Exhibit
99.4
   REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To the
shareholders
 Songzai
International Holding Group Inc
 
 We have
audited the combined balance sheet of Heilongjiang Xingan Group Hongyuan Coal
Mine Co., Ltd And Heilongjiang Xingan Group Shengyu Mining Co., Ltd. (the
“Company”) as of December 31, 2007 and, and the related combined statements of
income and other comprehensive income, shareholders equity and cash flows
for the years ended December 31, 2007 and 2006.  These financial
statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these financial statements based on
our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the combined financial position of the Company as of December
31, 2007, and the combined results of its operations and its cash flows for the
years ended December 31, 2007 and 2006 in conformity with U.S. generally
accepted accounting principles.
 
 
 
 Goldman
Parks Kurland Mohidin
 Encino,
California
 March 6,
2008
 1
  HEILONGJIANG
      XINGAN GROUP HONGYUAN COAL MINE CO., LTD. ANDHEILONGJIANG
      XINGAN GROUP SHENGYU MINING CO., LTD.COMBINED
      BALANCE SHEETAS
      OF DECEMBER 31, 2007ASSETSCURRENT
      ASSETSCash
      & cash equivalents
                
                $
                9,327,227Accounts
      receivable
                
                
                3,509,445Prepaid
      mining right
                
                
                405,780Inventory
                
                
                502,984Advance
      to related party
                
                
                753,982Total
      current assets
                
                
                14,499,418PROPERTY
      AND EQUIPMENT, net
                
                
                7,671,122NONCURRENT
      ASSETSPrepaid
      mining right
                
                
                9,097,484Asset
      retirement cost, net
                
                
                2,901,600Total
      noncurrent assets
                
                
                11,999,084TOTAL
      ASSETS
                
                $
                34,169,624LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESAccrued
      liabilities and other payables
                
                $
                225,348Tax
      payable
                
                
                7,253,019Total
      current liabilities
                
                
                7,478,367NONCURRENT
      LIABILITIESAsset
      retirement obligation
                
                
                3,577,759Deferred
      tax liability
                
                
                744,956Total
      noncurrent liabilities
                
                
                4,322,715Total
      liabilities
                
                
                11,801,082CONTINGENCIES
      AND COMMITMENTSSTOCKHOLDERS'
      EQUITYPaid
      in capital
                
                
                1,329,062Statutory
      reserve
                
                
                2,943,658Accumulated
      other comprehensive income
                
                
                1,405,103Retained
      earnings
                
                
                16,690,719Total
      stockholders' equity
                
                
                22,368,542TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                
                $
                34,169,624
  The
accompanying notes are an integral part of these combined financial
statements.
 2
  HEILONGJIANG
      XINGAN GROUP HONGYUAN COAL MINE CO., LTD. ANDHEILONGJIANG
      XINGAN GROUP SHENGYU MINING CO., LTD.COMBINED
      STATEMENTS OF OPERATIONSFOR
      THE YEARS ENDEDDECEMBER
      312007
                
                
                2006Net
      sales
                
                $
                34,580,611
                
                
                $
                21,316,745Cost
      of goods sold
                
                
                (12,964,485
                )
                
                
                (9,455,308
                )Gross
      profit
                
                
                21,616,126
                
                
                
                11,861,437Operating
      expensesSelling
      expenses
                
                
                (750,026
                )
                
                
                (331,105
                )General
      and administrative expenses
                
                
                (639,865
                )
                
                
                (527,503
                )Total
      operating expenses
                
                
                (1,389,891
                )
                
                
                (858,608
                )Income
      from operations
                
                
                20,226,235
                
                
                
                11,002,829Non-operating
      income (expenses)Interest
      income
                
                
                2,118
                
                
                
                2,273Interest
      expense
                
                
                (134,511
                )
                
                
                (123,298
                )Financial
      expense
                
                
                (203
                )
                
                
                (544
                )Total
      non-operating expenses
                
                
                (132,596
                )
                
                
                (121,569
                )Income
      before income tax
                
                
                20,093,639
                
                
                
                10,881,260Income
      tax
                
                
                (6,631,364
                )
                
                
                (3,590,816
                )Net
      income
                
                
                13,462,275
                
                
                
                7,290,444Other
      comprehensive itemForeign
      currency translation gain
                
                
                1,118,284
                
                
                
                237,757Comprehensive
      Income
                
                $
                14,580,559
                
                
                $
                7,528,201
  The
accompanying notes are an integral part of these combined financial
statements.
 3
  HEILONGJIANG
      XINGAN GROUP HONGYUAN COAL MINE CO., LTD. ANDHEILONGJIANG
      XINGAN GROUP SHENGYU MINING CO., LTD.COMBINED
      STATEMENTS OF CASH FLOWSFOR
      THE YEARS ENDEDDECEMBER
      31,2007
                  
                  
                  2006CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income
                  
                  $
                  13,462,275
                  
                  
                  $
                  7,290,444Adjustments
      to reconcile net income to net cashprovided
      by operating activities:Depreciation
      and amortization
                  
                  
                  631,691
                  
                  
                  
                  555,247Accretion
      of interest
                  
                  
                  134,512
                  
                  
                  
                  123,298Increase
      in deferred tax liability
                  
                  
                  361,919
                  
                  
                  
                  336,349(Increase)
      decrease in current assets:Accounts
      receivable
                  
                  
                  1,021,985
                  
                  
                  
                  (3,820,392
                  )Other
      receivable
                  
                  
                  79,320
                  
                  
                  
                  (51,742
                  )Inventory
                  
                  
                  (453,946
                  )
                  
                  
                  1,675,857Prepaid
      mining rights
                  
                  
                  (6,242,120
                  )
                  
                  
                  (2,158,022
                  )Increase
      (decrease) in current liabilities:Accounts
      payable
                  
                  
                  (90,477
                  )
                  
                  
                  (105,319
                  )Unearned
      revenue
                  
                  
                  (268,524
                  )
                  
                  
                  256,180Accrued
      liabilities and other payables
                  
                  
                  (365,433
                  )
                  
                  
                  169,090Tax
      payable
                  
                  
                  2,748,056
                  
                  
                  
                  3,340,290Net
      cash provided by operating activities
                  
                  
                  11,019,258
                  
                  
                  
                  7,611,280CASH
      FLOWS FROM INVESTING ACTIVITIES:Acquisition
      of property & equipment
                  
                  
                  (6,190,079
                  )
                  
                  
                  (192,793
                  )Net
      cash used in investing activities
                  
                  
                  (6,190,079
                  )
                  
                  
                  (192,793
                  )CASH
      FLOWS FROM FINANCING ACTIVITIES:Repayment
      from / (Loan to) shareholder
                  
                  
                  2,629,572
                  
                  
                  
                  (2,508,686
                  )Advances
      to shareholder
                  
                  
                  (1,774,961
                  )
                  
                  
                  (1,505,212
                  )Dividend
      paid
                  
                  
                  (2,159,719
                  )
                  
                  
                  -Net
      cash used in financing activities
                  
                  
                  (1,305,108
                  )
                  
                  
                  (4,013,898
                  )EFFECT
      OF EXCHANGE RATE CHANGE ON CASH & CASH EQUIVALENTS
                  
                  
                  519,392
                  
                  
                  
                  132,920NET
      INCREASE IN CASH & CASH EQUIVALENTS
                  
                  
                  3,524,071
                  
                  
                  
                  3,404,589CASH
      & CASH EQUIVALENTS, BEGINNING OF YEAR
                  
                  
                  5,283,764
                  
                  
                  
                  1,746,255CASH
      & CASH EQUIVALENTS, END OF YEAR
                  
                  $
                  9,327,227
                  
                  
                  $
                  5,283,764Supplemental
      Cash flow data:Income
      tax paid
                  
                  $
                  3,546,181
                  
                  
                  $
                  538,830Interest
      paid
                  
                  $
                  -
                  
                  
                  $
                  -
  The
accompanying notes are an integral part of these combined financial
statements.
  4
 HEILONGJIANG
      XINGAN GROUP HONGYUAN COAL MINE CO., LTD. ANDHEILONGJIANG
      XINGAN GROUP SHENGYU MINING CO., LTD.COMBINED
      STATEMENTS OF STOCKHOLDERS' EQUITYFOR
      THE YEAR ENDED DECEMBER 31,2007 AND 2006Common
      stockShares
                  
                  
                  Amount
                  
                  
                  Paid
      in capital
                  
                  
                  Statutory
      reserves
                  
                  
                  Other
      comprehensive
                    income
                  
                  
                  Retained
      earnings
                  
                  
                  TotalBalance
      at December 31, 2005
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  $
                  1,329,062
                  
                  
                  $
                  98,650
                  
                  
                  $
                  49,062
                  
                  
                  $
                  887,850
                  
                  
                  $
                  2,364,624Net
      income for the year
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  7,290,444
                  
                  
                  
                  7,290,444Transfer
      to statutory  reserves
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,748,283
                  
                  
                  
                  -
                  
                  
                  
                  -1,748,283
                  
                  
                  
                  -Dividend
      declared
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -2,104,842
                  
                  
                  
                  -2,104,842Foreign
      currency translation gain
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  237,757
                  
                  
                  
                  -
                  
                  
                  
                  237,757Balance
      at December 31, 2006
                  
                  
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  1,329,062
                  
                  
                  $
                  1,846,933
                  
                  
                  $
                  286,819
                  
                  
                  $
                  4,325,169
                  
                  
                  $
                  7,787,983Net
      income for the year
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  13,462,275
                  
                  
                  
                  13,462,275Transfer
      to statutory  reserves
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,096,725
                  
                  
                  
                  -
                  
                  
                  
                  -1,096,725
                  
                  
                  
                  -Foreign
      currency translation gain
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1,118,284
                  
                  
                  
                  -
                  
                  
                  
                  1,118,284Balance
      at December 31, 2007
                  
                  
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  1,329,062
                  
                  
                  $
                  2,943,658
                  
                  
                  $
                  1,405,103
                  
                  
                  $
                  16,690,719
                  
                  
                  $
                  22,368,542
 The
accompanying notes are an integral part of these combined financial
statements.
 5
 HEILONGJIANG
XINGAN GROUP HONGYUAN COAL MINE CO., LTD. AND
 HEILONGJIANG
XINGAN GROUP SHENGYU MINING CO., LTD.
 NOTES
TO COMBINED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 and 2006
  1.
ORGANIZATION AND DESCRIPTION OF BUSINESS
 
 Heilongjiang
Xingan Group Hongyuan Coal Mine Co., Ltd. (“Hongyuan”) was incorporated in
Heilongjiang Province, People’s Republic of China (“PRC”) on August 18, 2003,
and formerly known as Daxinganling Mohe County Hongyuan Coal Mine Co., Ltd.
(“Mohe Hongyuan”).  Hongyuan is engaged in production of coal from an
underground mine for sale to the utility and industrial
market.  Hongyuan’s mine is located in Mohe County, the most northern
part of China.
 
 Heilongjiang
Xingan Group Shengyu Mining Co., Ltd. (“Shengyu”) was incorporated in
Heilongjiang Province, People’s Republic of China on August 18, 2003, and
formerly known as Daxinganling Mohe County Shengyu Mining Co., Ltd. (“Mohe
Shengyu”).  Shengyu is engaged in production of coal from an
underground mine for sale to the utility and industrial
market.  Shengyu’s mine is located in Mohe County, the most northern
part of China.
 
 Coal
mines for Hongyuan and Shengyu (jointly “the Company”) are geologically
joined.  Hongyuan and Shengyu are commonly owned by same shareholders.
The Group acquired Hongyuan on August 19, 2005 and Shengyu on May 8, 2005. Prior
to the acquisitions, the mines were not in operation from January 1, 2005 to
their respective acquisition dates.
 
 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Principle
of Consolidation
 
 The
accompanying combined financial statements include the accounts of Hongyuan and
Shengyu. All intercompany balances and transactions are eliminated in
combination.
  Use
of Estimates
 
 In
preparing financial statements in conformity with accounting principles
generally accepted in the United States of America, management makes estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the dates of the financial
statements, as well as the reported amounts of revenues and expenses during the
reporting year. Significant estimates, required by management, include the
recoverability of long-lived assets and the valuation of inventories. Actual
results could differ from those estimates.
 
 Cash
and Cash Equivalents
 
 For
purposes of the statement of cash flows, the Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents.
 
 Accounts
Receivable
  The
Company’s policy is to maintain reserves for potential credit losses on accounts
receivable.  Management reviews the composition of accounts receivable
and analyzes historical bad debts, customer concentrations, customer credit
worthiness, current economic trends
and changes in customer payment patterns to evaluate the adequacy of these
reserves.  Based on historical collection activity, no allowance was
deemed necessary at December 31, 2007.
  6
 HEILONGJIANG
XINGAN GROUP HONGYUAN COAL MINE CO., LTD. AND
 HEILONGJIANG
XINGAN GROUP SHENGYU MINING CO., LTD.
 NOTES
TO COMBINED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 and 2006
  2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  Inventories
 
 Inventories
are valued at the lower of cost or market with cost determined on a weighted
average basis. Coal inventory costs comprise direct material, direct labor and
operating overhead.
 
 Prepaid
Mining Right
 
 Prepaid
mining right is the amount paid to acquire the right to mine the coal
reserves.  Prepaid mining right is expensed based on actual production
volume during the year. See additional discussion in Note 6, “Prepaid
Mining Right.”
  Asset
Retirement Cost and Obligation
 
 The
Company uses Statement of Financial Accounting Standards (SFAS) No. 143,
Accounting for Asset Retirement Obligations. This Statement generally requires
the Company’s legal obligations associated with the retirement of long-lived
assets are recognized at fair value at the time the obligations are incurred.
Obligations are incurred at the time development of a mine commences for
underground mines or construction begins for support facilities, refuse areas
and slurry ponds. The obligation’s fair value is determined using discounted
cash flow techniques and is accreted over time to its expected settlement value.
Upon initial recognition of a liability, a corresponding amount is capitalized
as part of the carrying amount of the related long-lived asset. Amortization of
the related asset is recorded on a straight line basis over the useful lives of
the reserves.  See additional discussion in Note 7, “Asset
Retirement Cost and Obligations.”
 
 Property
and Equipment
  Property
and equipment are recorded at cost, net of accumulated
depreciation.  Expenditures which extend the useful lives of existing
property and equipment or increase the productivity of the asset are
capitalized. The cost of maintenance and repairs that do not extend the useful
life or increase the productivity of the asset are expensed as incurred.
Property and equipment are depreciated principally on the straight-line method
over the estimated useful lives of the assets, which generally range from 5 to
20 years. When property and equipment are retired or otherwise disposed of,
the related cost and accumulated depreciation are removed from the respective
accounts, and any gain or loss is included in operations.
 
 Impairment
of Long-Lived Assets
  Long-lived
assets, which include property and equipment and intangible assets, are reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.
  7
 HEILONGJIANG
XINGAN GROUP HONGYUAN COAL MINE CO., LTD. AND
 HEILONGJIANG
XINGAN GROUP SHENGYU MINING CO., LTD.
 NOTES
TO COMBINED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 and 2006
  2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 Recoverability
of long-lived assets to be held and used is measured by a comparison of the
carrying amount of an asset to the estimated undiscounted future cash flows
expected to be generated by the asset. If the carrying amount of an asset
exceeds its estimated undiscounted
 future
cash flows, an impairment charge is recognized by the amount by which the
carrying amount of the asset exceeds the fair value of the assets. Fair value is
generally determined using the asset’s expected future discounted cash flows or
market value, if readily determinable.  Based on its review, the
Company believes that, as of December 31, 2007, there were no significant
impairments of its long-lived assets.
  Income
Taxes
 
 The
Company utilizes SFAS No. 109, “Accounting for Income Taxes,” which requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements or
tax returns.  Under this method, deferred income taxes are recognized
for the tax consequences in future years of differences between the tax bases of
assets and liabilities and their financial reporting amounts at each period end
based on enacted tax laws and statutory tax rates applicable to the periods in
which the differences are expected to affect taxable
income.  Valuation allowances are established, when necessary, to
reduce deferred tax assets to the amount expected to be realized.
 
 The
Company does not have any significant deferred tax asset or liabilities that
relate to tax jurisdictions not covered by the tax holiday.
 
 The
Company adopted the provisions of FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes, on January 1, 2007.  As a result of the
implementation of FIN 48, the Company made a comprehensive review of its
portfolio of tax positions in accordance with recognition standards established
by FIN 48.  As a result of the implementation of Interpretation 48,
the Company recognized no material adjustments to liabilities or stockholders
equity.  When tax returns are filed, it is highly certain that some
positions taken would be sustained upon examination by the taxing authorities,
while others are subject to uncertainty about the merits of the position taken
or the amount of the position that would be ultimately sustained.  The
benefit of a tax position is recognized in the financial statements in the
period during which, based on all available evidence, management believes it is
more likely than not that the position will be sustained upon examination,
including the resolution of appeals or litigation processes, if
any.  Tax positions taken are not offset or aggregated with other
positions.  Tax positions that meet the more-likely-than-not
recognition threshold are measured as the largest amount of tax benefit that is
more than 50 percent likely of being realized upon settlement with the
applicable taxing authority. The portion of the benefits associated with tax
positions taken that exceeds the amount measured as described above is reflected
as a liability for unrecognized tax benefits in the accompanying balance sheets
along with any associated interest and penalties that would be payable to the
taxing authorities upon examination.
  Interest
associated with unrecognized tax benefits are classified as interest expense and
penalties are classified in selling, general and administrative expenses in the
statements of income.
The adoption of FIN 48 did not have a material impact on the Company’s financial
statements.
  8
 HEILONGJIANG
XINGAN GROUP HONGYUAN COAL MINE CO., LTD. AND
 HEILONGJIANG
XINGAN GROUP SHENGYU MINING CO., LTD.
 NOTES
TO COMBINED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 and 2006
  2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  Revenue
Recognition
 
 The
Company's revenue recognition policies are in compliance with SEC Staff
Accounting Bulletin (“SAB”) 104.  Coal sales revenues include sales to
customers of coal produced at Company operations and coal purchased from other
coal mining companies. Sales revenue is recognized when a formal arrangement
exists, which is generally represented by a contract between the Company and the
buyer; the price is fixed or determinable; title has passed to the buyer, which
generally is at the time of delivery; no other significant obligations of the
Company exist and collectibility is reasonably assured.  Payments
received before all of the relevant criteria for revenue recognition are
recorded as unearned revenue.
 
 Sales
revenue represents the invoiced value of coal, net of value-added tax
(“VAT”).  All of the Company’s coal that is sold in the PRC is subject
to Chinese value-added tax of 13% of the gross sales price.  This VAT
may be offset by VAT paid by the Company on raw materials and other materials
included in the cost of producing their finished product.  The Company
recorded VAT payable and VAT receivable net of payments in the financial
statements.  The VAT tax return is filed offsetting the payables
against the receivables.
 
 VAT
payable on sales and VAT on purchases was $4,495,479 and $108,766 for the year
ended December 31, 2007, and $2,771,177 and $0 for the year ended December 31,
2006, respectively.  Sales and purchases are recorded net of VAT
collected and paid as the Company acts as an agent for the
government.
 
 Cost
of Goods Sold
  Cost of
goods sold consists primarily of direct material, transportation cost from mine
pithead to storage yard and railway station, depletion of mining preparation
plant and loadouts and relatedexpenses,
which are directly attributable to the production of coals.  Write-down of
inventory to lower of cost or market is also recorded in cost of goods
sold.
 
 Resource
Compensation Fees
 
 In
accordance with the relevant regulations, the Company is required to pay
resource compensation fees to the Mohe County Land Resource Bureau at 1% of
total sales.  The Company expenses such costs when
incurred.
 
 Concentration
of Credit Risk
 
 Financial
instruments that potentially subject the Company to credit risk consist
primarily of accounts receivable and other receivables. The Company does not
require collateral or other security to support these receivables. The Company
conducts periodic reviews of its clients' financial condition and customer
payment practices to minimize collection risk on accounts
receivable.
  9
 HEILONGJIANG
XINGAN GROUP HONGYUAN COAL MINE CO., LTD. AND
 HEILONGJIANG
XINGAN GROUP SHENGYU MINING CO., LTD.
 NOTES
TO COMBINED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 and 2006
  2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 The
operations of the Company are located in the PRC.  Accordingly, the
Company's business, financial condition, and results of operations may be
influenced by the political, economic, and legal environments in the PRC, as
well as by the general state of the PRC economy.
 
 Statement
of Cash Flows
 
 In
accordance with SFAS No. 95, “Statement of Cash Flows,” cash flows from the
Company's operations are calculated based upon the local
currencies.  As a result, amounts related to assets and liabilities
reported on the statement of cash flows may not necessarily agree with changes
in the corresponding balances on the balance sheet.
 
 Basic
and Diluted Net Income per Share
 
 Hongyuan
and Shengyu are limited companies formed under the laws of the PRC. Like limited
liability companies (LLC) in the United States, limited liability companies
in the PRC do not issue shares to the owners. The owners however,
are called shareholders. Ownership interest is determined in proportion
to capital contributed.  Accordingly, earnings per share data is
not presented.
 
 Fair
Value of Financial Instruments
 
 SFAS No.
107, “Disclosures about Fair Value of Financial Instruments,” requires that the
Company disclose estimated fair values of financial instruments.  The
carrying amounts reported in the statements of financial position for current
assets and current liabilities qualifying as financial instruments are a
reasonable estimate of fair value.
 
 Foreign
Currency Translation and Comprehensive Income (Loss)
 
 The
Company’s functional currency is the Renminbi (“RMB”). For financial reporting
purposes, RMB has been translated into United States dollars ("USD") as the
reporting currency. Assets and liabilities are translated at the exchange rate
in effect at the balance sheet date. Revenues and expenses are translated at the
average rate of exchange prevailing during the reporting period.
 
 Translation
adjustments arising from the use of different exchange rates from period to
period are included as a component of stockholders' equity as "Accumulated other
comprehensive income". Gains and losses resulting from foreign currency
transactions are included in income. There has been no significant fluctuation
in exchange rate for the conversion of RMB to USD after the balance sheet
date.
 
 On July
21, 2005, the central government of China allowed the RMB to fluctuate, ending
its decade old valuation peg to the U.S. dollar.  Historically, the
Chinese government has benchmarked the RMB exchange ratio against the U.S.
dollar, thereby mitigating the associated foreign currency exchange rate
fluctuation risk.  The Company does not believe that its
foreign currency exchange rate fluctuation risk is significant, especially if
the Chinese government continues to benchmark the RMB against the U.S.
dollar.
  10
 HEILONGJIANG
XINGAN GROUP HONGYUAN COAL MINE CO., LTD. AND
 HEILONGJIANG
XINGAN GROUP SHENGYU MINING CO., LTD.
 NOTES
TO COMBINED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 and 2006
  2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 This
quotation of the exchange rates does not imply free convertibility of RMB to
other foreign currencies. All foreign exchange transactions continue to take
place either through the People’s Bank of China or other banks authorized to buy
and sell foreign currencies at the exchange rate quoted by the People’s Bank of
China.
 
 The
Company uses SFAS No. 130 “Reporting Comprehensive Income”. Comprehensive income
is comprised of net income and all changes to the statements of stockholders’
equity, except those due to investments by stockholders, changes in paid-in
capital and distributions to stockholders. Comprehensive income for the year
ended December 31, 2007and 2006 included net income and foreign currency
translation adjustments.
 
 Segment
Reporting
 
 SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information"
requires use of the “management approach” model for segment
reporting.  The management approachmodel
is based on the way a company's management organizes segments within the company
for making operating decisions and assessing performance.  Reportable
segments are based on products and services, geography, legal structure,
management structure, or any other manner in which management disaggregates a
company.
 
 SFAS 131
has no effect on the Hongyuan and Shengyu's financial statements as
substantially all of their operations are conducted in one industry segment -
coal mining.
 
 New
Accounting Pronouncements
 
 Fair Value
Measurements
  In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,”
which establishes a framework for measuring fair value, and expands disclosures
about fair value measurements required under the accounting pronouncements, but
does not change existing guidance as to whether or not an instrument is carried
at fair value. Additionally, it establishes a fair value hierarchy that
prioritizes the information used to develop those assumptions. SFAS No. 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. Earlier
application is encouraged, provided that the reporting entity has not yet issued
financial statements for fiscal year, including financial statements for an
interim period within the fiscal year. The Company is currently evaluating the
impact, if any, that SFAS No. 157 will have on its financial
statements.
  Employers’ Accounting for
Defined Benefit Pension and Other Postretirement Plans, an Amendment of FASB
Statements No. 87, 88, 106, and 132R
   11
 HEILONGJIANG
XINGAN GROUP HONGYUAN COAL MINE CO., LTD. AND
 HEILONGJIANG
XINGAN GROUP SHENGYU MINING CO., LTD.
 NOTES
TO COMBINED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 and 2006
  2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 In
September 2006, the FASB, issued SFAS, No. 158, “Employers’ Accounting for
Defined Benefit Pension and Other Postretirement Plans, an Amendment of FASB
Statements No. 87, 88, 106, and 132R,” which requires employers to recognize the
underfunded or overfunded status of a defined benefit postretirement plan as an
asset or liability in its statement of financial position and to recognize
changes in the funded status in the year in which the changes occur through
accumulated other comprehensive income. Additionally, SFAS No. 158 requires
employers to measure the funded status of a plan as of the date of its year-end
statement of financial position.  effective for fiscal years ending
after December 15, 2006. The Company believes that the adoption of SFAS 158 will
not have a significant impact on its financial statements.
 
 Fair Value Option for
Financial Assets and Financial Liabilities
 
 In
February of 2007 the FASB issued SFAS 159, “The Fair Value Option for Financial
Assets and Financial Liabilities—Including an amendment of FASB Statement No.
115.”  The statement permits entities to choose to measure many
financial instruments and certain other items at fair value. The objective is to
improve financial reporting by providing entities with the opportunity to
mitigate volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions.
 The
statement is effective as of the beginning of an entity’s first fiscal year that
begins after November 15, 2007.  The Company believes that the
adoption of SFAS 159 will not have a significant impact on its financial
statements.
  Considering the Effects of
Prior Year Misstatements in Current Year Financial
Statements
  In
September 2006, the SEC issued SAB No. 108, “Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements” (“SAB 108”), which provides interpretive guidance on the
consideration of the effects of prior year misstatements in quantifying current
year misstatements for the purpose of a materiality assessment. The Company
adopted SAB 108 in the fourth quarter of 2006 with no impact on its financial
statements.
  Business
Combinations
 
 In
December 2007, the FASB issued SFAS No. 141 (Revised 2007), Business
Combinations (“SFAS 141R”). SFAS 141R will significantly change the accounting
for business combinations. Under SFAS 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 141R will change
the accounting treatment for certain specific items, including:
  •
            Acquisition
      costs will be generally expensed as
incurred;
  •
            Noncontrolling
      interests (formerly known as “minority interests” – see SFAS 160
      discussion below) will be valued at fair value at the acquisition
      date;
   12
 HEILONGJIANG
XINGAN GROUP HONGYUAN COAL MINE CO., LTD. AND
 HEILONGJIANG
XINGAN GROUP SHENGYU MINING CO., LTD.
 NOTES
TO COMBINED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 and 2006
  •
            Acquired
      contingent liabilities will be recorded at fair value at the acquisition
      date and subsequently measured at either the higher of such amount or the
      amount determined under existing guidance for non-acquired
      contingencies;
 
 •
            In-process
      research and development will be recorded at fair value as an
      indefinite-lived intangible asset at the acquisition
  date;
  •
            Restructuring
      costs associated with a business combination will be generally expensed
      subsequent to the acquisition date;
and
  •
            Changes
      in deferred tax asset valuation allowances and income tax uncertainties
      after the acquisition date generally will affect income tax
      expense.
   SFAS 141R
also includes a substantial number of new disclosure requirements. SFAS 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. Earlier adoption is prohibited. Accordingly, since
we are a calendar year-end company we will continue to record and disclose
business combinations following existing GAAP until
  January 1,
2009. We expect SFAS 141R will have an impact on accounting for business
combinations once adopted but the effect is dependent upon acquisitions at that
time.
  
 Noncontrolling Interests in
Consolidated Financial Statements – An Amendment of ARB No.
51
 
 In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements - An Amendment of ARB No. 51 (“SFAS
160”). SFAS 160 establishes new accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. Specifically, this statement requires the recognition of a
noncontrolling interest (minority interest) as equity in the consolidated
financial statements and separate from the parent’s equity. The amount of net
income attributable to the noncontrolling interest will be included in
consolidated net income on the face of the income statement. SFAS 160 clarifies
that changes in a parent’s ownership interest in a subsidiary that do not result
in deconsolidation are equity transactions if the parent retains its controlling
financial interest. In addition, this statement requires that a parent recognize
a gain or loss in net income when a subsidiary is deconsolidated. Such gain or
loss will be measured using the fair value of the noncontrolling equity
investment on the deconsolidation date. SFAS 160 also includes expanded
disclosure requirements regarding the interests of the parent and its
noncontrolling interest. SFAS 160 is effective for fiscal years, and interim
periods within those fiscal years, beginning on or after December 15, 2008.
Like SFAS 141R discussed above, earlier adoption is prohibited. We have not
completed our evaluation of the potential impact, if any, of the adoption of
SFAS 160 on our consolidated financial position, results of operations and cash
flows.
 
 3.
INVENTORY
 
 Inventory
at December 31, 2007 consisted of coal.
  13
 HEILONGJIANG
XINGAN GROUP HONGYUAN COAL MINE CO., LTD. AND
 HEILONGJIANG
XINGAN GROUP SHENGYU MINING CO., LTD.
 NOTES
TO COMBINED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 and 2006
  4.
PROPERTY AND EQUIPMENT, NET
 
 Property
and equipment consisted of the following at December 31, 2007:
  Building
            
            $
            1,925,671Mining
      structure
            
            
            3,440,002Production
      equipment
            
            
            2,492,049Vehicle
            
            
            14,3947,872,116Less:
      Accumulated depreciation
            
            
            (200,994
            )$
            7,671,122
 
 Depreciation
expense for the years ended December 31, 2007 and 2006 was $100,095 and $57,215,
respectively.
 
 5.
RELATED PARTY TRANSACTIONS
  Advance
to related party
 
 Advance
to related party represents advances to its principal shareholder in year 2007.
The advances are payable on demand and are non- interest bearing.
 
 Lease
from shareholder
 
 The
Company leases its offices and certain office equipments under long-term lease
agreements from its principal shareholder. The operating lease agreements
provide that the Company pays certain operating expenses applicable to the
leased premises. Rental expense to the principal shareholder for the years ended
December 31, 2007 and 2006 were $19,722 and $18,815, respectively.
 
 6.
PREPAID MINING RIGHT
 
 Prepaid
mining right represents amount the Company paid for its coal
reserves.  The price was RMB 4 per ton during year 2005, RMB 6 per ton
during 2006 and 2007, and will vary each year depending on the decision of the
local Mining Bureau’s from which the Company acquired the rights. The Company is
generally required to pay the full amount of mining right within five years
unless specific good cause exists for extension.
 
 The
Company’s prepaid mining right consisted of the following at December 31,
2007:
 
 In
      TonsPrepaid
      mining right
            
            $
            10,439,273
            
            
            
            13,647,520Less:
      Expensed portion
            
            
            (936,009
            )
            
            
            (1,706,952
            )$
            9,503,264
            
            
            
            11,940,568Current
            
            $
            405,780Noncurrent
            
            $
            9,097,484
  14
 HEILONGJIANG
XINGAN GROUP HONGYUAN COAL MINE CO., LTD. AND
 HEILONGJIANG
XINGAN GROUP SHENGYU MINING CO., LTD.
 NOTES
TO COMBINED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 and 2006
  The total
coal reserves the Company may extract under the mining right are 19,781,800
tons.  At December 31, 2007, The Company is committed to pay for 6,134,280
tons of coal at RMB 6 ($0.769) per ton for the total amount of $4,717,261. 
The contract has been accounted for similar to a royalty agreement as neither
the payment terms nor the price per ton is fixed. The Company expenses the tons
of coal extracted multiplied by the price per ton during the period, charging
the amount to cost of good sold with a corresponding credit to prepaid mining
rights.
 
 7.
ASSET RETIREMENT COST AND OBLIGATION
 
 The
Company had applied to Daxinganling District Environment Protection Bureau for
asset retirement obligation and is obligated to account for land subsidence,
restoration, rehabilitation and environmental protection for RMB 1 per ton for
total reserves at the end of the useful lives of the mines.  These
activities include reclaiming the pit, sealing portals at underground mines,
reclaiming and vegetating refuse areas.
 
 The
Company accounts for its asset retirement obligations in accordance with SFAS
No. 143, “Accounting for Asset Retirement Obligations”. The Company reviews
its asset retirement obligation at least annually and makes necessary
adjustments for permitted changes as granted by state authorities and for
revisions of estimates of the amount and timing of costs. For ongoing
operations, adjustments to the liability result in an adjustment to the
corresponding asset.
 
 The
following tables describe the changes to the Company’s asset retirement cost and
obligation:
 
 Asset
Retirement Cost at December 31, 2007:
 
 Asset
      retirement cost
            
            $
            3,269,409Less:
      Accumulated amortization
            
            
            (367,808
            )$
            2,901,600
 
 Amortization
expense for asset retirement cost for the years ended December 31, 2007 and 2006
was $156,782 and $149,574, respectively.
 
 Asset
Retirement Obligation activity for the years ended December 31 was:
 
 2007
              
              
              2006Balance
      at January 1
              
              $
              3,213,087
              
              
              
              2,985,340Accretion
      expense
              
              
              134,512
              
              
              
              123,298Foreign currency
      translationgain
              
              
              230,160
              
              
              
              104,449Balance
      at December 31
              
              $
              3,577,759
              
              
              
              3,213,087
  15
 HEILONGJIANG
XINGAN GROUP HONGYUAN COAL MINE CO., LTD. AND
 HEILONGJIANG
XINGAN GROUP SHENGYU MINING CO., LTD.
 NOTES
TO COMBINED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 and 2006
 8. TAX PAYABLE
  Tax
payable consisted of the following at December 31, 2007:
 
 Income
      tax payable
            
            $
            6,353,145Value
      added tax payable
            
            
            773,168Resource
      tax payable
            
            
            65,511Urban maintenance and
      construction taxpayable
            
            
            61,195$
            7,253,019
 
 9.
INCOME TAXES
 
 The
Company is governed by the Income Tax Law of the PRC concerning the private-run
enterprises, which are generally subject to tax at a statutory rate of 33% on
income reported in the statutory financial statements after appropriated tax
adjustments.
 
 The
following table reconciles the U.S. statutory rates to the Company’s effective
tax rate for the year ended December 31, 2007 and 2006:
  2007
            
            
            2006US
      statutory rates
            
            
            34
            %
            
            
            34
            %Tax
      rate difference
            
            
            (1
            %)
            
            
            (1
            %)Tax
      per financial statements
            
            
            33
            %
            
            
            33
            %
 
 10.
DEFFERED TAX LIABILITY
 
 Deferred
tax liability arises from tax deductible reserve for safety and maintenance
expenses to be incurred in the future. The reserve is calculated by management’s
best estimates within the unit price range provided by Ministry of Finance of
PRC, currently RMB 8.7 per for safety expense and RMB 3 per ton for maintenance
for the quantity of coal produced. For financial reporting purposes, this
reserve has been recorded as an appropriation of retained earnings as defined
under US generally accepted accounting principles, a liability for safety and
maintenance expenses does not exist at the balance sheet date.
 
 11. MAJOR
CUSTOMERS AND
VENDORS
 
 Three
major customers accounted for 98.5% and 86% of the Company’s net revenue for
year 2007 and 2006, respectively.  For year 2007, each customer
accounted for about 49.3%, 25.3%, and 23.9% of the sales.  For year
2006, each customer accounted for about 32%, 31%, and 23% of the
sales.  At December 31, 2007, the total receivable balance due from
these three customers was $3,509,445.
 
 There
were no major vendors for the Company for the year 2007 and 2006.
 
 12.
STATUTORY RESERVES
    16
 HEILONGJIANG
XINGAN GROUP HONGYUAN COAL MINE CO., LTD. AND
 HEILONGJIANG
XINGAN GROUP SHENGYU MINING CO., LTD.
 NOTES
TO COMBINED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 and 2006
  Surplus reserve
fund
 
 The
Company is now only required to transfer 10% of its net income, as determined
under PRC accounting rules and regulations, to a statutory surplus reserve fund
until such reserve balance reaches 50% of the Company’s registered
capital.  At December 31, 2007, the Company had $827,694 in this
reserve, of which $342,206 was mandatory surplus reserve and reached 50% of the
Company’s registered capital, $485,488 was optional surplus reserve which
exceeded 50% of the Company’s registered capital.
 
 The
surplus reserve fund is non-distributable other than during liquidation and can
be used to fund previous years’ losses, if any, and may be utilized for business
expansion or converted into share capital by issuing new shares to existing
shareholders in proportion to their shareholding or by increasing the par value
of the shares currently held by them, provided that the remaining reserve
balance after such issue is not less than 25% of the registered
capital.
 
 Common welfare
fund
 
 Common
welfare fund is a voluntary fund that the Company can elect to transfer 5% to
10% of its net income to this fund.  The Company did not make any
contribution to this fund for the year ended December 31, 2007.
 
 This fund
can only be utilized on capital items for the collective benefit of the
Company’s employees, such as construction of dormitories, cafeteria facilities,
and other staff welfare facilities. This fund is non-distributable other than
upon liquidation.
 
 
 Non-Surplus
reserve fund (Safety and Maintenance)
 
 According
to ruling No. 119 (2004) issued on May 21, 2004, amended ruling No. 168 (2005)
on April 8, 2005 by Ministry of Finance of PRC regarding “Accrual and
Utilization of Coal Production Safety Expense” and “Criterion on Coal Mine
Maintenance and Improvement”, the Company are required to accrue safety and
maintenance expense monthly to cost of production, the amount of accrual are
determined by management’s best estimates within the unit price range provided
by Ministry of Finance of PRC, currently RMB 8.7 per for safety expense and RMB
3 per ton for maintenance for the quantity of coal actual produced by the
Company.  For financial reporting purposes, this reserve has been
recorded as an appropriation of retained earnings as defined under US generally
accepted accounting principles, a liability for safety and maintenance expenses
does not exist at the balance sheet date. For the year ended December 31, 2007
and 2006, the Company recorded $1,096,726 and $1,019,238 as reserve for safety
and maintenance, respectively.
 
 The
following table reconciles the statutory reserves at December 31,
2007:
  17
 HEILONGJIANG
XINGAN GROUP HONGYUAN COAL MINE CO., LTD. AND
 HEILONGJIANG
XINGAN GROUP SHENGYU MINING CO., LTD.
 NOTES
TO COMBINED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 and 2006
  
 Statutory
      surplus reserve
            
            $
            1,415,537Safety
      and Maintenance reserve
            
            
            1,528,121Total
      statutory reserves
            
            $
            2,943,658
 
 13. SHAREHOLDERS’
EQUITY
  Hongyuan
was formed on August 18, 2003 by shareholders’ investing of cash of
$60,411.
 In May of
2005, the shareholders have injected additional $604,120 cash. At December 31,
2006, Hongyuan has paid in capital of $664,531.
 
 Shengyu
was formed on August 18, 2003 with paid in capital of $664,531.  As of
December 31, 2006, the Company had combined paid in capital of
$1,329,062.
  14.
CONTINGENCIES AND COMMITMENTS
  The
Company’s operations in the PRC are subject to specific considerations and
significant risks not typically associated with companies in the North America
and Western Europe. These include risks associated with, among others, the
political, economic and legal environments and foreign currency exchange. The
Company’ s results may be adversely affected by changes in governmental policies
with respect to laws and regulations, anti-inflationary measures, currency
conversion and remittance abroad, and rates and methods of taxation, among other
things.
  The
Company’s sales, purchases and expenses transactions are denominated in RMB and
all of the Company’s assets and liabilities are also denominated in RMB. The RMB
is not freely convertible into foreign currencies under the current law. In
China, foreign exchange transactions are required by law to be transacted only
by authorized financial institutions. Remittances in currencies other than RMB
may require certain supporting documentation in order to affect the
remittance.
 
 The
Company is required to pay the full amount of total reserves (mining right)
within five years from the date the reserves is approved by Heilongjiang
Province National Land Resource Office unless.  The Company’s
operation may be suspended if they are not able to pay off total mining right
within five years.
 
 The
Company leases its offices and certain office equipments under long-term lease
agreements expiring at July 30, 2015. The operating lease agreements provide
that the Company pays certain operating expenses applicable to the leased
premises. Rental expense for the years ended December 31, 2007 and 2006 were
$19,722 and $18,815, respectively.
 
 The
future minimum annual lease payments required under the operating leases are as
follows:
 
 Year
      Ending December 31
              
              Payments2008
              
              $
              18,8152009
              
              
              18,8152010
              
              
              18,815Total
      future lease payments
              
              $
              56,445
  18
 HEILONGJIANG
XINGAN GROUP HONGYUAN COAL MINE CO., LTD. AND
 HEILONGJIANG
XINGAN GROUP SHENGYU MINING CO., LTD.
 NOTES
TO COMBINED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 and 2006
  15.
SUBSEQUENT EVENT – REVERSE ACQUSITION
 
 On or
about December 31, 2007 (the "Effective Date"), the Company entered into a Stock
Purchase Agreement with Songzai International Holding Group, Inc. (“Songzai”).
Pursuant to the terms of the Agreement, Songzai acquired 90% of the registered
capital, representing 90% of the outstanding equity interests, of each of
Hongyuan and Shengyu from the selling shareholders for an aggregate purchase
price of thirty million dollars (the "Cash Consideration") and 80,000,000 shares
(pre-reverse stock split of Songzai effective on January 07, 2008) of the
Company's common stock ("Stock Consideration"). The remaining 10% equity
interest will be in trust by the selling shareholders of the Company for the
benefit of Songzai.  The acquisition transaction will not be deemed
closed until all the deliverables have been made. The transaction is completed
and closed at April4, 2008.
 
 As a
result of the share exchange agreement, the Company’s shareholders will own 53%
of the combined company.  For accounting purposes, the acquisition of
the Company by Songzai will be accounted for as a reverse acquisition of Songzai
by the Company.  The following unaudited pro forma consolidated
results of continuing operations for the Company and Songzai for the years ended
December 31, 2007 and 2006 presents the Company and Songzai’s operations as if
the acquisitions occurred on January 1, 2007 and 2006,
respectively.  The pro forma results are not necessarily indicative of
the actual results that would have occurred had the acquisitions been completed
as of the beginning of the periods presented, nor are they necessarily
indicative of future consolidated results.
 
 For
      the years endedDecember
      31, 2007
            
            
            December
      31, 2006(Unaudited)(In
      thousands)Total
      Revenue
            
            $
            46,931
            
            
            $
            25,152Net
      Income
            
            $
            17,550
            
            
            $
            7,937
 
 The
condensed unaudited balance sheet discloses the amount assigned to each major
asset and liability caption of the acquired entity (Songzai) at December 31,
2007 was as follows (in thousands):
  19
 HEILONGJIANG
XINGAN GROUP HONGYUAN COAL MINE CO., LTD. AND
 HEILONGJIANG
XINGAN GROUP SHENGYU MINING CO., LTD.
 NOTES
TO COMBINED FINANCIAL STATEMENTS
 DECEMBER
31, 2007 and 2006
  
 ASSETSCURRENT
      ASSETSCash
      and cash equivalents
              
              $
              4,494Other
      current assets
              
              
              959Total
      Current Assets
              
              
              5,453PROPERTY
      AND EQUIPMENT, NET
              
              
              5,904CONSTRUCTION
      IN PROGRESS
              
              
              158MINING
      RIGHTS - NONCURRENT
              
              
              1,380TOTAL
      ASSETS
              
              $
              12,895LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESAccounts
      payable
              
              $
              270Unearned
      revenue
              
              
              308Other
      payables
              
              
              515Tax
      payable
              
              
              192Due
      to a stockholder
              
              
              636Total
      Current Liabilities
              
              
              1,921DEFERRED
      TAX LIABILITY
              
              
              129NET
      ASSETS ACQUIRED
              
              $
              10,845