REPORT
OF INDEPENDENT REGISTERED
 PUBLIC
ACCOUNTING FIRM
 
 TO
THE BOARD OF DIRECTORS AND OWNERS OF
 HENAN
SMART FOOD CO., LTD
 
 We have
audited the accompanying balance sheets of Henan Smart Food Co., Ltd (the
“Company”) as of December 31, 2008, 2007 and 2006, and the related statements of
income, changes in owners’ equity, and cash flows for each of the years in the
periods ended December 31, 2008, 2007 and 2006. Henan Smart Food Co., Ltd’s
management is responsible for these financial statements.  Our
responsibility is to express an opinion on these financial statements based on
our audits.
 
 We
conducted our audits in accordance with the auditing 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 are we engaged to perform, an audit of its internal
control over financial reporting.  Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit
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 financial position of Henan Smart Food Co., Ltd as of
December 31, 2008, 2007 and 2006, and the results of its operations and its cash
flows for each of the years in the period ended December 31, 2008, 2007 and
2006, in conformity with accounting principles generally accepted in the United
States of America.
 
 /s/ UHY
VOCATION HK CPA LIMITED
 
 UHY
VOCATION HK CPA LIMITED
 
 Hong
Kong, the People’s Republic of China
 March 28,
2009.
 
 1
 
 
 HENAN
SMART FOOD COMPANY LIMITED
 BALANCE
SHEETS
 
 2008
                                  
                                  
                                  2007
                                  
                                  
                                  2006December
      31
                                  
                                  
                                  December
      31
                                  
                                  
                                  December
      31USD
                                  
                                  
                                  USD
                                  
                                  
                                  USDAssetsCurrent
      assetsCash
                                  
                                  $
                                  17,765,790
                                  
                                  
                                  $
                                  5,796,288
                                  
                                  
                                  $
                                  5,707,403Restricted
      cash
                                  
                                  
                                  1,758,886
                                  
                                  
                                  
                                  2,193,403
                                  
                                  
                                  
                                  4,664,215Accounts
      receivable
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  5,588Inventories
                                  
                                  
                                  17,044,352
                                  
                                  
                                  
                                  17,789,126
                                  
                                  
                                  
                                  11,398,837Prepayments
                                  
                                  
                                  1,900,419
                                  
                                  
                                  
                                  1,664,662
                                  
                                  
                                  
                                  856,300Other
      receivables
                                  
                                  
                                  71,411
                                  
                                  
                                  
                                  96,749
                                  
                                  
                                  
                                  78,204Amount
      due from related parties
                                  
                                  
                                  5,252,335
                                  
                                  
                                  
                                  3,493,301
                                  
                                  
                                  
                                  5,639,048Total
      current assets
                                  
                                  
                                  43,793,193
                                  
                                  
                                  
                                  31,033,529
                                  
                                  
                                  
                                  28,349,595Non-current
      assetsProperty,
      plant and equipment, net
                                  
                                  
                                  14,220,268
                                  
                                  
                                  
                                  13,770,075
                                  
                                  
                                  
                                  12,021,137Land
      use right, net
                                  
                                  
                                  1,792,840
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Total
      non-current assets
                                  
                                  
                                  16,013,108
                                  
                                  
                                  
                                  13,770,075
                                  
                                  
                                  
                                  12,021,137Total
      assets
                                  
                                  $
                                  59,806,301
                                  
                                  
                                  $
                                  44,803,604
                                  
                                  
                                  $
                                  40,370,732Liabilities
      and owners' equityCurrent
      liabilitiesAccounts
      payable
                                  
                                  $
                                  6,949,166
                                  
                                  
                                  $
                                  7,515,547
                                  
                                  
                                  $
                                  5,912,076Notes
      payable
                                  
                                  
                                  2,931,477
                                  
                                  
                                  
                                  3,290,105
                                  
                                  
                                  
                                  5,657,283Tax
      payable
                                  
                                  
                                  3,612,765
                                  
                                  
                                  
                                  1,911,192
                                  
                                  
                                  
                                  555,807Receipts
      in advance
                                  
                                  
                                  1,095,154
                                  
                                  
                                  
                                  734,080
                                  
                                  
                                  
                                  751,223Accrued
      liabilities and other payables
                                  
                                  
                                  6,359,958
                                  
                                  
                                  
                                  6,201,115
                                  
                                  
                                  
                                  6,218,125Amount
      due to related party
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  1,958,496Dividend
      payable
                                  
                                  
                                  22,631,157
                                  
                                  
                                  
                                  11,806,800
                                  
                                  
                                  
                                  9,413,713Short
      term loans
                                  
                                  
                                  13,001,099
                                  
                                  
                                  
                                  10,240,452
                                  
                                  
                                  
                                  7,944,542Total
      current liabilities
                                  
                                  
                                  56,580,776
                                  
                                  
                                  
                                  41,699,291
                                  
                                  
                                  
                                  38,411,265Non-current
      liabilitiesLong
      term loans
                                  
                                  
                                  604,617
                                  
                                  
                                  
                                  565,487
                                  
                                  
                                  
                                  -Total
      non-current liabilities
                                  
                                  
                                  604,617
                                  
                                  
                                  
                                  565,487
                                  
                                  
                                  
                                  -Total
      liabilities
                                  
                                  
                                  57,185,393
                                  
                                  
                                  
                                  42,264,778
                                  
                                  
                                  
                                  38,411,265Owners'
      equityRegistered
      capital
                                  
                                  
                                  425,300
                                  
                                  
                                  
                                  425,300
                                  
                                  
                                  
                                  425,300Retained
      earnings
                                  
                                  
                                  1,138,790
                                  
                                  
                                  
                                  1,039,690
                                  
                                  
                                  
                                  883,269Reserve
                                  
                                  
                                  192,747
                                  
                                  
                                  
                                  192,747
                                  
                                  
                                  
                                  192,747Statutory
      surplus reserve fund
                                  
                                  
                                  213,172
                                  
                                  
                                  
                                  213,172
                                  
                                  
                                  
                                  213,172Accumulated
      other comprehensive income
                                  
                                  
                                  650,899
                                  
                                  
                                  
                                  667,917
                                  
                                  
                                  
                                  244,979Total
      owners' equity
                                  
                                  
                                  2,620,908
                                  
                                  
                                  
                                  2,538,826
                                  
                                  
                                  
                                  1,959,467Total
      liabilities and owners' equity
                                  
                                  $
                                  59,806,301
                                  
                                  
                                  $
                                  44,803,604
                                  
                                  
                                  $
                                  40,370,732
 
 See
accompanying notes to the financial statements.
 
 2
 
 HENAN
SMART FOOD COMPANY LIMITED
 STATEMENTS
OF INCOME
 
 For
      the years ended December 31,2008
                  
                  
                  2007
                  
                  
                  2006USD
                  
                  
                  USD
                  
                  
                  USDRevenue
                  
                  $
                  175,387,248
                  
                  
                  $
                  136,059,329
                  
                  
                  $
                  108,679,259Cost
      of revenue
                  
                  
                  (129,284,646
                  )
                  
                  
                  (104,933,228
                  )
                  
                  
                  (86,423,801
                  )Gross
      profit
                  
                  
                  46,102,602
                  
                  
                  
                  31,126,101
                  
                  
                  
                  22,255,458General
      and administrative expenses
                  
                  
                  (2,367,463
                  )
                  
                  
                  (1,788,117
                  )
                  
                  
                  (1,362,804
                  )Selling
      and marketing expenses
                  
                  
                  (15,765,076
                  )
                  
                  
                  (12,867,872
                  )
                  
                  
                  (11,429,642
                  )Operating
      income
                  
                  
                  27,970,063
                  
                  
                  
                  16,470,112
                  
                  
                  
                  9,463,012Other
      income and (expense)Interest
      income
                  
                  
                  141,350
                  
                  
                  
                  117,160
                  
                  
                  
                  92,609Interest
      expenses
                  
                  
                  (834,958
                  )
                  
                  
                  (559,780
                  )
                  
                  
                  (419,655
                  )Other
      income
                  
                  
                  3,102,240
                  
                  
                  
                  1,150,154
                  
                  
                  
                  1,991,370Income
      before income taxes
                  
                  
                  30,378,695
                  
                  
                  
                  17,177,646
                  
                  
                  
                  11,127,336Income
      tax expense
                  
                  
                  (7,648,438
                  )
                  
                  
                  (5,214,425
                  )
                  
                  
                  (1,673,915
                  )Net
      income
                  
                  $
                  22,730,257
                  
                  
                  $
                  11,963,221
                  
                  
                  $
                  9,453,421
 
 See
accompanying notes to the financial statements.
 
 3
  HENAN
SMART FOOD COMPANY LIMITED
 STATEMENTS
OF OWNERS' EQUITY
 FOR
THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006
 
 Statutory
                                          
                                          
                                          Accumulatedsurplus
                                          
                                          
                                          Other
                                          
                                          
                                          TotalRegistered
                                          
                                          
                                          Retained
                                          
                                          
                                          
                                          
                                          
                                          Reserve
                                          
                                          
                                          Comprehensive
                                          
                                          
                                          Owners'Capital
                                          
                                          
                                          Earnings
                                          
                                          
                                          Reserve
                                          
                                          
                                          Fund
                                          
                                          
                                          Income
                                          
                                          
                                          EquityUSD
                                          
                                          
                                          USD
                                          
                                          
                                          USD
                                          
                                          
                                          USD
                                          
                                          
                                          USD
                                          
                                          
                                          USDBalance,
      January 1, 2006
                                          
                                          $
                                          425,300
                                          
                                          
                                          $
                                          843,561
                                          
                                          
                                          $
                                          192,747
                                          
                                          
                                          $
                                          213,172
                                          
                                          
                                          $
                                          1,515
                                          
                                          
                                          $
                                          1,676,295Net
      income
                                          
                                          
                                          
                                          
                                          
                                          
                                          9,453,421
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          9,453,421Foreign
      currency translation
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          243,464
                                          
                                          
                                          
                                          243,464Dividend
                                          
                                          
                                          
                                          
                                          
                                          
                                          (9,413,713
                                          )
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          (9,413,713
                                          )Balance,
      December 31, 2006
                                          
                                          
                                          425,300
                                          
                                          
                                          
                                          883,269
                                          
                                          
                                          
                                          192,747
                                          
                                          
                                          
                                          213,172
                                          
                                          
                                          
                                          244,979
                                          
                                          
                                          
                                          1,959,467Net
      income
                                          
                                          
                                          
                                          
                                          
                                          
                                          11,963,221
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          11,963,221Foreign
      currency translation
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          422,938
                                          
                                          
                                          
                                          422,938Dividend
                                          
                                          
                                          
                                          
                                          
                                          
                                          (11,806,800
                                          )
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          (11,806,800
                                          )Balance,
      December 31, 2007
                                          
                                          
                                          425,300
                                          
                                          
                                          
                                          1,039,690
                                          
                                          
                                          
                                          192,747
                                          
                                          
                                          
                                          213,172
                                          
                                          
                                          
                                          667,917
                                          
                                          
                                          
                                          2,538,826Net
      income
                                          
                                          
                                          
                                          
                                          
                                          
                                          22,730,257
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          22,730,257Foreign
      currency translation
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          (17,018
                                          )
                                          
                                          
                                          (17,018
                                          )Dividend
                                          
                                          
                                          
                                          
                                          
                                          
                                          (22,631,157
                                          )
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          
                                          (22,631,157
                                          )Balance,
      December 31, 2008
                                          
                                          $
                                          425,300
                                          
                                          
                                          $
                                          1,138,790
                                          
                                          
                                          $
                                          192,747
                                          
                                          
                                          $
                                          213,172
                                          
                                          
                                          $
                                          650,899
                                          
                                          
                                          $
                                          2,620,908
 
 See
accompanying notes to the financial statements.
 
 4
  HENAN
SMART FOOD COMPANY LIMITED
 STATEMENTS
OF CASH FLOWS
 
 For
      the years ended December 31,2008
                                
                                
                                2007
                                
                                
                                2006USD
                                
                                
                                USD
                                
                                
                                USDCash
      flows from operating activities:Net
      income
                                
                                $
                                22,730,257
                                
                                
                                $
                                11,963,221
                                
                                
                                $
                                9,453,421Adjustments to reconcile net
      income to net cash
      provided by operating activities:Depreciation
      of property, plant and equipment
                                
                                
                                1,632,760
                                
                                
                                
                                1,246,430
                                
                                
                                
                                1,017,002Amortization
      of land use right
                                
                                
                                17,815
                                
                                
                                
                                -
                                
                                
                                
                                -Loss
      on disposal of fixed asset
                                
                                
                                173,499
                                
                                
                                
                                183,465
                                
                                
                                
                                -Changes
      in:Accounts
      receivable
                                
                                
                                -
                                
                                
                                
                                5,588
                                
                                
                                
                                212,612Inventories
                                
                                
                                744,774
                                
                                
                                
                                (6,390,289
                                )
                                
                                
                                (2,597,206
                                )Prepayments
                                
                                
                                (81,583
                                )
                                
                                
                                (552,259
                                )
                                
                                
                                564,789Other
      receivables
                                
                                
                                25,338
                                
                                
                                
                                (18,545
                                )
                                
                                
                                (35,134
                                )Accounts
      payable
                                
                                
                                (566,381
                                )
                                
                                
                                1,603,471
                                
                                
                                
                                (822,843
                                )Notes
      payable
                                
                                
                                (358,628
                                )
                                
                                
                                (2,367,178
                                )
                                
                                
                                2,435,554Tax
      payable
                                
                                
                                1,701,573
                                
                                
                                
                                1,355,385
                                
                                
                                
                                (1,130,410
                                )Receipts
      in advance
                                
                                
                                361,074
                                
                                
                                
                                (17,143
                                )
                                
                                
                                (809,195
                                )Amount
      due from related parties
                                
                                
                                (952,878
                                )
                                
                                
                                1,722,892
                                
                                
                                
                                (1,996,978
                                )Accrued
      liabilities and other payables
                                
                                
                                158,843
                                
                                
                                
                                (17,010
                                )
                                
                                
                                3,721,227Net
      cash provided by operating activities
                                
                                
                                25,586,463
                                
                                
                                
                                8,718,028
                                
                                
                                
                                10,012,839Cash
      flows from investing activities:Capital
      expenditures on addition of property, plant and equipment
                                
                                
                                (1,364,729
                                )
                                
                                
                                (2,416,345
                                )
                                
                                
                                (4,312,235
                                )Capital
      expenditures on addition of land use right
                                
                                
                                (1,810,949
                                )
                                
                                
                                -
                                
                                
                                
                                -Sales
      proceeds of property, plant and equipment
                                
                                
                                30,813
                                
                                
                                
                                17,098
                                
                                
                                
                                5,734Prepaid
      purchases of plant and equipment
                                
                                
                                (154,174
                                )
                                
                                
                                (256,103
                                )
                                
                                
                                (152,022
                                )Change
      in restricted cash
                                
                                
                                434,517
                                
                                
                                
                                2,470,812
                                
                                
                                
                                (2,805,525
                                )Net
      cash used in investing activities
                                
                                
                                (2,864,522
                                )
                                
                                
                                (184,538
                                )
                                
                                
                                (7,264,048
                                )
 
 See
accompanying notes to the financial statements.
 
 5
 HENAN
SMART FOOD COMPANY LIMITED
 STATEMENTS
OF CASH FLOWS (...../Cont'd)
 
 For
      the years ended December 31,2008
                            
                            
                            2007
                            
                            
                            2006USD
                            
                            
                            USD
                            
                            
                            USDCash
      flows from financing activities:Amount
      due from related parties
                            
                            
                            (806,156
                            )
                            
                            
                            422,855
                            
                            
                            
                            (88,291
                            )Amount
      due to related party
                            
                            
                            -
                            
                            
                            
                            (1,958,496
                            )
                            
                            
                            66,580Dividend
      paid
                            
                            
                            (11,806,800
                            )
                            
                            
                            (9,413,713
                            )
                            
                            
                            (7,434,760
                            )Repayment
      of short term loans
                            
                            
                            (10,949,066
                            )
                            
                            
                            (8,499,438
                            )
                            
                            
                            (8,457,093
                            )Short
      term loans raised
                            
                            
                            13,001,099
                            
                            
                            
                            10,240,452
                            
                            
                            
                            11,660,537Long
      term loans raised
                            
                            
                            39,130
                            
                            
                            
                            565,487
                            
                            
                            
                            -Net
      cash provided by financing activities
                            
                            
                            (10,521,793
                            )
                            
                            
                            (8,642,853
                            )
                            
                            
                            (4,253,027
                            )Net
      increase/(decrease) in cash
                            
                            
                            12,200,148
                            
                            
                            
                            (109,363
                            )
                            
                            
                            (1,504,236
                            )Effect
      on change of exchange rates
                            
                            
                            (230,646
                            )
                            
                            
                            198,248
                            
                            
                            
                            131,374Cash
      as of January 1
                            
                            
                            5,796,288
                            
                            
                            
                            5,707,403
                            
                            
                            
                            7,080,265Cash
      as of December 31
                            
                            $
                            17,765,790
                            
                            
                            $
                            5,796,288
                            
                            
                            $
                            5,707,403Supplemental
      disclosures of cash flow information:Cash
      paid during the year:Interest
      paid
                            
                            $
                            834,958
                            
                            
                            $
                            559,780
                            
                            
                            $
                            419,655Income
      tax paid
                            
                            $
                            6,105,739
                            
                            
                            $
                            3,950,316
                            
                            
                            $
                            2,838,862
 
 See
accompanying notes to the financial statements.
 
 6
  HENAN
SMART FOOD COMPANY LIMITED
 NOTES
TO THE FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006
 
 1.
              DESCRIPTION
      OF BUSINESS AND ORGANIZATION
 
 Henan
Smart Food Company Limited (the "Company") is a China-based company that
processes and sells instant noodles. The Company conducts business directly with
its customers in the People's Republic of China (PRC).
 
 The
Company was incorporated on October 17, 1995 with total registered capital
Renminbi 3,440,677 and with total invested capital Renminbi 5,000,000. The
difference of Renminbi 1,559,323 is reserve. Beijing Instant Noodle Food Factory
(Jiaozuo) Limited (北京方便食品廠焦作分廠) and
Jin Weiping (金偉萍) held 70% and
30% interest of the Company, respectively.
 
 On July
1, 2008, Beijing Instant Noodle Food Factory (Jiaozuo) Limited transferred its
ownership to Jiaozuo Huafeng Food Co., Ltd (焦作市滑封食品有限公司). Wang
Youli is the legal person of those companies. Other ownership remains
unchanged.
  2.
              BASIS
      OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES
 
 (a)
              Basis
      of presentation
 
 The
Company's financial statements have been prepared accordance with generally
accepted accounting principles in the United States of America (the "U.S.
GAAP").
  (b)
              Use
      of estimates
 
 The
preparation of the financial statements in accordance with U.S GAAP requires
management of the Company to make a number of estimates and assumptions relating
to the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the years. Significant
items subject to such estimates and assumptions include the recoverability of
the carrying amount and the estimated useful lives of long-lived assets;
valuation allowances for receivables, realizable values for inventories. Actual
results could differ from those estimates.
 
 (c)
              Foreign
      currency translation
 
 Assets
and liabilities of foreign operations are translated at the rate of exchange in
effect on the balance sheet date; income and expenses are translated at the
average rate of exchange prevailing during the year. For 2008, 2007 and 2006,
the year-end rates of Renminbi to one US dollar are 6.8225, 7.2946 and 7.8041
respectively; average rates are 6.9351, 7.5973 and 7.9579 respectively. The
related translation adjustments are reflected in Accumulated other comprehensive
income/(loss) in the owners' equity section of the balance sheet. As of December
31, 2008, 2007 and 2006, the accumulated foreign currency translation gain was
$650,899, $667,917 and $244,979 respectively. Foreign currency gains and losses
resulting from transactions are included in earnings.
  (d)
              Cash
 
 Cash
represents cash in bank and cash on hand.
 
 The
Company considers all highly liquid investments with original maturities of
three months or less to be cash. The Company maintains bank accounts in the
PRC.
  7
  (e)
              Accounts
      receivable
 
 Accounts
receivable are recorded at the invoiced amount net of trade discounts. The
Company has historically been able to collect all of its receivable balances,
and accordingly, no allowance has been provided for doubtful
accounts.
 
 Outstanding
account balances are reviewed individually for collectibility. Account balances
are charged off against the allowance after all means of collection have been
exhausted and the potential for recovery is considered remote. The Company does
not have any off-balance-sheet credit exposure to its customers.
 
 Starting
from 2007, the Company does not grant credit to its customers.
 
 (f)
              Inventories
 
 Inventories
are stated at the lower of cost or market and consist primarily of wheat, flour,
palm oil and seasonings. Cost is determined using the standard cost method. Work
in process and finished goods are comprised of direct materials, direct labor
and an appropriate proportion of overheads.
 
 (g)
              Property,
      plant and equipment
 
 Property,
plant and equipment are recorded at cost less accumulated depreciation.
Expenditures for major additions and betterments are capitalized. Maintenance
and repairs are charged to general and administrative expenses as incurred.
Depreciation of property, plant and equipment is computed by the straight-line
method over the assets estimated useful lives ranging from five to twenty years.
Building improvements, if any, are amortized on a straight-line basis over the
estimated useful life.
  Upon sale
or retirement of property, plant and equipment, the related cost and accumulated
depreciation are removed from the accounts and any gain or loss is reflected in
operations.
  The
estimated useful lives of the assets are as follows:
  YearsBuildings
                
                20Machinery
      and equipment
                
                5 - 10Vehicles
                
                5Furniture
      fixtures and office equipment
                
                5
 
 Expenditures
for repairs and maintenance, which do not extend the useful life of the assets,
are expensed as incurred.
 
 (h)
              Land
      use right
 
 Land use
right is recorded at cost less accumulated amortization. Under Statement of
Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible
Assets", land use right classified as definite lived intangible assets
and are amortized over its useful life. According to the laws of the PRC, the
government owns all of the land in the PRC. Companies or individuals are
authorized to possess and use the land only through land use rights granted by
the PRC government. Land use right is amortized using the straight-line method
over the lease term of 50 years.
  (i)
              Impairment
      of long-lived assets
 
 Long-lived
assets, including property, plant and equipment 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
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 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 asset.
 
 8
  Assets to
be disposed of are separately presented in the balance sheet and reported at the
lower of the carrying amount or fair value less costs to sell, and are no longer
depreciated. The assets and liabilities of a disposed group classified as held
for sale are presented separately in the appropriate asset and liability
sections of the balance sheet.
 
 No
impairment was recognized in 2008, 2007 and 2006.
 
 (j)
              Revenue
      recognition
 
 The
Company generates revenue primarily from sales of instant noodles.
 
 Revenue
is recognized when products have been delivered to the buyer and title and risk
of ownership has passed to the buyer, the sales price is fixed and determinable
and collectibility is reasonably assured. Discount allowances related to sales
are recognized and reflected as reduction of revenues on the financial
statement.
 
 In the
PRC, value added tax (“VAT”) of 17% on the invoice amount is collected in
respect of the sales of goods on behalf of tax authorities. The VAT collected is
not revenue of the Company; instead, the amount is recorded as a liability on
the balance sheet until such VAT is paid to the authorities.
 
 (k)
              Income
      taxes
 
 The
Company accounts for income taxes under FASB Statement No. 109, "Accounting for Income
Taxes". Deferred income tax assets and liabilities are determined based
upon differences between the financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
effective when the differences are expected to reverse.
  Deferred
tax assets are reduced by a valuation allowance to the extent management
concludes it is more likely than not that the assets will not be realized.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in the statements
of income in the year that includes the enactment date.
 
 Management
has elected defer the application of FASB Interpretation No. 48, "Accounting for Uncertainty in
Income Taxes " ("FIN 48"), in accordance with FASB Staff Position No.
48-3, "Effective Date of FASB
Interpretation No. 48 for Certain Nonpublic Companies". The Company will
continue to evaluate uncertain tax positions in accordance with FASB Statement
No. 5 Accounting for Contingencies. Under that Statement, if it is probable that
an uncertain tax position will result in a material liability and the amount of
the liability can be estimated, then the estimated liability is accrued. The
Company does not expect FIN 48 to have a material impact on our financial
statements.
 
 (l)
              Comprehensive
      income
 
 The
Company has adopted SFAS No. 130, "Reporting Comprehensive
Income". This statement establishes rules for the reporting of
comprehensive income/(loss) and its components. Comprehensive income/(loss)
consists of net income/(loss) and foreign currency translation
adjustments.
 
 Comprehensive
income consist of the following:
 
 2008
                    
                    
                    2007
                    
                    
                    2006USD
                    
                    
                    USD
                    
                    
                    USDNet
      income
                    
                    $
                    22,730,257
                    
                    
                    $
                    11,963,221
                    
                    
                    $
                    9,453,421Other
      comprehensive income-
      Foreign currency translation adjustments
                    
                    
                    (17,018
                    )
                    
                    
                    422,938
                    
                    
                    
                    243,464$
                    22,713,239
                    
                    
                    $
                    12,386,159
                    
                    
                    $
                    9,696,885
 
 9
 
 (m)
              Commitments
      and contingencies
 
 In the
normal course of business, the Company is subject to contingencies, including
legal proceedings and claims arising out of the normal course of business that
relate to a wide range of matters, including among others, product liability.
The Company records accruals for such contingencies based upon the assessment of
the probability of occurrence and, where determinable, an estimate of the
liability. Management may consider many factors in making these assessments
including past history, scientific evidence and the specifics of each matter. As
management has not become aware of any product liability claims arising from any
incident over the last three years, the Company has not recognized a liability
for product liability claims.
 
 (n)
              Segment
      information
 
 Statement
of Financial Accounting Standards No. 131, "Disclosure About Segments of an
Enterprise and Related Information"establishes standards for reporting
information on operating segments in interim and annual financial statements.
The Company operates in one segment, which is the business of producing and
selling of instant noodles. The chief operating decision maker reviews our
operating results on an aggregate basis and manage our operations as a single
operating segment.
 
 (o)
              Advertising
      expenses
 
 Advertising
costs are expensed when incurred. Advertising costs amounted to approximately
$2.8 million, $1.6 million and $1.6 million, for the fiscal years 2008, 2007 and
2006, respectively.
  The
advertising costs represent the use of broadcasts and billboards to stimulate
customers' purchase of goods.
 
 (p)
              Fair
      Value Accounting
 
 In
September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No.
157, “Fair Value
Measurement”. This Statement defines fair value, establishes a framework
for measuring fair value in GAAP and expands disclosures about fair value
measurements. This Statement does not require any new fair value measurement,
rather, it applies under other accounting pronouncements that require or permit
fair value measurements. The provisions of this Statement are to be applied
prospertively as of the beginning of the fiscal year in which this Statement is
initially applied, with any transition adjustment to the opening balance of
retained earnings. The provisions of SFAS 157, as issued, are effective for
fiscal years beginning after November 15, 2007. The Company expects the adoption
of SFAS 157 to have no material impact on the financial statements.
 
 In
February 2008, the FASB issued FASB Staff Position No. FAS 157-2 ("FSP 157-2"),
Effective Date of FASB Statement No. 157, which amended SFAS 157 to defer the
effective date of SFAS 157 for non-financial assets and non-financial
liabilities, except for items that are recognized or disclosed at fair value in
the financial statements on a recurring basis, at least annually, including
goodwill and trademarks. In accordance with FSP 157-2, the Company will delay
application of SFAS 157 for non-financial assets and non-financial liabilities,
until January 1, 2009.
  10
  (q)
              Recently
      issued accounting standards
 
 In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial
Assets and Liabilities - including an amendment of FASB Statement No. 115 (SFAS
159)”. This Statement creates a fair value option under which an entity
may irrevocably elect fair value as the initial and subsequent measurement
attribute for certain assets and liabilities, on an instrument-by-instrument
basis. If the fair value option is elected for an instrument, all subsequent
changes in fair value for that instrument shall be reported in earnings. The
Statement is effective for fiscal years beginning after November 15, 2007. The
Company does not anticipate that the adoption of SFAS No. 159 will have a
material impact on its financial condition or results of
operations.
 
 In
December 2007, SAB 109 was issued which supersedes SAB 105, "Application of Accounting
Principles to Loan Commitments" ("SAB 105"), and provides that the
expected net future cash flows related to the associated servicing of the loan
should be included in the measurement of all written loan commitments that are
accounted for at fair value through earnings. SAB 105 also indicated that
internally-developed intangible assets should not be recorded as part of the
fair value of a derivative loan commitment. The Company does not believe that
the adoption of this statement will have a material effect on the Company's
financial condition and results of operations.
 
 In April
2008, the FASB issued FASB Staff Position No. 142-3 ("FSP 142-3") "Determination of the Useful Life of
Intangible Assets". FSP 142-3 amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under FAS 142, "Goodwill and Other Intangible
Assets," to include an entity's historical experience in renewing or
extending similar arrangements, adjusted for entity-specific factors, even when
there is likely to be "substantial cost or material modifications". FSP 142-3
states that in the absence of historical experience an entity should use
assumptions that market participants would make regarding renewals or
extensions, adjusted for entity-specific factors. The guidance for determining
the useful life of intangible assets included in this FSP will be applied
prospectively to intangible assets acquired after the effective date of January
1, 2009. The Company does not expect FSP 142-3 to have a material impact on our
financial statements.
  (q)
              Recently
      issued accounting standards
(.../Cont'd)
 
 In May
2008, the FASB issued Financial Accounting Standard No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (FAS 162). Under FAS 162, the GAAP hierarchy will
now reside in the accounting literature established by the FASB. FAS 162
identifies the sources of accounting principles and the framework for selecting
the principles used in the preparation of financial statements in conformity
with GAAP. FAS 162 is effective 60 days following the SEC’s approval of the
Public Company Accounting Oversight Board Auditing amendments to AU Section 411,
“The Meaning of Present Fairly
in Conformity with Generally Accepted Accounting Principles”. FAS 162
will not impact our financial statements.
 
 Management
does not believe that any recently issued, but not yet effective accounting
pronouncements, if adopted, would have a material effect on the accompanying
financial statements.
 
 3.
              CASH
 
 Cash
represents cash in bank and cash on hand.
 
 2008
                    
                    
                    2007
                    
                    
                    2006USD
                    
                    
                    USD
                    
                    
                    USDBank
      balances and cash
                    
                    $
                    19,524,676
                    
                    
                    $
                    7,989,691
                    
                    
                    $
                    10,371,618Less:
      Restricted cash
                    
                    
                    (1,758,886
                    )
                    
                    
                    (2,193,403
                    )
                    
                    
                    (4,664,215
                    )$
                    17,765,790
                    
                    
                    $
                    5,796,288
                    
                    
                    $
                    5,707,403
 
 Renminbi
is not a freely convertible currency and the remittance of funds out of the PRC
is subject to the exchange restrictions imposed by the PRC
government.
 
 As at
December 31, 2008, 2007, and 2006, the Company's cash of approximately
$1,758,886, $2,193,403 and $4,664,215 were restricted respectively and deposited
in certain banks as guarantee deposits for the benefit of issuance of notes
payable granted by the banks.
  11
  The
restricted cash guaranteed $2,931,477, $3,290,105 and $5,657,283 of notes
payable for the years ended 2008, 2007 and 2006, respectively. It can only be
released at the expiration date of corresponding notes payable.
  4.
              ACCOUNTS
      RECEIVABLE
 
 During
2006, the Company performed ongoing credit evaluations of its customers'
financial conditions. The Company generally encourages its customers to purchase
its products and settle the outstanding balance within the credit terms. The
Company has not accepted credit sales since January 1, 2007.
 
 5.
              INVENTORIES
 
 Inventories
as of December 31, consist of the following:
 
 2008
                    
                    
                    2007
                    
                    
                    2006USD
                    
                    
                    USD
                    
                    
                    USDRaw
      materials
                    
                    $
                    14,177,648
                    
                    
                    $
                    15,503,883
                    
                    
                    $
                    10,164,796Work-in-process
                    
                    
                    1,632,515
                    
                    
                    
                    1,292,897
                    
                    
                    
                    873,168Finished
      goods
                    
                    
                    1,234,189
                    
                    
                    
                    992,346
                    
                    
                    
                    360,873$
                    17,044,352
                    
                    
                    $
                    17,789,126
                    
                    
                    $
                    11,398,837
 
 6.
              PREPAYMENTS
 
 Prepayments
as of December 31, consist of the following:
 
 2008
                    
                    
                    2007
                    
                    
                    2006USD
                    
                    
                    USD
                    
                    
                    USDDeposit
      on equipment
                    
                    $
                    601,893
                    
                    
                    $
                    418,743
                    
                    
                    $
                    152,022Prepaid
      advertising
                    
                    
                    1,080,137
                    
                    
                    
                    891,437
                    
                    
                    
                    391,550Prepaid
      rental expenses
                    
                    
                    25,934
                    
                    
                    
                    107,934
                    
                    
                    
                    190,873Prepaid
      repairs and maintenance
                    
                    
                    73,797
                    
                    
                    
                    2,296
                    
                    
                    
                    8,760Prepaid
      insurance
                    
                    
                    22,726
                    
                    
                    
                    24,926
                    
                    
                    
                    47,084Advances
      to suppliers
                    
                    
                    -
                    
                    
                    
                    111,898
                    
                    
                    
                    -Others
                    
                    
                    95,932
                    
                    
                    
                    107,428
                    
                    
                    
                    66,011$
                    1,900,419
                    
                    
                    $
                    1,664,662
                    
                    
                    $
                    856,300
 
 Prepayments
represent amounts prepaid for advances to suppliers, purchases of equipment and
other expenses.
 
 7.
              OTHER
      RECEIVABLES
 
 Other
receivables as of December 31, consist of the following:
 
 2008
                    
                    
                    2007
                    
                    
                    2006USD
                    
                    
                    USD
                    
                    
                    USDUtilities
      deposit
                    
                    $
                    19,392
                    
                    
                    $
                    18,137
                    
                    
                    $
                    16,953Others
                    
                    
                    52,019
                    
                    
                    
                    78,612
                    
                    
                    
                    61,251$
                    71,411
                    
                    
                    $
                    96,749
                    
                    
                    $
                    78,204
  12
  8.
              PROPERTY,
      PLANT AND EQUIPMENT
 
 Property,
plant and equipment as of December 31, consists of:
 
 2008
                    
                    
                    2007
                    
                    
                    2006USD
                    
                    
                    USD
                    
                    
                    USDBuildings
                    
                    $
                    7,816,297
                    
                    
                    $
                    7,139,586
                    
                    
                    $
                    5,576,316Plant
      machinery and equipment
                    
                    
                    13,549,569
                    
                    
                    
                    12,103,546
                    
                    
                    
                    10,773,183Vehicles
                    
                    
                    166,379
                    
                    
                    
                    246,632
                    
                    
                    
                    287,308Office
      equipment
                    
                    
                    181,056
                    
                    
                    
                    164,204
                    
                    
                    
                    134,16621,713,301
                    
                    
                    
                    19,653,968
                    
                    
                    
                    16,770,973Accumulated
      depreciation
                    
                    
                    (7,493,033
                    )
                    
                    
                    (5,883,893
                    )
                    
                    
                    (4,749,836
                    )$
                    14,220,268
                    
                    
                    $
                    13,770,075
                    
                    
                    $
                    12,021,137
 
 Depreciation
charged to earnings for the years ended 2008, 2007 and 2006 was $1,632,760,
$1,246,430 and $1,017,002 respectively.
 
 As of
December 31, 2008, the property, plant and equipment of the Company with net
carrying amount of $4,268,290 was joint and several secured to related party for
a bank loan that amounted to $4,514,474.
 
 The
related party, Jiaozuo Huanghe Group Corporation was under common control of
Wong Youli, the legal representative of the Company and director of Jiaozuo
Huanghe Group Corporation.
 
 9.
              LAND
      USE RIGHT
 
 2008
                    
                    
                    2007
                    
                    
                    2006USD
                    
                    
                    USD
                    
                    
                    USDLand
      use right
                    
                    $
                    1,792,840
                    
                    
                    $
                    -
                    
                    
                    $
                    -
 
 Land use
right represents prepaid lease payments to the Local Government for land use
right held for a period of 50 years from August 14, 2008 to August 1, 2058 in
Jiaozuo, People's Republic of China.
  Land use
right is amortized using the straight-line method over the lease term of 50
years. The amortization expense for the year 2008 was $17,815.
  13
  10.
              NOTES
      PAYABLE
 
 Notes
payable as of December 31, consist of:
 
 2008
                    
                    
                    2007
                    
                    
                    2006USD
                    
                    
                    USD
                    
                    
                    USDClassified
      by financial institutions: -China
      Construction Bank
                    
                    $
                    -
                    
                    
                    $
                    548,350
                    
                    
                    $
                    1,537,653China
      Merchants Bank
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,556,874Jiaozuo
      City Commercial Bank
                    
                    
                    2,931,477
                    
                    
                    
                    2,741,755
                    
                    
                    
                    2,562,756$
                    2,931,477
                    
                    
                    $
                    3,290,105
                    
                    
                    $
                    5,657,283Additional
      information: -Maximum
      balance outstanding during the year
                    
                    $
                    3,517,772
                    
                    
                    $
                    6,052,422
                    
                    
                    $
                    6,624,723Finance
      charge
                    
                    $
                    2,884
                    
                    
                    $
                    3,031
                    
                    
                    $
                    5,348Interest
      paid
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -Finance
      charge per contract
                    
                    
                    0.05
                    %
                    
                    
                    0.05
                    %
                    
                    
                    0.05
                    %
 
 All of
the above notes payable are secured by either 50% , 60% or 100% corresponding
restricted cash and guarantees by related parties. As of December 31, 2008,
2007, and 2006, the Company's cash of approximately $1,758,886, $2,193,403 and
$4,664,215 was restricted as such, respectively. All of the notes payable are
current and have a maturity of no more than six months. There are no financial
covenant requirements and no interest expense on the notes payable.
 
 11.
              ACCRUED
      LIABILITIES AND OTHER PAYABLES
 
 Accrued
liabilities and other payables as of December 31, consist of the
following:
 
 2008
                    
                    
                    2007
                    
                    
                    2006USD
                    
                    
                    USD
                    
                    
                    USDAccrued
      wages
                    
                    $
                    1,699,175
                    
                    
                    $
                    1,853,295
                    
                    
                    $
                    1,856,531Accrued
      staff benefits
                    
                    
                    765,415
                    
                    
                    
                    1,068,876
                    
                    
                    
                    695,799Deposit
      received
                    
                    
                    1,147,953
                    
                    
                    
                    1,004,053
                    
                    
                    
                    915,885Electricity
      payable
                    
                    
                    419,760
                    
                    
                    
                    390,625
                    
                    
                    
                    437,262Advertising
      payable
                    
                    
                    304,214
                    
                    
                    
                    107,477
                    
                    
                    
                    48,518Other
      payables
                    
                    
                    366,419
                    
                    
                    
                    473,112
                    
                    
                    
                    493,488Other
      tax payables
                    
                    
                    1,657,022
                    
                    
                    
                    1,303,677
                    
                    
                    
                    1,770,642$
                    6,359,958
                    
                    
                    $
                    6,201,115
                    
                    
                    $
                    6,218,125
 
 Deposit
mainly represents the deposit in security for transportation of
goods.
 
 Other
payables represent transportation fee, purchases of equipment, long term loan
interest payable and government levies that should be paid on behalf of workers
and staff.
 
 Other tax
payables represent payables other than income tax which consist of value added
tax and city maintenance and construction tax.
 
 12.
              SHORT
      TERM LOANS
 
 In order
to obtain working capital for daily operations, the Company entered into the
following short term loan agreements as of December 31,:
 
 2008
                    
                    
                    2007
                    
                    
                    2006USD
                    
                    
                    USD
                    
                    
                    USDClassified
      by financial institutions: -Industrial
      and Commercial Bank of China
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    166,579Agricultural
      Development Bank of China
                    
                    
                    11,579,333
                    
                    
                    
                    8,088,175
                    
                    
                    
                    5,766,200China
      Construction Bank
                    
                    
                    -
                    
                    
                    
                    1,370,877
                    
                    
                    
                    1,281,378Xiltao
      Credit Cooperative
                    
                    
                    835,471
                    
                    
                    
                    781,400
                    
                    
                    
                    730,385Gezhuang
      Credit Cooperative
                    
                    
                    586,295
                    
                    
                    
                    -
                    
                    
                    
                    -$
                    13,001,099
                    
                    
                    $
                    10,240,452
                    
                    
                    $
                    7,944,542Additional
      information: -Maximum
      balance outstanding during the year
                    
                    $
                    13,001,099
                    
                    
                    $
                    10,418,666
                    
                    
                    $
                    8,521,162Interest
      paid during the year
                    
                    $
                    820,836
                    
                    
                    $
                    550,040
                    
                    
                    $
                    419,655Range
      of interest rate (basis point)
                    
                    55.8
      - 119.5pt
                    
                    
                    58.5
      - 106.2pt
                    
                    
                    55.8
      - 109.7ptWeighted
      average interest rate
                    
                    
                    6.39
                    %
                    
                    
                    6.16
                    %
                    
                    
                    5.91
                    %
 
 14
 
 All of
the above short terms loans are fixed term loans with a period of 12 months or
less. These short terms loans are joint and several guaranteed by related
parties including the Jiaozuo Huanghe Group Corporation and Henan Huafeng Paper
Co. Ltd. which the company have crossed guaranteed to them. Both related parties
are under the common control of Wong Youli, the legal representative of the
Company and director of Jiaozuo Huanghe Group Corporation.
 
 13.
              LONG
      TERM LOAN
 
 In order
to obtain working capital for daily operations, the Company entered into the
following long term loan agreement:
 
 2008
                    
                    
                    2007
                    
                    
                    2006USD
                    
                    
                    USD
                    
                    
                    USDWu
      Zhi Xian Financial Bureau
                    
                    $
                    604,617
                    
                    
                    $
                    565,487
                    
                    
                    $
                    -Additional
      information: -Maximum
      balance outstanding during the year
                    
                    $
                    604,617
                    
                    
                    $
                    565,487
                    
                    
                    $
                    -Interest
      paid during the year
                    
                    
                    14,278
                    
                    
                    
                    10,793
                    
                    
                    
                    -Fixed
      interest rate
                    
                    
                    2.40
                    %
                    
                    
                    2.40
                    %
                    
                    
                    -
 
 The long
term loan was a fixed term loan which had been drawn down since February 2007.
The principal is to be repaid on October 30, 2010 and October 30, 2011 in equal
amounts. This long term loan is unsecured.
 
 14.
              OWNERS'
      EQUITY AND RESERVE
 
 Registered
capital
 
 The
Company was incorporated on October 17, 1995 with total registered capital
$425,300 and with total invested capital $618,047 contributed by two
shareholders. The difference $192,747 is reserve.
 
 On July
1, 2008, one of the shareholders, Beijing Instant Noodle Food Factory (Jiaozuo)
Limited transferred its ownership to Jiaozuo Huafeng Food Limited.
  15.
              STATUTORY
      SURPLUS RESERVES FUND
 
 The
Company is required to transfer 10% of its net profits after income tax, as
determined in accordance with the PRC accounting rules and regulations. The
appropriation is required until the statutory surplus reserve reaches 50% of the
registered capital.
  15
  16.
              OTHER
      INCOME
 
 Other
income for the years ended December 31, 2008, 2007 and 2006:
 
 2008
                    
                    
                    2007
                    
                    
                    2006USD
                    
                    
                    USD
                    
                    
                    USDSales
      on flour and wheat bran
                    
                    $
                    2,115,801
                    
                    
                    $
                    544,118
                    
                    
                    $
                    1,546,431Sales
      on scrap materials
                    
                    
                    565,851
                    
                    
                    
                    503,256
                    
                    
                    
                    262,835Subsidy
      income
                    
                    
                    291,849
                    
                    
                    
                    36,450
                    
                    
                    
                    130,034Waived
      of previous accruals
                    
                    
                    88,498
                    
                    
                    
                    -
                    
                    
                    
                    -Others
                    
                    
                    40,241
                    
                    
                    
                    66,330
                    
                    
                    
                    52,070$
                    3,102,240
                    
                    
                    $
                    1,150,154
                    
                    
                    $
                    1,991,370
 
 17.
              INCOME
      TAXES
 
 All of
the Company's income is generated in the PRC. Income tax expense for the years
ended December 31, 2008, 2007 and 2006:
 
 2008
                    
                    
                    2007
                    
                    
                    2006USD
                    
                    
                    USD
                    
                    
                    USDCurrent
      income tax expense
                    
                    $
                    7,648,438
                    
                    
                    $
                    5,214,425
                    
                    
                    $
                    1,673,915
 
 The
Company's income tax provision in respect of operations in PRC is calculated at
the applicable tax rates on the estimated assessable profits for the year based
on existing legislation, interpretations and practices in respect
thereof.
  Under
general conditions, the central government levies income tax at the rate of 30%.
The local government levies income tax at the rate of 3%. The Company is a
foreign invested enterprise which can take advantage of the income tax
incentives.
 
 In 2006,
the Company was entitled to a 50% reduction in state income tax and free for
local income tax. In 2007, the Company was free for local income
tax.
 
 In 2008,
the general income tax reduced from 33% to 25%. The Company was not entitled to
any tax incentives.
 
 A
reconciliation of the expected income tax expense to the actual income tax
expense for the years ended December, 2008, 2007 and 2006 are as
follows:
 
 2008
                      
                      
                      2007
                      
                      
                      2006USD
                      
                      
                      USD
                      
                      
                      USDIncome
      before tax
                      
                      $
                      30,378,695
                      
                      
                      $
                      17,177,646
                      
                      
                      $
                      11,127,336Expected
      PRC income tax expense at statutory tax rate of (2008: 25%, 2007: 30%,
      2006: 15%)
                      
                      $
                      7,594,673
                      
                      
                      $
                      5,153,293
                      
                      
                      $
                      1,669,100Non-deductible
      expenses
                      
                      
                      53,765
                      
                      
                      
                      61,132
                      
                      
                      
                      4,815Actual
      income tax expense
                      
                      $
                      7,648,438
                      
                      
                      $
                      5,214,425
                      
                      
                      $
                      1,673,915
  16
  The PRC
tax system is subject to substantial uncertainties and has been subject to
recently enacted changes, the interpretation and enforcement of which are also
uncertain. There can be no assurance that changes in PRC tax laws or their
interpretation or their application will not subject the Company to substantial
PRC taxes in the future.
 
 No
deferred taxation has been provided as the effect of all temporary differences
is immaterial.
 
 18.
              AMOUNTS
      DUE FROM / TO RELATED PARTIES
 
 Amount
due from related parties as of December 31, is as follows:
 
 2008
                      
                      
                      2007
                      
                      
                      2006USD
                      
                      
                      USD
                      
                      
                      USDChangchun
      Smart Food Co., Ltd
                      
                      $
                      3,008,366
                      
                      
                      $
                      2,481,118
                      
                      
                      $
                      4,054,884Chenzhou
      Smart Food Co., Ltd.
                      
                      
                      1,437,813
                      
                      
                      
                      1,012,183
                      
                      
                      
                      1,161,309Henan
      Huafeng Paper Co. Ltd.
                      
                      
                      806,156
                      
                      
                      
                      -
                      
                      
                      
                      38,441Jiaozuo
      Electronic Cable Company
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      384,414$
                      5,252,335
                      
                      
                      $
                      3,493,301
                      
                      
                      $
                      5,639,048
 
 Changchun
Smart Food Co., Ltd and Chenzhou Smart Food Co., Ltd. are related parties
through common ownership. All balances refer to purchases or sale of inventories
at costs, expenses paid on behalf of and cash advanced to related parties. The
advances are unsecured, non interest-bearing and have no repayment
term.
  Henan
Huafeng Paper Co. Ltd and Jiaozuo Electronic Cable Company are related parties
through common control under Jiaozuo Huanghe Group Corporation. The legal
representative, Wang Youli, of the Company is director of Jiaozuo Huanghe Group
Corporation. The balances refer to cash advanced to those related parties. These
amounts are unsecured, interest free and with no fixed repayment terms. The
amount of $806,156 was subsequently paid in January 2009.
 
 Amount
due to related party as of December 31, is as follows:
 
 2008
                        
                        
                        2007
                        
                        
                        2006USD
                        
                        
                        USD
                        
                        
                        USDWang
      Youli
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        1,958,496
 
 Wang
Youli is the legal representive of the Company. The balance is cash advanced
from Wong Youli and is unsecured, non interest-bearing and has no repayment
term. The balance was repaid on July 7, 2007.
 
 19.
              OPERATING
      LEASE COMMITMENTS
 
 As of
December 31, 2008, the total future minimum lease payments under non-cancellable
operating leases are payable as follows:
  17
  Years
      ending
                                
                                Factory
                                
                                
                                Warehouse
                                
                                
                                Total2009
                                
                                $
                                123,658
                                
                                
                                $
                                36,644
                                
                                
                                $
                                160,3022010
                                
                                $
                                123,658
                                
                                
                                
                                -
                                
                                
                                
                                123,6582011
                                
                                $
                                123,658
                                
                                
                                
                                -
                                
                                
                                
                                123,6582012
                                
                                $
                                123,658
                                
                                
                                
                                -
                                
                                
                                
                                123,6582013
                                
                                $
                                123,658
                                
                                
                                
                                -
                                
                                
                                
                                123,658Thereafter
                                
                                $
                                577,073
                                
                                
                                
                                -
                                
                                
                                
                                577,073$
                                1,195,363
                                
                                
                                $
                                36,644
                                
                                
                                $
                                1,232,007
 Rental
expense for obligations under operating leases was $344,108 (RMB2,386,420),
$505,634 (RMB3,841,456) and $471,230 (RMB3,750,000) for the years ended December
31, 2008, 2007 and 2006, respectively.
 
 20.
              CAPITAL
      COMMITMENTS
 
 In
addition to the operating lease commitments detailed in note 19 above, the
Company had the following capital commitments at the balance sheet date which
will be due within the next financial year.
 
 USDPurchases
      of plant and equipment
                          
                          $
                          1,196,450
 
 21.
              FINANCIAL
      GUARANTEES
 
 USDFinancial
      guarantees as of December 31, 2008 are as follows:Guarantees
      given to the bank to secure the bank loan granted to related
      parties
                      
                      $
                      5,342,616Guarantees
      given to the bank to secure the bank loan granted to an unrelated third
      party
                      
                      
                      2,931,477$
                      8,274,093
 
 The
Company has provided joint and several guarantees to the related parties and an
unrelated third party for bank loans, and there was no outstanding contingent
payment obligation by the Company in respect to the indebtedness of the related
parties and an unrelated third party - Henan Yinlida Color Printing Company
Limited, supplier of packaging.
 
 The
related companies were under control of Jiaozuo Huanghe Group Corporation. Both
the Company and the related companies were under common control of Wang Youli,
the legal representative of the Company and director of Jiaozuo Huanghe Group
Corporation.
 
 18