UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
20-F




 ̈
              REGISTRATION
      STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT
      OF 1934




OR




x
              ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For the fiscal year ended December 31,
2008




OR




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




OR





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


Date of event requiring this shell
company report______________


For the transition period from
__________ to ___________


Commission file number 000-52679




SI MEI TE FOOD
LIMITED


(Exact
name of the Registrant as specified in its charter)




N/A


(Translation
of Registrant’s name into English)




Cayman
Islands


(Jurisdiction
of incorporation or organization)




c/o
HeNan Smart Food Company Limited


No.
8, Wuzhi Xi Huafeng Industrial Zone


He Nan Province; People’s
Republic of China


(Address
of principal executive offices)




Hu
Ye; Chief Financial Officer


c/o
HeNan Smart Food Company Limited


No.
8, Wuzhi Xi Huafeng Industrial Zone


He
Nan Province; People’s Republic of China


Tel:
+86 13911573595


huye_canada@yahoo.com.ca


(Name,
Telephone, E-mail and/or Facsimile number and Address of Company Contact
Person)




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




Title of Each Class
              
              Name of each exchange on which
      registeredN/A
              
              N/A




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





UNITS,
      EACH CONSISTING OF ONE ORDINARY SHARE, $0.0001 PAR VALUE,
    ANDTWO
      WARRANTSORDINARY
      SHARES, $.0001 PAR VALUEWARRANTS
      TO PURCHASE ONE ORDINARY SHARE, $.0001 PAR VALUEREPRESENTATIVE UNIT PURCHASE
      OPTION(Title
      of Class)




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




None


(Title of
Class)




Indicate
the number of outstanding shares of each of the Issuer’s classes of capital or
ordinary shares as of the close of the period covered by the annual report:
7,105,000 ordinary shares, par value $0.0001 per share, as of December 31,
2008.




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


 ̈
      Yes
            x
      No




If this
report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934.


 ̈
      Yes
            x
      No




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).


 ̈
      Yes
             ̈
      No







Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.


x
      Yes
             ̈
      No




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer.


 ̈
      Large Accelerated filer
             ̈
      Accelerated filer
            x
      Non-accelerated filer




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


x  US
      GAAP
             ̈    International
      Financial Reporting Standards as issued by the International Accounting
      Standards Board
             ̈  Other




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


 ̈
      Item 17
             ̈
      Item 18




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


x
      Yes
             ̈
      No








Table
of Contents





PagePART  I
                  
                  
                  3ITEM
      1.
                  IDENTITY
      OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
                  
                  3ITEM
      2.
                  OFFER
      STATISTICS AND EXPECTED TIMETABLE
                  
                  3ITEM
      3.
                  KEY
      INFORMATION
                  
                  3ITEM
      4.
                  INFORMATION
      ON OUR COMPANY
                  
                  14ITEM
      4A.
                  UNRESOLVED
      STAFF COMMENTS
                  
                  36ITEM
      5.
                  OPERATING
      AND FINANCIAL REVIEW AND PROSPECTS
                  
                  36ITEM
      6.
                  DIRECTORS,
      SENIOR MANAGEMENT AND EMPLOYEES
                  
                  48ITEM
      7.
                  MAJOR
      SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
                  
                  54ITEM
      8.
                  FINANCIAL
      INFORMATION
                  
                  59ITEM
      9.
                  THE
      OFFER AND LISTING
                  
                  60ITEM
      10.
                  ADDITIONAL
      INFORMATION
                  
                  61ITEM
      11.
                  QUANTITATIVE
      AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
                  
                  75ITEM
      12.
                  DESCRIPTION
      OF SECURITIES OTHER THAN EQUITY SECURITIES
                  
                  75PART  II
                  
                  
                  76ITEM
      13.
                  DEFAULTS,
      DIVIDEND ARREARAGES AND DELINQUENCIES
                  
                  76ITEM
      14.
                  MATERIAL
      MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
      PROCEEDS
                  
                  76ITEM
      15.
                  CONTROLS
      AND PROCEDURES
                  
                  77ITEM
      16.
                  [RESERVED]
                  
                  78ITEM
      16A.
                  AUDIT
      COMMITTEE FINANCIAL EXPERT
                  
                  78ITEM
      16B.
                  CODE
      OF ETHICS
                  
                  78ITEM
      16C.
                  PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
                  
                  78ITEM
      16D.
                  EXEMPTIONS
      FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
                  
                  79ITEM
      16E.
                  PURCHASES
      OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
    PURCHASERS
                  
                  79ITEM
      16F.
                  CHANGE
      IN REGISTRANT’S CERTIFYING ACCOUNTANT
                  
                  79ITEM
      16G.
                  CORPORATE
      GOVERNANCE
                  
                  79PART  III
                  
                  
                  80ITEM
      17.
                  FINANCIAL
      STATEMENTS
                  
                  80ITEM
      18.
                  FINANCIAL
      STATEMENTS
                  
                  80ITEM
      19.
                  EXHIBITS
                  
                  80


i




CERTAIN
INFORMATION




INTRODUCTION




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




·
            references to “Si Mei Te,” the
      “Company,” “we,” “us,” “our,” or “our company” refer to Si Mei Te
      Food Limited;




·
            references to “HeNan Smart
      Food” refer to HeNan Smart Food Company
  Limited;




·
            references to “PRC” or “China”
      refer to the People’s Republic of
China;




·
            references to “dollars” or “$”
      refer to the legal currency of the United
  States;




·
            references to “public
      shareholders” refer to the holders of shares purchased in Si Mei Te’s
      initial public offering; and




·
            references to “business
      combination” refer to Si Mei Te’s acquisition of HeNan Smart Food on June
      26th,
  2009.




FORWARD-LOOKING
STATEMENTS




This
Annual Report contains ‘‘forward-looking statements’’ that represent our
beliefs, projections and predictions about future events. All statements other
than statements of historical fact are ‘‘forward-looking statements’’, including
any projections of earnings, revenue or other financial items, any statements of
the plans, strategies and objectives of management for future operations, any
statements concerning proposed new projects or other developments, any
statements regarding future economic conditions or performance, any statements
of management’s beliefs, goals, strategies, intentions and objectives, and any
statements of assumptions underlying any of the foregoing. Words such as
‘‘may’’, ‘‘will’’, ‘‘should’’, ‘‘could’’, ‘‘would’’, ‘‘predicts’’,
‘‘potential’’, ‘‘continue’’, ‘‘expects’’, ‘‘anticipates’’, ‘‘future’’,
‘‘intends’’, ‘‘plans’’, ‘‘believes’’, ‘‘estimates’’ and similar expressions, as
well as statements in the future tense, identify forward-looking
statements.




These
statements are necessarily subjective and involve known and unknown risks,
uncertainties and other important factors that could cause our actual results,
performance or achievements, or industry results, to differ materially from any
future results, performance or achievements described in or implied by such
statements. Actual results may differ materially from expected results described
in our forward-looking statements, including with respect to correct measurement
and identification of factors affecting our business or the extent of their
likely impact, the accuracy and completeness of the publicly available
information with respect to the factors upon which our business strategy is
based or the success of our business.




Forward-looking
statements should not be read as a guarantee of future performance or results,
and will not necessarily be accurate indications of whether, or the times by
which, our performance or results may be achieved. Forward-looking statements
are based on information available at the time those statements are made and
management’s belief as of that time with respect to future events, and are
subject to risks and uncertainties that could cause actual performance or
results to differ materially from those expressed in or suggested by the
forward-looking statements. Important factors that could cause such differences
include, but are not limited to, those factors discussed under the headings
‘‘Risk Factors’’, ‘‘Operating and Financial Review and Prospects,’’
‘‘Information on our Company’ and elsewhere in this Annual Report.  This
Annual Report should be read in conjunction with our audited consolidated
financial statements and the accompanying notes thereto, which are included in
Item 18 to this Annual Report.







PART 
I




ITEM
      1.
            IDENTITY
      OF DIRECTORS, SENIOR MANAGEMENT AND
ADVISERS




Not
required.




ITEM
      2.
            OFFER
      STATISTICS AND EXPECTED TIMETABLE




Not
required.




ITEM
      3.
            KEY
      INFORMATION




A. 
         Selected financial data




The
selected financial information set forth below has been derived from our audited
financial statements (i) for the period from January 8, 2007 (date of inception)
to December 31, 2007 and (ii) for the year ended December 31, 2008. The
information is only a summary and should be read in conjunction with our audited
financial statements and notes thereto contained elsewhere herein. The financial
results should not be construed as indicative of financial results for
subsequent periods. See “Item 4. Information on Our Company” and “Item 5.
Operating and Financial Review and Prospects.”




Selected
Financial Data




(Expressed
in United States Dollars)





For
      the Period Ended
                                December
      31,2007
                              
                              
                              2008Statement
      of Operations Data:Formation costs
                              
                              
                              4,501
                              
                              
                              
                              –Operating
      expenses
                              
                              
                              266,288
                              
                              
                              
                              601,340Operating
      loss
                              
                              
                              (270,789
                              )
                              
                              
                              (601,340
                              )Interest
      income
                              
                              
                              814,854
                              
                              
                              
                              548,475Net
      income (Loss)
                              
                              
                              544,065
                              
                              
                              
                              (52,865
                              )Net
      loss per ordinary share, basic and diluted
                              
                              
                              0.13
                              
                              
                              
                              (0.01
                              )


3





As
      of December 31,2007
                            
                            
                            2008Balance
      Sheet Data:Cash
                            
                            
                            100,832
                            
                            
                            
                            335,999Cash
      and cash equivalents held in trust
                            
                            
                            33,876,887
                            
                            
                            
                            33,678,745Total
      assets
                            
                            
                            34,085,209
                            
                            
                            
                            34,049,844Total
      liabilities
                            
                            
                            345,000
                            
                            
                            
                            362,500Ordinary
      shares subject to  possible conversion
                            
                            
                            10,008,413
                            
                            
                            
                            10,100,256Total
      shareholders’ equity
                            
                            
                            23,731,796
                            
                            
                            
                            23,587,088




B. 
         Capitalization and Indebtedness




Not
required.




C. 
         Reasons for the Offer and Use of
Proceeds




Not
required.




D. 
         Risk Factors




Risks Associated with Our
Business




If
outstanding warrants are exercised, the underlying ordinary shares will be
eligible for future resale in the public market.  ”Market overhang” from
the warrants results in dilution and could reduce the market price of the
ordinary shares.




Outstanding
warrants and unit purchase options to purchase an aggregate of 12,743,334
ordinary shares issued in connection with Si Mei Te’s initial public offering
and the private placement that took place immediately prior to the initial
public offering will become exercisable after consummation of the acquisition.
If they are exercised, a substantial number of additional Si Mei Te ordinary
shares will be eligible for resale in the public market, which may reduce the
market price.




Because
Si Mei Te does not intend to pay dividends on its ordinary shares, shareholders
will benefit from an investment in Si Mei Te’s ordinary shares only if it
appreciates in value.




Si Mei Te
has never declared or paid any cash dividends on its ordinary shares. 
Following the acquisition, Si Mei Tei currently intends to retain all future
earnings, if any, for use in the operations and expansion of the business. As a
result, Si Mei Te does not anticipate paying cash dividends in the foreseeable
future. Any future determination as to the declaration and payment of cash
dividends will be at the discretion of Si Mei Te’s Board of Directors and will
depend on factors Si Mei Te’s Board of Directors deems relevant, including,
among others, Si Mei Te’s results of operations, financial condition and cash
requirements, business prospects, and the terms of Si Mei Te’s credit facilities
and other financing arrangements. Accordingly, realization of a gain on
shareholders’ investments will depend on the appreciation of the price of Si Mei
Te’s ordinary shares. There is no guarantee that Si Mei Te’s ordinary shares
will appreciate in value.


4




Si
Mei Te’s securities are quoted on the OTC Bulletin Board, which may limit the
liquidity and price of its securities more than if the securities were quoted or
listed on a national securities exchange.




Si Mei
Te’s securities are quoted on the OTC Bulletin Board, a NASD-sponsored and
operated inter-dealer automated quotation system. Quotation of Si Mei Te’s
securities on the OTC Bulletin Board will limit the liquidity and price of its
securities more than if the securities were quoted or listed on a national
securities exchange.




Si
Mei Te may choose to redeem its outstanding warrants at a time that is
disadvantageous to the warrant holders.




Subject
to there being a current prospectus under the Securities Act of 1933, Si Mei Te
may redeem all of its outstanding warrants at any time after they become
exercisable at a price of $0.01 per warrant, upon a minimum of 30 days prior
written notice of redemption if, and only if, the last sale price of Si Mei Te’s
ordinary shares equals or exceeds $11.50 per share for any 20 trading days
within a 30 trading day period ending three business days before Si Mei Te sends
the notice of redemption. Calling all of Si Mei Te’s outstanding warrants for
redemption could force the warrant holders:




·
            To
      exercise the warrants and pay the exercise price for such warrants at a
      time when it may be disadvantageous for the holders to do
    so;




·
            To
      sell the warrants at the then current market price when they might
      otherwise wish to hold the warrants;
or




·
            To
      accept the nominal redemption price which, at the time the warrants are
      called for redemption, is likely to be substantially less than the market
      value of the warrants.




Si
Mei Te’s warrant holders may not be able to exercise their warrants, which may
create liability for Si Mei Te.




Holders
of the warrants Si Mei Te issued in its initial public offering and private
placement will be able to receive shares upon exercise of the warrants only if
(i) a current registration statement under the Securities Act of 1933 relating
to the ordinary shares underlying the warrants is then effective and (ii) such
shares are qualified for sale or exempt from qualification under the applicable
securities laws of the states in which the various holders of warrants reside.
Although Si Mei Te has agreed to use its best efforts to maintain a current
registration statement covering the shares underlying the warrants to the extent
required by federal securities laws, and Si Mei Te intends to comply with such
agreement, Si Mei Te cannot assure you that it will be able to do so. In
addition, some states may not permit Si Mei Te to register the shares issuable
upon exercise of its warrants for sale. The value of the warrants will be
greatly reduced if a registration statement covering the shares issuable upon
the exercise of the warrants is not kept current or if the securities are not
qualified, or exempt from qualification, in the states in which the holders of
warrants reside. Holders of warrants who reside in jurisdictions in which the
shares underlying the warrants are not qualified and in which there is no
exemption will be unable to exercise their warrants and would either have to
sell their warrants in the open market or allow them to expire unexercised. If
and when the warrants become redeemable by Si Mei Te, Si Mei Te may exercise its
redemption right even if Si Mei Te is unable to qualify the underlying
securities for sale under all applicable state securities laws. Since Si Mei
Te’s obligations in this regard are subject to a “best efforts” standard, it is
possible that, even if Si Mei Te is able to successfully assert a defense to a
claim by warrant holders due to the impossibility of registration, a court may
impose monetary damages on Si Mei Te to compensate warrant holders due to the
change in circumstances that led to Si Mei Te being unable to fulfill its
obligations.




Si
Mei Te may qualify as a passive foreign investment company, or “PFIC,” which
could result in adverse U.S. federal income tax consequences to U.S.
investors.
 
 In
general, Si Mei Te will be classified as a PFIC for any taxable year in which
either (1) at least 75% of its gross income (looking through certain corporate
subsidiaries) is passive income or (2) at least 50% of the average value of its
assets (looking through certain corporate subsidiaries) is attributable to
assets that produce, or are held for the production of, passive income. Passive
income generally includes, without limitation, dividends, interest, rents,
royalties, and gains from the disposition of passive assets. If Si Mei Te is
determined to be a PFIC for any taxable year during which a U.S. Holder (as
defined in the section of this report captioned ‘‘Item 10. Additional
Information—Taxation–United States Federal Income Taxation–General’’) held Si
Mei Te’s ordinary shares, the U.S. Holder may be subject to increased U.S.
federal income tax liability and may be subject to additional reporting
requirements. Based on the composition of Si Mei Te’s assets and the nature of
its income in 2007 and 2008, which largely consisted of cash and other
investment assets, it is likely that Si Mei Te qualified as a PFIC in 2007 and
2008. Si Mei Te’s actual PFIC status for any subsequent taxable year will not be
determinable until after the end of such taxable year. Accordingly there can be
no assurance with respect to Si Mei Te’s status as a PFIC for 2009 or any
subsequent taxable year. We urge U.S. investors to consult their own tax
advisors regarding the possible application of the PFIC rules. For a more
detailed explanation of the tax consequences of PFIC classification to U.S.
Holders, see the section of this report captioned ‘‘Item 10. Additional
Information—Taxation—United States Federal Income Taxation—Tax Consequences to
U.S. Holders of Our Ordinary Shares and Warrants—Passive Foreign Investment
Company Rules.’’




5




Risks Related to Operations
in China




Risks
Related to HeNan Smart Food’s Business




HeNan
Smart Food may not be able to anticipate changes in consumer preferences, which
may result in decreased demand for its instant noodle products.




HeNan
Smart Food’s success depends in part on its ability to anticipate the tastes and
dietary habits of consumers and to offer products that appeal to their
preferences. Consumer preferences change and HeNan Smart Food’s failure to
anticipate, identify or react to these changes could result in reduced demand
for its products, which would, in turn, cause its sales volume, revenue and
operating income to suffer. HeNan Smart Food may be unable to introduce new
products that are in faster-growing and more profitable categories or reduce its
production of the products in the categories experiencing declining consumption.
To the extent HeNan Smart Food is unable to execute its strategy of continuously
improving its portfolio of products and satisfying consumers’ changing
preferences, its sales volume, revenue and operating income may not,
accordingly, achieve its financial targets, which may have a material adverse
effect on its financial condition and results of operations.




Price
increases for the commodities that HeNan Smart Food uses for raw materials and
packaging could adversely affect its profitability.




Most of
the raw materials and packaging used in HeNan Smart Food’s instant noodle
businesses are commodities that may experience price volatility caused by
external conditions, commodity market fluctuations, currency fluctuations and
changes in governmental agricultural programs. Unexpected commodity price
increases may result in increases in raw material and packaging costs, and HeNan
Smart Food may not be able to increase its product prices to offset these
increased costs without suffering reduced sales volume, revenue and operating
income. Raw material cost (including packaging cost) constituted approximately
92% of the total cost of sales relating to HeNan Smart Food’s instant noodle
products  in the year ended December 31, 2008. Any significant increase in
the cost of raw materials which HeNan Smart Food is unable to pass on to
consumers could have a material adverse affect on its margins and overall
profitability. During the three years ended December 31, 2006, 2007 and 2008,
costs of certain major raw materials, particularly palm oil used to produce its
instant noodle products, fluctuated significantly. Historically, HeNan Smart
Food has not hedged against changes in commodity prices, and it does not intend
to enter into such hedges in the future. See “Item 5. Operating and Financial
Review and Prospects – HeNan Smart Food’s Financial Condition and Results
of Operations – Major Factors affecting HeNan Smart Food’s Results of Operations
– Cost of raw materials” in this 20-F for a discussion on the historical price
volatility of HeNan Smart Food’s raw materials and packaging.


6




HeNan
Smart Food may not be able to effectively manage its rapid
expansion.




HeNan
Smart Food has expanded its market reach within the PRC in recent years, and it
expects to continue its expansion in terms of geography, customers and products
on offer. To manage HeNan Smart Food’s growth, it must continue to improve its
managerial, technical and operational capabilities and implement an effective
management information system. HeNan Smart Food’s expansion strategy may require
additional funding either through internal or external sources. There can be no
assurance that any future expansion plans will not adversely affect HeNan Smart
Food’s existing operations, since the execution of expansion plans often
involves challenges. For example, HeNan Smart Food may need to deal with issues
such as capacity constraints, upgrading or expanding existing facilities and
training an increasing number of personnel to manage and operate those
facilities. Such challenges could make it difficult to implement HeNan Smart
Food’s expansion plans successfully or in a timely manner, which could, among
other things, adversely affect its ability to manage the company, satisfy
customer demands and maintain product quality, resulting in an adverse impact on
its profitability.




HeNan Smart Food’s business is
seasonal.




HeNan
Smart Food experiences seasonal fluctuations in its revenue and operating income
for its instant noodle products. HeNan Smart Food generally records higher
turnover for its instant noodle products during the autumn and winter
months than during the spring and summer months. The seasonal nature of HeNan
Smart Food’s products causes specific production lines to operate at levels
approaching full capacity during certain times of year and at far less than full
capacity at others, as the production lines for a particular product segment
cannot be converted into production lines for another product segment. As a
result of these fluctuations, sales and operating results for any particular
period will not necessarily be indicative of our results for the full year or
future periods. The seasonal nature of HeNan Smart Food’s products also affects
the cash flows available to it. Any seasonal fluctuations reported in the future
may not match the expectations of investors, which could cause the trading price
of the combined company’s shares to fluctuate.




Our
intellectual property rights could be challenged.




As of
March 31, 2009, HeNan Smart Food had registered 26 patents and 22 trademarks in
the PRC. Please see the section headed “Item 4. Information on our Company – A.
History and development of the Company — HeNan Smart Food’s Development and
History – Trademarks and Intellectual Property” in this 20-F for further details
on the intellectual property rights HeNan Smart Food owns. While HeNan Smart
Food intends to enforce the trademarks it owns or licenses against infringement,
there can be no assurance that its actions to establish and protect its
trademarks are adequate to prevent imitation of its products by others or to
prevent others from seeking to block sales of its products which they claim
violate their trademarks and proprietary rights. If a competitor were to
infringe on trademarks held by HeNan Smart Food, enforcing its rights would
likely be costly and would divert funds and resources that could otherwise be
used to operate its business. There can be no assurance that HeNan Smart Food
would be successful in enforcing its intellectual property rights. If HeNan
Smart Food is not successful in enforcing such rights, there may be a material
adverse effect to its business.




HeNan
Smart Food’s new products may not be successful.




HeNan
Smart Food continues to seek opportunities to leverage its strong brand and
existing distribution network to develop new products. HeNan Smart Food has in
the past launched new products from time to time. HeNan Smart Food cannot assure
you its new products will attract sufficient consumer demand or gain sufficient
market share to be profitable. Failure to recover development, production and
marketing costs of unsuccessful new products could adversely affect HeNan Smart
Food’s overall profitability.


7




HeNan
Smart Food depends on independent third party and related party suppliers to
provide it with packaging materials for its products.




All of
the packaging material used in the manufacture of HeNan Smart Food’s instant
noodle products are supplied by independent third-party or related party
suppliers. In the event these independent third-party or related party suppliers
fail to continue to supply or cannot meet HeNan Smart Food’s demand for such
packaging materials, or it is unable in the future to reach agreement upon
reasonable terms with them in relation to such continued supply, HeNan Smart
Food may be unable to find a comparable substitute supplier of packaging
materials, which may lead to delays in the delivery of its products to
customers. Such delays may affect HeNan Smart Food’s results of
operations.




If
HeNan Smart Food’s products become adulterated or misbranded, it would need to
recall those items and may experience product liability claims if consumers are
harmed as a result.




HeNan
Smart Food sells food products for human consumption, which involves risks such
as product contamination or spoilage, product tampering and other adulteration.
HeNan Smart Food may need to recall some of its products if they become
adulterated or misbranded. A widespread product recall may cause HeNan Smart
Food’s products to be unavailable for a period of time. HeNan Smart Food may
also be subject to product liability claims if the consumption of its products
causes injury or illness. A widespread recall or a significant product liability
claim against HeNan Smart Food may cause customers to lose confidence in its
food products which could affect its reputation and result in a material adverse
effect on its business.




The
occurrence of such problems could also result in serious damage to HeNan Smart
Food’s brand and reputation. Adverse publicity, whether or not valid, could
discourage consumers from buying HeNan Smart Food’s products, as a result of
which its sales could materially decline, which would have an adverse impact on
HeNan Smart Food’s profitability.




The
interests of Mr. Wang Youli, who will continue to be HeNan Smart Food’s ultimate
controlling shareholder, may differ from those of HeNan Smart
Food’s other shareholders.




HeNan
Smart Food is controlled by Mr. Wang Youli through his majority ownership of Si
Mei Te. Wang Youli beneficially owns approximately 67.64% of Si Mei Te.
Accordingly, Mr. Wang Youli is able to influence HeNan Smart Food’s major policy
decisions, including its overall strategic and investment decisions, dividend
plans, issuances of securities and adjustments to its capital structure, and is
able to control the election of its directors and, in turn, indirectly control
the selection of its senior management in ways that may conflict with the best
interests of HeNan Smart Food’s other shareholders.


8




If
HeNan Smart Food fails to maintain effective internal controls, then its
business, financial results and reputation could be materially and adversely
affected.




HeNan
Smart Food has implemented various measures to improve its internal controls.
HeNan Smart Food intends to continue to monitor and enhance, and take further
steps to improve, its internal controls in the future. Due to its limited
experience with the internal control measures that it has recently implemented,
HeNan Smart Food cannot assure you that all such measures taken to improve its
internal controls will be effective or that material deficiencies in its
internal controls will not be discovered in the future. HeNan Smart Food’s
efforts to improve its internal controls have required, and in the future may
require, increased costs and significant management time and commitment. If
HeNan Smart Food fails to maintain effective internal controls in the future,
then its business, financial results and reputation may be materially and
adversely affected.





Pricing
of HeNan Smart Food’s products may be subject to PRC Government
intervention.




HeNan
Smart Food is generally free to determine the pricing of its products and the
PRC Government does not set any guidance or requirement on how it prices its
products. However, the PRC Government has expressed concern with price-collusion
among manufacturers of the types of products manufactured and sold by HeNan
Smart Food. For example, on August 16, 2007, the National Development and
Reform Commission, or NDRC,  issued a public notice (the “Notice”) in
relation to its findings on possible price-collusion involving the International
Ramen Manufacturers Association (China Branch) (“Noodle Association”) and
certain manufacturers of instant noodles in the PRC. In the Notice, which was
prompted by a general increase of instant noodle prices in July 2007, the NDRC
made it clear that (i) price-collusion or price-fixing amongst manufacturers is
prohibited; (ii) the Noodle Association and certain manufacturers had breached a
number of PRC anti-unfair competition regulations; and (iii) investigations into
this matter would continue and any violations would be dealt with in accordance
with applicable law.




While
HeNan Smart Food has participated in activities organized by the Noodle
Association and had in 2006 and 2007 attended meetings among major noodle
manufacturers where, among other things, increase in the selling price of
instant noodle products were discussed, HeNan Smart Food has not been notified
of any claims, proceedings or complaints from the NDRC or any PRC Government
agency in relation to the pricing of its products. In addition, the Notice also
makes it clear that while price-collusion or price-fixing amongst manufacturers
is prohibited, manufacturers are free to determine the price of their products.
HeNan Smart Food has not in the past participated in any price-collusion or
price-fixing activity and will not do so in future. As far as HeNan Smart Food
is aware it is not currently the subject of any investigation by NDRC or any
other relevant PRC governmental authorities in connection with any illegal
pricing activities. HeNan Smart Food has been advised by its PRC legal advisers,
Jing Tian Gong Cheng Law Offices, that it will not be subject to any litigation
claim in this regard. However, there can be no assurance that the NDRC or any
other PRC Government agency will not conclude that an increase in the price of
HeNan Smart Food’s instant noodle products is not the result of price-fixing or
price-collusion and/or take actions to intervene in the activities of instant
noodle manufacturers, including HeNan Smart Food, if it believes there is
price-fixing or price-collusion taking place in the market, in which case HeNan
Smart Food’s results of operation may be materially adversely
affected.


9





The
industry in which HeNan Smart Food operates faces increasing competition from
both domestic and foreign companies, which may affect its market share and
results of operation.




The
industry in which HeNan Smart Food operates in the PRC is highly competitive.
HeNan Smart Food’s ability to compete is, to a significant extent, dependent on
its ability to distinguish its products from those of its competitors by
providing high quality products at reasonable prices that appeal to consumers’
tastes and preferences. HeNan Smart Food’s competitors have varying abilities to
withstand changes in market conditions. Some of HeNan Smart Food’s competitors
have been in this business longer than it has, may have substantially greater
financial and other resources than its has and may be better established in the
market. HeNan Smart Food’s competitors in certain regional markets may also
benefit from raw material sources or production facilities that are closer to
such markets or may benefit from their approach in integrating upstream and
downstream production processes, which provides them with competitive advantages
in terms of costs and proximity to consumers.




HeNan
Smart Food cannot assure you that its current or potential competitors will not
provide products superior to those it provides or adapt more quickly to evolving
industry trends or changing consumers’ preferences than it does. It is also
possible that there will be further consolidation and building of alliances in
the industries in which HeNan Smart Food operates amongst its competitors, which
may rapidly acquire significant market share, and some of its distributors may
commence production of products similar to those HeNan Smart Food sells to them.
Furthermore, HeNan Smart Food’s competitors may significantly increase their
advertising expenditures and promotional activities or may engage in irrational
or predatory pricing behavior, which may result in price reductions, reduced
margins and loss of market share, any of which could materially adversely affect
HeNan Smart Food’s results of operation.





The
food industry could face slower potential market growth.




According
to Euromonitor, in terms of volume, sales of instant noodles in China
experienced a CAGR of 7.7% from 2003 to 2008; and in terms of value, the sales
of instant noodles in China experienced a CAGR of 11.1% from 2003 to 2008. 
Euromonitor predicts that in terms of volume, sales of instant noodles in China
will experience a CAGR of 2.6% from 2008 to 2013; and in terms of value, the
sales of instant noodles in China will experience a CAGR of 6.2% from 2008 to
2013.




HeNan
Smart Food cannot assure you the instant noodle market of China will grow in the
future and if so, at what rate the market will grow.  If the food industry
in China does not grow or if it grows at a slower rate than that in the past,
HeNan Smart Food’s profitability may be adversely affected.




HeNan
Smart Food requires various licenses and permits to operate its business, and
the failure to renew any or all of these licenses and permits could materially
adversely affect its business.




In
accordance with PRC laws and regulations, HeNan Smart Food is required to
maintain various licenses and permits in order to operate its production
facilities, including, without limitation, hygiene licenses and industrial
products production permits. HeNan Smart Food is required to comply with
applicable hygiene and food safety standards in relation to its production
processes. HeNan Smart Food’s premises and transportation vehicles are subject
to regular inspections by the regulatory authorities for compliance with the
relevant PRC laws and regulations. Failure to pass these inspections, or
otherwise renew HeNan Smart Food’s licences and permits, could lead to temporary
or permanent suspension of some or all of its production activities which would
materially adversely affect its business and results of
operations.


10





PRC
food safety and hygiene laws may become more onerous, which may adversely affect
HeNan Smart Food’s operations and financial performance and lead to an increase
in its costs which it may be unable to pass on to its customers.




As a
manufacturer of products intended for human consumption, HeNan Smart Food is
subject to extensive governmental regulation. For example, HeNan Smart Food is
subject to regulations with respect to product consumption, packaging, labeling
and advertising. HeNan Smart Food cannot assure investors that in the future the
PRC food safety and hygiene laws will not become more onerous, providing for
stricter and more comprehensive monitoring and regulation of food manufacturers
and distributors in areas including, but not limited to, food production and
distribution, which may lead to an increase in HeNan Smart Food’s costs of
complying with such regulations resulting in a material adverse effect on its
results of operations.





HeNan
Smart Food may be subject to higher compliance costs if PRC environmental
protection laws become more onerous, which may adversely affect its operations
and financial performance.




HeNan
Smart Food carries on its business in industries that are subject to PRC
environmental protection laws and regulations. These laws and regulations
require HeNan Smart Food to adopt effective measures to control and properly
dispose of waste materials, waste water and other environmental waste materials,
as well as fee payments from manufacturers discharging waste substances. Fines
may be levied against manufacturers causing pollution in excess of permitted
levels. If failure to comply with such laws or regulations results in
environmental pollution, the administrative department for environmental
protection can levy fines. If the circumstances of the breach are serious, it is
at the discretion of the PRC government to cease or close any operation failing
to comply with such laws or regulations. There can also be no assurance that the
PRC government will not change the existing laws or regulations or impose
additional or stricter laws or regulations, compliance with which may cause
HeNan Smart Food to incur significant capital expenditure and which may as a
result materially adversely affect its financial condition.





Negative
media reporting may adversely affect HeNan Smart Food’s sales.




Any
negative media reporting in relation to instant noodles, their ingredients or
production processes, whether or not valid, may raise health concerns over, and
lead to loss of consumer confidence in and demand for, the types of instant
noodle products being reported on and instant noodle products in general. In
such event, HeNan Smart Food’s sales and results of operations may be adversely
affected.





HeNan
Smart Food may be subject to product liability claims and product recalls that
could result in a decrease in demand for its products due to negative publicity,
which could negatively impact its profitability.




HeNan
Smart Food sells food products for human consumption, which involves risks such
as product contamination or spoilage, product tampering and other adulteration
of food products. HeNan Smart Food may be subject to liability if the
consumption of any of its products causes injury, illness or death.  In
addition, HeNan Smart Food will voluntarily recall products in the event of
contamination or damage.  A significant product liability judgment or a
widespread product recall may negatively impact HeNan Smart Food’s profitability
for a period of time depending on product availability, competitive reaction and
consumer attitudes.  Even if a product liability claim is unsuccessful or
is not fully pursued, the negative publicity surrounding any assertion that
company products caused illness or injury could adversely affect HeNan Smart
Food’s reputation with existing and potential customers and its corporate and
brand image.


11




In
September 2008, the Health Ministry of the People’s Republic of China announced
that several babies had died in recent months and thousands more had been
sickened by contaminated milk formula powder due to the presence of melamine, an
industrial chemical sometimes used to make plastics and fertilizer.  On
October 22, 2008, the United Nations issued a paper addressing food safety in
China, citing key challenges for China as the need for a more modern food safety
law; the need for improved monitoring, inspection and enforcement; and the need
to continue to improve standards to bring China in line with international
norms.  Although none of HeNan Smart Food’s products contain milk powder,
negative publicity surrounding this food safety issue could influence the
popular perceptions of consumers and result in lower demand for its food
products in China, which could have an adverse effect on HeNan Smart Food’s
sales and profitability.





HeNan
Smart Food’s business may experience adverse effects from competition in the
instant noodle product market.




The
instant noodle product market in the PRC is highly competitive. Competition in
these markets takes many forms, including the following:




·
            establishing
      favorable brand recognition;




·
            developing
      products sought by consumers;




·
            implementing
      appropriate pricing;




·
            providing
      strong marketing support; and




·
            obtaining
      access to retail outlets and sufficient shelf
  space.




Some of
HeNan Smart Food’s competitors are larger and have greater financial resources,
including HeNan Smart Food’s primary competitors, the manufactures of each of
the brand names “Hua Long” and “Bai Xiang”. HeNan Smart Food may not be able to
compete successfully with such competitors. Competition could cause HeNan Smart
Food to lose its market share, increase expenditures or reduce pricing, each of
which could have a material adverse effect on its business and financial
results.





An
inability to respond quickly and effectively to new trends would adversely
impact HeNan Smart Food’s competitive position.




HeNan
Smart Food’s failure to maintain its technological capabilities or to respond
effectively to technological changes could adversely affect HeNan Smart Food’s
ability to retain existing business and secure new business.  HeNan Smart
Food will need to constantly seek out new products and develop new solutions to
maintain in its portfolio.  If HeNan Smart Food is unable to keep current
with new trends, its competitors’ technologies or products may render it
noncompetitive and its products obsolete.


12


Increases
in prices of main ingredients and other materials could adversely affect our
business.




The main
ingredients that HeNan Smart Food uses to manufacture its products are flour,
palm oil, dehydrated vegetables, and various flavorings and spices. HeNan Smart
Food also use paper products, such as paper bowls and wrappers, as well as films
and plastics, to package its products. The prices of these materials have been,
and HeNan Smart Food expects them to continue to be, subject to volatility.
HeNan Smart Food may not be able to pass price increases in these materials onto
its customers, which could have an adverse effect on its financial
results.





HeNan
Smart Food may experience risks resulting from its plans for
expansion.




HeNan
Smart Food has acquired several companies and businesses and plan to continue to
acquire companies in the future. Entering into an acquisition entails many
risks, any of which could harm HeNan Smart Food’s business, including: (a)
diversion of management’s attention from other business concerns; (b) failure to
integrate the acquired company with its existing businesses; (c) additional
operating expenses not offset by additional revenue; and (d) dilution of its
stock as a result of issuing equity securities.




If HeNan
Smart Food is unable to implement its acquisition strategy, it may be less
successful in the future. A key component of HeNan Smart Food’s growth strategy
is accomplished by acquiring additional instant noodle companies. While there
are many such companies, HeNan Smart Food may not always be able to identify and
acquire companies meeting its acquisition criteria on terms acceptable to it.
Additionally, financing to complete significant acquisitions may not always be
available on satisfactory terms. Further, HeNan Smart Food’s acquisition
strategy presents a number of special risks to it that it would not otherwise
contend with absent such strategy, including possible adverse effects on its
earnings after each acquisition, diversion of management’s attention from its
core business due to the special attention that a particular acquisition may
require, failure to retain key acquired personnel and risks associated with
unanticipated events or liabilities arising after each acquisition, some or all
of which could have a material adverse effect on HeNan Smart Food’s business,
financial condition and results of operations.





A
general economic downturn, a recession in China or sudden disruption in business
conditions may affect consumer purchases of discretionary items, including
instant noodle products, which could adversely affect HeNan Smart Food’s
business.




Consumer
spending is generally affected by a number of factors, including general
economic conditions, the level of unemployment, inflation, interest rates,
energy costs, gasoline prices and consumer confidence generally, all of which
are beyond HeNan Smart Food’s control. Consumer purchases of discretionary items
tend to decline during recessionary periods, when disposable income is lower,
and may impact sales of HeNan Smart Food’s products. In addition, sudden
disruptions in business conditions as a result of a terrorist attack,
retaliation and the threat of further attacks or retaliation, war, adverse
weather conditions and climate changes or other natural disasters, pandemic
situations or large scale power outages can have a short or, sometimes,
long-term impact on consumer spending. A downturn in the economy in China,
including any recession or a sudden disruption of business conditions in those
economies, could adversely affect HeNan Smart Food’s business, financial
condition, and results of operation.






Under
the EIT Law, we, Ever Smart International Limited (“Ever Smart”) and Gliston
International Limited (“Gliston”) each may be classified as a “resident
enterprise” of the PRC. Such classification could result in unfavorable tax
consequences to us, Ever Smart, Gliston and our non-PRC security
holders.
 
 On
March 16, 2007, the Fifth Session of the Tenth National People’s Congress
passed the Enterprise Income Tax Law of the People’s Republic of China (the “EIT
Law”), which became effective on January 1, 2008. Under the EIT Law, an
enterprise established outside of China with “de facto management bodies” within
China is considered a “resident enterprise,” meaning that it can be treated in a
manner similar to a Chinese enterprise for enterprise income tax purposes,
although the dividends paid to one resident enterprise from another may qualify
as “tax-exempt income.” The implementing rules of the EIT Law define de facto
management as “substantial and overall management and control over the
production and operations, personnel, accounting, and properties” of the
enterprise. The EIT Law and its implementing rules are relatively new and
ambiguous in terms of some definitions, requirements and detailed procedures;
therefore, it is unclear how the PRC tax authorities will determine tax
residency based on the facts of each case.
 
 On April
22, 2009, the State Administration of Taxation issued the Notice on the Issues Regarding Recognition of
Overseas Incorporated Domestically Controlled Enterprises as PRC Resident
Enterprises Based on the De Facto Management Body Criteria, which was
retroactively effective as of January 1, 2008. Under this notice, an overseas
incorporated enterprise will be recognized as a PRC resident enterprise if it
satisfies all of the following conditions: (i) the senior management responsible
for daily production/business operations is primarily located in the PRC, and
the location(s) where such senior management execute their responsibilities are
primarily in the PRC; (ii) strategic financial and personnel decisions are made
or approved by organizations or personnel located in the PRC; (iii) major
properties, accounting ledgers, company seals and minutes of board meetings and
shareholder meetings, etc., are maintained in the PRC; and (iv) 50% or more of
the board members with voting rights or senior management habitually reside in
the PRC. However, even under this new notice, it is still unclear whether PRC
tax authorities would require us, Ever Smart and/or Gliston to be treated as a
PRC resident enterprise.
 
 If the
PRC tax authorities determine that we, Ever Smart and/or Gliston is a “resident
enterprise” for PRC enterprise income tax purposes, a number of unfavorable PRC
tax consequences could follow. First, we, Ever Smart and/or Gliston may be
subject to enterprise income tax at a rate of 25% on our, Ever Smart’s and/or
Gliston’s worldwide taxable income, as the case may be, as well as PRC
enterprise income tax reporting obligations. Second, although under the EIT Law
and its implementing rules, dividends paid to us from HeNan Smart Food through
Ever Smart and Gliston, assuming we, Gliston and Ever Smart are each treated as
a “resident enterprise” under the EIT Law, may qualify as “tax-exempt income,”
we cannot guarantee that such dividends will not be subject to PRC withholding
tax, which generally will be imposed at a rate of 10% (or, if the Double Tax
Avoidance Arrangement between Hong Kong and Mainland China applies, 5%).
Finally, the new “resident enterprise” classification could result in a
situation in which a 10% PRC tax is imposed on dividends we pay to our non-PRC
shareholders and on gains derived by our non-PRC security holders from
transferring our securities, if such income is considered PRC-sourced income by
the relevant PRC tax authorities.
 
 If any
such PRC taxes apply to a non-PRC security holder, such security holder may be
entitled to a reduced rate of PRC taxes under an applicable income tax treaty
and/or a foreign tax credit against such security holder’s domestic income tax
liability (subject to applicable conditions and limitations). You should consult
with your own tax advisors regarding the applicability of any such taxes, the
effects of any applicable income tax treaties, and any available foreign tax
credits.


13




ITEM
      4.
            INFORMATION
      ON OUR COMPANY




A. 
         History and development of the
Company




Si Mei Te
Food Limited (f/k/a China Discovery Acquisition Corp.) is a Cayman Islands
exempted company that was incorporated on January 8, 2007 under the Companies
Law of the Cayman Islands, and organized as a blank check company for the
purpose of acquiring, through a share exchange, asset acquisition or other
similar business combination, or controlling, through contractual arrangements,
an operating business, that has its principal operations in the People’s
Republic of China, or PRC. Si Mei Te’s Memorandum and Articles of Association at
the time provided that it could not consummate a business combination with a
business that had its principal operations outside of China.




The
Company operates under The Companies Law (2007 Revision) of the Cayman Islands.
The Company’s registered office is currently located at the offices of M&C
Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman,
KY-1104 Cayman Islands, telephone number 345-949-8066, though the directors
may change this location at any time. The Company’s principal executive office
is located at No. 8., Wuzhi Xi Huafeng Industrial Zone; He Nan Province;
People’s Republic of China, and its telephone number is +86
13911573595.





The
Initial Public Offering




On June 26, 2007, the Company closed
its initial public offering of 5,000,000 units with each unit consisting of one
ordinary share and two warrants, each to purchase one ordinary share at an
exercise price of $5.00 per share. On July 2, 2007, the Company consummated the
closing of an additional 750,000 units that were subject to the over-allotment
option. The units from the initial public offering (including the over-allotment
option) were sold at an offering price of $6.00 per unit.




Simultaneously
with the consummation of its initial public offering, the Company consummated
the private sale of 105,000 units at a price of $6.00 per unit and 1,033,334
warrants at a price of $0.60 per insider warrant, generating total proceeds of
$1,250,000. The privately purchased securities were purchased by Beatrice Hom,
the Company’s chief operating officer, chief financial officer and a member of
its board of directors, and Francois Shih, one of its special
advisors.




Gross
proceeds from the Company’s initial public offering (including from the private
placement of units and warrants) were $35,750,000. the Company paid a total of
$2,233,956 in underwriting discounts and commissions (after deferring $345,000)
and for costs and expenses related to the offering. After deducting the
underwriting discounts and commissions and the offering expenses, the total net
proceeds to the Company from the offering were approximately $32,266,000, of
which $32,123,000 was deposited into a trust account. In addition, all of the
proceeds from the private sale of the units and warrants were deposited into a
trust fund, for a total of $33,372,500 held in trust (or approximately $5.80 per
share sold in the offering).


14




All of
the founder shares have been placed in escrow with Continental Stock Transfer
& Trust Company, as escrow agent, until June 26, 2010 (one year after the
consummation of a business combination). The founder shares may be released from
escrow earlier than this date if, by June 26, 2010, it consummates a subsequent
liquidation, merger, stock exchange or other similar transaction which results
in all of its shareholders having the right to exchange their ordinary shares
for cash, securities or other property.




The
Acquisition





On June
26, 2009, pursuant to the terms of a stock purchase agreement, dated as of
February 4, 2009, as amended (the “Purchase Agreement”), by and among HeNan
Smart Food, Fenland Investments Limited (“Fenland”), Calendar Profits Limited
(“Calendar”), Honest Joy Group Limited (“Honest Joy”) (Fenland, Calendar and Honey Joy each a
“Seller” and collectively the “Sellers”), Mr. Wang Youli, the ultimate
beneficial owner of 92% of HeNan Smart Food and 100% of Fenland, and Si Mei Te,
the Company acquired all of the outstanding securities of Gliston International
Limited (“Gliston”), the parent company of HeNan Smart Food, resulting in HeNan
Smart Food becoming an indirect wholly owned subsidiary of the Company (the
“Transaction”). The Purchase Agreement did not include the acquisition of two
factories at Changchun and Chenzhou which are majority owned by, and operated
by, Mr. Wang Youli using patents and trademarks owned by HeNan Smart Food (the
“Wang Factories”). We are currently negotiating with Mr. Wang about fees to be
paid to HeNan Smart Food for the use of patents and trademarks owned by HeNan
Smart Food and used by the Wang Factories.  We will be negotiating to
purchase the Wang Factories.




HeNan
Smart Food is a leading producer and distributor of instant noodles in the
People’s Republic of China. HeNan Smart Food commenced operations in 1991 and
became a Sino-foreign joint venture in 1995. HeNan Smart Food has since grown
into one of the leading brands in the instant noodle industry, especially in
secondary cities, counties and rural areas in China.





Pursuant
to the Purchase Agreement, at the closing of the Transaction, the Company paid
15,200,000 ordinary shares in the Company in upfront consideration, of which
3,000,000 were held back and placed in escrow. In addition, pursuant to an
earn-out provision in the Purchase Agreement, the Company has agreed to issue to
each Seller, pro rata, additional shares as follows: (i) 1,800,000 shares if the
Company achieves net income of at least $30,000,000 for the fiscal year ending
December 31, 2009; (ii) 2,500,000 shares if the Company achieves net income of
at least $40,000,000 for the fiscal year ending December 31, 2010; and (iii)
2,500,000 shares if the Company achieves net income of at least $52,000,000 for
the fiscal year ending December 31, 2011.





In
connection with the approval of the Transaction at the Extraordinary General
Meeting of Shareholders of the Company held on June 25, 2009, the Company’s
shareholders also approved (i) the election of seven (7) directors to the Board
of Directors of the Company, each to serve until the expiration of his or her
term and until his or her successor is duly elected and qualified; (ii) an
amendment to the Company’s Memorandum and Articles of Association to change the
Company’s corporate name to “Si Mei Te Food Limited”; (iii) an amendment to the
Company’s Memorandum and Articles of Association to increase the share capital
of the Company from 26,000,000 shares to 101,00,000 shares consisting of
100,000,000 ordinary shares with a par value of $0.0001 per share and 1,000,000
shares of preferred stock with a par value of $0.0001 per share; and (iv) an
amendment to the Company’s Memorandum and Articles of Association to remove
certain provisions containing procedures and approvals applicable to the Company
prior to the consummation of a business combination that are no longer operative
due to the consummation of the acquisition.


15





In
addition, on June 26, 2009, after the closing of the Transaction, the Company
closed on its previously announced agreements to purchase 2,764,890 ordinary
shares for an aggregate of  $16,202,255.40. Such shares were voted in favor
of the Transaction. The Company also closed on its previously announced
agreements pursuant to which certain third parties were obligated to purchase
from third-party sellers and deliver to the Company an aggregate of 1,046,600
ordinary shares for  $6,244,720.73. Such shares would have been eligible
for redemption pursuant to the Company’s Articles of Association had there not
been an agreement to sell them to the Company.




HeNan
Smart Food Corporate Development and History




HeNan
Smart Food was established as a Sino-foreign equity joint venture under PRC Laws
on Oct.17, 1995. Upon establishment, HeNan Smart Food had registered capital of
$425,300, which was 70% owned by Jiaozuo Branch of Beijing Instant Food Company
and 30% owned by Ms. Jin Weiping. Since HeNan Smart Food’s initial operation, it
has engaged in the production of instant noodles.




To expand
HeNan Smart Food’s business, it established the Qishan Branch of Henan Smart
Food Co. Ltd. in Qishan County, Baoji City of Shaanxi Province on Sep. 11,
2002.




In 2008,
Beijing Instant Food Company transferred all of its equity interests to Jiaozuo
Huafeng Food Co. Ltd. and after such transfer, Jiaozuo Huafeng Food Co. Ltd.
held 70% of the equity interest of HeNan Smart Food while Ms. Jin Weiping held
30% of equity interest of HeNan Smart Food. The above transfer was reflected by
the business license issued by Henan Administration of Industry and Commerce on
July 31, 2008.




In May
2009, Jiaozuo Huafeng Food Co. Ltd. and Ms. Jinweiping transferred their
respective equity interests in HeNan Smart Food to Ever Smart International
Limited, which is a limited liability company incorporated in Hong Kong. 
As such, HeNan Smart Food changed to a wholly foreign owned enterprise under PRC
Laws, and it is now 100% owned by Ever Smart International Limited. 
EverSmart Limited is 100% controlled by Gliston International Limited. 
Prior to its acquisition by us, Gliston International Limited was owned by
Fenland Investments Limited (92%), which is 100% owned by Wang Youli (Si Mei
Te’s Chairman, Chief Executive Officer and a director), Calendar Profits Limited
(5%), which is 100% owned by Pinger Zhang, and Honest Joy Group Limited (3%),
which is 100% owned by K. K. Wong. After the closing of the acquisition by Si
Mei Te of HeNan Smart Food, Gliston International Limited became Si Mei Te’s
wholly owned indirect subsidiary.


16




B. 
         Business Overview




Prior to
its acquisition of HeNan Smart Food, Si Mei Te had no operations. HeNan Smart
Food is a leading producer and distributor of instant noodles in the People’s
Republic of China.  HeNan Smart Food commenced operations in 1991 and
became a Sino-foreign joint venture in 1995.  Since then, HeNan Smart Food
has grown into one of the leading brands in the instant noodle industry,
especially in secondary cities, counties and rural areas in China.  As of
December 31, 2008, HeNan Smart Food’s operations have expanded to include 26
production lines with a capacity of 2.3 billion packs of instant noodles per
year. Production under HeNan Smart Food’s trademarks and patents
are distributed in more than 800 counties and 22 provinces across China. 
HeNan Smart Food’s business has grown significantly over the past several
years.  HeNan Smart Food’s revenue over the three years ended December 31,
2008 grew at a compounded annual growth rate of approximately 27.3% from $108
million for the year ended December 31, 2006 to $175 million for the year ended
December 31, 2008. HeNan Smart Food’s net income for the three years ended
December 31, 2006, 2007 and 2008 was approximately $9.5 million, $12.0 million,
$22.7 million, respectively.




According
to Euromonitor, in the 12 months ended December 31, 2007, HeNan Smart Food was
the number 5 instant noodle manufacturer in China with 4.8% of the total market
value (which includes the products produced by the Wang Factories (whose
production accounts for approximately 20% of that of HeNan Smart
Food)).




HeNan
Smart Food produces approximately 100 instant noodle products, including bowl
noodles, packet noodles and snack noodles of different flavors in its production
facilities. HeNan Smart Food sells instant noodle products under 7 distinct
brands as follows:





·Si Yuan (思圆)
                ·Gou Wei (够味)
                ·Shi Shang (食尚)·Si Mei Te (斯美特)
                ·Zi Ran Yi Pai (自然一派)·Super Si Mei Te (超级斯美特)
                ·Crispy Noodle (香脆面)




HeNan
Smart Food currently targets the mid-market consisting of bowl and packet
instant noodles priced at approximately RMB0.8 to 1.2 per pack (wholesale
prices).  HeNan Smart Food produces its instant noodle products in 26
production lines located in 2 production facilities.  HeNan Smart Food
distributes its products throughout the PRC through its sales channels,
including approximately 1000 distributors in 22 provinces.  HeNan Smart
Food believes its extensive distribution network is an important competitive
advantage and will enable it to continue to rapidly and successfully introduce
new products to the market.




The
instant noodle industry in the PRC is highly competitive. HeNan Smart Food’s
ability to compete is, to a significant extent, dependent on its ability to
distinguish its products from those of its competitors by providing high quality
products at reasonable prices that appeal to consumers’ tastes and
preferences.  Unlike some of HeNan Smart Food’s competitors who have
diversified food and drink products, HeNan Smart Food is currently focused on
instant noodle products as it believes that there is significant growth
opportunity in its industry both through organic growth and through selective
acquisitions.


17




Business
Strategy




HeNan
Smart Food’s goal is to leverage its strong brand recognition and expand its
products to become the leading food company in the PRC. To accomplish this,
HeNan Smart Food plans to employ the following strategies:




Continue
to promote and develop its brand while expanding into brand
management




HeNan
Smart Food has built some of the leading product brands in the instant noodle
industry in the PRC.  HeNan Smart Food will continue its marketing and
promotional activities in order to maintain this brand leadership.  HeNan
Smart Food’s brand is its key corporate asset and competitive advantage. 
HeNan Smart Food will continue to enhance its product quality, tastes, and
innovation in order to serve its consumers.




Expand
distribution network




HeNan
Smart Food has been expanding and developing its distribution network to market
its products to vast areas in China, especially in the secondary cities,
counties and rural areas.  As disposable income in rural areas of PRC
grows, expansion into these areas enables HeNan Smart Food to reach more
potential end customers and increase sales. HeNan Smart Food currently has a
distribution presence in more than 800 counties in the PRC. HeNan Smart Food
plans to expand its distribution reach to more counties in the next few years.
There are approximately 2500 counties in China, and HeNan Smart Food plans to
penetrate more of the new counties in the coming years to increase the sales of
its products.  HeNan Smart Food will achieve this primarily by leveraging
more on distributors who have strong local relationships.




Expand
revenue by more product offerings




HeNan
Smart Food’s strong brand reputation, extensive distribution network and
established manufacturing capacity provide it with a solid platform to launch
new products in the market. HeNan Smart Food plans to leverage this platform to
launch new flavors of existing products as well as related product lines to
diversify its product portfolio and reach a wider customer base.  HeNan
Smart Food’s strategy with regard to its instant noodle products is to continue
to improve the quality of the noodles themselves so that they more closely
resemble non-instant hand-made noodles.  HeNan Smart Food believes this
will make its noodles more popular and attractive to consumers.  At the
same time, HeNan Smart Food will continue to produce new flavors of instant
noodles through its research and development efforts. HeNan Smart Food will also
explore other related products such as food sources in China with a view to
potentially increase the margin of its product offerings in the
future.




Grow
businesses with selective acquisitions




The
instant noodle industry in China is highly fragmented, and there are large
number of companies that lack of the scale and distribution reach to become
national marketers.  HeNan Smart Food sees significant opportunity to
expand its market penetration and reach by acquiring some of the smaller local
instant noodle companies.  HeNan Smart Food would create value to the
acquired companies by adding its brand name, management expertise, distribution
and ability to secure raw materials at low costs.  HeNan Smart Food
believes that there is significant growth in instant noodle consumption in China
for years to come.


18




Industry
Overview




The PRC
is experiencing increasing urbanization as a result of its rapid growth in its
economy. The population in large urban cities has increased with the influx of
people from rural and less developed areas. In the 10 years from 1997 to 2006,
the total number of urban population increased by 181 million (representing a
compound annual growth rate of 4.3%) while population in rural areas decreased
by 97 million (representing a compound annual growth rate of -1.4%). The
following table sets forth the percentage of the PRC’s total population
represented by urban and rural citizens in the years indicated.




Competitive
Strengths




HeNan
Smart Food believes its position as a leading producer and distributor of
instant noodles in the People’s Republic of China is due to the following
competitive advantages:




Strong
brand presence and scale.




According
to Euromonitor, in the year ended December 31, 2007, HeNan Smart Food was the
number 5 manufacturer of instant noodles in China, with a market share of
approximately 4.8% (which includes the products produced by the Wang Factories
(whose production accounts for approximately 20% of that of HeNan Smart Food)).
Over the course of 17 years of operations, HeNan Smart Food has developed the
“Si Mei Te” (“斯美特”) brand into
one of the best known instant noodle brands in China.  HeNan Smart Food
markets its instant noodle products under 7 distinct brands. Several of these
brand names have themselves also become leading brands in the segments in which
they are used. For example, HeNan Smart Food’s “Si Yuan” (“思圆”) brand is the
leading brand of instant noodles in China’s secondary cities, counties and rural
areas, in the segment of middle market.  HeNan Smart Food believes its
ability to launch and manage different brands for its products allows it to
target different segments of its market and to capture the changing tastes of
PRC consumers.




HeNan
Smart Food believes the scale of its operations also provides it with
significant bargaining power with raw material suppliers, retailers and
distributors, allowing it to obtain a steady supply of raw materials at a
competitive price and to obtain sufficient and more visible shelf space in
retail outlets. HeNan Smart Food believes it established brand names and
presence throughout the country provides it with a solid platform from which to
introduce new products and new brands and to further increase its market share.
HeNan Smart Food’s market position, the strength of its current brands and its
experience in developing several different successful brands in the PRC also
make it an attractive business partner, providing it with the opportunity to
enter into strategic alliances with other leading international and PRC food and
beverage companies to expand the scope of its business.




Extensive
distribution infrastructure and network.




HeNan
Smart Food has established relationships with distributors throughout the PRC.
HeNan Smart Food’s extensive distribution network has been an important factor
to its success. With China’s strong economic growth, new markets for HeNan Smart
Food’s products are developing rapidly. In response to changes in retail and
distribution models in the PRC, HeNan Smart Food has continually adapted and
improved its distribution network.


19




HeNan
Smart Food believes that establishing and maintaining close relationships with a large
number of distributors operating within traditional distribution channels is
particularly important in the PRC as such channels are prevalent in rural areas,
where there is significant potential to expand HeNan Smart Food’s
customer base. HeNan Smart Food believes the strength and depth of its
traditional distribution network provides it with the ability to roll out new
products and brands efficiently and effectively. As of March 31, 2009, HeNan
Smart Food had over 1000 distributors covering more than 800 counties in 22
provinces in China.  HeNan Smart Food believes its network also represents
a significant barrier to entry for other domestic and international brands
looking to compete with it on a national scale.




Superior
product quality and safety standards




HeNan
Smart Food endeavors to ensure the highest safety quality of its products in all
aspects.  In order to maintain consistently high safety standards, HeNan
Smart Food has adopted stricter safety standard than what is required by the
government regulations or guidelines.  Below table shows that HeNan Smart
Food’s internal standard is generally higher than the industry standards
published by the government:





Items
                                                  
                                                  National
                                                    Standards
                                                    (GB)
                                                  
                                                  
                                                  Industry
                                                    Standards
                                                    (LS/T)
                                                  
                                                  
                                                  Smart’s
                                                    Internal
                                                    Control
                                                    StandardsPhysical
      &
                                                  Water/
      ( g/100 ) ≤8.0
                                                  
                                                  
                                                  
                                                  8.0
                                                  
                                                  
                                                  
                                                  4.0Chemical
                                                  Acid
      ( in terms of fat ) ( KOH ) / ( mg/g ) ≤1.8
                                                  
                                                  
                                                  
                                                  1.8
                                                  
                                                  
                                                  
                                                  1.2Indicators
                                                  Peroxide
      (in terms of fat ) ( g/100g ) ≤0.25
                                                  
                                                  
                                                  
                                                  0.2
                                                  
                                                  
                                                  
                                                  0.125Fat
      % ≤24.0
                                                  
                                                  
                                                  
                                                  24.0
                                                  
                                                  
                                                  
                                                  24.0Iodine
      Colority ( LOD ) ≥1.0
                                                  
                                                  
                                                  
                                                  1.0
                                                  
                                                  
                                                  
                                                  1.0Sodium
      Chloride % ≤
                                                  
                                                  
                                                  2.5
                                                  
                                                  
                                                  
                                                  2.5
                                                  
                                                  
                                                  
                                                  2.5Microbial
                                                  Bacteria
      ( cfu/g ) ≤
                                                  
                                                  
                                                  1000
                                                  
                                                  
                                                  
                                                  1000
                                                  
                                                  
                                                  
                                                  1000Indicators
                                                  E.
      Coli / ( MPN/100g ) ≤
                                                  
                                                  
                                                  30
                                                  
                                                  
                                                  
                                                  30
                                                  
                                                  
                                                  
                                                  30Pathogens
      (Salmonella, Staphylococcus Aureus, Shigella)
                                                  
                                                  Not
                                                    Detected
                                                  
                                                  
                                                  Not
                                                    Detected
                                                  
                                                  
                                                  Not
      Detected




Strong,
market-oriented research and development capabilities




The
ability to improve HeNan Smart Food’s existing products and develop new products
in a timely manner to cater to the changing tastes of consumers is central to
HeNan Smart Food’s success. HeNan Smart Food believes that as the average
disposable income per capita in the PRC rises, consumer tastes will become more
sophisticated and PRC consumers will seek a greater variety of products. The
ability to develop food products targeting specific consumer segments will
become increasingly important. HeNan Smart Food has a dedicated central research
and development center in Henan.





20




Strong
management team with extensive experience and capabilities




HeNan
Smart Food’s senior management team has extensive experience in the food and
beverage business as well as a comprehensive understanding of local market
conditions and practices. HeNan Smart Food is able to achieve this balance of
local knowledge and industry expertise by fully utilizing the various sources of
talent available to it.  Some of HeNan Smart Food’s executives have worked
at other leading food and beverage companies such as Master Kang, Uni-President,
Hua Long and others.  HeNan Smart Food’s management teams have built up
significant local market know-how and expertise, including a deep understanding
of local consumers’ tastes and preferences, and strong relationships with local
distribution channels.  HeNan Smart Food’s management teams have first hand
experience and ability in growing its business from a small base into a leading
producer and distributor of instant noodles in the People’s Republic of China
and building a name brand across China.  HeNan Smart Food is proud of its
past achievement, and intends to leverage its team’s experience to expand its
businesses in the future.




Products




HeNan
Smart Food began producing and selling instant noodles in the PRC in 1991. 
HeNan Smart Food produces over 100 types of instant noodle products under 7
distinctive brand names, targeting different segments of the instant noodle
market.  HeNan Smart Food’s branding strategy is key to its product
development and differentiation and it has launched its products around several
key brands.  HeNan Smart Food packages and sells instant noodles in plastic
packets, cups and bowls. HeNan Smart Food’s packet instant noodles typically
contain a single serving of between 75 and 115 grams of noodles along with
seasoning powder and/or sauce and are sold at prices ranging from RMB0.5 to over
RMB2.0 per packet, depending on the target market of the particular brand. HeNan
Smart Food’s cup and bowl instant noodles are sold in cups and bowls made out of
paper and/or polypropylene, and include a plastic fork, and a single serving of
between 80 and 120 grams of noodles along with seasoning powder and sauce. Our
products, although sold at varying prices, typically are concentrated on the
middle markets, which have whole sales prices at RMB0.8 – 1.0 per pack, and
these products are typically sold at a suggested retail price of approximately
RMB1.0 – 1.2 per pack.  HeNan Smart Food’s bowl instant noodles are
typically sold at whole sale price of RMB2.0 – 2.5 per pack, and a suggested
retail price of RMB2.8 - 3.5 per serving depending on brand and target
market.




HeNan
Smart Food has a strong presence in the middle market consisting of instant
noodles priced at approximately RMB1.2 retail price. HeNan Smart Food expects
this segment to continue to grow.





21




The
following table contains additional information about some of our major product
offerings:










Raw
Materials and Suppliers




The
principal raw materials HeNan Smart Food uses in the production of instant
noodles include flour, palm oil, dehydrated vegetables, and various flavorings
and spices.  In addition, packaging materials also represent a key
production cost.  Overall, raw materials and consumables used typically
accounted for approximately 48% of HeNan Smart Food’s revenue. In addition,
packaging materials, such as carton boxes, polypropylene and paper-based
cups/bowls are significant components in the production cost of HeNan Smart
Food’s instant noodle products and constituted typically approximately 13% of
its revenue.




Most raw
materials for HeNan Smart Food’s products are sourced centrally by its Henan
headquarters. HeNan Smart Food centrally sources its raw materials in order to
increase its negotiation leverage with suppliers. Certain raw materials are
sourced locally from suppliers located near HeNan Smart Food’s various
production facilities. HeNan Smart Food purchases flour, which is used in making
its instant noodle products, from Henan province which is the largest wheat
producing province in China, and has the best quality of wheat.




Most of
the principal raw materials used in the manufacture of HeNan Smart Food’s
products are commodities, and accordingly, prices of its principal raw materials
fluctuate. HeNan Smart Food monitors supply and cost trends of these raw
materials and take appropriate action to obtain the ingredients it needs for
production. Over the three years ended December 31, 2006, 2007 and 2008, costs
of several of HeNan Smart Food’s major raw materials particularly the palm oil
fluctuated dramatically.  While HeNan Smart Food expects prices of its raw
materials to fluctuate, it believes there is generally an adequate supply of
these raw materials and they can be obtained from numerous
suppliers.





22




For flour
materials, HeNan Smart Food typically buys during the harvest season, when the
prices are at relative low levels, and it stores the wheat in its own storage
for later use.  For palm oil, HeNan Smart Food generally enters into
monthly purchase contracts with suppliers and places orders with them according
to its needs throughout the year.  HeNan Smart Food currently has 4
suppliers of palm oil.  HeNan Smart Food’s  policy is to generally
source each raw material from at least two different suppliers. HeNan Smart Food
does not engage in any hedging activities in relation to commodity
prices.




HeNan
Smart Food chooses suppliers on the basis of quality, price and level of service
provided. The ability to satisfy HeNan Smart Food’s quality standards is always
the top priority.




HeNan
Smart Food has an assessment team made up of employees from various departments,
including its research and development center, its technical department and the
relevant business department which assesses the quality of the materials
supplied by potential suppliers. Such assessment usually involves inspection of
qualification certificates, on-site inspection of the production process and
surrounding environment, and determination of level of technical sophistication.
HeNan Smart Food only appoints suppliers who can satisfy all its internal
criteria. HeNan Smart Food continues to monitor the quality of raw materials
provided by all its suppliers. Quality control personnel at each of its
manufacturing facilities conduct testing of raw materials upon each delivery to
ensure compliance with quality standards.




HeNan
Smart Food sources all of its flour within Henan province of China, and its palm
oil is principally sourced from Malaysia.  Currently, the packaging
materials used for HeNan Smart Food’s instant noodle products are supplied by an
independent third party and HeNan Smart Food makes packaging boxes with its own
factory.




For the
year ended December 31, 2008 HeNan Smart Food’s top five largest suppliers
accounted for 43.3% of its total cost of sales.   Payment is generally
made by way of cash remittance after HeNan Smart Food takes the delivery, and a
credit period of 7 - 8 days is generally granted by its suppliers.





23




Production
Process




The
diagram below illustrates the production process for our instant noodle
products:









Quality
Control




HeNan
Smart Food monitors the quality of its raw materials and products at each stage
of the procurement and production processes. Quality assurance is always HeNan
Smart Food’s top priority when evaluating potential and current suppliers. HeNan
Smart Food currently has 59 staff in the quality control department, and it
conducts quality assessment on all potential suppliers before selecting them as
its supplier, and monitors the quality of raw materials supplied on an on-going
basis.  HeNan Smart Food has formulated and implemented standard operating
procedures with respect to every stage of the production process to regulate and
standardize the conduct of its production staff.  Final products are sample
tested prior to delivery to HeNan Smart Food’s customers to ensure that both
internal and PRC quality standards have been met.  Customer feedback is
collected, processed and provided to relevant departments for their analysis
with a view to improving and resolving any deficiency promptly so as to enhance
customer satisfaction. HeNan Smart Food has also formulated internal guidelines
on sales returns. Quality control, production and business departments jointly
review and analyze customers’ complaints, keep a record of how the complaints
have been handled, and compile, file and promptly pass such record to the
responsible department in question so that the department can understand
relevant issues, carry out a review and make improvements. HeNan Smart Food has
been awarded ISO 9001: 2000 with respect to all of its operating facilities.
HeNan Smart Food is in compliance with product safety and hygiene laws and
regulations in the PRC and has not encountered any significant product liability
claims or product safety or hygiene complaints in the past.





24




Marketing,
Sales and Distribution




Marketing
and Branding Strategy




HeNan
Smart Food engages in a variety of marketing activities including advertising on
commercial and satellite television, radio and other media, outdoor advertising
on billboards, buses and bus stops, and various promotional activities including
consumer promotions such as sales and discounts, sponsorship of public events,
free taste samples at designated sales locations and use of sponsors and
spokespersons to promote brand awareness.   For the three years ended
December 31, 2006, 2007 and 2008 total promotion and advertising expenses were
approximately RMB14.2 million, RMB15.2 million, and RMB20.8 million,
respectively. Branding activities constitute an important part of HeNan Smart
Food’s marketing efforts. As HeNan Smart Food’s products are sold under
distinctly different product brands to target specific demographics and consumer
segments, HeNan Smart Food has different marketing teams developing and adopting
different strategies for each product brand.




Distribution
Network




The
establishment and maintenance of an extensive distribution network are crucial
to the profitability and growth of HeNan Smart Food’s business and to the swift
and effective distribution of new products.  HeNan Smart Food’s
distribution network covers more than 800 counties in 22 provinces across
China.  HeNan Smart Food’s distribution network consists of various
traditional and modern distribution channels located throughout the PRC and
special distribution channels.




Traditional
distribution channels include small stalls, grocery and general merchandise
stores. Such small, local distribution points make up most of the distribution
points in China and are particularly prevalent in second and third tier cities
and less developed areas of the PRC. HeNan Smart Food believes most of its
product sales are made through traditional distribution channels.




Modern
distribution channels include supermarkets, hypermarkets and convenience
stores.  Modern distribution channels have become an increasingly popular
means of distribution as urbanization increases across the PRC. 
 HeNan Smart Food believes its sales through modern distribution channels
are relatively small, due to the fact that it is more focused on the middle
markets in secondary cities and counties.




Most of
HeNan Smart Food’s sales are made through independent third party distributors.
HeNan Smart Food has been making use of its relationship with distributors to
develop its distribution network. In certain cases, HeNan Smart Food’s sales
personnel also work alongside with its distributors in servicing its end
customers. HeNan Smart Food’s distributors typically have strong local
connections and are familiar with the local market in which they operate. HeNan
Smart Food intends to continue to rely on its distributors whenever it is able
to do so and therefore it will introduce its end customers to them when it
believes it is more efficient for its distributors to deal with them so that
HeNan Smart Food can focus on developing new customers and markets and promoting
new products.




HeNan
Smart Food’s sales and marketing department is based in Henan headquarters and
it is divided into 9 regions, with each region being responsible for the sales
and marketing of HeNan Smart Food’s products in that particular region. 
Most of HeNan Smart Food’s sales managers and staff make frequent visits to
distributors which provide constant feedback about the market trends and
customer opinions on HeNan Smart Food’s products.  As of March 31, 2009,
HeNan Smart Food’s sales team comprised more than 600 staff personnel dealing
with the distribution of its instant noodle products.





25




HeNan
Smart Food believes that its strategy of building a traditional distribution
network in rural areas throughout the PRC in addition to modern distribution
channels allows it to enjoy a wide distribution coverage for its products,
giving HeNan Smart Food a broader potential market than some of its competitors.
HeNan Smart Food believes that it can further strengthen its market position and
expand the market shares of its various products by building stronger
distribution networks to cover more regions and areas in the PRC.




HeNan
Smart Food’s distributors purchase its products as principals. Cash payment is
typically made prior to shipment. Such sales are final and not conditional upon
the purchasers re-selling HeNan Smart Food’s products to end consumers. As such,
HeNan Smart Food generally books sales when these purchasers take receipt of its
products and such purchasers, and not end consumers, effectively constitute
HeNan Smart Food’s direct customers. HeNan Smart Food typically bears the cost
of transporting its products to distributors within 500 kilometers and it
charges certain transportation fees beyond 500 kilometers.   All of
HeNan Smart Food’s sales contracts are entered into with its head office. 
HeNan Smart Food’s customer base is diverse. For the year ended December 31,
2008, HeNan Smart Food’s top five customers accounted for 6.52% of its total
sales revenue.




Capital
Expenditures




HeNan
Smart Food’s capital expenditures are principally comprised of purchases of
property, plant and equipment in connection with its existing and expanding
production facilities and building new production facilities for its instant
noodle products. For the three years ended December 31, 2006, 2007, and
2008, the total cash outflow of principal capital expenditures over
total assets are 11.1%, 6.0%, and 5.6%, respectively. The Company intends to use
cash from operations and funds raised in financings for any material capital
expenditures.




Research
and Product Development




Developing
new products in a timely manner to cater to the tastes of local customers is a
key component of HeNan Smart Food sales strategy.




HeNan
Smart Food has a dedicated research and development team which is situated in
Henan.  As of March 31, 2009, there were 16 personnel working at our
R&D department.  Such personnel are organized into separate product
development divisions, focusing on new flavor/product development and technical
know-how research and development. In addition to new product/flavor development
and technological development, HeNan Smart Food’s R&D department also
participates in quality control and studies ways to reduce production costs of
its existing instant noodle products.




The
business department formulating a new idea or requiring a new product to be
developed will work closely with the R&D department and the new product will
be given to independent market researchers who will gather further public
opinion through taste tests and consumer interviews. HeNan Smart Food takes into
account external market research, its estimated costs of production and its
expected profit margin and finalize the recipe, packaging and design of such
products. HeNan Smart Food typically tests the market of a product in various
regions. If the product proves successful, HeNan Smart Food will then launch it
nationally.  The whole product development process, from submission of an
idea to product launch, typically takes between 2 and 3 months.





26




Facilities
and Production




As of
March 31, 2009, HeNan Smart Food owned 2 parcels of land located at North of
Xiwu Road and South of Xiwu Road, respectively, Xihuafeng Village, Xitao Town,
with an aggregate site area of approximately 131,960.51 square meters for
industrial use.  HeNan Smart Food also owned 38 buildings or units, located
at Xitao Town, Wuzhi County of HeNan Province.  HeNan Smart Food has
legally obtained the state-owned land use rights certificates for the
aforementioned 2 parcels of land. HeNan Smart Food has obtained the building
ownership certificates for the above 38 buildings or units.




HeNan
Smart Food produces its instant noodle products in 2 manufacturing facilities
located in Wu Zhi, Henan Province, and Qi Shan, Shaanxi Province, respectively.
In addition, occasionally HeNan Smart Food also outsources a portion of its
production through arrangements with a number of manufacturing partners to
produce its instant noodle products.




HeNan
Smart Food operates 26 production lines producing instant noodle products. HeNan
Smart Food’s total annual designed production capacity is currently
approximately 2.3 billion packs of instant noodle products. The annual designed
capacity is calculated based on HeNan Smart Food’s production facilities
operating two shifts, 16 hours a day and 300 days per year.  HeNan Smart
Food plans to expand its new instant noodle production facility in the future
either by building its own production lines or by selective
acquisitions.




HeNan
Smart Food maintains various insurance policies to cover its production
facilities and other principal fixed assets including its
inventory.




Environmental
Matters




HeNan
Smart Food’s business discharges little waste materials and therefore is very
environmental friendly.  HeNan Smart Food monitors and ensures its business
to be in compliance with all statutory regulations and its internal standards
relating to environmental protection. HeNan Smart Food believes it is in
compliance with applicable environmental regulations in the PRC in all material
respects.  And the costs associated with environmental compliance has been
immaterial.




Competition




The
following table indicates the market size of the instant noodle market in China
from 2003 to 2008:


Year 2003
                  
                  
                  Year 2004
                  
                  
                  Year 2005
                  
                  
                  Year 2006
                  
                  
                  Year 2007
                  
                  
                  Year 2008Sales
      of Instant Noodles by Volume ('000 Tonnes)
                  
                  
                  2,410.4
                  
                  
                  
                  2,675.2
                  
                  
                  
                  2,970.4
                  
                  
                  
                  3,270.4
                  
                  
                  
                  3,380.5
                  
                  
                  
                  3,489.0Sales
      of Instant Noodles by Value (RMB Million)
                  
                  
                  34,865.1
                  
                  
                  
                  38,677.0
                  
                  
                  
                  42,804.8
                  
                  
                  
                  47,449.8
                  
                  
                  
                  54,328.5
                  
                  
                  
                  59,034.1




Source:
Noodles in China by Euromonitor International in February 2009





27




The
instant noodle market in China is fragmented with various regional and local
manufacturers. Consumers in this market are highly price-sensitive and therefore
manufacturers have in the past primarily competed on price or sometimes by
increasing the serving size while maintaining the same price levels. The market
has witnessed consolidation over the past several years.




Noodles
Company Shares (% Retail Value)





Year 2003
                
                
                Year 2004
                
                
                Year 2005
                
                
                Year 2006
                
                
                Year 2007Ting
      Hsin Int'l Group
                
                
                24.9
                
                
                
                24.9
                
                
                
                24.8
                
                
                
                24.2
                
                
                
                26.1Hebei
      Hua Long Food Co. Ltd.
                
                
                10.0
                
                
                
                12.1
                
                
                
                13.3
                
                
                
                15.1
                
                
                
                14.8Uni-President
      China Holdings Ltd.
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                6.7Baixiang
      Food Group
                
                
                5.6
                
                
                
                5.5
                
                
                
                5.7
                
                
                
                5.7
                
                
                
                5.6Henan
      Si Mei Te Food Co. Ltd.*
                
                
                4.6
                
                
                
                4.5
                
                
                
                4.4
                
                
                
                4.9
                
                
                
                4.8Hebei
      Zhongwang Food Group Ltd.
                
                
                3.8
                
                
                
                4.0
                
                
                
                3.9
                
                
                
                3.9
                
                
                
                3.8Guangdong
      Jinfeng Enterprises Co. Ltd.
                
                
                3.7
                
                
                
                3.7
                
                
                
                3.6
                
                
                
                3.5
                
                
                
                3.4Henan
      Nanjiecun Group Ltd.
                
                
                2.9
                
                
                
                2.8
                
                
                
                2.6
                
                
                
                2.7
                
                
                
                2.6




Source:
Noodles in China by Euromonitor International in February 2009




*
              Includes
      the Wang Factories.


In 2007,
the top five instant noodle manufacturers together accounted for 58.0% of the
total market, with the top three manufacturers accounting for 47.6% market
share.  In 2007, HeNan Smart Food had 4.8% of the total instant noodle
market making HeNan Smart Food the 5th largest manufacturer of instant noodle
products (which includes the products produced by the Wang Factories (whose
production accounts for approximately 20% of that of HeNan Smart
Food)).





Noodles
Brand Shares (% Retail Value)


Brand
                Company
                
                Year 2004
                
                
                Year 2005
                
                
                Year 2006
                
                
                Year 2007Master
      Kong
                Ting
      Hsin Int'l Group
                
                
                24.9
                
                
                
                24.8
                
                
                
                24.2
                
                
                
                26.1Hua
      Long
                Hebei
      Hua Long Food Co. Ltd.
                
                
                8.1
                
                
                
                8.5
                
                
                
                9.4
                
                
                
                9.1Jinmailang
                Hebei
      Hua Long Food Co. Ltd.
                
                
                3.9
                
                
                
                4.7
                
                
                
                5.6
                
                
                
                5.6Hao
      Hao Chi
                Baixiang
      Food Group
                
                
                5.5
                
                
                
                5.7
                
                
                
                5.7
                
                
                
                5.6Si
      Mei Te*
                Henan
      Si Mei Te Food Co. Ltd.
                
                
                4.5
                
                
                
                4.4
                
                
                
                4.9
                
                
                
                4.8San
      Tai Zi
                Hebei
      Zhongwang Food Group Ltd.
                
                
                4.0
                
                
                
                3.9
                
                
                
                3.9
                
                
                
                3.8President
                Uni-President
      China Holdings Ltd.
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                3.6Jinfeng
                Guangdong
      Jinfeng Enterprises Co. Ltd.
                
                
                3.7
                
                
                
                3.6
                
                
                
                3.5
                
                
                
                3.4Hao
      Jin Dao
                Uni-President
      China Holdings Ltd.
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                2.9Han
      Jielun
                Henan
      Nanjiecum
                
                
                2.8
                
                
                
                2.6
                
                
                
                2.7
                
                
                
                2.6




Source:
Noodles in China by Euromonitor International in February 2009




*
            Includes
      the Wang Factories.





28




In 2007,
the top five instant noodle brands together accounted for 51.2% of the total
market, with the top three brands accounting for 40.8% of the total market
share.  In 2007, HeNan Smart Food’s Si Mei Te had 4.8% of the total instant
noodle market making Si Mei Te the 5th largest brand of instant noodle products
(which includes the products produced by the Wang Factories (whose production
accounts for approximately 20% of that of HeNan Smart Food)).




According
to Euromonitor’s observation and analysis, there was a significant price hike
for noodles, especially instant noodles, in 2007 and 2008.  The main raw
material such as vegetable and seed oil and flour saw prices rise significantly
in 2007 and 2008, which directly increased the production cost of noodles. 
According to the National Bureau of Statistics of China, the price of oil
increased by 18% in the first quarter of 2008 compared to the same period in
2007.  In order to absorb the cost increase, almost all leading instant
noodles brands increased prices in mid-2007.




HeNan
Smart Food faces significant competition in the instant noodle markets in the
China. It competes against several major Chinese instant noodle manufacturers.
In addition, there are numerous smaller manufacturers of instant noodles. 
Competition for instant noodles in the China is primarily on the bases of price,
brand recognition and taste.




Trademarks
and Intellectual Property




As of
March 31, 2009, HeNan Smart Food had registered 26 patents in the PRC, and had
another 15 patents under application.  HeNan Smart Food also had 22
registered trademarks, with another 88 under applications.




Employees




As of
March 31, 2009, HeNan Smart Food employed approximately 3,800 employees. All of
them were located in the 26 production lines and our corporate office located
in two manufacturing facilities in Wu Zhi, Henan province, and Qi Shan,
Shaanxi province. These employees include approximately 3,000 employees involved
in HeNan Smart Food’s manufacturing activities, 600 involved in sales and
marketing and 200 in management and administrative activities. HeNan Smart Food
believes is has maintained good relationships with its employees and no major
disputes have incurred since its inception.





29




Occupational
Health and Safety




In order
to ensure that HeNan Smart Food provides its employees with a safe working
environment, HeNan Smart Food has adopted certain management rules on production
safety based on the safety laws and regulations of the PRC. It is mandatory for
all of HeNan Smart Food’s employees to abide by these safety rules.  HeNan
Smart Food provides safety education to its employees and has established safety
standards in connection with matters such as purchasing, installing and
operating new equipment, as well as for each stage of the manufacturing process.
In addition, each of HeNan Smart Food’s production plants has established a
safety and hygiene department responsible for supervising the labor, hygiene and
safety conditions in its production process, and monitoring compliance with
statutory regulations and its established standards relating to production
safety. HeNan Smart Food also requires its production staff to go through annual
medical check-ups to ensure the safety of its products.




Seasonality




HeNan
Smart Food experiences seasonal fluctuations in demand for its instant noodle
products, with demand for its instant noodle products generally higher during
the cold weather of autumn and winter. The seasonal nature of HeNan Smart Food’s
products causes its production lines to operate at near full capacity during
certain times of the year and at significantly less than full capacity at
others. The utilization rates for the instant noodle production lines will be
lower during the second and third quarters of each year.  HeNan Smart
Food’s average utilization rate for the year ended December 31, 2008 was
approximately 80% of the maximum capacity.




Governmental
Regulations




HeNan
Smart Food’s businesses in the PRC are primarily subject to supervision and
administration of the following PRC government authorities:




·
            The
      Ministry of Health (“MOH”) and its local counterparts are responsible for
      supervision and control of food hygiene throughout
  PRC.




·
            The
      General Administration of Quality Supervision, Inspection and Quarantine
      (“GAQSIQ”) and its counterparts are responsible for the supervision and
      administration of quality safety of food manufacturing and processing in
      PRC.




Regulations
on the Industry of Food Production and Sale in China




Regulations on Food
Safety. Food Safety Law of the People's Republic of China (“Food Safety
Law”) (中华人民共和国食品安全法) has
come into force on June 1, 2009 and is the principal law governing food safety
through food production, processing and sale in the PRC. Anyone engaging in food
production processing or sale is subject to the Food Safety Law which sets out
the monitoring and assessment of food safety risks, standards for food safety,
food production, trading and inspection, food import and export, disposal of
food safety accidents and the legal liabilities for violating the provisions
stipulated therein. According to the Food Safety Law, to engage in food
production, food circulation, and catering services, the food production
license, food circulation license, and catering service license shall be
obtained and Food producers who have obtained food production license do not
need to obtain food circulation license for selling the food produced by them at
their production place.


30




Regulations on Production
license. In accordance with the Regulation of the PRC on Production
Licenses for Industrial Products (中华人民共和国工业产品生产许可证管理条例),
which was promulgated by the State Council on July 9, 2005, the PRC implements a
system of production licensing over enterprises manufacturing certain important
industrial products and the catalogue of such important industrial products is
formulated by GAQSIQ in cooperation with other relevant governmental
authorities.  According to the Regulation of the PRC on Production Licenses
for Industrial Products and its implementing measures, no enterprise is
permitted to manufacture products listed in the catalogue of important
industrial products unless the production license is obtained from the GAQSIQ or
its local counterparts.




Regulations
on Environment Protection




The major
environmental regulations applicable to HeNan Smart Food include the
Environmental Protection Law of the PRC (中华人民共和国环境保护法), Law
of the PRC on the Prevention and Control of Water Pollution (中华人民共和国水污染防治法), Law
of the PRC on the Prevention and Control of Atmospheric Pollution (中华人民共和国大气污染防治法),
Law of the PRC on the Prevention and Control of Pollution From Environmental
Noise (中华人民共和国环境噪声污染防治法),
Law of the PRC on the Prevention and Control of Environmental Pollution by Solid
Waste (中华人民共和国固体废物污染环境防治法).
These laws and regulations govern a broad range of environmental matters,
including air pollution, noise emissions and water and waste
discharge.




According
to these environmental laws and regulations, all business operations that may
cause environmental pollution and other public hazards are required to
incorporate environmental protection measures into their plans and establish a
reliable system for environmental protection. These operations must adopt
effective measures to prevent and control pollution levels and harm caused to
the environment in the form of waste gas, waste water and solid waste, dust,
malodorous gas, radioactive substances, noise, vibration and electromagnetic
radiation generated in the course of production, construction or other
activities.




Enterprises
are also required to carry out an environment impact assessment before
commencing construction of production facilities and install pollution disposal
facilities which should meet the relevant environmental standards and to dispose
pollutants before discharge.




Government
Regulations Relating to Foreign Exchange Controls




The
principal regulation governing foreign exchange in the PRC is the Foreign
Currency Administration Rules (2008), as amended. Under the
aforesaid rules, the Renminbi, the PRCs currency, is freely convertible for
trade and service related foreign exchange transactions (such as normal
purchases and sales of goods and services from providers in foreign countries),
but not for direct investment, loan or investment in securities outside of China
unless the prior approval of the State Administration for Foreign Exchange, or
SAFE, of the PRC is obtained. Foreign investment enterprises, or FIEs, are
required to apply to the SAFE for Foreign Exchange Registration Certificates for
FIEs.  Si Mei Te is a FIE as a result of its aquisition of HeNan
Smart Food. With such registration certificates, which need to be renewed
annually, FIEs are allowed to open foreign currency accounts including
a current account and capital account. Currency translation within the
scope of the current account, such as remittance of foreign currencies for
payment of dividends, can be effected without requiring the approval of the
SAFE. Such transactions are subject to the consent of investment banks which are
authorized by the SAFE to review current account currency transactions.
However, conversion of currency in the capital account, including capital items
such as direct investment, loans and securities, still require approval of the
SAFE. This prior approval may delay or impair the combined company’s ability to
operate following the proposed acquisition. On November 21, 2005, the SAFE
issued Circular No. 75 on Relevant Issues Concerning Foreign Exchange Control on
Domestic Residents Corporate Financing and Roundtrip Investment through Offshore
Special Purpose Vehicles. Circular No. 75 confirms that the use of offshore
special purpose vehicles as holding companies for PRC investments are permitted,
but proper foreign exchange registration applications are required to be
reviewed and accepted by the SAFE or its local counterparts.


31




Government
Regulations Relating to Taxation




Income Tax. Prior to
January 1, 2008, the standard enterprise income tax rate was 33%, which
consisted of a 30% national income tax and a 3% local surcharge, for a company’s
domestic and overseas incomes.




On March
16, 2007, the Fifth Session of the Tenth National People’s Congress passed the
Enterprise Income Tax Law of the People’s Republic of China (the “EIT
Law”),
which become effective on January 1, 2008. Under the EIT Law, PRC companies are
subject to a uniform income tax rate of 25%. The EIT Law provides a five-year
transition period starting from its effective date for those enterprises which
were established before the promulgation date of the EIT Law and which were
entitled to a preferential lower tax rate under the then-effective tax laws or
regulations. In accordance with regulations issued by the State Council, the tax
rate of such enterprises may gradually transition to the uniform tax rate within
the transition period. For those enterprises which are enjoying tax holidays,
such tax holidays may continue until their expiration in accordance with the
regulations issued by the State Council, but where the tax holiday has not yet
started because of losses, such tax holiday shall be deemed to commence from the
first effective year of the EIT Law. Preferential tax treatment would continue
to be given to companies in certain encouraged sectors and to entities
classified as high-technology companies supported by the PRC government.
According to the EIT Law, entities that qualify as high-technology companies
especially supported by the PRC government are expected to benefit from a tax
rate of 15% as compared to the uniform tax rate of 25%. Nevertheless, there can
be no assurances that any particular company will continue to qualify as a
high-technology company supported by the PRC government in the future, and
benefit from such preferential tax rate. Following the effectiveness of the EIT
Law, a company’s effective tax rate may increase, unless it is otherwise
eligible for preferential treatment.




Additionally,
under the EIT Law, an income tax rate for dividends payable to non-PRC investors
and derived from sources within the PRC may be increased to 20%. It is currently
unclear in what circumstances a source will be considered as located within the
PRC.




The EIT
Law provides only a framework of the enterprise tax provisions, leaving many
details on the definitions of numerous terms as well as the interpretation and
specific applications of various provisions unclear and unspecified. Any
increase in the combined company’s tax rate in the future could have a material
adverse effect on its financial conditions and results of
operations.


32




Value-added Tax.
Pursuant to the Provisional Regulation on Value-Added Tax of PRC (中华人民共和国增值税暂行条例) and
its implementing rule, all entities and individuals that are engaged in the sale
of goods, the provision of repairs and replacement services and the importation
of goods in the PRC are generally required to pay value-added tax at a rate of
17% of the gross sales proceeds received less any deductible value-added tax
already paid or borne by the taxpayer. Furthermore, when exporting goods, the
exporter is entitled to a total or partial refund of value-added tax that it has
already paid or borne. The imported raw materials that are used for
manufacturing export products and are deposited in the warehouses of free trade
zone are exempt from import value-added tax.




Regulation
of Dividend Distribution




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




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




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




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




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




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




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




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





33




Periodic
Reporting and Audited Financial Statements




Si Mei Te
has registered its securities under the Securities Exchange Act of 1934 and has
reporting obligations, including the requirement to file annual reports with the
SEC. In accordance with the requirements of the Securities Exchange Act of 1934,
Si Mei Te’s annual report contains financial statements audited and reported on
by Si Mei Te’s independent registered public accounting firm.




As a
foreign private issuer, we are exempt from the rules under the Securities
Exchange Act of 1934, as amended, prescribing the furnishing and content of
proxy statements. In addition, we will not be required under the Exchange Act to
file current reports with the SEC as frequently or as promptly as United States
companies whose securities are registered under the Exchange Act.




Legal
Proceedings




Si Mei Te
is not currently a party to any pending legal proceeding. Historically HeNan
Smart Food has not been involved in any lawsuits, or material disputes that led
to legal actions with third parties.  Currently HeNan Smart Food is not
engaged in any litigation or arbitration proceedings or aware of any such
proceedings pending or threatened against it or any of its Directors that could
have a material adverse effect on its financial condition or results of
operation.




C. 
         Organizational structure.




As of
December 31, 2008, we did not have any subsidiaries, and were not part of a
group.  On June 26, 2009, we acquired all of the securities of Gliston
International Limited, the parent company of HeNan Smart Food, through a share
exchange whereby HeNan Smart Food became our wholly owned indirect
subsidiary.




The
following chart represents our significant subsidiaries, and each company’s
country of incorporation:









Each arrow represents 100% ownership
and possession of voting rights.





34




D. 
         Property, plants and equipment.




Prior to
its acquisition of HeNan Smart Food, Si Mei Te had no operations. From June 18,
2007 through June 26, 2009, Si Mei Te leased office space and certain general
and administrative services from Voxa, Inc., an affiliate of Beatrice Hom, the
Company’s previous chief operating officer, chief financial officer and a
previous member of its board of directors, for a fee of $7,500 per
month.




HeNan
Smart Food is a leading producer and distributor of instant noodles in the
People’s Republic of China.  HeNan Smart Food commenced operations in 1991
and became a Sino-foreign joint venture in 1995.  Since then, HeNan Smart
Food has grown into one of the leading brands in the instant noodle industry,
especially in secondary cities, counties and rural areas in China.  As of
December 31, 2008, HeNan Smart Food’s operations have expanded to include 26
production lines with a capacity of 2.3 billion packs of instant noodles per
year.  Production under HeNan Smart Food’s trademarks and
patents are distributed in more than 800 counties and 22 provinces across
China.  HeNan Smart Food’s business has grown significantly over the past
several years.  HeNan Smart Food’s revenue over the three years ended
December 31, 2008 grew at a compounded annual growth rate of approximately 27.3%
from $108 million for the year ended December 31, 2006 to $175 million for the
year ended December 31, 2008. HeNan Smart Food’s net income for the three years
ended December 31, 2006, 2007 and 2008 was approximately $9.5 million, $12.0
million, $22.7 million, respectively.




According
to Euromonitor, in the 12 months ended December 31, 2007, HeNan Smart Food was
the number 5 instant noodle manufacturer in China with 4.8% of the total market
value (which includes the products produced by the Wang Factories (whose
production accounts for approximately 20% of that of HeNan Smart
Food)).




HeNan
Smart Food produces approximately 100 instant noodle products, including bowl
noodles, packet noodles and snack noodles of different flavors in its production
facilities. HeNan Smart Food sells instant noodle products under 7 distinct
brands as follows:





·Si Yuan (思圆)
              
              ·Gou Wei (够味)
              
              ·Shi Shang ( 食尚)·Si Mei Te (斯美特)
              
              ·Zi Ran Yi Pai ( 自然一派)·Super Si Mei Te (超级斯美特)
              
              ·Crispy Noodle (香脆面)




HeNan
Smart Food currently targets the mid-market consisting of bowl and packet
instant noodles priced at approximately RMB0.8 to 1.2 per pack (wholesale
prices).  HeNan Smart Food produces its instant noodle products in 26
production lines located in 2 production facilities.  HeNan Smart Food
distributes its products throughout the PRC through its sales channels,
including approximately 1000 distributors in 22 provinces.  HeNan Smart
Food believes its extensive distribution network is an important competitive
advantage and will enable it to continue to rapidly and successfully introduce
new products to the market.





35




The
instant noodle industry in the PRC is highly competitive. HeNan Smart Food’s
ability to compete is, to a significant extent, dependent on its ability to
distinguish its products from those of its competitors by providing high quality
products at reasonable prices that appeal to consumers’ tastes and
preferences.  Unlike some of HeNan Smart Food’s competitors who have
diversified food and drink products, HeNan Smart Food is currently focused on
instant noodle products as it believes that there is significant growth
opportunity in its industry both through organic growth and through selective
acquisitions.




As of
March 31, 2009, HeNan Smart Food owned 2 parcels of land with an aggregate site
area of approximately 131,960.51 square meters for industrial use.  HeNan
Smart Food also owned 38 buildings or units.  HeNan Smart Food has legally
obtained the state-owned land use rights certificates for the aforementioned 2
parcels of land. HeNan Smart Food has obtained the building ownership
certificates for the above 38 buildings or units.




HeNan
Smart Food produces its instant noodle products in 2 manufacturing facilities
located at Wu Zhi, Henan province, and Qi Shan, Shaanxi province. In addition,
occasionally HeNan Smart Food also outsources a portion of its production
through arrangements with a number of manufacturing partners to produce its
instant noodle products.




HeNan
Smart Food operates 26 production lines producing instant noodle products. HeNan
Smart Food’s total annual designed production capacity is currently
approximately 2.3 billion packs of instant noodle products. The annual designed
capacity is calculated based on HeNan Smart Food’s production facilities
operating two shifts, 16 hours a day and 300 days per year.  HeNan Smart
Food plans to expand its new instant noodle production facility in the future
either by building its own production lines or by selective
acquisitions.




HeNan
Smart Food maintains various insurance policies to cover its production
facilities and other principal fixed assets including its
inventory.




ITEM
      4A.
            UNRESOLVED
      STAFF COMMENTS




None.




ITEM
      5.
            OPERATING
      AND FINANCIAL REVIEW AND PROSPECTS





OVERVIEW





Si Mei Te
Food Limited (f/k/a China Discovery Acquisition Corp.) is a Cayman Islands
exempted company that was incorporated on January 8, 2007, and organized as a
blank check company for the purpose of acquiring, through a share exchange,
asset acquisition or other similar business combination, or controlling, through
contractual arrangements, an operating business, that has its principal
operations in the People’s Republic of China, or PRC. Si Mei Te’s Memorandum and
Articles of Association at the time provided that it could not consummate a
business combination with a business that had its principal operations outside
of China.  To avoid being required to liquidate, as provided in its
constitutional documents, Si Mei Te needed, by June 26, 2009, to consummate a
business combination. Under its constitutional documents as previously in
effect, if Si Mei Te did not acquire at least majority control of a target
business by June 26, 2009, Si Mei Te would have gone into voluntary liquidation
and distributed to its public shareholders the amount in the trust account plus
any remaining net assets as part of the liquidation process.





36





On June
26, 2009, pursuant to the terms of a stock purchase agreement, dated as of
February 4, 2009, as amended, Si Mei Te acquired all of the outstanding
securities of the parent company of HeNan Smart Food, as a result of which HeNan
Smart Food became the wholly owned indirect subsidiary of Si Mei
Te.





HeNan
Smart Food is a leading producer and distributor of instant noodles in the
People’s Republic of China.  HeNan Smart Food commenced operations in 1991
and became a Sino-foreign joint venture in 1995.  Since then, HeNan Smart
Food has grown into a leading instant noodle brand, especially in secondary
cities, countries and rural areas in China.  As of December 31, 2008, HeNan
Smart Food’s operations have expanded to include 26 production lines with
capacity of 2.3 billion packs of instant noodles.  Production under HeNan
Smart Food’s trademarks and patents are distributed in more than 800
counties and 22 provinces across China.  HeNan Smart Food’s business has
grown significantly over the past several years.  HeNan Smart Food’s
revenue over the three years ended December 31, 2008 grew at a compounded annual
growth rate of 27.3% from $108 million for the year ended December 31, 2006 to
$175 million for the year ended December 31, 2008. HeNan Smart Food’s net income
for the three years ended December 31, 2006, 2007 and 2008 was approximately
$9.5 million, $12.0 million, $22.7 million, respectively.




HENAN
SMART FOOD’S FINANCIAL CONDITION AND RESULTS OF OPERATIONS




The
following discussion and financial information relates to periods prior to the
acquisition of the parent company of HeNan Smart Food by Si Mei Te.




Major
Factors Affecting HeNan Smart Food’s Results of Operations




HeNan
Smart Food’s results of operations and financial condition have been and will
continue to be affected by a number of factors, including those set out
below.




Growth
of Chinese Economy




Because
of the steady increase in the size of the economy and disposable income, China
will experience rapid growth in all areas of investment and consumption. HeNan
Smart Food believes that this rapid growth will provide sustained demand for its
instant noodle products.




Sales
Volume and Pricing of HeNan Smart Food’s Products




HeNan
Smart Food’s results of operations are directly affected by its sales volume,
which, in turn, is a function of market demand and its ability to widely
distribute its products. HeNan Smart Food’s revenue is also a function of the
average sales prices for the periods under the discussion.




Sales
volume of HeNan Smart Food’s instant noodle products increased by 12.0% from the
year ended December 31, 2006 to the year ended December 31, 2007 and increased
8.6% from the year ended December 31, 2007 to the year ended December 31, 2008.
Average prices of HeNan Smart Food’s instant noodle products increased by 15.0%
from the year ended December 31, 2007 to the year ended December 31, 2008. This
increase largely reflected HeNan Smart Food’s ability to pass the increase in
raw material costs to its customers during 2008.





37




Cost
of Raw Materials




Raw
materials and consumables and packaging materials used in the production of
HeNan Smart Food’s products comprise the largest component of its cost of sales,
and represented 84.1%, 84.0% and 81.2% of its cost of sales for the three years
ended December 31, 2006, 2007, and 2008, respectively. The largest raw materials
used in HeNan Smart Food’s production of instant noodles include flour, palm
oil, and packaging materials. Below is the portion of major cost items as
percentage of total cost of sales:





2006
                    
                    
                    2007
                    
                    
                    2008Flour
                    
                    
                    24.4
                    %
                    
                    
                    23.2
                    %
                    
                    
                    20.8
                    %Palm
      oil
                    
                    
                    17.0
                    %
                    
                    
                    18.7
                    %
                    
                    
                    27.7
                    %Packaging
      materials
                    
                    
                    23.4
                    %
                    
                    
                    21.6
                    %
                    
                    
                    20.7
                    %Other
                    
                    
                    35.2
                    %
                    
                    
                    36.5
                    %
                    
                    
                    30.8
                    %




Seasonality




HeNan
Smart Food experiences seasonal fluctuations in demand for its instant noodle
products, with demand for its instant noodle products generally higher during
cold weather of autumn and winter. The seasonal nature of HeNan Smart Food’s
products causes its production lines to operate at near full capacity during
certain times of the year and at significantly less than full capacity at
others, as the production lines for a particular product segment cannot be
converted into production lines for another product segment. The utilization
rates for the instant noodle production lines will be lower during the second
and third quarters of each year. The seasonal nature of HeNan Smart Food’s
different segments also affects comparability of its profit margins at different
times of the year. HeNan Smart Food’s average utilization rate for the year
ended December 31, 2008 was approximately 80% of maximum capacity based on 16
hours of production a day.




Inventory




Instead
of purchasing wheat evenly across a year, HeNan Smart Food purchases wheat
between June and September of a year, right after the wheat harvest season in
June. Therefore, HeNan Smart Food’s inventory is highest in the third quarter of
a year and lowest in the second quarter.




Gross
Profit and Gross Margin




Gross
profit is equal to the difference between HeNan Smart Food’s revenue and its
cost of revenue. Gross margin is equal to gross profit divided by revenue. In
the year ended December 31, 2008, HeNan Smart Food’s gross margin increased to
26.3%, while in fiscal year 2007, its gross margin was 22.9%. Between fiscal
years 2006 and 2008, HeNan Smart Food was able to maintain gross margins between
approximately 21% and 27%. Changes in HeNan Smart Food’s gross margin are
primarily driven by changes in its product sales volume, prices and cost of
revenue.





38




Operating
Expenses




HeNan
Smart Food’s operating expenses consist of selling expense and general and
administrative expenses.




Selling
Expenses. Selling expenses consist primarily of compensation and benefits to
HeNan Smart Food’s sales and marketing staff, sales commission, cost of
advertising, promotion, business travels, after-sale support, transportation
costs and other sales related costs.




General
and Administrative Expenses. General and administrative expenses consist
primarily of compensation and benefits to HeNan Smart Food’s general management,
finance and administrative staff, professional advisor fees, and other expenses
incurred in connection with general operation. HeNan Smart Food expects the
general and administrative expenses will increase as its business grows and the
expected increased costs for being a public company.




Below is
the table that shows the percentages of each major item against the total
selling, general and administrative expenses:





2006
                    
                    
                    2007
                    
                    
                    2008Marketing
                    
                    
                    19.6
                    %
                    
                    
                    12.6
                    %
                    
                    
                    8.8
                    %Transportation
                    
                    
                    42.0
                    %
                    
                    
                    47.2
                    %
                    
                    
                    45.7
                    %Salary
      and benefits
                    
                    
                    15.4
                    %
                    
                    
                    18.2
                    %
                    
                    
                    18.1
                    %Advertising
                    
                    
                    14.1
                    %
                    
                    
                    12.4
                    %
                    
                    
                    17.7
                    %Others
                    
                    
                    8.9
                    %
                    
                    
                    9.6
                    %
                    
                    
                    9.7
                    %




Provision
for Income Taxes




PRC. Foreign Invested
Entities, or FIE, established in the PRC are generally subject to an enterprise
income tax, or EIT, at a rate of 33%, which includes a 30.0% state income tax
and a 3.0% local income tax. On March 16, 2007, the National People’s Congress
of China passed the new Enterprise Income Tax Law, or EIT Law, and on November
28, 2007, the State Council of China passed the Implementing Rules for the EIT
Law, or Implementing Rules, which took effect on January 1, 2008. The EIT Law
and Implementing Rules impose a unified EIT of 25.0% on all domestic-invested
enterprises and FIEs, unless they qualify under certain limited exceptions.
Therefore, nearly all FIEs are subject to the new tax rate alongside other
domestic businesses rather than benefiting from the EIT, and its associated
preferential tax treatments, beginning January 1, 2008.




Year
Ended December 31, 2008 Compared to Year Ended December 31, 2007





39




The
following tables set forth financial data from our income statements for the
periods indicated:





For
      the years ended December 31,2006
                USD
              
              
              2007
                USD
              
              
              2008
                USDRevenue
              
              $
              165,387,248
              
              
              $
              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




Revenue. HeNan Smart Food’s
revenue increased $39.3 million, or 28.7% to $175.4 million in fiscal year 2008
from $136.1 million in fiscal year 2007. This increase was mainly attributable
to the increased sales volume and increase in HeNan Smart Food’s product prices
during 2008. During 2008, the Company increased its product price by average of
approximately 10% in light of significant increase in the price of palm oil.
There was an increase of approximately 18% in the product volume sold in 2008
compared to 2007.




Cost of Revenue. HeNan Smart
Food’s cost of revenue increased $24.4 million, or 23.3% to $129.3 million in
fiscal year 2008 from $104.9 million in fiscal year 2007. This dollar increase
was mainly due to increased production and sales volume, as well as increased
price of palm oil prices during the first half of 2008. As a percentage of
revenue, the cost of revenue decreased to 73.7% in fiscal year 2008 from 77.1%
in fiscal year 2007.




Gross Profit. HeNan Smart
Food’s gross profit increased $15.0 million to $46.1 million in fiscal year 2008
from $31.1 million in fiscal year 2007. Gross profit as a percentage of revenue
(gross margin) was 26.3% in fiscal year 2008, as compared to 22.9% in fiscal
year 2007.




General and Administrative Expenses. HeNan
Smart Food’s general and administrative expenses increased $0.6 million to $2.4
million in fiscal year 2008 from $1.8 million in fiscal year 2007. As a
percentage of revenue, general and administrative expenses increased to 1.4% in
fiscal year 2008 from 1.3% in fiscal year 2007. The dollar increase was mainly
attributable to the increase in business activities in general.




Selling Expenses. HeNan Smart
Food’s selling expenses increased $2.9 million to $15.8 million in fiscal year
2008 from $12.9 million in fiscal year 2007. As a percentage of revenue, HeNan
Smart Food’s selling expenses was 9.0% in fiscal year 2008 and 9.5% in fiscal
year 2007.




Other Income. HeNan Smart
Food’s other income, mainly net interest income, and sales of some scrap
materials, increased $1.7 million to $2.4 million in fiscal year 2008 from $0.7
million in fiscal year 2007.




Provision for Income Taxes.
HeNan Smart Food incurred income tax expense of $7.6 million and $5.2 million in
fiscal years 2008 and 2007, respectively.





40




Net Income. Net income
increased $10.8 million, or 90.8%, to $22.7 million in fiscal year 2008 from
$12.0 million in fiscal year 2007, as a result of the factors described above.
The net income margins were 13.0% and 8.8% for fiscal year ended December 31,
2008 and fiscal year ended December 31, 2007, respectively.




Year
Ended December 31, 2007 Compared to Year Ended December 31, 2006




Revenue. HeNan Smart Food’s
revenue increased $27.4 million, or 25.2% to $136.1 million in fiscal year 2007
from $108.7 million in fiscal year 2006. This increase was mainly attributable
to the increased sales volume during the periods.




Cost of Revenue. HeNan Smart
Food’s cost of revenue increased $18.5 million, or 21.4% to $104.9 million in
fiscal year 2007 from $86.4 million in fiscal year 2006. This dollar increase
was mainly due to increased production and sales volume. As a percentage of
revenue, the cost of revenue decreased to 77.1% in fiscal year 2007 from 79.5%
in fiscal year 2006.




Gross Profit. HeNan Smart
Food’s gross profit increased $8.9 million to $31.1 million in fiscal year 2007
from $22.3 million in fiscal year 2006. Gross profit as a percentage of revenue
(gross margin) was 22.9% in fiscal year 2007, as compared to 20.5% in fiscal
year 2006.




General and Administrative
Expenses. HeNan Smart Food’s general and administrative expenses
increased $0.4 million to $1.8 million in fiscal year 2007 from $1.4 million in
fiscal year 2006. As a percentage of revenue, general and administrative
expenses remained steady at 1.3% for both fiscal year 2007 and fiscal year
2006.




Selling Expenses. HeNan Smart
Food’s selling expenses increased $1.5 million to $12.9 million in fiscal year
2007 from $11.4 million in fiscal year 2006. As a percentage of revenue, HeNan
Smart Food’s selling expenses was 9.4% in fiscal year 2007 and 10.5% in fiscal
year 2006.




Other Income. HeNan Smart
Food’s other income, mainly net interest income and sales of some scrap
materials, decreased $1.0 million to $0.7 million in fiscal year 2007 from $1.7
million in fiscal year 2006.




Provision for Income Taxes.
HeNan Smart Food incurred income tax expense of $5.2 million and $1.7 million in
fiscal years 2007 and 2006, respectively.




Net Income. Net income
increased $2.5 million, or 26.3%, to $12.0 million in fiscal year 2007 from $9.5
million in fiscal year 2006, as a result of the factors described above. The net
income margins were 8.8% and 8.7% for fiscal year ended December 31, 2007 and
fiscal year ended December 31, 2006, respectively.




Cash
Flow Information




Fiscal
Year 2008




The
following table presents selected cash flow data from HeNan Smart Food’s
combined cash flow statements for the years ended December 31, 2006, 2007 and
2008.





December
      31,2008
              
              
              2007
              
              
              2006Net
      cash provided by operating activities
              
              $
              25,586,463
              
              
              $
              8,718,028
              
              
              $
              10,012,839Net
      cash used in investing activities
              
              
              (2,864,522
              )
              
              
              (184,538
              )
              
              
              (7,264,048
              )Net
      cash used in financing activities
              
              
              (10,521,793
              )
              
              
              (8,642,853
              )
              
              
              (4,253,027
              )Effect
      of exchange rate change
              
              $
              (230,646
              )
              
              $
              198,248
              
              
              $
              131,374Net
      increase in cash and cash equivalents
              
              $
              11,969,502
              
              
              $
              88,885
              
              
              $
              (1,372,862
              )




41




Operating Activities.
Net cash generated from operating activities was $25.6 million in fiscal year
2008, an increase of $16.9 million from the $8.7 million from fiscal year 2007.
Such increase of net cash position in operating activities was primarily
attributable to significant increase of net income during 2008 as compared to
2007.
  Net cash
generated from operating activities was $8.7 million in fiscal year 2007, and
the net cash provided by operating activities was $10.0 million in fiscal year
2006, partly attributable to increased use of cash in inventory during
2007.
  Investing Activities.
HeNan Smart Food’s main uses of cash for investing activities are payments
relating to the capital expenditures.  Net cash used in investing
activities in fiscal year 2008, 2007 and 2006 was $2.9 million, $0.2 million and
$7.3 million, respectively, and the amounts were used in various capital
expenditures related to HeNan Smart Food’s operations.
  Financing Activities.
Net cash used in financing activities in fiscal year 2008 totaled $10.5 million
as compared to $8.6 million used in financing activities in fiscal year 2007.
The increase of cash use in financing activities was mainly attributable to an
increase of dividends paid.
  Net cash
used in financing activities in fiscal year 2006 totaled $4.3
million.
  Loan Facilities.
HeNan Smart Food believes it currently maintains a good business relationship
with many banks. As of December 31, 2008, the maturities for HeNan Smart Food’s
bank loans were as follows.
  (All
amounts in millions of RMB)
 Banks
                      
                      Amount
                        (millions
                        of
      RMB)
                      
                      Starting
      Date
                      
                      Maturity
      Date
                      
                      Interest
                        Rate
      %China
      Agriculture Bank
                      
                      
                      44.0
                      
                      July
      15, 2008
                      
                      July
      13, 2009
                      
                      
                      7.48China
      Agriculture Bank
                      
                      
                      20.0
                      
                      June
      19, 2008
                      
                      March
      18, 2009
                      
                      
                      7.48China
      Agriculture Bank
                      
                      
                      15.0
                      
                      September17,
      2008
                      
                      July
      13, 2009
                      
                      
                      7.48Xi
      Tao Trust Bank
                      
                      
                      2.9
                      
                      February
      29, 2008
                      
                      February
      5, 2009
                      
                      
                      11.88Xi
      Tao Trust Bank
                      
                      
                      2.8
                      
                      May
      5, 2008
                      
                      November
      2, 2009
                      
                      
                      11.88Ge
      Zhuang Trust Bank
                      
                      
                      4.0
                      
                      September
      25, 2008
                      
                      September
      24, 2009
                      
                      
                      9.72
  *
              Calculated
      on the basis that $1 = RMB 6.8225
  42


Liquidity
and Capital Resources




HeNan
Smart Food has historically funded working capital and other capital
requirements principally with cash from operations and short-term borrowings
from banks and related parties. These sources of funding, and HeNan Smart Food’s
ability to fund its capital expenditure needs, could be adversely affected by
deterioration in its operating results, or an inability to obtain funds from
external sources on acceptable terms or in a timely manner. HeNan Smart Food
continuously manages its liquidity situation to ensure that it is adequate to
meet its needs. As of December 31, 2008, HeNan Smart Food had short-term bank
borrowing facilities in the amount of approximately $13.0 million. Approximately
$3.4 million of these short-term bank borrowing facilities were paid back in the
first quarter of 2009. In HeNan Smart Food opinion, its working capital is
sufficient for its present requirements.


According
to the relevant PRC laws and regulations, profits or dividends of HeNan Smart
Food shall be distributed to its foreign shareholders, i.e. Ever Smart
International Limited, according to the proportion of the consideration actually
paid by Ever Smart International Limited, who has acquired the equity interests
of HeNan Smart Food. As for the transfer of advance from HeNan Smart Food to its
foreign shareholders, if such foreign exchange is made through current account,
it shall be made out of its own foreign exchange funds on the strength of valid
documents or be made with foreign exchange purchased from any financial
institution engaged in foreign exchange settlement and sales business. If HeNan
Smart Food seeks to provide overseas commercial loans to its foreign
shareholders, it shall submit an application to the relevant foreign exchange
administrative authority which shall, in light of the assets, liabilities and
other circumstances of HeNan Smart Food, make a decision to approve or decline
the application.




Quantitative
and Qualitative Disclosure About Market Risk




Interest Rate Risk.
HeNan Smart Food is exposed to interest rate risk due primarily to its
short-term bank loans. Although the interest rates are fixed for the terms of
the loans, the terms are typically twelve months and interest rates are subject
to change upon renewal. HeNan Smart Food monitors interest rates in conjunction
with its cash requirements to determine the appropriate level of debt balances
relative to other sources of funds. HeNan Smart Food has not entered into any
hedging transactions in an effort to reduce its exposure to interest rate
risk.




Foreign Exchange
Risk. The value of the RMB against the U.S. dollar and other currencies
is affected by, among other things, changes in China’s political and economic
conditions. Since July 2005, the RMB has no longer been pegged to the U.S.
dollar. Although the People’s Bank of China regularly intervenes in the foreign
exchange market to prevent significant short-term fluctuations in the exchange
rate, the RMB may appreciate or depreciate significantly in value against the
U.S. dollar in the medium to long term. Moreover, it is possible that, in the
future, PRC authorities may lift restrictions on fluctuations in the RMB
exchange rate and lessen intervention in the foreign exchange
market.




Because
substantially all of HeNan Smart Food’s earnings and cash assets are denominated
in RMB, but its reporting currency is the U.S. dollar, fluctuations in the
exchange rate between the U.S. dollar and the RMB will affect its balance sheet
and its earnings per share in U.S. dollars. In addition, appreciation or
depreciation in the value of the RMB relative to the U.S. dollar would affect
HeNan Smart Food’s financial results reported in U.S. dollar terms without
giving effect to any underlying change in its business or results of operations.
Fluctuations in the exchange rate will also affect the relative value of any
dividend HeNan Smart Food issues in the future that will be exchanged into U.S.
dollars and earnings from, and the value of, any U.S. dollar-denominated
investments HeNan Smart Food makes in the future.




Very
limited hedging transactions are available in China to reduce HeNan Smart Food’s
exposure to exchange rate fluctuations. To date, HeNan Smart Food has not
entered into any hedging transactions in an effort to reduce its exposure to
foreign currency exchange risk. While HeNan Smart Food may enter into hedging
transactions in the future, the availability and effectiveness of these
transactions may be limited, and it may not be able to successfully hedge its
exposure at all. In addition, HeNan Smart Food’s foreign currency exchange
losses may be magnified by PRC exchange control regulations that restrict its
ability to convert RMB into foreign currencies.


43




Inflation.
Inflationary factors, such as increases in the cost of its products and overhead
costs, could impair HeNan Smart Food’s operating results. Although HeNan Smart
Food does not believe that inflation has had a material impact on its financial
position or results of operations to date, a high rate of inflation in the
future may have an adverse effect on its ability to maintain current levels of
gross margin and selling, general and administrative expenses as a percentage of
sales revenue if the selling prices of its products do not increase with these
increased costs.




Contractual
Payment Obligations


Payments
      due by periodTotal
              
              
              Less than
                1 year
              
              
              1-3 years
              
              
              3-5 years
              
              
              More than 5 yearsOperating
      lease commitment (factory rental)
              
              
              1,195,363
              
              
              
              123,658
              
              
              
              247,316
              
              
              
              247,316
              
              
              
              577,073Operating
      lease commitment (warehouse rental)
              
              
              36,644
              
              
              
              36,644
              
              
              
              –
              
              
              
              –
              
              
              
              –Purchase
      of plan and equipment
              
              
              383,747
              
              
              
              383,747
              
              
              
              –
              
              
              
              –
              
              
              
              –1,615,754
              
              
              
              544,049
              
              
              
              247,316
              
              
              
              247,316
              
              
              
              577,073





HeNan Smart Food intends to use cash
from operations and funds raised in financings for any material capital
expenditures.




Off-Balance
Sheet Arrangements




HeNan
Smart Food has no material off-balance sheet arrangements or
transactions.




Critical
Accounting Policies and Estimates




Key Accounting Policies and
Estimates. A company’s accounting policies form the basis for preparation
of its financial statements. Those financial statements in turn are an essential
factor in understanding a company’s operations. The accounting policies of HeNan
Smart Food are fully described in the notes to the financial statements as of
and for the years ended December 31, 2008, 2007 and 2006; these financial
statements are included in Section FII hereof and the index as presented on page
F-18. A summary of the key accounting policies of HeNan are set forth
below:




Revenue recognition.
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.




Business and income
taxes. Business and income taxes are accounted for 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.


44




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.




Foreign currency
translation. All of the revenues and costs of HeNan are denominated in
the Chinese Renminbi, as are substantially all of the Henan’s cash holdings,
assets and liabilities. The 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 a result, changes in the exchange rate of
Renminbi to the U.S. dollar will affect the Group's sales, cost of sales, and
operating margins and could result in exchange losses. The impact of future
exchange rate fluctuations on the Group's results of operations cannot be
accurately predicted.




The
financial statements of Henan are presented in United States Dollars ("US$").
Transactions in foreign currencies during the period are translated into US$ at
the exchange rates prevailing at the transaction dates. Monetary assets and
liabilities denominated in foreign currencies at the balance sheet date are
translated into US$ at the exchange rates prevailing at that date. All
transaction differences are recorded in the equity section of the balance sheet
as accumulated other comprehensive income.




Consequently
the exchange rates applicable to the Balance Sheet and Statement of Income can
be materially different in periods of rapidly changing exchange rates. As
result, the value of working capital assets recognized at the end of an
accounting period can differ materially from the revenue and expenses recorded
during the period.




RMB is
not a fully convertible currency to US$. All foreign exchange transactions
involving RMB must take place either institutions authorized to buy and sell
foreign exchange. The exchange rates adopted for the foreign exchange
transactions are the rates of exchange, which are determined by supply and
demand and policy priorities of the PRC central government.




The PRC
has adopted a managed floating exchange rate regime based on market demand and
supply with reference to a basket of currencies. The exchange rate of the US
dollar against the RMB was adjusted from approximately RMB 8.28 per US dollar to
approximately RMB 8.11 per US dollar on July 21, 2005. Since then, the PBOC
administers and regulates the exchange rate of US dollar against RMB taking into
account demand and supply of RMB, as well as domestic and foreign economic and
financial conditions.




Use of estimates. The
preparation of the financial statements requires management 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 period. Significant items subject to such estimates and assumptions.
Actual results could differ from estimates.


45




Seasonality




HeNan
Smart Food experiences seasonal fluctuations in demand for its instant noodle
products, with demand for its instant noodle products generally higher during
cold weather of autumn and winter. The seasonal nature of HeNan Smart Food’s
products causes its production lines to operate at near full capacity during
certain times of year and at significantly less than full capacity at others, as
the production lines for a particular product segment cannot be converted into
production lines for another product segment. The utilization rates for the
instant noodle production lines will be lower during the second and third
quarters of each year. The seasonal nature of HeNan Smart Food’s different
segments also affects comparability of its profit margins at different times of
the year. HeNan Smart Food’s average utilization rate for the year ended
December 31, 2008 was approximately 80% of maximum capacity based on 16 hours of
production a day.




Impact
of Inflation




Inflation
has not historically been a significant factor impacting HeNan Smart Food’s
results.




Research
and Product Development




Developing
new products in a timely manner to cater to the tastes of local customers is a
key component of HeNan Smart Food sales strategy.






HeNan
Smart Food has a dedicated research and development team which is situated in
Henan.  As of March 31, 2009, there were 16 personnel working at our
R&D department.  Such personnel are organized into separate
product development divisions, focusing on new flavor/product development and
technical know-how research and development. In addition to new product/flavor
development and technological development, HeNan Smart Food’s R&D department
also participates in quality control and studies ways to reduce production costs
of its existing instant noodle products.




The
business department formulating a new idea or requiring a new product to be
developed will work closely with the R&D department and the new product will
be given to independent market researchers who will gather further public
opinion through taste tests and consumer interviews. HeNan Smart Food takes into
account external market research, its estimated costs of production and its
expected profit margin and finalize the recipe, packaging and design of such
products. HeNan Smart Food typically tests the market of a product in various
regions. If the product proves successful, HeNan Smart Food will then launch it
nationally.  The whole product development process, from submission of
an idea to product launch, typically takes between 2 and 3 months.




Trademarks
and Intellectual Property




As of
March 31, 2009, HeNan Smart Food had registered 26 patents in the PRC, and had
another 15 patents under application.  HeNan Smart Food also had 22
registered trademarks, with another 88 under applications.


46




Governmental
Regulations




Please
refer to the section entitled “Item 4B. Information About Our Company–Business
Overview–Governmental Regulations” in this Form 20-F for a description of
governmental regulations that have materially affected, or could materially
affect, directly or indirectly, the Company’s operations.




SI
MEI TE’S FINANCIAL CONDITION AND RESULTS OF OPERATIONS




The
following discussion and financial information relates to periods prior to the
acquisition of the parent company of HeNan Smart Food by Si Mei Te.




Results
of Operations for the fiscal year ended December 31, 2008 compared to the fiscal
year ended December 31, 2007




For the
year ended December 31, 2008, Si Mei Te had net loss of $52,865 derived from
interest income of $548,475 offset by $601,340 of operating
expenses.




For the
period from January 8, 2007 (inception) to December 31, 2007, Si Mei Te had net
income of $544,065 derived from interest income of $814,854, offset by $270,789
for operating and other expenses.




Financial
Condition and Liquidity




Si Mei Te
consummated its initial public offering consisting of 5,000,000 units on June
26, 2007. On July 2, 2007, Si Mei Te consummated the closing of an additional
750,000 units that were subject to the over-allotment option. Simultaneously
with the consummation of Si Mei Te’s initial public offering, it consummated the
private sale of 105,000 units at $6.00 per unit and 1,033,334 warrants at $0.60
per warrant to certain of its initial stockholders and affiliates for an
aggregate purchase price of $1,250,000. Gross proceeds from Si Mei Te’s initial
public offering (including from its private placement of units and warrants)
were $35,750,000. Si Mei Te paid a total of $2,031,456 in underwriting discounts
and commissions (after deferring $345,000) and for costs and expenses related to
the offering. After deducting the underwriting discounts and commissions and the
offering expenses, the total net proceeds to Si Mei Te from the offering were
approximately $33,700,000, of which $33,372,500 was deposited into the trust
account (or approximately $5.80 per share sold in the offering). The remaining
proceeds were available to be used by Si Mei Te to provide for business, legal
and accounting due diligence on prospective acquisitions, tax payments and
continuing general and administrative expenses. On March 31, 2009, Si Mei Te had
withdrawn $1,050,000 from the trust account.


47




Si Mei Te
used substantially all of the net proceeds of this offering to acquire HeNan
Smart Food, including identifying and evaluating prospective acquisition
candidates, selecting HeNan Smart Food, and structuring, negotiating and
consummating the business combination. The proceeds held in the trust fund as
well as any other net proceeds not expended will be used to finance the
operations of HeNan Smart Food.




From June
18, 2007 through June 26, 2009, Si Mei Te incurred a fee from Voxa, Inc., an
affiliate of Beatrice Hom, its previous chief operating officer, chief financial
officer and a previous member of its board of directors, of $7,500 per month for
providing it with office space and certain general and administrative services.
Additionally, on January 9, 2007, Beatrice Hom, Wing Yip, Si Mei Te’s previous
secretary and previous a member of its board of directors, Vincent Shen and
Xiong Yin, both prior members of its board of directors, advanced an aggregate
of $100,000 to Si Mei Te for payment of offering expenses on its behalf. This
loan was repaid following Si Mei Te’s initial public offering from the proceeds
of the offering.




Off-Balance
Sheet Arrangements




Options
and warrants issued in conjunction with our IPO are equity linked derivatives
and accordingly represent off-balance sheet arrangements. The options and
warrants meet the scope exception in paragraph 11(a) of Financial Accounting
Standard (FAS) 133 and are accordingly not accounted for as derivatives for
purposes of FAS 133, but instead are accounted for as equity. See Footnote 2 to
the financial statements for more information.




ITEM
      6.
            DIRECTORS,
      SENIOR MANAGEMENT AND EMPLOYEES




A.           Directors
and Senior Management.




The Board
of Directors, executive officers and key employees of the Company are currently
as follows:




Name
                        
                        Age
                        
                        PositionWang
      Youli
                        
                        45
                        
                        Chairman
      and Chief Executive OfficerMeng
      Fanyou
                        
                        48
                        
                        Vice
      ChairmanHu
      Ye
                        
                        47
                        
                        Chief
      Financial OfficerWang
      Guanqun
                        
                        36
                        
                        General
      ManagerGuo
      Jinchang
                        
                        44
                        
                        Vice
      PresidentZhao
      Jianguo
                        
                        35
                        
                        Chief
      AccountantWang
      Hai
                        
                        41
                        
                        Director
      of Research and DevelopmentLiu
      Pei
                        
                        39
                        
                        Director
      of Quality ControlFrancois
      Da Pan Shih
                        
                        60
                        
                        DirectorNgan
      Man Kit
                        
                        58
                        
                        DirectorWang
      Youping
                        
                        46
                        
                        DirectorWang
      Huaijing
                        
                        57
                        
                        DirectorCheng
      Yixue
                        
                        51
                        
                        Director




Wang Youli
was elected to our board of directors on June 25, 2009, and was named Chairman
and Chief Executive Officer on June 26, 2009. Mr. Wang is the founder of HeNan
Smart Food and has served as its Chairman and Chief Executive Officer since
1991. Mr. Wang has more than 20 years of experience managing enterprises
including the instant noodle industry in China. Under Mr. Wang’s supervision,
HeNan Smart Food has become a top 5 instant noodle company and a top 100 company
in the food industry in China. He has been a standing member of China’s National
People’s Congress since 2008. In addition, Mr. Wang has been a representative in
the National Convention of the Communist Party of China, president and committee
member for China Noodle Industry Association, and legal representative of HeNan
Chunzhou county.


48




Meng
Fanyou was elected to our board of directors on June 25, 2009, and was
named Vice Chairman on June 26, 2009. Mr. Meng is HeNan Smart Food’s Vice
Chairman and joined HeNan Smart Food in 2001 and is currently in charge of daily
operation of HeNan Smart Food. Mr. Meng has more than 20 years of work
experience in the instant noodle industry in China, and has more than 28 years
combined experience in the manufacturing, food processing and construction
industries, including extensive experience with state-owned enterprises. Prior
to joining HeNan Smart Food, Mr. Meng was a manager for the Beijing Noodle
Company for over a decade prior to its privatization in 2001. He graduated from
Beijing Normal University in 1986 with a major in Physics.




Hu Ye was
named our Chief Financial Officer on June 26, 2009. Mr. Ye is also HeNan Smart
Food’s Chief Financial Officer. Mr. Ye joined HeNan Smart Food in May 2009. He
has a Master’s Degree in Economics from University of Toronto, Canada, and a
Bachelor’s Degree of Science in Electrical Engineering from Huazhong University
of Science and Technology, China. He has been a Certified General Accountant
(CGA) of Canada since 1998. From December 2003 to March 2009, he was CFO of
Odysys International Ltd., BOCO Enterprises Ltd., EMarket Holding Group Corp.
and China Shen Zhou Mining & Resources, Inc. (AMEX: SHZ). From January 1990
to September 2003, he worked for CIT Group Canada, Merrill Lynch Canada and
Mackenzie Financial Corporation, Canada. He has been a Non-Executive Director of
CIC Mining Resources Ltd. (CNSX:RRR; FSE:3 1C) since February 2009, and a
Non-Executive Director of Beijing Heidrick & Struggles International
Management Consulting Company Limited since 2006.




Wang
Guanqun was named our General Manager on June 26, 2009. Mr. Wang is also
HeNan Smart Food’s General Manager. Mr. Wang joined HeNan Smart Food in 2003 and
is in charge of company’s operations in marketing and sales. He has more than 12
years of experience in the food industry, including serving as the General
Manger of Tianjin Qun Ying Trade Company Limited from 1997 to 1998, Senior
Manager of Tianjin Tingyi Food Company Limited from 1998 to 1999, Sales Director
of Zhengzhou Guo Hua Food Company Limited from 1999 to 2002 and Vice President
of Zhengzhou Xue Yang Food Company Limited from 2002 to 2003. He has a Master’s
Degree of Business Administration from Tsinghua University.




Guo
Jinchang was named our Vice President on June 26, 2009. Mr. Guo is also
HeNan Smart Food’s Vice President, and joined HeNan Smart Food in 1995. Mr. Guo
is in charge of production of HeNan Smart Food’s instant noodle products, and
has more than 10 years of work experience in the food industry. He graduated
from China Military University in 1988.




Zhao
Jianguo was named our Chief Accountant on June 26, 2009. Mr. Zhao is also
HeNan Smart Food’s Chief Accountant, and joined HeNan Smart Food in 2000. Mr.
Zhao has been a certified accountant of China since 1998. He graduated from Jiao
Zuo Financial Institute in 1993, and from Henan University of Finance and
Economics with a diploma in 1998. He has 20 years of work experiences in
accounting and financial management.


49




Wang Hai
was named our Director of Research and Development on June 26, 2009. Mr. Wang is
also HeNan Smart Food’s Director of Research and Development, and joined HeNan
Smart Food in 2008. Mr. Wang is a senior engineer. He has more than 16 years of
experience in the food business in China, and served as Vice President of Henan
Zheng Long Food Development Company Limited from 1988 to 1992. He graduated from
Zhengzhou Food Institute in 1992.




Liu Pei
was named our Director of Quality Control on June 26, 2009. Mr. Liu is also
HeNan Smart Food’s Director of Quality Control, and joined HeNan Smart Food in
2008. Mr. Liu has 15 years of experience in the food business in China, and
served as the Director of Quality Control for Wuhan Uni-President Company
Limited from 1994 to 2006, and Production Head of Zhejiang Qi Wa Food Company
Limited from 2007 to 2008. He graduated from Hubei University in 1993 with a
major in Applied Chemistry.




Francois Da Pan
Shih was elected to our board of directors on June 25, 2009. He been the
president and chief executive officer of Sharpland Investments Ltd, a private
equity firm making investments in China, since 1980. Mr. Shih has been invited
to serve as economic advisor to a variety of provinces in China including
Shadong and Guizhou as well as the Tianjin Municipal Government, the Guiyang
Municipal Government and the Jinan Municipal Government. He was also invited by
the Prince of Wales to participate in the Business Leaders Forum, a group formed
to promote world-wide social welfare, education, medical care, training and
development and agricultural techniques, to be a council member. Mr. Shih was
appointed by President Jimmy Carter as a council member of the International
Advisory Council of The Friendship Force. In 1996, Senator Max Cleland named Mr.
Shih as an honorable citizen of the State of Georgia.




Ngan Man
Kit was elected to our board of directors on June 25, 2009. Mr. Ngan was
an Independent Non- Executive Director of Singamas Containers Holdings Company
Limited from July, 2003 to December 2008. Singaams is listed in the Hong Kong
Stock Exchange. Prior to that, he was the CEO and Director of Zindart Ltd. which
is listed on NASDAQ. A Bachelor of Mathematics graduate of University of
Waterloo in Canada, Mr. Ngan, has over 33 years of experience in corporate and
investment banking, equity and debt securities trading, corporate advisory
services, as well as direct and private equity investment and operation
experience. Mr. Ngan was previously a director of Amish Naturals, Inc., EUPA
International Corporation, Clearant, Inc. and ForgeHouse, Inc. (formerly known
as “Milk Bottle Cards Inc.”), all companies listed on the OTCBB.




Wang
Youping was elected to our board of directors on June 25, 2009. Mr. Wang
has been the Vice-President in charge of administration of Jiaozuo Electronic
Cable Co. since September 2004.




Wang Huaijing
Huai was elected to our board of directors on June 25, 2009. Mr. Wang has
been the Vice- President in charge of administration of Jiaozuo Huanghe (Yellow
River) Group Co. since September 2004.




Cheng Yixue
Huai was elected to our board of directors on June 25, 2009. Mr. Cheng
has been Chief Financial Officer of Jiaozuo Huanghe (Yellow River) Group Co.
since 2004.




Each
director will serve until his or her term has expired and until his or her
successor has been duly elected and qualified. Each officer serves at the
pleasure of the Board of Directors. All of the directors, and Wang Guanqun, Hun
Ye and Guo Jinchang, each an officer, were selected by the Sellers pursuant to
Section 2.4 of the Purchase Agreement.


50




None of
the Company’s officers and directors are related.




HeNan
Smart Food management’s has remained in place following the business combination
and continues to run day-to-day operations of the Company.




B.           Compensation




Director Compensation




Si Mei Te
is will compensate its Board of Directors based on policies that it is in the
process of putting in place, but which are expected to include a per diem for
each board meeting attended, an annual fee, reimbursement of expenses incurred
in attending meetings and equity awards. The amounts of compensation, numbers of
shares subject to awards and other terms of director compensation have not been
finally determined. No member of the Company’s board of directors is entitled to
benefits upon termination of his or her directorship.




Si Mei
Te’s directors prior to the business combination did not receive any
compensation for their services, other than out of pocket expenses related to
the business combination.




Executive Compensation




HeNan
Smart Food Executive Compensation




The
following table shows information concerning the annual compensation for
services provided to HeNan Smart Food by its Chief Executive Officer, the Chief
Financial Officer.





Name and
                                      Principal Position
                                    
                                    Year
                                    
                                    Salary
                                    
                                    
                                    Bonus
                                    
                                    
                                    All other
                                      Compensation
                                    
                                    
                                    Total
                                      CompensationWang
      Youli, Chairman and
                                      Chief
      Executive Officer
                                    
                                    2008
                                    
                                    $
                                    51,910
                                    
                                    
                                    $
                                    0
                                    
                                    
                                    $
                                    0
                                    
                                    
                                    $
                                    51,9102007
                                    
                                    
                                    39,488
                                    
                                    
                                    
                                    0
                                    
                                    
                                    
                                    0
                                    
                                    
                                    
                                    39,4882006
                                    
                                    
                                    30,159
                                    
                                    
                                    
                                    0
                                    
                                    
                                    
                                    0
                                    
                                    
                                    
                                    30,159Meng
      Fanyou,
                                      Vice-Chairman
                                    
                                    2008
                                    
                                    
                                    43,258
                                    
                                    
                                    
                                    0
                                    
                                    
                                    
                                    0
                                    
                                    
                                    
                                    43,2582007
                                    
                                    
                                    31,590
                                    
                                    
                                    
                                    0
                                    
                                    
                                    
                                    0
                                    
                                    
                                    
                                    31,5902006
                                    
                                    
                                    22,619
                                    
                                    
                                    
                                    0
                                    
                                    
                                    
                                    0
                                    
                                    
                                    
                                    22,619Wang
      Guanqun,
                                      General
      Manager
                                    
                                    2008
                                    
                                    
                                    34,607
                                    
                                    
                                    
                                    0
                                    
                                    
                                    
                                    0
                                    
                                    
                                    
                                    34,6072007
                                    
                                    
                                    23,693
                                    
                                    
                                    
                                    0
                                    
                                    
                                    
                                    0
                                    
                                    
                                    
                                    23,6932006
                                    
                                    
                                    18,849
                                    
                                    
                                    
                                    0
                                    
                                    
                                    
                                    0
                                    
                                    
                                    
                                    18,849Ye
      Hu,
                                      Chief
      Financial Officer
                                    
                                    2008
                                    
                                    
                                    0
                                    (1)
                                    
                                    
                                    0
                                    
                                    
                                    
                                    0
                                    
                                    
                                    
                                    02007
                                    
                                    
                                    0
                                    (1)
                                    
                                    
                                    0
                                    
                                    
                                    
                                    0
                                    
                                    
                                    
                                    02006
                                    
                                    $
                                    0
                                    (1)
                                    
                                    $
                                    0
                                    
                                    
                                    $
                                    0
                                    
                                    
                                    $
                                    0





(1)
            Mr.
      Ye He was hired on May 1, 2009.


51






Current
Employment Agreements




On May 1,
2009, HeNan Smart Food and Hu Ye entered into an employment agreement pursuant
to which Hu Ye is serving as HeNan Smart Food’s Chief Financial Officer. Upon
closing of the acquisition, the term of the employment agreement automatically
renewed for a period of 12 months. The agreement provides for cash compensation
of RMB999,996 per year, plus options to purchase 120,000 shares of Si Mei
Te to be issued upon the closing of the acquisition. In addition, Hu Ye is
entitled to benefits which HeNan Smart Food provides to senior executives,
including health and life insurance. The agreement may be terminated by either
Hu Ye or HeNan Smart Food for any reason upon 30 days notice, or sooner for
cause.




Si
Mei Te’s Initial Shareholder and Executive Compensation.




No
compensation of any kind, including finders and consulting fees, has been or
will be paid to any Si Mei Te shareholder who acquired ordinary shares prior to
its initial public offering, or any of their respective affiliates, for services
rendered prior to or in connection with a business combination. However, those
Si Mei Te shareholders have been and will continue to be reimbursed for any
out-of-pocket expenses incurred in connection with activities on Si Mei Te’s
behalf.




Since Si
Mei Te did not have an operating business prior to the  business
combination, its pre-business combination officers did not receive any
compensation for their services to Si Mei Te; and, since it had no other
employees, Si Mei Te did not have any compensation policies, procedures,
objectives or programs in place. Si Mei Te is currently in the process of
adopting appropriate compensation policies, procedures, objectives and programs.
However, it is anticipated that the compensation for senior executives of Si Mei
Te will be comprised of four elements: a base salary, an annual performance
bonus, equity and benefits.




In
developing salary ranges, potential bonus payouts, equity awards and benefit
plans, it is anticipated that the Board of Directors will take into account: 1)
competitive compensation among comparable companies and for similar positions in
the market, 2) relevant ways to incentivize and reward senior management for
improving shareholder value while building Si Mei Te into a successful company,
3) individual performance, 4) how best to retain key executives, 5) the overall
performance of the company and its various key component entities, 6) the
company’s ability to pay and 7) other factors deemed to be relevant at the
time.





Retirement Benefits


As of
December 31, 2008, HeNan Smart Food’s branches in the PRC have participated
the government-mandated employee welfare and retirement benefit contribution and
provided pension, retirement or similar benefits to its employees that are hired
directly by the Company. The PRC regulations require HeNan Smart Food’s
PRC branches to pay the local labor administration bureau a monthly
contribution at a stated contribution rate based on the monthly basic
compensation of qualified employees.  The local labor administration
bureau, which manages various investment funds, will take care of employee
retirement, medical and other fringe benefits.  HeNan Smart
Food’s branches have no further commitments beyond its monthly
contribution.


52





Si Mei Te
is not required to accrue pension, retirement or similar benefits.




C.           Board
Practices




Board
Committees




Si Mei Te
does not have an audit committee, nominating committee or compensation committee
and therefore the entire Board of Directors performs those functions for Si Mei
Te. The Board of Directors has not determined whether anyone on the Board of
Directors is an audit committee financial expert, as such term is defined by SEC
rules. Since the Board of Directors does not have a separately designated Audit
Committee, Si Mei Te has not made the determination of whether anyone is an
audit committee financial expert.




Director
Independence




Si Mei
Te’s Board of Directors has not determined if any of its directors qualifies as
independent, although Si Mei Te’s management believes that Francois Da Pan Shih,
Ngay Man Kit Wang Youping, Wang Huaijing and Cheng Yixue qualify as independent
directors under the rules of the NASDAQ Stock Market because they do not
currently own a large percentage of HeNan Smart Food’s capital stock, are not
currently employed by HeNan Smart Food, have not been actively involved in the
management of HeNan Smart Food and do not fall into any of the enumerated
categories of people who cannot be considered independent in the NASDAQ Share
Market Rules. Si Mei Te does not have an audit committee, nominating committee
or compensation committee and therefore the entire Board of Directors performs
those functions for Si Mei Te.




Compensation
Committee Interlocks and Insider Participation




During
the last fiscal year, no officer and employee of Si Mei Te, and no former
officer of Si Mei Te, during the last completed fiscal year, participated in
deliberations of Si Mei Te’s Board of Directors concerning executive officer
compensation.




Code
of Ethics




Si Mei Te
does not have a formal code of ethics. Si Mei Te intends to adopt a code of
ethics that applies to Si Mei Te’s principal executive officers, principal
financial officer, principal accounting officer or controller or persons
performing similar functions.




D.           Employees




As of
March 31, 2009, HeNan Smart Food employed approximately 3,800 employees. As of
December 31, 2006, and December 31, 2007, HeNan Smart Food employed 2,800
and 3,400 employees, respectively. All of them were located in the 26
production lines and our corporate office located in two manufacturing
facilities in Wu Zhi, Henan province, and Qi Shan, Shaanxi province. These
employees include approximately 3,000 employees involved in HeNan Smart Food’s
manufacturing activities, 600 involved in sales and marketing and 200 in
management and administrative activities. HeNan Smart Food believes is has
maintained good relationships with its employees and no major disputes have
incurred since its inception.


53




Prior to
the business combination, Si Mei Te had four executive officers. They were not
obligated to contribute any specific number of hours per week on Si Mei Te’s
affairs, and they devoted only as much time as they deemed necessary to Si Mei
Te’s affairs. Si Mei Te had no employees.




E.           Share
Ownership




See Item
7, below.




ITEM
      7.
            MAJOR
      SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS




A.           Major
Shareholders




The following table sets forth certain
information regarding the Company’s ordinary shares as of July 14, 2009
by:




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




·
            each
      officer and director; and




·
            all
      officers and directors as a group.




As of
July 14, 2009, there were a total of 16,263,824 ordinary shares issued and
outstanding. Unless otherwise indicated, the Company believes that all persons
named in the table have sole voting and investment power with respect to all
ordinary shares beneficially owned by them. The Company’s major shareholders do
not have different voting rights with respect to their ordinary shares in the
Company than any other holder of the Company’s ordinary shares.




Ordinary
shares which an individual or group has a right to acquire within 60 days
pursuant to the exercise or conversion of options, warrants or other similar
convertible or derivative securities are deemed to be outstanding for the
purpose of computing the percentage ownership of such individual or group, but
are not deemed to be outstanding for the purpose of computing the percentage
ownership of any other person shown in the table.





Name and Address of Beneficial Owner (1)
                  
                  Amount and
                    Nature of
                    Beneficial
                    Ownership
                  
                  
                  Approximate
                    Percentage of
                    Outstanding
                    Ordinary sharesFenland
      Investments Limited
                  
                  
                  13,984,000
                  (2)
                  
                  
                  85.98
                  %Wang
      Youli
                  
                  
                  13,984,000
                  (2)
                  
                  
                  85.98
                  %Beatrice
      Hom
                  
                  
                  1,567,634
                  (3)
                  
                  
                  9.03
                  %Meng
      Fanyou
                  
                  
                  -0-
                  
                  
                  
                  -
                  %Hu
      Ye
                  
                  
                  -0-
                  
                  
                  
                  -
                  %Wang
      Guanqun
                  
                  
                  -0-
                  
                  
                  
                  -
                  %Guo
      Jinchang
                  
                  
                  -0-
                  
                  
                  
                  -
                  %Zhao
      Jianguo
                  
                  
                  -0-
                  
                  
                  
                  -
                  %Wang
      Hai
                  
                  
                  -0-
                  
                  
                  
                  -
                  %Liu
      Pei
                  
                  
                  -0-
                  
                  
                  
                  -
                  %Francois
      Da Pan Shih
                  
                  
                  161,800
                  (4)
                  
                  
                  *Ngan
      Man Kit
                  
                  
                  -0-
                  
                  
                  
                  -
                  %Wang
      Youping
                  
                  
                  -0-
                  
                  
                  
                  -
                  %Wang
      Huaijing
                  
                  
                  -0-
                  
                  
                  
                  -
                  %Cheng
      Yixue
                  
                  
                  -0-
                  
                  
                  
                  -
                  %All
      directors and executive officers as a group (13
    individuals)
                  
                  
                  14,713,434
                  
                  
                  
                  89.75
                  %




54





* Less
than 1%





(1)
            Unless
      otherwise indicated, the business address of each shareholder is c/o HeNan
      Smart Food Co., Ltd., No. 8, Wuzhi Xi Huafeng Industrial Zone, HeNan
      Province, People’s Republic of
China.


(2)
            Fenland
      Investments Limited, a British Virgin Islands company, acquired 13,984,000
      ordinary shares of the Company in connection with the
      Transaction.  Mr. Wang Youli is the ultimate beneficial owner of
      100% of Fenland Investments
Limited.


(3)
            Consists
      of (i) 473,500 ordinary shares, and (ii) 1,094,134 ordinary shares
      issuable upon the exercise of warrants.Each warrant entitles
      the holder to purchase one ordinary share. Each warrant became exercisable
      on June 26, 2009 for $5.00 per share and expires at 5:00 p.m. New York
      City time on June 18, 2011.


(4)
            Consists
      of (i) 12,600 ordinary shares, and (ii) 149,200 ordinary shares issuable
      upon the exercise of warrants.Each warrant entitles
      the holder to purchase one ordinary share. Each warrant became exercisable
      on June 26, 2009 for $5.00 per share and expires at 5:00 p.m. New York
      City time on June 18, 2011.




B.           Related
Party Transactions




Si
Mei Te




In
January 2007, the Company issued 1,250,000 ordinary shares to the individuals
set forth below for $25,000 in cash, at a purchase price of $0.02 per share, as
follows:




Name
                  
                  Number
                    of Shares
                  
                  PositionBeatrice
      Hom
                  
                  
                  601,100
                  
                  Chief
      Operating Officer, Chief Financial Officer and DirectorWing
      Yip
                  
                  
                  202,000
                  
                  Secretary
      and DirectorMichael
      Hsu
                  
                  
                  107,800
                  
                  Chief
      Executive Officer and DirectorVincent
      Shen
                  
                  
                  107,800
                  
                  DirectorFrancois
      Shih
                  
                  
                  90,200
                  
                  Special
      AdvisorLi
      Wen Shi
                  
                  
                  80,400
                  
                  Chairman
      of the BoardXiong
      Yin
                  
                  
                  60,700
                  
                  Director




In March
2007, Beatrice Hom transferred (i) 106,000 ordinary shares to Wing Yip, (ii)
11,000 ordinary shares to Michael Hsu, (iii) 300 ordinary shares to Xiong Yin,
(iv) 48,000 ordinary shares to Li Wen Shi and (v) 35,000 ordinary shares to
Vincent Shen. All of the transfers were made at $0.02 per
share.


55




Beatrice
Hom and Francois Shih purchased an aggregate of 105,000 insider units at $6.00
per unit and 1,033,334 insider warrants at $0.60 per warrant (for an aggregate
purchase price of $1,250,000) from the Company. These purchases took place on a
private placement basis simultaneously with the consummation of the initial
public offering. The insider units and insider warrants are identical to the
units (and underlying warrants) offered in the Company’s initial public offering
except that if the Company calls the warrants for redemption, the warrants
underlying the insider units and insider warrants may be exercisable on a
cashless basis at the holder’s option (except in the case of a forced cashless
exercise upon the Company’s redemption of the warrants) so long as such warrants
are held by these purchasers or their affiliates. Additionally, the purchasers
agreed that the insider units and underlying securities and the insider warrants
will not be sold or transferred by them until after the Company completed a
business combination. The holders of the majority of these insider units and
insider warrants (or underlying securities) are entitled to demand that the
Company register these securities pursuant to an agreement signed on June 18,
2007. The holders of the majority of these securities may elect to exercise
these registration rights with respect to such securities. In addition, these
holders have certain “piggy-back” registration rights with respect to
registration statements filed subsequent to such date. The Company will bear the
expenses incurred in connection with the filing of any such registration
statements.




Voxa,
Inc., an affiliate of Beatrice Hom,  made available to the Company a
small amount of office space and certain office and secretarial services, as the
Company required from time to time, from June 18, 2007 through June 26, 2009.
The Company paid Voxa, Inc. $7,500 per month for these services. Beatrice Hom is
the president and owner of Voxa, Inc. As a result, she benefited from the
transaction to the extent of her interest in Voxa, Inc. However, this
arrangement was solely for the Company’s benefit and was not intended to provide
the Company’s officers and directors compensation in lieu of a salary. The
Company believes that the fee charged by Voxa, Inc. was at least as favorable as
it could have obtained from an unaffiliated person. However, as the Company’s
pre-business combination directors may not be deemed “independent,” it did not
have the benefit of disinterested directors approving this
transaction.




Prior to
the Company’s initial public offering, Beatrice Hom, Wing Yip, Vincent Shen and
Xiong Yin loaned it an aggregate of $100,000 to cover expenses related to the
initial public offering. The loans were repaid without interest from the
proceeds of the offering not being placed in trust.




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




Related
party policy




Si Mei
Te’s board of directors is responsible for reviewing and approving related-party
transactions to the extent it enters into such transactions. The board of
directors will consider all relevant factors when determining whether to approve
a related party transaction, including whether the related party transaction is
on terms no less favorable than terms generally available to an unaffiliated
third-party under the same or similar circumstances and the extent of the
related party’s interest in the transaction. No director may participate in the
approval of any transaction in which he is a related party, but that director is
required to provide the other members of the board of directors with all
material information concerning the transaction. Additionally, Si Mei Te
requires each of its directors and executive officers to complete a directors’
and officers’ questionnaire that elicits information about related party
transactions. These procedures are intended to determine whether any such
related party transaction impairs the independence of a director or presents a
conflict of interest on the part of a director, employee or
officer.


56




HeNan
Smart Food




The
tables below reflect transactions entered into by HeNan Smart Food with certain
of its officers, directors and their respective affiliates. Balances with
Changchun Smart Food and Chenzhou Smart Food relate to the purchase or sale of
inventories at cost, expenses paid on behalf of and cash advanced to related
parties. The advances are unsecured, non interest bearing and have no repayment
terms. Balances with Huafeng Paper Co. Ltd. and Jiaozuo Electronic Cable are
cash advances. As of March 31, 2009, there was $4,555,988 owed to HeNan Smart
Food by Changchun Smart Food and $2,276,334 owed to HeNan Smart Food by Chenzhou
Smart Food and no outstanding balances with Huafeng Paper Co. Ltd. and Jiaozuo
Electronic Cable. Balances with Wang Youli are cash advances. As of March 31,
2008, there was no outstanding balance with Wang Youli.




Transactions
with related parties were entered into at competitive market prices charged to
unaffiliated customers for similar transaction or charged by other
suppliers.




Three
Months Ended March 31, 2009


No.
                          
                          Party Name
                          
                          Balance at
                            beginning
                            of period
                          
                          
                          Funds
                            advanced to
                            related party
                          
                          
                          Repayment
                            received
                            from related
                            party
                          
                          
                          Expenses
                            Paid on
                            behalf of
                            related party
                          
                          
                          Balance
                            at end of
                            period
                          
                          
                          Director
                            Remuneration1.
                          
                          Changchun
      Smart Food Co., Ltd.
                          
                          $
                          3,008,366
                          
                          
                          $
                          568,912
                          
                          
                          $
                          –
                          
                          
                          $
                          978,710
                          
                          
                          $
                          4,555,988
                          
                          
                          
                          N/A2.
                          
                          Chenzhou
      Smart Food Co., Ltd.
                          
                          
                          1,437,814
                          
                          
                          
                          –
                          
                          
                          
                          (291,859
                          )
                          
                          
                          1,130,379
                          
                          
                          
                          2,276,334
                          
                          
                          
                          N/A3.
                          
                          Henan
      Huafeng Paper Co., Ltd.
                          
                          
                          806,156
                          
                          
                          
                          2,061,557
                          
                          
                          
                          (2,867,713
                          )
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          N/A4.
                          
                          Jiaozuo
      Electronic Cable Company
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          N/A5.
                          
                          Wang
      Youli
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          
                          –
                          
                          
                          $
                          17,589


57




Year
Ended December 31, 2008


No.
                      
                      Party Name
                      
                      Balance at
                        beginning
                        of period
                      
                      
                      Funds
                        advanced to
                        related party
                      
                      
                      Repayment
                        received
                        from related
                        party
                      
                      
                      Expenses
                        Paid on
                        behalf of
                        related party
                      
                      
                      Balance
                        at end of
                        period
                      
                      
                      Director
                        Remuneration1.
                      
                      Changchun
      Smart Food Co., Ltd
                      
                      $
                      2,481,119
                      
                      
                      $
                      2,608,189
                      
                      
                      $
                      (5,194,647
                      )
                      
                      $
                      3,113,705
                      
                      
                      $
                      3,008,366
                      
                      
                      
                      N/A2.
                      
                      Chenzhou
      Smart Food Co., Ltd.
                      
                      
                      1,012,184
                      
                      
                      
                      2,543,952
                      
                      
                      
                      (6,666,911
                      )
                      
                      
                      4,548,589
                      
                      
                      
                      1,437,814
                      
                      
                      
                      N/A3.
                      
                      Henan
      Huafeng Paper Co. Ltd.
                      
                      
                      –
                      
                      
                      
                      1,585,952
                      
                      
                      
                      (779,796
                      )
                      
                      
                      –
                      
                      
                      
                      806,159
                      
                      
                      
                      N/A4.
                      
                      Jiaozuo
      Electronic Cable Company
                      
                      
                      –
                      
                      
                      
                      –
                      
                      
                      
                      –
                      
                      
                      
                      –
                      
                      
                      
                      –
                      
                      
                      
                      N/A5.
                      
                      Wang
      Youli
                      
                      
                      –
                      
                      
                      
                      –
                      
                      
                      
                      –
                      
                      
                      
                      –
                      
                      
                      
                      –
                      
                      
                      $
                      51,910




Year
Ended December 31, 2007


No.
                      
                      Party Name
                      
                      Balance at
                        beginning
                        of period
                      
                      
                      Funds
                        advanced to
                        related party
                      
                      
                      Repayment
                        received
                        from related
                        party
                      
                      
                      Expenses
                        Paid on
                        behalf of
                        related party
                      
                      
                      Balance
                        at end of
                        period
                      
                      
                      Director
                        Remuneration1.
                      
                      Changchun
      Smart Food Co., Ltd
                      
                      $
                      4,054,885
                      
                      
                      $
                      174,272
                      
                      
                      $
                      (4,165,048
                      )
                      
                      $
                      2,417,010
                      
                      
                      $
                      2,481,119
                      
                      
                      
                      N/A2.
                      
                      Chenzhou
      Smart Food Co., Ltd.
                      
                      
                      1,161,309
                      
                      
                      
                      532,752
                      
                      
                      
                      (2,770,312
                      )
                      
                      
                      2,088,435
                      
                      
                      
                      1,012,184
                      
                      
                      
                      N/A3.
                      
                      Henan
      Huafeng Paper Co. Ltd.
                      
                      
                      38,442
                      
                      
                      
                      –
                      
                      
                      
                      (38,442
                      )
                      
                      
                      –
                      
                      
                      
                      –
                      
                      
                      
                      N/A4.
                      
                      Jiaozuo
      Electronic Cable Company
                      
                      
                      384,413
                      
                      
                      
                      –
                      
                      
                      
                      (384,413
                      )
                      
                      
                      –
                      
                      
                      
                      –
                      
                      
                      
                      N/A5.
                      
                      Wang
      Youli
                      
                      
                      (1,958,496
                      )
                      
                      
                      1,951,571
                      
                      
                      
                      –
                      
                      
                      
                      6,925
                      
                      
                      
                      –
                      
                      
                      $
                      38,488




Year
Ended December 31, 2006


No.
                        
                        Party Name
                        
                        Balance at
                          beginning
                          of period
                        
                        
                        Funds
                          advanced to
                          related party
                        
                        
                        Repayment
                          received
                          from related
                          party
                        
                        
                        Expenses
                          Paid on
                          behalf of
                          related party
                        
                        
                        Balance
                          at end of
                          period
                        
                        
                        Director
                          Remuneration1.
                        
                        Changchun
      Smart Food Co., Ltd
                        
                        $
                        3,015,388
                        
                        
                        $
                        113,762
                        
                        
                        $
                        (2,900,944
                        )
                        
                        $
                        3,826,679
                        
                        
                        $
                        4,054,885
                        
                        
                        
                        N/A2.
                        
                        Chenzhou
      Smart Food Co., Ltd.
                        
                        
                        203,827
                        
                        
                        
                        683,192
                        
                        
                        
                        (4,576,989
                        )
                        
                        
                        4,851,989
                        
                        
                        
                        1,162,019
                        
                        
                        
                        N/A3.
                        
                        Henan
      Huafeng Paper Co. Ltd.
                        
                        
                        –
                        
                        
                        
                        172,983
                        
                        
                        
                        (134,541
                        )
                        
                        
                        –
                        
                        
                        
                        38,442
                        
                        
                        
                        N/A4.
                        
                        Jiaozuo
      Electronic Cable Company
                        
                        
                        334,564
                        
                        
                        
                        714,491
                        
                        
                        
                        (664,642
                        )
                        
                        
                        –
                        
                        
                        
                        384,413
                        
                        
                        
                        N/A5.
                        
                        Wang
      Youli
                        
                        
                        (1,891,916
                        )
                        
                        
                        29,027,040
                        
                        
                        
                        (29,093,620
                        )
                        
                        
                        –
                        
                        
                        
                        (1,958,496
                        )
                        
                        $
                        30,159




In
addition, HeNan Smart Food has guaranteed certain loan obligations of Jiaozuo
Huanghe Group Corporation, of which Wang Youli, our Chairman and Chief Executive
Officer, is a director. As of December 31, 2008, HeNan Smart Food was
guaranteeing $2,931,477 of loans to Henan Yinlida Color Printing Company
Limited, an unrelated third party and $5,342,616 to related parties. In
addition, as of December 31, 2008, a third party lender had a security interest
in a property jointly and severally owned by HeNan Smart Food and Jiaozuo
Huanghe Group Corporation. As of December 31, 2008, the amount of the loan was
$4,514,474 and secured by the property of HeNan Smart Food with net carrying
amount of $4,268,290.




Following
are the details of each related party, their relationship with HeNan Smart Food
and, if the party was not related to HeNan Smart Food, a description of the
interest for related parties:


58





Party
      Name
                                            
                                            Relationship
      with HeNan Smart Food
                                            
                                            Interest
      in the Transaction by Indirectly
                                              Related
      PartiesChangchun
      Smart Food Co., Ltd
                                            
                                            N/A
                                            
                                            Wang
      Youli, HeNan Smart Food’s Chairman, is the beneficial owner of 60% of the
      share capital of Changchun Smart Food Co., Ltd.Chenzhou
      Smart Food Co., Ltd.
                                            
                                            N/A
                                            
                                            Wang
      Youli, HeNan Smart Food’s Chairman, is the beneficial owner of 57.89% of
      the share capital of Chenzhou Smart Food Co., Ltd.Henan
      Huafeng Paper Co. Ltd.
                                            
                                            Henan
      Huafeng Paper Co. Ltd and Jiaozuo Electronic Cable Company are related
      parties through common control under Jiaozuo Huanghe Group Corporation.
      Wang Youli, the Chairman and CEO of HeNan Smart Food, is a director of
      Jiaozuo Huanghe Group Corporation.
                                            
                                            Wang
      Youli was formerly affiliated with Henan Huafeng Paper Co. Ltd., but has
      never had a pecuniary interest in the company.Jiaozuo
      Electronic Cable Company
                                            
                                            Henan
      Huafeng Paper Co. Ltd and Jiaozuo Electronic Cable Company are related
      parties through common control under Jiaozuo Huanghe Group Corporation.
      Wang Youli, the Chairman and CEO of HeNan Smart Food, is a director of
      Jiaozuo Huanghe Group Corporation.
                                            
                                            Wang
      Youli was formerly affiliated with Jiaozuo Electronic Cable Company, but
      has never had a pecuniary interest in the company.Wang
      Youli
                                            
                                            Wang
      Youli is the Chairman and CEO of HeNan Smart Food.
                                            
                                            N/A





The Purchase Agreement did not include
the acquisition of two factories operated by Mr. Wang Youli using patents and
trademarks owned by HeNan Smart Food (the “Wang Factories”). The Wang Factories
currently do not make any payments to us for the use of the patents and
trademarks.  We are currently negotiating with Mr. Wang about fees to
be paid to HeNan Smart Food for the use of patents and trademarks owned by HeNan
Smart Food and used by the Wang Factories.  We will be negotiating to
purchase the Wang Factories.




C.           Interests
of experts and counsel.




Not
applicable.




ITEM
      8.
            FINANCIAL
      INFORMATION




A.           Consolidated
Statements and Other Financial Information.




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




B.           Significant
Changes




Not
applicable.


59


ITEM
      9.
              THE
      OFFER AND LISTING




A.          Offer
and Listing Details





The
Company’s ordinary shares, warrants and units are quoted on the OTC Bulletin
Board under the symbols CADQE, CADWE, and CADUE, respectively. The units have
been quoted on the Bulletin Board since June 22, 2007 and the ordinary shares
and warrants since July 12, 2007. The Company’s securities did not trade on any
market or exchange prior June 22, 2007.





The table
below sets forth, for the calendar quarters indicated, the high and low bid
prices for the Company’s units for the period from June 22, 2007 through June
30, 2009, and the Company’s ordinary shares and warrants for the period from
July 12, 2007 through June 30, 2009. The OTC Bulletin Board quotations reflect
inter-dealer prices, are without retail markup, markdowns or commissions, and
may not represent actual transactions.





Ordinary Shares
                
                
                Warrants
                
                
                UnitsHigh
                
                
                Low
                
                
                High
                
                
                Low
                
                
                High
                
                
                LowAnnual Highs and Lows2007
                
                $
                5.98
                
                
                $
                5.25
                
                
                $
                1.25
                
                
                $
                0.60
                
                
                $
                8.25
                
                
                $
                6.002008
                
                
                5.61
                
                
                
                5.30
                
                
                
                0.96
                
                
                
                0.01
                
                
                
                7.60
                
                
                
                5.002009
                
                
                6.00
                
                
                
                4.00
                
                
                
                0.30
                
                
                
                0.01
                
                
                
                6.00
                
                
                
                5.00Quarterly Highs and Lows2007Second
      Quarter
                
                NA
                
                
                NA
                
                
                NA
                
                
                NA
                
                
                $
                6.50
                
                
                $
                6.40Third
      Quarter
                
                $
                5.40
                
                
                $
                5.25
                
                
                
                0.90
                
                
                
                0.60
                
                
                
                7.60
                
                
                
                6.00Fourth
      Quarter
                
                
                5.98
                
                
                
                5.44
                
                
                
                1.25
                
                
                
                0.88
                
                
                
                8.25
                
                
                
                7.002008First
      Quarter
                
                $
                5.61
                
                
                $
                5.45
                
                
                $
                0.96
                
                
                $
                0.72
                
                
                $
                7.60
                
                
                $
                7.40Second
      Quarter
                
                
                5.54
                
                
                
                5.35
                
                
                
                0.85
                
                
                
                0.55
                
                
                
                7.40
                
                
                
                6.60Third
      Quarter
                
                
                5.60
                
                
                
                5.37
                
                
                
                0.55
                
                
                
                0.18
                
                
                
                6.90
                
                
                
                5.30Fourth
      Quarter
                
                
                5.55
                
                
                
                5.30
                
                
                
                0.22
                
                
                
                0.01
                
                
                
                6.00
                
                
                
                5.002009First
      Quarter
                
                $
                5.85
                
                
                $
                5.52
                
                
                $
                0.09
                
                
                $
                0.01
                
                
                $
                5.78
                
                
                $
                5.00Second
      Quarter
                
                
                6.00
                
                
                
                4.00
                
                
                
                0.30
                
                
                
                0.03
                
                
                
                6.00
                
                
                
                5.74Monthly Highs and LowsJanuary
      2009
                
                $
                5.85
                
                
                $
                5.52
                
                
                $
                0.05
                
                
                $
                0.01
                
                
                $
                5.49
                
                
                $
                5.00February
      2009
                
                
                5.85
                
                
                
                5.70
                
                
                
                0.07
                
                
                
                0.02
                
                
                
                5.78
                
                
                
                5.10March
      2009
                
                
                5.74
                
                
                
                5.72
                
                
                
                0.09
                
                
                
                0.03
                
                
                
                5.74
                
                
                
                5.73April
      2009
                
                
                5.80
                
                
                
                5.74
                
                
                
                0.27
                
                
                
                0.03
                
                
                
                6.00
                
                
                
                5.74May
      2009
                
                
                5.88
                
                
                
                5.75
                
                
                
                0.30
                
                
                
                0.09
                
                
                
                6.00
                
                
                
                5.90June 2009
                
                
                6.00
                
                
                
                4.00
                
                
                
                0.30
                
                
                
                0.16
                
                
                
                6.00
                
                
                
                5.80




B.           Plan
of Distribution




Not
required.




C.          
Markets





The
Company’s ordinary shares, warrants and units are quoted on Over the Counter
Bulletin Board under the symbols “CADQ”, “CADWE” and “CADUE”,
respectively.


60




D.          
Selling Shareholders




Not
required.




E.          
Dilution




Not
required.




F.          
Expenses of the Issue




Not
required.




ITEM
      10.
            ADDITIONAL
      INFORMATION




A.          Share
Capital




Not
required.




B.   
      Memorandum and Articles of
Association




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





Registered Office.Under the
Company’s Amended and Restated Memorandum of Association, the Registered Office
of the Company is the offices of M&C Corporate Services Limited, PO Box 309,
Ugland House, Grand Cayman, KY-1104 Cayman Islands, or at such other place as
the directors may from time to time decide.





Objects and Purposes. Under
Article 3 of the Company’s Amended and Restated Memorandum of Association, the
objects for which the Company is established are unrestricted and the Company
shall have full power and authority to carry out any object not prohibited by
Cayman Islands law.





Directors. Directors of the
Company may vote in respect of any contract or transaction in which he or she is
interested provided that the nature of the interest of any director in any such
interest shall be disclosed by him or her at or prior to its consideration and
any vote thereon. Directors of the Company may vote compensation to themselves
or members of the board of directors in the absence of an independent quorum,
and may exercise all the powers of the Company to borrow money and to mortgage
or charge its undertaking, property and uncalled capital or any part thereof and
to issue debentures, debenture stock, mortgages, bonds and other such securities
whether outright or as security for any debt, liability or obligation of the
Company or of any third party. There is no age limit that triggers mandatory
retirement, and no share ownership required for a director’s
qualification.


61


Rights, Preferences and Restrictions
Attaching to the Company’s Shares.
 
 General





Si Mei Te is authorized to issue
100,000,000 ordinary shares, par value $.0001, and 1,000,000 shares of preferred
stock, par value $.0001. As of the date of 20-F, 16,263,824  ordinary
shares are issued and outstanding. No preferred shares are currently issued and
outstanding.





Units





Each unit consists of one ordinary
share and two warrants. Each warrant entitles the holder to purchase one
ordinary share. The ordinary shares and warrants began to trade separately on
July 10, 2007.





Ordinary Shares





Si Mei Te’s shareholders of record are
entitled to one vote for each share held on all matters to be voted on by
shareholders.





Preferred Shares





Si Mei Te’s Amended and Restated
Memorandum and Articles of Association authorizes the issuance of 1,000,000
preferred shares with such designation, rights and preferences as may be
determined from time to time by its board of directors. No preferred shares have
been issued. Accordingly, Si Mei Te’s board of directors is empowered, without
shareholder approval, to issue preferred shares with dividend, liquidation,
conversion, redemption voting or other rights which could adversely affect the
voting power or other rights of the holders of ordinary shares. In addition, the preferred
shares could be utilized as a method of discouraging, delaying or preventing a
change in control of Si Mei Te. Although Si Mei Te does not currently intend to
issue any preferred shares, it cannot assure you that it will not do so in the
future.





Warrants





12,743,334 warrants are currently
outstanding, 1,243,334 of which are currently owned by pre-business combination
officers or directors of Si Mei Te. Each warrant entitles the registered holder
to purchase one ordinary share at a price of $5.00 per share, subject to
adjustment as discussed below, at any time commencing on June 26, 2009 until
four years from the date of the initial public offering prospectus at 5:00 p.m.,
New York City time.





Si Mei Te may call the warrants for
redemption (including the warrants included within the insider units, any
insider warrants and any warrants


issued
upon exercise of the unit purchase option issued to EarlyBird Capital), without
the prior consent of the underwriters,





·
            in
      whole and not in part,


·
            at
      a price of $0.01 per warrant at any time while the warrants are
      exercisable (which will only occur if a registration statement relating to
      the ordinary shares issuable upon exercise of the warrants is effective
      and current),


·
            upon
      not less than 30 days’ prior written notice of redemption to each warrant
      holder, and


62





·
            if,
      and only if, the reported last sale price of the ordinary shares equals or
      exceeds $8.50 per share, for any 20 trading days within a 30-trading day
      period ending on the third business day prior to the notice of redemption
      to warrant holders.





The redemption criteria for our
warrants have been established at a price which is intended to provide warrant
holders a reasonable premium to the initial exercise price and provide a
sufficient degree of liquidity to cushion the market reaction to our redemption
call.





If Si Mei Te calls the warrants for
redemption as described above, its management will have the option to require
any holder that wishes to exercise his, her or its warrant (including the
warrants included within the insider units) to do so on a “cashless basis.” If
Si Mei Te’s management takes advantage of this option, all holders of warrants
would pay the exercise price by surrendering his, her or its warrants for that
number of ordinary shares equal to the quotient obtained by dividing (x) the
product of the number of ordinary shares underlying the warrants, multiplied by
the difference between the exercise price of the warrants and the “fair market
value” (defined below) by (y) the fair market value. The “fair market value”
shall mean the average reported last sale price of the ordinary shares for the
10 trading days ending on the third trading day prior to the date on which the
notice of redemption is sent to the holders of warrants. If Si Mei Te’s
management takes advantage of this option, the notice of redemption will contain
the information necessary to calculate the number of ordinary shares to be
received upon exercise of the warrants, including the “fair market value” in
such case. Requiring a cashless exercise in this manner will reduce the number
of shares to be issued and thereby lessen the dilutive effect of a warrant
redemption. Si Mei Te believes this feature is an attractive option to it if it
does not need the cash from the exercise of the warrants after the business
combination. If Si Mei Te calls its warrants for redemption and its management
does not take advantage of this option, its officers, directors and special
advisor would still be entitled to exercise their warrants underlying
the insider units and the insider warrants for cash or on a cashless basis using
the same formula described above that other warrant holders would have been
required to use had all warrant holders been required to exercise their warrants
on a cashless basis. The reason that Si Mei Te has agreed that these warrants
will be exercisable on a cashless basis so long as they are held by its
officers, directors, special advisor or their affiliates is because was is not
known at the time whether they would be affiliated with Si Mei Te following the
business combination. Si Mei Te expects to have policies in place that prohibit
insiders from selling its securities except during specific periods of time.
Even during such periods of time when insiders will be permitted to sell Si Mei
Te’s securities, an insider cannot trade in its securities if he is in
possession of material non-public information. Accordingly, unlike public
shareholders who could exercise their warrants and sell the ordinary shares
received upon such exercise freely in the open market in order to recoup the
cost of such exercise, the insiders could be significantly restricted from
selling such securities. As a result, Si Mei Te believes that allowing the
holders to exercise such warrants on a cashless basis is
appropriate.





The warrants have been issued in
registered form under a warrant agreement between Continental Stock Transfer
& Trust Company, as warrant agent, and Si Mei Te. The exercise price and
number of ordinary shares issuable on exercise of the warrants may be adjusted
in certain circumstances including in the event of a stock dividend, or Si Mei
Te’s recapitalization, reorganization, merger or consolidation. However, the
warrants will not be adjusted for issuances of ordinary shares at a price below
their respective exercise prices. The warrants may be exercised upon surrender
of the warrant certificate on or prior to the expiration date at the offices of
the warrant agent, with the exercise form on the reverse side of the warrant
certificate completed and executed as indicated, accompanied by full payment of
the exercise price, by certified or official bank check payable to Si Mei Te,
for the number of warrants being exercised. The warrant holders do not have the
rights or privileges of holders of ordinary shares and any voting rights until
they exercise their warrants and receive ordinary shares. After the issuance of
ordinary shares upon exercise of the warrants, each holder will be entitled to
one vote for each share held of record on all matters to be voted on by
shareholders.


63





No warrants will be exercisable unless
at the time of exercise a prospectus relating to ordinary shares issuable upon
exercise of the warrants is current and the ordinary shares have been registered
or qualified or deemed to be exempt under the securities laws of the state of
residence of the holder of the warrants. Under the terms of the warrant
agreement, Si Mei Te has agreed to meet these conditions and use its best
efforts to maintain a current prospectus relating to ordinary shares issuable
upon exercise of the warrants until the expiration of the warrants. However, Si
Mei Te cannot assure you that we will be able to do so, and if its does not
maintain a current prospectus related to the ordinary shares issuable upon
exercise of the warrants, holders will be unable to exercise their warrants and
it will not be required to net cash settle or cash settle any such warrant
exercise. If the prospectus relating to the ordinary shares issuable upon the
exercise of the warrants is not current or if the ordinary shares are not
qualified or exempt from qualification in the jurisdictions in which the holders
of the warrants
reside, the warrants may have no value, the market for the warrants may be
limited and the warrants may expire worthless. If the warrants expire worthless,
this would mean that a person who paid $6.00 for a unit in our initial public
and who did not sell the warrants included in the unit would have effectively
paid $6.00 for one ordinary share. Because the warrants will not be exercisable
without an effective registration statement covering the shares underlying the
warrants, Si Mei Te will not call the warrants for redemption unless there is an
effective registration statement in place.





No fractional shares will be issued
upon exercise of the warrants. If, upon exercise of the warrants, a holder would
be entitled to receive a fractional interest in a share, Si Mei Te will, upon
exercise, round up to the nearest whole number the number of ordinary shares to
be issued to the warrant holder.





Dividends





Si Mei
Te has not paid any cash dividends on its ordinary shares to date and does
not intend to pay cash dividends prior to the completion of a business
combination. The payment of cash dividends in the future will be dependent upon
Si Mei Te’s
revenues and earnings, if any, capital requirements and general financial
condition subsequent to completion of a business combination. The payment of any
dividends subsequent to a business combination will be within the discretion
of Si Mei Te’s then board of directors. See the section entitled “Price
Range of Securities and Dividends” for a discussion of the combined company’s
dividend policy following the acquisition.





Alteration of Rights. If at
any time the share capital of the Company is divided into different classes of
shares, the rights attached to any class (unless otherwise provided by the terms
of issue of the shares of that class) may, whether or not the Company is being
wound up, be varied with the consent in writing of the holders of three-quarters
of the issued shares of that class, or with the sanction of a special resolution
passed at a general meeting of the holders of the shares of that class. The
necessary quorum shall be one person holding or representing by proxy at least
one third of the issued shares of the class and that any holder of shares of the
class present in person or by proxy may demand a poll. The rights conferred upon
the holders of the shares of any class issued with preferred or other rights
shall not, unless otherwise expressly provided by the terms of issue of the
shares of that class, be deemed to be varied by the creation or issue of further
shares ranking pari passu therewith.


64





Meetings. At least ten days'
notice shall be given of any general meeting, which shall specify the place, the
day and the hour of the meeting and the general nature of the
business.





Limitations on the Right to Own
Securities. There are no limitations on the rights to own securities of
the Company, or limitations on the rights of non-resident or foreign
shareholders to hold or exercise voting rights on the Company’s securities,
contained in the Company’s Amended and Restated Memorandum and Articles of
Association or under Cayman Islands law.





Changes in Control.The
Company could issue preferred shares as a method of discouraging, delaying or
preventing a change in control of the Company. Although the Company does not
currently intend to issue any preferred shares, it cannot assure you that it
will not do so in the future.




C.           Material
Contracts




As of
December 31, 2008, the Company has not entered into any material
contracts.




D.           Exchange
Controls and Other Limitations Affecting Security Holders




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




E.           Taxation




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





Cayman
Islands Taxation




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




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


65




We
applied for and received on January 16, 2007, an undertaking from the
Governor-in-Cabinet of the Cayman Islands that, in accordance with section 6 of
the Tax Concessions Law (1999 Revision) of the Cayman Islands, for a period of
20 years from the date of the undertaking, no law which is enacted in the Cayman
Islands imposing any tax to be levied on profits, income, gains or appreciations
shall apply to us or our operations and, in addition, that no tax to be levied
on profits, income, gains or appreciations or which is in the nature of estate
duty or inheritance tax shall be payable (i) on the shares, debentures or other
obligations of Si Mei Te or (ii) by way of the withholding in whole or in
part of a payment of dividend or other distribution of income or capital by Si
Mei Te to its members or a payment of principal or interest or other sums due
under a debenture or other obligation of Si Mei Te.




United
States Federal Income Taxation




General




The
following is a summary of the material U.S. federal income tax consequences of
owning and disposing of our ordinary shares and warrants, sometimes referred to
as our securities, to us and to holders of our securities. Because the
components of a unit are separable at the option of the holder, the holder of a
unit should be treated, for U.S. federal income tax purposes, as the owner of
the underlying ordinary share and warrant components of the unit, as the case
may be. As a result, the discussion below of the U.S. federal income tax
consequences with respect to actual holders of ordinary shares and warrants
should also apply to the holder of a unit (as the deemed owner of the underlying
ordinary share and warrant components of the unit). The discussion below of the
U.S. federal income tax consequences to “U.S. Holders” will apply to a
beneficial owner of ordinary shares or warrants that is for U.S. federal income
tax purposes:




·
            an
      individual citizen or resident of the United
  States;




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




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




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




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




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


66




This
discussion does not address all aspects of U.S. federal income taxation that may
be relevant to us or to any particular holder based on such holder’s individual
circumstances. In particular, this discussion considers only holders that own
our ordinary shares and warrants as capital assets within the meaning of Section
1221 of the Code, and does not address the potential application of the
alternative minimum tax or the U.S. federal income tax consequences to holders
that are subject to special rules, including:




·
            financial
      institutions or financial services
entities;




·
            broker-dealers;




·
            taxpayers
      who have elected mark-to-market
accounting;




·
            tax-exempt
      entities;




·
            governments
      or agencies or instrumentalities
thereof;




·
            insurance
      companies;




·
            regulated
      investment companies;




·
            real
      estate investment trusts;




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




·
            persons
      that actually or constructively own 5% or more of our voting
      shares;




·
            persons
      that acquired our ordinary shares or warrants pursuant to an exercise of
      employee stock options, in connection with employee stock incentive plans
      or otherwise as compensation;




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




·
            persons
      whose functional currency is not the U.S.
  dollar.




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




We have
not sought, and will not seek, a ruling from the Internal Revenue Service (the
“IRS”) or an opinion of counsel as to any U.S. federal income tax consequence
described herein. The IRS may disagree with the description herein, and its
determination may be upheld by a court. Moreover, there can be no assurance that
future legislation, regulations, administrative rulings or court decisions will
not adversely affect the accuracy of the statements in this
discussion.


67




BECAUSE
OF THE COMPLEXITY OF THE TAX LAWS AND BECAUSE THE TAX CONSEQUENCES TO US OR TO
ANY PARTICULAR HOLDER OF OUR SECURITIES MAY BE AFFECTED BY MATTERS NOT DISCUSSED
HEREIN, EACH HOLDER OF OUR SECURITIES IS URGED TO CONSULT WITH ITS TAX ADVISOR
WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION
OF OUR ORDINARY SHARES AND WARRANTS, INCLUDING THE APPLICABILITY AND
EFFECT OF STATE, LOCAL AND NON-U.S. TAX LAWS, AS WELL AS U.S. FEDERAL TAX
LAWS.




Tax
Consequences to U.S. Holders of Our Ordinary Shares and Warrants




Taxation
of Distributions Paid on Ordinary Shares




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




With
respect to non-corporate U.S. Holders for taxable years beginning before January
1, 2011, dividends may be taxed at the lower applicable long-term capital gains
rate (see “— Taxation on the Disposition of Ordinary Shares and Warrants” below)
provided that (1) our ordinary shares are readily tradable on an established
securities market in the United States, (2) we are not a PFIC, as discussed
below, for either the taxable year in which the dividend was paid or the
preceding taxable year, and (3) certain holding period requirements are met. It
is not entirely clear, however, whether a U.S. Holder’s holding period for our
ordinary shares would be suspended for purposes of clause (3) above for the
period that such holder had a right to have such ordinary shares redeemed by us.
In addition, under recently published IRS authority, ordinary shares are
considered for purposes of clause (1) above to be readily tradable on an
established securities market in the United States only if they are listed on
certain exchanges, which presently do not include the OTC Bulletin Board.
Because our ordinary shares will be listed and traded only on the OTC Bulletin
Board, any dividends paid on our ordinary shares currently are not expected to
qualify for the lower rate. U.S. Holders should consult their own tax advisors
regarding the availability of the lower rate for any dividends paid with respect
to our ordinary shares.




If PRC
taxes apply to dividends paid to a U.S. Holder on our ordinary shares, such
taxes may be treated as foreign taxes eligible for credit against such holder’s
U.S. federal income tax liability (subject to certain limitations), and a U.S.
Holder may be entitled to certain benefits under the income tax treaty between
the United States and the PRC. U.S. Holders should consult their own tax
advisors regarding the creditability of any such PRC tax and their eligibility
for the benefits of the income tax treaty between the United States and the
PRC.


68




Taxation
on the Disposition of Ordinary Shares and Warrants




Upon a
sale or other taxable disposition of our ordinary shares or warrants, and
subject to the PFIC rules discussed below, a U.S. Holder generally will
recognize capital gain or loss in an amount equal to the difference between the
amount realized and the U.S. Holder’s adjusted tax basis in the ordinary shares
or warrants. See “— Exercise or Lapse of a Warrant” below for a discussion
regarding a U.S. Holder’s basis in the ordinary shares acquired pursuant to the
exercise of a warrant.




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




If PRC
taxes apply to any gain from the disposition of our ordinary shares or warrants
by a U.S. Holder, such taxes may be treated as foreign taxes eligible for credit
against such holder’s U.S. federal income tax liability (subject to certain
limitations), and a U.S. Holder may be entitled to certain benefits under the
income tax treaty between the United States and the PRC. U.S. Holders should
consult their own tax advisors regarding the creditability of any such PRC tax
and their eligibility for the benefits of the income tax treaty between the
United States and the PRC.




Exercise
or Lapse of a Warrant




Subject
to the discussion of the PFIC rules below, a U.S. Holder generally will not
recognize gain or loss upon the exercise of a warrant for cash. Ordinary shares
acquired pursuant to the exercise of a warrant for cash generally will have a
tax basis equal to the U.S. Holder’s tax basis in the warrant, increased by the
amount paid to exercise the warrant. The holding period of such ordinary shares
generally would begin on the day after the date of exercise of the warrant. The
terms of a warrant provide for an adjustment to the number of ordinary shares
for which the warrant may be exercised or to the exercise price of the warrant,
in certain events. Such adjustment may, under certain circumstances, result in
constructive distributions that could be taxable to the U.S. Holder of the
warrants. Conversely, the absence of an appropriate adjustment similarly may
result in a constructive distribution that could be taxable to the U.S. Holders
of the ordinary shares. See “—Taxation of Distributions Paid on Ordinary
Shares,” above. If a warrant is allowed to lapse unexercised, a U.S. Holder
generally will recognize a capital loss equal to such holder’s tax basis in the
warrant. U.S. Holders that exercise a warrant other than by paying the exercise
price in cash should consult their own tax advisors regarding the tax treatment
of such on exercise, which may vary from that described above.




Passive
Foreign Investment Company Rules




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


69




Based on
the composition of our assets and the nature of our income in 2007 and
2008, which largely consisted of cash and other investment assets, it is likely
that we qualified as a PFIC in 2007 and 2008. Our actual PFIC status for any
subsequent taxable year, however, will not be determinable until after the end
of the taxable year. Accordingly, there can be no assurance with respect to our
status as a PFIC for 2009 or any subsequent taxable year.




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




·
            any
      gain recognized by the U.S. Holder on the sale or other disposition of its
      ordinary shares or warrants; and




·
            any
      “excess distribution” made to the U.S. Holder (generally, any
      distributions to such U.S. Holder during a taxable year that are greater
      than 125% of the average annual distributions received by such U.S. Holder
      in respect of the ordinary shares during the three preceding taxable years
      or, if shorter, such U.S. Holder’s holding period for the ordinary
      shares).




Under
these rules,




·
            the
      U.S. Holder’s gain or excess distribution will be allocated ratably over
      the U.S. Holder’s holding period for the ordinary shares or
      warrants;




·
            the
      amount allocated to the taxable year in which the U.S. Holder recognized
      the gain or received the excess distribution, or to any taxable year prior
      to the first taxable year in which we qualified as a PFIC, will be taxed
      as ordinary income;




·
            the
      amount allocated to other taxable years will be taxed at the highest tax
      rate in effect for that year and applicable to the U.S. Holder;
      and




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




In
addition, if we are a PFIC, a U.S. Holder who acquires our ordinary shares or
warrants from a deceased U.S. Holder who dies before January 1, 2010 and who had
not made a timely QEF election for the ordinary shares generally will be denied
the step-up of U.S. federal income tax basis in such shares or warrants to their
fair market value at the date of the deceased holder’s death. Instead, such U.S.
Holder would have a tax basis in such shares or warrants equal to the deceased
holder’s tax basis, if lower.




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


70




A U.S.
Holder may not make a QEF election with respect to its warrants. As a result, if
a U.S. Holder sells or otherwise disposes of a warrant (other than upon exercise
of a warrant), any gain recognized generally will be subject to the special tax
and interest charge rules treating the gain as an excess distribution, as
described above, if we were a PFIC at any time during the period the U.S. Holder
held the warrants. If a U.S. Holder that exercises such warrants properly makes
a QEF election with respect to the newly acquired ordinary shares (or has
previously made a QEF election with respect to our ordinary shares), the QEF
election will apply to the newly acquired ordinary shares, but the adverse tax
consequences relating to PFIC shares will continue to apply with respect to such
ordinary shares (which generally will be deemed to have a holding period for the
purposes of the PFIC rules that includes the period the U.S. Holder held the
warrants), unless the U.S. Holder makes a purging election. The purging election
creates a deemed sale of such shares at their fair market value. The gain
recognized by the purging election will be subject to the special tax and
interest charge rules treating the gain as an excess distribution, as described
above. As a result of the purging election, the U.S. Holder will have a new
basis and holding period in the ordinary shares acquired upon the exercise of
the warrants for purposes of the PFIC rules.




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




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




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


71




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




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




The
mark-to-market election is available only for stock that is regularly traded on
a national securities exchange that is registered with the Securities and
Exchange Commission, or on a foreign exchange or market that the IRS determines
has rules sufficient to ensure that the market price represents a legitimate and
sound fair market value. Because our ordinary shares are listed and traded only
on the OTC Bulletin Board, they may not currently qualify as marketable
stock for purposes of this election. U.S. Holders should consult their own tax
advisors regarding the availability and tax consequences of a mark-to-market
election in respect to our ordinary shares under their particular
circumstances.




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


72




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




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




Tax
Consequences to Non-U.S. Holders of Our Ordinary Shares and
Warrants




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




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




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




Backup
Withholding and Information Reporting




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




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




·
            fails
      to provide an accurate taxpayer identification
  number;




·
            is
      notified by the IRS that backup withholding is required;
  or




73




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




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




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




F.           Dividends
and paying agents




Not
required.




G.          Statement
by experts




Not
required.




H.          Documents
on display




Documents
concerning us that are referred to in this document may be inspected at our
principal executive offices at No. 8, Wuzhi Xi Huafeng Industrial Zone; HeNan
Province; People’s Republic of China; Tel: +86 13911573595.




In
addition, we will file annual reports and other information with the Securities
and Exchange Commission. We will file annual reports on Form 20-F and
submit other information under cover of Form 6-K. As a foreign private
issuer, we are exempt from the proxy requirements of Section 14 of the
Exchange Act and our officers, directors and principal shareholders will be
exempt from the insider short-swing disclosure and profit recovery rules of
Section 16 of the Exchange Act. Annual reports and other information
we file with the Commission may be inspected at the public reference facilities
maintained by the Commission at Room 1024, 100 F. Street, N.E., Washington,
D.C. 20549, and at its regional offices located at 233 Broadway, New York, New
York 10279 and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661, and copies of all or any part thereof may be obtained from such offices
upon payment of the prescribed fees. You may call the Commission at
1-800-SEC-0330 for further information on the operation of the public reference
rooms and you can request copies of the documents upon payment of a duplicating
fee, by writing to the Commission. In addition, the Commission maintains a
web site that contains reports and other information regarding registrants
(including us) that file electronically with the Commission which can be
assessed at http://www.sec.gov.




I.            Subsidiary
Information




Not
required.


74




ITEM
      11.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK




Quantitative
and Qualitative Disclosure About Market Risk




Interest Rate Risk.
HeNan Smart Food is exposed to interest rate risk due primarily to its
short-term bank loans. Although the interest rates are fixed for the terms of
the loans, the terms are typically twelve months and interest rates are subject
to change upon renewal. HeNan Smart Food monitors interest rates in conjunction
with its cash requirements to determine the appropriate level of debt balances
relative to other sources of funds. HeNan Smart Food has not entered into any
hedging transactions in an effort to reduce its exposure to interest rate
risk.




Foreign Exchange
Risk. The value of the RMB against the U.S. dollar and other currencies
is affected by, among other things, changes in China’s political and economic
conditions. Since July 2005, the RMB has no longer been pegged to the U.S.
dollar. Although the People’s Bank of China regularly intervenes in the foreign
exchange market to prevent significant short-term fluctuations in the exchange
rate, the RMB may appreciate or depreciate significantly in value against the
U.S. dollar in the medium to long term. Moreover, it is possible that, in the
future, PRC authorities may lift restrictions on fluctuations in the RMB
exchange rate and lessen intervention in the foreign exchange
market.




Because
substantially all of HeNan Smart Food’s earnings and cash assets are denominated
in RMB, but its reporting currency is the U.S. dollar, fluctuations in the
exchange rate between the U.S. dollar and the RMB will affect its balance sheet
and its earnings per share in U.S. dollars. In addition, appreciation or
depreciation in the value of the RMB relative to the U.S. dollar would affect
HeNan Smart Food’s financial results reported in U.S. dollar terms without
giving effect to any underlying change in its business or results of operations.
Fluctuations in the exchange rate will also affect the relative value of any
dividend HeNan Smart Food issues in the future that will be exchanged into U.S.
dollars and earnings from, and the value of, any U.S. dollar-denominated
investments HeNan Smart Food makes in the future.




Very
limited hedging transactions are available in China to reduce HeNan Smart Food’s
exposure to exchange rate fluctuations. To date, HeNan Smart Food has not
entered into any hedging transactions in an effort to reduce its exposure to
foreign currency exchange risk. While HeNan Smart Food may enter into hedging
transactions in the future, the availability and effectiveness of these
transactions may be limited, and it may not be able to successfully hedge its
exposure at all. In addition, HeNan Smart Food’s foreign currency exchange
losses may be magnified by PRC exchange control regulations that restrict its
ability to convert RMB into foreign currencies.




Inflation.
Inflationary factors, such as increases in the cost of its products and overhead
costs, could impair HeNan Smart Food’s operating results. Although HeNan Smart
Food does not believe that inflation has had a material impact on its financial
position or results of operations to date, a high rate of inflation in the
future may have an adverse effect on its ability to maintain current levels of
gross margin and selling, general and administrative expenses as a percentage of
sales revenue if the selling prices of its products do not increase with these
increased costs.




ITEM
      12.
            DESCRIPTION
      OF SECURITIES OTHER THAN EQUITY
SECURITIES




Not
required.


75




PART  II




ITEM
      13.
            DEFAULTS,
      DIVIDEND ARREARAGES AND
DELINQUENCIES




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




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




On June
25, 2009 at the Extraordinary General Meeting of the Shareholders of the
Company, the shareholders approved amendments to the Company’s Memorandum and
Articles of Association, attached to this annual report as Exhibit 1.1, to
delete the following divisions, each of which related to the rights of holders
of the Company’s ordinary shares:




·
            “Transfer
      of Shares” (which related to required procedures in the event of a
      transfer of shares);




·
            “Lien
      on Shares” (pursuant to which the Company had a lien on its outstanding
      shares);




·
            “Call
      on Shares” (pursuant to which the Company could call unpaid amounts on its
      shares); and




·
            “Forfeiture
      of Shares” (which related to shareholders forfeiting their shares in the
      event that shareholders were unable to pay amounts due on such
      shares).




The
Company’s Amended and Restated Memorandum and Articles of Association reflecting
these changes is attached to this annual report as Exhibit 1.2.




There are
no restrictions on working capital and no removal or substitution of assets
securing any class of our registered securities.




Initial
Public Offering




On June 26, 2007, the Company closed
its initial public offering of 5,000,000 units with each unit consisting of one
ordinary share and two warrants, each to purchase one ordinary share at an
exercise price of $5.00 per share. On July 2, 2007, the Company consummated the
closing of an additional 750,000 units that were subject to the over-allotment
option. The units from the initial public offering (including the over-allotment
option) were sold at an offering price of $6.00 per unit.




Simultaneously
with the consummation of its initial public offering, the Company consummated
the private sale of 105,000 units at a price of $6.00 per unit and 1,033,334
warrants at a price of $0.60 per insider warrant, generating total proceeds of
$1,250,000. The privately purchased securities were purchased by Beatrice Hom,
the Company’s previous chief operating officer, chief financial officer and a
member of its board of directors, and Francois Shih, one of its previous special
advisors.


76




Gross
proceeds from the Company’s initial public offering (including from the private
placement of units and warrants) were $35,750,000. The Company paid a total of
$2,233,956 in underwriting discounts and commissions (after deferring $345,000)
and for costs and expenses related to the offering. After deducting the
underwriting discounts and commissions and the offering expenses, the total net
proceeds to the Company from the offering were approximately $32,266,000, of
which $32,123,000 was deposited into a trust account. In addition, all of the
proceeds from the private sale of the units and warrants were deposited into a
trust fund, for a total of $33,372,500 held in trust (or approximately $5.80 per
share sold in the offering).




All of
the founder shares were placed in escrow with Continental Stock Transfer &
Trust Company, as escrow agent, until June 26, 2010 (one year after the
consummation of a business combination). The founder shares may be released from
escrow earlier than this date if, by June 26, 2009, it consummates a subsequent
liquidation, merger, stock exchange or other similar transaction which results
in all of its shareholders having the right to exchange their ordinary shares
for cash, securities or other property.




ITEM
      15.
            CONTROLS
      AND PROCEDURES




A.           Disclosure
Controls and Procedures




An
evaluation was performed under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer,
regarding the effectiveness of the design and operation of our disclosure
controls and procedures as of the end of the December 31, 2008. Based on
that evaluation, our management, including our Chief Executive Officer and Chief
Financial Officer, have concluded that our disclosure controls and procedures as
of December 31, 2008 were effective.




Disclosure
controls and procedures are designed to insure that information required to be
disclosed by us in reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms. The evaluation under this
report was conducted at a time prior to the acquisition of HeNan Smart Food by
us and does not include an evaluation of HeNan Smart Food’s
operations.




B.           Management’s
annual report on internal control over financial reporting




Our management is responsible for
establishing and maintaining adequate internal control over financial reporting,
as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f).
Under the supervision and with the participation of our management, including
our principal executive officer and principal financial officer, we conducted an
evaluation of the effectiveness of our internal control over financial
reporting. In making this assessment, it used the criteria set forth inInternal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).




Based on
our evaluation, our principal executive officer and principal financial officer
have concluded that during the period covered by this report, our internal
controls over financial reporting were effective.


77




This annual report does not include an
attestation report of the company’s registered public accounting firm regarding
internal control over financial reporting. Management’s report was not subject
to attestation by the company’s registered public accounting firm pursuant to
temporary rules of the Securities and Exchange Commission that permit the
company to provide only management’s report in this annual report.




The evaluation under this report was
conducted at a time prior to the acquisition of HeNan Smart Food by us and does
not include an evaluation of HeNan Smart Food’s operations.




C.           Changes
in Internal Controls over Financial Reporting




There
were no changes in our internal control over financial reporting (as defined in
Rule 13a-15(f) of the Exchange Act) that occurred during the year ended
December 31, 2008 that have materially affected, or are reasonably likely
to materially affect, our internal controls over financial reporting. It should
be noted that while our management believes that our disclosure controls and
procedures provide a reasonable level of assurance; our management does not
expect that our disclosure controls and procedures or internal financial
controls will prevent all errors or fraud. A control system, no matter how well
conceived or operated, can provide only reasonable, not absolute, assurance that
the objectives of the control system are met.




ITEM
      16.
            [RESERVED]




ITEM
16A.        AUDIT COMMITTEE FINANCIAL
EXPERT.




The Board of Directors has not
determined whether anyone on the Board of Directors is an audit committee
financial expert, as such term is defined by SEC rules. Since the Board of
Directors does not have a separately designated Audit Committee and Si Mei Te
only acquired operations upon the consummation of the business combination, Si
Mei Te has not made the determination of whether anyone is an audit committee
financial expert.




ITEM
16B.        CODE OF ETHICS.




Si Mei Te does not have a formal code
of ethics due to the fact that it did not have an operating business until June
26, 2009 upon the consummation of the business combination. Si Mei Te intends to
adopt a code of ethics that applies to Si Mei Te’s principal executive officers,
principal financial officer, principal accounting officer or controller or
persons performing similar functions.




ITEM
16C.        PRINCIPAL ACCOUNTANT FEES
AND SERVICES.




The firm
of UHY LLP acts as the Company’s principal accountant. The following is a
summary of fees paid to the Company’s principal accountant for services rendered
during fiscal years 2007 and 2008 (prior to the business
combination).




Audit
Fees.  During the year ended December 31, 2007, Si Mei Te paid
its principal accountant $25,000 for the services they performed in connection
with its Registration Statement on Form S-1 related to its initial public
offering, including the financial statements included in the Current Report on
Form 8-K filed with the Securities and Exchange Commission on June 29, 2007, and
$2,700 in connection with the review of its two Quarterly Reports on Form
10-QSB. The fee for the audit of the financial statements included in its Annual
Report on Form 10-KSB for the fiscal year ended December 31, 2007 was $15,000.
The aggregate of such fees is $47,700.


78




During
the year ended December 31, 2008, Si Mei Te paid its principal accountant
$11,500 in connection with the review of its Quarterly Reports on Form 10-Q. The
fee for the audit of the financial statements included in Si Mei Te’s Annual
Report on Form 20-F for the fiscal year ended December 31, 2008 is approximately
$20,000. The aggregate of such fees is $31,500.




Through
December 31, 2008, UHY had a continuing relationship with UHY Advisors, Inc.
(“Advisors”) from which it leased auditing staff who were full time, permanent
employees of Advisors and through which UHY’s partners provide non-audit
services. UHY has only a few full time employees. Therefore, few, if any, of the
audit services performed were provided by permanent full-time employees of UHY.
UHY manages and supervises the audit services and audit staff, and is
exclusively responsible for the opinion rendered in connection with its
examination.




Audit-Related
Fees.  During the years ended December 31, 2007 and 2008, Si
Mei Te’s principal accountant did not render assurance and related services
reasonably related to the performance of the audit or review of financial
statements.




Tax
Fees.  During the years ended December 31, 2007 and 2008, Si
Mei Te’s principal accountant did not render services to it for tax compliance,
tax advice and tax planning.




All Other
Fees.  During the years ended December 31, 2007 and 2008, there
were no fees billed for products and services provided by the principal
accountant other than those set forth above.




Pre-Approval of
Services.  Si Mei Te does not have an Audit Committee. The
Board of Directors does not have any pre-approval policies in
place.




ITEM
16D.        EXEMPTIONS FROM THE LISTING
STANDARDS FOR AUDIT COMMITTEES.




Not
Applicable.




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




Not
Applicable.




ITEM
16F.         CHANGE IN REGISTRANT’S
CERTIFYING ACCOUNTANT




Not
Applicable.




ITEM
16G.        CORPORATE
GOVERNANCE




Not
Applicable.


79




PART  III




ITEM
      17.
            FINANCIAL
      STATEMENTS




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




ITEM
      18.
            FINANCIAL
      STATEMENTS




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





PageReport
      of Independent Registered Public Accounting Firm
              
              F-1Financial
      Statements:Balance
      Sheet
              
              F-2Statement
      of Operations
              
              F-3Statement
      of Stockholders’ Equity
              
              F-4Statement
      of Cash Flows
              
              F-5Notes
      to Financial Statements
              
              F-6




ITEM
      19.
            EXHIBITS





Exhibit No.
                
                Description1.1
                
                Memorandum
      of Association, adopted January 8, 2007**1.2
                
                Amended
      and Restated Articles of Association, adopted April 11, 2007
      and in effect on December 31, 20081.3
                
                Second Amended
      and Restated Memorandum and Articles of Association, adopted June 25,
      2009*2.1
                
                Specimen
      Unit Certificate**2.2
                
                Specimen
      Ordinary Share Certificate**2.3
                
                Specimen
      Warrant Certificate**2.4
                
                Form
      of Unit Purchase Option granted to Earlybird Capital,
    Inc.**2.5
                
                Form
      of Warrant Agreement between Continental Stock Transfer & Trust
      Company and Si Mei Te Food Limited**4.1
                
                Purchase
      Agreement*4.2
                
                Amendment
      1 to Purchase Agreement dated June 23, 2009***4.3
                
                Employment
      Agreement between HeNan Smart Food and Hu Ye, dated May 1,
      20098.1
                
                List
      of Subsidiaries12.1
                
                Certification
      of Wang Youli pursuant to Rule 13a-14(a) of the Exchange
    Act12.2
                
                Certification
      of Hu Ye pursuant to Rule 13a-14(a) of the Exchange Act13.1
                
                Certification
      Pursuant to 18 U.S.C. Section 135015.1
                
                Financial
      Statements of HeNan Smart Food15.2
                
                Press
      Release dated June 26,
2009


80





*
Incorporated by reference to the Company’s Final Proxy Statement, filed under
cover of Form 6-K with the SEC on June 2, 2009.





**
Incorporated by reference to the Company’s Registration Statement on Form F-1,
filed with the SEC on February 8, 2007.





***
Incorporated by reference to the Company’s Current Report on Form 6-K, filed
with the SEC as Exhibit 10.1 to its Form 6-K dated June 25,
2009.


81


SIGNATURES




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





July 15,
2009





SI
      MEI TE FOOD LIMITEDBy:
              /s/ Hu YeName:
      Hu YeTitle:
      Chief Financial Officer


1





REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the
Board of Directors and Shareholders of


China
Discovery Acquisition Corp.




We have
audited the accompanying balance sheets of China Discovery Acquisition Corp. (a
corporation in the development stage) as of December 31, 2008 and 2007, and the
related statements of operations and changes in stockholders’ equity and cash
flows for the year ended December 31, 2008 and for the periods from January 8,
2007 (inception) through December 31, 2008 and 2007. These financial statements
are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these financial statements based on our
audits.




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




In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of China Discovery Acquisition
Corp. as of December 31, 2008 and 2007, and the results of its operations
and its cash flows for the year ended December 31, 2008 and for the periods from
January 8, 2007 (inception) through December 31, 2008 and 2007 in conformity
with accounting principles generally accepted in the United States of
America.




The
accompanying financial statements have been prepared assuming the China
Discovery Acquisition Corp.  will continue as a going concern. As
discussed in Note 1 to the financial statements, the Company faces a mandatory
liquidation on June 26, 2009 if a business combination is not consummated which
raises substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.




/s/ UHY
LLP




Albany,
New York


May 5,
2009


F-1





China
Discovery Acquisition Corp.


(a
Corporation in the Development Stage)


Balance
Sheets




December
      31,
                    2008
                
                
                December
      31,
                    2007ASSETSCURRENT
      ASSETSCash
                
                $
                335,999
                
                
                $
                100,832Cash
      and cash equivalents held in Trust Fund
                
                
                33,678,745
                
                
                
                33,876,887Interest
      receivable
                
                
                -
                
                
                
                107,490Prepaid
      expenses and other
                
                
                35,100
                
                
                
                -Total
      Assets
                
                $
                34,049,844
                
                
                $
                34,085,209LIABILITIES
      AND STOCKHOLDERS’ EQUITYCURRENT
      LIABILITIESAccrued
      expenses
                
                $
                17,500
                
                
                $
                -Deferred
      underwriter’s fees
                
                
                345,000
                
                
                
                345,000Total
      current liabilities
                
                
                362,500
                
                
                
                345,000ORDINARY
      SHARES SUBJECT TO POSSIBLE CONVERSION (1,724,999 shares at conversion
      value)
                
                
                10,100,256
                
                
                
                10,008,413COMMITMENTS
      AND CONTINGENCYSTOCKHOLDERS’
      EQUITYPreferred
      shares, $.0001 par valueAuthorized 1,000,000
      shares; none issuedOrdinary shares,
      $.0001 par valueAuthorized
      25,000,000 shares
                
                
                -
                
                
                
                -Issued
      and outstanding 7,105,000 shares (which includes 1,724,999 shares subject
      to possible conversion)
                
                
                711
                
                
                
                711Additional
      paid-in capital
                
                
                23,095,177
                
                
                
                23,187,020Earnings
      accumulated during the development stage
                
                
                491,200
                
                
                
                544,065Total
      stockholders’ equity
                
                
                23,587,088
                
                
                
                23,731,796Total
      liabilities and stockholders’ equity
                
                $
                34,049,844
                
                
                $
                34,085,209




See notes
to financial statements


F-2


China
Discovery Acquisition Corp.




(a
Corporation in the Development Stage)




Statements
of Operations




For
      the Year
                  Ended
                  December 31,
                  2008
              
              
              Period
      from
                  January 8, 2007
                  (inception)
      to
                  December 31,
                  2007
              
              
              Period
      from
                  January 8, 2007
                  (inception)
      to
                  December 31,
                  2008Formation
      costs
              
              $
              -
              
              
              $
              4,501
              
              
              $
              4,501Operating
      expenses
              
              
              601,340
              
              
              
              266,288
              
              
              
              867,628Operating
      loss
              
              
              (601,340
              )
              
              
              (270,789
              )
              
              
              (872,129
              )Other
      income:Investment
      income
              
              
              548,475
              
              
              
              814,854
              
              
              
              1,363,329Net
      (loss) / income for period
              
              
              (52,865
              )
              
              
              544,065
              
              
              
              491,200Net
      (loss) / income attributable to common shareholders
              
              
              (52,865
              )
              
              
              544,065
              
              
              
              491,200Weighted
      average shares outstanding
              
              
              7,105,000
              
              
              
              4,144,500
              
              
              
              5,666,000Net
      (loss) / income per share, basic and diluted
              
              $
              (0.01
              )
              
              $
              0.13
              
              
              $
              0.09




See notes
to financial statements


F-3


China
Discovery Acquisition Corp.




(a
Corporation in the Development Stage)




Statement
of Stockholders’ Equity




Ordinary
      Shares
              
              
              Additional
                Paid-In
              
              
              Earnings
                accumulated
                during
      the
                developmentShares
              
              
              Amount
              
              
              Capital
              
              
              stage
              
              
              TotalOrdinary
      shares issued January 8, 2007 at $.0200 per share
              
              
              1,250,000
              
              
              $
              125
              
              
              $
              24,875
              
              
              
              
              
              $
              25,000Sale
      of 5,750,000 units at $6.00 per unit through a public offering, net of
      underwriter’s discount and offering expenses (1,724,999 shares subject to
      possible conversion)
              
              
              5,750,000
              
              
              
              575
              
              
              
              31,920,469
              
              
              
              
              
              
              31,921,044Proceeds
      from issuance of underwriter’s options
              
              
              
              
              
              
              
              
              
              
              100
              
              
              
              
              
              
              100Proceeds
      subject to possible conversion of 1,724,999 shares
              
              
              
              
              
              
              
              
              
              
              (10,008,413
              )
              
              
              
              
              
              (10,008,413
              )Proceeds
      from private placement of insider units and warrants
              
              
              105,000
              
              
              
              11
              
              
              
              1,249,989
              
              
              
              
              
              
              1,250,000Net
      income for the period ended December 31, 2007
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              544,065
              
              
              
              544,065Balance,
      December 31, 2007
              
              
              7,105,000
              
              
              $
              711
              
              
              $
              23,187,020
              
              
              $
              544,065
              
              
              $
              23,731,796Accretion
      of trust relating to ordinary shares subject to possible
      redemption
              
              
              
              
              
              
              
              
              
              
              (91,843
              )
              
              
              
              
              
              
              (91,843
              )Net
      loss for the year ended December 31, 2008
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (52,865
              )
              
              
              (52,865
              )Balance,
      December 31, 2008
              
              
              7,105,000
              
              
              $
              711
              
              
              $
              23,095,177
              
              
              $
              491,200
              
              
              $
              23,587,088





See notes
to financial statements


F-4


China
Discovery Acquisition Corp.




(a
Corporation in the Development Stage)




Statements
of Cash Flow





For
      the Year Ended
                  December
      31, 2008
              
              
              January
      8, 2007
                  (inception)
      to
                  December
      31, 2007
              
              
              January
      8, 2007
                  (inception)
      to
                  December
      31, 2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      (loss)/income
              
              $
              (52,865
              )
              
              $
              544,065
              
              
              $
              491,200Adjustments
      to reconcile net (loss)/income for the period to net cash used in
      operating activities:Investment
      income – Interest earned on trust fund
              
              
              (651,858
              )
              
              
              (704,387
              )
              
              
              (1,356,245
              )Changes
      in operating assets and liabilities:Interest
      receivable
              
              
              107,490
              
              
              
              (107,490
              )
              
              
              -Prepaid
      expense
              
              
              (35,000
              )
              
              
              -
              
              
              
              (35,000
              )Due
      from underwriter
              
              
              (100
              )
              
              
              -
              
              
              
              (100
              )Accrued
      Expenses
              
              
              17,500
              
              
              
              -
              
              
              
              17,500Net
      cash used in operating activities
              
              
              (614,833
              )
              
              
              (267,812
              )
              
              
              (882,645
              )CASH
      FLOWS FROM INVESTING ACTIVITIESDeposits
      to Trust Fund
              
              
              -
              
              
              
              (33,372,500
              )
              
              
              (33,372,500
              )Withdrawals
      from Trust Fund
              
              
              850,000
              
              
              
              200,000
              
              
              
              1,050,000Net
      cash provided by / (used in) investing activities
              
              
              850,000
              
              
              
              (33,172,500
              )
              
              
              (32,322,500
              )CASH
      FLOWS FROM FINANCING ACTIVITIESGross
      proceeds from initial public offering
              
              
              -
              
              
              
              34,500,000
              
              
              
              34,500,000Proceeds
      from underwriters’ purchase option
              
              
              -
              
              
              
              100
              
              
              
              100Proceeds
      from sale of ordinary shares to founding stockholders
              
              
              -
              
              
              
              25,000
              
              
              
              25,000Proceeds
      from private placement to founding stockholders
              
              
              -
              
              
              
              1,250,000
              
              
              
              1,250,000Payment
      of costs of initial public offering
              
              
              -
              
              
              
              (2,233,956
              )
              
              
              (2,233,956
              )Proceeds
      from stockholder notes payable
              
              
              -
              
              
              
              100,000
              
              
              
              100,000Repayment
      of stockholder notes payable
              
              
              -
              
              
              
              (100,000
              )
              
              
              (100,000
              )Net
      cash provided by financing activities
              
              
              -
              
              
              
              33,541,144
              
              
              
              33,541,144NET
      INCREASE IN CASH
              
              
              235,167
              
              
              
              100,832
              
              
              
              335,999CASH
      AT BEGINNING OF PERIOD
              
              
              100,832
              
              
              
              0
              
              
              
              0CASH
      AT END OF PERIOD
              
              $
              335,999
              
              
              $
              100,832
              
              
              $
              335,999SUPPLEMENTAL
      SCHEDULE OF NON-CASH FINANCING ACTIVITIESAccrual
      of deferred underwriting discount & commission
              
              $
              -
              
              
              $
              345,000
              
              
              $
              345,000Fair
      value of underwriter purchase option included in offering
      costs
              
              $
              -
              
              
              $
              1,054,114
              
              
              $
              1,054,114




See notes
to financial statements


F-5


China
Discovery Acquisition Corp.


(a
Corporation in the Development Stage)





Notes to
Financial Statements


F-6





1.
      Organization and Business Operations
              
              China
      Discovery Acquisition Corp. (the “Company”) was incorporated in the Cayman
      Islands on January 8, 2007 as a blank check company whose objective is to
      acquire, through a stock exchange, asset acquisition or other similar
      business combination, an operating business, or control of such operating
      business through contractual arrangements, that has its principal
      operations located in the People’s Republic of China.
                
                All
      activity from January 8, 2007 (inception) through December 31, 2008
      relates to the Company’s formation and initial public offering described
      below. The Company has selected December 31 as its fiscal
      year-end.  The registration statement for the Company’s initial
      public offering (“Offering”) was declared effective June 18, 2007. The
      Company consummated the offering on June 26, 2007 (Note 2). The Company’s
      management has broad discretion with respect to the specific application
      of the net proceeds of this Offering, although substantially all of the
      net proceeds of this Offering are intended to be generally applied toward
      consummating the acquisition, through a stock exchange, asset acquisition
      or other similar business combination, of an operating business, or the
      acquisition of control of such operating business through contractual
      arrangements, that has its principal operations located in the People’s
      Republic of China (“Business Combination”). However, there is no assurance
      that the Company will be able to successfully effect a Business
      Combination. Upon the closing of the Offering, including the
      over-allotment option, an amount of $33,372,500 of the net proceeds was
      deposited in an interest-bearing trust account (“Trust Account”) until the
      earlier of (i) the consummation of a Business Combination or (ii)
      liquidation of the Company. There can be released to the Company, from
      time to time, interest earned on the funds held in trust up to an
      aggregate of $1,050,000. Under the agreement governing the Trust Account,
      funds will only be invested in United States “government securities”
      within the meaning of Section 2(a)(16) of the Investment Company Act of
      1940 with a maturity of 180 days or less or in money market funds meeting
      certain conditions under Rule 2a-7 promulgated under the Investment
      Company Act of 1940. The remaining net proceeds (not held in the Trust
      Account) may be used to pay for business, legal and accounting due
      diligence on prospective acquisitions and continuing general and
      administrative expenses.
                
                The
      Company, after signing a definitive agreement for the acquisition of a
      target business, will submit such transaction for stockholder approval. In
      the event that stockholders owning 30% or more of the shares sold in the
      Offering vote against the Business Combination and exercise their
      conversion rights described below, the Business Combination will not be
      consummated.
                
                All
      of the Company’s stockholders prior to the Offering, including all of the
      officers and directors of the Company (“Initial Stockholders”), have
      agreed to vote their 1,250,000 founding shares of common stock in
      accordance with the vote of the majority in interest of all other
      stockholders of the Company (“Public Stockholders”) with respect to any
      Business Combination. After consummation of a Business Combination, these
      voting safeguards will no longer be applicable.
                
                The
      Company has signed a definitive agreement for the acquisition of a target
      business (Note 7) and will submit such transaction for stockholder
      approval.


F-7





With
      respect to a Business Combination which is approved and consummated, any
      Public Stockholder who voted against the Business Combination may demand
      that the Company convert his shares. The per share conversion price will
      equal the amount in the Trust Account, calculated as of two business days
      prior to the consummation of the proposed Business Combination, divided by
      the number of shares of common stock held by Public Stockholders at the
      consummation of the Offering. Accordingly, Public Stockholders holding
      29.99% of the aggregate number of shares owned by all Public Stockholders
      may seek conversion of their shares in the event of a Business
      Combination. Such Public Stockholders are entitled to receive their per
      share interest in the Trust Account computed without regard to the shares
      held by Initial Stockholders. Accordingly, a portion of the net proceeds
      from the offering (29.99% of the amount held in the Trust Account) has
      been classified as common stock subject to possible conversion in the
      accompanying balance sheet.
                
                The
      Company’s Memorandum and Articles of Association provides that the Company
      will continue in existence only until June 26, 2009. If the Company has
      not completed a Business Combination by such date, its corporate existence
      will cease and it will dissolve and liquidate for the purposes of winding
      up its affairs. There is no assurance that the Company will be able to
      complete the Business Combination described in Note 7 within that period.
      This factor raises substantial doubt about the Company’s ability to
      continue as a going concern. The accompanying financial statements are
      prepared assuming the Company will continue as a going concern. The
      financial statements do not include any adjustments that might result from
      the outcome of this uncertainty. In the event of liquidation, it is likely
      that the per share value of the residual assets remaining available for
      distribution (including Trust Fund assets) will be less than the initial
      public offering price per share in the Offering (assuming no value is
      attributed to the Warrants contained in the Units to be offered in the
      Offering discussed in Note 2).
                
                Concentration
      of Credit Risk
                
                The
      Company maintains cash in bank deposit accounts which, at times, exceed
      federally insured limits. The company has not experienced any losses on
      these accounts.
                
                Investment
      Held in Trust
                
                Assets
      of the Trust Fundare generally invested in tax exempt securities with
      short term maturities. Such securities generate current income which is
      exempt from federal income tax.
                
                Continental
      Stock Transfer and Trust Company is the trustee of the Trust Fund and the
      trust account is maintained by the trustee at JP Morgan Chase New York
      Bank. The Company is permitted to draw up to $1,050,000 of after-tax
      interest to meet its needs for operating expenses and working
      capital.


F-8





Income
      (loss) Per Share
              .
              Basic
      earnings (loss) per share is computed by dividing income available to
      common shareholders by the weighted average ordinary shares outstanding
      during the period. Diluted earnings per share reflects the potential
      dilution that could occur if securities or other contracts to issue
      ordinary shares were exercised or converted into ordinary shares or
      resulted in the issuance of ordinary shares that then shared in the
      earning of the Company.
              
              The
      effect of the 11,500,000 warrants issued in connection with the public
      offering, 1,033,334 warrants and 105,000 units (210,000 warrants) issued
      in connection with the private placement and the 500,000 units (1,000,000
      warrants) included in the underwriter’s purchase option has not been
      considered in diluted income (loss) per share calculations since such
      warrants are contingently excercisable.
              
              Use
      of Estimates
              
              The
      preparation of financial statements in conformity with accounting
      principles generally accepted in the United States of America requires
      management to make estimates and assumptions that affect the reported
      amounts of assets and liabilities at the date of the financial statements
      and the reported amounts of expenses during the reporting period. Actual
      results could differ from those estimates.
              
              Recent
      Accounting Pronouncements
              
              In
      September 2006, FASB issued Statement of Financial Accounting Standards
      No. 157, Fair Value Measurements (SFAS No. 157). SFAS No. 157 defines fair
      value, establishes a framework for measuring fair value, and expands
      disclosures about fair value measurement. SFAS No. 157 also emphasizes
      that fair value is a market-based measurement, not an entity-specific
      measurement, and sets out a fair value hierarchy with the highest priority
      being quoted prices in active markets. Under SFAS No. 157, fair value
      measurements are disclosed by level within that hierarchy. In February
      2008, the FASB issued FASB Staff Position No. 157-2, Effective Date of
      FASB Statement No. 157, which permits a one-year deferral for the
      implementation of SFAS No. 157 with regard to nonfinancial assets and
      liabilities that are not recognized or disclosed at fair value in the
      financial statements on a recurring basis. The Company adopted SFAS No.
      157 for the fiscal year beginning January 1, 2008, except for nonfinancial
      assets and nonfinancial liabilities that are recognized or disclosed at
      fair value in the financial statements on a nonrecurring basis for which
      delayed application is permitted until our fiscal year beginning January
      1, 2009. The adoption of the remaining provisions of SFAS No. 157 is not
      expected to have a material impact on the Company’s financial position,
      results of operations or cash
flows.




F-9




In
      December 2007, FASB issued Statement of Financial Accounting Standards
      No. 141 (revised 2007), ‘‘Business Combinations’’
      (‘‘FAS 141R’’). FAS 141R replaces Statement of Financial
      Accounting Standards No. 141, ‘‘Business Combinations’’
      (‘‘FAS 141’’), although it retains the fundamental requirement in
      FAS 141 that the acquisition method of accounting be used for all
      business combinations. FAS 141R establishes principles and
      requirements for how the acquirer in a business combination
      (a) recognizes and measures the assets acquired, liabilities assumed
      and any noncontrolling (‘‘minority’’) interest in the acquiree,
      (b) recognizes and measures the goodwill acquired in a business
      combination or a gain from a bargain purchase and (c) determines what
      information to disclose regarding the business combination. FAS 141R
      applies prospectively to business combinations for which the acquisition
      date is on or after the beginning of the Company’s 2009 fiscal year. SFAS
      141R is expected to significantly change how future business acquisitions
      are accounted for and will impact financial statements both on the
      acquisition date and in subsequent periods. SFAS 160, Noncontrolling
      Interests in Consolidated Financial Statements
              
              In December
      2007, the FASB issued Statement of Financial Accounting Standards
      No. 160, ‘‘Noncontrolling  Interests in Consolidated Financial
      Statements’’ (‘‘FAS 160’’). FAS 160 establishes accounting and
      reporting standards for the noncontrolling interest in a subsidiary. Among
      other matters, FAS 160 requires (a) the noncontrolling interest
      be reported within equity in the balance sheet and (b) the amount of
      consolidated net income attributable to the parent and to the
      noncontrolling interest to be clearly presented in the statement of
      income. FAS 160 is effective for the Company’s 2009 fiscal year.
      FAS 160 is to be applied prospectively, except for the presentation
      and disclosure requirements, which shall be applied retrospectively for
      all periods presented. The Company is currently assessing the potential
      effect of FAS 160 on its financial statements.
              
              In
      March 2008, the FASB issued Statement of Financial Accounting Standard No.
      161 (“SFAS 161”), “Disclosures about Derivative Instruments and Hedging
      Activities.” SFAS 161 enhances the disclosure requirements for derivative
      instruments and hedging activities. SFAS 161 is effective for the Company
      on January 1, 2009 and early adoption is encouraged. The Company expects
      that the adoption of SFAS 161 will not have a material impact on its
      financial statements.
              
              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. Specifically, the Company shall consider its own historical
      experience in renewing or extending similar arrangements, even when there
      is likely to be substantial cost or material modifications. Also, in the
      absence of its own experience, an entity shall consider the assumptions
      that market participants would use. The provisions of FSP 142-3 are
      applied prospectively to intangible assets acquired after January 1, 2009.
      FSP 142-3 may have a material impact on the determination of the useful
      lives of intangible assets acquired after January 1, 2009. The impact, if
      any, from the application of FSP 142-3 will depend on the facts and
      circumstances of the intangible assets acquired after
      adoption.




F-10





In
      May 2008, the FASB issued FASB Staff Position No. APB 14-1 (“APB 14-1”),
      “Accounting for Convertible Debt Instruments That May Be Settled in Cash
      upon Conversion (Including Partial Cash Settlement).” APB 14-1 clarifies
      that the liability and equity components of convertible debt instruments
      that may be settled in cash upon conversion should be accounted for
      separately. The liability and equity components of convertible debt
      instruments within the scope of APB 14-1 shall be separately accounted for
      in a manner that will reflect the entity’s nonconvertible debt borrowing
      rate when interest costs are recognized in subsequent periods. The
      provisions of APB 14-1 are applied retrospectively and are effective for
      the Company as of January 1, 2009. The Company currently expects that the
      adoption of APB 14-1 will not have a material impact on its financial
      statements.
              
              Management
      does not believe that any other recently issued, but not yet effective,
      accounting standards if currently adopted would have a material effect on
      the accompanying financial
statements.


F-11





2.
      Initial Public Offering
            On
      June 26, 2007, the Company sold 5,000,000 units (“Units”) in the Offering.
      On July 2, 2007, the Company consummated the closing of an additional
      750,000 Units which were subject to the over-allotment option. Each
      Unit consists of one ordinary share, $.0001 par value, and two warrants
      (“Warrants”). Each Warrant entitles the holder to purchase from the
      Company one ordinary share at an exercise price of $5.00 commencing the
      later of the completion of a Business Combination or June 18, 2008 and
      expiring June 17, 2011. The Warrants will be redeemable, at the Company’s
      option, with the prior consent of EarlyBirdCapital, Inc., the
      representative of the underwriters in the Offering (“Representative”), at
      a price of $.01 per Warrant upon 30 days’ notice after the Warrants become
      exercisable, only in the event that the last sale price of the common
      stock is at least $8.50 per share for any 20 trading days within a 30
      trading day period ending on the third day prior to the date on which
      notice of redemption is given. If the Company redeems the Warrants as
      described above, management will have the option to require any holder
      that wishes to exercise his Warrant to do so on a “cashless basis.” In
      such event, the holder would pay the exercise price by surrendering his
      Warrants for that number of ordinary shares equal to the quotient obtained
      by dividing (x) the product of the number of ordinary shares underlying
      the Warrants, multiplied by the difference between the exercise price of
      the Warrants and the “fair market value” (defined below) by (y) the fair
      market value. The “fair market value” shall mean the average reported last
      sale price of the ordinary shares for the 10 trading days ending on the
      third trading day prior to the date on which the notice of redemption is
      sent to holders of Warrants. In accordance with the warrant agreement
      relating to the Warrants to be sold and issued in the Offering, the
      Company is only required to use its best efforts to maintain the
      effectiveness of the registration statement covering the Warrants. The
      Company will not be obligated to deliver securities, and there are no
      contractual penalties for failure to deliver securities, if a registration
      statement is not effective at the time of exercise. Additionally, in the
      event that a registration is not effective at the time of exercise, the
      holder of such Warrant shall not be entitled to exercise such Warrant and
      in no event (whether in the case of a registration statement not being
      effective or otherwise) will the Company be required to net cash settle
      the warrant exercise. Consequently, the Warrants may expire unexercised
      and unredeemed.
              
              The
      Company paid the underwriters in the Offering an underwriting discount of
      5.5% of the gross proceeds of the Offering and a non-accountable expense
      allowance of 0.5% of the gross proceeds of the Offering. However, the
      underwriters agreed that 1% of the underwriting discount would be deferred
      and would not be paid unless and until the Company consummated a Business
      Combination. In connection with this Offering, the Company also issued an
      option (“Option”), for $100, to the Representative to purchase 500,000
      Units at an exercise price of $6.60 per Unit. The Company accounted for
      the fair value of the Option, inclusive of the receipt of the $100 cash
      payment, as an expense of the Offering resulting in a charge directly to
      stockholders’ equity. The Company estimated that the fair value of the
      Option was approximately $1,054,114 ($2.11 per Unit) using a Black-Scholes
      option-pricing model. The fair value of the Option granted to the
      Representative was estimated as of the date of grant using the following
      assumptions: (1) expected volatility of 35.03%, (2) risk-free interest
      rate of 4.54% and (3) expected life of 5 years. The Option may be
      exercised for cash or on a “cashless” basis, at the holder’s option
      (except in the case of a forced cashless exercise upon the Company’s
      redemption of the Warrants, as described above), such that the holder may
      use the appreciated value of the Option (the difference between the
      exercise prices of the Option and the underlying Warrants and the market
      price of the Units and underlying securities) to exercise the option
      without the payment of any cash. The Company will have no obligation to
      net cash settle the exercise of the unit purchase option or the Warrants
      underlying the unit purchase option. The holder of the unit purchase
      option will not be entitled to exercise the unit purchase option or the
      Warrants underlying the unit purchase option unless a registration
      statement covering the securities underlying the unit purchase option is
      effective or an exemption from registration is available. If the holder is
      unable to exercise the unit purchase option or underlying Warrants, the
      unit purchase option or Warrants, as applicable, will expire
      worthless.


F-12





3.
      Note Payable, Stockholder
              During
      2007, the Company issued unsecured promissory notes in aggregate amount of
      $100,000 to certain officers. The notes were non interest bearing and were
      repaid from the net proceeds of the Offering.
                
                4.           Fair
      Value of Financial Instruments
                
                Effective
      January 1, 2008 the Company adopted Statement No. 157, Fair Value
      Measurements.  Statement No. 157 applies to all assets
      and liabilities that are being measured and reported on a fair value
      basis.  Statement No. 157 requires new disclosure that
      establishes a framework for measuring fair value in generally accepted
      accounting principles, and expands disclosure about fair value
      measurements.  This statement enables the reader of the
      financial statements to assess the inputs used to develop those
      measurements by establishing a hierarchy for ranking the quality and
      reliability of the information used to determine fair
      values.  The statement requires that assets and liabilities
      carried at fair value will be classified and disclosed in one of the
      following three categories:
                
                Level
      1:              Quoted
      market prices in active markets for identical assets or
      liabilities;
                Level
      2:              Observable
      market based inputs or unobservable inputs that are corroborated by market
      data;
                Level
      3:              Unobservable
      inputs that are not corroborated by market data.
                
                In
      determining the appropriate levels, the Company performs a detailed
      analysis of the assets and liabilities that are subject to Statement No.
      157.  At each reporting period, all assets and liabilities for
      which the fair value measurement is based on significant unobservable
      inputs are classified as Level 3.
                
                The
      Company’s restricted funds held in trust are considered to be highly
      liquid and easily tradable and accordingly fair value measure are based
      upon Level 1 inputs.




F-13




5.
      Commitments and Contingency
            The
      Company occupies office space provided by an affiliate of the Company’s
      chief operating officer. Such affiliate has agreed that, until the Company
      consummates a Business Combination, it will make such office space, as
      well as certain office and secretarial services, available to the Company,
      as may be required by the Company from time to time. The Company has
      agreed to pay such affiliate $7,500 per month for such services commencing
      on the effective date of the Offering. The Company recognized $90,000 of
      expense under this arrangement for the year ended December 31, 2008 and
      $142,500 for the period from January 8, 2007 (inception) to December 31,
      2008, respectively.
              
              Pursuant
      to letter agreements with the Company and the underwriter, the Initial
      Stockholders have waived their right to receive distributions with respect
      to their founding shares upon the Company’s liquidation.
              
              The
      Company’s directors and certain special advisors and their members
      purchased 105,000 Units (“Insider Units”) at $6.00 per Unit and 1,033,334
      Warrants (“Insider Warrants”) at $0.60 per Warrant (for an aggregate
      purchase price of $1,250,000) privately from the Company. These purchases
      took place simultaneously with the consummation of the Offering. All of
      the proceeds received from these purchases were placed in the Trust
      Account. The Insider Units and Insider Warrants are identical to the Units
      sold in the Offering (and the Warrants underlying such Units) except that
      if the Company calls the Warrants for redemption, the Insider Warrants may
      be exercisable on a “cashless basis,” at the holder’s option (except in
      the case of a forced cashless exercise upon the Company’s redemption of
      the Warrants, as described above), so long as such securities are held by
      such purchasers or their affiliates. Furthermore, the purchasers have
      agreed that the Insider Warrants will not be sold or transferred by them
      until after the Company has completed a Business Combination.
              
              The
      Initial Stockholders and the holders of the Insider Units and Insider
      Warrants (or underlying securities) will be entitled to registration
      rights with respect to their founding shares, Insider Units or Insider
      Warrants (or underlying securities) pursuant to an agreement signed prior
      the Offering. The holders of the majority of the founding shares are
      entitled to demand that the Company register these shares at any time
      commencing three months prior to the first anniversary of the consummation
      of a Business Combination. The holders of the Insider Units and Insider
      Warrants (or underlying securities) are entitled to demand that the
      Company register these securities at any time after the Company
      consummates a Business Combination. In addition, the Initial Stockholders
      and holders of the Insider Units and Insider Warrants (or underlying
      securities) have certain “piggy-back” registration rights on registration
      statements filed after the Company’s consummation of a Business
      Combination.
              
              The
      Representative has been engaged by the Company to act as the Company’s
      non-exclusive investment banker in connection with a proposed Business
      Combination. For assisting the Company in structuring and negotiating the
      terms of a Business Combination, the Company will pay the Representative a
      cash transaction fee equal to 1% of the total consideration paid in
      connection with the Business Combination, with a maximum fee to be paid of
      $300,000. Additionally, the Company has agreed to pay the fees and issue
      the securities to the underwriters in the Offering as described in Note 2
      above.


F-14





6.
      Preferred Stock
            The
      Company is authorized to issue 1,000,000 shares of preferred stock with
      such designations, voting and other rights and preferences as may be
      determined from time to time by the Board of Directors.
              
              The
      agreement with the underwriters prohibits the Company, prior to a Business
      Combination, from issuing preferred stock which participates in the
      proceeds of the Trust Account or which votes as a class with the Ordinary
      Shares on a Business Combination.7.
      Subsequent Events
            On
      April 8, 2009, a Stock Purchase Agreement (the “Agreement”) was entered
      into by and among the Company, HeNan Smart Food Company Limited, a Chinese
      enterprise (the “HeNan Smart”), Fenland Investments Limited (“Fenland”), a
      British Virgin Islands company, and Calendar Profits Limited (“Calendar”),
      a British Virgin Islands company, Honest Joy Group Limited (“Honest Joy”),
      a British Virgin Islands company, (Fenland, Calendar and Honest Joy each a
      “Seller” and collectively, the “Sellers”), and Mr. Wang Youli, the
      ultimate beneficial owner of 92% of the equity interests of HeNan Smart
      and 100% of Fenland.
              
              Upon
      the closing of the transactions contemplated in the Agreement, the Company
      will acquire 100% of the issued and outstanding shares of the direct
      parent of the HeNan Smart (Gliston International Limited (“Gliston”)) from
      its shareholders (Fenland, Calendar and Honest Joy) in exchange for an
      aggregate of 14,700,000 the Company’s ordinary shares and $3,000,000 in
      upfront consideration.
              
              In
      addition, pursuant to an earn-out provision in the share exchange
      agreement, the Company has agreed to issue to Gliston’s shareholders up to
      6.8 million additional shares if the following net income targets are
      achieved (calculated on a U.S. GAAP basis):
              
              ·      net
      income for the fiscal year ending December 31, 2009 of at least $30.0
      million, an additional 1.8 million shares will be issued.
              
              ·      net
      income for the fiscal year ending December 31, 2010 of at least $40.0
      million, an additional 2.5 million shares will be issued.
              
              ·      net
      income for the fiscal year ending December 31, 2011 of at least $52.0
      million, an additional 2.5 million shares will be issued.
              
              The
      shareholders of Gliston are also eligible to receive a cash payment of
      $5.0 million in the event that 75% or more of the Company’s publicly
      traded warrants are exercised prior to their expiration on June 17,
      2011.
              
              Fenland
      will place 3,000,000 of the shares issued to it in escrow.  Such
      shares may be used to pay for the indemnification obligations described
      below.




F-15




The
      Agreement contains certain representations, warranties and covenants of
      each of the parties thereto that are customary for this type of
      transaction.  The consummation of the transactions contemplated
      by the Agreement is subject to certain closing conditions, including
      without limitation, (a) Holders of a majority of the Company’s ordinary
      shares approving the business combination in accordance with its
      Memorandum and Articles of Association, with holders of less than 30% of
      the Company’s public ordinary shares voting against the acquisition and
      properly exercising their rights to convert such public ordinary shares to
      cash. (b) The Company giving Gliston’s shareholders piggy-back
      registration rights relating to the ordinary shares issued in connection
      with the acquisition. (c) HeNan Smart, Fenland and Wang agree to
      restructure (the “Restructuring”) HeNan Smart and certain affiliated
      companies, to be completed prior to the consummation of the
      acquisition.
              
              The
      acquisition is expected to be consummated in the second quarter of 2009,
      after the required approval by the Company’s stockholders and the
      fulfillment of certain other closing conditions. Recent changes in market
      conditions have increased the risk the acquisition cannot be completed on
      the terms set forth in the
Agreement.


F-16