavor (a) to file a registration
      statement for the resale of specified financial instruments and/or for the
      resale of equity shares that are issuable upon exercise or conversion of
      specified financial instruments and for that registration statement to be
      declared effective by the Securities and Exchange Commission within a specified
      grace period, and/or (b) to maintain the effectiveness of the registration
      statement for a specified period of time (or in perpetuity); and (2) the
      arrangement requires the issuer to transfer consideration to the counterparty
      if
      the registration statement for the resale of the financial instrument or
      instruments subject to the arrangement is not declared effective or if
      effectiveness of the registration statement is not maintained.




F-14





·
            Uncertain
                tax positions





The
      Company adopted Financial Accounting Standards Board Interpretation No. 48, *“Accounting
      for Uncertainty in Income Taxes”* (“FIN
      48”), on January 1, 2007. FIN 48 prescribes a more likely than not
      threshold for financial statement recognition and measurement of a tax position
      taken or expected to be taken in a tax return. This Interpretation also provides
      guidance on derecognition of income tax assets and liabilities, classification
      of current and deferred income tax assets and liabilities, accounting for
      interest and penalties associated with tax positions, accounting for income
      taxes in interim periods, and income tax disclosures. The Company did not have
      any adjustment to the opening balance of retained earnings as of January 1,
      2007 as a result of the implementation of FIN 48. For the year ended
      December 31, 2007, the Company did not have any interest and penalties
      associated with tax positions. As of December 31, 2007, the Company did not
      have any significant unrecognized uncertain tax positions.





·
            Recently
                issued accounting standards





In
      February 2007, the FASB issued Statement of Financial Accounting Standard No.
      159, *“The
      Fair Value Option for Financial Assets and Financial
      Liabilities”* ,
      or SFAS
      159. SFAS 159 permits companies to choose to measure many financial instruments
      and certain other items at fair value. It is expected to expand the use of
      fair
      value measurements which is consistent with the Financial Accounting Standards
      Board’s long-term measurement objectives for accounting for financial
      instruments. SFAS 159 is effective for our first fiscal year that begins after
      November 15, 2007, which is our fiscal year 2009 that begins in January 2008.
      The Company is currently evaluating the impact of this statement to its
      financial position and results of operations.





In
      December 2007, the FASB issued SFAS No. 141 (Revised 2007), *‘’Business
      Combinations’’* ,
      or SFAS
      No. 141R. SFAS No. 141R will change the accounting for business combinations.
      Under SFAS No. 141R, an acquiring entity will be required to recognize all
      the
      assets acquired and liabilities assumed in a transaction at the acquisition-date
      fair value with limited exceptions. SFAS No. 141R will change the accounting
      treatment and disclosure for certain specific items in a business combination.
      SFAS No. 141R applies prospectively to business combinations for which the
      acquisition date is on or after the beginning of the first annual reporting
      period beginning on or after December 15, 2008. Accordingly, any business
      combinations we engage in will be recorded and disclosed following existing
      GAAP
      until January 1, 2009. We expect SFAS No. 141R will have an impact on accounting
      for business combinations once adopted but the effect is dependent upon
      acquisitions at that time. We are still assessing the impact of this
      pronouncement.





In
      December 2007, the FASB issued SFAS No. 160, *"Noncontrolling Interests in Consolidated Financial Statements--An Amendment
      of
      ARB No. 51’’* ,
      or SFAS
      No. 160. SFAS No. 160 establishes new accounting and reporting standards for
      the
      noncontrolling interest in a subsidiary and for the deconsolidation of a
      subsidiary. SFAS No. 160 is effective for fiscal years beginning on or after
      December 15, 2008. We believe that SFAS 160 should not have a material impact
      on
      our financial position or results of operations.




**3.**
            **ACCOUNTS
                RECEIVABLE, NET**





The
      majority of the Company’s sales are on open credit terms and in accordance with
      terms specified in the contracts governing the relevant transactions. The
      Company evaluates the need of an allowance for doubtful accounts based on
      specifically identified amounts that management believes to be uncollectible.
      If
      actual collections experience changes, revisions to the allowance may be
      required.




Accounts
      receivable consists of:




As
                of December 31,2007
            
            
            2006Accounts
                receivable, cost
            
            $
            4,204,459
            
            $
            1,296,110Less:
                allowance for doubtful accounts
            
            
            (21,022
            )
            
            (6,441
            )Accounts
                receivable, net
            
            $
            4,183,437
            
            $
            1,289,669





F-15





For
      the
      year end December 31, 2007, the Company recorded increase to the allowance
      for
      doubtful accounts of $14,581.





For
      the
      year ended December 31, 2006, the Company recorded the reversal of allowance
      for
      doubtful accounts of $15,934.





**4.**
            **INVENTORIES**





Inventory
      consists of:




As
                of December 31,2007
            
            2006Raw
                materials
            
            $
            863,675
            
            $
            599,188Work-in-process
            
            
            88,528
            
            
            290,274Finished
                goods
            
            
            136,197
            
            
            233,965Packaging
                materials
            
            
            98,935
            
            
            12,659$
            1,187,335
            
            $
            1,136,086




**5.**   **PROPERTY,
      PLANT AND EQUIPMENT, NET**





Property,
      plant and equipment, net, consisted of the following:




As
                of December 31,2007
            
            2006Buildings
            
            $
            2,160,070
            
            $
            1,926,802Plant
                and machinery
            
            
            2,787,017
            
            
            2,460,818Office
                equipments
            
            
            20,721
            
            
            17,948Motor
                vehicles
            
            
            178,941
            
            
            159,6175,146,749
            
            
            4,565,185Less:
                accumulated depreciation
            
            
            (1,635,912
            )
            
            (1,328,730
            )Property,
                plant and equipment, net
            
            $
            3,510,837
            
            $
            3,236,455





As
      of
      December 31, 2007 and 2006, certain property, plant and machinery with the
      net
      book value of $1,362,297 and $1,609,836, respectively, were pledged as
      securities in connection with the outstanding loan facilities, as described
      in
      more details in Note 7.





Depreciation
      expenses for the years ended December 31, 2007, 2006 and 2005 were $209,501,
      $273,941 and $259,840, respectively, in which $177,854, $256,127 and $247,937
      were included in cost of revenue.




F-16




**6.**   **INTANGIBLE
      ASSETS, NET**





Intangible
      assets consist of:




As
                of December 31,2007
            
            2006Land
                use rights, at cost
            
            $
            753,387
            
            $
            681,974Less:
                accumulated amortization
            
            
            (147,564
            )
            
            (131,671
            )Land
                use rights, net
            
            $
            605,823
            
            $
            550,303





As
      of
      December 31, 2007 and 2006, certain land use rights with the net book value
      of
      $-0- and $140,288, respectively, were pledged as securities in connection with
      the outstanding loan facilities, as described in Note 7.





Amortization
      expenses for the years ended December 31, 2007, 2006 and 2005 were $14,792,
      $14,261 and $13,846, respectively, in which $9,426, $-0- and $-0- were included
      in cost of revenue.





**7.**  **SHORT-TERM
      BORROWINGS**





The
      Company’s wholly-owned subsidiary, Mingxiang has short-term bank loans in the
      aggregate amount of approximately $772,481 (equivalent to RMB5,650,000) as
      of
      December 31, 2007 and $3,792,640 (equivalent to RMB 29,630,000) as of December
      31, 2006 with Agricultural Bank of China, a registered financial institution
      in
      the PRC. These borrowings are secured by certain land use rights, plant and
      machinery and leasehold buildings with an aggregate net book value of $1,362,297
      (2006: $1,750,124). Borrowings under the short-term bank loans bear effective
      interest rate per annum ranging from 7.96% to 9.48% in 2007 and from 7.25%
      to
      7.96% in 2006.





**8.**  **AMOUNT
      DUE TO A SHAREHOLDER**





From
      time
      to time, the majority shareholder and CEO provides short term advances to the
      Company for working capital purposes, which are considered unsecured,
      interest-free and due on demand. At December 31, 2007 and 2006, the balance
      due
      to the CEO totaled $262,388 and $646,094, respectively.





**9.**  **OTHER
      PAYABLES AND ACCRUED LIABILITIES**





Other
      payables and accrued liabilities consisted of the following:




As
                of December 31,2007
            
            2006Value-added
                tax payable
            
            $
            232,467
            
            $
            142,191Accrued
                fishing vessels rental
            
            
            -
            
            
            124,160Accrued
                operating expenses
            
            
            99,608
            
            
            9,244Accrued
                professional expenses
            
            
            108,002
            
            
            -Other
                payables
            
            
            3,456
            
            
            3,623$
            443,533
            
            $
            279,218




F-17




**10.**  **STOCKHOLDERS’
      EQUITY**




**Private
      placement offering**





On
      November 17, 2007, NPP completed a private placement of securities to certain
      accredited investors who subscribed to units consisting of one share of common
      stock and one warrant to purchase one-fifth of one share of our common stock.
      The investors subscribed to an aggregate of 6,199,441 units, consisting of
      6,199,441 shares of our common stock and warrants to purchase an aggregate
      of
      1,239,888 shares of the common stock at $3.214 per unit. The units were offered
      and sold pursuant to exemptions from registration under the Securities Act,
      including without limitation, Regulation D and Regulation S promulgated under
      the Securities Act. The gross cash proceeds from the private placement totaled
      $19,925,000 less estimated transaction cost of $5,941,014, which includes the
      fair value of warrants granted to consultants and agents, as discussed
      below.





**Warrants
      granted, accounted for under the fair value method**





In
      connection with the private placement offering, the Board of Directors granted
      to consultants and agents warrants to purchase an aggregate of 929,916 shares
      of
      the Company’s common stock at an exercise price of $4.1782 per share or on a
      cashless exercise basis. The warrants vested immediately and will expire on
      November 16, 2010. The market price of the stock was $4.1782 per share on the
      grant date. The Company valued the warrants at $2.0873 per share, or $1,941,014,
      in accordance with SFAS 123R, which was recorded as offering cost in additional
      paid-in capital in the accompanying consolidated financial statements for the
      year ended December 31, 2007.





The
      fair
      value of the warrants was estimated at the date of grant using the Black-Scholes
      option-pricing model with the following assumptions:





Risk
                free interest rate
            
            
            3.49
            %Dividend
                yield
            
            
            0.00
            %Expected
                life of warrant grants (years)
            
            
            0.87Expected
                volatility of warrant grants
            
            
            13.00
            %





A
      summary
      of the status of the Company’s outstanding common stock warrants as of December
      31, 2007 and 2006:




**Number of**
              **Warrants**
            
            **Weighted**
              **Average**
              **Exercise Price**
            
            **Remaining**
              **Contractual**
              **Term**
            
            **Aggregate**
              **Intrinsic**
              **Value**Outstanding
                at December 31, 2005
            
            
            —
            
            $
            —
            
            
            —
            
            $
            —Granted
            
            
            —
            
            
            —
            
            
            —
            
            
            —Exercised
            
            
            —
            
            
            —
            
            
            —
            
            
            —Forfeited
            
            
            —
            
            
            —
            
            
            —
            
            
            —Expired
            
            
            —
            
            
            —
            
            
            —
            
            
            —Outstanding
                at December 31, 2006
            
            
            —
            
            
            —
            
            
            —
            
            
            —Granted
            
            
            2,169,804
            
            
            4.1782
            
            
            3.0
                years
            
            
            -0-Exercised
            
            
            —
            
            
            —
            
            
            —
            
            
            —Forfeited
            
            
            —
            
            
            —
            
            
            —
            
            
            —Expired
            
            
            —
            
            
            —
            
            
            —
            
            
            —Outstanding
                and Exercisable at December 31, 2007
            
            
            2,169,804
            
            $
            4.1782
            
            
            3.0
                years
            
            $
            -0-





On
      November 17, 2007, in connection with the securities purchase agreement, the
      Company also entered into a registration rights agreement, under which it agreed
      to use its commercially reasonable efforts to cause the common stock issued
      and
      issuable upon exercise of the warrants issued to the investors, placement agent,
      and consultants, to be registered for resale on an appropriate form for
      registration to be filed with the SEC within 30 days following the closing.
      If
      the registration statement is not filed within such 30 day period or does not
      become effective within 180 days after closing, the Registrant is subject to
      a
      monthly penalty of 1% of the offering amount, up to a maximum of $1,000,000.
      Upon the effectiveness of the registration statement, the Registrant will also
      maintain the effectiveness of the registration statement for a specified period
      of time.




F-18




The
      Company did not accrue any penalty, since the Form S-1 was filed on December
      14,
      2007. Additionally, management believes that through its best efforts, there
      is
      a remote chance that they will not be able to cause the shares of common stock
      to be registered and maintain the effectiveness of its registration statement
      within the specified period of time, therefore no penalty was
      accrued.





**11.** **DIVIDENDS**





For
      the
      year ended December 31, 2007, a subsidiary, Rixiang declared an interim dividend
      of $4,562,044 (equivalent to RMB35,000,000) to Mr. Liu, a shareholder and was
      fully paid during the year ended December 31, 2007.





**12.** **INCOME
          TAXES**





The
      Company is registered in State of Nevada and operates in three tax
      jurisdictions: United States of America, Hong Kong and the PRC. The components
      of income before income taxes separating Hong Kong and PRC operations are as
      follows:




Years
                ended December 31,2007
            
            2006
            
            2005Loss
                from US operation
            
            $
            -
            
            $
            -
            
            $
            -Income
                (loss) from Hong Kong operation
            
            
            7,474
            
            
            (47,208
            )
            
            (336
            )Income
                from PRC operation
            
            
            9,874,823
            
            
            7,082,850
            
            
            3,362,951Income
                before income taxes
            
            $
            9,882,297
            
            $
            7,035,642
            
            $
            3,362,615





The
      Company generated all of its net income from operations in the PRC for the
      years
      ended December 31, 2007, 2006 and 2005. The
      companies registered in the PRC are all domestically owned and subject to PRC
      Enterprise Income Tax (“EIT”) on the taxable income in accordance with the
      relevant PRC income tax laws. Prior to January 2005, PRC EIT is at the rate
      of
      33% on its taxable income. From January 2005 onwards, foreign investment
      enterprises (“FIEs”) engaged in production established in coastal economic open
      zones or in the old urban districts of cities where the special economic zones
      or the economic and technological development zones are located may pay income
      taxes at a reduced rate of 24%. In addition, FIEs engaged in production having
      a
      period of operation of not less than ten years shall be exempted from income
      tax
      for the first two profit-making years and a 50% reduction in the income tax
      payable for the next three years .





Upon
      the
      change of legal status of Rixiang to FIEs in 2005, Rixiang is entitled to the
      exemptions from PRC Foreign Enterprise Income Tax (“FEIT”) for the period from
      January 1, 2005 to December 31, 2006 and a reduced rate of 12% for the following
      three years. However, Jixiang and Mingxiang has used up all exemptions from
      PRC
      FEIT in prior years and accordingly Jixiang and Mingxiang are subject to PRC
      FEIT at rate of 24% on the taxable income. During 2005, substantial portion
      of
      business of Jixiang and Mingxiang was transferred to Rixiang and since then
      Jixiang and Mingxiang became property holding companies.





In
      March
      2007, the Chinese government enacted the Corporate Income Tax Law, and
      promulgated related regulations, which were effective January 1, 2008. The
      Corporate Income Tax Law, among other things, imposes a unified income tax
      rate
      of 25% for both domestic and foreign invested enterprises. The previous income
      tax laws and rules, which stipulated income tax rates for domestic and foreign
      invested enterprises at different rates, expired upon the effectiveness of
      the
      Corporate Income Tax Law. For enterprises engaged in production established
      in
      coastal economic open zones or in the old urban districts of cities where the
      special economic zones or the economic and technological development zones
      enjoy
      a favorable tax rate of 24%, the income tax rate will change to 25% with
      effective from January 1, 2008. However, the new provision allows these
      enterprises to continue to enjoy their unexpired tax holiday under the previous
      income tax laws and rules.





Therefore,
      Rixiang will continue to entitle to the reduced rate of 12% for the three years
      since 2007 up to 2009 followed by the unified tax rate of 25% from 2010. Jixiang
      and Mingxiang has used up all exemptions from PRC FEIT in prior years and
      accordingly Jixiang and Mingxiang are subject to PRC FEIT at rate of 25% on
      the
      taxable income with effective from January 1, 2008.




F-19




The
      Corporate Income Tax Law also imposes a 10% withholding income tax for dividends
      distributed by a foreign invested enterprise to its immediate holding company
      outside China, which were exempted under the previous income tax laws and
      rules.  A lower withholding tax rate will be applied if there is a tax
      treaty arrangement between mainland China and the jurisdiction of the foreign
      holding company. Holding companies in Hong Kong, for example, will be subject
      to
      a 5% rate. The China-based subsidiaries, Rixiang is invested by immediate
      foreign holding company in Hong Kong. All of these foreign invested enterprises
      will be subject to the withholding tax on January 1, 2008. Since the
      Company intends to reinvest earnings to further expand businesses in mainland
      China, the foreign invested enterprises do not intend to declare dividends
      to
      their immediate foreign holding companies at the moment. Accordingly, as of
      December 31, 2007, the Company has not recorded any withholding tax on the
      retained earnings of our foreign invested enterprises in China.





The
      reconciliation of income tax rate to the effective income tax rate based on
      income before income taxes for PRC operation for the years ended December 31,
      2007, 2006 and 2005 is as follows:




Years
                ended December 31,2007
            
            2006
            
            2005Income
                before income taxes
            
            $
            10,201,426
            
            $
            7,437,409
            
            $
            4,332,917Statutory
                income tax rate
            
            
            12
            %
            
            24
            %
            
            24
            %1,224,171
            
            
            1,784,978
            
            
            1,039,900Less:
                items not subject to taxesEffect
                for tax holiday
            
            
            (3,229
            )
            
            (1,748,978
            )
            
            (1,026,305
            )Income
                tax expenses
            
            $
            1,220,942
            
            $
            -
            
            $
            13,595





The
      following table sets forth the significant components of the aggregate net
      deferred tax assets of the Company as of December 31, 2007 and
      2006:




As
                of December 31,2007
            
            2006Deferred
                tax assets:Net
                operating loss carryforwards
            
            $
            58,377
            
            $
            58,377Less:
                valuation allowance
            
            
            (58,377
            )
            
            (58,377
            )Deferred
                tax assets
            
            $
            -
            
            $
            -





China
      Marine has provided for a full valuation allowance for any future tax benefits
      from the net operating loss carryforwards as the management believes it is
      more
      likely than not that these assets will not be realized in the future. During
      the
      years ended December 31, 2007 and 2006, valuation allowance of $-0- and $11,261,
      respectively were provided to the deferred tax assets due to the uncertainty
      surrounding their realization.





At
      December 31, 2007 and 2006, China Marine has unused net operating loss of
      approximately $147,000 available for federal tax purposes, which may be
      available to offset future taxable income. The net operating loss carryforward
      begins to expire in 2027.




F-20





**13.**  **NET
      INCOME PER SHARE**





The
      following table sets forth the computation of basic and diluted net income
      per
      share for the years ended December 31, 2007, 2006 and 2005:




Years
                ended December 31,2007
            
            2006
            
            2005Basic
                and diluted net income per share calculationNumerator:-
                Net income in computing basic net income per share
            
            $
            8,661,355
            
            $
            7,035,642
            
            $
            3,349,020Denominator:-
                Weighted average ordinary shares outstanding
            
            
            22,972,301
            
            
            15,624,034
            
            
            15,624,034-
                Warrant shares outstanding
            
            
            2,169,804
            
            
            -
            
            
            -25,142,105
            
            
            15,624,034
            
            
            15,624,034Basic
                net income per share
            
            $
            0.377
            
            $
            0.450
            
            $
            0.214Diluted
                net income per share
            
            $
            0.344
            
            $
            0.450
            
            $
            0.214




**14.**  **SEGMENT
      REPORTING, GEOGRAPHICAL INFORMATION**





(a)  Business
      information





The
      Company’s chief operating decision maker has been identified as chairman, Mr.
      Liu, who reviews the consolidated results when making decisions about allocating
      resources and assessing performance of the Company. Based on this assessment,
      the Company has determined that it has two operating and reporting segments
      for
      the years ended December 31, 2007, 2006 and 2005 which are processed seafood
      products and marine catch.




F-21





An
      analysis of the Company’s revenue and total assets are as follows:





Years
                ended December 31,2007
            
            2006
            
            2005**Revenue:**Processed
                seafood products
            
            $
            27,863,397
            
            $
            16,550,526
            
            $
            7,045,713Marine
                catch
            
            
            8,561,930
            
            
            10,891,496
            
            
            7,892,850$
            36,425,327
            
            $
            27,442,022
            
            $
            14,938,563Years
                ended December 31,2007
            
            
            2006
            
            
            2005**Gross
                profit:**Processed
                seafood products
            
            $
            9,065,326
            
            $
            5,186,184
            
            $
            1,594,709Marine
                catch
            
            
            1,710,483
            
            
            2,525,648
            
            
            2,146,234$
            10,775,809
            
            $
            7,711,832
            
            $
            3,740,943





As
                of December 31,2007
            
            2006
            
            2005**Total
                assets:**Processed
                seafood products
            
            $
            8,753,820
            
            $
            4,874,159
            
            $
            5,559,668Marine
                catch
            
            
            421,015
            
            
            568,999
            
            
            1,754,525Corporate
                overhead
            
            
            24,954,772
            
            
            9,986,478
            
            
            3,592,352$
            34,129,607
            
            $
            15,429,636
            
            $
            10,906,545





(b)  Geographic
      information





The
      Company’s operations are located in three main geographical areas. All the
      Company’s long-life assets are located in the PRC. The Company’s sales by
      geographical market are analyzed as follows:





Years
                ended December 31,2007
            
            2006
            
            2005**Revenue:**PRC
            
            $
            36,230,926
            
            $
            27,191,599
            
            $
            14,306,308Japan
            
            
            96,578
            
            
            98,939
            
            
            287,187Others
            
            
            97,823
            
            
            151,484
            
            
            345,068$
            36,425,327
            
            $
            27,442,022
            
            $
            14,938,563




F-22




Years
                ended December 31,2007
            
            2006
            
            2005**Gross
                profit:**PRC
            
            $
            10,718,028
            
            $
            7,641,796
            
            $
            3,563,121Japan
            
            
            28,705
            
            
            27,671
            
            
            80,772Others
            
            
            29,076
            
            
            42,365
            
            
            97,050$
            10,775,809
            
            $
            7,711,832
            
            $
            3,740,943




**15.**  **CHINA
      CONTRIBUTION PLAN**





Under
      the
      PRC Law, full-time employees of the Company’s subsidiaries, Rixiang, Jixiang and
      Mingxiang are entitled to staff welfare benefits including medical care, welfare
      subsidies, unemployment insurance and pension benefits through a China
      government-mandated multi-employer defined contribution plan. The Company is
      required to accrue for these benefits based on certain percentages of the
      employees’ salaries. The total contributions made for such employee benefits
      were $260,138, $219,611 and $155,506 for the years ended December 31, 2007,
      2006
      and 2005, respectively.





**16.**  **STATUTORY
      RESERVES**





Under
      the
      PRC Law, the Company’s subsidiaries, Rixiang, Jixiang
      and Mingxiang are
      required to make appropriations at the end of each calendar year to the
      statutory reserve based on after-tax net earnings and determined in accordance
      with generally accepted accounting principles of the People’s Republic of China
      (the “PRC GAAP”). Appropriation to the statutory reserve should be at least 10%
      of the after-tax net income until the reserve is equal to 50% of the registered
      capital. The statutory reserve is established for the purpose of providing
      employee facilities and other collective benefits to the employees and is
      non-distributable other than in liquidation.





For
      the
      years ended December 31, 2007, 2006 and 2005, Rixiang contributed $1,385,997,
      $1,132,988 and $591,281 to statutory reserves, respectively. Both Jixiang
      and Mingxiang did not
      make any contribution to the statutory reserve for the years ended December
      31,
      2007, 2006 and 2005 since they suffered after-tax net losses during these
      periods.




**17.**  **CONCENTRATION
      OF RISK**





(a)  Major
      customers





The
      following is a table summarizing the revenue from customers that individually
      represents greater than 10% of the total revenue for each of the years ended
      December 31, 2007, 2006 and 2005 and their outstanding balances at year-end
      date:




Year
                ended December 31, 2007Revenue
            
            Percentage
                of
              total
                revenue
            
            Accounts
              receivable,
                trade**Customer****s**Customer
                A
            
            $
            3,563,492
            
            
            10
            %
            $
            395,054Customer
                B
            
            
            3,618,819
            
            
            10
            %
            
            390,146Total:
            
            $
            7,182,311
            
            
            20
            %
            $
            785,200








F-23


Year
                ended December 31, 2006Revenue
            
            Percentage
                of
              total
                revenue
            
            Accounts
              receivable,
                trade**Customer****s**Customer
                A
            
            $
            3,919,057
            
            
            14
            %
            $
            146,270Customer
                B
            
            
            3,845,173
            
            
            14
            %
            
            164,354Customer
                C
            
            
            3,022,121
            
            
            11
            %
            
            96,845Customer
                D
            
            
            2,659,585
            
            
            10
            %
            
            72,212Total:
            
            $
            13,445,936
            
            
            49
            %
            $
            479,681




Year
                ended December 31, 2005Revenue
            
            Percentage
                of
              total
                revenue
            
            Accounts
              receivable,
                trade**Customer****s**Customer
                A
            
            $
            1,463,085
            
            
            10
            %
            $
            313,492Customer
                B
            
            
            1,611,657
            
            
            11
            %
            
            402,742Customer
                C
            
            
            2,922,916
            
            
            20
            %
            
            615,217Customer
                E
            
            
            1,875,118
            
            
            13
            %
            
            571,151Customer
                F
            
            
            1,701,876
            
            
            11
            %
            
            348,782Total:
            
            $
            9,574,652
            
            
            65
            %
            $
            2,251,384





(b)  Major
      vendors





The
      following is a table summarizing the purchases from vendors that individually
      represents greater than 10% of the total purchases for each of the years ended
      December 31, 2007, 2006 and 2005 and their outstanding balances as at year-end
      date:




Year
                ended December 31, 2007Purchases
            
            Percentage
                of total purchases
            
            Accounts
              payable,
                trade**Vendor****s**Vendor
                A
            
            $
            3,483,613
            
            
            14
            %
            $
            -Vendor
                B
            
            
            3,215,352
            
            
            13
            %
            
            29,978Vendor
                C
            
            
            2,731,895
            
            
            11
            %
            
            64,489Vendor
                D
            
            
            2,588,709
            
            
            10
            %
            
            25,315Total:
            
            $
            12,019,569
            
            
            48
            %
            $
            119,782




Year
                ended December 31, 2006Purchases
            
            
            Percentage
                of total purchases
            
            
            Accounts
                payable, trade**Vendor****s**Vendor
                ATotal:
            
            $
            4,531,990
            
            
            23
            %
            $
            -





F-24




Year
                ended December 31, 2005Purchases
            
            Percentage
                of total purchases
            
            Accounts
              payable,
                trade**Vendor****s**Vendor
                A
            
            $
            3,300,438
            
            
            29
            %
            $
            -Vendor
                B
            
            
            3,012,413
            
            
            27
            %
            
            -Total:
            
            $
            6,312,851
            
            
            56
            %
            $
            -





(c)  Credit
      risks





Financial
      instruments that are potentially subject to credit risk consist principally
      of
      trade receivables. The Company believes the concentration of credit risk in
      its
      trade receivables is substantially mitigated by its ongoing credit evaluation
      process and relatively short collection terms. The Company does not generally
      require collateral from customers. The Company evaluates the need for an
      allowance for doubtful accounts based upon factors surrounding the credit risk
      of specific customers, historical trends and other information.





(d)  Interest
      rate risk





As
      the
      Company has no significant interest-bearing assets, the Company’s income and
      operating cash flows are substantially independent of changes in market interest
      rates.





The
      Company’s interest-rate risk arises from short-term borrowings. Borrowings
      issued at floating rates expose the Company to cash flow and fair value
      interest-rate risk. Company policy is to maintain approximately all of its
      borrowings in floating rate instruments. At the year end, all of borrowings
      were
      at floating rates.





**18.**  **GUARANTEES**





Mingxiang
      provided a bank loan guarantee to an unrelated third party for the following
      loan balance:





Guarantor
            
            Guarantee
            
            2007
            
            2006ShiShi
                Huabao Mingxiang Foods Co. Ltd
            
            
            Shishi
                Yu Ching Knitting and Clothing Company
            
            $
            640,000
            
            $
            640,000





In
      accordance with FIN 45 *“Guarantor’s
      Accounting and Disclosure Requirements for Guarantees, Including Indirect
      Guarantees of Indebtedness of Others”* ,
      guarantor must recognize a liability for the fair value of the obligations
      it
      assumes under certain guarantees. Mingxiang did not receive any consideration
      for the guarantee and has determined the indemnification fair value to be
      insignificant. Accordingly, the Company has not recorded any liabilities for
      these agreements as of December 31, 2007 and 2006. The guarantee expired on
      January 10, 2008 and it was renewed through January 10, 2010.




F-25




**ITEM
      9.**  **Changes
      In and Disagreements with Accountants on Accounting and Financial
      Disclosure**




On
      November 17, 2007, concurrent with the change in control transaction discussed
      above, our board of directors elected
      to continue the existing relationship of our new subsidiary Nice Enterprise
      with
      Zhong Yi (Hong Kong) C.P.A. Company Limited, and appointed Zhong Yi (Hong Kong)
      C.P.A. Company Limited, as our independent auditor. Additionally, concurrent
      with the decision to maintain our relationship with Zhong Yi (Hong Kong) C.P.A.
      Company Limited, our board of directors approved
      the termination of Pritchett, Siler & Hardy, P.C. as our independent
      auditor.





We
      furnished a copy of this disclosure to Pritchett, Siler & Hardy, P.C. and
      requested Pritchett, Siler & Hardy, P.C. to furnish us with a letter
      addressed to the SEC stating whether it agrees with the statements made by
      us
      herein in response to Item 304(1) of Regulation S-K and, if not, stating the
      respect in which it does not agree. A copy of this letter was filed by us as
      Exhibit 16.1 to our current report on Form 8-K, filed on November 23,
      2007.





On
      January 23, 2008, concurrent with the decision to dismiss Zhong Yi (Hong Kong)
      C.P.A. Co., Ltd. as its independent auditor, the board of directors unanimously
      voted to engage Cordovano and Honeck, LLP as its new independent auditor. Zhong
      Yi (Hong Kong) C.P.A. Co., Ltd. is the affiliated firm of Cordovano and Honeck,
      LLP’s in Asia.





We
      furnished a copy of this disclosure to Zhong Yi (Hong Kong) C.P.A. Co., Ltd.
      and
      requested Zhong Yi (Hong Kong) C.P.A. Co., Ltd. to furnish us with a letter
      addressed to the SEC stating whether it agrees with the statements made by
      us
      herein in response to Item 304(1) of Regulation S-K and, if not, stating the
      respect in which it does not agree. A copy of this letter was filed by us as
      Exhibit 16 to our current report on Form 8-K, filed on January 31,
      2008.





No
      accountant’s report issued by Pritchett, Siler & Hardy, P.C. on the
      financial statements for either of the past two years contained an adverse
      opinion or disclaimer of opinion or was qualified or modified as to uncertainty,
      audit scope or accounting principals, except for a going concern opinion
      expressing substantial doubt about the ability of us to continue as a going
      concern.





During
      the two most recent financial years (ended December 31, 2005 and 2006) and
      from
      January 1, 2007 to the date of this statement, there were no disagreements
      with
      Pritchett, Siler & Hardy, P.C. and Zhong Yi (Hong Kong) C.P.A. Co., Ltd. or
      any matter of accounting principals or practices, financial disclosures, or
      auditing scope or procedure. There were no reportable events, as described
      in
      Item 304(a)(1)(v) of Regulation S-K, during our two most recent financial years
      (ended December 31, 2005 and 2006) and from January 1, 2007 to the date of
      this
      statement.




**ITEM
      9A.**  **Controls
      and Procedures**





**Evaluation
      of Disclosure Controls and Procedures**





Based
      on
      their evaluation as of December 31, 2007, our Chief Executive Officer and Chief
      Financial Officer have concluded that our disclosure controls and procedures
      (as
      defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
      of
      1934, as amended) were sufficiently effective to ensure that the information
      required to be disclosed by us in this Annual Report on Form 10-K was recorded,
      processed, summarized and reported within the time periods specified in the
      SEC’s rules and instructions for Form 10-K.





**Management’s
      Report on Internal Control over Financial Reporting**





Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting (as defined in Rule 13a-15(f) under the
      Securities Exchange Act of 1934, as amended). Our management assessed the
      effectiveness of our internal control over financial reporting as of December
      31, 2007. In making this assessment, our management used the criteria set forth
      by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”)
      in ‘Internal Control - Integrated Framework’. Our management has concluded that,
      as of December 31, 2007, our internal control over financial reporting is
      effective based on these criteria. Our independent registered public accounting
      firm, Zhong Yi (Hong Kong) C.P.A. Company Limited, have issued an audit report
      on our assessment of our internal control over financial reporting, which is
      included herein.





There
      were no changes in our internal controls over financial reporting during the
      quarter ended December 31, 2007 that have materially affected, or are reasonably
      likely to materially affect our internal controls over financial
      reporting.





Our
      management, including our Chief Executive Officer and Chief Financial Officer,
      does not expect that our disclosure controls and procedures or our internal
      controls will prevent all error and all fraud. A control system, no matter
      how
      well conceived and operated, can provide only reasonable, not absolute,
      assurance that the objectives of the control system are met. Further, the design
      of a control system must reflect the fact that there are resource constraints,
      and the benefits of controls must be considered relative to their costs. Because
      of the inherent limitations in all control systems, no evaluation of controls
      can provide absolute assurance that all control issues and instances of fraud,
      if any, within China Marine Food Group Limited have been detected.




61





**Report
      of Independent Registered Public Accounting Firm**





To
      the
      Board of Directors and Stockholders of China Marine Food Group Limited:





We
      have
      audited management’s assessment, included in the accompanying Report of
      Management on Internal Control over Financial Reporting, that China Marine
      Food
      Group Limited and subsidiaries (the “Company”) maintained effective internal
      control over financial reporting as of December 31, 2007, based on criteria
      established in *Internal
      Control—Integrated Framework* issued
      by
      the Committee of Sponsoring Organizations of the Treadway Commission. The
      Company’s management is responsible for maintaining effective internal control
      over financial reporting and for its assessment of the effectiveness of internal
      control over financial reporting. Our responsibility is to express an opinion
      on
      management’s assessment and an opinion on the effectiveness of the Company’s
      internal control over financial reporting based on our audit.





We
      conducted our audit 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
      effective internal control over financial reporting was maintained in all
      material respects. Our audit included obtaining an understanding of
      internal control over financial reporting, evaluating management’s assessment,
      testing and evaluating the design and operating effectiveness of internal
      control, and performing such other procedures as we considered necessary in
      the
      circumstances. We believe that our audit provides a reasonable basis for
      our opinions.





A
      company’s internal control over financial reporting is a process designed by, or
      under the supervision of, the company's principal executive and principal
      financial officers, or persons performing similar functions, and effected by
      the
      company's board of directors, management, and other personnel to provide
      reasonable assurance regarding the reliability of financial reporting and the
      preparation of financial statements for external purposes in accordance with
      generally accepted accounting principles. A company's internal control over
      financial reporting includes those policies and procedures that (1) pertain
      to the maintenance of records that, in reasonable detail, accurately and fairly
      reflect the transactions and dispositions of the assets of the company;
      (2) provide reasonable assurance that transactions are recorded as
      necessary to permit preparation of financial statements in accordance with
      generally accepted accounting principles, and that receipts and expenditures
      of
      the company are being made only in accordance with authorizations of management
      and directors of the company; and (3) provide reasonable assurance
      regarding prevention or timely detection of unauthorized acquisition, use,
      or
      disposition of the company's assets that could have a material effect on the
      financial statements.





Because
      of the inherent limitations of internal control over financial reporting,
      including the possibility of collusion or improper management override of
      controls, material misstatements due to error or fraud may not be prevented
      or
      detected on a timely basis. Also, projections of any evaluation of the
      effectiveness of the internal control over financial reporting to future periods
      are subject to the risk that the controls may become inadequate because of
      changes in conditions, or that the degree of compliance with the policies or
      procedures may deteriorate.





In
      our
      opinion, management’s assessment that the Company maintained effective internal
      control over financial reporting as of December 31, 2007, is fairly stated,
      in
      all material respects, based on the criteria established in *Internal
      Control—Integrated Framework* issued
      by
      the Committee of Sponsoring Organizations of the Treadway Commission. Also
      in our opinion, the Company maintained, in all material respects, effective
      internal control over financial reporting as of December 31, 2007, based on
      the
      criteria established in *Internal
      Control—Integrated Framework* issued
      by the Committee of Sponsoring Organizations of the Treadway Commission.





We
      have
      also audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), the consolidated financial statements as of
      and
      for the year ended December 31, 2007 of the Company and our report dated March
      20, 2008 expressed an unqualified opinion on those financial statements.








CORDOVANO
      AND HONECK, LLP


Englewood,
      Colorado


March
      28,
      2008




62





**ITEM
      9B.**  **Other
      Information**





On
      November 23, 2007, the Company filed with the Commission a Form 8-K stating
      that
      the Company had: (i) entered into a Share Exchange Agreement with Nice
      Enterprise Trading H.K. Co., Ltd; (ii) completed a reverse acquisition of Nice
      Enterprise pursuant to the Share Exchange Agreement; (iii) the Company acquired
      all of the issued and outstanding shares of Nice Enterprise from Nice Enterprise
      stockholders in exchange for 15,624,034 shares of the Company’s common stock.
      Further, the Company sold to certain accredited investors units consisting
      of an
      aggregate of 6,199,441 restricted common stock shares and warrants to purchase
      up to an aggregate of 1,239,731 common stock shares for $3,214 per unit; (iv)
      dismissed the Company’s independent auditor, Pritchett, Siler & Hardy, P.C.
      and engaged Zhong Yi (Hong Kong) C.P.A. Co., Ltd. as the Company’s new
      independent auditor; (v) as a result of the closing of the reverse acquisition
      with Nice Enterprise, the former stockholders of Nice Enterprise, prior to
      the
      private placement transaction as described under Item 2.01 of the Form 8-K,
      owned 93.15% of the total outstanding shares of our Common Stock and total
      voting power of all our outstanding voting securities. After the private
      placement, their interest in the company was diluted to 68% of the total
      outstanding shares of our Common Stock and total voting power of all our
      outstanding voting securities; (vi) upon the closing of the reverse acquisition,
      Richard Crimmins, the Company’s sole director, submitted his resignation letter
      pursuant to which he resigned from all offices of the Company that he held.
      Mr.
      Pengfei Liu, Mr. Shaobin Yang and Mr. Weipeng Piu were appopinted to serve
      on
      the Board of Directors. In addition, Mr. Pengfei Liu was appointed the Chief
      Executive Officer and Interim Secretary; Mr. Shaobin Yang was appointed the
      Deputy Chief Executive Officer and Mr. Marco Hon Wai Ku was appointed the Chief
      Financial Officer; (vii) the Company changed its name to China Marine Food
      Group
      Limited; (viii) change in the Company’s status as a ‘Shell Company;’ and (ix)
      attached the audited  consolidated
      financial statements of Nice Enterprise Trading H.K. Co., Ltd., Shishi Rixiang
      Marine Foods Co., Ltd., Shishi Huabao Mingxiang Foods Co., Ltd., and Shishi
      Huabao Jixiang Water Products., Ltd. for the fiscal years ended December 31,
      2004, 2005 and 2006, as well as, the unaudited pro forma condensed consolidated
      financial information of New Paradigm Productions, Inc. and its subsidiaries
      for
      the nine months ended September 30, 2007.




On
      November 30, 2007, the Company filed with the Commission a Form 8-K/A correcting
      the Form 8-K filed with the Commission on November 23, 2007 as follows: (i)
      the
      aggregate number of shares of common stock underlying warrants sold pursuant
      to
      the Securities Purchase Agreement; (ii) the exercise price of the warrants
      sold
      in connection with the Securities Purchase Agreement; (iii) the Commission
      File
      Number; (iv) the name of the Company; (v) a single typographical error which
      appeared on page 1 of the Common Stock Purchase Warrant issued to Sterne Agee
      & Leach, Inc. and its designee, attached hereto as Exhibit 4.3; (vi) a
      single typographical error which appeared on page 1 the Common Stock Purchase
      Warrant issued to Yorkshire Capital Limited and its designee, attached hereto
      as
      Exhibit 4.4; (vii) a single typographical error which appeared on page 1 of
      the
      Securities Purchase Agreement, attached hereto as Exhibit 10.1; and (vii) to
      include the Unaudited Pro Forma Financial Information of the Company, attached
      hereto under Item 9.01(b).





On
      December 14, 2007, the Company filed the Commission a Form S-1 registering
      the
      following amount of 13,291,942 shares of common stock of New Paradigm
      Productions, Inc. (K/N/A China Marine Food Group Limited), a Nevada corporation
      that may be sold from time to time by the selling stockholders named in the
      Prospectus as part of the S-1 filing, consisting of 11,122,138 shares of common
      stock and 2,169,804 shares of common stock issuable upon exercise of three-year
      warrants owned by the selling stockholders named in the Prospectus as part
      of
      the S-1 filing. The Company will not receive any proceeds from the sales of
      any
      shares of common stock by the selling stockholders.





On
      March
      21, 2008, the Company filed with the Commission a Form 8-K stating that on
      February 20, 2008, the Company had entered into an Investor Relations Consulting
      Agreement (“Agreement”) with Hayden Communications International, Inc. (“HCI”).
      Pursuant to the terms of the Agreement, HCI will advise, counsel and inform
      designated officers and employees of the Company as it relates to financial
      markets and exchanges, competitors, business acquisitions and other aspects
      of
      or concerning the Company’s business about which HCI has knowledge or expertise.
      Moreover, HCI will develop, implement and maintain an ongoing stock market
      support system for the Registrant with the general objective of expanding
      awareness of the Registrant among stockbrokers, analysts, micro-cap
      portfolio/fund managers, market makers, and the appropriate financial and trade
      publications. In exchange for these services, the Company shall pay HCI
      compensation as follows: (i) a monthly consulting and service fee of $7,500
      a
      month from the initial start date of February 20, 2008 through the effective
      date of the Form S-1, at which time the consulting fee will increase to $11,500
      per month through the end of the contractual period; and (ii) Thirty Thousand
      (30,000) shares of restricted common stock. The Agreement shall remain in effect
      for a period commencing on February 20, 2008 until twelve (12) months
      thereafter. There are no material relationships between the Registrant or its
      affiliates and HCI. A copy of the Investor Relations Consulting Agreement was
      filed as Exhibit 10.1 to the Form 10-K




63





**PART
      III.**





**ITEM
      10.**  **Directors
      and Executive Officers of the Registrant**





**DIRECTORS
      AND OFFICERS**





The
      following sets forth the name and position of each of our current executive
      officers and directors.





**Directors****Name**
            
            **Age**
            
            **Position
                held**Pengfei
                LIU
            
            52
            
            CEO,
                Secretary and DirectorShaobin
                YANG
            
            40
            
            Deputy
                CEO and DirectorWeipeng
                LIU
            
            31
            
            DirectorMarco
                Hon Wai KU
            
            34
            
            Chief
                Financial Officer





None
      of
      the Directors and Executive Officers is related to each other or the Substantial Shareholder .




64





**Pengfei
      Liu** is
      our
      CEO, Secretary and Director. He is the founder of our Company, and has been
      spearheading the expansion and growth of our Company. Mr Liu is responsible
      for
      our operations, marketing, public relations, strategic planning and development
      of new products and markets and overall running of our Company.





From
      1975
      to 1981, Mr. Liu served as a seaman with the Zhejiang East Ocean Navy. From
      1981
      to 1993, he worked as a trader in seafood. In 1994, Mr. Liu established
      Mingxiang. In
      October 2003 ,  Mr.
      Liu was
      elected as member of the executive committee of the China Aquatic Products
      Processing and Marketing Association (CAPPMA). In December 2003, Mr Liu was
      appointed committee member of the Shishi Committee (Fujian Province) of the
      Chinese People’s Political Consultative Conference. In January 2005, Mr Liu was
      elected vice-chairman of the executive committee of Quanzhou Food Products
      Industry Association. In December 2005, Mr Liu was appointed as a member of
      the
      executive committee of the China Chamber of International Commerce, Shishi
      Chamber of Commerce. In August 2006, Mr Liu was appointed executive member
      of
      the general meeting of the Fujian Aquatic Products Processing and Marketing
      Association (FAPPMA). **** Mr.
      Liu
      is not a member of the board of directors for any public company **.**





**Shaobin
      Yang** is
      our
      Deputy CEO and Director. Mr Yang joined our Company in October 2006 and is
      responsible for the overall business and market development of our Company.
      In
      July 1987, Mr Yang graduated from the Fujian Agriculture and Forestry University
      with a bachelor degree in agricultural economics management. He later obtained
      a
      PhD in Economics (major in Finance) from Xiamen University in 2002 **.** ****





Prior
      to
      joining our Company, Mr Yang was an officer at the Fujian Province Shishi City
      Tax Bureau from January 1989 to July 1995. From 1995 to 2002, Mr. Yang attended
      Xiamen University and earned his PhD in Economics. He then served as an officer
      at the Fujian Province Shishi City State Tax Bureau from December 2002 to
      October 2003; an officer at the Fujian Province Quanzhou City State Tax Bureau
      from October 2003 to July 2005; and an officer at the Fujian Province State
      Tax
      Bureau from July 2005 to September 2006. Mr.
      Yang
      is not a director of any public company.





**Weipeng
      Liu** is our
      Director and is responsible for overseeing the construction, operation and
      maintenance of our equipment and production facilities. After graduating with
      a
      degree in mechanical design and manufacturing and automation from Fuzhou
      University in 1997, Mr Liu joined our Company as Mingxiang and Rixiang’s
      facilities manager. He was appointed to serve as an executive director of
      Rixiang in October 2006. . **** Mr.
      Liu
      is not a director of any public company.


**Marco
      Hon Wai Ku** is
      our
      Chief Financial Officer and joined our Company in July 2007. He is responsible
      for the corporate finance function of our Company and oversees matters relating
      to accounting, financial administration and the compliance and reporting
      obligations of our Company. Mr Ku obtained a bachelor’s degree in Finance from
      the Hong Kong University of Science and Technology in 1996, and is currently
      a
      Fellow Member of the Hong Kong Institute of Certified Public
      Accountants.





Prior
      to
      joining us, from 1996 to 2000, Mr Ku was with KPMG, where he last held the
      position as Assistant Manager. From August 2000 to February 2003, he was the
      Manager - Corporate Services in Logistics Information Network Enterprise (HK)
      Limited, a subsidiary of Hutchison Port Holdings Ltd., where he later worked
      as
      Manager - Management Accounting from March 2003 to September 2004. From October
      2004 to September 2005, he worked as a Financial Controller for Hongkong.com
      Company Limited (a Hong Kong listed company within the China.com Group). And
      from October 2005 to April 2007, he co-founded KISS Catering Group, which is
      a
      food and beverage business in Beijing. Mr.
      Ku is
      not a director of any public company. ****




There
      are
      no agreements or understandings for any of our executive officers or directors
      to resign at the request of another person, and no officer or director is acting
      on behalf of nor will any of them act at the direction of any other person.




**SIGNIFICANT
      EMPLOYEES**





Other
      than the officers described above, we do not expect any other individuals to
      make a significant contribution to our business.





**FAMILY
      RELATIONSHIPS**





There
      are
      no family relationships among our officers, directors, persons nominated for
      such positions, or significant shareholders.





**INVOLVEMENT
      IN CERTAIN LEGAL PROCEEDINGS**





None
      of
      our directors, executive officers, or control persons have been involved in
      any
      of the following events during the past five years:





·
            Any
                bankruptcy petition filed by or against any business of which such
                person
                was a general partner or executive officer either at the time of
                bankruptcy or within two years prior to that
                time;





·
            Any
                conviction in a criminal proceeding or being subject to a pending
                criminal
                proceeding (excluding traffic violations and other minor
                offenses);




65





·
            Being
                subject to any order, judgment, or decree, not subsequently reversed,
                suspended or vacated, of any court of competent jurisdiction, permanently
                or temporarily enjoining, barring, suspending or otherwise limiting
                his
                involvement in any type of business, securities or banking activities;
                or





·
            Being
                found by a court of competent jurisdiction (in a civil violation),
                the SEC
                or the Commodity Future Trading Commission to have violated a federal
                or
                state securities or commodities law, and the judgment has not been
                reversed, suspended, or vacated.





**BOARD
      COMMITTEES**





Our board of
      directors is currently composed of three executive directors, Mr. Pengfei
      Liu, Mr. Shaobin
      Yang and Mr. Weipeng Liu. All
      board action requires the approval of a majority of directors in attendance
      at a
      meeting at which a quorum is present. We intend to increase the number of
      independent directors by June of 2008.





We
      currently do not have standing audit, nominating or compensation committees.
      Our
      entire board of directors handles the functions that would otherwise be handled
      by each of the committees. We intend, however, to establish an audit committee,
      a nominating committee and a compensation committee of the board of directors
      as
      soon as practicable. We envision that the audit committee will be primarily
      responsible for reviewing the services performed by our independent auditors,
      evaluating our accounting policies and our system of internal controls. The
      nominating committee would be primarily responsible for nominating directors
      and
      setting policies and procedures for the nomination of directors. The nominating
      committee would also be responsible for overseeing the creation and
      implementation of our corporate governance policies and procedures. The
      compensation committee will be primarily responsible for reviewing and approving
      our salary and benefit policies (including equity plans), including compensation
      of executive officers.




**CODE
      OF ETHICS**





We
      adopted a Code of Ethics pursuant to Section 406 of the Sarbanes-Oxley Act
      of
      2002 on January 24, 2008. The Code is designed to deter wrongdoing and to
      promote:





·
            Honest
                and ethical conduct, including the ethical handling of actual or
                apparent
                conflicts of interest between personal and professional
                relationships;





·
            Full,
                fair, accurate, timely and understandable disclosure in reports and
                documents that we file with, or submit to, the SEC, and in other
                public
                communications that we made;





·
            Compliance
                with applicable governing laws, rules and
                regulations;





·
            The
                prompts internal reporting of violations of the Code to the appropriate
                person or persons; and





·
            Accountability
                for adherence to this Code.





This
      Code
      requires the highest standard of ethical conduct and fair dealing of its Chief
      Financial Officers. While, per Sarbanes-Oxley, this policy is intended to only
      cover the actions of the CFO, we expect our other officers, directors and
      employees to also review the Code and abide by its provisions. We believe that
      our reputation is a valuable asset and must continually be guarded by all
      associated with us so as to earn the trust, confidence and respect of our
      suppliers, customers and stockholders.





Our
      CFO
      is committed to conducting business in accordance with the highest ethical
      standards. The CFO must comply with all applicable laws, rules and regulations.
      Furthermore, the CFO must not commit an illegal or unethical act, or instruct
      or
      authorize others to do so.




**ITEM
      11.**  **Executive
      Compensation**





**COMPENSATION
      DISCUSSION AND ANALYSIS**





***Background
      and Compensation Philosophy***





Our board of directors consists
      of three individuals :
      (1)
      Pengfei Liu, our Chief Executive Officer and beneficial owner of 50.96% of
      our
      common stock; (2) Shaobin Yang, our Deputy CEO; (3) and Weipeng Liu, our
      Executive Director. Our board of directors
      have historically determined the compensation to be paid to our executive officers based on our financial and operating performance and prospects, the level of compensation
      paid to similarly situated executives in comparably sized companies, such
      as
      HQ Sustainable Maritime Industries, Inc., Zhongpin Inc. and American Dairy,
      Inc., and
      contributions made by the officers’ to our success.
      Each of the named officers will be measured by a series of performance criteria
      by the board of directors ,
      or the
      compensation committee when it is established, on
      a
      yearly basis. Such criteria will be set forth based on certain objective
      parameters such as job characteristics, required professionalism, management
      skills, interpersonal skills, related experience, personal performance and
      overall corporate performance.




66





Our board of directors
      have not
      adopted or established a formal policy or procedure for determining the amount
      of compensation paid to our executive officers. Mr. Pengfei Liu has
      been
      and may continue to be involved when our board of directors deliberate
      compensation issues related to his,
      Mr. Yang’s and Mr. Ku’s compensation.





As
      our
      executive leadership and b oard of directors
      grow ,
      our board of directors may
      decide to form a compensation committee charged with the oversight of executive
      compensation plans, policies and programs.





***Elements
      of Compensation***





We
      provide our executive officers solely with a base salary to compensate them
      for
      services rendered during the year. Our policy of compensating our executives
      with a cash
      salary has served us well.
      Because of our history of attracting and retaining executive talent, we do
      not
      believe it is necessary at this time to provide our executives discretionary
      bonuses, equity incentives, or other benefits in
      order for us to
      continue to be successful.





***Base
      Salary***





The
      base
      salary paid to Mr. Pengfei Liu and Mr. Shaobin Yang during 2006 was $13,000
      and
      $5,400 respectively. In 2007, the base salary paid to Mr. Liu, Mr. Yang and
      Mr.
      Ku was increased to approximately $22,000, $18,000 and $32,000 respectively.
      The
      2008 annual compensation for Mr. Liu, Mr. Yang and Mr. Ku is expected to be
      $132,000, $78,000 and $84,000 respectively. All such amounts were paid in cash.
      The value of base salary reflects each executive’s skill set and the market
      value of that skill set in the sole discretion of our
      board of directors and/or our
      executive officers .





***Discretionary
      Bonus***





We
      have
      not provided our executive officers with any discretionary bonuses at the moment
      but our board of directors may
      consider the necessity of such scheme in the future based on our financial and operating performance and prospects, the level of compensation
      paid to similarly situated executives in comparably sized companies and
      contributions made by the officers’ to our success .





***Equity
      Incentives***





We have not
      established an equity based incentive program and have not granted stock based
      awards as a component of compensation, apart from the common stock award of
      approximately 24,000 shares to be
      awarded to Mr.
      Ku
      upon the successful
      listing of our
      shares on a stock
      exchange. In the future, we may adopt and establish an equity incentive plan
      pursuant to which awards may be granted if our board of directors determines that it is in the best interests of our stockholders and the
      Company to do
      so.





***Retirement
      Benefits***





Our
      executive officers are not presently entitled to company-sponsored retirement
      benefits.





***Perquisites***





We
      have
      not provided our executive officers with any material perquisites and other
      personal benefits and, therefore, we do not view perquisites as a significant
      or
      necessary element of our executive’s compensation.





***Deferred
      Compensation***





We
      do not
      provide our executives the opportunity to defer receipt of annual
      compensation.





The
      following table sets forth information for the period indicated with respect
      to
      the persons who served as our CEO, CFO and other most highly compensated
      executive officers who served on our
      board
      of directors .




67




**SUMMARY
      COMPENSATION TABLE**





Name
                and Position
            
            Year
            
            Salary
                ($)
            
            Bonus
                ($)
            
            Stock
                Awards ($)
            
            Option
                Awards ($)
            
            Non-Equity
                Incentive Plan Compensation ($)
            
            Nonqualified
                Deferred Compensation Earnings ($)
            
            All
                Other
              Compensation
                ($)
            
            Total
                ($)Richard
                Crimmins, Sole Director
            
            
            2007
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Pengfei
                Liu, CEO
            
            
            2007
            
            
            22,000
            
            
            26,000
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            48,000Shaobin
                Yang, Deputy CEO
            
            
            2007
            
            
            18,000
            
            
            16,000
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            34,000Marco
                Hon Wai Ku, CFO(1)
            
            
            2007
            
            
            32,000
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            32,000Weipeng
                Liu, Executive Director
            
            
            2007
            
            
            11,000
            
            
            11,000
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            22,000





(1)
            Mr.Ku
                joined our Company in July 2007.





On
      November 17, 2007, we
      entered into a reverse acquisition transaction with Nice Enterprise that was
      structured as a share exchange and in connection with that transaction; Mr.
      Liu
      became the Chief Executive Officer (“CEO”). Prior to the effective date of the
      reverse acquisition, Mr. Liu served at Nice Enterprise as the CEO. The annual,
      long term and other compensation shown in this table include the amount Mr.
      Liu
      received from Nice Enterprise prior to the consummation of the reverse
      acquisition.





Richard
      Crimmins did not receive any compensation as our sole
      director. He tendered his resignation with our Company upon the closing of
      the
      reverse acquisition of Nice Enterprise on November 17, 2007 and his resignation
      from his position as our director became effective immediately.





**SERVICE
      AGREEMENTS WITH DIRECTORS AND EXECUTIVE OFFICERS**





On
      November 17, 2007,
      we entered
      into separate service agreements ( “Service
      Agreements”) with our executive
      directors ,
      namely,
      Pengfei Liu, Shaobin Yang and Weipeng Liu, on
      substantially similar terms, which will remain effective until December
      31, 2010. After
      December 31, 2010, each
      of the
      Service Agreements will continue for a further term of three years unless
      otherwise terminated by the
      respective parties to the Service Agreement giving
      not less than six months’ notice in writing to the counterparty
      to such agreement. Each
      of the Service
      Agreements may be terminated if any of  the
      executive directors commit s a breach
      of his Service Agreement, such as being convicted of any offence involving
      fraud
      or dishonesty or being adjudicated bankrupt. There
      are
      no benefits payable to an executive
      director upon
      termination of his Service Agreement. The
      Service Agreement covers the terms of employment, such
      as salary
      and bonus. Under the terms of the Service
      Agreements, Pengfei Liu, Shaobin Yang and Weipeng Liu will each be
      paid
      an annual salary of approximately $132,000, $78,000 and $39,000 respectively,
      payable in equal monthly instalments. A
      copy of
      each of the Service Agreements for each of our three directors was filed as
      Exhibits 10.5, 10.6 and 10.7 of the Form 8-K filed on November 23, 2007 with
      the
      Commission.





We
      also
      have entered into a service agreement with Marco
      Hon
      Wai Ku who joined
      the Company as  o ur
      chief
      financial officer in July
      2007. The service
      agreement with Mr.
      Ku is r enewable on a year-to-year basis and may
      be terminated by either party giving not less than two months’ notice in writing
      to the other. The s ervice
      agreement may also
      be terminated if Mr. Ku commits a breach of  the
      agreement ,
      such as
      being convicted of any offence involving fraud or dishonesty or being
      adjudicated bankrupt. The s ervice
      agreement covers
      the terms of employment, such
      as salary
      and bonus. Under the s ervice
      agreement, Mr. Ku has also
      agreed not to enter into businesses that will compete with us for a
      period of six months after the termination of the service
      agreement .
      Mr. Ku
      will be paid an annual salary of approximately $84,000, and will
      receive a
      common
      stock award of approximately 24,000 shares upon successful listing of our
      shares on a
      stock exchange. A copy
      of the service agreement for Mr. Ku was filed as Exhibit 10.8 of the Form 8-K
      filed on November 23, 2007 with the Commission.





We
      will
      bear all travelling and travel-related expenses, entertainment expenses and
      other out-of-pocket expenses reasonably incurred by our executive
      directors in the
      process of discharging their respective duties on our behalf.





Except
      as
      disclosed herein, we
      have no other
      existing or proposed service agreement with any of
      our directors .





**BONUSES
      AND DEFERRED COMPENSATION**





In
      addition, we
      will pay
      to
      each of Pengfei Liu, Shaobin Yang and Weipeng Liu an incentive bonus based
      on
      our  PBT , where “PBT”
      refers to the audited combined profit from our operations and before income tax and before any dividend distribution (excluding
      non-recurring exceptional items and extraordinary items) and before minority
      interests for the relevant financial year.




68





The
      amount of incentive bonus that Pengfei Liu is
      expected to receive
      in each financial year will be  determined
      as  follows:




**Rate
                of Incentive Bonus****PBT**
            
            **Pengfei
                Liu**Where
                the PBT is between US $ 10,684,000 and US $ 13,356,000
            
            0.75%
                of the PBTWhere
                the PBT is US $ 13,356,000 or more but not more than US $
                16,027,000
            
            0.75%
                of the PBT for the first US $ 13,356,000 of PBT; and
              1.0%
                on the amount over US $ 13,356,000Where
                the PBT is US $ 16,027,000 and above
            
            0.75%
                of the PBT for the first US $ 13,356,000 of PBT;
              1.0%
                on the US $ 2,671,000after
                the first US $ 13,356,000 of PBT; and
              1.5%
                on the amount over US $ 16,027,000





The
      amount of incentive bonus that Shaobin
      Yang and Weipeng Liu is
      expected to receive
      in each financial year will be determined as follows :





**Rate
                of Incentive Bonus****PBT**
            
            **Shaobin
                Yang**
            
            **Weipeng
                Liu**Where
                the PBT is between US $ 10,684,000 and US $ 13,356,000
            
            0.25%
                of the PBT
            
            0.15%
                of the PBTWhere
                the PBT is above US $ 13,356,000
            
            0.25%
                of the PBT for the first US $ 13,356,000 of PBT; and
              0.5%
                on the amount over US $ 13,356,000
            
            0.15%
                of the PBT for the first US $ 13,356,000 of PBT; and
              0.25%
                on the amount over US $ 13,356,000




The
      incentive bonuses will be paid in the first quarter of the year following the
      year of assessment. The first assessment year for incentive bonuses will be
      year
      2008.





This
      particular performance metric was chosen by the board of directors because
      they
      believed that such scheme would help in measuring the rewards provided to the
      senior executives and the directors in an open, fair, and measurable manner
      given the bonuses were tied in with the performance of the group. A progressive
      basis was selected because the senior executives and the directors could be
      highly motivated under the said scheme and we believe this should improve
      long-term stockholder value over time. This particular performance metric was
      arbitrarily determined by the board of directors after considering our
      historical business performance and the expected returns which could be possibly
      achieved if the business strategies and development plans could be implemented
      and well managed by the management. This performance metric will be consistently
      reviewed by the board of directors, or the compensation committee when it is
      established, going forward.





We
      do not
      have any deferred compensation or retirement plans. We do not have a
      compensation committee; all decisions regarding compensation are determined
      by
      our entire board of directors.





**OPTION
      GRANTS IN THE LAST FISCAL YEAR**





We
      did
      not grant any options or stock appreciation rights to our named executive
      officers or directors in the fiscal year 2007. As of December 31, 2007, none
      of
      our executive officers or directors owned any of our derivative
      securities.





**INDEMNIFICATION
      OF DIRECTORS AND EXECUTIVE OFFICERS**





Our
      bylaws provide for the indemnification of our present and prior directors and
      officers or any person who may have served at our request as a director or
      officer of another corporation in which we own shares of capital stock or of
      which we are a creditor, against expenses actually and necessarily incurred
      by
      them in connection with the defense of any actions, suits or proceedings in
      which they, or any of them, are made parties, or a party, by reason of being
      or
      having been director(s) or officer(s) of us or of such other corporation, in
      the
      absence of negligence or misconduct in the performance of their duties. This
      indemnification policy could result in substantial expenditure by us, which
      we
      may be unable to recoup.





Insofar
      as indemnification by us for liabilities arising under the Securities Exchange
      Act of 1934 may be permitted to our directors, officers and controlling persons
      pursuant to provisions of the Amended Articles of Incorporation and Bylaws,
      or
      otherwise, we have been advised that in the opinion of the SEC, such
      indemnification is against public policy and is, therefore, unenforceable.
      In
      the event that a claim for indemnification by such director, officer or
      controlling person of us is in the successful defense of any action, suit or
      proceeding is asserted by such director, officer or controlling person in
      connection with the securities being offered, we will, unless in the opinion
      of
      our counsel the matter has been settled by controlling precedent, submit to
      a
      court of appropriate jurisdiction the question whether such indemnification
      by
      us is against public policy as expressed in the Act and will be governed by
      the
      final adjudication of such issue.




69




At
      the
      present time, there is no pending litigation or proceeding involving a director,
      officer, employee or other agent of ours in which indemnification would be
      required or permitted. We are not aware of any threatened litigation or
      proceeding which may result in a claim for such indemnification.





**ITEM
      12.**  **Security
      Ownership of Certain Beneficial Owners and Management and Related Stockholder
      Matters**




The
      following tables set forth information regarding beneficial ownership of our
      common stock as of December 31, 2007 (i) by each person who is known to us
      to
      beneficially own more than 5% of
      our
      common stock; (ii) by each of our officers and directors; and (iii) by all
      of
      our officers and directors as a group. Beneficial ownership is determined in accordance with Rule 13d-3 under the
      Securities Exchange Act of 1934 and does not necessarily bear on the economic
      incidents of ownership or the rights to transfer the shares described below.
      Unless otherwise indicated each stockholder has sole voting power and
      dispositive power with respect to the indicated shares.







Unless
      otherwise specified, the address of each of the persons set forth below is
      in
      care of Da Bao Industrial Zone, Shishi City, Fujian, China, 362700.





**Title
                of Class**
            
            **Name
                & Address of Beneficial Owner**
            
            **Office,
                If Applicable**
            
            **Amount
                and Nature of Beneficial Ownership**
            
            **Percent
                of Class**Common
                Stock $0.001 par value
            
            **Pengfei
                Liu**
            
            CEO
            
            11,706,537
                (1)
            
            50.96Dabao
                Industrial Zone, Shishi City, Fujian Province, ChinaCommon
                Stock $0.001 par value
            
            **Shaobin
                Yang**
            
            Deputy
                CEO
            
            0
            
            0Dabao
                Industrial Zone, Shishi City, Fujian Province, ChinaCommon
                Stock $0.001 par value
            
            **Marco
                Hon Wai Ku**
            
            CFO
            
            0
            
            0Dabao
                Industrial Zone, Shishi City, Fujian Province, ChinaCommon
                Stock $0.001 par value
            
            **Weipeng
                Liu**
            
            Executive
                Director
            
            0
            
            0Dabao
                Industrial Zone, Shishi City, Fujian Province, ChinaCommon
                Stock $0.001 par value
            
            **Tradelink
                Securities, LLC**
            
            
            
            2,240,200
                (2)
            
            9.7521
                S. Wacker Dr.
              Suite
                1900
              Chicago,
                Il 60606Common
                Stock $.001 par value
            
            All
                officers and directors as a group
            
            
            
            11,706,537
            
            50.96





(1)
            Of
                these 11,706,537 common stock shares, 6,199,441 common stock shares
                have
                been placed into an escrow account pursuant to a make good agreement
                entered into by Mr. Pengfei Liu in connection with the Securities
                Purchase
                Agreement.


(2)
            This
                includes 1,866,833 common stock shares and 373,367 common stock shares
                underlying warrants issued pursuant to the Securities Purchase Agreement.





70




**ITEM
      13.**  **Certain
      Relationships and Related Transactions**





**INTERESTED
      PERSON TRANSACTIONS**





Except
      as
      disclosed herein,  we
      have
      not entered into any related transaction with any of our directors, executive
      officers or controlling shareholder or their affiliates.





***Past
      Interested Person Transactions***





Details
      of the material interested person transactions for the fiscal years ended
      December 31, 2005, 2006 and 2007 are set forth below:





**Year
                of Transaction**
            
            **Acquirer**
            
            **Acquiree**
            
            **Nature/Amount
                of Property**
              **Acquired
                or to be Acquired**
            
            **Terms
                of Transaction**2005
            
            Mingxiang
                and Rixiang
            
            Pengfei
                Liu, CEO and Controlling Shareholder
            
            $0.2
                million for charter fees, paid to the lessors of fishing
                vessels.
            
            Loan
                was unsecured, repayable on demand and interest-free.Lessors
                were unrelated third-parties.
            
            Loan
                fully repaid as of October 31, 2006.2005
            
            Nice
                Enterprise
            
            Pengfei
                Liu, CEO and Controlling Shareholder
            
            $4.164
                million advance.
            
            Advance
                was unsecured, repayable on demand and interest-free.2006
            
            Nice
                Enterprise
            
            Rixiang
            
            Nice
                Enterprises acquired Rixiang at a total consideration of
                $0.13.
            
            The
                purpose of this transaction was to restructure the
                Company.2006
            
            Nice
                Enterprise
            
            Jixiang
            
            Nice
                Enterprise through Rixiang acquired Jixiang for a cash consideration
                of
                $0.56 Million.
            
            The
                purpose of this transaction was to restructure the
                Company.2006
            
            Nice
                Enterprise
            
            Mingxiang
            
            Nice
                Enterprise through Rixiang acquired Mingxiang at a cash consideration
                of
                $3.76 Million.
            
            The
                purpose of this transaction was to restructure the
                Company.2006
            
            Mingxiang
                and Rixiang
            
            Pengfei
                Liu, CEO and Controlling Shareholder
            
            $23,000
                for charter fees paid to the lessors of fishing vessels.
              
              Lessors
                were unrelated third-parties.
            
            Loan
                was unsecured, repayable on demand and interest-free.
              
              Loan
                fully repaid as of October 31, 2006.2006
            
            Nice
                Enterprise
            
            Pengfei
                Liu, CEO and Controlling Shareholder
            
            $646,000
                advance.
            
            Advance
                was unsecured, repayable on demand and interest-free.2007
            
            Nice
                Enterprise
            
            Pengfei
                Liu, CEO and Controlling Shareholder
            
            $262,000
                advance.
            
            Advance
                was unsecured, repayable on demand and
                interest-free.





*a)*
            *Payment
                by Pengfei Liu, on behalf of Mingxiang and Rixiang, of charter fees
                for
                fishing vessels*





During
      the period under review, our CEO and controlling
      shareholder ,
      Pengfei
      Liu, paid charter fees in respect of 10 fishing vessels for and on behalf of
      Mingxiang and Rixiang. The charter fees were paid to the lessors of the fishing
      vessels and amounted to $0.1 million in 2004, $0.2 million in 2005 and $23,000
      in 2006. The lessors were unrelated third-par ties.
      The
      amounts due from us to Pengfei Liu were unsecured, repayable on demand and
      interest-free, and were fully repaid as at October 31, 2006.





*b)*
            *Payment
                by Pengfei Liu, on behalf of Jixiang, of purchase price for land
                use
                rights*





In
      2003,
      our subsidiary Jixiang purchased land-use rights at Dabao Industrial Zone,
      Xiangzhi Town, Shishi City, Fujian Province for $0.2 million. It also acquired
      two blocks of factory space at the same location for $60,000. The aggregate
      amount of $0.3 million due from Jixiang was paid for by Pengfei Liu, and was
      unsecured, repayable on demand and interest-free. Jixiang had repaid the amount
      in full as at December 31, 2005.





*c)*
            *Non-trade
                advances to and from Pengfei
                Liu*





From
      time
      to time, we have extended advances to Pengfei Liu. The amounts advanced to
      Pengfei Liu were interest-free, unsecured and had no fixed terms of repayment.
      All advances to Pengfei Liu have been fully repaid as at October 31, 2005.
      Pengfei Liu had also, from time to time, extended advances to us for working
      capital purposes.




71




**As
                at December 31,****US$’000**
            
            **2007**
            
            **2006**
            
            **2005**Advances
                from Pengfei Liu
            
            
            262
            
            
            646
            
            
            4,164Advances
                to Pengfei Liu
            
            
            -
            
            
            -
            
            
            -





***Present
      Interested Person Transactions***





*a)*
            *Provision
                of guarantees by Pengfei Liu and Yazuo
                Qiu*





As
      at
      December 31, 2007, the guarantees provided by our directors and
      their respective associates to secure bank facilities from the Agricultural Bank of China, Shishi
      Branch, are as follows:





**Party
                to which banking facilities are granted**
            
            **Loan
                Amount (US$’000)**
            
            **Outstanding
                Loan Amount (US$’000)**
            
            **Guarantees**Mingxiang
            
            
            410
            
            
            53
            
            
            Guaranteed
                by Pengfei Liu and Yazuo QiuMingxiang
            
            
            719
            
            
            719
            
            
            Guaranteed
                by Pengfei Liu and Yazuo Qiu





The
      facilities provided by the Agricultural Bank of China, Shishi Branch, were
      used
      to finance our working capital requirements.





As
      at
      December 31, 2007, the total outstanding loan amounts by we
      held were
      approximately $0.7 million, and the full amounts which amounts
      are guaranteed by Pengfei Liu and Yazuo Qiu. The effective interest rate on these
      short-term loans is approximately 9.2% per annum. N o
      consideration was provided to Pengfei Liu and Yazuo Qiu in exchange for their
      guarantees.





**REVIEW,
      APPROVAL OR RATIFICATION OF TRANSACTIONS WITH RELATED
      PERSONS**





All
      ongoing and future transactions between us and any of our officers and directors
      and their respective affiliates, including loans by our officers and directors,
      will be on terms believed by us to be no less favorable 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
      disinterested “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. We will not enter into a business combination
      or invest alongside any of our directors, officers, any affiliate of ours or
      of
      any of our directors or officers or a portfolio company of any affiliate of
      our
      directors or officers.





**POTENTIAL
      CONFLICTS OF INTERESTS**





Save
      as
      disclosed below and under the section “Interested Person Transactions”, during
      the past three financial years:





a)
            None
                of our directors, executive officers or controlling shareholder or
                their
                affiliates have hadany interest, direct or indirect, in any material transaction to
                whichwe
                area
                party.





b)
            None
                of our directors, executive officers or controlling shareholder or
                their
                affiliates have hadany interest, direct or indirect, in any companythat
                carriesthe same business orsimilar
                trade which competes materially and directly withourexisting business.





c)
            None
                of our directors, executive officers or controlling shareholder or
                their
                affiliates have hadany interest, direct or indirect, in any enterprise or company that
                is ourmajor
                customer or supplier of goods or
                services.





d)
            None
                of our directors, executive officers or controlling shareholder or
                their
                affiliates has hadany interest, direct or indirect, in any material transactionwe
                haveundertaken
                within the last three years.





72




**ITEM
      14.**  **Principal
      Account Fees and Services**





The
      following is a summary of the fees billed to us by Zhong Yi (Hong Kong) C.P.A.
      Co., Ltd., the Company’s current auditors; Gervais McCannon Tyler &
Associates, P.C., the Company’s current taxation advisors; Pritchett, Siler
& Hardy, P.C. (“PSH”), the Company’s former auditors (for the period January
      1, 2007 to September 30, 2007); and the Company's former auditors, McKennon,
      Wilson & Morgan LLP ("MWM") for professional services rendered for the years
      ended December 31, 2007 and 2006:





Services
                (US$’000)
            
            2007
            
            2006Audit
                Fees
            
            $
            80
            
            $
            5Audit
                Related Fees
            
            
            10
            
            
            -Tax
                Fees
            
            
            1
            
            
            1All
                Other Fees
            
            
            -
            
            
            -TOTAL
            
            $
            91
            
            $
            6




Audit
      fees consist of the aggregate fees billed for services rendered for the audit
      of
      our annual financial statements, the reviews of the financial statements
      included in our Forms 10-QSB and for any other services that are normally
      provided by our independent auditors in connection with our statutory and
      regulatory filings or engagements.




Audit
      related fees consist of the aggregate fees billed for professional services
      rendered for assurance and related services that reasonably related to the
      performance of the audit or review of our financial statements that were not
      otherwise included in Audit Fees.




Tax
      fees
      consist of the aggregate fees billed for professional services rendered for
      tax
      compliance, tax advice and tax planning. These services include assistance
      regarding federal, state and local tax compliance and consultation in connection
      with various transactions and acquisitions.




All
      other
      fees consist of the aggregate fees billed for products and services provided
      by
      our independent auditors and not otherwise included in Audit Fees, Audit Related
      fees or Tax Fees.




**PART
      IV.**





**ITEM
      15.**  **Exhibits,
      Financial Statement Schedules**




(a)
      Financial Statements





The
      financial statements are set forth under Item 8 of this Annual Report on
      Form 10-K. Financial statement schedules have been omitted since they are either
      not required, not applicable, or the information is otherwise
      included.





(b)
      Exhibits




2.1
            Share
                Exchange Agreement, dated November 17, 2007 by and among the Registrant,
                Nice Enterprise and its stockholders. (Filed with the Commission
                on Form
                8-K dated November 23, 2007 as Exhibit
                2.1)




3.1
            Amended
                Articles of Incorporation of the Registrant as filed with the Secretary
                of
                State of Nevada, as amended to date. (Filed with the Commission on
                Form
                8-K dated November 23, 2007 as Exhibit
                3.1)




3.2
            Amended
                and Restated Bylaws of the Registrant. (Filed with the Commission
                on Form
                8-K dated November 23, 2007 as Exhibit
                3.2)




4.1
            Form
                of Registration Rights Agreement dated November 17, 2007. (Filed
                with the
                Commission on Form 8-K dated November 23, 2007 as Exhibit
                4.1)





4.2
            Form
                of Common Stock Purchase Warrant issued to Investors dated November
                17,
                2007. (Filed with the Commission on Form 8-K dated November 23, 2007
                as
                Exhibit 4.2)




73




4.3
            Form
                of Common Stock Purchase Warrant issued to Sterne Agee & Leach, Inc.
                and its designee. (Filed with the Commission on Form 8-K/A dated
                November
                30, 2007 as Exhibit 4.3)




4.4
            Form
                of Common Stock Purchase Warrant issued to Yorkshire Capital Limited
                and
                its designee. (Filed with the Commission on Form 8-K/Adated November
                30,
                2007 as Exhibit 4.4)





10.1
            Form
                of Securities Purchase Agreement dated November 17, 2007. (Filed
                with the
                Commission on Form 8-K/A on November 30, 2007 as Exhibit
                10.1)





10.2
            Closing
                Escrow Agreement dated November 17, 2007, by and among the Registrant,
                Sterne Agee & Leach, Inc. and Thelen Reid Brown Raysman & Steiner,
                LLP. (Filed with the Commission on Form 8-K dated November 23, 007
                as
                Exhibit 10.3)




10.3
            Employment
                Contract dated November 17, 2007, between the Registrant and Pengfei
                Liu.
                (Filed with the Commission on Form 8-K dated November 23, 2007 as
                Exhibit
                10.5)





10.4
            Employment
                Contract dated November 17, 2007, between the Registrant and Shaobin
                Yang.
                (Filed with the Commission on Form 8-K dated November 23, 2007 as
                Exhibit
                10.7)




10.5
            Employment
                Contract dated November 17, 2007, between the Registrant and Weipeng
                Liu.
                (Filed with the Commission on Form 8-K dated November 23, 2007 as
                Exhibit
                10.6)





10.6
            Employment
                Contract dated July 26, 2007, between Nice Enterprise and Marco Hon
                Wai
                Ku. (Filed with the Commission on Form 8-K dated November 23, 2007
                as
                Exhibit 10.8)




10.7
            Consulting
                Agreement dated January 1, 2007 between Yorkshire Capital Ltd. And
                Nice
                Enterprise Trading H.K. Co., Ltd. (Filed with the Commission on Form
                8-K
                dated November 23, 2007 as Exhibit
                10.9)




10.8
            Common
                Stock Purchase Agreement dated September 13, 2007, by and between
                New
                Paradigm Productions, Inc. and Halter Financial Investments, L.P.
                (Filed
                with the Commission on Form 8-K dated September 14, 2007 as Exhibit
                10.1)





10.9
            Loan
                Contract by and between Huabao Mingxiang Foods Co., Ltd. And Shishi
                Subranch Agricultural Bank of China dated October 26, 2006. (Filed
                with
                the Commission on Form S-1 (Amendment No. 2) dated March 13, 2008
                as
                Exhibit 10.9)





10.10
            Loan
                Contract by and between Huabao Mingxiang Foods Co., Ltd. And Shishi
                Subranch Agricultural Bank of China dated April 18, 2007. (Filed
                with the
                Commission on Form S-1 (Amendment No. 2) dated March 13, 2008 as
                Exhibit
                10.9)




10.11
            Loan
                Contract by and between Huabao Mingxiang Foods Co., Ltd. And Shishi
                Subranch Agricultural Bank of China dated April 29, 2007. (Filed
                with the
                Commission on Form S-1 (Amendment No. 2) dated March 13, 2008 as
                Exhibit
                10.9)




10.12
            Loan
                Contract by and between Huabao Mingxiang Foods Co., Ltd. And Shishi
                Subranch Agricultural Bank of China dated June 3, 2007. (Filed with
                the
                Commission on Form S-1 (Amendment No. 2) dated March 13, 2008 as
                Exhibit
                10.9)





10.13
            Loan
                Contract by and between Huabao Mingxiang Foods Co., Ltd. And Shishi
                Subranch Agricultural Bank of China dated June 13, 2007. (Filed with
                the
                Commission on Form S-1 (Amendment No. 2) dated March 13, 2008 as
                Exhibit
                10.9)




10.14
            Loan
                Contract by and between Huabao Mingxiang Foods Co., Ltd. And Shishi
                Subranch Agricultural Bank of China dated July 2, 2007. (Filed with
                the
                Commission on Form S-1 (Amendment No. 2) dated March 13, 2008 as
                Exhibit
                10.9)





10.15
            Loan
                Contract by and between Huabao Mingxiang Foods Co., Ltd. And Shishi
                Subranch Agricultural Bank of China dated August 21, 2007. (Filed
                with the
                Commission on Form S-1 (Amendment No. 2) dated March 13, 2008 as
                Exhibit
                10.9)




10.16
            Make
                Good Escrow Agreement dated November 17, 2007, by and among the
                Registrant, Sterne Agee & Leach, Inc., Mr. Pengfei Liu, and Interwest
                Transfer Company, Inc. (Filed with the Commission on Form 8-K dated
                November 23, 2007 as Exhibit 10.2)




10.17
            Lock-up
                Agreement dated November 17, 2007, by and among the Registrant and
                Mr.
                Pengfei Liu. (Filed with the Commission on Form 8-K dated November
                23,
                2007 as Exhibit 10.4)




10.18
            Investor
                Relations Consulting Agreement, by and between the Registrant and
                Hayden
                Communications International, Inc. dated February 20, 2008. (Filed
                with
                the Commission on Form 8-K dated March 21, 2008 as Exhibit
                10.1)




74




14.1
            Business
                Code of Conduct (Filed with the Commission on Form 8-K dated January
                24,
                2008 as Exhibit 14.1)




14.2
            Financial
                Code of Conduct (Filed with the Commission on Form 8-K dated January
                24,
                2008 as Exhibit 14.2)





21
            *Subsidiaries
                List (filed herewith)




23.1
            *Consent
                of Registered Public Accounting Firm - Zhong Yi (Hong Kong) C.P.A.
                Co.,
                Ltd. (filed herewith)





24
            *Power
                of Attorney (filed herewith)31.1
            *Certification
                of Chief Executive Officer pursuant to 13a-14 and 15d-14 of the Exchange
                Act (filed herewith)




31.2
            *Certification
                of Chief Financial Officer pursuant to 13a-14 and 15d-14 of the Exchange
                Act (filed herewith)




32.1
            *Certificate
                pursuant to 18 U.S.C. ss. 1350 for Michael Mak, Chief Executive Officer
                (filed herewith)




32.2
            *Certificate
                pursuant to 18 U.S.C. ss. 1350 for Michael Mak, Chief Financial Officer
                (filed herewith)




*
      - Filed
      herein




75





**SIGNATURES**




In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant has
      duly
      caused this report to be signed on its behalf by the undersigned, thereunto
      duly
      authorized.




**CHINA
                MARINE FOOD GROUP LIMITED**Dated:
                March 28, 2008
            
            /s/
                Pengfei LiuPengfei
              Liu, Chief Executive Officer(Principal
                executive officer)




Dated:
                March 28, 2008
            
            /s/
                Marco Hon Wai KuMarco
                Hon Wai Ku, Chief Financial Officer(Principal
                financial officer)




76